Over the history of real estate, buyers have determined the market.
They decide how much education and investigation they need to complete before making what is now the biggest decision of their life, and then they proceed when ready – or when they see an attractive house, hopefully in that order! There isn’t much education available on how to do it, so people just trust their gut and start looking around – even those who already own a home. HGTV makes it look easy (see three, and buy one), and the disrupters keep promoting that their agent-lite program is all you need. In a hot market, the investigation/education phase usually gets obliterated.
You’d think it would cause people to Get Good Help, to compensate – and many do (thanks!).
But once on the playing field, the buyers are split into two categories:
Those who own a home here now, and are trying to do better.
Those who don’t own a home here, and want/need to get in.
Buyers from the second category are determining the market.
They see every decent home get snatched up by those who got desperate sooner. It becomes a race for those newcomers to get desperate enough so they can compete with those ahead of them.
Buyers in Category 1 already have it good. Even if their home doesn’t suit their current needs, it’s what got them here. The property taxes are lower, the neighborhood is a known quantity, and they are comfortable. Are they going to rise to the same desperation level as those who don’t own a home here yet? It’s doubtful, even if the Prop 19 passes and sellers can take their property-tax basis with them anywhere – nobody is desperate to leave coastal San Diego.
It’s what is causing the inventory to be so thin, and why I’m convinced it’s only going to get worse.
Consider these factors:
Baby boomers are older now – if they haven’t moved yet, it’s probably too late. They will make do with their current residence, and make it last for the duration. Kids will inherit, and one of them will occupy as their primary residence – and the cycle of low inventory for sale will continue for another generation.
San Diego is a mid-range market – there are a number of more expensive areas that makes us look cheap, relatively. It’s those move-down buyers from affluent areas who are filling up Category 2, making it very tough for locals to compete, which prevents them from moving…..which means less inventory.
There aren’t any new-home tracts left to build in Coastal North County.
There will be massive pressure on the Fed to keep rates low for years to come.
The business is being dumbed-down for easier consumption, not smarter.
These factors will keep the inventory low, and competition high for a long time. It also means that the deliberate, informed buyers will keep getting run over by those who are just in a hurry to buy a house.
The old adage of buyers determining the market is being snuffed out.
Sellers can name their price now, and there is probably someone who will at least consider paying it. Until unsold listings are stacking up to the rafters, sellers will ensure that prices keep creeping upward.
A comprehensive assessment of the housing and community of an area. This grade takes into account key factors of a location’s housing market, including home values, taxes, crime rates, and quality of local schools, in an attempt to measure the quality and stability of an area’s real estate market:
I spoke to a seller of a home in Texas that isn’t moving, and offered these tips:
My Pricing Rules-of-Thumb
1. Pricing Gauge for Anywhere, Any Time, Any Market:
If you are getting offers, then your list price is about right.
If you are getting lookers but no offers, your list price is about 5% to 10% too high.
If you don’t have any buyers looking at the home, it’s more than 10% wrong on price.
2. Buyers are watching the days-on-market statistic, which is out in the open, and they are seeing other listings pop into escrow quickly (the median days-on-market today for those NSDCC homes in escrow under $2M is 16 days). Buyers are subtracting about 1% from your original list price for every week the house is on the market. You can ‘refresh’ your listing every month, but you’re not fooling the serious buyers.
3. As a result, sellers should lower their price by 5% every 2-4 weeks until they start getting offers. Mondays and Thursdays are the best days to lower your price.
4. An exciting price creates urgency and enthusiasm among both buyers and agents. Without it, your listing goes stale quickly, usually after two weeks – and then lookers dwindle down to just those occasional stops by agents to help them sell the better-priced house down the street.
5. Buyers are using their online tools to make decisions, which aren’t the same as visiting a home in person – but they only want to venture out if it’s an obvious contender. Can you blame them? As a result, the online video presentation needs to be spectacular.
6. Rotate the photo gallery and change up the description regularly to highlight different features.
7. Make the home easier to show. It’s best if you move out in advance, and use staging.
8. Tune up the home before listing, and keep improving while on the market if necessary – and get new pro photos of the changes.
9. Donna’s hot tip – clean sells! Wash the windows, and replace the flooring.
10. If you don’t want to do the extras, then your price needs to be adjusted to reflect – and it needs to be low enough to solve all the problems.
11. Get Good Help. Your agent’s ability to operate successfully during the coronavirus can be determined by their sales on Zillow. Those who have closed sales with buyers and sellers over the last three months have what it takes to get you through!
In response to the coronavirus, the California Association of Realtors issued several disclosures that need to be signed electronically before showing a home. In addition, Cal-OSHA has mandated strict policies about wearing PPE, cleaning the home before and after showings, etc.
It’s a whole new level of distractions for agents, and because management has made it clear how important it is to comply (five Compass agents have already been turned in by outside realtors for non-compliance), there’s usually more attention on masks, gloves, and booties than on selling. Some agents even insist on pre-qual letters and/or bank statements just to see the house.
I’m all for compliance!
But the buyers are going to tire of the additional hassles……unless they are really interested in the house.
Thankfully, the situation is also forcing realtors to be more adept at video production and virtual showings, so buyers are getting a better feel for a home before deciding to see it in person – which also means that the buyers who do go to the trouble of jumping through the hoops are probably real contenders.
Realtors won’t mind no open houses, fewer looky-loos, and only showing homes to legitimate buyers!
But agents better be ready to go.
It’s already happened three times this year where I sold my listing to the first buyer who saw it!
The old broker saying that “your first offer is your best offer” may be more true now than ever.
