Okay, I must admit it. I don’t quite get this. I look through the MLS several times a day and it continues to amaze me to see how few price reductions are going on in this market right now. Sellers continue to believe that the market, i.e. the buyers, will come to them. I’m sorry, but that’s not going to happen. Not now. Not in 2008. Perhaps we’ll see a change in the market in 2009, but if you want to continue to sell your home throughout 2008 and in to 2009, continue to hold strong on your price.
Meanwhile, each day that a seller holds his price, they are actually falling further away from where the true market price is for their home given the slide in pricing. The challenge for sellers is they actually can never catch up to where the market is. They are almost always behind. If they do decide to finally reduce the price of their home, inevitably, they are not getting ahead of the market…i.e. price it under the market. Too often, they drop the price to where the market was for the home 3,4,5,6 months ago.
Sellers don’t like to hear this, but we are in a commodity market where buyers are few and mortgages are getting more scrutiny given the credit squeeze on Wall Street. If your home has been on the market this spring for 30-60 days and you haven’t had any offers, your price is too high. (Granted, there are exceptions to very expensive property…i.e. over $1.5 million).
Homes will sell for what they are worth. While many sellers are hoping for a quick sale, they seem prepared to wait 6, 12, or 18 months. However, the more market time, the less sellers will actually get for their home. In addition, with the market continuing to slide, as each month goes by, the sellers home is worth less.
Last week, the Star Tribune reported that the Twin Cities saw the median sales price of housing drop by 12% YoY. I do believe that that is a historic drop and the largest drop in local real estate prices ever recorded. The S&P/Case-Shiller Index studies the top 20 metropolitan markets and they have the Twin Cities down 8% so far looking at data from December.
The market sets the price for housing…not real estates agents and not homeowners. It’s the buyers and what they are willing to pay today given the market uncertainty. Right now we are clearly in decline. It’s not a collapse, but it is clearly declining. Given we are in year three of the decline and the daily onslaught of disastrous news about real estate, mortgages, Wall Street, and the U.S. Dollar, you’d think that sellers would understand prices must come down in order to get buyers to even bid on the properties.
I understand people being optimistic and hopeful. I would count myself as part of that crowd, but in this kind of market a heavy dose of reality is necessary. There’s not enough of that going around – yet.
