What the Data Tells Us about Real Estate Sales

We've been experiencing higher than normal volume on our website lately.  I know that's a message that you are used to hearing when you call in for customer service almost anywhere, but here it means something different.  It means that we can tell, from the analytics provided to us by our web provider and our Search Engine Management provider, that the usual uptick in site visits and searches began right after the holidays this year.  Usually we would see that rise begin in February or so, and that would translate into more traffic at open houses and more showings by the end of March. 


This year, all indications are that the spring market has already started.  And this despite all the snow!  While you might think (as I did) that bad weather and dark, cold nights would have people rushing to their computers to search for property, we can tell that the visits are coming during the day, and during the week, more than on the bitterly cold and messy weekends we've been having.  That would suggest that the traffic is normal, but early, as opposed to caused by boredom.


Our agents are reporting that showings are surprisingly robust for this time of year, and that open houses were strong, even on the traditionally slow Super Bowl Sunday (I've never understood why it takes all day, if you're not hosting a party, to get ready to watch a football game, but that's another blog topic...).  Inventory is down, and buyers are clearly eager to see new listings.  Many of the listings that have been on the market for a long time have been judged by buyers to be overpriced, or compromised in some way, so new offerings are highly prized.  Sellers take note!

Multiple Offers are Back

When your office meeting discussion involves how to manage an "escalation clause"(with difficulty), and whether a verbal acceptance of an offer counts (probably not), you know that at least some portion of the market has turned.  According to agents, this is particularly true in the higher end of the market, especially in higher-priced suburbs and in East Rock.  Although, as I have previously written, there is still inventory on paper, much of what exists has been around for a long time and may not be ideal.  Therefore, what new listings there are many be highly sought after.  One of our new East Rock listings had well over 20 people at the first open house, with some coming back for a second look.

This level of interest, combined with the issue of competing offers, argues for a quick decision, with offers written as soon as possible.  The best way to get a house under these conditions is to try to lock it up quickly.  Rather than have the problem of a contract agreed to but not signed, better to have sewn it up first, before another offer came in. Buyers can help this process along by being prequalified, or, better yet, preapproved, and knowing what their financial and psychological limits are in advance.

P.S.  An escalation clause is an addendum that says, in some form, that you will match or exceed any offer by x amount, up to a cap of y amount.  There are many issues raised by this, often revolving around proof of the offer you have agreed to exceed; there is even the question as to whether such an offer even meets the requirements of specificity called for in a legal contract.  Nonetheless, they are out there, and being used.

Not Enough to Sell

This week, we've spent some time at every office meeting, going over our list of active listings.  It looks like a list done in a poor market, in the dead of winter.  There aren't enough new listings, not enough listings in towns and neighborhoods where we are getting calls, not enough listings in certain price ranges, and way too many listings with a "story" of some kind attached to them.  The stories can range from something badly wrong with the house, a bad location, a short sale with bank approval needed and seemingly withheld for no reason, or the most popular--overpriced.  We have taken listings all over the place, as agents tend to do when listings are thin on the ground, and we've let sellers dictate prices. 

Now we are entering the traditional time for the spring market, when typical buyers look for homes on which they can go into contract in the spring, and move into in the summer.  We simply don't have the inventory to show all the buyers stacked up (waiting for the snow to stop) what they want to see.  Some sellers are paralyzed by weather, and this is somewhere we can all empathize. This is particularly true of older owners, who may be fearful of trying to clear their walkways and driveways for showings.  It also tends to be true of owners who are out of town, as it can be harder, and more expensive, for them to keep pathways clear.  In some cases, people may feel that their houses won't show as well with muddy floors, or ice dams (true).  It may be hard to get necessary repairs made in cold and snowy weather. 

All of this needs to be weighed against the need to give buyers what they want, when they want it.  Suppose you were selling Christmas candy, but thought that your product would look or taste more attractive in January?  Or you grew flowers for Valentine's Day, but got them ready in March?  It behooves sellers to get their homes prepared for sale right away, and to anticipate that all kinds of issues can slow that process down.  It's not so easy to call a repair or landscaping service on the first nice day, and go right to the top of the list.  Even if you have to go back and do some cleanup work in the springtime, it's still better to get the bulk of the work done now.  Also, it's important to remember that your chances of selling are greater when the supply of available properties is smaller. We have more than forty relocation buyers from other places, just waiting for homes they can view. Act now!  Get your homes ready, and get a jump on the spring market!  Buyers are waiting!

Listing and Buying in the Shadow of Yale

In most national real estate publications, you will read that people buy in the spring and move in the summer. This is largely tied to the school calendar, and buyers want their children to get settled before the new school year starts.  If you back that up, the best time to list a property would therefore be late March or April.  That also coincides, in the Northeast, with better weather for open houses and showings in April and May.

