Don't Discard the First Offer

 In this current market of low inventory and motivated buyers, many properties have been going on deposit quickly.  The national average, I read recently, is 22 days from listing to contract. In that kind of environment, even in the traditional "off" season of the late fall, people can wonder about whether to take the first offer they get.  They often think that they either listed the property for too little, didn't get enough exposure to the market to turn up the most avid bidders, or should wait for more offers, to stimulate a bidding war.

The answers to those potential strategies would be no, no, and no.  The first offer is often the best one.  That's because people are very well versed in the inventory available when they are looking.  They know when the right property comes along, and they frequently jump at the chance to take it off the block with a good offer out of the box.  Secondly, the information flow now, between search parameter feeds and instant posting of new listings, means that the time to get something fully exposed to potential buyers has dropped dramatically.  Those most interested in buying soon are watching closely.  Sometimes, I'm surprised that they may tell me about a new listing Pearce has!  Finally, bidding wars are great, but we should always remember what people say about the stock market:  Bears do well.  Bulls do well.  Pigs get slaughtered.  Don't be greedy.  If an early offer meets or exceeds what you expected to get for your property, grab it.  It's time to sell and move on.  Bidding wars may, in fact, result in a higher price if they occur.  However, they can also turn buyers off, who can feel they are being used, and drop out. The chance of losing everyone isn't worth the chance of finding someone who will overpay to beat out others.  

At this time of year especially, time is fleeting, and taking an early offer means that sellers can turn around and buy something else before the end of the year.  Supply gets thinner as the holidays approach, for many reasons--weather, time, difficulty of showings, and the inevitable decisions to wait until spring.  The sooner you buy, the more choice you have.

This is not an equivocal message.  If you have a number in mind, and it's a rational one, don't ignore an offer that comes close to meeting it, or meets it.  Moving forward when interest rates are this low makes more difference than the last couple of thousand in the price could ever do.  

Homes Across the Country Are Selling Fast

Some Highlights

Buyers are actively searching for and purchasing homes at a record-breaking pace. According to the latest report from the National Association of Realtors (NAR), in July, 68% of homes were on the market for less than a month.

With homes moving from listing day to pending sale in an average of just 22 days, it’s a great time to sell a house.

Reach out to a local real estate professional today so you can make your move while buyers are scooping homes up faster than they’re coming to market.

Your New Neighbor May Be from New York

 My new next-door neighbors are from New York.  They just moved in, and they are planning to telecommute from the shoreline. They have high-level jobs that can be done remotely, for the most part. They have little children, and no idea what schooling will be like in the near future.  They have bicycles, a boat, a pool, and a new second car.

My husband and I also have one adult child (accompanied by a boyfriend) sheltering with us.  They are also telecommuting from New York, with good jobs, now being performed remotely.  They aren't sure when their offices will reopen, nor whether they will soon--or ever--have to be physically present in those locations.  They have new exercise routines, new athleisure wear, new cooking accessories, and new disposable income from no rents, no bars and restaurants, and no travel.  They have started looking at houses online, and near us.  Many people we know have similar stories.

Our friends, many of whom are retired or working remotely, are planning ahead to spend time in another part of the country this winter, if they haven't already decamped to a vacation home.  They are renting for months at a time, and testing out possible retirement locations. Rather than use hotels, or try to travel, they are opting for staying put elsewhere, to have a change of venue safely.

You may have relatives, friends, and neighbors like this as well.  Over 10,000 New Yorkers changed their addresses to Connecticut in the second quarter of this year alone.  Anecdotally, we are seeing lots of real estate activity from out of state, and many NY license plates on the roads.  We all know that the pandemic is current, but it's somewhat of a surprise that more permanent choices are being made so quickly.  It's been great for our business, and it will be good for Greater New Haven as well. New Haven proper, although a city, is low in density compared to other places, and remains very attractive for those who want both proximity and outdoor space. After long years of population decline, it's nice to be trendy again!

What does this mean for the real estate market in our region?  Supply, which was already slim, is even tighter.  Prices, which were inching up, are moving more quickly in that direction.  Time on the market is declining.  All of this puts sellers in the driver's seat, and advocates for selling--or even renting for a season or a year--soon.  

