Bidding in a Market with Tight Inventory

Currently, the Greater New Haven market is experiencing a shortage of inventory in some price ranges.  Although most of the country has been like this for a while, it has been a long time since it has occurred in Connecticut.  Many local buyers are not accustomed to needing to, or may not even believe that they need to, compete with other offers.  Some people that real estate agents mislead potential buyers about other buyers, in order to encourage interested parties to act quickly, or bid higher.  We are amazed now at how often a house that has been on the market for months, without any interest, suddenly may have two or even three parties competing to buy it.  Once a certain point in the spring has been reached, people feel that they have seen most of what might be coming on, so that they no longer feel that they should wait. Of course, homes that are well-priced and desirable attract interest, and usually these days multiple offers, almost right away.

So my advice to buyers is simple, and fairly obvious.  First, make a list of what you require in a house.  Keep a running preference order for what you’ve already seen, with your first three choices clear.  If those choices don’t change every time you go out, it’s probably time to stop looking. Be honest with yourself, and your agent, about your limits.  It’s amazing how often people tell us their upper price range, and then exceed it. Then, make the cleanest offer you can, with the fewest contingencies and for the shortest amount of time.  Assume that there is other interest in the property,  and follow this important rule:  Bid the highest amount that you would be sorry to hear that someone else paid.  If your reaction to a later record of the sales price is that you couldn’t, or wouldn’t, have matched it, then you did the right thing.  If your immediate thought (never mind what you told your agent about the highest you would go) is that you would have paid that price, then you should have bid more.

A Generational Shift is Coming

We've long known that the real estate industry is aging, with the average salesperson now in his or her late 50s.  What we also know now is that the recent, long-lasting recession caused an entire cohort of people either to leave the business, or not get into it in the first place.  That leaves us, like architecture and other fields with cyclical demand and incomes, without the next generation ready to step up and lead, or, in this case, even to sell.

That's important to some extent simply because we currently have experienced real estate agents having to adjust to new technology, new laws, new ways of selling, and buyers who are often the age of their children.  While many are up to the task, or even more than up to it, there is a void left for buyers who wish to work with agents who look like themselves.  For instance, there is a shortage of supply among agents who have school-age children.  Also, our industry is less diverse--sometimes much less diverse---than the population we serve.  That is, in part, because the world is becoming more diverse as younger people intermarry, while older groups are often less likely to have done so.  Even our social customs have evolved, with younger groups less inclined to plan ahead, making it more challenging to plan showings and appointments.

What will the future bring?  What we are starting to see now is a much younger demographic entering the sales force, for several reasons.  First of all, there are very few barriers to entry.  You need a license, and some training, and you're good to go.  For kids having trouble cracking an anemic job market, real estate is an increasingly popular choice.  Secondly, it takes some time and some money to get going, since you live from commission to commission, and they don't happen right away.  So many boomers are now supporting their 20-something children, for recessional reasons and others, that they may as well support them to enter real estate, as pay their rent so that they can be an underpaid intern somewhere.  And, unlike that intern, they may be able to become self-supporting without changing jobs, as their skills and contacts increase.  As a parent, you can directly influence your child's income, by sending your friends and coworkers to him or her as clients!  Thirdly, real estate is a low-risk way to be in your own business.  It doesn't take much capital, unless you are the broker, but you are running your own small firm.  That appeals to millennials, especially since it doesn't require being at a desk at all, certainly not on specific days and at specific hours. It uses skills that are second nature to digital natives.  Even going to a party counts as networking, so there are opportunities to sell everywhere and at any time.  Finally, the real estate industry is ripe for change, for growth, and for the advent of a new generation.  In the midst of an entrepreneurial boom, real estate is front and center--everybody lives somewhere!