Vol. 281 - The Heat is ON!
While I'm loathe to admit it, I've recently been suffering with symptoms associated with growing older. Without warning or provocation (or exercise) the heat is ON (!) and I am suddenly grabbing a fan, opening a window, stripping off my sweater, or kicking off the sheets at night in VERY dramatic fashion (Sorry Cliff). This new found "heat" comes courtesy of my fifties and what seems to be a broken internal thermostat.
"Would you like to consider hormone replacement therapy?" my good doctor asked? Really? Has it come to that?
Yes, it has. Last week, I actually stuck my head out of the car window like my dog, Buck, just to feel the breeze . . . ahhh. It seems there's no end to what I will do in order to cool off just a little. In short, my radiator is OVERHEATING - AHHHHH!
"Overheated" may be the word used by many anxious Buyers (and their agents) to describe our current marketplace as each successive sale trumps the one that came before, but in point of fact, we may just be getting started . . . It's not just that multiple offers are back in play on the majority of homes we represent, it's that the level of play has jumped so dramatically from where it stood one short year ago, and more surprisingly, that CASH has played such a major role in this acceleration (48% of transactions have traded in "all-cash" offers according to current statistics).
As a result, getting Buyers into the homes they desire, has been challenging at best. At worst, the rapid growth has priced many Buyers out of the home-buying market altogether. But for everyone involved - consumers, agents, mortgage lenders, appraisers, and escrow officers (just to name a few) - the Spring Market has shaped up to be the most competitive marketplace to emerge in years.
In truth, sales have been so robust that any past formulas we used to position our clients for success, no longer applies. While it's no surprise that "value" is a moving target (heck, it's always been a moving target), the speed of acceleration has caught many people off guard.
Frankly speaking, it should no longer surprise us to hear about sales that came in 25%-40% over asking (!) but it does. The result being that there's often a HUGE CHASM between the list and the sales price - and a troubling disconnect.
Unfortunately for Buyers (fortunately for Sellers) this upward trend is now the new norm. As such, adjustments are required if we are to compete in a meaningful way. Therefore, I encourage you to "flow with the river" IF home ownership is the intended goal. And try this on for size: Even though the market seems more expensive, it's actually more affordable to buy.
"Can you send us some comps?" I'm often asked by earnest Buyers as we begin to formulate an offer price.
Why yes I can, but they'll be of little real value.
"How much should we offer?
In reality, last week's ceiling, is this week's floor, AND if I could tell you exactly where each property will trade, I'd be the most sought after woman in real estate (no joke).
By way of illustration, I'll share a story with you that I was told by a friend who bought a decade and a half ago when the market also had tremendous velocity and "heat." Like most Buyers, the question they needed answered was: "How much should we pay?" and without missing a beat, their astute Realtor said, "As much as you can." They did and the home they thought they "overpaid" for then, is now worth far more today. That's a repeating theme for many of us, in any decade. (my neighbor paid $60,000 for her home and often tells me what a 'stretch' it was at the time.)
"I refuse to play that game," one Buyer recently told me in no uncertain terms. "We're too pragmatic to get caught up in a bidding war."
I completely understand and I say this with all due respect - this is not the market for you. Step out and step off. Like all cyclical investments, this too will adjust. We just don't know when.
Which is often the very next question I'm asked: "So when will the market slow down?"
I wish I knew. I can only ever speak to the market in which we are in or put another way, "hindsight is 20/20." It could be weeks, months or years before we see a change or correction. Much of it depends on "supply and demand" and the economy at large, not just nationally, but internationally as well. If it's any consolation, we do appear to be cooling off just a bit now that more inventory has hit the market and summer is just around the corner. With families focused on graduation, this weekend might prove to be just the quiet breath you were looking for - or not. Only time will tell.
Speaking of breath, I need to catch mine. All this fanning is a real work out. I'm getting hot - again What's a woman to do?
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Julie Gardner, has been writing The Perspective for 18 years and has published more than 670 essays on life and real estate.