2018 started out with great expectations, it was supposed to have been a year of massive sales. Economists warned of an overdue recession (not the 2008 kind, just a cut back). That’s not what happened. Economists talk about data, not trends, and there is no why in data.
The spring market started early in February in the Twin Cities, multiple offers were expected. Spring is always our strongest market season. 2018 spring market rumbled along with buyers jostling amid multiple offers for the home of their dreams. Then we got to Memorial Day, and multiple offers turned into a faded memory. Sellers panicked. What happened?
I check market stats daily to see new listings, price corrections, back on market, expired listings, etc. It was a shocked to see an onslaught of price reductions, back on market (that transaction fell apart), expired/cancelled listings. One morning I saw 300 new listings, 280 price reductions, 42 back on market, 56 expired, and xx cancellations. There was still a shortage of listings so it was technically a sellers’ market. But, buyers weren’t buying it. One lender calls it “Buyer Revenge.”
Personally, I think it is “Multiple Offer Fatigue Syndrome.” There are a couple of things happening simultaneously. The Media keeps pounding out Seller’s Market, Name Your Price, Make Me Move! After writing a series of failed offers, buyers get discouraged. They drop out. They are tired of overpriced, fair condition, and lack luster homes demanding top dollar with little flexibility.
The entire country is now HGTV trained as to what makes a happy home: as sparkling new kitchen cabinets with brushed steel appliances, stone counter tops, open spaces, ship lap or reclaimed wood. They don’t want a reclaimed house, just the wood. An 80+ grandma trotted through an open house of a brand new construction with a razor sharp critique of what she would have done differently. “I watch HGTV you know.”
Reality TV has unleashed unrealistic expectations on the public in general. It takes more than an hour to remodel a kitchen. Surprise is a bad word in real estate, why does reality TV never seem to have an inspection? Contractors don’t do interior design and gift all the furniture to buyers. Neither do home owners. Buyers think that sellers need to unload it and it should be almost free. One agent sent in a low offer adding that their client would accept the home with all the furniture so the seller wouldn’t have to chuck it. That went over well.
Sellers think that if buyers want cheap furniture that they should shop Craig’s list. Another buyer asked for all the main floor furniture to be included on an historical landmark. The dining table alone was $20,000. Negotiating ‘personal property’ is laden with landmines, it is a separate agreement, but the lines get blurry. Let’s just leave decor out of it.
On the other hand, sellers who love their homes hope that a buyer will love it too and pay top dollar. Some are counting on every dime for retirement and feel like they are losing money if they get a lower offer. The Make Me Move program with high online estimates are based on neighborhood sales and tax data. It doesn’t have any idea that the boiler is from 1933, or that the main bathroom is still a 1953 blue and yellow theme.
That would be an unhealthy does of HOPIUM, hoping to make a killing without knowing buyer expectations. They don’t see their home as a buyer sees it. A seller became angry and depressed because despite massive online marketing there were scant showings, and one low ball offer on his overpriced home. He refused my suggestions on pricing and some updates. His friends told him it was gorgeous, and should 3x what he paid for it during the recession. I explained that his friends aren’t making offers. In fact, one friend of his went on to buy another home in better condition for $40K less. Don’t count friend’s opinions.
Data is just data until you put a meaning to the numbers. For example: In Minneapolis up to November 2018, there were +2.7% new listing, -2.6% in closed sales with an average price of $325,169, up 7.1% from 2017. The normal appreciation is 3% a year, above that means that there is high demand.
In SW Minneapolis there were 1163 new listings, up 3.5%. BUT, 805 of those listings sold, down 7.2%. Read that again. 1163 new listings, 805 sold. What happened to the other 358 homes??? 30% of all the new listings did not sell! What is going on?
In NE Minneapolis there were 553 new listings, up +4.86% with an average price of $265,258 up 9.8%. 481 of those sold, -6.6%, but still 72 (13%) didn’t sell at all.
North Minneapolis had an increase of sales by 12.1%. 70 of homes reported are new construction. Not all of the new construction in North is driven by government supported programs. Some sold over $300K with a private builder who bought land cheaply. That changes averages and neighborhood demographics.
What do home sellers need to know going into 2019? That it is still a great time to sell their homes and make that next step. But, it’s smart to know what buyers expectations and what is the competition beyond the data and have a plan A and plan B. What’s surprising, is that of all the homes sold in Minneapolis, 148 of them are new construction, 14 of them were priced over $1,000,000. Jobs are up, interest rates
What home sellers need to know:
1. We are in a normal market
2. Buyer expectation is HGTV trained, they expect the Property Brothers
3. Expect to negotiate some things, or price
4. Online evaluations are based on what happened, that train left the station.
I watch the numbers of new listings, price reductions, and back to the market every morning. It is frustrating for sellers if they are off mark, get no offers, low offers or lousy feedback. Let’s make a plan. Prices usually take a bump up in the spring, we’re almost there. Give me a jingle, set an appointment, and get you to your next step.