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Do sellers have an advantage in a buyers’ market?

By: 4 December 2011 No Comment

For the past few years, we’ve heard about how declining housing markets have hurt sellers due to dropping average prices.

There some merit to that point of view – no one likes the idea of a home losing value. However, there are some advantages to sellers even in the buyer’s market that has been in place over the past few years.

Before getting into those advantages, let’s take a look at a few statistics that reveal recent trends in Arkansas. In October, the average price of a home sold in central Arkansas was $159,714 – down 3.37 percent from $165,005 in the same month last year. Sellers, on average, realized 96.21 percent of their sales prices in October in the area.

Meanwhile, in northwest Arkansas the average price of a home sold in October was $153,014 – down 3.76 percent from $158,996 a year ago. On average, sellers realized 94.82 percent of their listing prices on homes that closed in October.

Such statistics may dishearten sellers, but here’s the thing – most sellers are also buyers in that they plan to sell one home and buy another. In some cases, then, the seller that doesn’t realize as much from the sale of a home as he or she would like may be able to make up for it when purchasing another home.

Let’s say, for example, Michael Seller in Benton has $40,000 in equity in a home valued at $120,000. Michael lists it for $120,000 and sells it for $115,000. Rather than realizing $40,000 in proceeds, Michael brings in $35,000. He uses that $35,000 to put down on another house listed for $175,000 by Brenda Seller, who also lives in Benton.

Brenda realizes the area average sales-to-list ratio of around 96.21 percent when she sells her home to Michael for $168,000. Michael, then, brought in $5,000 less than he wanted, but he turned around and paid $7,000 less than expected on his new, larger home.

Will the math always benefit sellers in today’s market? No, but it is important to keep in mind that sellers may come out very well when they purchase houses and take advantage of market trends.

Another positive factor for anyone purchasing a home now has to do with interest rates. Freddie Mac reported that the average interest rate on a 30-year mortgage hit another record, 60-year low of 3.98 percent in the last full week of November. That’s significant in that the 3.98 percent rate was the lowest record in history – financial institutions have only tracked long-term rates for the past 60 years.

We’ll not get into when interest rates might increase as that’s an exercise in speculation at this point. We know they won’t last forever, but no one seems certain about when they will rise significantly again.

Going back to Michael Seller, then, he might not like the price for which his home sells in today’s market, but he could well make it back by taking advantage of recovering prices and locking in a low interest-rate.

Home Sweet Home is written by Ethan C. Nobles and is sent weekly to publications throughout the Natural State on behalf of the Mortgage Bankers Association of Arkansas.

About: Ethan C. Nobles:
Benton resident. Rogue journalist. Recovering attorney. Email = Ethan@FirstArkansasNews.net.

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