Some Perspective on the Market
I wanted to take a moment to put some of the market changes we’re going through into some perspective.
Naturally as Realtors® we watch the market probably harder than anyone, and if things get really tight, we start counting the pennies in the savings jar. Well, first of all, as a professional, let me assure you that I don’t have any idea how many pennies are in the jar. So we haven’t quite gotten to the total economic collapse of western civilization yet.
Our office manager recently held a meeting to discuss marketing in the changing market, and we got an interesting perspective from Gay Berge’s remarks to our local Realtor® association to the effect that “A bad market is not a market where you have lots of nice homes to sell and single digit interest rates.”
This is an important point to drive home. Yes, the market has cooled somewhat, days on market are up from last year, and total unit volume is down — in almost all the markets we’ve examined. But rumors of the market’s death are greatly exaggerated.
On the seller’s side, what we see happening is the same thing that happens in a good market, only more dramatically. Sellers who overprice their home — sometimes helped by (let me be kind) “overzealous” agents — are finding that their homes don’t sell. What wasn’t well publicized was that the same thing happened before the press started talking about a housing bubble as well, but with low inventory and lots of willing buyers, sellers — especially sellers who were only modestly greedy and not yet quite drooling — could often enjoy the increases over recent comparable sales (”comps”) that they wanted.
What’s happening now is that there’s more inventory, and buyers are seeing many price reductions happen on individual homes. We believe we’re at a point now where buyers are starting to shoot themselves in the foot waiting for prices to come down. Seeing lots of price reductions on individual homes, buyers are sure that “prices are coming down”, so they’re waiting for that to happen.
Before I get into what I think about that, let me tell you I’m not against waiting just because I want more escrows this month. Remember I haven’t counted the pennies yet, and yes, I’d like more escrows and more paychecks for my team, but there are plenty of good reasons to wait — new job coming up with more money, you’re working on getting your credit score to increase with your lender, you don’t have enough information yet, you like where you’re living now and/or you like paying rent. If it’s not time to move yet for you for any number of good reasons, you should wait.
But waiting to buy because you’re waiting for prices to come down at this point is emphatically not a good idea, in my opinion.
The reason I say this is that I’ve seen interest rates go up for five or six weeks in a row, and no one I know expects it to come down to 2002-2003 levels any time soon. Yesterday we quoted Freddie Mac’s forecast that interest will continue to climb gradually over the next twelve months.
Yes, it’s still single digit, and no, it’s not fourteen percent or anything frightening like that — but the difference between the seven-point-something percent that we’re likely to see next year and this year’s six-point-something is quite likely to absorb any fall in prices we’ll see during that time.
