Has the Real Estate Market Really Recovered?

  • stop-dreaming-marketHas real estate recovered? The truth may lie in the eye of the beholder.

The realities of real estate as a livelihood often differ from the day to day headlines our potential clients read and hear in the media. Hype and spin are often joined at the hip in our business, but that does still not confer the title that headlines are gospel. Real estate organizations, the government, brokerages, mortgage brokers, and banks all try to keep a positive spin on things even in the worst of times.

News headlines may read, “Home sales are up…”, “Home inventory is down…” or “Average home sales price are up!” Consumers that grew up in this tech and Twitter era tend to focus only on the headline and so the problem begins. However, most news stories neglect to tell you what is really selling, how long it is actually taking to sell a home, and what homes are really selling for. They are only interested in capitalizing on the sensational headline.

For the most part, most news stories never tell you if the seller made a profit. They neglect that detail which is distasteful part of the story. There are many hidden costs in selling a home, maintenance, improvements, upkeep and updates, commissions, mortgage payments, taxes, and yes commissions. All expenses impact the seller’s bottom line of profit, or loss and cannot be ignored.

So sometimes prices are up indeed according to local statistics, but what portion of the market is up? Is it the bottom of the market, middle or the top end? Keep in mind that most statistics are just an average of the big picture. So no matter who we are, we must ask questions – reading the news headlines will not suffice. The reason for this is simple – a real estate market many times can be disjointed even in the same local market.

For agents that work a niche bottom end of the market… sales can appear to be hot and driving the market frenzy with first time buyers and investors. Yet in that same market luxury home sellers are grilling their real estate agent why their home is not being shown and question why their home is sitting on the market for an extended period of time. When this occurs, many homeowners give up selling their home out of frustration, believing that the market will improve a little further down the road. They may be right, but in the meantime the inventory of listed homes shrinks again.

The reality of why real estate inventory of listed single family homes is still down in most markets is simple, and yet seems to go unreported in most news stories these days. It’s because many homeowners are still upside down or at best can only break even when selling a home. The cost burden to sell a home for many homeowners still outweighs the reason to sell.

With home prices rising quickly, does it make sense to move and pay more to get less home?

Yes, home sales may be up nationally, but for those successfully selling a home it still does not mean the home owner made a profit when selling – this is a reality that is not covered in any statistic. By the time you figure in the cost of upgrades such as granite worktops in the kitchen, new paint, carpet or décor… or money spent to prepare a home for sale many homeowners are still selling at a loss. As for others – many of these sellers had no choice but had to sell due to job loss, relocation or a life change. They were adults about it, and took the loss and moved on.

For the real estate agent, the issues are many and are both painful and loaded with stress whether they are working with buyers or sellers. The key for real estate professionals is to arm themselves in depth with market knowledge. Agents must delve in to the most recent statistics to make sense of the reported trends so they can best grasp the impact on the market segments. This is vital so they can educate their clients. Honesty is always the best policy for providing market direction.

Face it, these days we do not have the best of clients. In this post economic downturn, buyers and sellers are both damaged goods. This is an unavoidable new reality. As agents, our day-to-day world is now a real estate triage! We constantly deal with buyers with some sort of impaired credit. Short sales, bankruptcies, and low paying jobs have created their own collateral damage. Millenniums are carrying massive debt with student loans and mandated health coverage. Now as would be first time home buyers – they are being priced out of the market by rising prices, and difficulty in obtaining a home loan. For home sellers, it’s not much different.

For home sellers the issue is pricing or over pricing. It is an issue of denial. Sellers appear to be greedy looking for hard pressed buyers to bail them out of their financial dilemma because of the market’s perceived shortage of inventory. It is a false credo, yet sellers will place their homes on the market, but pricing it way too high.

When a realistic offer comes in lower than full listing price, homeowners fail to negotiate feeling that they have the upper hand. They act as if they are insulted. When that occurs we are at another stalemate. Buyers will balk at higher prices, withdraw their offer and walk away. The listed home now back on the market may sit on the market until the listing expires or the home price is reduced again and again – the listing inventory then becomes stale. The problem is that home sellers are buying into the media hype of higher home prices and a rising market, but the reality is that in spite of all this homes are still not appraising, and many buyers are still not qualifying for a loan. Why not? Ignorance is bliss! A misleading headline is easier to swallow than the truth.

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