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BUTTING HEADS-BUYERS & SELLERS WHOSE MARKET IS IT?

By
Real Estate Broker/Owner with St.Cloud Homes

           

 

Supply side economics equates to  Supply and Demand. If you are a Consumer... You're right. The "Buyers Market" has not addressed the demand is for workforce housing...of which the market has had little to offer. As the market resistance is increased, the supply of housing at or below median value will increase. What happened in 2005 was created in a buyers frenzy born of low inventory of available housing. Since then, new construction (at record levels) has flooded the market. Builders are now offering fantastic incentives along with price reductions to liquidate excess inventory.  Many Realtors, are counseling sellers of existing homes to reduce prices in order to remain competitive in the market. This in combination has resulted in the deceleration of prices and an increase in achievable sales. An Achievable sale is one which makes it to the closing table pending lender, appraisal and inspection caveat approvals.

In Have Buyers Been Playing Fair?  This post generated a great discussion with numerous comments on both sides. What consumers want, and what Realtors need to counsel sellers. Should buyers not make lower than asking price offers? Of course they should- how low is too low? In the example cited the competing offer was 30K lower than the last offer presented. It was by the way, rejected and an offer 40K HIGHER the next day was accepted.It was below Asking Price but within reason so that BOTH parties were satisfied with the compromise. The Real Estate process has always been negotiable. The role of a sellers agent is to help the seller get the most money possible for their home. The role of the buyers agent is to try and buy the home desired for the least amount of money as possible. 

 While some properties are offered at a price too high, they may "whither on the vine" as one consumer commented. Withdrawn or expired listings are testimony to that. We sometimes call them "Market Rejected".  Some sellers have set unreasonable expectations of what their home is worth. Value is determined by what the market will yield. It fluxuates, adjusts, and is not constant.  There are buyers out there, and sales are being achieved in the present market here in Central Florida.    

 Realtors have been counseling sellers to adjust the asking prices of  existing homes downwards so that successful sales may be achieved. No one can dispute that the cost of building materials and rising vacant land costs will increase in time, thereby increasing the cost of new housing. So the value in existing homes can be adjusted more favorably to the consumer.  Resulting in the current market activity.  While it is true, there are still many units for sale, the favorably priced ones are selling as some buyers are beginning to discover.

As defined in Wikipedia Opportunity is defined as follows:

 

opportunity
  1. a chance for advancement, progress or profit
  2. a favorable circumstance or occasion

[edit] Translations

Opportunity is a great term. It applies for both sellers and buyers. The real trick is in finding the balance for both to achieve equal opportunity. Reasonable appreciation for existing home owners, and reasonable opportunity for current market buyers.  There is no good or evil here.  Depending on what side of the fence you represent there is opportunity for both sides to come to a meeting of the minds. The word for the day is COMPROMISE.

  Let's start this at the 50 yard line.

Posted by

St.Cloud Homes

Allison Stewart Broker, SFR, CDPE 

407-616-9904www.kissimmee-stcloudflhomes.com

                                                                                                       

    St. Cloud Homes YOUR Local Real Estate Experts serving Home Buyers/Sellers in Kissimee, St. Cloud Fl, Harmony, Lake Nona, Anthem Park, Bay Lake Ranch, Lake Lizzie, Reunion, Celebration, Lakepointe, Steven Plantation, Acadia Estates, East Lake, Windermere, Bay Hill. Our unparalleled service begins with YOU.

