There have been some very positive reports about sales in our region recently. I have written about some of the reasons for the Shoreline’s improvement, like the time that’s passed since Hurricanes Irene and Sandy, but the broader market appears to be healthier also. When discussing the Shoreline, I made the point that prices had come down to where the value proposition for many people was just too compelling to wait longer, and that it stacked up well against other places where second homes are also popular. That also seems true in the non-waterfront sector. There are two factors that stand out: one is that inventory has moved, leaving less supply for the same, or increasing, demand; and two, that prices are often more realistic than they were a few years ago.
SMART MLS, our local MLS service, recently published a shocking statistic. Its records show that only 16% of listings entered into the system sell! That number may soon be going up, though, if demand continues to improve; however, it illustrates what happens when sellers price their properties too high. Buyers don’t feel compelled to act, and other sellers follow that lead and also overprice, leading to even more sluggishness in sales, while buyers hang around until prices fall. That dynamic has been playing out in our area, unfortunately, for many years. While it has always been true that a portion of the inventory is overpriced, that rate has accelerated as demand, units, and median sales prices all fell. It becomes a vicious cycle, and owners who need to sell begin to do what we call “chasing the market down”. That means that they start high and keep lowering the offering price, until they ultimately end up closing at a lower number than if they had priced correctly to start. The recent news that sales are more robust and inventory thinned out makes me think that prices are realistic, or more realistic than they were when people could still fixate on what they paid for the house ten or fifteen years ago (a period during which values have overall declined).
Like any other cycle, a good boost can start the opposite effect, where competitive prices lead to more sales, which leads to lower inventories, which leads to higher prices, which leads to more listings, and finally again to more sales. No one could be happier than we will be, if that’s where our market is headed this fall!
