You’ll hear people say that there’s a lack of good inventory for sale.
The total number of attached and detached homes for sale was 23,649 in September, 2007.
Today it’s down to 10,123, counting those pending short sales that are still marked ‘active’ – it’s probably more likely to be in the 8,000 to 9,000 range. SB mentioned that Sandicor has a new status called ‘CONT’ for sales that have offers in contingent on lender approvals, but it’ll take time before agents incorporate it – there was no mandatory requirement to go back through your listings and re-mark them.
Yet there are virtually no good buys lying around – they get snapped up immediately upon listing.
WHAT CAN BUYERS DO? WAIT – FOR THE FOLLOWING:
A. WAIT FOR LISTING AGENTS TO WAKE UP
There are still thousands of homes for sale, but their listing agents are drinking the kool-aid. They read headines that say sales are up, and hear stories around the water cooler about hot deals and multiple offers. They want to believe that it’s just a matter of time before a buyer comes along.
Excuses heard recently from agents trying to justify their list price, and, as a result, not selling:
- “It has six figures in upgrades” (no offers in almost 3 months of trying)
- “Just have to find the right buyer” (1950s home in original condition)”
- “For that money you should be looking at condos” (same agent trying to sell since 9/07)
- “You’re going to have to do better than that, kiddo.”
If a house is on the open market, the only question that matters is, “Have you had offers?”
If the answer is no, then the price is TOO HIGH! Yet even the experienced veteran agents think that their job is to protect their sellers from selling too low, and to wait instead for that magical ‘LUCKY SALE’. “Waiting” works when prices are increasing – but in this market, agents have a fiduciary duty to tell their sellers to lower their price. But they don’t do it.
B. WAIT FOR MORE REOs
Everyone is talking about it, from Bruce Norris to Dan McAllister, from the blogging community to the local grocery bagger.
More REOs coming to market will provide inventory that is hard to find today – properties with the right price, and that you can buy today. In the better areas that have had fewer bank-owneds, a frenzy will break out at the sight of a well-priced REO.
The coming REO listings could get absorbed, with the lack of other realistically-priced listings – everything else on the market is picked over, and buyers want new meat! The recent REOs haven’t been selling cheap either.
You can see them coming too – here are the SFRs on the foreclosure lists: 30 in Rancho Santa Fe, 50 in Del Mar/Solana Beach, 70 in Carmel Valley (29), 130 in Encinitas (25), and 300 in Carlsbad (26). In parenthesis are those valued over $1 million.
If the aren’t enough buyers, the motivated bank-sellers will lower their prices until sold. But they haven’t had to discount many REOs, at least so far. They’ve been very successful listing at 2%-5% under comps – with more REOs in the higher price ranges, that formula may get tested.
C. TRY SHORT SALES
There will probably be more short sales coming to market, than foreclosures – only because it’s still early. If you have time (3-6 months) to wait and see if the bank will approve your terms, then there could be some opportunity. But patience is required.
The banks aren’t rolling over on lowball short sales.
The agent in La Costa Oaks who tried to dump and run at $920,000 had to put the listing back on the market yesterday – for $1,065,000, the bank’s appraised value.
D. EXPAND YOUR TARGET ZONE
If schools are a primary motivator, investigate them carefully. The high schools especially have seen movement – did you know that La Jolla, Torrey Pines, CCA, La Costa Canyon, Carlsbad, and San Marcos High Schools are all rated an “8” at the website www.greatschools.net? I don’t know much about the website’s accuracy, but it wasn’t that long ago that they rated Torrey Pines a “10”.
There are reports of rampant drug use at all SD high schools (my oldest is graduating next week!).
E. PAY MORE
I don’t condone over-paying – most listings I see are 10% to 20% too high, and you have to let them go. But if you are within 1-2% of making a deal, consider the benefit of ending the frustration. It will get more frustrating, not less, should more foreclosures hit your market. The additional competition between buyers will likely push prices beyond the ‘nice buy’ range, and into the ‘retail-ish’ range.
In summary, the longer you wait, the better your chances of seeing more product, but finding the right house at the right price is very difficult. I think that there are many homeowners who are just now defaulting, and will hit the market as short sales or REOs over the next 1-2 years. They should help fuel the supply, but if you can’t find the right house at the right price, it won’t matter much.