For the most part in today’s market buyers will not make a full price offer. Sellers reduce prices, and buyers still offer less than the asking price. I am finding this to be true no matter how low or how fair the asking price is. They just know that no one is paying the asking price.
If the home is priced at or below market value, it still tends to get multiple offers. Honest I am not making this up. I have seen a couple of multiple offer situations in the past two weeks. In both cases buyers ended up paying more than the asking price, because they had to out bid each other to get the home, and they did. Hard to imagine, but like I said I am not making this up. I found another bargain this weekend and wanted to show it to a buyer. Only on the market 10 days, and when I called I was told it already had an offer on it.
Some sellers have had homes on the market for months without ever reducing the price. As we go into the Fall and Winter months it becomes less likely that they will get an offer at all. The best advice I can give is to reduce the price. I think the sellers who decide to take the home off the market until spring and then offer it at the same price or for more are going to be surprised. It isn’t going to sell next spring either, unless the price is reduced. Bookmark this post and see if I am right. I think I am. Right now there is no indication that prices will go up in the spring. The inventory of homes on the market continues to climb, not a good sign for those who believe prices will go up in the spring.
Buyers who have been sitting on the fence and are ready to go should consider buying soon. Why? Because interest rates are going up, not down.
Also see:
Don’t let the big one get away
Hi, You are so right on pricing. This isn’t 15-20 years ago, when the only homes a buyer saw were the ones the REALTORS let be shwon. Buyers knwt what the inventory is and how long they have been on the market and so forth.
They don’t call the information age because of the lack of info.
Good morning Teresa,
As usual, good information at the right time. I encourage my agents to not take even marginally over priced listings in this market, and to establish time frames to reduce the price in writing if they do.
I have been working with them to not only give market statistics, but to interpret them as well. Information needs to become knowledge. Our focus is to show that we do, in fact, add value to the relationship.
We are in the information age, as Rob stated, so we need to add more than just providing information. Our clients already have information, they need us to explain what it means and to advise them appropriately.
Price is the major factor in getting an offer, but condition is also playing a larger roll. You are right, the houses that are priced well and show well are still getting sold. Staging should be an element of the marketing plan.
Thanks for all your great blogs!
I agree, but with one caveat-
Rising interest rates should be more of an concern for sellers than buyers. This sounds strange at first, until you think about it a bit. This is due to the effect of buying at the margin.
Most homes are purchased using financing. As time has passed, many buyers are going with lower and lower down payments. As a result, the full purchase price is, more than ever, fully exposed to interest rates. If there were many people who had a few hundred thousand in the bank, then rate increases would be bad for buyers.
Let’s try a though experiment: Imagine that mortgage money was no longer available. What would happen to prices? Either people would not sell, or they would have to sell to the highest cash offer. How much cash does the average buyer have lying around? Not 300k, that’s for sure.
Now apply that thought to interest rates. Each uptick of rates eliminates certain price points from the reach of each borrower’s income. If buyers were in great supply and houses were scare, buyers would either have to some up with the money somehow, or settle for a lower-priced home.
With excess supply, however, a rise in rates means that any given seller – already seeing a scarcity of buyers – will now have even less buyers available due to some buyers being knocked out of that price bracket due to interest rates.
This will create free-market forces that will cause equilibrium to be reached again. Sellers will have to make the monthly payment work for the buyer by reducing price. This is the danger of overpaying on price due to lower rates. Higher rates mean fewer buyers for any given price. Supply and demand will take it from there.
What makes this outcome likely is that fact that many buyers buy at the maximum payment level. “I can afford 1500 per month, how much house can I get?”
Add in tighter lending standards and you have even fewer buyers at any given price point.
Essentially, since so many buyers are ‘monthly-payment’ thinkers (this wasn’t always so), the payment is more likely to remain the same, and prices and rates will move opposite each other to make the average buyer have the average payment.
In order to get a higher price, sellers need a buyer that has the purchasing power and the MOTIVATION to pay.
Higher rates = less purchasing power.
Excess supply = less motivation.
Neither bodes well for price recovery.
So the conclusion is higher rates+excess inventory = neutral outcome for buyers. Payment will be nearly the same. Bad for sellers, though.
And we will leave out the additional erosion of purchasing power due to higher fuel costs, less medical insurance, higher medical costs, soon-to-be-higher taxes, etc.
Signed,
A Very Patient Buyer in Minneapolis
Patient buyer – 🙂
Thanks for the comment. you are dead on. .