The "New Normal"

In my line of work people ask me what I think is going to happen in the real estate market in Broward County. Not only my clients and prospective clients, but colleagues I work with in my office and other companies. My clients and colleagues wonder, "When will the market return to normal?" I always think, "That depends on your definition of normal." The new normal of the South Florida real estate market is a foreign concept to most of my clients and peers, either because of a lack of experience or, I believe in many cases, selective memory.

I first heard the phrase, "The New Normal" on several national news broadcasts in reference to the changes in the airport check-in and security process by the Department of Homeland Security in response to a foiled plot by terrorists to bomb several commercial passenger jets flying from the U.K. to the USA. The more I heard this phrase used the more I began to see how useful it may be in explaining the current and future market conditions to my clients and peers.

For my colleagues the new normal means understanding that in order to sell their clients properties, agents must look at pricing homes 7-10% below the previous comparable sales. It also means that agents must have a well defined customer service plan because the changes in this market require closer monitoring of list and sales prices as well as more personal contact with the client over a longer period of time because homes are on the market two to three times longer than they were a 18 months ago. This change also requires that agents have the necessary training and skill sets required to convey these changes to their clients with credibility. Agents in the market also need to understand that based the current level of available inventory they may have to carry five to ten times more inventory than they are accustomed to in order to make the same number of sales they were making 18 months ago. This increase in inventory creates additional expenses in the form of administrative costs, supplies (lock boxes, yard signs, property brochures) and marketing, which requires an even greater listing inventory to offset increased expenses and maintain previous years income levels.

For my clients the new normal means understanding that time is truly of the essence in the sale of their home in order to maximize equity preservation. It also means an understanding that if they choose to "wait till the market turns around," to sell their home they may need to be prepared to wait as long as five to seven years for the market to return to its current valuation. The new normal also requires my clients to understand that in order to create value in the eyes of a buyer they should either have the lowest price home with similar features and benefits or offer the buyer more features and benefits for the same price as the competition. In this market, to charge a buyer for additional features and benefits that the seller installed in the home for their own enjoyment only serves to make the home more expensive rather than more valuable in the buyers eyes. My clients and prospective clients also need to understand that installation of new roofing, landscaping or flooring do not make a home more valuable but only bring the home up to selling standards. All homes need roofs, landscaping and flooring.

I can't tell you exactly what the "New Normal" is, because it is changing on an almost daily basis. I can only tell you that it's not the market we were in 18 months ago and probably will not return to that type of market for some time. The good news is, as always, motivated buyers and sellers are entering contracts and closing transactions with us every day.