A local realty market is a lot like a giant barge. It takes a long time to get going, and once it does, it takes a long time to slow down, turn, and go in another direction. The media usually seems to be about six months behind what’s really going on, except in the middle of the trend, where all seems to be in harmony for some amount of time (not sure the number yet, but I’m watching this one).
Right now, in Reno/Sparks, as a Realtor on the street, here’s what I see. More inventory (I keep waiting for it to drop, but it doesn’t) and generally consistent sales (but prices are a lot more flexible than in the past). Homes are selling as usual, but here’s the deal: the ones that sell are the absolute best value. How do you get to be the best value? By pricing yourself below the competition. What does that mean for the future? It means that prices will probably come down. How much? I’m not sure, but if our market continues to echo the historic Northern California patterns, I don’t think it will be all that much. Certainly not like the dramatic the LA-Vegas patterns (in my humble opinion, that is).
In the meantime, our reality today is that the best priced homes sell. The best priced homes become the best priced homes by pricing themselves below the other homes for sale, and often below the recent comparable sales. The barge is slowing, and turning.
Reno Ignoramus
Diane………You say that “prices will probably come down.”
Come down from where? Come down from the unrealistic, sometimes absurd asking prices that many sellers are still seeking?
Come down from prices of six months ago?
Come down from prices of a year ago? 2 years ago?
You say you don’t think prices will fall that much. Fall that much from where?
It seems to me there are still a whole lot of sellers that saw what their neighbor’s house sold for in 2004, have added 10% to that figure, and have put their house on the market. And then they sit. And sit. And sit. Could that be why inventory keeps mounting? Could that be why there is now 240 days of inventory, and rising?Is “coming down” from an unrealistic asking price really coming down?
Will it be August or September that the YoY median sales price goes negative?
A lot of potential buyers are asking if “prices are going to come down”, Why buy now? How does a buyer avoid buying into a falling market?
What are your thoughts?
Diane Cohn
Despite my attempts to predict the market, I can’t reliably do so. I just make educated guesses. Will our median prices come down? I think they may. How much? No clue, but when I say not much, I’m thinking few percentage points. And coming down from where? Our high point last June. But I don’t know when the yo-yo median will start trending down. Maybe it won’t. So far prices have remained generally above last year’s levels. I’m just not confident that will last given all the resale and builder inventory continuing to appear on the market. When the builders run out of freebies to throw in and start slashing prices, maybe that’s when the median will be affected.
Why buy now? Do it if you have to live somewhere, before interest rates go too high. Do it if you need a bigger house for your growing family, but bargain hard. Buy for long term needs, but don’t buy on speculation thinking that you can do a quick flip next year. You may lose money.
Just my two cents…
OfficeSupport
THE “ART” OF THE DEAL
I hear there is an art painting kit available that includes a canvas imprinted with a Van Gogh picture outline that you paint by the numbers. Here’s a “duh” for you- my friend did one and she says it doesn’t look nearly as good as an original “Van Gogh”. Go figure, it’s an imprecise art.
In this age of computers capable of producing what appears to be perfect and impeccable mathematical precision, some strictly mathematical applications can be misleading. Precision in making predictions about future real estate values is inherently difficult. One real life example is where trained professional certified real estate appraisers arrive at value conclusions 10% to 30% apart from each other regarding the same real property involved in Federal, State or City condemnation proceedings. The real estate market of buyers/sellers consists of dynamic factors having very strong influences on prices paid including lack of “reliable & verified” market knowledge/information, personal preferences, terms, emotional components, etc. It is an art to filter in/out the essential elements of a market running a sprint and therefore difficult at best.
In the mid to late 80s the topic of a final or single real property appraised value conclusion became an important one among real estate appraisal professionals. The thought was that a single value conclusion in many instances could be misleading by implying that it represented a high degree of precision to the reader of an appraisal report. One solution implemented by many appraisers was a “bracketing” or reporting a narrow value range. Go figure, I guess it’s difficult for even a professional to shoot a moving target.
One more but most poignant idea, at least to me, being more of a trader of many things and pattern observer. When I was 14, I intuitively pulled a tiny booklet from the library stacks and read in it about Barnard Baruch, one of the most successful stock traders in the late 20s who apparently even lent money to the Federal government. Someone asked him what the market was going to do. He said “it’s going to fluxuate”.
I thank Diane for being honest about a difficult subject, providing all the information she does and Reno Ignoramous for evoking her great complimentary responses that give this blog’s readers a clearer balanced picture of how things really work in the real world. I really mean it when I say ITS ALL GOOD. Heaps of gratitude.
All anybody can tell you for certain about anything is that it’s going to fluxuate. As for me, I’m working on getting better at asking lots of questions, taking action and making corrections quickly so I can take advantage of opportunity and not have to rely soley on obsolete precise information.
SS
Reno Ignoramus
Thanks to you SS, and I absolutely agree thanks to Diane for providing a forum for an exchange of sometimes contrasting views. Mark Twain once said that when everybody thinks the same, nobody thinks very much.
OfficeSupport
R.I., a very good and timely Twain quote. Twain had such a way to economise words.
Right on R.I.
SS
Reno Ignoramus
Well, wouldn’t you know. The RGJ has a story out this morning on the very topic we have been discussing here.
According to the RJG, we have already gone negative YoY on median sales price in Reno. The story says the median in Reno for April, ’06 was $388,200, down 2% from April, ’05.
I know these numbers tend to bounce around and also seem to vary depending upon the source of the info. Also, one month does not a trend make. But we shall have to watch closely what the next few months bring. As Diane has pointed out, inventory keep rising, and pending offers, a leading indicator of future performance, are not much better than about 10% of listings.
I am a bit suspicious of the days on market figures quoted in the article. While the article clearly notes that DOM are up, I suspect they are in reality up a lot more than the article states. I say this because I track a number of listings on the MLS. There seems to be a practice by some realtors that after a listing gets to be 80 or 90 or 100 days old, they pull the property off the MLS. For a day or two. Then they bring it back as a “new listing”.
A question for Diane: does the MLS report DOM for just a particular listing, or for the address of a property? Obvioulsy, the DOM for any particular listing can be easily manipulated. The total DOM for a particular property, no matter how many times it has “been listed”, would be much more informative.
Diane Cohn
Days on the market are tracked by MLS number. So, yes, manipulation can occur. Agents may take a slow seller off the market and relist anew, resulting in the assignment of a new MLS number, a new identity and a new statistic for days on the market. Have your Realtor run a property history by address on anything you’re interested in to get a true sense of what’s happening with the property.