How Do We Give Pricing Advice Today?

In my last blog post, I wrote about how Connecticut's real estate market has diverged from the rest of the country's situation.  There are many reasons for that, and they've been well documented.  That begs the question, though, of what the real problems in the real estate arena are for professionals now.  We are having trouble getting buyers and sellers on the same page. 


There is definitely a market for well-priced homes, especially those that are within reach of first-time homebuyers.  Although the strength of the recovery varies from town to town, and even from submarket to submarket, a compelling price will often result in multiple bids.  This often confuses buyers, who have been led to believe that they are in a buyer's market, and can offer well below the asking price.  They are happy to believe this, even though it is clear that most of the country is in a seller's market, due primarily to a lack of inventory. 


Here, in many places, we have lots of inventory.  However, it's not always in the same price categories or locations that buyers want first.  And, sorry to say, much of what's been around a long time is overpriced.  Sellers don't accept that in many cases, though, because they often paid more for the home that it is currently worth, and sometimes have also done work.  They can also point to homes that sold for more, even if those properties may not be in the same condition as their own home.  (A note here:  Buyers today want perfection.  They do not want to do any work to a home.  What you may overlook as the current occupants, they will deduct from the value.) 


What should sellers do?  Listen carefully to what you are being told about value.  Write it down, so you don't forget it.  Don't ask "What shall I put my house on the market for?", but rather "At what price will my home sell within thirty days?".  Don't assume that you need to leave room for negotiation.  That's one tactic, but, in my opinion, a compelling price (at or slightly below the expected sales price within 30 days) will have the greatest likelihood of drawing multiple offers, which is your best chance of getting a higher price.  Bidding wars work.  They excite people, and increase a buyer's estimation of a home's value.  Pay attention to early signs.  If your home has been shown ten times, and you don't have an offer, it's the price.  Period.  If you don't sell your home in the first month (or even in the first two weeks), your chances of selling relatively quickly go way down. Period.  This isn't rocket science.  So why is it so hard for people to follow these rules? 


One clear example, as we know from Freakonomics, is to look at what real estate agents do with their own properties.  I heard yesterday that one shoreline agent just sold her own home for $200,000 less than she paid for it.  That should ring a big bell for sellers there. 


And for buyers?  The market now is hyperlocal.  You may find much more competition in some places than in others.  If you love the home, bid what you would regret to hear that someone else paid for it.  If it goes for more than you could afford, or if you didn't like it that much, you won't have regrets.  Otherwise, don't play games.  Understand that there are often back-up offers, and don't go crazy with the inspection requests, or consider them a second round of price negotiations on the property.  Behave fairly.  Tell the truth.  Again, these rules are simple.  And they yield big dividends.


Are we ever wrong?  Of course we are.  But not as often as you would think, since we see so much inventory, and have such a good pulse on market conditions.  Please listen to us.  It will be worth your while.

Recent Statistics

There have been new indications that shed some light on what we may expect for a spring market in residential real estate.  It's been a brutal winter, but the February job numbers, which just came out, were not as bad as they might have been, and put Connecticut at 50% of its jobs regained from the lowest recessionary level.  This, of course, compares with 92% of jobs regained nationwide, after awful weather everywhere, but we welcome any good news.

Other recent studies predict that the Northeast is the likeliest region to see multiple bids on property this spring, suggesting that demand has been postponed due to winter storms, and will "pop" when spring arrives (will it ever come??).  Rates are edging up, which is another indication that time is of the essence for buyers, since monthly payments matter more than total cost for most people.

Another report from Zillow suggests that the West Coast is best for sellers, and the East Coast for buyers.  That's not surprising, since prices in Connecticut are still 23% below their peak in June of 2006.  It is yet another indication that our region will see strong buyer demand.  Since the listing inventory is delayed, again by weather, supply may be tight.

In our office, we've been getting reports of greatly increased web traffic to our site, with strong demand for certain types of searches by buyers.  Again, that would seem to indicate pent-up demand.

My crystal ball is a little cloudy, but my outlook, based on all of the above, is positive!

Hartford's Buyers' Market

Hartford is currently listed number 9 in the list of the best markets in the country for buyers.  To put that in perspective, Phoenix is listed as one of the hottest sellers' markets.  So what do they really mean?

The people who compile these lists rate as a buyers' market anywhere where prices are not rising, where homes sell below the asking price, and where the median home in on the market longer before selling.  Now think about what that could mean.  In Phoenix, where everyone knows that there are tons of short sales and there was a huge oversupply of homes built, with declining values and high rates of foreclosure, sellers are very realistic.  They may even expect to lose money.  Also, many people have seasonal homes there, in which they are less emotionally invested, and may just be willing to dump them to be done with things.  They may rate outside advice more strongly, since they may not be Phoenix natives.  And they know that they are competing with banks and corporations as non-emotional sellers.

Now compare that to the Hartford area.  Most homes are primary homes, with owners living in them and feeling strongly about their value.  There was not a great deal of building down in the prior decade, nor were there daily articles in national news media about the poor market and the high foreclosure rate.  Most foreclosures, since Connecticut is a law state (meaning that you must go through the legal system to foreclose), are still in the works.  Finally, prices went up in the past decade and a half, but not like they did in the Sunbelt, where jobs were growing and the economy was expanding.

Then, add in the factor that every home is different, so its value is subjective, and it is not a commodity (although it may have gotten close in the Southwest).  It's not like buying a Honda here versus in Arizona; you are not comparing apples to apples.

However, numbers don't lie.  Sellers here have not been as willing to drop prices or make concessions, so their homes have not sold.  Buyers have chosen to rent and wait for values to bottom out.  Also, they have probably been less inclined to put their homes on the market for what they are truly worth, since they are still hoping to get out whole, and, often, to buy another home.

When will things change?  Either the market will get much better, and, like a rising tide, raise all boats, or prices will come down until those homes that have rusty For Sale signs out front are all gone.  But it does seem like a stretch to say that sellers are better off in Phoenix than in Hartford, overall.  Like much of life, it's just not black and white.