After a long, steady period of seeing homes for sale in Highland Park and Eagle Rock selling fast and high, and homes in Glassell Park and Mt. Washington being snatched up with record multiple offers, there are signs that trend is changing.
Everyone is talking about it—the market seems to be slowing down! I’ve talked to Realtors, potential sellers, buyers, and the man on the street—they all feel the same. So are they right? Well, let’s see. Looking at the Trends analysis for Eagle Rock since May of 2012 we see this:
So what do we have here? A lot of people see a shift in the market and they are convinced it’s gonna crash, and crash hard. I can’t tell you how many people have said to me, “what goes up must come down.”
What do I think? My opinion seems to be of interest to the people representing the people who want to buy my listings and potential sellers but they are the ones who don’t like what I say. I think we are seeing a period of both affordability issues and a shift in what people want in their next house. When you have an average sales price of around $1 million in a historically middle class neighborhood, the bar goes up in what buyers expect to see. This has been shaped by what they see on all the house porn sites they visit regularly on the Internet, and a lot of home sellers and investors have figured out how to give it to them. But what about the other homes that sell? We see a number of price reductions out there and eventually most of them sell, but at prices less than their sellers had hoped.
So what happens next? The answer is based on so many things that we don’t even think about—the national lending laws, the international economy, the general faith in our economy, the general confidence in the real estate market as a whole. What continually seems to have happened over the last six years is occasional pauses where the general mood of buyers is that prices are too high so they wait for prices to come down, a month or so goes by, nothing changes, they still need to move, they shrug their shoulders and jump back into the market with a twinge of regret that they took time out and that meanwhile the prices went up not down.
So here is what I really think—sellers should really price strategically because while buyers might be paying historically high prices, they aren’t going to do it willingly and they aren’t going to do it by themselves—meaning if there are only one or two offers, you aren’t going to see a big jump over list price because they won’t do that unless they have a lot of competition. If you want, say, $1 million for your house you can price it at $899,000 and maybe get 10 or more offers and the terms you want, or you can price it at $1 or $1.1 million and get one or two offers and a request for repairs that brings the sales price down a bunch. Or you can fix up your house just like everyone wants, spend a fair amount of money on that and end up netting less than you would have if you had priced it well in the first place. Your choice.
What we are seeing here is a lot of creative logic on the part of sellers and a lot of voting with their feet from buyers. That’s not a good way to get what you want on either side. Buyers are in this crazy market for a reason—they need to buy a house. Sellers think that inventory is low, it’s a seller’s market, and therefore they can ask for their dream price and get more—this is a recipe for not selling their house. Buyers are too nervous for that, and too well educated about the market. And who among us is willing to pay more for something we want just because the sellers want us to?