It's been a BIG week for my son, Tristan, who not only hit a solid triple in yesterday's baseball game (that's him, running safely to third), but committed to Colgate University in upstate New York and most importantly, secured a lovely date for the Senior Ball! (She's darling.) Ah, to be happy, joyous and free again (young would be optimal too).
Of course, the months leading up to these victories have been less than happy and joyous, as Tris anxiously waited for news of his college acceptances and, for the first real time in his rather charmed life, dealt with a fair number of rejections before receiving the nod from several colleges on his list.
Cliff and I aren't new to this game; we've been down this road before with our elder son and knew that the right "fit" would present, but it seemed tougher this time around as the competition for schools becomes ever more global and difficult to navigate with each passing year. (I'm glad I don't have a third waiting in the wings.) Admittedly, Tristan's "stretch" list was far more ambitious than Case's, so that added a hefty amount of pressure that we didn't contend with the last go-round. Even so, in both instances, getting into college wasn't just about the number of applicants, the pedigree of the institution, or the expenses involved (yikes!), it was also a highly emotional journey fraught with anxiety and fear. (I'm still talking about the kids here; the parents are a whole other subset of crazy!)
Hmmm, that sounds a lot like buying Real Estate, especially these days when rejection is often the name of the game and deciding on a price to offer is often based more on gut, than on intrinsic value alone. (I agree, that's a tough road to hoe.) Wouldn't it be nice if the columns all neatly added up and it made sense? (Yes it would.)
So how does one maneuver the rocky landscape? Like the college hunt, buying a home begins with good analysis and a desire to find the right "fit." It also requires some soul searching and a clear understanding of what is within your reach. Make sure you and your mate are on the same page in this regard and you'll save yourself countless hours of research and writing.
Once the picture is clear and a property has been identified, we find reliable comps of nearby sales, determine the number of other interested parties, ask about the Sellers' requirements, preinspect when possible, thoroughly read the disclosures provided, seek out any additional information as needed, write a love-letter accompanied by adorable pictures (yes, this CAN actually be the deciding factor) set up financing WELL ahead of time, and then move in with determination and commitment. Sadly, anything less is really going to leave you at a disadvantage. In truth, home ownership is acquired by those who have a clear understanding of the marketplace, coupled with a strong desire.
So how does this year's market stack up to last year's thus far? In both instances, the market was exuberant and vigorous, but it seems even more heated this year and for good reason. Overall volume is down. As of April 23, 2014 - 60 homes had traded ownership, per the MLS (Multiple Listing Service). As of today, the number of pending and sold properties in Piedmont since January 1, 2015, sits at only 42. (These numbers don't account for any properties sold privately, off-market.)
While it's GREAT to be a Seller under such conditions, being a Buyer can be quite daunting, so for many, it's safer to simply sit it out. With fewer homes to meet the high demand, homes are selling for more money than last year, although not outrageously so (although it might appear that way to the casual observer). In fact, the average price in Piedmont at the end of the first quarter was approximately $664 per square foot, while this year, the price per square foot currently factors out to $681. It's a bump, but a reasonable one in light of the numbers. (It bears saying that now that you have the figures, it's wise to remember that homes don't sell by the square foot!)
What has changed somewhat is the pricing strategy which accounts for the multitude of overbids. Current practice dictates that a Realtor price a property below the anticipated market value in order to attract a bidding war. Unlike other negotiated markets in which a commodity is typically priced above where it will ultimately sell (think cars) our local real estate market sets a price below the anticipated sale and then bets on the market to carry the value UP! (Did you follow that?)
While this strategy may sound ridiculous, it actually works quite well given that the market has a keen sense of where a home ought to ultimately trade and DOES. Better to price a bit below the final selling price than to risk listing too high and losing your market share to the lower-priced home down the street. BTW - if you start too high, the market will NOT automatically carry the price higher; it doesn't work that way. Listen up Sellers: homes perceived as "overpriced" don't sell quickly in ANY market. For the uninitiated, this can seem like a bait-and-switch tactic. It isn't. It's simply supply and demand at work and unfortunately for Buyers, this year, there's less supply and more demand, so adjust your expectations accordingly and get ready to bid aggressively if home ownership is the desired goal.
If it feels too heated to enter the race, take a "Gap Year" and grow into it. That's okay; you may not be ready. Not everybody is. In the end, jumping into the unknown is a bit like heading off to college; both require a leap of faith and the belief that it will all work out in the end. Except that with home ownership, you will know your roommates ahead of time and someone will likely be there to do the laundry. (Sorry Tris, you're on your own from here on out. I'll pay for the education.)
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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.