Mixed Signals

The latest issue of the Commercial Record illustrates our current problem for sellers and buyers.  If you look at New Haven county for June, the most recent month available, compared to the same month last year, sales are down by 12% and prices for the whole county are up by almost 6%.  If you look just at the shoreline towns and add Woodbridge, to try to capture the higher end of the market, sales are slightly up and prices are down.  Go figure. 

I guess the lesson as a whole is that we can't pay too much attention to what we read in the national press.  Connecticut is following its own, slower, path to recovery.  Our listors at the high end of the market are beginning to accept that there seems to be a ceiling on prices for luxury homes, and that no one can say what a given home is "worth".  We can predict that it won't sell for what the seller thinks it should, given what money is in the house and what the condition is, but we can't find examples that will pinpoint the exact price.  We can't even promise that it will sell at a lower price, nor can we swear that we're not "making a market" by lowering prices, causing low prices to slip lower.  What can we say?  We can tell buyers that it's a great time to buy direct waterfront, or properties over a million dollars.

In other submarkets, the picture is murkier.  The numbers of months of supply in houses has declined, and is now in the range of a balanced market.  That should mean that neither seller or buyer has an advantage.  But, depending upon where you are, and the type of house you have, you could find a bidding war or few showings, with maybe a lowball offer.  However, the only way to test the market is to put the property on at a "fair" price and see. 

There is a bump every fall, when buyers try to close and move before the end of the year, and, this season, it may tell the final tale of 2013.  Let's see what happens.  We do know this--mortgage rates, over the long run, matter much more than a few thousand dollars here or there in the sales price.  So buyers should definitely act, because interest rates have already gone up about 15% from their lowest point, and will likely rise further after the elections.  Time is fleeting--carpe diem!

The Phones are Ringing!

A new year and a new decade have started, and I've never heard so many people say that they were happy to put the old year behind them. We can tell that they've moved on, because our phones, even in Commercial, have taken a big leap from December. It will be a few weeks before we see the results, but, in the meantime, we're busy.

What does that mean for sellers and buyers? It means that people are coming off the sidelines. They've put their lives on hold for long enough. Even in commercial real estate, where there are dire predictions for the next couple of years, business goes on. The leases may be shorter and smaller, but space needs will prevail at some point.

Therefore, there will be competition for well-priced listings. Well-priced is the key here. There are still plenty of listings getting no play, but others go right away. The latter ones are perceived to be good deals. There are also a lot of short sales in the market; i.e., houses where there the proceeds will not cover the debt. Banks are required to get within a certain percentage of fair market value, so don't look for big bargains in that department.

If you're a serious buyer, buy now. You need to leave time to get through the whole sales process, and you don't want to miss out on the tax credits available. And please, don't assume that you can take 10 or 20% off the listed price (see paragraph above!).

If you're a serious seller, be realistic about the price. And list now, to get a jump on the competition.

More Confirmation on Pricing

The lead article in yesterday's New York Times Real Estate section confirmed yet again what real estate practitioners know, but are often unable to convey persuasively to others. It gave examples of sellers who priced their units aggressively in today's market, and kept lowering the prices without success. It contrasted that with sellers who priced so as to seem to be a "good deal", and told about the bidding wars that have been taking place in such cases.

Underlying this phenomenon is a change in the marketplace from the past: Now buyers, who get more information through the Internet and by looking at more places before buying, are more educated about prices than they used to be. They can tell when something is priced to sell, and they know that they have to move quickly. They also know that, often, there will be multiple offers; therefore, if they want to get the property, they may have to bid over the asking price.

This has happened to us so many times that we can all attest to its effectiveness. We cannot, however, seem to convince sellers that they will actually receive higher offers by pricing the property lower. It's not unlike the psychology of pricing store items at sale prices, to stimulate demand and encourage prompt purchases. Of course, the seller can always reject an offer, if it does not meet his or her specifications. The point is to get offers, particularly to get enough offers to assure that fair market value is established.

Separating oneself from the pack is key in this market. Unfortunately for our business, pricing aggressively does that!