Living in a terrible real estate market
Most days I have the pleasure of talking about real estate to dozens and dozens of people which gives me the opportunity to ask a lot of questions. When you talk with enough people and ask enough questions you start to see patterns form with the answers you receive. One of the Mysteries of the Real Estate industry is the answer to the question; Why hasn't your property sold? The consistent answer we hear is "The Market".
First, you must understand that the market has never been responsible for any real estate owner to sell or not sell a property. The market with real estate, like anything else offered for sale, is dependent upon the demand for the product and the amount of the product available to meet that demand. I do get the excuse that the reason a property won't sell is "The Market", but let's look truthfully at the real reason before moving on to the numbers - It is a Seller's willingness or unwillingness to accept a price for a property that will cause it to sell or keep it from selling, not the market. As a seller, you always want to evaluate the hold & see approach against the costs associated with doing so and what likelihood there is that prices will improve. You can do it in the back room, so no one sees you do it and make the decision yourself without telling anyone, so don't be afraid. You actually should be afraid to NOT do it, but make sure you're using facts and not HOPE as your driver.
Let's pretend for a moment that "The Market" is the cause of a property not selling. This exercise got me thinking about the past and reflecting on the "Great" market we were in back in 2006. You'll remember 2006 because it is the year every property owner thinks is returning next year...well next year...or next year. I went back in time (via MLS system) to see what was going on back in the single best year of real estate sales in the history of our nation and it is interesting what I saw.
Since we are a seasonal area, many people also believe July is the best sales month of the year, so I pulled the selling numbers for July in both 2006 and 2014. I also pulled the year-to-date numbers from January to August 21st for both of the same years. You think we are in a bad real estate market? Read the numbers below -
July 2006 had 512 homes sale. July 2014 had 593 home sale. That's right - Better in 2014 than 2006!
2006 Jan - Aug had 3958 total homes sale. 2014 Jan - Aug had 3893 homes sale - 8 less homes per month sell in 2014 to date as there were in the best market ever! A Bad market??
But let's look at Condo & Townhome sales -
July 2006 had 396 condos sale. July 2014 had 382 condos sale.
2006 Jan - Aug had 4488 condos sale. 2014 Jan - Aug had 2613 condos sale.
You can see that where July wasn't far apart in the different years the annualized number is WAY off. Over 550 fewer condos are selling per month in 2014 than in 2006, but there are still an average of 326 condos selling every single month right now.
Land sales are roughly half right now than what they were in 2006, except in 2006 there were large tracts selling to developers where the current sales are driven by individual lot sales. Land is a super challenged segment of our local market and will remain that way for many more years.
So, when you truly examine the numbers of properties selling you cannot deny that the market today is not drastically different than the best market ever. Of course this relates only to selling volume and not pricing...which is kind of the point. It is always about the price and no matter how much we, as homeowners, don't want to hear it that doesn't change the fact.
"The Market" is never the culprit for you not selling your property. It is all about you making the decision to sell or not sell as it relates to today's market. As an example, if the true market pricing is on a property is $250,000, but you won't sell for less than $290,000 why would you put it on the market? (see previous post about the dumb buyer). If you don't put it on the market because you feel it will get better down the road, then look at the potential and probable appreciation that needs to happen. Let's assume that the market returns to 3% appreciation year over year for the next 5 years. You would arrive at your target $290,000 price at the end of the 5th year and again assuming an average cost of $2,000 per month to carry the property, you only invested $120,000 to get your $40,000! The only thing more wrong than investing $120,000 to get a $40,000 return is expecting the real estate market to guarantee a 3% annualized return for the next 5 years. Do you really want to put your life on hold for this hope?
If selling is you goal, then make the decision on the facts and if you just can't do it then stop thinking about selling all together.
Get out of 2006 and understand that today's market is 2014 - 8 years removed from what you may still be waiting to return.
Let's talk about it -