The US housing market has shown a
robust recovery since the depths of the Great Recession, but there are some
worrying signs that the surge is starting to show weakness. According to the National
Association of Realtors,
their seasonally adjusted pending home sales index fell in September to lows
not seen since December last year.
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In September, the index fell to 101.6,
a decline of approximately 5.6% in a single month. That precipitous fall
follows a decline from around 112 back in May to just above 107 in August. In
fact, the index is now lower than it was in September 2012, the first time that
the index has fallen year over year in nearly 2½ years. While most analysts who
track the housing market believe that sales will continue to recover, the rate
of recovery is likely to be significantly lower in coming months.
The underlying reasons for this may be
a combination of higher mortgage rates and home prices, which once again have
started to make accommodation increasingly unaffordable. Mortgage rates climbed
to a two-year high in August and remained at high levels in September, although
they are still relatively low on a historical basis. There has been some relief
in October, but it is unclear how long this will last.
Against this background, what can
homeowners and developers do to ensure that they sell their properties?
First of all, getting the price right
is essential. Before listing a property, sellers should survey the selling
price of similar properties in the area, and look at what the trend has been
for the past several months. While dropping prices to bargain-basement levels
is not the right thing to do, it is also important not to price properties out
of the market. Generally, if the price of the property is 5% or less above the
target selling price, then buyers will be willing to make an offer. However,
anything higher may well scare them off.
Second, it is important to get a good
realtor to promote the property. Sellers should choose a realtor who has a
track record of closing sales in their area, and should check that they
advertise the property widely – including online and in local media. Open
houses are also a good idea, provided that they are promoted visibly and well
in advance. For example, placing banners in the surrounding area that direct
people to the open house can generate significant interest.
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Finally, when buyers look at a
property, they think about the total cost to them, including any work that
needs to be done. Therefore, it is critical that the property is presented in
good order. It should also be “neutral” – it needs to be a blank canvas for the
prospective buyer, rather than a reflection of the current owner’s personal
tastes. For example, the walls should be painted neutral colors, flooring
should be unobtrusive, and furniture should be positioned to provide easy flow
throughout the home.
