A friend of mine is a lender in a mountain town in Colorado. We’ve been talking about home sales and where the market might be headed. Here is an excerpt of an email he sent me yesterday:
“From what I’m hearing around the country (from lenders,) everyone has seen the buyer market completely dry up. Like off a cliff. Wonderful. At least I’m busy with refinances.”
Why is the buyer market drying up? Rates are at unbelievable lows. Like nothing any of us has seen in our lifetime. Prices are as low as they’ve been since 2004. With low rates and low prices, buyers can now purchase a home they could only dream about 5 or 6 years ago.
But here’s the rub - some buyers are struggling with unemployment, some are pulling back on spending and paying off debt or refinancing, and some have changed their mindset from a house being a home to a house being an investment. Those in the last category seem compelled to wait until the market “bottoms out.”
They may be able to time the bottom, but they’ll likely as not miss it. The buyers who are buying now are the ones who realize that this current combination of low rates and low prices affords them the opportunity to focus on home as a lifestyle. To find the home they want to live in and raise their families in, to retire in, to relax and shut out the craziness of the world in.
How do you get those buyers to make an offer on your house today? Here the top 5 things you must know to get your house sold:
1. Know your competition - There has been a lot of talk about “shadow inventory” the past few months. What does that mean and how does is affect you? Homes that are in the pipeline to come on the market, but aren’t on the market yet are in the shadow inventory. Homeowners who are delinquent, but not yet in foreclosure are highly likely to have their homes added to this inventory. Bank owned properties tend to reduce the value of all homes for sale, so this potential inventory poses some risk that we’ll have flat or reducing prices until we work this pig through the snake. The experts suggest that we have between 4 and 8 million distressed properties not yet on the market.
2. Know where you stand - You MUST pay attention to the feedback. Some sellers say, “no one has said anything about price!” They counter that the feedback has been about the size of the basement, the size of the back yard or the master bedroom closets. I’m here to tell you now - this is disguised price feedback! Sellers, know this - There’s an ass for every saddle. If you are getting feedback like the above the only way to address it is through price. The buyers aren’t finding the value in your house yet, so they’re looking for another saddle. If the feedback says your house is dirty or the paint is chipping, then you can clean and paint.
3. No showings means wrong price - Are you getting no showings? You rightfully feel that you can’t react to the feedback because you aren’t hearing any. First, have your broker review the listing as it’s entered into the MLS. Make sure that there isn’t a mistake like the wrong sub area or incorrect directional information. Check that the house is showing up on the typical internet sites. Then consider whether you are ready to plunge into potentially severe price reductions. With no showings at all, you could we way off target. You’ll need to step down your price until you begin to get showings. You can now react to the feedback and see if you hit it, or if you need to reduce further.
4. Keep abreast of new competitors - Shadow inventory doesn’t only include bank owned properties. It’s also comprised of the homes that sellers will be putting on the market while you’re still trying to sell. Studies suggest that a tremendous number of sellers have been waiting until they perceive the market is turning around. In Denver, this shadow inventory has been hitting the market since our news got better. Available properties are increasing as the news about homes sales improves. The good news has been fabulous, but the added inventory will lengthen the time it takes to sell a home, which could result in further price depreciation. 22 million people in the U.S. are at least somewhat likely to put their home on the market at signs of a turnaround.
5. Don’t get behind the rock - No, not Dwayne Johnson. I wouldn’t mind being behind Dwayne. I mean the rock that’s rolling downhill. If your house has been on the market for more than 30 days and/or 25 showings without an offer, you’re behind the rock. Once you’re behind a rock that’s rolling downhill, it’s very hard to get back out in front of it. Get in front of it now. Look at the last chart carefully. This is Case Shiller’s projected increase in inventory for the Denver area. We’re facing an 89% increase in inventory in the next year. Of course, that won’t be released all on the same day or week, but it’s a number to pay attention to. If they’re even half right, we’ll have a lot of homes to sell in coming months.
Your broker’s job is to expose the house to the larger market - via MLS, internet marketing, personal networking, open houses, blogging, mailings, etc. Your job is to react to the feedback. Don’t take it personally. It’s not a reflection on your choice to buy the house (it may be if you live on a freeway.) It’s a reflection on the market and what buyers - the only ones who count - think the house is worth.
Originally published at LifeStyleDenver.