Let's Get Real About Real Estate - Up, Down, Balanced, Confused?

It would be a complete understatement to say that most of the country was and is relieved that the Real Estate Market turned around this year. But just how much did it turn around and how long will this last?

Several factors right now are brewing and mixing together setting us up for a strange next few months:

• Interest Rates - First of all, interest rates have started to inch up. While, yes, they are still historically low what needs to be understood is that as they inch up a large portion of the buyer pool goes away. What a buyer could afford at a 3.5% interest rate may very not be reasonable to that same buyer at a 4.5% interest rate. For instance, did you know that for every .5% the interest rate increases on a $300,000.00 home purchase there is an increase of approximately $100.00 per month in a mortgage payment? While they may not seem like much it affects a huge number of potential home buyers. The average sales price for a home in St Louis is approximately $195,000 - so, yes, this is an important factor to keep in mind.

• Sales Have Decreased - Sales have slipped in June. While that is typical trend during the summer months it isn't favorable with the increase in interest rates. As sales slip and interest rates increase the days that a home stays on the market (DOM) will potentially increase. As the DOM increases the likelihood of price adjustments starts to materialize.

• Shadow Inventory and Increase in Average Sales Price - The average sales price has increased. That should be a good thing, right? Not so fast. There is an ENORMOUS shadow inventory at the moment being held by the banks just waiting to be released. Once those homes start being released there will be a shift in the market. Why are banks holding the properties? They, too, are waiting for market improvement. Why release a home into general inventory for sale at the current conditions when they can wait a bit longer and ask a higher price? Remember, banks aren't like normal sellers - they don't have to sell which means they can sit on the inventory for quite a long period of time. I have known of homes that have been foreclosed by the bank and they were not introduced back into the marketplace for sale for 4 years. It happens, and it happens a lot! An increase in the average sales price ALSO knocks out a portion of the buyer pool.

• Current Inventory Tight - The current inventory of homes for sale is tight. And, if the trend since the beginning of the year continues it will tighten up even more. While many sellers may think that since there are less homes on the market that it is a "sellers’ market", today's real estate environment doesn't necessarily align with that premise. With fewer homes on the market for buyers to choose from price then becomes the most attractive incentive to buyers. It has and always will be important to price property appropriately but now more than ever if you want to sell your home it must be priced right.

With all of the current factors in the Real Estate Market swirling around it is still a bit bumpy and the outlook is unclear. If your home is currently For Sale and you receive a contract you simply must take all of the above factors into consideration when making your decision to accept the offer or how you want to counter the offer. EVERY offer right now needs to be taken seriously, dissected and transformed into a mutually beneficial deal for both buyers and sellers.