Monthly Archives: February 2014

All Filler – No Killer?

CrunchyTacoWhat was that tag line we used to see on posters promoting Rasta bands at the Catalyst in the old days?   All Killer – No Filler?

Wouldn’t it be nice if we could channel more of that sentiment (and mojo) into the real estate inventory right now?  Seems like no matter how many times a day you and I (and I ) go onto the MLS to check for new listings or download our search engine results…nothing much new “of value” comes on. Just the same old same old.

Tired inventory.  Picked-over inventory.  Stale-inventory.  A warmed-over re-hash of stuff that didn’t sell last year.  A strange menagerie of distress properties.  Dubious short sales you can never be sure of.  A smattering of REOs the banks are still pinching out of their systems…starting with the worst first.

The sum total?  An uninspiring catalogue of choices.  Most of which aren’t qualified enough to move anyone anywhere.  As in: Move buyers in. And move sellers out.

I guess we could say it’s mostly Filler…Very Little Killer in real estate right now.  Not many killer views, killer yards, killer locations.  Lowering our expectations even more… there aren’t even many plain old, modest, middle of the road, houses packaged in nice presentations at reasonable price points.  Specially right in the sweet spot zone between $600k and $800k.

I don’t know about you…but it’s killin’ me.

Most Agents out there understand.  They’ve got clients calling. Buyers ready to buy.  Buyers becoming increasingly frustrated with a market that doesn’t seem to offer anything that fits their needs or price range.

And by extension, Buyers frustrated with their own Agents, who become more and more suspect each week they fail to uncover that special hidden gem that’s waiting out there. Somewhere.

It isn’t a Perfect Buyers Market anymore.  But it still could be a good one.  Interest rates are still remarkably low.  And prices are still well below the peak (remember – the Median Price almost hit $800k back in the boom days).  The median is in the low $600,000s now.

What’s missing?   Great places that people actually want to buy.  I think some people call it supply.  Or maybe “effective” supply would be a better term.

I keep having the same deja-vu experience.  Clients who’ve been looking forever, pouring over on-line pictures of homes for sale, who keep calling and asking to see places they forgot they already saw a year ago.

Houses that didn’t work then and aren’t going to work after another 365 days on market and a minimal price reduction.   I call this  “Deja Viewing”. Stare at the MLS long enough and homes start repeating themselves over and over.

So when’s this slow tortuous drip of new properties coming on going to end?  When do the floodgates open? I feel like a kid staring at the classroom clock.  Waiting for recess from a hard lesson. The minute hand isn’t moving. The fabric of time is frozen.

Groundhog Day comes tomorrow – February 2nd.  Will another shadow appear?  Will we have another six weeks of wintry inventory?   Will there be a foreshadowing of a huge shadow inventory we’ll see relatively soon?  Or will there be the shadowy logic of would-be sellers still planning to hold back putting their places on the market, for as long as they can?

Either way, looks like the winter of our buyers’ discontent (vis-à-vis the market’s lack of content)  might run through to the spring.  Hopefully not the summer and fall too – like it did for all of 2013.

Hopefully the shadow will be banished for good by February 2015.  We can’t keep kicking the groundhog down the road forever.

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Replaying the Game Film

ReelsLast week we continued rewinding the tape on 2013. Going back over the action to see if we could discern any patterns to help us design a better game plan for 2014.

You never know when you might have to call an audible in the heat of the moment. Specially when the market looks like it’s lining up for another blitz. Things move so fast on the field that it helps to review them in slo mo from a comfortable perch in the skybox.

Here’s a quick summary:

January –  February 2013: Very little inventory.  Rising optimism in the market and real estate’s recovery. Pent up demand. Exceptionally  low interest rates.

March – April 2013:  Rapid escalation into an all-out, over the top, multiple-offer, frenzy.  Think 2005-2006 in terms of rabid intensity.

May to June 2013:  Energy begins to dissipate. Fewer multiple offers. More days on market. Bid-ups aren’t pushing prices quite so high.

IMPORTANT NOTE:  Sold Stats are trailing indicators. When closed sales are published for May and June – it reflects real market activity 30 to 90 days prior. Sales peaked in May, June and July of 2013 – indicating how strong the market was from March to May.

The Median Price jumped from $449,000 to $641,000 in amonth’s time, between March and May –  representing the entire price gain for the year. Alot was happening. Very quickly.

July and August 2013: Vocal enthusiasm still reverberates from early spring but the market begins to level out. Compared to March it feels like a disappointing drop off.  The number of sales dips and the median settles into the low to mid $600s.

On the ground, it seems like the market has run into an invisible barrier. Despite continuing optimism, even the Feds, pull back on their plan to end Quantitative Easing. Economists keep using the phrase “headwinds in the recovery”.

QUESTION:  Are Housing and Real Estate growth supposed to lead the economy out of this recession –like they’ve always done? Or are they waiting for significant increases in jobs, earnings and consumer confidence to lead them out of the downturn this time around? Which is the chicken? Which the egg?

September to October 2013:  Significantly fewer new listings come on. Sellers try to push price points higher while Buyers begin to push back.  Buyers are becoming more particular and discerning about what they buy and what they are willing to spend.  Or can spend.  The number of active listings drops further. The inventory of desirable “quality” listings falls even further than that.  Buyers dig in, trying to muster patience.  Wait for more, better choices to come on.

November to December 2013:  Buyer fatigue is in full force. Many are taking self-imposed timeouts. Fewer transactions.  Sales prices stay steady due to exceedingly low inventory.  Fewer Sellers list during the holidays in traditional fashion.

And we are back to where we started last year. Here are the Important Patterns that have emerged:

– The market is bifurcated.  Homes listed between $500 – $800k continue to experience strong demand.  Homes listed above that are accruing more days on market.  Homes listed above $1mill are accounting for an increasingly large percentage of the unsold inventory.

– The missing piece in a self-sustaining real estate market is Move-up Buyers.  Their healthy participation would allow both supply and demand to increase.  When more transactions flow easier, more people enter the market and pricescan rise.

– Move-up buyers are absent because: a) Sweeping mortgage reforms inhibit flexible loan options, b) Lack of inventory discourages contingent offers that would allow more Sellers to become Buyers and more Buyers to become Sellers.  Lower inventory is self-perpetuating. c) Risk aversion remains strong from the memory of 2008. People are buying beneath their means.