   For a free consultation call us 407-616-9904 or visit our website or  email us

Comments(23)

Allison Stewart
St.Cloud Homes - Saint Cloud, FL
St. Cloud Fl Realtor, Osceola County Real Estate 407-616-9904
You Raise a good point George- The lines of scrimmage have gone back and forth over the past year or so (sellers and buyers)...thanks for the insightful comment!
Feb 23, 2007 07:59 AM
Allison Stewart
St.Cloud Homes - Saint Cloud, FL
St. Cloud Fl Realtor, Osceola County Real Estate 407-616-9904
Aziz- You're right about the local nature of Real Estate but we do see the the rends going from coast to coast. In 05 Florida felt the boom and suddenly it was crazy- waning in 06 and now picking back up in 07. It will be many years before inventory levels decline to that point (05) again. Since I specialize in the resale market when building starts drop that is something to watch. Market shifts from stocks, and rent and occupancy rates as well.  Thanks for the comment and good luck!
Feb 23, 2007 08:03 AM
George Tallabas
RE/MAX Advantage - Nampa, ID
Idaho Real Estate
You are welcome Allison - None of us should be surprised by the attitudes that rise from sellers and buyers. We are all interesting creatures and there is good, bad, pride, greed, compassion in all of us.
Feb 23, 2007 08:04 AM
Allison Stewart
St.Cloud Homes - Saint Cloud, FL
St. Cloud Fl Realtor, Osceola County Real Estate 407-616-9904

George-The comment on "Have buyers been playing fair" were very interesting. The view is different depending what side of the field you represent. Thus the compromise- a little give an take on both sides will achieve the goal in the long run. What is the commonality amongst all- everyone wants  a deal they can live with.

Feb 23, 2007 08:43 AM
Kaushik Sirkar
Call Realty, Inc. - Chandler, AZ
I think that the market is picking up in general...we just need to be ready to provide 1st class service to our clients when they are ready to move.....
Feb 23, 2007 09:17 AM
David A. Podgursky PA
THE PODGURSKY GROUP @ Re/Max Direct - Boynton Beach, FL
THE PODGURSKY GROUP - Make the Right Move!

This is similar in spirit to my post on Opportunity Costs...

I agree with what you're saying.. .and I know that Realtors are getting called all sorts of names for asking for price reductions.  My neighbors just listed their house WELL ABOVE what it is really worth - actually at the price it was worth at the height of the market... the thing is, the Agent took the listing!! Someone will always take the listing...

To say the least, I question the professionalism of that agent... but I know that Realtors are working harder and harder to validate their CMAs

Maybe we need to have Nick M work with the Appraisers to come up with a one page CMA certification that says that a certified appraiser stands behind those numbers and then the Seller doesn't have the objection to pose!

Feb 23, 2007 10:02 AM
Anonymous
Anonymous

What happened in 2005 was created in a buyers frenzy born of low inventory of available housing.

I completely disagree with that statement.  Low inventory did not create the frenzy, but look no further than incredibly lack lending standards.  Everyone who could "fog a mirror" was suddenly qualified to buy one, not make that two.....oh, might as well make it three houses.  Look at the markets who "enjoyed" the biggest runnup in prices.  They are now "enjoying" the largest decreases in sales and prices.  In San Diego alone, over 40% of houses on the market are VACANT.  Because vast numbers of residents suddenly moved away?  Nope, the fools were looking for greater fools and they looked and looked but none could be found.....so the houses sit and sit and sit.  Don't forget all those not in inventory because sellers had to convert to rentals.  Let's not forget record increases in foreclosures......rising by the month to record levels in several states.  Not enough?  How about state after state reporting mortgage fraud as has seldom, if ever, been seen.  This market has long legs and has to run a long way DOWNHILL to achieve parity or balance.

This year alone, over 1.5 TRILLION, that's one thousand thousand million dollars plus another five hundred thousand million dollars in ARM's will reset to higher rates.  A large portion, to subprime borrowers who cannot afford the house and cannot sell....but the market will have no choice but to accept the additional inventory.

......and this is just the beginning.......

George is correct and speaks wisely.  This market will surely balance itself, but at what cost and for how long.  The longer it takes, the worse it will be.

Now, to be fair, it won't happen in every market, but the downturn will continue and the pressure will get greater.  Maybe I'm wrong; but if I'm not.......time will be the teller of history.  Maybe I'm rambling, I'm not a blogger so I'll shut up.  Thanks for the chance to share my opinion

Regards

Feb 23, 2007 02:49 PM
#10
Anonymous
Stan
Sorry, that was my comment....hit submit too quickly.....apologies.
Feb 23, 2007 02:50 PM
#11
1~Judi Barrett
Integrity Real Estate Services 116 SE AVE N, Idabel, OK 74745 - Idabel, OK
BS Ed, Integrity Real Estate Services -IDABEL OK

That's one reason that people should use a local Realtor that knows the local market and not just depend on what they read about the nation's real estate market. Thanks for the post.

