Yesterday we saw that sellers – who said, “we can always come down later” – are getting more realistic, with the percentage of price reductions doubling over the last six months.
Others will be less optimistic, and give up altogether:
NSDCC Expired/Cancelled/Withdrawn Listings, Sept. 1 – Oct. 15:
2011 – 421
2012 – 237
2013 – 317 (+34% YoY)
There isn’t a problem with the demand – this change is purely because sellers kept pushing their list prices higher and higher. Mr. Market finally said, “Enough” in many areas, and for many product-types.
Expect more price reductions from the motivated sellers, and more cancellations from the market-testers, as we find equilibrium.
What will buyers do?
Most buyers will check out, and wait until next year. There are distractions like school, football, holidays, Dodgers going to the…oh never mind. Primarily, buyers are exhausted from having to be so patient while sellers experiment with finding a lucky sale.
Should everyone check out? No, and here’s why:
1. The market still appears healthy. My best indicator is comparing the new listings vs pending listings each day – it has been a steady 1:1 ratio this month. During the peak-frenzy days, there were more listings going pending than coming to market, but typically a ratio of 2:1 is healthy.
2. Mortgage rates are down. Around 4.25% for conforming and jumbo.
3. The best deals are around the fringes. Buyers will come running for decked-out Carmel Valley tract houses that list for the same price as the last sale. On the other hand, the fixers, inferior locations, marginal school districts, etc. could over-correct if desperate sellers out-number the motivated buyers.
Sellers – Don’t panic, and use the other active listings in the area to your advantage, price-wise. You can sell today for 15% to 20% more than 18 months ago, and if that’s enough to get you where you want to be, you should get it done now. But if it isn’t working out, cancel in the next 30 days so you can come back fresh in February.
Buyers – Stay in the hunt, get good help, and get more comfortable with fixers. If you want a good primer on fixing stuff, and people who can help, you can start with reading the 53 articles and videos here: https://www.bubbleinfo.com/category/vendors/
I heard this in my first month in the business:
Sellers – Sell when everyone else isn’t.
Buyers – Buy when everyone else isn’t.