Anecdotal evidence on the local market

The news was flooded last week with reports on the housing market’s decline. This article in the Washington Times is but one example:

The downturn in the housing market is deepening, with new home sales at a nine-year low, prices down for the fourth month in a row and mortgage applications at their lowest point in three years.

“We see construction diminishing somewhat and real estate prices flattening, not declining,” she said. “Clearly, however, we could be wrong on the magnitudes.”

I received this email the other day from a reader who is renting in the area –

Did you see
this article in Yahoo news? I closed on my house in xxx.  Should I wait for a fall back in prices?

Maybe. Maybe not. If there is a compelling reason to to buy rather than rent and you plan to be in the area more than a short period of time, (insert my usual caveats here – if you have good credit, are mentally ready for the responsibility of owning, etc.)  then you should probably consider buying. The greatest challenge right now in the market is sellers’ expectations. They have been so conditioned to getting at least the asking price, that some are unable to see the forest for the trees. There is often more to an offer than money. Closing costs, closing dates, etc.

Take the past few days for example – I wrote four offers, all of which are fair offers, based on the recent sold comparable homes.

1) Asking price: $285k. Albemarle. Offered a net of $274k. Seller bought the property for $206k in August 2004. No deal.
2) Asking price: $200. Charlottesville. Offered $200k. Seller bought the property for $89k in 2000. Offer accepted.
3) Asking price: $295k. Greene. Offered $285k. Seller bought the property for $209 in March 2004. We were one of two offers, neither of which was accepted.
4) Asking price: $310k. Waynesboro. Offered $310k. Seller bought the property for $215k in May 2002. Offer accepted.

For all of these offers, I did comparative market analyses. Just because a Seller is asking for a certain price does not mean that is what the property is worth. That said, if a ready, willing and able buyer wants to pay full price, that property is worth full price.

The market is changing. Make no mistake. Are the tires coming off the cart? Doubtful. Are sellers’ expectations in need of adjustment? Yup.

Note: more on the Waynesboro market later.

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  1. Merv March 28, 2006 at 06:06

    Jim, love this article…mentally prepared can be likened to “adult responsibility”. I have sellers still holding out for the spring rush. I just checked some numbers, it didn’t happen in March and I don’t think it is happening in April. New listings are still outpacing new contracts by a wide margin. Crash and burn? I don’t think so either. Sellers just need to reset expectations big time! We are not going back to the heady days any time soon.

  2. Jim duncan March 28, 2006 at 07:57

    Merv –

    Thanks for the note. Most telling from the above is that for the property in Greene, two offers were presented, neither of which was accepted – so I wasn’t the only one looking at data!

    Well-priced properties will sell and sell quickly, however. I put a property on the market Saturday and had two offers on Monday. My clients listened to my counsel, and we are one step closer to removing the kickout clause on the house they are purchasing. Sellers’ motivations are all different; those who have a fair degree of “reasonable-ness” will do better than those without.

  3. TrvlnMn March 29, 2006 at 01:21

    What’s the chance that numbers 1 and 3 were ‘flipping’? (that speculation made based on the short turn around time).

    It seems to me that an offer within 10k of the asking price is a reasonable offer (unless it’s a really low priced property- low priced in this instance being below 150).

    that’s just my 2 cents anyway.

  4. Jim Duncan March 29, 2006 at 07:26

    The sellers on 1 and 3 were moving for legitimate reasons. My thought is that they have been so “used to” getting asking price (if not more) that they don’t want to negotiate. That said, there are probably two more offers being written on each one right now …