Watching, Reading, and Listening
Watching, reading, and listening to news reports of falling prices, building inventories, and an overall sense of doom and gloom in the real estate market contrasts with our current experience in the Micro Markets we track. If you study the numbers closely you will see that little has changed in the year over year numbers for May 08 versus May 07. Yes, the number of sales has decreased by 37% however the rest of the statistics don’t reflect a big change in the market (see below). The key factor in the market right now is inventory. Inventory in the markets we survey is still low on a relative basis and this is what we believe is holding the market up compared to surrounding areas where foreclosures and short sales are much more prevalent.
Here are some highlights from our Micro Market Report:
1. The number of sales are down year over year. For the month of May that decrease was 37%. Sales volume in 11 markets we track fared better for May 2008 than April of the same year.
2. The median sales price was down year over year for the month of May by 3%. However in 10 of the 19 Micro Markets we study, the median price was actually up looking at May 08 versus May 07. The markets that were up included: Beverly Hills, Sunset Strip-Hollywood, Bel Air Holmby Hills, Brentwood, Cheviot Hills-Rancho Park, West Hollywood Vicinity, Venice, Santa Monica, Pacific Palisades, and Hancock Park - Wilshire.
3. The list price to sales price ratio declined 2.6% year over year looking at the May numbers. The ratio of sales price to list price was 97.9% in May 07 versus 95.3% in May 08.
4. 43.7% of all the listings that sold in the markets we are watching sold in less than 30 days in May of this year. This is a very important number. It clearly shows the importance of pricing when it comes to selling a home. It also shows that good homes at the right price are still selling quickly and in some cases in multiple offers. There is still demand in the market for good homes at the right price.
As a buyer in today’s market you are probably not going to get the “deal” you are hoping for based on the headlines you are reading. Prices are firmer than the media reports would lead you to believe. Buyers who anticipate further declines in the market run the risk of higher interest rates and more restrictive lending practices. No one has the ability to predict the market. Many buyers who were hoping for lower prices are now locked out of the market because they can not get the loans that were available to them a year ago or prices have not dropped as much as they had hoped. There is always a risk in waiting.
For sellers, the lesson of this market is price. Homes are still selling and selling quickly, however the market is extremely price sensitive. The only people who should be putting their homes on the market right now are those individuals who absolutely want to sell. If you need to get a certain price for your home, now is not the best time to be on the market. Please know there is no news on the horizon that points to higher prices in the short term and therefore sellers should not have any false expectations around receiving higher prices than the market will bear.
Filed under: Industry and Economic News, Micro Market Updates, Teles News and Press Releases on June 19th, 2008
I definitely agree with the comment that for Sellers the market is price sensitive. I also agree that as a Seller if you need to get a certain price and this price pushes the boundries of what the “true” market value is, then now is not the time to sell.
During the last several months, we sold two homes that languished on the market for over six months. Obviously, these homes weren’t priced correctly.
Every home appears to have a magic number where the Buyers swarm in order to compete for the home - and compete they do. In each instance, these Buyers found themselves in a multiple offer situation.
More recently, we are in escrow in a home where the Sellers were very agressive with their price reductions. They too just found their magic number and sold their home in multiples. Granted, none of the aforementioned prices were the original list prices but all realized nice profits. (thus goes the adage that a Seller really makes his/her money when the Seller bought their home (a smart buy) - not when the Seller goes to sell)
A real Seller is one who will rely on the expertise of their agent’s market analysis. Of course, not all agents are created equal so it’s critical for a Seller to partner with an agent who is immersed in the day to day machinations of the industry. This is also an agent who is not afraid to price the house at its market value even at the risk of loosing the listing.
I know it’s counter intuitive for a Seller to price a home at the “market” price the agent believes will sell the home especially if this price appears to be a low number. Most times, Sellers believe that they need room to negotiate down. I disagree.
Using the internet, Buyers are more “market” educated than ever. 100% of Buyers that I work with use the internet. These Buyers track homes and areas. They are savvy and I love it!
If Sellers add $200K to their list price with the thought that they’ll be negotiated down to that number then these Sellers are going to chase the market down and possibly sell for even less. Often times, Buyers won’t even write a “low ball” offer for fear they won’t be taken seriously.
In my opinion, in this market if Sellers want to sell then those Sellers need to dangle a carrot in front of those educated Buyers to write an offer and in this market that dangling carrot is price.
Don’t chase the market - get out ahead of it.
Of course, I’m interested in other’s comments and experiences.
Chris Pickett
Teles Properties