Orange County Housing Report: It is Time for Sellers to Listen Flooded by unrealistic sellers, the housing market has changed. A Lecture for Sellers: Get REAL or throw in the towel. In the past month, the inventory has skyrocketed up 21% and demand has dropped by 16%. The last time this many homes came on the market over a two week period was seven years ago, the Spring of 2007 during the subprime meltdown. What is causing the rapid change this time? Way too many overpriced homes are hitting the market at the same time. Demand is dropping because there is a drought of properly priced homes. The problem is that everybody has finally caught wind that the home values are way up. From real estate mailers to newspaper articles to the nightly news, multiple offers, sales prices above the list prices, ridiculous price appreciation, and a lack of inventory have all been widely reported. Reports from family and friends abound explaining how neighborhood homes are closing at higher and higher prices. Everybody is talking about the real estate recovery. These reports have enticed a herd of homeowners to come on the market who all have thrown discretion out the door. They don’t carefully arrive at price; instead, they push value to the edge of reason and arbitrarily arrive at price. Within the last few months REALTORS® started taking listings even if the homes were absurdly priced because the inventory was at a historic, extremely anemic low. An overpriced listed home was better than no listed home at all, counting on future price reductions to eventually achieve success. This phenomenon started in mid-March and the active listing inventory has grown by 68% since. There are so few accurately price homes listed for sale at or close to their fair market values that demand plunged to its lowest level since the end of January. It is time for sellers to get real. The market has shifted because homes are no longer priced based upon recent pending and closed sales. Instead, many are using the list prices of other overpriced neighborhood homes to arrive at price. Others are pricing based upon what they would like to net from the sale of their homes. Homes were appreciating extremely fast over the past year as list prices were constantly pushing the limit. But, that is because we had hit a bottom. Given the incredible historically low interest rates coupled with dirt cheap values, homes were being snapped up so fast that there simply were not enough homes to keep up with demand. Around mid-March, values climbed to levels where buyers were no longer willing to pay a giant premium over the last sale. Instead, overpriced listings have languished on the market. At their current list prices, they will not sale. It is time for sellers to make a choice because this shift in the market is not temporary: reduce the asking price close to the true fair market value or throw in the towel and pull the home off of the market. Typically, during the Autumn Market, when the kids go back to school, there is a dip in the active listing inventory as sellers either reduce or throw in towel. This year could be different because the rate at which the active inventory is climbing is increasing. The current momentum is worrisome and there is a chance that the inventory may continue to grow through the end of the year. Demand will not improve until sellers start getting realistic. Sellers need to arrive at the fair market value and decide if they still want to sell. Since demand is dropping as the inventory rises, crazy appreciation will be replaced with a much slower rate of appreciation. Overpriced sellers cannot just wait for the market to appreciate to their level either. If an overpriced seller is unwilling to reduce, the only alternative is to pull the home off the market. wendy.pierce realtor Thank you Wendy !
Posted on: Tue, 30 Jul 2013 19:02:12 +0000
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