Yes, it's official. It's been a "buyer's" market since late 2005. How do we know we are in a depreciating market? Well, besides hearing it all over the media and learning from friends and colleagues that they have not been able to sell their homes, there is a more accurate way of measuring what the market is doing.
By tracking inventory of homes for sale, one can accurately predict a trend which indicates an appreciating or depreciating market. The determining factor for either of these markets is INVENTORY. When there are three consecutive months with more homes coming on the market than going off, it is a depreciating market and prices have to come down. When there are three consecutive months with more homes coming off the market and than coming on, it is an appreciating market and prices have to go up. It's all about supply and demand. It's the supply that controls the demand and not the demand that controls the supply.
How did we get into this situation anyway? There are numerous contributing factors, but at some point, inventory hit a "tipping point", where new listings began out-pacing sold listings. We certainly couldn't expect 10-12 % yearly appreciation in real estate forever, could we? What does a person do with an asset that is losing value? They unload it. What does a person do with an asset that is gaining in value? They hold onto it. With news everywhere we turn telling us over and over about the "bubble", inventory sitting longer and longer on the market while new listings are constantly joining them and the correct perception among property owners that their most important asset is losing value or about to lose value, more and more homeowners figured they would cash out now rather than face getting less for their homes later on. Problem is...those sellers just assumed that they could still get the inflated price that their home would have commanded two years ago and they were prepared to sit tight until they got that price.
In an appreciating market, it's ok to price your home slightly higher than "market value" and then just wait because eventually market prices do catch up to that price. However, in a depreciating market with so much competition out there, pricing your property above market value can be the death nail. Why? The longer one's property sits unsold in a depreciating market the more value it loses. Sellers are told by their agents to lower the price but they always seem to be one step behind the market slide and the property becomes "stale".
A real estate professional should know exactly what the market is doing. He or she must be aware of all factors that may adversely affect the sale of property. An excellent real estate agent should not tell you what your home is worth but rather help you find out what your property is worth. So, that is all well and good, but exactly how is this done?
In my next blog, I will explain step by step how to create the energy and excitement to drive buyer traffic through your property and to help create the perception of value necessary in order to lead to one or more offers from the interested parties. Myself and two of my colleagues will be offering a class in our office at 601 Central Ave in Dover, NH on Nov 7th from 7-8pm to attempt to educate the public on the process as well. It is a bold move as no one else in real estate in this area besides our company has agents willing to tell their sellers the truth about the market and what they need to do to sell their home now and for full price plus 10%. Stay tuned.
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