Having The Talk
Part 2: The Market is a Changin’
The conversation in real estate is changing. Six months ago it would have been unfathomable to even think about having to have “the talk” with a Seller who’s home was still on the market after three or four weeks. You know, the one about why their house isn’t selling. Or God Forbid, the even harder one that comes after that. The one about it being time to consider a price reduction.
That just didn’t happen six months ago. It was almost a universally accepted notion back then that every single property that came on the market would leave the market with equal ease and equanimity. They all sold and they all sold quickly. Most likely with multiple-offers, some all-cash, few or no contingencies, for well over asking.
Even though it wasn’t really the case. (Yes Virginia, sometimes Santa didn’t show and there were actually properties that didn’t sell and had to reduce their prices. And maybe after that, they still didn’t sell and they ended up chasing the market down a lot longer!). But all and all, it was true enough at the time to sustain a powerful fantasy about an infallible marketplace. One that just about everyone could take to the bank.
Success was a given. Instant gratification the norm. Sellers could do no wrong. All was well and the sun was shining in the land of blue skies. And for a while, Buyers seemed to be on board with the program. We put the houses on. They bought them as fast as we could bring em to market. Sellers said: “Jump!” and they said: “ How high?!”
(There’s always been a weird Buyer psychology-thing that makes people feel more comfortable buying in a marketplace that’s rapidly appreciating and moving away from them, than they are buying in a marketplace where the prices are moving down and rapidly coming to meet them. Must be those brain chemicals that the neuroscientists keep telling us about. The ones that encourage people to keep on gambling even when the odds against them are increasing.
The really smart buyers were the ones that mustered up the cojones and intestinal fortitude to buy in 2010 or 2011 when there was no end of the down market in sight. Just one long dark yawning cavernous hole stretching out in front and an engraved invitation to dive headfirst into the abyss. But good for them. They are the ones who really made out. Earlier this year, two different sets of clients of mine put homes on the market they had purchased in 2010. Both sold quickly for more than twice what they had paid six years ago. And both have successfully relocated out of state to bigger and better homes. Thank you very much California!)
And so it went. Sellers kept raising the bar. And Buyers kept jumping. Until suddenly this summer, the median price of homes in Santa Cruz County cleared the once-insurmountable hurdle of $800k for the first time (kinda like breaking real estate’s 4 minute mile!).
And then what? Well, we don’t know. It’s a long ride and we aren’t there yet. We are still waiting for more intel. All we know is that the median price peaked but that the number of transactions has been significantly down. Houses are selling for more money. But fewer are selling.
And it’s the homes that aren’t selling that are changing the conversation about real estate. It’s a conversation we’ll listen into next week…
