I recently returned from the Keller Williams conference in Austin, TX, where we discussed many things including the market. One of the main themes that came out of the conference is that the market is "Shifty." What does that mean? Over the past 10 years we could say the market had or has shifted. Now it seems that the market is not sure what it wants to do and is a bit flakey. Rather than say flakey, we call it shifty. It's shifting all over the board. And real estate agents around the country are seeing the same thing, making it difficult to hit a moving target.
What does that mean for a buyer or seller?
Well, for a seller, the pricing and demand has certainly tapered off over the past two months. We've gone from multiple offers (like 10-20) per property, with buyers giving their first born and anything else they could to buy a home, to buyers wandering around aimlessly almost saying, "Yeah, I'll get back to you on that house." What a dramatic change! We're seeing this in all price ranges, from $200k into the millions.
Why is this happening?
Two main reasons. One is that prices in our area have shot up 20-28% over the past year. With our price range, that's a lot of money! So in a year, a $600,000 house jumped to $720,000, a 20% increase in price. The second reason is that the interest rate has also gone up, 1.5+% and for every 1% of rate increase, that represents a 10% drop in affordability for buyers. So one day they are looking for a home at $700,000 and after the rate hike, they are now looking for a home at $585,000! Not even the same neighborhood! That's a bit crazy and buyers have felt the pain. Now sellers are feeling the pain too.
While the market was going crazy earlier this year, sellers and Realtors were getting crazy with pricing. Yes, I'm guilty too. After all, it's my job to get the highest price for my seller. The demand was there and that's what drove pricing up. Now, it's time to pay the piper a bit. Homes are staying on the market longer, and prices are dropping a little too. This will be very hyper-local.
What do I mean by hyper-local?
What I mean is that in one neighborhood or price range, prices may not be dropping immediately. In another, they may be down 10%. Given that, it makes no sense to compare your home to your friend's home or how it is selling or sold. Their neighborhood may be experiencing something different than your neighborhood. That's hyper-local. Our weather is a great example of hyper-local. West of Hawthorne Blvd., it will be cold and foggy and east of Hawthorne Blvd. it will be 85 degrees. Real estate can be like that too.
How do you work with this craziness?
First, don't blame your Realtor. Obviously they don't have anything to do with the market ups and downs. They get to work with it just like you do. Second, LISTEN to your Realtor. They have the experience to get you through this. If they recommend a price reduction, or new carpet, paint, or whatever, listen! Don't battle them. It's not you against the Realtor. It's you AND the Realtor, coming up with a strategy. Get out of the way and let your Realtor do the job they are being paid to do.
If your house is not getting any or few showings, you probably won't get an offer. Price is everything. Did I say price is everything? Again, did I say, price is everything!!! I know, sellers don't like to hear that. The bottom line is that the buyers are the ones buying the house and they really don't care what the seller wants or why they want it. Buyers, if they make an offer at all, will make an offer based on what THEY want to pay. This is reality. Accept it. Arguing with that is futile. Once an offer is received, it's the seller's option to accept, decline, or counter offer. It all goes from there. But keep in mind, NOTHING happens without an offer so create value, get your price in line with the market and the buyers so you at least have something to work with.
Buyers in today's market.
Yep, there are still lots of them and they sure are picky! And they are taking their time too. Earlier this year, they didn't have time to wait and if they did, they got beat out by other buyers. Now, with the slow-down in the speed of the market, homes are staying on the market longer and prices are slightly dropping, and buyers have time to pick just the right house. It's the seller's job, and the seller's Realtor's job, to create value for the buyers so at least one of them will make an offer. So buyers, right now you have a leg up in the market, at least on some homes. Make the best of it while you can.
The speed of change.
I've been a Realtor for many years and over the years the market usually changed slowly. You could watch grass grow while waiting for the market to change. Over the past 5-6 years it seems that the market changes on a dime. One minute it's fast, the next it's slow. Why is that? Great question! The crazy market of 2013 started back in November 2012, at least in my opinion. It changed again in June 2013 and very abruptly. Oh don't worry, there will be more changes to come and they will be upon us before you realize it. In fact, it's changing as we speak! And it's not just the real estate market. It's the stock market, bonds, and even the world. So much can change so fast. Keep your eyes open and listen to your professional.
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Here are a few links to articles and information that you may find useful. These are current so depending on when you read this, they may be current, or they may be history.
For more information and assistance with buying or selling a home, please contact us at 310-928-9035. My team and I are here to help you with your real estate plans. We are a top real estate team in the South Bay and have been helping clients buy and sell property since 1999. Call us, we're here to help.
Frank Kenny Real Estate Team 310-928-9035