Happy Holidays

As this challenging economic year comes to a close, I'd like to take this opportunity to wish all H. Pearce agents, staff, clients, and blog readers a very healthy and happy holiday season, with best wishes for a prosperous New Year. We value your business, and commit ourselves to providing you with the best in professional real estate services. Please call us with any and all of your real estate needs in 2010!

Open Houses

Even though we are not in the traditional season for open houses, we've been surprised at how many people have been coming to the ones that have been held lately. We think it's a result of the tax credit, and the interest is stronger at the lower end of the price scale, but we're happy for the activity wherever it falls.

The moral of this story is that this may not be the typical holiday season, and that, if you are a seller, you may want to try harder to sell your home over the holidays. Don't make the assumption that the market will be dead until spring. Our November results were 80% ahead of our November results last year--we are clearly in the early stages of a recovery. While prices will lag for a long time after unit sales rise, there are clearly buyers out there.

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!

Last Call

The Wall Street Journal had an article about buying a house for your child for Christmas. I guess it's appropriate that such an article would be in the WSJ, but it's an interesting idea and deserves some thought!

However, for the average person, it's time to think about buying a property as a holiday gift for yourself. If you hurry, and really move on the mortgage and the inspections, you might even get in for the New Year's celebration. We bought our current house that way. We signed the contract around Thanksgiving, and moved in the weekend before New Year's Day. We even thought of the purchase as a present to ourselves, since, at the time, it was our second home. Many people now do that--buying a vacation home now, with the idea that you might retire to it, is increasingly common with baby boomers. After all, how many socks and sweaters do you need? Putting all the gift money together, and doing something big with it, is likely to be the present that you remember--and enjoy--longest of all.

Here's Hoping that Shiller is Right

I saw Bob Shiller in his driveway the other morning, and I asked if we were over the hump. He gave me what I took to be a positive indication, and then I saw the fuller explanation in last weekend's New York Times. It's a version of Franklin Roosevelt's first inaugural speech: The only thing we have to fear is fear itself.

Basically, he was saying that the recession will end if people decide that it's time for it to end, and begin acting as though it has. He cautioned that there are many ways to derail such a phenomenon, and warned that we, or the government, could do that. However, if we all move forward, spending and expanding, we might be able to pull it off.

There are many sticky wickets to navigate in that strategy. For one thing, the banks are certainly not acting--or lending--as though we have returned to normal. The appraisals are low, the terms are high, and the process takes a long time. They also are modifying loans for those who can't pay, but most of those modifications go bad within a year. While we need to think positively, we can't fool ourselves into thinking that we are OK when we are not. My advice to those who have gotten a change in the terms of a loan: Take the deal, then list and sell as soon as you can.

The other big obstacle for a recovery is employment. As long as job creation is low, and layoffs keep going up, we won't have a permanent recovery. It's hard to fool yourself into thinking that the economy is on the upswing if you don't have a job. Whether or not we can fix the jobs conundrum remains to be seen.

Government spending on the national, state, and local level is also a huge block to long term stability. We can't keep spending what we don't have, and it is beginning to look as though our debt could cripple us in the not-so-distant future.

Having said all that, though, we can pull together and pull out of the trench. It takes some faith, some guts, and some hoarded cash. The stakes are big, and each individual action is small, so a lot of us will have to act in order to make a difference on a macro level. But let's hope that we do, so that we can all prosper together.

More Confirmation on Pricing

The lead article in yesterday's New York Times Real Estate section confirmed yet again what real estate practitioners know, but are often unable to convey persuasively to others. It gave examples of sellers who priced their units aggressively in today's market, and kept lowering the prices without success. It contrasted that with sellers who priced so as to seem to be a "good deal", and told about the bidding wars that have been taking place in such cases.

Underlying this phenomenon is a change in the marketplace from the past: Now buyers, who get more information through the Internet and by looking at more places before buying, are more educated about prices than they used to be. They can tell when something is priced to sell, and they know that they have to move quickly. They also know that, often, there will be multiple offers; therefore, if they want to get the property, they may have to bid over the asking price.

This has happened to us so many times that we can all attest to its effectiveness. We cannot, however, seem to convince sellers that they will actually receive higher offers by pricing the property lower. It's not unlike the psychology of pricing store items at sale prices, to stimulate demand and encourage prompt purchases. Of course, the seller can always reject an offer, if it does not meet his or her specifications. The point is to get offers, particularly to get enough offers to assure that fair market value is established.

Separating oneself from the pack is key in this market. Unfortunately for our business, pricing aggressively does that!

A Warmer Winter?

To us, a warm winter is one with a lot of real estate sales! The recent extension and expansion of the homebuyers' tax credit gives us hope for the traditionally slower months. Because of the timing on the new bill, sellers and buyers should realize that they can't wait until the spring market. Buyers who have no home to sell (usually the first-time buyers) can probably put off finalizing a sale, since the contract must be signed by April 30,2010 and must close within 60 days, by June 30, 2010.

Many of the houses listed in the so-called "spring market" are still coming on the market even into May, so it won't be possible to wait until all the possible choices are available for viewing. Of course, if a buyer also has a house to sell, he or she should get started right away, since that could take up the intervening months. In addition, people should factor in extra time for mortgage approval, as we have been finding that the appraisal process in particular is taking far longer than it did before.

All of that leads to the conclusion that buyers who wish to take advantage of the tax credit cannot risk waiting until the spring rolls around. Since sellers certainly need to start soon, that argues for a busier winter than we're used to having. Don't forget that, although the holidays are busy and it's difficult to schedule showings, many homes look their best when decorated. In addition, the snowiest and iciest months are later in the winter, so now is better from that angle. It's also good to remember that it can pay to list when there isn't much around to compete. Once others realize that time is of the essence, you can already be negotiating your sale and moving on to a new purchase.