Climbing up from the bottom…prices in the "new" normal
The old adage “Location, Location, Location” has been displaced in this new real estate market to “Price, Location, Price.”
After a few years or so of a market dragging at the bottom of the barrel here in Grand Rapids, MI- we are now seeing some signs of rebirth and life. Open house attendance is really high, showings are ramping up on listings, buyers are coming into the area, sellers are on the phone to agents asking if now would be a good time to put their homes on the market…signs are everywhere that a turnaround is at hand.
The question is…what are we turning around to? What is the “New Normal” that we will be seeing for the time being? Here is what I’m seeing as a Realtor in the marketplace:
– Sellers have been gun-shy about putting their homes on the market unless they absolutely have to sell. Two of my last three closings the sellers had to bring a substantial amount of money to close ($61,000 for one and $28,000 for another). They both were transfered and had jobs in another City so “had to sell.”
Because of all the media hype about what a bad market it is – for a while only sellers who “had to sell” put their homes on the market. It wasn’t until the buyers tax credit hit in conjunction with some positive spring indicators that a seller that wasn’t in trouble even bothered to think about selling.
None of the sellers that I am working with are surprised when I explain about prices in the marketplace – they all know they have gone down. That being said – I believe I am pricing my listings to the market right now – not to some old inflated idea of normal. This is a trend across the board.
Now – in comes a Buyer who is only hearing about foreclosures, short sales, deeply discounted prices and encouraged by some mis-guided ideas are still throwing low-ball offers at a seller who has taken the market into consideration when pricing their home already. Don’t get me wrong – we love to get offers – and sometimes they even get accepted and closed. But I think many buyers have the misconception in this marketplace that all houses are overpriced and no matter where a seller has priced their home – a major low-ball offer is in order.
Suggestion to Buyers: work with your agent to do a CMA on any home you are considering before you make that low offer.
Suggestion to Sellers: price to the market today – your Realtor can help you know where this is.
After all is said and done – the free market system will prevail. A house is still only worth what a buyer is willing to pay and a seller is willing to sell for. We have some artificial market pressures going on now with shortsales and foreclosures – but the New Normal will always balance out to Adam Smith’s Law of Supply and Demand.