People are Competitive and So is Buying a Home
Competition is at the root of our evolutionary heritage. Competition is one of the most basic functions of nature. This was a well-studied subject in the 1800's by Charles Darwin, the father of natural selection. It can sure feel like survival of the fittest when helping a buyer compete in today's market among multiple offers for the home they want. Competition is a powerful instinctual drive in human nature and it permeates every level of our society, economy and world. We witness competition for food and survival in the animal kingdom. As children, we learn about competing in games and through sports. Children grow to become young adults who compete for class rank in high school and acceptance into universities and then after graduation for jobs. We compete for mates when preparing to create a family. We compete as individuals and in groups, even countries compete from across the globe. Competition typically cannot be evaded in life and we're reminded of this when in the pursuit of a highly sought after home.
Present Economic Conditions in the Housing Market
There are certain economic conditions in today's housing market that contribute to a relatively higher level of competition than normal. In particular, as shown in the graph below.
This fact has been exacerbated by lagging housing starts from builders still recovering from the Great Recession. Combine this with still near all-time low interest rates sparking buyers in addition to the accumulation of pent up buyer demand unable to find adequate supply in recent years. The market is left with conditions that continue to be ripe for a very competitive home buying experience. The statistic that best illustrates the supply and demand problem is months of supply (inventory). Months of supply is the measurement of how many months it would take for the current inventory of homes on the market to sell, given the current pace of home sales. For example, if there are 60 homes on the market and 10 homes selling each month, there is a 6 month supply of homes for sale. Months of supply is a good indicator of whether a particular real estate market favors buyers or sellers. Typically, a market that favors sellers has less than 6 months of supply, while more than 6 months of supply indicates a surplus of homes for sale that favors buyers.
Housing stock in Northern Virginia has historically averaged 5 months supply. However, in the last five years, average inventory has dropped to just 2 months. Making it even more challenging for buyers, in the last few years inventory has dropped to 1.5 months and the current Q1 2019 period clocked just 1.3 months. It should be noted though, that's across all price points - property values from $100,000 to $2+ million. There are several neighborhoods in Northern Virginia with property values under $500,000 and inventory levels of just 0.5 months. Homes in these neighborhoods can move at a high velocity and can be very competitive among buyers to say the least.
The Probability a Buyer Will Confront Multiple Offers Illustrated a Different Way
These two tables below really say it all when trying to determine the frequency of multiple offer situations. The data represents total home sales in Q1 2019 with corresponding Days on Market (DOM). In general, when a home has secured a ratified contract within 20 DOM there is a relatively higher probability the seller received multiple offers prior to ratifying with the winning buyer. Although, it's not uncommon that a seller receives multiple offers in the other periods with higher DOM. For example, a seller can commonly receive multiple offers immediately after a price reduction when buyer interest is renewed. However, to be sure most multiple offer activity occurs in those first three bands of time.
The table on the left represents activity in the entire Northern Virginia region - 1,693 of the 3,993 total homes sold in Q1 secured a ratified contract in less than 20 days. This represents 42% of the total sales - 30% occurred in the less than 10 days band! The table on the right represents activity in the specific Broadlands sub-market of Northern Virginia. The median sold price during Q1 2019 in Broadlands was $493,000. A total of 15 sales transacted in Broadlands with 12 of the 15 occurring in less than 20 days. This is a staggering statistic - 80% of the sales occurred in the super high velocity territory where one would expect a frequent instance of multiple offers.
Extraordinary Agents Significantly Increase a Buyer's Chance of Winning
Agents are not created equal. Varying capabilities mean buyers can receive a completely different level of service and outcome from agent to agent. An agent who does the ordinary will yield ordinary results. Extraordinary agents produce extraordinary results and these are the results that most benefit my buyers. When I work with my buyer clients, we identify their desired outcome and then everything goes into the process of delivering on that outcome. I treat our teamwork like preparing for the most important competition of my buyer's life. It's my job to be the knowledge expert and conduit of information for my client so they can make informed decisions and be positioned with the strongest comparative advantages. Why? Because another buyer/agent team could want the same home as my buyer. Our team must be the better positioned to win seller acceptance! Don't forget to ask for my Whitepaper "Prepare, Present & Compete to Win in a Multiple Offer Situation - Understanding the Key Elements of an Offer".