Where is the market going?

In the direction of the starter home. As we noted in a recent post, we're seeing a ton of activity in the first-time home buyer segment right now.

Another way we can look at the direction of the market is to look at the MLS data for single family homes "under contract". These are homes that are recorded in the MLS as having an accepted offer. Some of these offers still need to clear hurdles such as financing, inspection and sale of home contingencies. Others have cleared all contingencies and are waiting to close.

As the data below shows, the segments with the highest percentage of homes under contract are the segments with homes priced under $275,000. For example, take the segment of homes between $200,000 and $224,999. Twenty-six percent of these listings are under contract. In other words for every 1 home that is under contract in this price range there are 3 other homes that are working to get an accepted offer.

Contrast this to the segment of homes priced between $600,000 and $699,999, where the percent under contract is only 6%. For every 1 home in this price range under contract, there are 16 other homes fighting to receive an accepted offer.

The implications for sellers in the higher price categories are huge. Supply is high and demand is weak, so pricing and presentation are critical.

Yes, we will see owners of starter homes moving up into larger and more expensive homes upon the successful sale of their current home. The $8,000 tax credit will end up providing a boost to all segments of the market. But keep in mind many of the sales in the starter home segment right now are short sale and foreclosure situations. The occupants of these homes are not moving up in the housing market. They are getting out or being forced out due to financial hardship.

If you own a home listed for over $400,000, and you need to sell, now is the time to evaluate everything about your plan. We can expect the $8,000 tax credit to "trickle up" into the higher price categories, but we can't count on it as a panacea for the market.

For more articles and resources devoted to sellers, check out the selling real estate page on DaneCountyMarket.com.

Have a good day,

Dan Miller, Keller Williams Realty and DaneCountyMarket.com