The short answer is: Yes – and it’s a GREAT thing!
Let’s break down why, and review what it means for a market to be HOT, COLD or NEUTRAL.
HOT MARKET aka “Seller’s Market”
This is the best financial market for a home owner to SELL, because there are more buyers than there are homes available to purchase.
What does this mean? Buyers are often willing to pay MORE than list price and homes sell quickly. In an EXTREMELY HOT market, sellers may be able to insist buyers waive inspections/appraisals (Note: not a good idea for the buyer). Although unless written into the Purchase & Sales Agreement, federal law states sellers must give a buyer 10 days to inspect for lead paint.
Signs of a HOT/Seller’s Market
- Low inventory as compared to previous months/years
- Fewer than 6 months of inventory on the market
- Comparable sales prices are lower than active listing prices
- More buyers are purchasing, resulting in higher number of closed sales
- Median sales prices are increasing
- Real estate advertising is low
- For Sale signs are only up for a few days before a pending or sold sign is attached
COLD MARKET aka “Buyer’s Market”
This is the best financial market for a buyer to BUY, because there are more homes than there are buyers with the ability to purchase.
What does this mean? Buyers have more homes to choose from, increasing the odds that they will find the “perfect” home. Serious sellers are often willing to negotiate, so buyers can probably purchase a home for below list price, and sellers might be willing to include “buyer incentives” like paying for some or all closing costs. This is a more relaxed and easy experience for buyers.
Signs of a COLD/Buyer’s Market
- High inventory as compared to previous months/years
- More than 6 months of inventory on the market
- Comparable sales prices are higher than active listing prices
- Fewer buyers are purchasing, resulting in lower number of closed sales
- Median sales prices are declining
- Real estate advertising is high
- For Sale signs are staying up longer
This is when the market is considered balanced. Interest rates are affordable and the number of buyers and sellers are evenly matched. There aren’t as many extreme changes in home value. Neutral markets have become less common in recent years, but were common prior to the real estate crashes.
Signs of a Neutral Market
- Steady inventory as compared to previous steady months/years
- 3-6 months of inventory on the market
- Comparable sale prices are close to active listing prices
- Sales numbers have stabilized
- Median sales prices are level
- Real estate advertising is consistent
- For Sale signs are replaced with pending or sold signs within 30-45 days
Atlanta has recently been a HOT market. Competition for the very low inventory on the market was fierce, with bidding wars artificially driving home prices up. Sellers have been listing their homes at inflated prices, in hopes of desperate buyers being willing to overpay so as not to lose out on purchasing the home. Meaning home/contract prices were often exceeding the actual value of the home, resulting in discrepancies between appraised value and contract price. While a hot market is typically considered a good thing, they can also be the most brutal and frustrating time to buy and/or sell a home.
The cooling we are seeing is really the market evening itself back out. Which means price cuts. Most price cuts are being found in the most expensive price points and in markets where pricing has outrun home values *ahem, Atlanta*.
This DOESN’T mean home values have depreciated or will soon depreciate. In fact, home values will continue to appreciate over the next 12 months (at double their historic rate). It DOES mean seller’s should be more conservative when pricing their home, especially in higher price points.
Homes are not depreciating. If you want to sell your home quickly and with less headache, pricing it correctly from the beginning (and using a good REALTOR) is the best strategy.
**If you live in the Greater Atlanta area and are interested in learning the current value of your home, contact me! I am happy to provide you with a price analysis.**