Forget the Calendar

After a bitterly cold and snowy first half to our winter in Greater New Haven, we can look at our sales for the past few months and know one thing for sure:  The old rule that bad weather ruins real estate sales isn't true any longer.  In fact, both December and January were blockbuster months for us at Pearce.

Some of that could relate to tax changes, and some of that should relate to rising interest rates (sadly, we know that no one believes that rates will rise until they start to do so); however, the rest seems to have come from a spike in activity that began in late October.  That's far later than prior "fall markets" started, but is in line with what is closing now.  It seems to be about more than tax and mortgage changes, and has to do with a sense of urgency that didn't exist for a long time.

In almost every part of the country, lack of inventory is driving what is clearly a sellers' market in most places.  That is pushing up prices, lowering days on market, and creating a feeding frenzy.  Connecticut has been very late to this party, but we are finally showing up.  There isn't much to show in many price ranges, millennials are coming to the fore, and market fluctuations are pushing buyers off the fence.  We've seen this in commercial markets as well; in fact,  in our region, it's stronger there, at the moment.

So what do we do with the traditional model, where homes get listed early in May, sold in June, and closed in July and August?  Throw it out?  Probably so.  For at least the foreseeable future, our Greater New Haven academic market heats up early in the year, stops dead around graduation, and picks up again in late fall, when the semester has settled in.  That's great news for sellers who are ready to list now.  Don't let us stop you--it's the time to move!

Pricing is an Art

I've been writing a lot about pricing--signs of a changing market, appraisal issues, the importance of the first two weeks, and other aspects--but I still feel that there is more to say about this critical piece of the real estate market.  It would be nice if there were a formula to apply, that would spit out the correct number every time.  However, the pricing of property is more an art than a science, for a plethora of reasons.

First of all, nothing about real estate is static.  Things are constantly changing, from stock prices and political fortunes (which do affect real estate) to tastes and preferences among buyers.  In the same way that a video can go viral, a trend can suddenly take off (or end), leaving in its wake all kinds of now outdated homes. Even towns and neighborhoods become trendy or not, and make pricing differences apparent from place to place. In the realm of changes, an election can cast a big shadow, be it local or national, with people waiting for resolution before making decisions.

Interest rates deserve their own paragraph, since they play such a big role in what buyers can afford.  They have ranged from low single digits to almost 20% during the course of the last thirty years or so.  Many buyers, probably most buyers, look at the monthly payments more than the actual price of the home, since that's the true measure of what they can afford.  Strangely, though, more buyers pull the trigger on a purchase as interest rates are rising, than when they are falling, because the rise creates a sense of urgency. 

Demographics also factor into the equation.  Millennials have lagged behind their parents and grandparents in the buying of homes, but they are out in full force now.  They waited longer to get married, longer to have kids, and they owe more in student debt, so it has taken them more time to get around to buying property.  For a long time, we believed that they never would, but that seems to have changed. That increases demand, which affects prices.

Values in other markets come into play when we consider relocating transferees.  Those coming into our market may be coming from places with hotter markets, or higher prices, which inevitably influences what they will pay.  This is especially true if they sold a house in a booming economy somewhere else, and for tax reasons or otherwise, they want to reinvest that same amount here.  It's a good example of the old saying:  "The property is worth what you are willing to pay for it". 

Conversely, people relocating within our region may be faced with a decline in the value of their current properties, and may not be able to spend on a new home what they thought they could.  That puts pricing pressure on in the opposite direction.  In addition, the average person spends double the time between purchases (eight years) than he/she used to do, so that dampens demand as well.

Finally, when is the spring market?  As the world changes, and more households are not tied to a school year move, and more families spend time apart before rejoining forces in a new location after a job change, the traditional spring selling season is less certain.  Weather definitely plays a role, whether it be snow lasting into the spring, or even a rainy month (think this month!).  Often the "spring market" lasts longer, and in 2016, we saw that occurring, with the market staying strong into early August. 

All of this together gives you an idea of what goes into a pricing recommendation.  In the past few weeks, we've seen prices lowered at the last minute before listing, and we've seen others raised.  We've seen many more price reductions within the first month on the market than we used to see, and we've seen some homes fly off the market and others not even get shown. We may bring in a high offer, only to have the home not appraise, which in many price ranges effectively means that it can't sell at that price.  Sometimes we are sure we are correct, and sometimes we have our fingers crossed.  Connecticut is harder to predict than other places, since we are in our own "bad economy" bubble, but other markets can face these uncertainties as well.  Much as a doctor may not know which procedure will be best for an individual patient, or a financial advisor can find his or her stock picks having unexpected outcomes, professionals of all stripes have to offer advice with imperfect knowledge.  So we go forward, together with our clients, combining hope and trepidation, into an evolving market in 2017. 

