Pandemic Proceeds Are Gone

Sellers, this may come as a surprise to some of you, but a home will only sell for what a buyer is willing to pay.

Most homes that sell (and when they sell) are typically based on buyer affordability. Location, conditon and price are all factors in getting a home sold with the major consideration weighing on price - and what that price looks like as a monthly mortgage payment.

With that being said, the recent spike in interest rates means a higher monthly payment that many would-be home owners simply cannot afford. Yet sellers seem to still insist on listing their homes at the higher prices from the past two years. With this information, why would they continue to list an unsaleable home? Perhaps it's because no one is having the conversation below with them.

The cash haul sellers saw during the pandemic came from overpricing as a result of buyers outbidding other buyers in a tight, low inventory market paying sometimes 20K to 70K more than a home's true value. Buyers competed as long as rates were low. But once rates increased buyers tapped out and the cash haul opportunity vanished. From March 2022 to September 2022 we saw a 3.25% rate increase and here in Sacramento County the median sales price dropped 6.9% in just three months from May to August.

If you bought your home more than four years ago, you've accumulated some pretty good real equity and are still in a good position to sell as long as you are not looking to add "pandemic proceeds" to your bottom line.

The hard conversation agents must now have with potential sellers, showing them a valuation based on buyer affordability in light of today's interest rates. We must run comps for the past several months, assess the rates and sales over those months and show would be sellers the numbers which reflect how buyer's spending has changed, how affordability has changed, which homes sat on the market, experienced price reductions (or cancelled), and which homes actually sold once the pricing lined up with buyer affordability.

The longer sellers take to pivot, the more price reductions and cancellations we will see and the longer it will take the market to turn, which also means we will see more rate increases as the feds intentionally place the squeeze on the market until mindsets change.

Or you can be the seller who makes the pivot, and gets it sold!

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