Benefits of Selling To The First Buyer:
Maximum negotiating power
Fewer repair hassles
Stop the showings
End the uncertainty
Get Your Money Sooner!
With the improved internet tools, buyers are more prepared than ever to buy your home – and they want to get it over with now, before they have to sign another form or wear another booty!
We are #24 on the Top 30 markets to be affected by the coronavirus, which is pretty far down the list – and we’re still relatively affordable when compared to other higher-end areas.
For those who are thinking of moving to a more affordable area and aren’t affected by the statistics, here are my favorites that still have a 2020 median SP under $300,000, in order of how they rank on the list:
Las Vegas – $283,000 (1st)
Miami – $275,900 (5th)
Orlando – $245,000 (6th)
Ft Myers – $235,000 (8th)
Fresno – $265,000 (12th)
Lakeland FL – $193,000 (13th)
Memphis – $145,000 (21st)
Jacksonville – $210,000 (25th)
Daytona Beach – $202,000 (26th)
Phoenix – $288,000 (28th)
And their surrounding suburbs might be an even greater value!
At least this was based on a survey, rather than ivory-tower speculation:
Where people choose to live has traditionally been tied to where they work, a dynamic that through the past decade spurred extreme home value growth and an affordability crisis in coastal job centers. But the post-pandemic recovery could mitigate or even produce the opposite effect and drive a boom in secondary cities and exurbs, prompted not by a fear of density but by a seismic shift toward remote work.
Now that more than half of employed Americans (56%) have had the opportunity to work from home, a vast majority want to continue, at least occasionally. A new survey from Zillow, conducted by The Harris Poll, finds 75 percent of Americans working from home due to COVID-19 say they would prefer to continue that at least half the time, if given the option, after the pandemic subsides.
Two-thirds of employees working from home due to COVID-19 (66%) would be at least somewhat likely to consider moving if they had the flexibility to work from home as often as they want. Only 24 percent of Americans overall say they thought about moving as a result of spending more time at home due to social distancing recommendations.
Many employed Americans are trying to square the desire to work remotely with the functionality and size of their existing homes. Among employees who would be likely to consider moving, If given the flexibility to work from home when they want, nearly one-third say they would consider moving in order to live in a home with a dedicated office space (31%), to live in a larger home (30%), and to live in a home with more rooms (29%).
A Zillow analysis finds 46 percent of current households have a spare bedroom that could be used as an office. But that percentage drops off by more than 10 points in dense, expensive metros such as Los Angeles, New York, San Jose, San Francisco and San Diego, where far fewer homes have spare rooms.
When it comes time to move, home shoppers who can work remotely may seek out more space — both indoor and outdoor — farther outside city limits, where they can find larger homes within their budget.
“Moving away from the central core has traditionally offered affordability at the cost of your time and gas money. Relaxing those costs by working remotely could mean more households choose those larger homes farther out, easing price pressure on urban and inner suburban areas,” said Zillow senior principal economist, Skylar Olsen. “However, that means they’d also be moving farther from a wider variety of restaurants, shops, yoga studios and art galleries. Given the value many place on access to such amenities, we’re not talking about the rise of the rural homesteader on a large scale. Future growth under broader remote work would still favor suburban communities or secondary cities that offer those amenities along with more spacious homes and larger lots.”
Zillow Premier Agents from Silicon Valley to Manhattan say anecdotally, they’re seeing the early beginnings of a shift.
“We are seeing more buyers looking to leave the city,” said Bic DeCaro, a member of Zillow’s Agent Advisory Board serving Washington, D.C., and Northern Virginia. “Buyers, who just a few months ago were looking for walkability, are now looking for extra land to go along with more square footage.”
Keith Taylor Andrews, a small business owner in Denver, started home shopping on Zillow the week Colorado issued a stay-home order. The first-time homebuyer is now under contract on a house in Fayetteville, Arkansas that he plans to use as his home office.
“We learned from COVID-19 that we could operate our business remotely,” said Andrews, who has 40 employees working from home. “Arkansas is a good place to move, it’s economical and there are far fewer people. It feels like a breath of fresh air to get out of the city.”
We’ve touched on two differences that the coronavirus is causing in residential real estate sales; the cumbersome arrangements now required just to see a house for sale, and how wearing masks will help buyers hide their interest in a home.
What else is changing?
The real estate flyers are gone now, and public open houses are heading for extinction too – and the 3D tours are being heralded as a worthy substitute. It’s too bad too, because the industry never fully grasped the biggest benefit of open houses – helping to create urgency in the buyers, especially when the home is fresh on the market.
The 3D tours are very crafty, and buyers should love them for offering maximum convenience within minutes – or seconds. Sellers don’t have to leave their house every Sunday afternoon, and agents won’t have to work weekends any more.
What’s wrong with that?
Have you ever seen a perfect house? Me neither.
The 3D tour allows the viewer to scroll around the home at their own pace, which is a plus. But it’s too easy for viewers to give up when they see something unusual or have trouble navigating.
You gotta give the house a chance.
Rather than relying on a thorough walk-around with an agent who is explaining every nuance, the home-buying decisions will be based on fancy imagery on a computer screen.
Won’t the interested parties pursue an in-home visit? Yes, and they are the most likely real buyers.
But it’s the internet viewers who click out too quickly who will miss out – and fewer buyers relying on less information isn’t a positive for home sales. Instead, the sales process gets dumbed down further, and those who support the 3D tours as an adequate substitute for agent advice are contributing to the downfall.
It’s all going that way anyway, but at least you can say you saw it coming!
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