The housing market has definitely rebounded since hitting its lows back in 2008 and 2009, but just how positively you view the economy depends on where you live. There were some pockets of the nation that barely saw any decline in home prices, and other locations such as San Francisco and Las Vegas that got hit hard.
A new report gives some interesting insight into the housing market, indicating that the best sellers markets are actually the ones that were hit the hardest by the economic crisis. California, which you would typically not think would be a good place to sell a house dominates the current listing by Zillow (Z) of the best places for sellers.
Of the top 30 markets for sellers, Californian cities held 24 of those markets.
The top 5 sellers’ markets are:
- San Jose, CA
- San Francisco, CA
- Sacramento, CA
- Las Vegas NV
- Phoenix, AZ
Homes in these markets are selling very fast, typically in under 2 months, and in many cases the homes are selling for greater than the initial listing price. While these areas may be the easiest places to sell a home, the ease of the sale does come at a cost… and that cost is the dramatic price adjustments that took place over recent years.
With prices at their current level, buyers have been coming back into the market. But another thing that is working in favor of sellers is that there is a lot of investor interest in the regions. Big investors have been entering the market and buying properties in bulk to convert them into rental properties.
There are also a lot of properties in these regions that have negative equity. This is also known as being “underwater” and occurs when a property value falls under the amount of the remaining mortgage. These homeowners are in a position where they can not get out of their homes, which helps keep inventories low, which works in the advantage of sellers.
While west coast cities dominated the list of sellers’ markets, for buyers it is better to venture east where cities like Chicago and Cleveland offer the best deals.
The top 5 buyers’ markets are:
- Chicago, IL
- Cleveland, OH
- Philadelphia, PA
- Cincinnati, OH
- New York, NY
Homes in these markets are not selling nearly as quickly, and a typical home sells in around 4 months. You can also negotiate better in these areas, with final sales prices being 4% of 5% lower than the final listing price.
The biggest reason is that inventories are higher in these markets. The housing crisis did not hit these regions as hard, so there are not as many “underwater” properties. There is also not as much investment activity in these markets because they are not typically considered to be areas where people would buy a second vacation home, and there is not as much international interest in these markets (New York City being the exception to that rule).
The thing to remember is that in this situation, sellers may prefer to be in the tougher markets. The ease of selling a house is nice, but we have to remember why the process is easier in cities like San Francisco. If you were a seller, would you rather live somewhere you could sell a house in 2 months that has fallen 40% in the last few years, or a city where it may take you up to 6 months to sell a property, but only at a 10% lower price than a few years ago?
Your answer to that question would depend on your situation. If you are re-locating and need to get out of your house quick, then obviously you want the shorter time frame. On the other hand, if you just want to get out of your house, but have the luxury to wait a while, then you would want to be in the tougher market.
Even in the markets where sellers have the advantage right now, that will not last forever. The low inventories are going to eventually drive up prices, and as prices rise more homes will go on the market, and eventually it will all even out.