Friday, March 31, 2017

The Tax Refund Bump

Wanted : Houses like this. High Demand :)
Tax refunds are starting to arrive for many Americans and this can lead directly to a bump in buyers entering the market. With inventory extra tight, this will probably put additional pricing pressure on active inventory.

Tax returns often give buyers on the bubble that extra bit of "seasoned" cash they need to meet down payment requirements. Sellers can capitalize on the increased in buyers by holding out for the highest as new "bidders" intensify the seller's market conditions.

I have never been a fan of an overheated seller's market. So many real estate people like it, but I feel it is never really a good thing to have any consumer feeling pressure to buy especially something as illiquid as real estate. I like a nice neutral market where sellers have to actually present the home and buyers can be at least a tad choosy. Everyone wins in that scenario. In fact 2013-14 was fairly neutral except at the very entry level.

But if we cannot get more inventory in play, then this market will continue to produce ragged edge deals with multiple offers and multiple disappointed buyers. I still get buyers that cannot wrap their arms around the notion that they have to bid up over asking on many properties. For some people this just rubs against grain. Unfortunately they have to suck it up or stay put.

Listings are what this market needs right now, and sellers should not sit on the fence too long. For any potential seller that has a property they believe will be bought by a family with school age children, April and May are ideal months to list as that places move in day for the new owners during summer break.

I think it is safe to say that the "refund bump" is mostly entry level sub-median priced homes and these are already disproportionately priced relative to the mid to upper end. Homeowners sitting on a 1950s 3-2 in clean shape might fetch $250-$270k for that little house and then nearly double their living space in a step up house for $325-$350k. The demand for sub median priced homes is enormous right now and this bodes well for the step up buyer sitting on a small house that is really hot at the moment. Sellers can lose an opportunity if they wait too long as rates can rise and demand can fall off when buyers become frustrated and leave the market.

This market is so hungry for sub $300k property that anyone sitting on such a house has a great opportunity to sell the small house at a puffed up value and buy the step up house at a relatively and comparatively low price. Knock Knock, you here that... it's opportunity.

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