By Chad Meier, August 22, 2018
By Chad Meier, August 22, 2018
Or, just another “STRAIGHT OUTTA ESCROW” story.
Certainly our city’s various news outlets will call out trends in real estate after they’ve established themselves, but as a Realtor, I’m confident that the people in my profession are typically the first (and most qualified) to sense when a shift in the marketplace is actually occuring in real time.
Take for example, the opinions put forth recently on a nightly news telecast and in an article from our city’s main newspaper, essentially saying that a trend in home price reductions indicates that we’ll be headed towards a “Buyer’s Market” soon. While it’s certainly true that our summer lull – when everyone apparently goes to Disneyland until the end of August – started a bit early in 2018, and signs suggest the cooling may be a bit more dramatic this year, it’s also just as likely that these are indicators of a marketplace simply experiencing some buyer fatigue (among the locals) as opposed to any sort of credible doomsday scenario. Here’s another angle…
Last week, in a new report from Zillow, it was revealed that there has been a rash of price reductions across the country. According to the report:
Senior Economist Aaron Terrazas further explained:
“A rising share of on-market listings are seeing price cuts, though these price cuts are concentrated at the most expensive price-points and primarily in markets that have seen outsized price gains in recent years.”
What this DOESN’T MEAN for the real estate market…
This doesn’t necessarily mean home values have depreciated or are about to depreciate.
A seller may put a home worth $300,000 on the market for $325,000 hoping a bidding war will occur and an overanxious buyer will pay more than its actual value. That has happened often over the last few years. If the seller gets no offers and reduces the price to $300,000, it doesn’t mean the home dropped in value. It is still worth $300,000.
And other signs suggest that home prices will continue to appreciate over the next 12 months. In this same report, Terrazas remarks:
“It’s far too soon to call this a buyer’s market, home values are still expected to appreciate at double their historic rate over the next 12 months, but the frenetic pace of the housing market over the past few years is starting to return toward a more normal trend.”
What this DOES MEAN for the real estate market…
This does mean that sellers should be more conservative when it comes to the price at which they list their homes – especially sellers in the upper end of each market.
Sellers have been listing their homes at inflated prices hoping a super-hot market will deliver a buyer willing to pay virtually any price to ensure they don’t lose the house. That strategy has worked somewhat successfully over the last two years. However, the time that strategy would have worked may have passed.
Again, quoting Aaron Terrazas in the report:
“The housing market has tilted sharply in favor of sellers over the past two years, but there are very early preliminary signs that the winds may be starting to shift ever-so-slightly.”
Prices are not necessarily depreciating. However, if you want to sell your house quickly and with the least amount of hassles, pricing it correctly from the beginning makes the most sense.
And now for a recent example of seller success…
Pictured above is a sharp little home that belonged to a client of mine until just a few days ago. It went pending after only 3 weeks on the market – as opposed to the old 1 week expectation. You may be wondering if this listing required a price reduction to sell? Nope, we priced it correctly. In fact, it still ended up selling for a few thousand dollars over list price.
Bottom line: Add the 3/4 million folks projected to join our growing population over the next two decades (give or take a few years) + a sound pricing strategy + compelling marketing methods = a sunny long term forecast!
I’d love to chat with anyone wondering what this might mean for their plans, so give me a call!