US News and World Report published an enlightening article this week, Rules for a Slowdown: Its a New Housing Market. One interesting comment: "Sellers have tried to hang in there and get their price," says David
Wyss, chief economist at Standard & Poor’s. "But there comes a
point where they’ll have to give in.
Late last year, all eyes were on the housing market, waiting for it to go bust. It was like we were all standing on the sidewalk looking up at a man about to jump from a skyscraper. When it didn’t happen in a dramatic, explosive way, we all stood back and patted ourselves on the back that we were in for a soft landing and the real estate market overall was still robust. Sellers remained fat, happy, complacent and greedy — convinced that, if they just held firm, they would get their price. After all, if all the sellers held firm, the buyers would give in and pay their price.
But quietly and without a lot of fanfare, that dike has been springing a leak. Inventory has been steadily climbing for a year now. Here in Sullivan County (and in much of the northeast) that inventory rise has been far more modest (in the 50% range) than in some previously red-hot areas of the country, like Florida, San Diego and Phoenix, that have witnessed doubling and tripling of the available inventory. There isn’t a "sellers’ union" that can hold the line on prices; and those sellers that need to sell have been reducing asking prices and/or negotiating very good deals.
The market turn to a buyer’s market didn’t happen 6 months ago, when we were all looking for it, its happening now. In January, I predicted it would take sellers about 6-9 months to get with the program, which is turning out to be about right. The average and median asking prices for single family homes in Sullivan County took their first downward turn this month.
Personally, I don’t think we’re going to witness a market crash, but we may see a price pullback to last year’s levels. The sellers that will be successful in selling their houses will be the ones willing to accept a modest rate of appreciation; those that want to make a 50% to 75% gain on a house they bought two years ago will likely be disappointed. And there will likely be a few losers, particularly some ‘spec’ builders who overbuilt on medicore pieces of property or investors who spent big bucks renovating houses in less than choice locations.
Some real estate brokers may want to hang me in effigy for this post. I remember hearing many blame the slow winter and spring on the media for ‘all the talk about the housing bubble.’ Is somehow not talking about a real estate slowdown going to keep it from happening? No. Listing agents need to be upfront and honest with sellers. Its ‘tough love’, but they need to hear it — "Your house is overpriced!" Keeping your asking price above the market isn’t going to get your house sold, its just going to keep you behind the eight ball.
There’s a magical belief system at work here in Sullivan County, among many sellers and real estate agents, that we have something special going on that is going to insulate us from any real estate downturn. The opening of Bethel Woods is a big contributor to that, but it didn’t instantly result in a surge of buyer demand. I think buyer interest in Sullivan County continues to be pretty strong, and we may well outperform the regional market in the short to mid term — after all, we are still the best value within 2 hours of New York City. But we are not insulated from market factors like rising inventory, higher mortgage rates, and the level of consumer confidence.
The real estate market is not dead. Mark Twain’s famous quote, "Reports of my death have been greatly exaggerated," is apt. There are buyers in the market. I go out with them every weekend, and am making deals. They just have a lot more choices, and won’t even look at anything they perceive as way overpriced.
P.S. I don’t want to give the impression that everything is overpriced. Far from it. There are a lot of sellers who are motivated, realistic and pricing their properties to sell.