Spring is in the air and homebuyers are coming out of hibernation. With the holidays over and the weather warming up, it’s the time of year that's typically considered a hot period for the housing market.
But this won't be your standard spring homebuying season – 2016 is expected to be a particularly powerful year for home sales. The Federal Housing Finance Agency's monthly Housing Price Index has exceeded the previous peak level from March 2007 every month since last October. At the same time, the Federal Reserve announced Wednesday it will not increase interest rates, keeping them unmoved from the December 2015 increase of 25 basis points, or 0.25 percent, giving homebuyers optimal lending options.
As the recession becomes a distant memory, homeowners are gaining confidence. John Aaroe, owner of Los Angeles -based real estate firm John Aaroe Group, says his interactions with prospective clients are indicating stronger confidence in home values and buyers’ ability to pay, helping to get them off the fence about selling. He predicts that “we’re going to see a little more inventory come on the market in 2016 than we had in 2015.”
If you’ve considered selling your home, here are some reasons this season and this year is a great time to get started on those plans, and here is how you can prep your home to take advantage of the warm weather and even hotter market.
It’s the right time of year. Spring is the undisputed champion of seasons for selling a home – not only are flowers in bloom and the sky blue for some great marketing photos, but also people are chomping at the bit to get the closing process started so they can be moved in and settled before fall.
Homebuyers have a tendency to taper off in the winter, and not just in parts of the country that typically have frigid weather. A mixture of holiday obligations and kids in school lead to more homes coming off the market temporarily and buyers pressing pause on checking out new listings.
Despite year-round warm weather and a wide variety of potential buyers, the luxury market in Los Angeles sees a similar ebb and flow throughout the year. “We’re pretty much a bell curve industry. We are slowest in January and February – by March we have significantly picked up. We’ll hit our crescendo around July, August, September,” Aaroe says, adding that in November, the market largely slows for the holidays.
By the time spring hits, cabin fever has people anxious to start touring homes.
“Buyers have a lot of pent up demand by then. They’ve gone through the dreary winter months when it’s not as exciting to go out looking at homes,” says Dina Gorrell, a real estate agent for Redfin focused in the Northern Virginia area. “So when the weather starts turning, they get excited about going out.”
Looking forward to work, school or family obligations for the rest of the year, spring is the optimal time to take on house hunting and get moving on the purchase process. “Especially if they have children in schools, they want to be closed right after schools are finished so they can move and be ready for a new school year,” Gorrell says.
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The market is in the right place. Many markets across the country have not only fully returned to pre-recession levels, but home values are reaching beyond that point as well. A combination of low interest rates and low single-family housing inventory means there are a lot of eager homebuyers that have to compete for what’s on the market.
The fact that it’s a seller’s market – meaning the seller has an upper hand since there are more buyers than homes available – provides a great opening for homeowners looking to sell. And the opportunity is particularly good for those who have held off on selling in recent years while they wait for home values to go back up.
“People who have waited for years to sell because they couldn’t get what they either paid or what they could once have gotten in ’06 and ’07, can now achieve that or a greater number,” Aaroe says.
He adds that this year in particular appears to be more promising to entice some homeowners that have been holding back on selling because they’re finally starting to feel more confident in the real estate market after seeing consistent encouraging results for the first time since the recession.
The S&P;/Case-Shiller U.S. National Home Price Index, which measures price increases in single-family homes in 20 cities throughout the country, found home prices increased by 5.4 percent in February of this year compared to one year ago, still outpacing inflation but slowing a bit.
“I’m talking to more sellers now who are saying, ‘We would have sold a year or two or three ago, but now we feel we can get what we could have gotten at a better moment in the market [in the past],’” Aaroe says.
You’ve got a whole new buyer pool. It’s not just low interest rates that are bringing people back to the market – 2016 is prime time for the millennial generation to join the homebuying party. An annual study by the National Association of Realtors that examines generational trends in buyers and sellers surveyed more than 94,000 recent homebuyers and found that millennials make up 35 percent of them, the largest group for the third year in a row. Not only is owning a home more desired, but it is also more feasible for millennials after at least a few years of working and saving.
Having grown up with technology, the emergence of millennials in the real estate marketbrings with it a greater understanding of the homebuying process, as well as what else is available.
“The level of empowerment for a buyer or seller today is light-years ahead of 20 years ago, when you really couldn’t enter a market without first calling an agent,” says Steve Udelson, president and CEO of Owners.com, a website dedicated to helping self-directed homebuyers and sellers. “Today, you can become as knowledgeable as most agents on your own, and consumers are doing that.”
And it’s not just the economic opportunity that makes homeownership attractive to millennials, those born between 1982 and 2000 according to the Census Bureau. The generation that until this point has been largely recognized as renters still carries the belief of previous generations that owning a home is an important part of life.
“Homeownership has always been a rite of passage, and a point of pride for people,” Udelson says.
To make your home as marketable as possible to millennials, update key rooms like the kitchen and master bathroom, which are known to get a lot of attention from potential homebuyers. Selling your home "as-is" promises quite a bit more work than a first-time buyer is willing to take on.
Get started now. There’s still time to get your home on the market this spring to take advantage of the growing number of interested buyers, but successfully reaching potential buyers requires a bit more work than just an online post, and it’s best to get started sooner rather than later. Gorrell recommends reaching out to a professional to know what you need to do early on, so you can avoid a time crunch.
“It would be best to give several weeks’ notice [to an agent] before going on the market,” Gorrell says.
Here are four tips for taking advantage of the springtime homebuying surge:
- Prep your home. It’s a year-round rule that you should be putting your home’s best face forward, from planting some flowers along the walkway to updating appliances in the kitchen or bathroom. While an interested buyer may be competitive about bidding on a home, he or she will also be well-informed, and prepping your home is imperative to getting the highest possible return on your investment.
- Price it right the first time. Redfin looked at 12 million home sales from the last five years and found that a home’s listing is viewed five times more its first day on the market than even a week later. If your home is priced too high, it’s much harder to bring back the homebuyers who moved on to other listings because the asking price was out of their range.
- Aim for a Thursday. The same Redfin study reveals homes listed on a Thursday are more likely to sell above list price and find a buyer faster than homes put on the market any other day of the week. Gorrell says that Wednesday and Friday are also good days to put it on the market because the latter half of the work week sees the most traffic on Redfin’s website, but sellers should avoid listing on weekends and Mondays.
- Stay competitive. Even in a seller’s market there’s no guarantee your home will be scooped up quickly – or even necessarily scooped up at all. It’s important to pay attention to homes going on the market in your area, and market the particular strengths of your home. And while many markets are heating up or hot already, it’s important to keep in mind that a jump in home values in one area doesn’t promise high home values anywhere else. As Udelson explains, “It’s all very local-market driven. There are definitely markets that are much safer bets than others.”