Don't Chase the Market Down, Home Sellers

Because of the strength of the current real estate market, largely due to lack of supply, there is still time this calendar year to sell a home.  Even now, buyers are out there.  One agent at our firm listed her home yesterday, and had multiple showings within an hour.  

What's the secret to selling your home quickly?  Don't overprice.  That's it. Many people want to try for more, so they overprice, hoping that a desperate buyer will bite.  That's the wrong way to do it.  The only real way to get more than your home is worth is to list it for at, or slightly below, what it should sell for--then buyers will bid, more than one offer might well come in, and, with luck, a bidding war will ensue.  

When, on the other hand, the seller starts high, s/he misses the best two weeks to sell a home--the first two.  And, since the best offer is often the first, it's important to get that offer in.  Overpricing leads to lowering the price, which in turn leads buyers to try for even less.

It's so simple, and so often violated.  Don't be greedy, and listen to your agent.  You'll be happy you did.

Current Absorption Rates

 Explanation of absorption rate: The rate at which available homes are sold in a specific real estate market during a given time period. If you look at the number for Guilford you can say “If market conditions do not change and if no new listings come on the market it will take 1.7 months for the current inventory to sell at the current pace of the market. A balanced market’s absorption rate is typically between 5-7 months”.

 

Current Absorption Rates (Single-Family Residential Homes)

Explanation of absorption rate: The rate at which available homes are sold in a specific real estate market during a given time period. If you look at the number for New Haven you can say “If market conditions do not change and if no new listings come on the market it will take 2.8 months for the current inventory to sell at the current pace of the market. A balanced market’s absorption rate is typically between 5-7 months”.

Exposing Your LIsting to the Market Before Selling

 One of the country's large real estate boards recently did a study of the prices obtained for so-called "pocket" listings.  Those are properties that are really sold before they are listed, but that often go onto the MLS and immediately flip to pending status.  In all likelihood, they were sold to a client of the listing agent or agency before anyone else saw them, and were then put onto the MLS for the purposes of market share for that agency.  Buyers are seeking these types of opportunities, since there is such a short supply of new homes for sale.  It has some appeal for sellers as well, since it shortens the amount of time that their home has to be ready for showing. It also gives them an early indication of value, if an offer is made, that won't be able to be inferred by number of days on the market.

But what are the downsides?  One of the basic principles of behavioral economics is called the wisdom of crowds. That refers to the fact that large groups of people weighing in on almost any forecast produces a better result than one or two people can produce alone.  Therefore, a house that is bid on, or even seen, by the general public will result in a sales price closer to the true value, than a bid by one buyer.  In fact, this study of pricing mentioned above, for homes sold with pocket listings, resulted in prices which were 6 to 20% below what those homes were estimated to have gotten if broadly exposed to the market.  One could certainly assume that the same thing would happen, perhaps even to a greater extent, if owners simply sold the home themselves. Real estate agents should be, and generally are, much more familiar with current pricing in the area, and have an incentive to sell a property for more, since commissions are usually a percentage of the sales price.

There is one countervailing argument, however. If someone feels that they are getting an early look, with a chance to buy before others can bid, shouldn't they want to make sure that they are paying a fair price?  Maybe, and perhaps for that reason, they may come in high. Odds are, however, that they will want to pay as little as they can, and that time will work for them.  That is particularly true without a broker involved, since buyers will expect to save the amount that the seller won't have to pay in commission, and will aim to pay his or her net price. (This doesn't usually go well, because the seller also expects to save the amount of the commission, but that's a topic for another day).

So, in an ideally fair world, all buyers would have the chance to put in an offer equal to what the house is worth to them, and sellers would be able to tell what it's worth, by looking at the average of the offers, maybe throwing out the highest and lowest.  The only way to do that is to make sure all potential bidders know that the property is available, which is how the MLS came to be in the first place.  It still works pretty well, after all these years, and all these real estate cycles.

Current Absorption Rates

Explanation of absorption rate: The rate at which available homes are sold in a specific real estate market during a given time period. If you look at the number for Branford you can say “If market conditions do not change and if no new listings come on the market it will take 2.9 months for the current inventory to sell at the current pace of the market. A balanced market’s absorption rate is typically between 5-7 months”.

 

Current Absorption Rates

Explanation of absorption rate: The rate at which available homes are sold in a specific real estate market during a given time period. If you look at the number for Guilford you can say “If market conditions do not change and if no new listings come on the market it will take 2.8 months for the current inventory to sell at the current pace of the market. A balanced market’s absorption rate is typically between 5-7 months”.

 

Halloween is the Witching Hour for Real Estate Sales

 Every year at this time I repost the same advice:  If you are looking to buy real estate, we are now approaching the very best time of the year to do so.  Buyers will get the lowest prices, and the lowest interest rates, between Halloween and Thanksgiving.

It's not rocket science.  Sellers who have had their homes on the market are more likely to do the expedient thing and accept an offer before the holiday season.  Often, that offer is lower than it would have been in the spring, where there is more competition for buyers.  When considering that lower offer, people who already have another home, be it a vacation/winter home or a relocation move, start factoring in the cost of keeping their current house through the winter.  Heating and plowing are two big concerns, and they both can take mental energy as well.  With the end of the tax year looming, they may also decide to take either their gains or their losses; as we know, any deadline will do, when someone is making a decision they find difficult.  December 31st is a clear finish line for many things, and home sales are no different.

