Why Are There so Many Homes on the Market for so Long!

It is always interesting how people perceive things.  I recently had an inquiry from an agent representing a prospective buyer about a listing I have for a property listed at $539,900.  The agent told me over the phone that his buyer was thinking of making an offer for (and I don't remember the exact amount now, but for the sake of an example let's say) $325,000.  It was so far off that what I heard (again here's a perception issue of my own) was $525,000.  The agent went on to say that he didn't think it was worth putting an offer together.  Since I had heard $525,000 I told him to go ahead and lets see what happens.  After talking some more he mentioned the $325,000 price a couple more times, and I finally heard it correctly!  I said "Did you say ‘$325,000?'"  When he assured me he had, I then agreed with him that it probably wasn't worth the trouble of putting together an offer.  (Too much late night TV on the part of the prospective buyer!)

In further discussion it was disclosed that his buyer was in the process of selling a condominium in a nearby neighborhood.  The agent told me the condo was listed for something like $350,000.  I saw a grand opportunity, so I asked the agent if he thought his client might be willing to accept $50,000 for the condo.  We both laughed and the agent said no.

So the prospective buyer for my listing somehow perceived that he had some sort of a chance to make a purchase at a ridiculously low price, but perceived the value of what he was trying to sell at a reasonable and probably slightly inflated price.  Odd, but I guess most of us are the same way, maybe not in regard to real estate (because, hopefully, we have a realistic view of it), but in at least some areas.

I have refused listings recently where the seller offered me the job but would not list at the price I recommended.  I told them I was not the person for them if they are not serious about doing what it takes to sell in this market.  

About half of these people said OK and I took the listing.  Those sold within a month.  I tracked the others and they are still on the market. 

I agree this is a buyers market, but I think we have created a monster.  In 04/05 it was the seller asking for huge amounts of money, now it's the buyers that think they can get something for nothing......And they think by waiting, it's actually going to happen! 

Fortune magazine has a good article on the real estate market that explains how the price-to-rent ratio needs to normalize (rents need to increase and prices need to decrease) before sales pick up again.

http://money.cnn.com/2007/11/06/real_estate/home_prices.fortune/index.htm?postversion=2007110711

The problem with applying the law of supply and demand to home sales is that the demand is for housing, not home ownership.  Home ownership is more valuable than renting, but right now the premium is very high.

What if the seller could offer the buyer something that no other sellers in the area are offering, something that would make his listing stand out from the rest?

If all other things being similar (price, condition, location) what if the seller offered to give the buyer a financial software system that has been tested and working for thousands of homeowners across the country, that will coach that buyer on how to pay off his new 30 year home loan, that he negotiates with his own lender, in half the time or less (10-15 years in most cases) and paying no more than his 30 year payment that was set by his lender. Do you think you might have an advantage over the competition? I'm personally working with several agents that have had success with this concept.

Anyone interested in offering this to their clients to use as an incentive to sell their home faster contact me for complete details. There is no cost to you as the agent and I will handle all the necessary paperwork with your client, and the buyer to close the deal. It's a win win win for everyone. 

Great post! It's tough trying to convince some people that their homes just won't sell for what their neighbors home sold for even a year ago. I'm at the point now where I just won't take anymore overpriced listings. Some sellers just have to learn the hard way. If they just priced their homes right to begin with, their homes would sell quicker. Instead they end up getting desperate to sell, and end up selling at a much lower price than they would have received if they just allowed me to price their home right to begin with.

Even when I go in to a listing presentation with printed articles & comps/statistics on the market today, some people are just too much in a state of denial, which is unfortunate. Very frustrating.

The #1 Reason homes are on the market longer is the lack of Down Payment Funds available that buyers have!

Simply put, the mortgage crisis has almost eliminated all 100% loan programs and the new banking guidelines have become so tight that 40% of all potential home buyers have been elimimated. We actually have a new name for theses folks it's called renters.

There is a solution! If you are interested in what it is click on a link below:

For Buyers

For Sellers

For Realtors and Lo's to grow their business.

Hope this helps :)

Marlo

If it makes any of you feel better, Corona del Mar, Dana Point, Coastal Huntington Beach, Laguna Beach, Newport Beach, Newport Coast & San Juan Capistrano all have had increases in the median price since 2006.  Many other areas in Orange County as well. It's true that sales volume is down in all of these areas except Corona del Mar and Dana Point but things are definitely changing for the better.  My area is usually the last to feel the pain and the first to recover.  Also, properties $3 million and up into the mega millions ($30) are moving.  If cycles repeat themselves, for us in Orange County and surrounding areas, we could possibly be at the bottom right now.  Temecula is probably only a year away.  Buyers are beginning to lose their opportunities.

 I have my buyers email me the articles they are reading.  Most of the time they don't realize that the "reporter" is using statistics from Michigan or somewhere else that least affects us.  It makes for good conversation and it's getting my buyers off the fence. 

Mutiple offers are even back on properly priced properties. 

I have also been taking the last 3 months worth of sales with me and I post it on my Open House Board.  People are surprised to see so many sales.  It works equally well with expireds who blame the market instead of their agent.  "It's not the market, it was your alignment within the market that cause your home not to sell."  It's all the truth. 

Even if the sellers are realistic about the prices and buyers are willing to make the offer, I heard deals fall through because loan is not available.  I wonder how the increase in mortgage/loan limit will change the scenario in the California real estate market.  People can now borrow more money at a higher(?) rate when loan is not available?

For more information on the loan limit increase:

http://www.fhaloanpros.com/2008/02/huge-increase-in-fha-loan-limit-passes-congress/

http://www.mortgagebankers.org/NewsandMedia/IndustryNews/60648.htm

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The current market is still over way over priced, and the marjority of homes that are being sold are most likely people that feel like they need a home now, and that it's the perfect time to buy, or those who are moving from one location to another.  

For the most part sellers are putting their homes on the market just to test it and see if they could get the "magic number" that would make it possible for them to sell for an overpriced amount then re-purchase a "deal". 

We see this all the time with people who try to sell there own cars.  Most private sellers always ask for much more than the car is worth. This is the major reason why larger homes are not being sold as they have seen the majority of the decline in value and the homeowners have lost more in equity.  

We almost never see new purchases over 3500 sq ft come through our office these days.  I have a client right now who has made 4 reasonable offers on homes that are overpriced and the sellers did not even entertain the offer. 

We do offer very competitive rates for homes built in 1990 and later. I have included our rates below for for these types of homes. 

It's a matter of supply and demand.  Prices won't go up until the glut of homes on the market get sold and supply drives prices back up again. 

I think it's worthwhile for homeowners to understand that what their house was worth two years ago is not what it's worth today.

It's nice to see a more realistic attitude about the market today than there was in 2007 when this was first posted.

Good post and infomation that can give us all food for thought. I hope your market picks up because our market is HOT HOT HOT here on the San Francisco peninsula.

Buyers valued their money that is why for them PRICE is a KING...

With so many markets experiencing shortages of housing inventory, if one remains on the market long, it usually has to do with price, condition, or location.  But, of those three, PRICE is usually the culprit!