For those of you who follow the real estate market, it has definitely been a bizarre year, and an even crazier summer season, at least here in San Diego County, CA.
2018 started out with a continuing decline in housing inventory, and many buyers got caught up in trying to find a home they could afford due to increased prices…a perfect “seller’s market.”
As we headed into the Spring and Summer seasons, the typical “buying season,” the market started off with a big bang in April and May, with many listings selling at high prices and with multiple offers. But then in June many areas came to a dead halt. All of a sudden, listings were sitting on market. Price drops were common as we headed into July and even August.
At one point in July I looked up how many homes had reduced price in the previous 30 days in Carlsbad, and the number was 250. That is a big number of homes dropping price. Heading into August this trend continued, with many homes showing multiple price drops. Then all of a sudden in mid August the market literally picked up, and homes started going into escrow….not normal and hard to understand.
Here are some of the reasons I believe that prices have dropped, which has lead to a slower summer selling season:
1. Price Frustration – prices have increased continually over the last few years and many people can not afford to buy homes they once could qualify for, forcing many to rent instead.
2. Economy – there is a lot of uncertainty in the economy due mainly to the political situation, causing many would-be buyers to put a hold on big purchases and moves. Apparently other industries are also feeling this – a friend of mine owns furniture stores and said this has been a very slow year in his business.
3. Lack of Inventory – for the last few years housing inventory has been historically low, which led to increased prices, which creates purchasing doubt on both financial and emotional levels. Once inventory increases prices will stop going up and it will truly become a buyer’s market (which is already happening in many areas).
Many sellers think they can still list at high prices, but I am seeing appraisal issues come into play more and more, and agents need to educate their sellers about what is happening in the market now. It is not time to list at high prices that sit over comparable property values – rather it is time to be smart and realize that if you want to sell in this changing market, you probably need to make some price concessions.
I will leave you with an interesting statistic from the National Association of Realtors, as relayed to me by a colleague: if a home has been on the market at least 10 days, and had at least 10 showings but no offers, it is likely 10% overpriced. I have been thinking about this over the last few days and have come to the conclusion that it really does make sense in the market of today.