Sellers, don’t conflate the economic strength with home values!
Recently, the market has softened as buyers retrench. This recent change in buyers’ attitudes toward home values has resulted in 5 consecutive monthly drops in home sales and has left many MLS listed properties overpriced.
Sellers believe their homes are worth more than what buyers believe. The most common seller’s remark about getting an asking price is, “We don’t have to sell.” That’s because sellers believe the market is stronger than it is and believe it will go higher if only they are patient.
Any seller who lists a home in today’s market can attract a buyer within 30 days or less if the home is priced without any wiggle room and, more importantly, if the home is popular with the buyers. It’s easy to make your home popular with buyers. Just price the home using common sense as if there were no gamesmanship (negotiations) and as if buyers and sellers fully trusted one another to make a fair deal.
Getting a home sold for the highest value depends on a seller being willing to sell at a price that makes buyers want to buy. Frequently, we hear sellers say, “I am not giving my home away.” Translated into professional broker language that means, “I am not willing to sell my home for what it’s worth because I want more.”
Every real estate transaction in America happens because a buyer and seller meet at a price that both can live with. Listing agents do not create value, but they are responsible for “proving value” before taking a contract. The way to attract buyers is to start with an accurate and effective listing price which will bring offers, not just showings! In order to make offers flow, the home must be attractive to all buyers. If more than one buyer sees value, then multiple offers may occur, and a trained real estate negotiator will find the buyer who will pay the most, possibly above the list price. That process is called proving value. See video at Altru about proving value.
But recently I see that sellers are too slow to react to the new dynamic and think that the economic good news of full-employment along with a strong second quarter GDP at 4.1% means higher real estate prices. In other words they think they should and will benefit from the perceived strength in the economy, believing they can sell later for a better price. But here is the truth: this cake is fully-baked so don’t expect prices to rise. Any market, even the real estate market, anticipates trends and prices move on that anticipation. This bull market is in its 9th year which has set a record. It can’t last forever. What goes up must come down.
The outlook for home prices is not a rosy one. We are seeing a reversal in the 7 year trend of shrinking real estate inventory which is bad for sellers, higher interest rates which is bad for buyers, and record deficits, inflation, loan tightening, and a looming recession within a year which is bad for everyone.
Adding to the concern, companies like Redfin may be over inflating home prices by using an aggressive price algorithm similar to Zillow’s Zestimate which some analysts are saying is artificially inflating home values. Their algorithms actually track how many times a listing is viewed and shared once that listing is live in the MLS. Then based on that analysis their forecasting pricing tool increases their estimate of value. That is not helpful in any market and could help lead real estate into bubble trouble since interest or views doesn’t equate to offers and certainly doesn’t prove the actual value. Only the sold pricing data can do that.
If you intend on selling your home, do not wait on the economy to buoy your home’s value. That is not happening! Sell now, price it right, and save some commissions in the meantime by choosing Altru Realty.