Words of Wisdom
FOR SELLERS, IT’S “PRICE”
If you must sell your home in today’s buyer-friendly market, the key word that should most inform your thinking is “price.” Even with sales perking-up considerably over the past few months, price remains every buyer’s top priority. With the sheer number of available properties continuing to significantly outstrip demand, if a home is not priced in line with—or below—similar properties that have sold in the last 60 days, its chances of selling in a reasonable amount of time are drastically diminished with each passing day. Moreover, home prices won’t stabilize until buyer demand catches up with supply.
Even though inventories of available homes are dropping significantly with each passing month, the key word that continues to affect supply is “foreclosures.” Regrettably, thousands more are anticipated by year’s end; which will continually replenish the market’s overabundance of homes.
An article in the May 5th edition of Business Week Magazine was blunt in its assessment of what sellers must do to succeed in today’s market. Its title basically says it all: “Want to Sell Your Home? Lower Your Price.” The article went on to say:
“Accepting a price reduction—even a sizable one—may be the only way to sell a house in this market. For sellers who can afford to ride out the downturn, the smart move is to take your property off the market. For everyone else it’s time to get real.”
Even if you have the ability to “ride out the downturn,” you must be content to stay put for a while. The Federal Housing Finance Agency, in its June 2009 examination of past markets and previous price declines reports that “the time from peak to bottom tends to be about 3-3/4 years, whereas the median recovery period—from bottom to prior peak—was 6-2/3 years.” If they are as accurate in the recovery half of this prediction as they were in the bottoming half, the pricing curve will not favor sellers again until 2016. Even then, it is highly doubtful we’ll see the sort of off-the-wall prices that characterized the prior peak. Ultimately, you may be better off to sell now, become a buyer again; and be subject to the same great buying opportunities that exist for others.
Last week’s Money Magazine added its voice to the chorus of business media advising sellers to lower their expectations in order to sell:
“To sell your home fast, you’re going to have to dip 10 to 15 percent below what comparable homes in your neighborhood recently sold for. You still may not be able to compete with foreclosures and short sales, but at least you stand a chance of getting buyers to notice your listing.”
Locally, sellers who have taken this message to heart have proven in no uncertain terms that if the price is right, the buyers are there. Sales of single family homes in Sarasota County, even as we approach the most seasonally inactive time of the year, are ahead of all but two months since September of 2005. Pending sales across the board are at their highest level since April 2004. (Source: TRENDGRAPHIX, May 2009)
Further, we are proud to report that sellers with Michael Saunders & Company—through detailed consultations with their agents—have been supplied with the most up-to-date market data which, when studied carefully, enabled them to make the informed decisions that resulted in more than $110 million in collective price reductions. This was accomplished in just 47 days, resulting in closed transaction throughout all price ranges that help shore-up prices and bring us that much closer to market stability.
FOR BUYERS, IT’S “COST”
If—on the other hand—you are in the market to purchase a home, the key word in your mind should be “cost.”
Chances are you don’t remember the exact price you paid for your last new car; but you almost certainly remember the amount of its monthly payment down to the last decimal point. The same comparison holds true when you buy a new home.
The actual price you negotiate for a home ultimately bears little resemblance to its total cost once the interest rate is factored into several years of monthly payments. This is why locking in the lowest possible interest rate should take precedence over holding out for the uncertain prospect of prices perhaps tumbling another few percentage points. Even if they decline by as much as another ten percentage points, if the interest rate creeps up again by one percentage point, your monthly carrying cost will go up.
It’s worth noting that since 2003, in four out of five instances where mortgage rates have fallen to new lows, they have bounced back quickly and dramatically to points higher than they were before. Moreover, since October of last year conventional and FHA mortgage rates have dropped by two percentage points. If the pattern holds true, you can expect to see interest rates shoot up again by at least as many percentage points, and then some.
For EVERYONE, It’s “OPPORTUNITY”
The key word for everyone in today’s market is “opportunity.” With more and more sellers embracing the new realities of today’s pricing there has never been a better time to jump in and take advantage of the best buying opportunities of the decade. For a complete list of the best priced properties on michaelsaunders.com, visit the site’s “Best Opportunities” Web page and sign up for weekly updates.
If you’ve been contemplating selling your home, contact any agent from Michael Saunders & Company to help you price it right, sell it fast; and become a buyer again yourself.
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