Will The Market Come Back Soon Enough???

July 9th, 2007

Lots of folks in the western U.S. (southern California & Arizona mainly) are wondering about the triumphant return of the slower than slow real estate market...

When it is safe to sell my house and NOT lose my shirt? When can I actually get a respectable contract in less than 6-9 months? Is it worth it to try and sell at this time just to see what we can get?

WHEN, WHEN, WHEN will things turn back to an even flow between buyer and seller???????

Well no one has that magical crystal ball. But obviously, many "booming" markets of a few years back couldn't sustain 25-30% appreciation year after year. There had to be a slowing of the momentum...an "adjustment" of sorts.

A snapshot of the hotter markets in the western U.S. (Las Vegas, Phoenix, San Diego, etc) have shown sales volume and transactions sides for most of the TOP 100 Real Estate Brokerages in those markets cooling anywhere from 29% all the way up to nearly 40% from a year ago. The top office in the formerly "red-hot" Sarasota, FL actually had business drop more than 50%!

Homeowners aren't alone in feeling a bit squeezed...New home sales are also struggling to keep their head above water. The inventory has swelled for builders looking to hold onto their investments. The incentives often sound just short of a fire sale.

One indication of how the market is moving can be measured by what homebuilders are offering. A few years back (in the hot markets) many builders, who had developed relationships with real estate agents over the years, were no longer "cooperating" by paying the broker's commission. Agents, many of whom had brought lots of buyers in, were no longer needed. (By the way, those commissions are paid from an advertising & marketing budget from builders. They are not - as some believe - paid out by building it into the buyer's price.)

They simply didn't have to pay those commissions because of the massive demand that swept many new homes up as fast as they were available. Homeowner "waiting lists" numbered in the hundreds for many new communities. They didn't need real estate agents, despite the fact that nearly 60% of their previous buyers came from agents.

They also weren't offering the crazy incentives to buyers...new pool, $25,000 in upgrade options, ALL applicable closing costs paid, plus a brand NEW PLASMA HDTV! But for many builders, that's the "norm" today.

Along with - you guessed it - Real estate broker fees. Many builders are offering 5% or more on the total cost...rather than just the normal 3% on the base price. MY MY MY...how things have changed!

A few years back my wife and I were looking at a new community east of Pasadena (CA) and were notified they were going to release 15 new lots on a certain date ( to add onto the other 90+ homes). To be eligible for the "drawing", we had to show up at the lot at 8:30am on the dot with a conditional loan approval letter and a cashiers check for $15,000 just to be considered...no guarantees! We chose not to do that.

So when builders back down some of the incentives for buyers and agents, that will signal a cautious return to normalcy. That's actually a good thing for the market. The Fed cutting rates would also be a good thing, but we'll save that for another time.

Other markets, that resisted the boom have actually been rather strong. Charlotte and Houston are doing quite well with anywhere from a healthy 6-8% appreciation up to a robust 12% or more in some neighborhoods.

But it remains a bonafide BUYERS MARKET for now.

If you have to sell:

- Price it RIGHT THE FIRST TIME!!! Too many people test the market and with a higher price and miss a ton of prospective buyers in the beginning because of it. Being the "new house on the market" is great for agents and buyers. A serious price will usually yield more serious offers.

- Stage the house with elegance and style. Pick up the clutter, clean up the kids' toys and dog hair, take the family pictures off the walls, remove the crayon drawings off the refrigerator, and empty lots of stuff out of the master closet...for starters. And please keep the yard looking nice...maybe even plant a few colorful flowers in the front. If you know buyers are coming, open ALL the blinds/curtains and turn on EVERY light. It's a little trick that shows the cheeriness of the home. Next time you're in a new model home, look around and you'll notice that every light fixture is on (even during the day) and every blind is open...Most new home models also have their interior doors removed to show maximum space. I wouldn't necessarily recommend that!!!

- Consider replacing old dull light fixtures with something new...Polished nickel is popular finish and has a broad appeal in taste and decor. Remember if the lights are on, buyers will naturally look at the fixtures.

- Keep the kitchen counters clean and reasonably empty...Nothing worse than dirty dishes in the sink and that GIGANTIC flower arrangement swallowing up the entire island counter. Put that little used blender, toaster, etc. away. Buyers want to see space and more space. And PLEASE don't store the cat's liter box in the pantry!

- Be FLEXIBLE...Don't focus on the just the price...look at the whole picture. Are they putting down 20%, how long has my house been on the market, how much previous activity has my house received, are they asking me to paying most of their closing costs, how soon can they close, can I deal with keeping my house on the market another few months if they walk, what impact will there be on the family if we can't move into our new place before school starts back...????? These can all be important and relevant issues. Sometimes we lose sight of the "big picture".

- Be PATIENT...Many real estate professionals ARE indeed optimistic about the market improving...perhaps as soon as spring 2008. The economy is strong and will be even stronger with a healthy real estate market. Stocks are up and unemployment is low. But remember, perception often lags reality.

Chances are - you'll find the right buyer (with a little more time than normal) and things will work out. Stay focused and keep the faith!