Librans like to focus on balance and harmony. There is a time when balance in the real estate market can be found and its right about now. This is the time we change over from cool to warm when taking the temperature of our market. We’ve had enough of tepid. What happened in June is quickly washed away by the increase in activity and showings in July and after. It would be easy to be pessimistic in early and mid June because that wave of buyers has not returned quite yet.
You know the ones I am talking about. Buyers who have looked at homes off and on for several years might be coming back for real this year. Buyers who have waited to time the market (good luck on that one) might figure out that this year it is finally time to buy, while we see the creep up of higher interest rates and the shrinking of quality inventory. At any time, such as 2 months or 2 years ago, one could make the case that now (I mean then) was not quite the time to buy. If that even entered your thoughts or affected your actions or planning, allow me tell you that time has passed. There is no better time than now (or in the next 120 days) to buy a home in Santa Fe. Not yesterday or 2010, but now.
Why would I say that? Think of the past 8 or 9 years with not only zero appreciation of home values, but actual documented lower prices and values. That might finally have run its course. MAYBE we will start to see appreciation later this year and next. Interest rates? Yes, that is a direct factor for about half of home buyers in our market. Every quarter point increase in rates will knock out a percentage of buyers, or at least force them to buy a less expensive home based on their qualifications. The inventory of homes available is smaller than at any time in recent memory and almost no new homes are being built that are not already pre-sold to a buyer. The exceptions are worth a look. So the new inventory is coming from where, exactly? From homeowners that are ready to pull out and ready to sell, whether the home pays off all of their debt or not. There still are short sales coming up and there is a mini wave of defaults also coming, as a large number of HELOC loans convert to amortization from interest only terms. An example: an old friend’s HELOC (home equity line of credit, usually a 2nd mortgage) payment went from $180 a month to $650. He is not sure he can afford that and may have to default. It is not news that many people, even owners of homes, live paycheck to paycheck and a change throws off their ability to have that tooth crowned or set up that family doctor appointment. Never mind the trip to Alaska…thats out of the question.
To balance your checkbook is one thing, but its another thing entirely to achieve balance in a real estate market. As we shift to more of a seller’s market (we are not there yet, but steadily moving that direction) that tipping point when sellers and buyers are on level ground will exist, if only for a month or two. I have no idea how long we will be in balance, but lets enjoy it while we can. Librans really know how to talk about balance. I hope I have come close.
Another example of viewing balance in a real estate market is comparing new listings to sold listings. There are always more listings than there are solds. Some go on the market and never sell. Other listings expire after 6 or 12 months and then a new listing might take its place. That’s at least two listings for one sold, if it does in fact sell during the 2nd listing term. Over the last 15 days, per our MLS database, there have been 245 new listings and 175 sold listings. Thats about as close to balance as we could design and invent. Compare to early spring when new listings outnumbered solds by 5 to 1 or even more at times.
So where exactly are we? Of sold homes reported to our MLS, something like 90+ percent, had at least one price reduction since first listed. Clever and sly Realtors and homeowners can scheme to hide the truth of how long a home was on the market. Ask if it matters to you. There is a magic number/price for listing a property. Most all listings start above that number and then settle for the true market price. That true price is literally what someone will pay, and does pay for it. Santa Fe residential real estate buyers expect to get a price below the asking price, while the market is still favoring buyers. Once the shift kicks in and we enter the seller’s market we are heading into, that might eventually change. Except maybe not. By then, sellers will expect to get a higher price instead of putting it out there at a price that will bring immediate offers. So who can blame a buyer for making a low offer? A seller has the right to be insulted by a low offer. But insults don’t write checks and show up at closing, so bully for your right to feel that way. Get over it and counter with a number you like and start the negotiations.
Buyers almost never start with their best offer. A most recent example: the first offer came in at about 12% below asking price. During the back and forth of negotiations, another buyer stepped up and made a strong offer. The seller decided to ask both buyers for their best new offer and both responded. The first buyer ended up paying a price about 1% above asking price. What will that 13% additional net proceeds mean to that seller? Why did that happen? The seller not only did not have to lower the price; the seller got more than asking price. The starting price was such that immediate interest and offers within a day or two showed up. Every home has its magic price. If timing is everything and you don’t want to be sitting on that home in November, unsold and shopworn, find that number and run with it. What is the advantage of having your home on the market for 6 or 12 months when you likely will not get your asking price anyway? Remember the situation we are in today; over 90% of homes that sell had at least one price reduction during the listing period. One might say that price reduction is why it finally sold.
Does any of this make sense? I try to write in a conversational manner that I hope makes it easy to follow and comes across as logical. We can make this complicated or we can keep it simple. As we move into balance, be prepared to take action accordingly. A buyer maybe should act soon. A seller maybe should rethink their asking price if they want success this summer. Now that wasn’t too complicated, was it?
I am always ready to discuss your own real estate situation and goals with you. Knowing what is going on is of great importance. My strength is getting you through the negotiations and to the closing table feeling good about the process. Anyone can crunch numbers. Making sense of them can be a challenge.