Sales are up, inventory is down. Buyers are here, there … seemingly everywhere. Matter of fact, I’m getting downright chummy with the agents and buyers who my clients and I keep running into as we troll new listings.
“Frank, how are ya? What’d you guys think of that last one? Nice wallpaper, right?”
It is borderline comical how many luxury SUVs and bluetooth-clad agent types can be found milling about outside of the latest foreclosure as the hesitant listing agent shuffles towards the front door to place the combo lockbox. He is buried under an avalanche of paper as seventeen offers are hurled in his direction before he can escape to whatever underworld chasm in which an REO agent keeps a cubicle.
Multiple offers, bidding wars, thousands over asking price … so why hasn’t your house sold yet?
There it is.
The sum total of a seller’s concern when it comes to the overall vitality of the market is his or her own home. So bank-owned properties are moving at a record clip, so what? If there are so many buyers out there, why aren’t any knocking on your door?
The unspoken fact of the matter is that the market is still out of whack. While the free fall in prices seems to have finally stalled (hopefully at the bottom of the cliff, not just on another ledge), and sales activity has agents excited about going to work again, there is an underlying issue that I have heard little, if any, mention of in the media, or even amongst fellow agents for that matter. It is self-evident that bank properties are stiff competition for the average home seller, but pricing concerns are only half of the equation.
The soft underbelly of our purported recovery is the lack of move-up buyers. Not only are the higher priced resale homes suffering from a dearth of financing options, but from the very buyers that should be fleeing the lower end of the market. When the market is healthy, an entry level Real Estate transaction acts as a domino. The seller of the entry-level home moves up to house #2, thus freeing the seller of house #3 to buy the dream house, and off we go. When a foreclosure property sells, however, it’s one and done. No seller eager to use the proceeds to take another step up the ladder. Just an institution eager to get an albatross off its books.
Until buyers start turning back to resale homes in the lower price ranges, we will continue to see improved sales statistics …
…. for the banks.
It may not be what sellers want to hear, but it’s where we are. We need to clean out the glut of foreclosures not only on the market now, but the backlog (rumor has it that banks are sitting on many foreclosures and bringing them to market slowly, so as not to implode their own values by flooding the market) as well, before buyers start purchasing resales with more regularity. Though the market is showing definite signs of life as of late, your buyer may still be trapped in a home that he can’t sell.
So if you want to be a part of those happy, happy, joy, joy reports of increased sales, you can’t rely on the move-up guy. The market is improving, but not enough to swing buyers to you of its own accord. You still have to meet it halfway and position yourself to compete with the banks. We may be down to 33,000 listings in the greater Phoenix area, but buyers are really only competing for the most viable 3000 or so (in accordance with rigorous scientific guestimation).
In the “one and done” market that we have become in 2009, it is much better to be the former than the latter.