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In 2006 we’ll see more of the same of what we’ve seen since July of 2004, just magnified:

Sellers and agents listing houses too high, and not selling.  Then every once in a while a seller gets lucky and sells for a retail price – and you think the market is fine.  But it’s NOT fine – buyers in general are demanding lower prices and are holding out more and more. 

The market is going to be flooded with inventory in January.  Between January 1st and 7th, 2005, we had exactly 100 detached houses go on the market in Carlsbad, Oceanside, and north Vista.  It will be a interesting test of sellers’ paranoia in the coming year -  I’m guessing we’ll see at least 200 houses go for sale the first week of 2006. 

That’ll cause more frustration and less sales.  Sellers will be forced to either lower their price or wait it out, hoping for a lucky sale.  And sellers are much more inclined to hold out longer, making the market a big sludge pot of stale, old listings. If you have a lousy agent, you’ll both be left hanging – hoping for a miracle.

You’ll see plenty of desperate-looking sellers and agents, which could spook even more buyers to the sidelines.  Most agents have never seen this kind of market, and they won’t know what to do or say. The tension will be running high, and the buyers will be left to figure it out on their own, and they’ll go conservative and be inclined to stay on the fence.

The higher your price, the tougher it’ll be.  The market over $1 million will be jammed with choices and less demand – how many people can afford $1 million-plus? Especially if they can’t sell theirs for what they want?  I strongly recommend that anyone looking to buy or sell a high-end home be very deliberate in getting the best representation you can from a long-time experienced veteran of the real estate business.

There will also be discount brokers/carpetbaggers who bring their medicine show to town, trying to convince sellers that all you need is their "unique" bundling of services.  It’s the exact opposite – all you need is a good salesman!

This business is tough because buyers and sellers are making life-changing decisions with little, if any, experience in real estate.  When the market is booming, it’s easier to make those decisions.  Now that the decisions are becoming tougher, getting assistance from an experienced agent will be more helpful than ever. 

My 2006 prediction - 20% less sales, 5-10% lower median price, much more challenging environment.