In the category of “it’s about time” we have the first month with an increase of homes sold in over three years! The July 2009 total of homes sold in Santa Fe City and County increased compared to the July 2008 monthly total. That is the first increase, same period year to year, since June 2006! We were due for some positive news to build on.
The rumors of the national housing market turning the corner are in the statistics, and we see improvement locally too. We are far from recovery, but at least we have taken the first step. The attached spreadsheet shows a slight improvement in the number of months to absorb the entire existing inventory. Let’s make plans for similar improvement with August results and we will have something good to build on. We can make that happen by working together to help buyers make buying decisions while prices are in their favor, and by helping sellers move on if they will lower their asking price to a level that will make the home go away.
There are many people in Santa Fe that dearly want to see numbers that show improvement. As of now, we have unofficially stopped falling (prices, units sold, etc.) and we have leveled off. The specific number: July 2008 total homes sold in Santa Fe City/County was 113. The same period for 2009 shows 121 sales. While that is a nice 7% improvement, we need a few more of those to get back some of the nearly 50% we have given up in sales results over the last 3 years. It was almost exactly 3 years ago; July 2006 was lower than June 2006 and that began a steady decline month by month in total homes sold in our area. I believe we’ll have a respectable August and September and then we will need to regroup. Sellers who have not identified a buyer by this fall will want to rethink their strategy. If you are unwilling or unable to reduce the price of your home enough to attract a serious buyer, you should probably take it off the market.
Why say that? Many of us have come to expect a “profit” when we sell a home. If you think there is profit for you when you sell, and it hasn’t sold in 9 or 18 or more months, forget it. The wish for a “good” sales price has proven to be empty. The market has spoken and the message is clear. If your home has not had any serious interest (a written offer you agreed to) then your asking price is just not going to happen. It might in a year, and more likely in two years. But this year? Not a chance. That’s because others have jumped in front of you by pricing their home aggressively. These days, buyers weigh about 90% of their decision on price. Yes, location and the condition of the home are always important. They won’t buy a home at any price that sits on a former landfill site. To make your home the one they want, it has to appear that you have drastically cut the price and are giving up a great deal of paper equity. Buyers don’t really want sellers to suffer. But they do want to take advantage of the lopsided market and get the largest possible price reduction. They don’t want a home that might be worth less next year.
There is also some psychology to take into account with such a large amount of inventory sitting there. When someone learns there is a 25 month supply, or 40 months or more of inventory already available, they feel no urgency to come to a buying decision. Recall those good old days earlier this decade? Buyers were competing for homes; multiple purchase offers might come in at the same time. Buyers knew they had to move quickly in order to get the home they wanted. Now they know they are in charge. If they miss out on the one they want, there is another home just as nice at a very good price.
If we can get the inventory down a little (15 % maybe?) then the urgency for buyers will start to return. Personally, I had my eye on a house in an area I like. When I heard the other morning that it had gone under contract, I was not upset about missing my chance since there are plenty of other homes still available. The wrap up of this line of thinking is: if homes listed that are not realistically priced would come off the market, then everything will begin to change. My recommendation to Realtors is to get that Withdraw Listing form out and have an adult conversation with your seller. If they can’t believe in the price range that will bring serious interest, why would you spend time and money marketing the home when you know it will not sell? The Realtor with the most listings does not win this game. That was a different time when it was a seller’s market and homes would sell in a matter of weeks. Now that they sit and sit and don’t sell for a year or two or more, having the most listings is a fool’s game.
Are you as amazed as I am why so many people with so much at stake pay so little attention to the details or fine print of business arrangements? Should “fine print” be outlawed? We are aware that not every home buyer knows all of the right questions to ask when they buy. They may take their neighbor’s suggestion that they call Joe or Sandra to help get a mortgage. (Joe and Sandra are fictitious, of course). They might like the ad in the yellow pages for a certain professional providing a valuable service without checking references or asking for other opinions. Then the paperwork shows up and time spent on understanding the language is too short. When a contract between a buyer and seller terminates, many sellers are under the impression that they will get the buyers earnest money. It almost never happens the way people think it should. If you were writing a check for $10,000, wouldn’t you want to know in what exact circumstances you might forfeit that money? And if you were selling your family home for a half a million dollars, shouldn’t you have a clear grasp of the ins and outs of a purchase agreement that you agreed to? Why so much surprise when things don’t go as planned? A broker of one of the larger agencies in the area says as many as one in three purchase agreements fails to close these days. Most of this has to do with the home’s physical condition, but also could be the buyer’s lack of confidence in their ability to pay for the home. Some are declined for financing, showing the lender’s lack of confidence in the borrower. Others lose interest in what was attractive when they were here on vacation.
One of the most troubling facts about recent corporate practice is the business model that is most successful when a customer fails. If a credit card company makes 10 million when most customers pay their bills, why should laws support a business model where they make 20 million if most customers fail to make payments? What would that company like to see happen? If profits go up when more customers fail, do you think they will work to help customers avoid failure? The best businesses are managed with plans to work with customers consistently over a long period of time. Would you rather make a large profit on a deal today or make a smaller profit from the same customer knowing they will be back year after year to see you again? Is it the instant gratification and fast profit you seek? Or is it long planned success that comes from hard work and excellent service and providing something of value every day?
What’s new? Solar capture equipment that generates power brings tax credits. Driving a car that sips instead of slurps is finally the rage. Mass transit is more popular now than it has been since automobiles became commonplace. It would be very rewarding to see these trends continue toward an environment that is self sustaining and a future that is bright. There are a great many new opportunities out there that have yet to be identified. Oh, to be a young person just starting out! What wonders that person will see and what changes they will experience! Are you OK with change? You might want to get comfortable with constant change. I can almost hear someone say “change is the new staying the same”.