Feb 23, 2007 03:02 PM
Jeff Belonger
Social Media - Infinity Home Mortgage Company, Inc - Cherry Hill, NJ
The FHA Expert - FHA Loans - FHA mortgages - USDA loans - VA Loans
Allison... good post with some good views. And it hasn't been easy to follow at times, because of the media also... which has the ability to make people think differently.
Feb 23, 2007 03:53 PM
Brian Brady
Matthews Capital Markets - Tampa, FL
858-699-4590
You might consider entering this in the CARNIVAL: The Economics of Real Estate Group
Feb 23, 2007 04:18 PM
Allison Stewart
St.Cloud Homes - Saint Cloud, FL
St. Cloud Fl Realtor, Osceola County Real Estate 407-616-9904

Hi Stan Thanks for chiming in.  Your viewpoint of the San Diego market is interesting. "Anyone who could fog a mirror" was very good. There appears to be a corrolation to the drop in stocks and the rise in Real Estate. The Dot Com meltdown in Silicon Valley, may have been a contributing factor to the sudden surge in California's Real Estate Market. The Adjustable Rate Loans, in particular the Interest Only Lines of Credit have absolutely had an impact in the glut of homes entering default. We saw that coming. As bridge loans post hurricane season 2004-2005 here in Florida they were helping many Florida Home Owners make necessary repairs after Hurricanes Charlie, Francis,and Jeanne. (All within six weeks of each other) Insurance left many of these homeowners short. That compounded with what we saw on a local level in Central Florida regarding low available housing inventories at that time made finding a home difficult. "Investors" have always been out there. The new wave are a different breed however. 100% financing, no money down, and flips that flopped penetrated the market in record numbers. In addition many large new developments sprung up like weeds in the swamp (here in unincorporated parts of Central Florida) Massive PUD's (planned Unit Developments comprising of mixed use land parcels of townhomes and single family residences) in addition to the larger building companies moving in to develop agricultural parcels.  The Real Estate Market here, in Central Florida is beginning its road to recovery. For 33 years, the National average of home appreciation was 6.5%.  Until 2005.  At that point it jumped to 100-300% over cost.

You are right- the flips that flopped are now For Rent. We see that here as well. But as George pointed out and I can testify to as well- we have the cycles in Real Estate before. Eventually the prices adjust and come into balance. I realize it is hard to fathom 16% mortgages(1980) the cost of the home back then was $50,000 for example but we have seen them. It was incomprehensable to imagine a 5% mortgage rate would ever emerge, but we saw that too.

Feb 23, 2007 10:13 PM
Anonymous
Stan

Allison,

When in doubt, listen to someone who's "been through it" and George has.  *I* remember well the days of 16% mortgages and have to chuckle when people whine and whine about how "high" rates have climbed in the past year or so......LOL

Regardless of what position pundits champion, the market will listen only to itself.  It *WILL* balance itself and could care less who the winners and losers happen to be.  Other than buying a house for my retirement, I could really care less what happens in the real estate market.  If people get rich, that's fine.  If they go broke, tough.  They made their decisions and will live with the results; good or bad.  Mainly I find the conversations entertaining, especially the "bubble heads" who cry the sky is falling" and those on the other side of the coin who champion how "different" their market is.....pretty much both camps sound rather foolish.

If people want to buy now, offer what it's worth to THEM.....

If people want to sell NOW, simply drop their price.....

Feb 24, 2007 06:31 AM
#16
Anonymous
Mike

Stan, if you are not a bubblehead, then I'm a bit scared to meet someone who meets your definition of one! =) Seriously, I think you and I subscribe to the same school of thought. 

