Now the the market has tightened up with very little selection available, (more pendings than active listings in San Diego), who are the people that benefit, and who gets hurt?
The environment is full of anxiety, bidding wars, and shenanigans, and not much hope of it changing much. Those who can adapt will benefit greatly, because most will struggle to be nimble enough.
The winners:
1. Cash buyers. As long as everything else is equal or close, cash buyers will win a bidding war. Being able to buy without an appraisal in an era where comps are thin, and there is mounting pressure on prices, is a big plus to the seller.
2. Those with ample time on their hands. To make good decisions quickly, you have to know the market, which means investing time in looking at the comparables constantly. Yes, you can be a master of the internet, but listing agents disguise the negatives that can only be seen in person – yapping dogs nearby, garage band next door, smelly carpet, etc.
3. Big egos with big money. You’ve seen these guys, they just want to buy so they have bragging rights around the BBQ this summer. They will overpay just to win the race.
4. Easy money. Buyers who inherited their dough, or have otherwise come across their down payment somewhat easily won’t be as discerning when it comes time to invest it. They have heard that is is safe to go back in the water, so they will trust that the money will be secure.
5. Sellers with great agents. A listing agent who can properly handle a bidding war (where all buyers feel they are treated fairly and have ample opportunity to overpay) can run up the sales price another 5% to 10% above list. many sellers are deprived of this chance because their agent doesn’t know how to handle a bidding war, or tilts the table.
6. Sellers with minor imperfections. Buyers are going to live with a few dings now, rather than blow out and have to find another. The veteran home-lookers know that every house has dings.
The losers:
1. The deal-seekers. There is so much competition in every category that the only deals are the major fixers (which are only deals for the great rehabbers) and the shady short sales. If you would only buy if you got a great deal, you should probably evalute how you can work those two angles.
2. Low-down-payment buyers. Listing agents are putting you at the end of the line, and the only houses you’ll have a clean shot at are those that nobody else wants.
3. Out-of-town buyers. You can have everything else going for you, but if you aren’t here in person, it is very difficult to keep up, and be able to strike quickly. Being nimble is the name of the game.
4. The Over-Priced Turkeys. The OPTs are exposed more now than ever, and with lucky sales in short supply, their only hope is that appreciation kicks in – which could happen. The OPTs will eventually be priced right, we just don’t know how many years it will take.
5. Inexperienced agents. Sorry, you get the leftovers. I’d encourage you to work as an assistant to a more powerful agent so you can learn the ropes for a year or two, then get back in the game.
This is the hot time of year, so it’s wouldn’t be a bad idea to hope for things to cool off at the end of summer or beyond – because it did last year. But the selections then were some of the worst ever, and it doesn’t matter when you are looking if you can’t find a house worth buying.
Get good help!
Nothing is certain is it. A few contrary thoughts:
– Cash buyers and big ego buyers of single homes would be losers if the market drops another 10, 20 or 30%. Cash flow properties are a different animal all together.
– Those with time on their hands should not need to make quick decisions.
– The easy money buyers tend to dwindle during bad economic conditions.
The last thing people should do when buying a home is make a hasty decision. Anytime it seems like we are getting back to the “I’d better buy it before it gets sold to someone else” mentality, it makes me take a step back.
#2 beats #1 when the hot money can’t be tied up for short sales that drag on.
Loving #6. Take it or leave it. Sellers aren’t going to jump through hoops fixing a bunch of crap when they know they can just sell it to someone else. Agents submitting big requests for repairs and flexing right now take a chance at blowing the whole deal. Thanks for all the help Jim!
Please keep in mind most of what we are seeing is of the Artificial nature.
– Rates are artificially low
– The goverments and banks are artificially restricting supply by not foreclosing and by not even filing NODs(talked to 3 different individuals in “immune” Coronado who have said they havent made payments for a year at least and no NOD filed).
-Bernanke has so far successfully artificially inflated the US stock indices(watch out below)by the QE printing press.
there is a lot of manipulation going on. However at least for the near term, this manipulation will definitely lead to continued inventory shortages and some “probable” short term appreciation in our local San Diego market.
No one knows what the future brings -but as far as local real estate is concerned- the next six months it should be more of the same with no major changes.
one more loser. buyers who still think it will get better the longer they wait.
“buyers who still think it will get better the longer they wait.”
Waiting another year has been the winning strategy for buyers for the last 5 years. At some point it will be the wrong strategy.
I’ll add that it is better to wait, than buy the wrong house.
Make sure this one will last you!
one more loser. sellers who think it will get better the longer they wait.
FIFY.
Give it a month or two and I believe we’ll start seeing a lot more inventory…but a lot more dodos(tm).