Sales and Resales

Although it's true that the real estate market is improving, the actual degree of improvement is less than one might suspect, since so much of what is selling is selling, falling through, and selling again.  At our sales meetings, we've had agents report up to three "repeat" sales in a single week.  There are a variety of reasons for these resales.  Some of the problems are mortgage issues, either of credit or of appraisal.  Some involve other contingencies that are never met, or renegotiations based on inspections.  There are a few, however, that boggle the mind.  One was a person who lost his job the day after the offer.  One was a couple who decided not to move.  The office winner, though, has to be the couple who completely disappeared, after a completely clean contract was accepted.  If anyone has seen these people, who had even brought their parents to see the property, please let us know!

I'm telling these stories so that sellers know better than to count their chickens before they hatch. To add cliche on top of cliche, just remember that it's not over til the fat lady sings!

Up or Down?

Don Klepper-Smith, our local economist, recently published a press release, quoting the Register, which was quoting the Commercial Record (yes, I know, therein most likely lies the problem).  Anyway, by the time Don repeated this chain of statistics, he reported that the health of the economy in Greater New Haven had gone drastically south in the month of March (of course, most people here wanted to go south last month, but I'm talking numbers now).  He picked out the trends in consumer confidence and job loss as being particularly problematic, and causing our region to buck the national positive trend line.  He went on to say that housing was the single bright spot in the figures, and that the median price for single-family homes had risen by $45,000 last month.  That seemed so improbable to me that I called the Commercial Record to check.

According to them, February's numbers showed a huge increase in the median sales price, combined with a steep decline in the number of sales, so the particular mix of the lesser number of sales seems to have affected the price for that month.  For the year so far, total sales are down, unlike most parts of the country.  When I had them check March, the median sales price had evened out, and was almost the same as it had been in 2012, but the number of sales was again way down. When I asked the reporter what she made of these numbers, she said that most places in the country are now reporting that sales are not increasing as rapidly as they had been, nor are prices rising as rapidly, but she said that Connecticut clearly is lagging behind other states.  She attributed that to state budget woes.

So, to recap this confusing report:  The recovery appears to be sputtering in our region, although it is not as robust in other places as it has been for the past few months.  Here, we are seeing prices that are flat to slightly down, which puts us behind everywhere else, with 2013 numbers that are far below 2012's.  I'm going with weather as the cause of that, although state problems and consumer confidence are quite possible alternative explanations.  Let's hope it gets better soon, and I'm betting that the weather improves before the State solves its fiscal issues!

Sales Around the Country This Spring

It's always interesting for me to visit with my friends from other large independent companies around the country, especially when the market is changing rapidly.  I just got back last night from Charlotte, and the mood from other places is almost giddy.  The feeling nationally is that market activity will be back within 10% of normal levels by the end of this year.  That's a big improvement from the projections we heard only last fall, when most experts thought that historical norms of housing turnover would not return before 2015.

Now the commonly heard complaint is lack of inventory.  There simply aren't enough properties for sale to meet the demand. The average number of months of inventory seems to be about three.  Well-priced, well-maintained homes in many areas get multiple offers--sometimes dozens--within a few days or weeks of being listed.  Once they go under contract, the problem that arises is that appraisals have been lagging, as they always do, so there are issues with mortgages.  In some cases, sellers and their agents are going back to the highest bidder and telling them that they need to release all the contingencies, including mortgage, or they will proceed to the next offer. New construction is hot everywhere.

Here in Connecticut, we're recovering slowly.  (Maybe that's why they call us the Land of Steady Habits?)  We have just over eight months of inventory overall in our county, with some towns much higher than that.  Guilford, for example, has 17 months' supply.  Our supply of million dollar homes will last several years.  So, for us, the report from other places tells us what the future will be like.  And it will be great.  However, if you are a buyer, my advice is to buy right now!

Escalating Offers

So my last blog was about the return of multiple offers, a sure sign of an improving market, but now there's a new twist, and one we've rarely seen before.  It's call an "escalating offer", and essentially it says that the offerer will exceed any other offer made on the property, sometimes up to an amount certain, and usually for a specific amount over the other offer.  For example, if the home is listed for $550,000, I might offer $5,000 over any other offer, up to $600,000.

These escalators are problematic, legally and ethically.  If I'm the listing agent, I can't exercise your higher bid  without proving to you what the other offer is. Does that violate the privacy of the first buyer? Also, how do we know what makes a better offer? Will you also match the mortgage, inspection, and closing clauses?  If the first offerer responds in kind, don't you now have an advantage, since you know what the terms of the first offer are?

Additionally, if I am the listing agent, acting on behalf of the seller, shouldn't I be assuming that your offer is for the highest amount that you'll go?  So, if you say you'll match up to $600,000, and an offer needs a fixed price to be legal, wouldn't that be the only fixed amount you've indicated?  So isn't your offer really $600,000, since you've indicated that that's how high you'll go to get the property?

All of these questions are food for thought, and likely to be settled over time through a combination of convention and controversy.  In the meantime, however, I just wanted to make readers aware of the newest trend in real estate offers.  And show you how complicated it is!

Bidding Wars Return

When I ran this morning, it was 29 degrees, with wind chill that made it feel like 17 degrees, so it didn't seem like the first day of spring, but it is!  And with spring comes the spring real estate market, which we are definitely seeing.  The surest sign of an improving sales environment is to have a listing come on and receive multiple offers right away, and that's happening.  Although we don't yet have the shortage of supply that other markets do, it's true that most of what is selling has just come on the MLS, and is garnering attention immediately.

Buyers have been coming in close to asking price on properties correctly priced to sell.  In more cases than we've seen in a long time, several parties have come in at once, leading to situations where buyers have been asked to produce a "highest and best" offer.  Just to be clear, that does include price, but it also considers terms, so offers that are cash, or that don't have inspection clauses, are usually favored over offers with contingencies.  We realize that buyers often doubt the veracity of real estate agents who say that they have another offer, so I'm using this forum to make sure that everyone knows that it is indeed happening often these days.  While there may indeed be cases where an agent claims to have another offer coming in to raise or accelerate a bid, it is true that, even with properties that may have been languishing for months, there are instances of multiple bids.

What does this mean for sellers?  First of all, it doesn't mean that you underpriced your property.  Things priced to sell quickly go for more than those set higher, even though that may seem counter-intuitive.  Buyers go higher when they perceive that the price is attractive, because buyers today are well-informed, and they know what properties are worth.  Also, since mortgages require appraisals and appraisals depend upon comparable sales sold recently, rising prices mean difficult appraisal situations, since appraisers can only use closed properties as comparables, and those contracts are already several months old when they close.  So, you can hold out for more money, but your buyers may not get a mortgage for the higher amount.

And what does it mean for buyers?  You'd better get out there soon...and don't fool around.  Offer what you would be sorry to hear that someone else bought it for, and do it quickly.  Make your offer as clean as possible, and don't ask for contingencies you don't need.  You'll never borrow again at rates this low, so be happy and buy now!