A New Market Dynamic

After a brief lag in the first quarter amidst some economic uncertainties, activity for our local housing market is up across the board as buyers and sellers are re-entering the fray. Interestingly, both inventory and number of sales have surged to eclipse their levels from the prior month and prior years. 

As of end of April, inventory is at 437 homes, which is the highest it has been in over a decade and buyers have responded enthusiastically with number of sales up by over 40% as people are finally finding encouraging options to choose from. And in responding to the new conditions, pretty much every agent I know is busy holding open houses, broker tours and showing properties to help their clients keep pace.

Our local real estate environment has developed a more decisive feel about it, reflected in the number of Days on Market for homes dropping dramatically by a full 30% from 40 days to 28 days, which is the lowest it has been in well over a year. In general, homes are getting a lot of attention and selling quickly, particularly when buyers see a good value for their money, and we are seeing a return to bidding wars for strategically priced listings.

I am currently helping a client purchase their next home using the tools of a Reverse Exchange with a bridge loan which I assessed would be viable since their last home has been rented out for long enough to qualify under the rules of IRC Section 1031. This will enable them to defer their capital gains provided they rent out the new home for an acceptable period of time before they can change its designation to become their primary residence.

In order to complete the exchange, they will need to close escrow on the property they are selling within 180 days of when they complete the purchase of the new home-to-be, and there was sufficient equity between the two properties for them to get one of those “Buy Before You Sell” loans.

The cost of the bridge financing and the Reverse Exchange together run upwards of $30,00, but will ultimately save them hundreds of thousands of dollars by allowing them to do the transaction as an exchange. And in managing to negotiate a longer escrow on the replacement home, our clients have an outside shot of saving on these costs entirely if we can get them a quicker close on the home they are selling, in which case they can do a traditional 1031 with no loan needed.

It's an exciting environment to work in as we are now increasingly able help clients unlock their equity to realize their goals, in contrast to what for many of them had been a frustratingly constrained market hampered by high interest rates—and it’s often these types of workaround solutions that help make it possible.