Are You Losing Value?

Recent reports indicate that residential real estate values in our region are declining at around 10-12% per year. That means that a $400,000 home is worth $4000 less every month. Therein lies the real danger of overpricing.

Since we know from experience that the first two weeks of a new listing are the most important from a marketing point of view (since many buyers--and agents--only check for new listings when they search), it's important to begin that period at the correct price. "Testing the market" at a higher amount for a "little while" can lead to months of delay in selling the property, since it doesn't appear as new to those looking to buy, even when it eventually reaches the best price point. Once you factor in the economics of a market that's declining, you can see the true downside of waiting longer for a house to sell. It isn't just the carrying costs, or putting one's life on hold, it's dollars and cents--1% per month, as a matter of fact. And that doesn't even take into account the number of sellers who turn down the first offer (almost always the most motivated offer, and the highest), because they somehow forget that they are "testing the market", and start to think of the higher price as the dollar amount they expect to receive. If we had a dollar for every time a seller tells us later that they regret not taking the first offer, we might not even be taking listings that are too high!

More Good News

The New York Times yesterday had the most positive article on real estate activity that I've seen there in many, many months. My interpretation was that the dreaded "W" or "L" recoveries may be replaced by a more robust resurgence. The "capital letter" recoveries suppose that the recent upticks in real estate and the stock market will be followed by either a second downturn (as happened in the Great Depression) or a period characterized by bumping along the bottom of the economic cycle.

Those who are now more optimistic seem to think that all the stimuli provided by the government will boost real estate sales to levels that are more than were expected. It may be that the stimuli are even too great, or incorrectly aimed, but they may do their job anyway. As most experts will admit, the effect of psychological factors in economics is far greater than its mathematical bases would predict. We have all known for a long time now that there is a crisis of confidence in our country, and that something would have to happen to get us off the fence, and spending again.

I still submit that it's the weather. It's a good an explanation as anything else.

Compromising

With the recent spate of real estate activity, we were hoping to see sellers more realistic than many are. This is my chance to remind them that, given the current credit climate, it doesn't help them to extract the last dollar in the sales contract, if the home then does not appraise out. Banks are understandably cautious these days, and many people don't have extra money to put down, so they are dependent upon an appraisal that will support maximum financing. Even if they do put plan to put a little more down, buyers will likely balk at paying more than the bank's appraised value for property, particularly in a market less than robust. It's funny (well, maybe that's not the word...) how the problem in getting transactions from A to Z has moved through the process, from listing to offers to inspections to financing. Let's hope that it moves right out of the system!

I'm also wondering whether the spring market will last further into the summer, especially since it seems to rain EVERY day. We got a late start, more due to economics than weather, but often a late start means a longer season for selling. We could use the time to try to catch up to last year throughout the region.