Last year during the pandemic, if you put your house on the market, it just sold. Since the number of listings were extremely small compared to the number of buyers, and the interest rate was so low, houses were sold almost regardless of their condition.
The current market is a bit different. Of course, the number of listings still falls far short of the number of buyers looking for homes. As I always say, the market is balanced when the total number of listings is 6 to 7 times the number of active buyers. However, the ratio of good school districts around Chicago that my clients are looking for is about 1.6 or 1.4:1, so there are too many listings.
If I say something like, "Shouldn't all houses be sold as quickly as before? I heard the market is slowing down a bit?" I get asked a lot: Yes, the market has slowed down, what is the reason?
According to Ali Wolf, an economist at Zonda, a building-related consulting firm, the prices buyers are paying have risen dramatically. In other words, interest rates have risen a lot, and house prices have risen tremendously (mostly because the number of listings cannot keep up with the number of buyers). Therefore, these buyers have the mindset of "I can't buy a house like that with this money" because last year that amount of money would have bought a much better house.
Conversely, if the house is in a good location, the lot is good, the area is good, and it is in great condition, as in you can move in and live without any problems (i.e., if it has been remodeled in a clean and modern condition less than 10 years ago), it will still sell fast. Because there are still many buyers. Especially since there are so many buyers who are staying on the market and waiting for a good house, these houses almost 100% receive multi-offers and sell for more than the listing.
This leads to why houses that are not selling are still not selling: there are fewer buyers looking for a fixer upper. The buyers who are looking for a fixer upper are mainly fix-and-flip investors. However, due to the rising interest rate, the holding cost they had to pay during construction went up so much that it was difficult to make a profit, so demand decreased. In addition, from the point of view of general buyers, demand decreased because buying a fixer upper and remodeling is no longer an advantage due to the increase in material and labor costs compared to buying a normal house.
In other words, houses that require major construction, such as kitchens and bathrooms, do not sell well.
So what should sellers do? Updating your kitchen and bathrooms as much as possible will help you sell your home quickly in today's market. And if you don't have the confidence to handle the construction, it's a good idea to change your strategy so that you can appeal to buyers a little more attractively by lowering the price. This kind of strategic thinking has become more necessary than in the previous real estate market.
If you have any additional questions about today's article, please feel free to contact us. I'll see you next time with another great article.