The Real Estate Conversation

I had intended to devote today’s blog to the 3 most important words in real estate.  However in light of the sales numbers that appeared in the Los Angeles Times today, I’m going to comment on them instead (a blogger’s perogative)…

The headline of Alejandro Lazo’s article today is that sales fell 16%, median price up slightly.  To read that, you’d have to assume the sky is falling again in real estate. This kind of headline sells papers I guess, but given the decline in newspaper sales these days, perhaps a different approach might be warranted.  How about this headline: “Buyers and sellers at a standoff'”.  This is the real story. 

First the numbers:

Sales were off 16% from a year ago, but only down 2.4% from last month.  Notable yes, disasterous? No.  More numbers: Median prices rises 2.6% from August and 7.5% year over year.  Not bad.   So why this apparent contradiction?  Maybe slower sales are the result of the end of the housing credit, maybe tighter lending standards or maybe a simple matter of a difference of opinion.  But why then higher median prices?  The Times suggests a decline in REO property is the cause since foreclosures currently represent only 33.4% of the market today vs. 56.7% a year ago.  While this may be true, I tend to believe more higher end property sales are the root.  So a higher priced home then, is “pulling up” the market rather than fewer lower end homes a selling and “pushing down” the market.

The conclusion?  There is a stand off between sellers and buyers.  Just yestereday I had a convesation with a client who insisted a listing of mine was over priced.  She pointed to a model match sale last spring on a superior location, that sold for a lower price as being eveidence to her point.  I countered with half a dozen more recent sales that suggested it was priced correctly.  The result?  No offer.  My buyer client doesn’t agree and thus won’t open her wallet.  Conversely, my seller client, who has also just listed her property for lease by the way, doesn’t have to agree with the buyer either.  The result?  No sale.  So we are left with a chasm.  For some sellers, selling is the only option so they will lower their price until they find a willing buyer.  Others however, are opting to wait until the spring selling season when demand is stronger and prices firmer.  For buyers like mine, they risk missing historically low rates in the hopes of saving a mythical $10-20,000 from some other seller, yet since no two homes are the same, perhaps missing out on a home she really likes.   When I suggested she pass on this one and look for another, I only annoyed her.  She wants the seller to be realistic and reach the same conclusion she has and reduce the price so she can buy it.  But the seller won’t.  Alas in this scenario, both parties likely lose out.  On that note, I better end now – clearly I’ve got a couple of clients I need to try to talk off the cliff and bring together… wish me luck!

The number of closings this week are down from earlier months by as much as 25%.  However, that number is not entirely inconsistent with seasonal averages.  In the first week of October 2005 we closed 47 total units, while last week we closed 33 (a 30% decline).  In terms of annual numbers, we closed just over 2500 total units, while today we are on a pace for just over 2200.  That’s only a 10% decline from the peak of market in terms of sales activity.  Every market remains its own universe, but I can say that within our universe, the sun is still rising in the east and setting in the west; homes are still selling and everyday someone is moving into their new home. 

Next post: What are the three most important words in real estate (a hint: they are not price per foot).

The market seems to be in the doldrums again.  We went from a super strong July to seasonally  normal moderate August and September, however, October has really slowed.  There aren’t many new listings in our area and the same for sales.  There’s still a couple of weeks left so I’ll hold an opinion for the moment.