With disruptions to the traditional spring selling season, when should sellers re-enter the market?
Spring is traditionally the best time to sell a home for those interested in maximizing profit, minimizing the time their home spends on the market — or both.
This year, however, the combination of the coronavirus, historically low mortgage interest rates and high demand for the small pool of homes for sale have kept home prices stable and pushed the selling season well into the summer — and possibly beyond, according to Zillow economist Jeff Tucker.
“Right now, this is a market that is starved for listings,’’ Tucker said. “We’re seeing a really healthy pace of sales and pent-up demand from buyers who missed their chance to buy in the spring. All the data suggests you will get a good price and sell your home relatively quickly, assuming you price it appropriately.”
Tucker said most people sell a home because of life events: They need more room for a growing family, or less because the kids have moved out. Or maybe they’ve changed jobs, or they’ve retired and want to live in a warmer climate or near grandkids.
“Most people are not treating their home like stock trading where they want to buy low and sell high,’’ he said. “But I think people are often aware that they have some flexibility.”
That flexibility helps explain why for-sale listings dropped off in April and May as people figured out how to sell during a pandemic and determined whether it was better to sell or wait.
At the time, no one knew if home buyers would show up during a time of massive job losses and business closures. A lot of homeowners who might have listed their homes held back to get a better read on the market, leading to a drop in what had already become a huge shortage of homes for sale.
According to Tucker, there are 350,000 fewer homes for sale now compared to this time last year.
Sellers who did list their homes for sale in April and May — when alarms were sounding about the spread of COVID-19 — were rewarded with record-fast selling times and buyers willing to pay asking price for homes.
As of June, homes were going from listing to pending in 2 weeks — a full week shorter than this time last year. And sellers are getting their asking prices at a time when we’d normally be seeing price cuts from sellers who listed in the spring, Tucker said.
He also noted that interest rates are playing a big role in sustaining buyer interest and viability. Historically low interest rates — which briefly dipped below 3% in June and have been hovering around 3% for months — boost buying power and lower monthly mortgage payments.
Remote schooling also could be contributing to the extended buying, especially since people who are making offers on homes now are not likely to close the sale before school starts.
Tucker said he predicts the market will favor sellers at least until spring 2021, when federal interventions that enabled millions of homeowners to postpone mortgage payments expire. (Such postponement of mortgage payments is called forbearance.)
“Until next spring or summer, I don’t see anything on the horizon that will relieve this huge shortage of inventory,’’ he said. “At that point, things could really change unless forbearance is extended.”
And if forbearance is not extended? According to Tucker, “There may end up being a lot of foreclosure of homes or distressed sales from people who lost their job during the pandemic and entered forbearance, which, in most cases is up to 12 months. If those 12 months are up and they’re still unemployed and can’t figure out a repayment plan with their lender, then we could see a mix of motivated sellers and banks doing foreclosed sales.”
It’s also unclear what effect a resurgence of COVID-19 cases would have on the broader economy over time.
It’s worth noting that local markets can have their own dynamics, especially since the coronavirus’ impacts are variable in different parts of the country.
You can find Zillow Research’s latest market updates at https://www.zillow.com/research/.
