This summer has brought with it record-breaking home prices. That’s great news for sellers, but what will the future bring? In this article, real estate developer and investor Andrew Shader will shed light on whether or not this is the best time to sell your home.
A hot real estate market, like the last several months, can cause anxiety as sellers wonder if they should sell now or wait to see if prices continue to rise. Buyers and sellers alike wonder if the current environment is another bubble that will burst and send prices crashing, an anomaly that will self-correct in the near future, or a trend that will continue into next year.
For experienced real estate investors, it’s pretty easy to eliminate the first of those possible options. There are no indications that the real estate market is unstable or balancing on the precipice of disaster. The market is not flooded with subprime loans, and all signs are that we are experiencing the results of pent-up demand combined with lower than normal supply.
When demand outstrips supply causing prices to rise, one of the first things to happen is investors show up with cash to buy up the diminishing inventory. This is a smart move because it’s easy to see that prices will continue to rise. But there are limits.
Investors and buyers without the option to wait for prices to come down tend to drive prices to the point that an appraisal gap surfaces. This condition is what we’ve seen through the summer months. Buyers with cash or enough money to cover the gap are offering prices over the asking price. But an increase in price driven by cash buyers is not sustainable. Eventually, the market must make room for mortgage holders dependent on the lender’s appraisal being close to their offer.
The other thing that is sure to happen anytime demand outstrips supply is developers will increase the supply. It takes time to build new homes, so supply is a little slower to catch up with demand, but it always does.
As we head into the fall, this is the current state of affairs. Cash buyers have driven prices to the point that many borrowers are excluded, and builders have been feverishly building more homes.
Over the remainder of the year, we can expect that the rise in home prices will slow and become more stable. Appraisals will catch up with the current market, and home builders fill the supply void.
There is no indication that home prices will depreciate; instead, expect slower appreciation. For sellers anxiously awaiting the peak of the market before selling, you might want to move in that direction. Prices won’t go down any time soon, but they will stabilize.
For buyers that have been waiting for prices to come down, sorry — you might want to consider finding a new home now. You will not likely find a better opportunity to purchase in the next several years.
About Andrew Shader
Andrew Shader is an entrepreneur and a successful real estate developer and investor in Fort Lauderdale, Florida. He got his Business Management and Marketing degree from Florida State University. After spending years in the insurance industry, Mr. Shader decided to shift his focus to real estate. Andrew specializes in value-added properties and boosting property value through investment.