The standoff…
One of the interesting things about real estate is the significant amount of time that many of the processes involved take. From the point one decides to buy or sell a home, to the time the process is actually complete is typically measured in months, and sometimes goes even into the years… While decisions like a vehicle or a vacation happen sometimes with the click of a mouse, the fact that a real estate transaction takes so long is both necessary and potentially problematic… And is one of the main reasons for the housing market’s current lull in activity.
When it comes to selling, the majority of homeowners find themselves looking at what neighbors, or other similar homes have recently sold for to determine the worth of their property. Unfortunately, in the world of real estate, a recent sale is typically one that has closed within the last 3-6 months. In addition one must also account for the amount of time that particular comparable sale was in escrow as well. With typical escrows in the 30-60 day range, this can mean the date that the offer was actually made was as long as seven or eight months earlier. And as we all know… A lot can happen in that amount of time.
Conversely, Buyers are not nearly as concerned with comparable sales data. They are looking forward – sometimes FAR forward when making their decisions. They are considering what interest rates are today, and where they are forecasted to be in the upcoming months. They are factoring in what their daycare costs might be once they have another child in a year or so. They are determining how long it is going to take for one, or both of them to receive a raise to offset the rising costs of EVERYTHING… And they are looking at what the likelihood of a recession is over the next 1-2 years or longer.
Which leaves us with the quandary that we currently find ourselves in.
Sellers who are looking backward for their data are desperately trying to hang on to yesterday’s values. This is a psychologically challenging place to be. The feeling of having “missed the market” is not a good one. Because of this, they are hesitant to price on a downward trend, hesitant to reduce price after being on the market for too long and hesitant to accept the offer that is great today, but pales in comparison to what they would have gotten 6 months ago… Buyers are dealing with their own psychological battle. In a time where we are hearing more and more about a housing correction, and an economic recession, they are having a difficult time justifying a home purchase. If they can ultimately convince themselves to move forward with a purchase, it has to be at a price that they deem an amazing deal… Because the feeling of a Buyer having overpaid might be the only thing that rivals that of a Seller leaving money on the table.
And so in many cases, we have what amounts to a standoff. Sellers looking far into the past and still wanting too much for their homes. Buyers looking far into the future and wanting a bottom basement price to feel good about. And ultimately a great deal of not much happening…
Dan Bosch is a Realtor Associate with RE/ MAX of Chico and the team leader for the Premier Professionals Real Estate Team... Dan specializes in residential and investment properties. He can be reached at (530) 8969330 or via email at danbosch@sbcglobal. net. You can also follow him at @dan_bosch on Instagram