We have discharged all previous assumptions, and are open to what the future may bring for the local real estate market.
Let’s examine – what are the possibilities, given these conditions:
1. Low sales volume.
2. Low pressure on pricing.
3. Not many foreclosures.
4. Abundant realtor fraud.
5. Lots of buyers willing to buy, but picky on price & condition.
Last year’s Spring Kick was a dud, by all accounts. Sellers came out blazing with high prices, but buyers didn’t bite – and the sales volume was lower than usual. When sellers succumbed, and got more realistic later in the year, then more sales occured (almost as many as 2005):
Buyers are holding tough, but I think we’ll probably see this year’s number of Spring Kick sales be better than last year, helped somewhat by the expiring homebuyer tax credit. But sales will still be low, compared to previous years.
Won’t low sales volume + anxious buyers = rising prices?
It has in the past, but thankfully we have jettisoned all previous theories.
What are the barriers to increasing prices?
The fraud will play a role in keeping a lid on pricing, and I think we’re seeing enough low/fraudulent sales that it’ll temper buyers’ enthusiasm. Buyers would need to see a flood of higher-priced closings for them to panic. A wider price variance could cause more confusion, as sellers focus on high comps, and buyers use the low sales for decision-making – and lead to The Big-Stallout.
The average cost-per-sf statistic is less then perfect, but in the graph above shows a limited decrease in pricing since the peak. It there had been a huge dive in pricing, there would be ample room for a spike, but that’s not the case. If there was a flurry of higher sales it might be noticable, but an occasional high comp won’t create a trend.
Where does that leave us?
Without a Spring Kick game-changer we’re just going to plod along. A few buyers will get lucky with the trickle of well-priced listings, and the remainder will be left wondering what to do.
1. More over-priced listings = The Big Stallout.
2. More well-priced listings (REOs and short-sales) = more sales/frenzy that could possibly lead to upward momentum on pricing.
3. Higher mortgage rates (over 6%) = The Big Stallout.
What can buyers do?
1. Hang in there – be patient.
2. Compromise on parameters – area, size of house/yard, etc.
3. See if you have any deposits left at the Bank of Mom and Dad.
4. Eliminate or reduce other expenses to afford higher mortgage payments.
5. Wait until 4Q10, and hope that a Spring Kick frenzy might exhaust demand.
6. Stay tuned to bubbleinfo.com!
If you’d like some assistance, I’m here for you.