There are some deviations from that, even in our area.  For example, Branford has a big supply of condos, and only 1 in 30 units sends a child to the public schools.  Thanks in large part to the big proportion of condos, there is a relatively smaller pool of single-family homes, and so a lower percentage of spring sales and summer closings. Since condos are often investment properties, and since investments are influenced heavily by tax considerations, we see a jump in condo closings in the last quarter of the year, in part for tax reasons, and partially just because there isn't a school-based reason to prefer summer.

Yale is, of course, the region's biggest employer.  Therefore, the Yale calendar is very important in the decision of when to buy and sell, especially in New Haven and closely contiguous towns.  While offers are made to new employees year-round, and while promotions and local hires can occur at any time, we see a big uptick after the first of the year, especially with the Medical School and Hospital, where July 1st is a traditional starting date.  This moves the optimal time to list up into late January or February, even though there can be weather issues in those months.

If you are a local buyer, therefore, you should consider buying before you have to compete with Yale buyers on short time frames.  In case you haven't done the math on that, you need to be buying now!

Decorating for the Holidays

Are you the kind of person who puts up increasingly elaborate Christmas decorations every year, beginning on the day after Thanksgiving?  Do you bake dozens of cookies and special ethnic Christmas treats, filling your home with delicious odors for weeks before the actual holiday?  Do you entertain during the holiday season, keeping your house in tip-top shape for viewing?

If you answered yes to one or more of these questions, you may be a candidate for putting your home on the market now.  While there are fewer buyers at this time of year, it turns out that the ones that do look are more serious, on the whole, than the average person.  They also tend to want to move more quickly, as they may be starting new jobs after the first of the year.  Therefore, you can both reduce your competition by listing when others do not, and increase your chances of a serious buyer or two.

So, if you are up for keeping your house clean and tidy for the next few weeks, and you are otherwise ready to list, go for it.  Just remember that Santa will leave soot when he comes down the chimney, so don't schedule any showings for early on Christmas morning!

Are You Losing Value?

Recent reports indicate that residential real estate values in our region are declining at around 10-12% per year. That means that a $400,000 home is worth $4000 less every month. Therein lies the real danger of overpricing.

Since we know from experience that the first two weeks of a new listing are the most important from a marketing point of view (since many buyers--and agents--only check for new listings when they search), it's important to begin that period at the correct price. "Testing the market" at a higher amount for a "little while" can lead to months of delay in selling the property, since it doesn't appear as new to those looking to buy, even when it eventually reaches the best price point. Once you factor in the economics of a market that's declining, you can see the true downside of waiting longer for a house to sell. It isn't just the carrying costs, or putting one's life on hold, it's dollars and cents--1% per month, as a matter of fact. And that doesn't even take into account the number of sellers who turn down the first offer (almost always the most motivated offer, and the highest), because they somehow forget that they are "testing the market", and start to think of the higher price as the dollar amount they expect to receive. If we had a dollar for every time a seller tells us later that they regret not taking the first offer, we might not even be taking listings that are too high!

Time to Reprice that Listing

There's a term in real estate called "chasing the market down", and it refers to people who start out by pricing their listings too high, and then continue to lower them month by month. It's a strategy that many sellers employ, and we agents are not immune to it ourselves, but the results are almost always poor. We can cite example after example of buildings and houses that sold BELOW what they would have sold for, if they'd only started out at the correct price. Now, I realize that "correct" is a term of art, and subject to disagreement. I also realize how tempting it is just to "test the market" at a high number. But you have to understand how the selling process works in order to see what a mistake it is.

A listing receives most attention when it's new, for a number of reasons. We notice signs when they're just erected. We notice pictures in ads when they're different from prior weeks. The same is true of the website. Also, agents and buyers who are receiving notifications of new listings are focusing on the ones that they haven't seen before. Most mailings are done on new listings. Most showings come as soon as something comes on the market. Everyone is motivated to see, consider, and buy something before it gets snatched up by someone else.

What that means for sellers is that you have wasted the most valuable exposure that your listing will receive. It's the same principle as the old saying that "you only get one chance to make a first impression". Every time the price comes down later, agents and buyers will have a subliminal impression that your property is overpriced, or that there's something wrong with it, since it's been on the market for so long. Why would you risk that, when our experience shows that people whose homes sell quickly for a lower price ultimately receive more than people who start out high, in order to "leave room to negotiate" or "see what they can get".

The moral is clear: If you're serious about selling, be serious from the start. Don't waste your time, your agent's time, or the attention span of the buying public. Consumers now are far more educated about prices, with the advent of the Internet. They'll know when you've entered the market with an attractive price, and your chances of selling, and selling quickly, will ratchet up. Take the money and move on. Buy another property while rates are low. Time is money.

Right now, our agents feel that almost 90% of our listings are priced too high to sell right away. Some of that is because, with declining prices, what was a good price 90 days ago may be too high now. Some is because there's just not enough selling right now (for example, only two houses closed in Madison in November). However, a great deal is because people don't understand what I just described above. You will have an advantgage--one you need in a difficult economy--if you do.