I recently read an article on the real estate market that explains the circumstances behind the slow down in sales and encourages buyers and sellers to work with the market you are currently in and not look at what the market was months or years ago. I think thiere is much truth in this and I hope you enjoy reading it. If you have any comments, please send them to me.
M. Anthony Carr
9/16/06
When it comes to pricing your house when you’re ready to sell it, keep in mind you must sell in the market you’re in today. It doesn’t matter what your former neighbor got six months ago, or what properties are listed for now. All that matters is this-whatever the last sale price in your neighborhood of your model, that’s probably your sale price now. When you’re looking at what you’ll gain on the sale of your house, let’s keep it in perspective. If house prices increased year after year at four percent per year and then suddenly people were selling their houses for one percent less than last year’s asking price, would that be reasonable? If so, then when property is moving up at twenty percent per year for several years and then suddenly you have to sell it for five percent less than the prices last year, would that be reasonable? The challenge is when we move from percentages to dollar amounts. If five percent represented $5000.00, most people wouldn’t blink. It’s when five percent represents $25,000.00 that sellers start to freak. We are experiencing astounding rates of appreciation as a region, twenty percent from 2004 to 2005 prices. Many homeowners have experienced a doubling in property values over the last five years. The average home price is now about $540,000.00, according to the local multiple listing system. Now, price appreciation has subsided and is sitting at a mere five to eight percent region wide. Still sounds pretty healthy, right? You would think. However, there are stories from the field on how sellers are defending their prices as if their lives depended on it. While sellers are sitting on hundreds of thousands of dollars of equity, they can’t stand the idea of dropping their prices by $25,000.00 or $50,000.00 to sell it today. The house that was $260,000.00 in 2001, is now selling for $569,000.00 today. But some sellers now want that same type appreciation and can’t imagine selling it for less than $589,000.00. Bringing it down the $20,000.00 or $40,000.00 to sell the property seems, well, just not fair. Sellers seem to be saying to buyers, “I’ll drop my price, just make an offer.” While buyers are replying, “I’ll make an offer, just lower your price.” It’s this stalemate that has played a part in creating an abundant supply of houses on the market in our area. We’re talking upwards to 200 percent more homes on the market in any given year-to-year comparison. Is it affecting prices? Sure. Are sellers going to lose money? Well, in some cases, but not in most cases. For sellers staying in the same area, keep in mind, if you have to drop your price by five percent, then the seller of the house you’re buying (usually a lot more expensive) is probably going to drop the sales price by about the same percentage point. It means that while you may “loose” money on the sale of your home, you’ll more than likely “gain”it on the purchase up. Keep in mind, the market is the market. When it is time to buy, buy. When it is time to move, then sell. Work with the market you’re in, not in the market you wish it would be.