As with most shifts in the market, buyers and sellers are not aware of the shift until it is too late to do anything about it. For example, most of NEJC has shifted from a strong seller’s market to a more balanced market. And this shift has taken place over the last 45-60 days. Pretty quick shift, right?
So what does this mean for the market moving forward this year? A more balanced market has several implications. Before we go there, let’s first discuss what has caused the market to shift.
This shift, which is partially seasonal, has occurred due to the growing amount of inventory (active homes for sale) versus the number of homes that are going under contract currently. This is what I have referred to before as the absorption rate. Perhaps you have seen the evidence yourself. A perfect example is driving on Roe Avenue from 63rd Street to 75th Street. I think there is a real estate pointer sign on every street.
I was at a function earlier this week when I ran into a good Realtor friend of mine. She asked me how business was which sparked a conversation about the shift. Her observation was that she felt like we went from a crazy busy market to an “eerily quiet one.” And she has observed that buyers have all of a sudden gotten really picky about almost everything.
When I analyzed the numbers this week, the reason was clear. I looked closely at NEJC and found a dramatic difference in the absorption rate comparing the last week in March to the first week in June. The last week in March, there were 411 homes for sale and 79 under contract, therefore, the homes under contract were approximately 20 percent of the actives. The first week in June, there were 576 homes for sale and 29 under contract, or approximately 5 percent of the actives. And since the last week in March, the number of homes under contract has been on a slow and steady decline. Eerily quiet.
For those buyers out there who have had to participate in the frenzied early Spring market and have yet to find a home, your time is coming. The balance of power is shifting. So how does this shift affect the buying process for you?
- 1. You can breathe. Not to say that there are still not some locations and some price ranges that are flying off of the shelves, but in most cases the pace of the market is slowing which should allow buyers to make more calculated decisions.
- 2. You can be a little pickier. No too picky mind you. We are by no means in a buyer’s market. And yet when you have more options, you can be choosy. Maybe that is a better way to put it.
- 3. Values should stabilize. Based on current trending, the median sales prices in most areas are stabilizing. And historically values have dropped slowly from this time of the year through the remaining months. The Feds position on increasing interest rates will also have a big impact on values as well.
And what about the selling process? Just look at the statements above and consider the opposite side of the coin for sellers.
- 1. Hold your breath. The sale of your home may not take place as quickly as some in the early Spring market. Patience may be required in some cases.
- 2. More options for buyers means higher expectations when it comes to condition and that the competition is on! Don’t offer allowances or keep bids in your back pocket for condition concerns that you anticipate a buyer might have. Just do the work. You want the choosy buyer to choose you, right?
- 3. Values should stabilize. This means don’t get over confident with your pricing. We are seeing more and more price adjustments every day in our market which is indicative of overly confident pricing. During a shift, it is extremely important to price a fair market value and, in my opinion, to price slightly below market value. The best value will almost always get the most attention.
Dru Bloomfield on Flickr.com