Waiting to exhale....have we seen the last breath of the down market?
Both the local and national media have spent the last seven or eight months beating up on the real estate market (with some correctness) and now seem to be debating where it's all headed. The Indianapolis Star on Friday May 11 boldly predicted from two different sources that April Real Estate sales numbers rose and that we were literally coming out of the cold. It's always interesting to me when multiple sources draw from the same data and get different numbers to support a theory, which happened in this case. Company A said sales rose 7 percent from the 11 county metro and Company B said 9 percent. What it really tells you is that data can be viewed many ways by different sources especially if it's in their self interest to do so. I've always believed we just tell people the truth, no matter if it's good news or bad and let the market work itself out. In our experience in having over 75 properties listed, there was a brief pulse of sales in April but it has retreated and now is grinding along at a Jan/Feb/Mar pace. Are we going down again? Hard to tell but at the very least we do seem to be bumping along the bottom of the market trough without any clear direction.
Surprisingly, May is typically a slow month in the Indianapolis area with more of a focus on the 500, graduations and such and less concern about home buying. We have companies that don't want to fight trying to find hotel rooms for their potential incoming employees on a weekend in May and choose to just wait until June to bring them in for a visit. This has actually been a trend we've seen for years. The question is this year will things perk up in June or will we continue to trudge forward at a 'snail like' pace.
Several things are more certain in this economic climate that all of us can relate to. Gas prices have shot up and consumer spending has sagged with Wal Mart posting it's biggest drop in sales in the history of the company. Real estate inventories are still very high with a minimum absorbtion rate taking place on those homes for sale. For home sellers, it's a time to be realistic and not greedy. I'm amazed when I go out on market studies, present the data and watch homeowners still virtually ignore the raw numbers to pick a valuation of their home out of thin air. I was on such an appointment several weeks ago where a home had a number of similar comps that had sold in the low $300,000's along with having over 80 homes for sale in it's close geography/price. Two were selling per week from that price range and location. 8 sales per month with 80 for sale....a 10 month inventory assuming NO other homes coming on the market, all of which is a big hurdle to overcome. I explained it thoroughly, talked about the importance of marketing quality to maximize their home's value and they promptly listed it at $337,000 (at no surprise with another agent). Their agent has since posted poorly chosen pictures with no descriptions that make their home look half the size it really is. The agent either doesn't understand what good presentation is or simply chose to implement the marketing on the cheap. Either way, the price and presentation are going to cost the sellers big money before it's over.
What many sellers don't realize is that the responsibility of the Realtor has changed. Being a Realtor is no long just about supplying information than it is the actual use of that information to strategically position a home to sell. It's also about psychological presentation. Now more than ever how you present your home on the Internet will absolutely affect value. If your pictures are shot without a wide angle and chosen improperly you will make your home look small and you will lose potential buyers. If you lack the proper descriptions of the available spaces in your home you will lose potential buyers who may have a need for what your home offers but not the vision to recognize the potential your home has from a poor photo.
Timing is also a major part of the equation. It is such a strong buyer's market that pricing relating to time for sale will affect a seller's bottom line. A seller will never have more leverage than they do at the start of the marketing process. They will never have the leverage to negotiate price, inspection items, closing dates, timing, or ANY of the essential terms if they incorrectly price their homes. Incorrect pricing means longer time to procure a buyer, the more cynical the buyers will be about their absolute value and the less balance there will be for sellers to have their fair say in getting the transaction to closing. Longer time on the market from incorrect pricing usually means a price reduction which leads to even more indecision in the minds of the buying public. Sometimes quality homes who over price at the outset get into a pricing 'free fall' where interested parties become so cynical they simply choose to watch the price go down rather than jump in for fear of overpaying for a property.
In short it's not a time for the faint of heart. Savy buyers have learned their money is worth more than ever with the supply outpacing demand. Does it mean that every closed sale is a steal for the buyer? No....but it does mean that purchases made now based on good information and guidance will bear strong investment returns over the long haul. We've all heard the phrase, 'it's good to be king.' Buyers are the kings of the market right now so breath deep and plan accordingly if you're active in the real estate market. If you're selling don't get greedy. If you're buying recognize that values have been deflated and you're likely making a profitable investment. Either way, only time will tell if the down market has exhaled it's last breath.....
If you dislike change, you're going to like irrelevance even less. - Anonymous