"That's one reason that people should use a local Realtor that knows the local market and not just depend on what they read about the nation's real estate market" - Judi, or anyone else: I challenge you to find and post on this blog a single recent headline ANYWHERE in the US, national or local, that says something to the effect of "no problems here!  both sales volume and prices are UP UP UP!" If you can find and post one, I will eat my words.

Feb 26, 2007 02:45 AM
#17
Brian Brady
Matthews Capital Markets - Tampa, FL
858-699-4590

Thanks for the entry in The "Carnival of the Economics of Real Estate".  I'll be posting the entries and winners by Friday and will be sure to notify the winner about his/her new Forbes subscription.  We had fifteen entries; two from new Active Rain members.  You can see all the entries here with a star next to them.

Each entry was masterful.  One person will win the Forbes subscription but all of you won something from your well thought out posts; increased knowledge.  Be sure to comment on each other's posts.  There is a lot to learn from each other.

Feb 28, 2007 04:26 PM
Brian Brady
Matthews Capital Markets - Tampa, FL
858-699-4590

Mike:

I'm guessing that YOU ARE HUNGRY?

Start eating 

Feb 28, 2007 04:28 PM
Anonymous
Mike

Brian,

Actually, at this very minute I am rather hungry but my my... I must say you sound rather bitter.  Although it took 4 click-throughs, I did find the article you are referring to and I will concede that you found 1 example of both sales and price going up in January in part of NYC - good job.  My point was that pointing to this example (or any other one-offs if they exist) and saying, "see? there is no national RE bubble...RE is completely local" just doesn't make sense. It would be like pointing to the one stock that was up on an overall down day and proclaiming that some individual stocks are immune from the rest of the market. Long term there is no such thing as a negative beta, and likewise in RE, sooner or later even the outliers follow the rest of the market.

Mar 02, 2007 05:32 AM
#20
Anonymous
Mikey

BUTTING HEADS-BUYERS & SELLERS WHOSE MARKET IS IT?

I don't have to know whose market it is, I just know whose money it is.

p.s. Mikey != Mike

 

 

XOXO,
"Mikey"

Mar 02, 2007 07:26 AM
#21
Brian Brady
Matthews Capital Markets - Tampa, FL
858-699-4590
My point was that pointing to this example (or any other one-offs if they exist) and saying, "see? there is no national RE bubble...RE is completely local" just doesn't make sense. It would be like pointing to the one stock that was up on an overall down day and proclaiming that some individual stocks are immune from the rest of the market

You can still pick a good company in an overall bear market and make money.I think there are a few good pockets left (two in California) for opportunity that defy the affordability index.  Notice that I wasn't "searching"; I actually called that one back in the fall.

Mikey, I'm getting a bigger kick out of you each day.  I wasn't bitter just hurried.  I knew you'd like it. 

PS- What's the subprime grave count now, like 43? 

Mar 03, 2007 05:37 AM
Anonymous
Mike

Brian,

"You can still pick a good company in an overall bear market and make money" - Care to quantify this?  If you said "in any given day" or "in any given week", I'll concede the point.  Conversely, if you said, "in the long run", again, I will concede the point. But then again, I can fairly confidently say about almost any house or property that in the long run, it's price will go up.  So what?  In the long run, we will also all be dead.  For me personally, it is the foreseeable future, or the next few years that is important.  To give you an example arguing against your point above, even Microsoft (arguably one of the best companies ever from an investment standpoint) went from a high right before the 87 crash, and over the next couple years hit a bottom, falling in value almost 40% before recovering again 2 years later. Same thing for most of 1990, and then again in 93-94. Most recently, it hit a high during the 2000 tech bubble and when that crashed went down 50% and STILL hasn't recovered and it's nearly 7 years later. Get my drift?

I'm glad you are enjoying this as much as I am. I don't really talk about the housing bubble much in person anymore since it tends to really upset most people, but I'm always up for some debate.

PS - "Mikey != Mike" = "Mikey does not equal Mike"

 

Mar 05, 2007 06:43 AM
#23