Get Real and Get Sold in 2009
To understand the current status and future trends of the upper valley real estate market,two assumptions must be made: First, unlike so many other communities around the nation, including some very near, the upper valley real estate market is not in a crisis. Other terms being used to describe declining markets real estate markets include ‘blood bath’, ‘brutal’, and ‘spiraling’. The upper valley real estate market is none of those things.
The second assumption, which is more like stating the obvious, is we have been affected by the economic downturn that ushered in rare buyer’s market trend that has heels dug in.
A Polaroid snapshot of St. Helena’s 2008 real estate market, when compared to two recent Seller’s market years (2005 and 2006), reveals both assumptions:
I. 50% fewer homes sold in St. Helena in 2007 (67) and in 2008 (62) compared to the total homes sold in the seller’s markets of 2005 and 2006 (114 and 112 respectively).
II. It took twice the time to sell a St. Helena home in 2008 (200 days) compared to the seller’s market conditions of ‘05 and ‘06 when the average time to secure a buyer was less than 100 days.
III. The weighted average price of all SH homes sold in 2008 was $999,000. In 2007 the average was $1, 115,000. Compared to 2006, when the average sale reached an all time high of $1,841, a loss of 19.6% results.
These figures are not what sellers like to hear, and even harder to apply. The best possible news in the current environment of unprecedented challenges,
is the insulation provided by the valley’s supply and demand which once again prevents us (so far) from suffering extremes. However, since no economy is an island, the market conditions have changed, and for those property sellers who are serious about getting sold in 2009 they simply must accept and apply the new order of the day. Indisputably,no matter how special a house is, it’s worth less today than two years ago (2006), lesser still than one year ago (2007) and definitely less since November 2008.
I urge sellers to resist applying direct math percentages generally referred to in the above examples to figure a current market value. First, because the rules and comps have significantly changed since November, (remember that the 2008 figures primarily represent the majority of averages from the first ten months, with very little influencing activity from November and December when the rules changed). Second, every property’s value IS unique in the sense of how it has been affected, especially since the end of last year. It’s best to consult your Realtor, even if their experienced opinions don’t match with your needs or expectations at the moment.
Getting real about the current value is the most important step a seller should adopt, sooner rather than later, to get sold in 2009. Agents and brokers are focused on very current sold prices, since buyers and appraisers will only consider very recent sold comps when determining the price they are willing to pay for a house.
If you are a seller, perhaps you identify with one of these common errors that prevented, or is preventing a sale:
• Refusal to accept that real estate is selling and appraising for less than it did two years ago, when optimal appreciation was achieved throughout the valley.
• Presuming (in some cases, requiring) that a personal need such as a retirement nest egg goal, or an out-dated re-fi appraisal has bearing on how a buyer and an appraiser will evaluate your home’s current value
• Believing against logic that there is a buyer somewhere out there who will consider the current market conditions and relevant sales, and then somehow offer you the 2006 value anyway.
Rather than adopt these irrelevant, ineffective strategies, in addition to getting real about a home’s current value, sellers can further improve their chances of getting sold by applying these strategies that are more relevant to a buyer’s market than a seller’s:
• Get inspections prior to listing rather than leaving that crucial step to a buyer. A $300 inspection could save you tens of thousands in negotiations.
• Get an appraisal before you list your house, rather than wait for this potentially deal-breaking report to be revealed toward the end of your escrow. There’s no sense getting to the altar, only to find the clergy will simply not perform the ceremony.
• Don’t marry your first asking price even if your Realtor’s advice is already far less than you hoped for or need. Drawing lines in the sand is tantamount to refusing to share your toys when no playmate is present. Plan ahead for price reductions at intervals one you’ve thoroughly tested the waters with a price. If, within several weeks (or less) of listing your house for sale, you are not getting consistent nibbles (showing appointments or offers in the range of your asking price) bring up your line and hook it with a different and fresh bait.
• Don’t convince yourself that you are leaving money behind every time you reduce your asking price. If your house was worth your asking price today, it would have received an offer within a reasonable amount of exposure time, even in a slow market where there are few buyers.
And whatever you do, don’t beat yourself up about ‘losing’ the equity you may have reached in 2006. Everyone else has lost too, but, in most cases around the region and throughout the country, to a more ‘brutal’ extent than up valley.
(January 2010 update)This just in: Based on the activity of the first two weeks of January, showing activity and opened escrows around the valley nearly doubled compared to an average 14-day span in November and December. Perhaps the clog in the drain is slowly being plunged by a combination of low interest rates, a slight loosening of bank funding and political settling that has hints of hope and a plan. While this potential increase in activity is encouraging, it will not affect local values, nor will it change the course of the buyer’s market stream with a garden hose toward a seller’s market. That will come slowly but surely. In the meantime, we have what we have so make the best of it if you have to.
Katie Somple is a veteran upper valley real estate broker and an advocate for local sellers. She can be reached at LifeStyle Properties (707) 968-9100