The residential real estate mantra for the past couple of years has been that rising home prices have, in large part, been based on a better economy but more importantly from a lack of supply of homes for sale!
And invoking the law of supply and demand, as any first-year economics major will explain, says that the price of something being offered for sale will typically rise when there is a shortage and fall when there is oversupply.
But as nothing lasts forever, the dearth of homes for sale scenario seems to be rapidly changing…Taylor Marr, a senior economist at Redfin said this “…there are some early signs of a softening market, and the increase in price drops may be another indicator that sellers are going to have trouble getting the prices, and the bidding wars, that they may have just months ago.”
Lack Of Emotional Urgency
Another problematic factor that comes into play when prices are falling (in economics it’s referred to as deflation) is that potential buyers do not have the emotional urgency to ‘pull the trigger’ on a purchase, as they may feel the price could come down further in the future.
In real estate, unless there is an immediate need to buy for some specific reason whether school for the children or to get-in prior to mortgage rates increasing significantly, a wait and see attitude can be hard for sellers and their real estate agents to overcome.
What Can A Seller Do?
For sellers, it’s always critical to be realistic about the value of their property and to price it accordingly. It’s irrelevant what it could have been sold for a year ago or even two months ago, but what the market is now!
Depending on how immediate the need to sell will often dictate how aggressive the property owner needs to be on setting a sales price. This with the understanding that potential buyers who are interested will likely bid lower.
This current scenario stands in stark contrast to bidding wars that existed where offers would come in above a homes asking price.
Sellers also need to be creative, potentially staging their property while at the same time making sure that whatever constitutes ‘curb appeal’ for their home is as strong as it can possibly be.
And while in the past selling only to buyers with no mortgage contingency or to cash buyers has not only been possible but more likely than not, creativity with a buyer in terms of financing may also become a necessity.
How To Ensure As Smooth A Selling Process As Possible…
From years of working with a great number of real estate professionals from a wide variety of different markets in New York, my observation is that it’s critical to create a team that will put you the seller, in the best position to win!
What does a win look like?
Going into contract with a buyer for the highest possible price, in the shortest timeframe and with who you have a high degree of certainty will be able to close if funding the purchase becomes an issue.
So, in other words, sellers need to identify and work with a top real estate agent from their area, a top real estate attorney who is immediately responsive and can quickly address issues, align with a top mortgage professional that can be referred to a potential buyer, a top title insurance company they can recommend to a buyer who can ensure a smooth process etc.
For anyone reading this who needs a recommendation for one of these professionals let me know, and I will connect you.
Homes For Sale And Volume Of Price Cuts: 2018 vs. 2009
Finally, who among us can forget the pain and dislocation created by the financial crisis that kicked off in earnest after Lehman Brothers filed for bankruptcy in 2008 (10-Years Beyond The Lehman Brothers Bankruptcy: Seven Points To Ponder!)?
Now, 10-years later, are cracks beginning to appear in the foundation of the housing market?
Anecdotally, the chart below that uses Manhattan, New York as an example, shows the recent spike of in inventory hitting the market. Will this trend continue, abate or move higher in NYC and elsewhere around the country?
Only time will tell…
Michael Haltman, President
Hallmark Abstract Service
Phone: (646) 741-6101