In a hot market where homes are selling for all-time high prices and buyers are being forced to make quick, emotional decisions in order to compete, you would think the issue of “buyer’s remorse” might be a real issue.
But it’s not.
In fact, if the topic is “remorse”, I think you may find more sellers wrestling with this issue than buyers.
Fact is, anyone who has purchased a home over the past few years has seen sizable equity gains with the added benefit of incredibly low, fixed-rate payments thanks to our continuing low interest rate environment.
While many buyers have felt anxiety about our market during their negotiations, I honestly cannot think of one client in recent memory who was anything but happy (and already firmly in the black) 60- 90 days after closing on their new home.
Earlier this week, however, I received an interesting email from a client who sold a home with me about 16 months ago. It was a vintage farmhouse on an irregular, oversized rectangular lot in a mixed use area of Arvada, full of quirks and backing to an apartment building. It had just two bedrooms and measured barely 1,000 square feet, with a mud room slapped on the back and a single tiny bathroom that had made every morning feel like rush hour on I-25 for my seller and her teenage daughter. It was garageless, with only a broken down shed and a pasture of unkempt native grasses in the backyard which provided the infrastructure for someone’s small livestock operation many years ago.
We listed the home for $204,000, and over 21 days we had about a dozen showings.
“Don’t like the proximity to the apartments.”
“Needs another bath.”
Finally, we received an offer. Although it was only about three weeks, it felt a lot longer, in part because the feedback made it sound like this was the strangest house ever. It really wasn’t, but in more cautious times, buyers weren’t afraid to nitpick.
We sold it, but only after some extended negotiation and a few additional concessions. My client was relieved that it was finally sold, and I was happy to help her get on to the next chapter of her life.
Fast forward 16 months and the quirky farmhouse has been listed for sale in a zero inventory environment. No improvements, other than taking down the shed in back and cutting down the tall native grasses behind the home. The only real difference? A supercharged market the likes of which we have never seen before.
Listed for $250,000, the home received multiple offers in the first 48 hours and eventually sold… for $260,000.
“What just happened here?”, asked my seller in her email.
What just happened here is that between January of 2013 and May of 2014, an armada of buyers showed up in Denver. Thousands of them were first generation foreclosure households (estimates are that somewhere between 30 and 40 first generation foreclosure households are hitting their eligibility point for getting back into the metro area market every day), thousands others were renters tired of rising rents and shrinking square footage, while thousands more had just settled in to town from California, Texas, Illinois and other large feeder states that are pumping up Colorado’s population like never before.
This massive demand surge has launched the greatest housing rush in memory, and it’s not going to settle down until more inventory shows up or buyers are altogether priced out of the market.
Will it eventually slow down? Of course – it has to.
But has it happened yet?
Nope. Buyers need to know that as long as inventory remains low and buyers outnumber sellers, prices will continue to go up. But more and more, you’ve got sellers thinking about holding out a while longer, wanting to ride things all the way to the top. Not wanting to feel seller’s remorse for selling too soon.
That reluctance to sell creates a self-fulfilling prophecy, where sellers don’t sell because prices are rising and prices rise because sellers aren’t selling.
So when does the top arrive? In my mind, you’ll see it first in the inventory, because when buyers finally grow weary and the market top arrives, sellers will sense it and begin throwing their homes on the market en masse. Buyers will become skeptical and their skepticism will be met with even more homes for sale. The market will eventually stall out, normalized conditions will return, and logic will once again have a place at the table.
Until then, you need to pay attention to the inventory. If you’re watching the numbers, you will see it beginning with a subtle shift, then a larger trend, and then, finally, after it is firmly in motion and/or already happened, the Denver Post will report on it.
But right now, the story remains nothing for sale and a seemingly limitless pool of motivated, qualified buyers. That tells me we’re not done yet, and that multiple offer mayhem will be the norm for at least a while longer.