The Seller’s Dilemma

Why Sellers May Think Twice About Taking Advantage of the Seller's Market

May 27, 2021

Aside from the initial lockdowns of the pandemic, the real estate market has remained active. The demand of first-time homebuyers is driving the market, seeing this as the right time to buy a home for several reasons.

Buyer’s Demand

Many buyers want to have more space for their growing families and lock in their investment with currently available low-interest rates. Additionally, as remote work became the norm during the pandemic, many find the freedom to move away from dense urban centers and into suburban or rural areas with lower living costs, as they no longer need to worry about their commute.

Seller’s Market

The competition among buyers has led to homes sold for well over the listing price and waiving protective contingencies. With this increased demand for homes, it quickly became the seller’s market we are experiencing today. Now over a year since the pandemic began, with the busy market of Spring in full effect, there appears to be no end in sight for the seller’s market of 2021.

Seller’s Dilemma

But there is more to the seller’s market than simple supply and demand. With the current market, it appears that sellers are in a desirable position to sell their homes quickly and receive well over their existing worth.

However, the critical factor that complicates this scenario is that the seller now must find a place to live and face the seller’s market, now as a buyer.

This factor has left many potential sellers with cold feet about selling even in a seller’s market, raising the question of whether or not now is the time to sell. Opting to keep their current home rather than take their chances in an already oversaturated market as a buyer. This hesitation plays a crucial role in lowering the overall supply of houses, which has not been able to keep up with the growing demand.

Rising Prices

There are not enough homes available in the US to match the demand, creating a shortage nationwide. This deficit has caused the prices of houses to skyrocket throughout 2021 for both new and existing homes. The median price of a new home sold in April was $372,400, a 20.1% increase from the previous year. According to the National Association of Realtors, existing homes also saw a hefty gain of 19.1% in April: the median sales price rose $341,600. As the prices soar, some homebuyers may not afford the homes even with attractive interest rates.

Under-building New Homes

Since the Great Recession, new home construction has had a sluggish return over the past decade. Between 2007-2012, the number of home builders declined 50% across the nation. During the 2010s, new construction was not able to keep up with demand for new homes. This deficit has further exacerbated the current need in the market and accounts for a significant reason why housing inventory was already low before the pandemic. Currently, production is ramping up to address the need for more homes, but there are still some hurdles in the way. According to the National Association of Home Builders, the limiting factors of housing production are the “Five Ls: lack of labor, lots/land, lumber/materials, lending for builders, and laws/regulatory burdens.” Various combinations of these factors account for why housing production has not been able for inventory to increase at the rate needed.

The Takeaway

Sellers will have to consider all these factors to determine whether or not they want to take advantage of the seller’s market. Do the increased prices of their home sale outweigh the burden of finding their own home after selling? Will the additional money made off the sale cover the increased cost of their new home? For some potential sellers, other factors such as being cautious about covid exposure during showings, as the pandemic persists, may hold them back from listing their home. Regardless, the hesitancy that is halting sellers from putting their house on the market creates a vicious cycle of keeping overall inventory low and driving up the available stock’s price. The seller’s market appears to be here to stay.


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