Crucial First Two Weeks



Stark Company Realtors : Timing is Everything

The following is from Stark Company Realtors.  For more information about the following newsletter or to view properties in South Central Wisconsin, please visit their website by clicking here



2013 vs. 2014 New Haven & Shoreline County Statistics

Click on the link below to view a report on the market change in real estate between 2013 and 2014.  Page one of the report has single-family residential home data, while page two consists of condominium data.  

2013 vs. 2014 New Haven & Shoreline County Statistics

What To Do About Low First Offers

One of the most frustrating situations for real estate agents is how to advise buyers and sellers about making or responding to the first offer on a home.  It doesn't come up all the time, because some homes are clearly going to move quickly, and some are so obviously priced to sell that buyers know that they cannot play around.  However, it happens more than one might think, that the buyers put in (usually with advice from outsiders and not from real estate professionals) an offer so far below the asking price that sellers are insulted, and often do not even counter it.

It's a little baffling as to why this should be so common, because I've written many times about buyers knowing what homes are worth, from doing their internet research and seeing so many that are for sale.  The buyers should have a pretty good idea, in many cases, about not only what the property is worth, but about what it will fetch on the open market (although those numbers are arguably the same, we all know exceptions).  Yet somehow, they frequently come in with a first offer twenty or more percent below that figure.  Sometimes, it's because they like the house, but can't really afford it, so they are taking a flyer, much like applying to a "reach" college.  Lot of times, though, they are hoping that they can reap the benefit of a still-depressed market, and get a bargain.

While bargains do occur, sellers also know, in many cases, what they think their home will bring.  Putting in a very low offer insults them, both from the point of view that they think their home is desirable, and should be appreciated as such, and also because they think buyers are trying to take advantage of them.  Our job then is to get them to look beyond those feelings, and deal with what's on the table.

 So many people think that the price ultimately paid will fall in the middle between the asking price and the first offer that we wonder why--how is real estate different from any other field in that regard?  Plenty of other things sell at the asking price, or near it.  However, there is a common perception that, if you lower your price up front, you will get less in the end. Again, why?  No one forces a seller to take a particular offer.  While you can always hold firm, holding firm at the asking price means that you think it will sell for that.  Unless you are confident, and your Realtor agrees, you should counter at some number--it doesn't have to be far below asking, just enough to keep the ball rolling.  We need something to work with, and we need the buyer to stay interested.  It's just the fact, unfortunately, that you can't make the buyers' first offer for them.  Remember, though, that it's often the second round that indicates what they really think, and how high they can really go.  And it's easier to get another offer, if other agents and clients know that someone is serious enough to bid.  It deals with the current problem that buyers think everything will still be for sale when they are ready to act.  Wouldn't it be nice for sellers if that weren't true?

Third Quarter Statistics

Our office has just posted statistics for the third quarter of 2012, which we get from the Connecticut Multiple  Listing Service, and it shows that activity is definitely improving.  Sales are up almost 18% from last year, and there is increased movement in almost every town.

The median sales price was down by nearly 2%, which should caution sellers not to be greedy.  Connecticut is ranked 46th in terms of price recovery from the depths of the recession.  In addition, there are so many homes on the market that the absorption rate stretches out for a couple of years.  For example, Guilford and Madison each have about 400 homes on the market, and each has seen about 175 sell this year so far.  That means that it would take almost two years at the current rate until all properties are sold.

Now, that's more pessimistic than it ought to be.  As with all markets, there are properties on the MLS that are overpriced or in poor condition or in bad locations, and many of those will expire without selling.  That means that good properties, well priced, should move fairly quickly, at least in comparison to the past few years.  It won't happen as quickly in the higher price ranges, because it's harder to price and market homes over a million, and there have only been about five more that have sold this year (64 in all).

In all categories, though, days on market (DOM) have declined, and market speed has increased.  For a complete report, go to www.hpearce.com.