Because the volume of unit sales is lower, and because most businesses plan for down time at the holidays, the closing process can progress more quickly at the end of the year, so don't be discouraged if you haven't bought yet.  There is still time!  But don't delay--not every offer goes through, not every inspection turns out well, and other obstacles can arise.  It helps to think of early November as the deadline for signing a contract.

Will COVID change this traditional pattern?  I doubt it.  With more time this year, due to fewer family gatherings and virtually no parties (that aren't virtual--pun intended), sellers can do what's necessary to close, more easily than in prior years. There are even homeowners who have used this pandemic to do major clearing out and decluttering--sadly for me, I am not among them, but I do have clean house envy.  In a telecommuting world, it's important to be able to work from your home, and you are certainly spending more time in it. 

And that's the final factor for this year's prediction--people will be willing to do more work on purchased homes, so that they can nest comfortably going forward.  Their biggest selection criterion will remain location, but that will include open space and distancing.  If a home has those elements, potential drawbacks may matter less. Plus, supply is lower, increasing the likelihood that inspections may loosen up.  All of this should convince possible sellers to go for it.  There's no time like the present!  

Current Absorption Rates

Explanation of absorption rate: The rate at which available homes are sold in a specific real estate market during a given time period. If you look at the number for Cheshire you can say “If market conditions do not change and if no new listings come on the market it will take 1.7 months for the current inventory to sell at the current pace of the market. A balanced market’s absorption rate is typically between 5-7 months”.

 

 

Current Absorption Rates

Explanation of absorption rate: The rate at which available homes are sold in a specific real estate market during a given time period. If you look at the number for Guilford you can say “If market conditions do not change and if no new listings come on the market it will take 6.1 months for the current inventory to sell at the current pace of the market. A balanced market’s absorption rate is typically between 5 - 7 months.”



Absorption Rates

Explanation of absorption rate: The rate at which available homes are sold in a specific real estate market during a given time period. If you look at the number for Hamden you can say, “If market conditions do not change and if no new listings come on the market it will take 5.2 months for the current inventory to sell at the current pace of the market. A balanced market’s absorption rate is typically between 5 - 7 months.”

Absorption Rates

Explanation of absorption rate: The rate at which available homes are sold in a specific real estate market during a given time period. If you look at the number for Madison you can say “If market conditions do not change and if no new listings come on the market it will take 7.0 months for the current inventory to sell at the current pace of the market. A balanced market’s absorption rate is typically between 5 - 7 months.”



New Haven is Finally Normal!

Every month, we post the absorption rates for our region, and compare them to last month, and last year.  What we don't do is compare them to everywhere else.  Around the country, most areas have inventories far too small for the demand they see.  A healthy inventory would be considered 3 to 6 months' supply.  We haven't been seeing those numbers in years, for the most part. 

If you check this week's posting, you will see that New Haven clocks in at a very respectable 4.4 months of supply, meaning that it would take 4.4 months to sell all of the current houses on the market at current sales levels.  That's pretty much dead center in the "healthy" category, and is promising for 2016 sales.  Of course, inventory levels are always lowest at the start of the year, and can go up if people start listing before others start buying, but, for now, let's just rejoice that we are again normal!

Current Absorption Rates

Explanation of absorption rate: The rate at which available homes are sold in a specific real estate market during a given time period. If you look at the number for North Haven you can say “If market conditions do not change and if no new listings come on the market it will take 4.2 months for the current inventory to sell at the current pace of the market. A balanced market’s absorption rate is typically between 5 - 7 months.”



Current Absorption Rates

Explanation of absorption rate: The rate at which available homes are sold in a specific real estate market during a given time period. If you look at the number for North Haven you can say “If market conditions do not change and if no new listings come on the market it will take 5.1 months for the current inventory to sell at the current pace of the market. A balanced market’s absorption rate is typically between 5 - 7 months.”



Current Absorption Rates

Explanation of absorption rate: The rate at which available homes are sold in a specific real estate market during a given time period.  If you look at the number for New Haven you can say “If market conditions do not change and if no new listings come on the market it will take 5.0 months for the current inventory to sell at the current pace of the market.  A balanced market’s absorption rate is typically between 5 - 7 months.”
 

Current Absorption Rates

Explanation of absorption rate: The rate at which available homes are sold in a specific real estate market during a given time period.  If you look at the number for New Haven you can say “If market conditions do not change and if no new listings come on the market it will take 5.0 months for the current inventory to sell at the current pace of the market.  A balanced market’s absorption rate is typically between 5 - 7 months.”



Current Absorption Rates

Explanation of absorption rate: The rate at which available homes are sold in a specific real estate market during a given time period.  If you look at the number for New Haven you can say “If market conditions do not change and if no new listings come on the market it will take 6.5 months for the current inventory to sell at the current pace of the market.  A balanced market’s absorption rate is typically between 5 - 7 months.”

Current Absorption Rates

Explanation of absorption rate: The rate at which available homes are sold in a specific real estate market during a given time period.  If you look at the number for Wallingford you can say “If market conditions do not change and if no new listings come on the market it will take 7.2 months for the current inventory to sell at the current pace of the market.  A balanced market’s absorption rate is typically between 5 – 7 months.”

Click on table to zoom in

Current Absorption Rates

Explanation of absorption rate: The rate at which available homes are sold in a specific real estate market during a given time period.  If you look at the number for New Haven you can say “If market conditions do not change and if no new listings come on the market it will take 9.3 months for the current inventory to sell at the current pace of the market.  A balanced market’s absorption rate is typically between 5 – 7 months.”

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!