I was recently helping another agent in the office with his open house, his sellers still lived in the house and wanted to make sure there was always someone in the living room to keep an eye on their belongings. While I was there a gentleman came in and looked around and then started badgering the listing agent about making an offer well below asking price. He stated that the market had flattened out and was going to go down and suggested the agent inform his sellers that they were way over priced, they needed to be realistic, and should consider offers of much less. I’m talking about $300,000 under asking price and this house was the best priced house in the area. He eventually talked himself out of making an offer and left.
I wasn’t my place to say anything since it wasn’t my listing and the agent I was helping had more experience and years in the business than me. But it got me thinking about the market which has slowed a little recently, I had to ask myself why is that? Clients that I talk to ask me the same question so I figured out the reasons that make the most sense to me.
I think there are a couple reasons, none of which do I think indicate a problem or a large downward trend in the local market. The market is still strong, interest rates are at record lows still which makes buying a home more affordable. There is still a large influx of people coming to the area for jobs at all the tech companies. And rents are still ridiculously high. So why is it that homes are sitting on the market longer and not selling for way over asking price like they were 6 month to a year ago?
First off, I think when home prices are at record highs and home owners are watching homes sell the day they hit the market with multiple offers over asking price they get a little excited. This leads to people selling and moving out of the area for an early retirement or a job in a cheaper area that pays a comparable salary. This increases the inventory and gives buyers more options.
Secondly, most people with kids don’t want to deal with the hassles of moving while getting their kids ready to go back to school. This removes a huge chunk of buyers from the market. And another big part of the market are people that move here for work from out of the area, and now is the prime time for vacations further reducing the amount of buyer in the market. Following all of that are a string of big holidays and only serious buyers are going to be shopping for a home during that time keeping the market slow until the start of next year.
The combination of these two things I think is the major cause of the soften market we’ve been seeing. No one has a magic crystal ball but I think the market will pick back up at the beginning of next year when the excitement of the red hot market has gone down and people are back from vacation, the holidays are over, and kids are settled in school.
I do think its a great time for buyers though, there’s less competition and you have the most buying power right now due to the super low interest rates. Even a small bump in interest greatly reduces your buying power, so the moral of the story is don’t be like the guy from the beginning of this article he’ll end up with less buying power and end up paying more for the property he does buy when he realizes low balling doesn’t work.