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Low Inventory a Sign that Sellers Need Your Expertise

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By Margaret Kelly

We’ve all heard that inventory is on the decline in several major markets across the U.S., creating a shortage for homebuyers who are on the hunt but coming up empty-handed.

In the January RE/MAX National Housing Report, we found that the number of homes for sale fell each month of 2012, ending the year at a level 29 percent below the inventory of December 2011. Lower inventories are pushing home prices upward because there aren’t enough desirable properties to go around in many markets, particularly those that were hardest hit by the housing downturn.

Lower inventory and rising prices are good news for sellers who’ve been waiting for their home values to go back up so they can move up or downsize. There are plenty of reasons for them to be optimistic this year. As an agent and market expert, you should be armed with all the facts to help educate sellers and address their objections head-on.

For starters, you might have to level with sellers who are still on the fence waiting for prices to go back to pre-downturn levels. That’s probably not going to happen, and if they keep waiting, they might miss the chance to find the right buyer for their home. This is slowly becoming a seller’s market again, and two factors work in their favor: new construction and foreclosure filings.

New home construction had been at a virtual standstill as a result of the housing downturn in 2007. But the National Association of Home Builders reports that it’s seeing a gradual improvement in months supply, from 11.2 months in 2008 to 5.4 months in 2011. The market is still underbuilt, though, and it’s going to take a while before new construction is in full swing.

As more new homes are built in the next few years, traditional resale listings will have more competition. If you have prospective or past clients who are interested in selling, it would benefit them to act sooner rather than later when inventory rises again, slowing price increases.

The slowdown in foreclosure filings also helps traditional sellers who don’t have to compete against a glut of distressed homes. CoreLogic reports that REO sales declined more than 20 percent in 2012 while short sales rose by 23 percent. Banks are more knowledgeable on how to do short sales and loan modifications, which keeps foreclosures at bay and helps increase property values—another positive working for traditional sellers.

Negative equity and being underwater are slowly becoming less prevalent, but potential sellers need you to reinforce that. The housing recovery is on a slow but steady march, and right now sellers have the upper hand.

Low inventory might sound like a scary thing, but we need to look at it as an opportunity to let our expertise and market knowledge shine. Educate sellers about why inventory levels have dropped, show them local market statistics and let them know how you can help them get the best value for their home. If they want to move up into something bigger or downsize into a smaller home, it’s a good time to consider making their move.

Margaret Kelly (CRB) is chief executive officer of RE/MAX, LLC.

For more information, visit www.remax.com.

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