MARKET COMMENTARY

MARKET CONDITION

After the stimulus had ended for purchases by first time and move up buyers on April 30th, buying activity dropped off dramatically. The bottom should have occurred within a couple of months and then sales should have improved month to month, at least marginally, as new buyers came into the market. According to the non seasonally adjusted pending home sales data from the National Association of Realtors (NAR), that has not been the case. In fact, from April 2010 to January 2011, for the midwest region, sales are 55% lower, continuing a steady decline from what should have been the low in June 2010. The story is similar, though better, using seasonally adjusted data with a 26% decline. Year over year sales are down 5.9% unadjusted and 3.2% adjusted. Pricing is lower, year over year, by 3.2% based on median and 1.8% based on mean. The one bright spot is a significant decline in inventory to 7.6 months, the best level in over three years. From anecdotal evidence it appears that buyer traffic has been improving in the Omaha area over the last few weeks. If it continues, we should see a nice rebound in activity for the spring season. I would not expect to see stronger pricing, however.

While pricing is steady to slightly lower overall, pricing on high demand properties is seems to be steady to rising. Traffic appears to be picking up, as it should this time of year. In the near term two factors could cause a further deterioration in market conditions, rising mortgage rates and increased listings of foreclosed or other distressed properties. Sellers need to pay close attention to these factors.

Buyers are at a distinct advantage and the savvy ones are buying properties now, taking advantage of the strong discounts available and the near record low mortgage rates. If you are credit worthy and are contemplating a move or thinking about investing in real estate this is a great time to act. Unless the economy weakens, interest rates and housing prices will rise along with inflation.

MARKETING TIP

Your best opportunity for a fast sale and to get top dollar is to attract activity quickly. The first three weeks after a listing becomes available is the most advantageous period. Early in the listing period motivated buyers are less likely to make low offers for fear that they may lose the property to someone else. They also realize that sellers are less motivated to deviate from the list price. The ideal marketing strategy positions the property toward a sale in the first three weeks.

In robust markets there are often shortages of good properties. Buyers have to be flexible or risk missing out as properties quickly move from "for sale" to "sold". In slow markets buyers tend to be more price and quality conscious. They know that there is less competition and they expect more for their money. Buyer's see your house as a "house" and nothing more. You have to make sure that the house the buyers see is as close to perfect as possible. If the house needs a "little work" the buyer will expect a big price concession. If your house is going to be the one that sells, you have to be one step ahead of your neighbor. The prepared seller understands the dynamics of the current market and positions the house to sell in that environment! Sellers that do not offer what buyers want, at a price point they want, will not sell their property. I suspect that 50% of the listings will fail to sell.

CURRENT STRATEGY

Because of the excess inventory your property must stand out from the competition. To make sure your house sells, instead of a competing property, it is critical that the house shows well and is priced correctly. Make sure all repairs are done and the house is neat and clean before the sign goes up. Walk through the house with "buyers eyes" and look at it as if you were going to buy the house. Zero in on anything that would detract from the property in the eyes of a buyer. You must either have your house in pristine condition or discounted accordingly if your house is going to be in the 50% that sells. Make sure you review our Selling Tips page in the Seller section for valuable tips on making your house buyer friendly.

Do NOT over price the house. Buyers don't care how much money you have invested in it, they only care how much they will have to invest in it. Besides, unless the sale is a cash sale, the lender will require an appraisal which sets the price ceiling. If the sale price exceeds the appraised price you may have to reduce the price or lose the sale.

Expect longer market times and fewer buyers in this market, but houses are selling. Buyers have a tremendous amount of choices today, make sure your house is in the running. Finally, if you have ever thought about investing in real estate now may be that once in a century opportunity. The rental market is good (thanks to the tighter mortgage requirements) and properties are highly discounted. In the words of Warren Buffett, “Be fearful when others are greedy. Be greedy when others are fearful.”

To read a discussion on the 2005 - 2010 housing decline please click here.

Written by Mike Salkin, Berkshire Real Estate market analyst.

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