When agents ask me how the market is I always answer with, “It depends.” There is no such thing as one general market. Markets change by price point, by area, by neighborhood, and by home style.
While the media has been guilty of making sweeping statements that the market is either a strong buyers’ or sellers’ market these statements are not completely accurate. Are they saying that the supply and demand for $200,000 homes are the same as $5 million homes? Does the supply of sprawling ranches in a county match the supply of urban condos? Of course not. Markets – meaning supply-and-demand – vary greatly.
In any given market, at any given time there are homes that do not sell. This even happens in a sellers’ market. They may not sell because of price or location or condition, but the fact is that they don’t sell. All you have to do is pull the days-on-market stats for an area of active listings and you will quickly see listings that have aged and not sold. So, if the media is saying that the area is a strong sellers’ market, then why would there be unsold listings with a high days-on-market number? When I pull these numbers in any market it is very easy to see that even in a “hot” market there are always pockets of homes that don’t sell.
You simply should never make a sweeping statement that the market is a strong buyers’ market or strong sellers’ market without doing your homework first. You must first look at the days on market numbers for area, style of home and price point.
Recently a friend of my husband called to tell us that he was going to be putting his home on the market. He was very excited to tell us that his agent (a family friend of his) had told him that his home was in the Seattle market, a strong sellers’ market, and that it would sell very quickly and that he was expecting multiple offers.
However, the offer review period came and went without a single offer.
He called me distraught. He was shocked and didn’t know what to do. He was losing faith in his agent too. His agent was also shocked and wanted to know what I thought and asked me if he should do a price reduction.
Of course, I went right into the MLS to look at the days-on-market numbers. What I discovered was that in their price range, style of home, and location the days-on-market numbers had gone from an average of 8 days to 17 days. I told them to hold tight, not panic and give it another 10 days.
Sure enough, at day 16 they got an offer. Only one offer, not multiple offers like they had expected. The home didn’t sell for full price. The seller and buyer negotiated a good price, but there wasn’t an escalated sale price and there were no multiple offers.
When I looked further into the numbers, I could also see that many of the recent closings had also not sold for above list price. When I looked even further, I could see that many of the homes that had recently sold appeared to have inflated prices to begin with.
When a market starts to heat up, many sellers believe the sky is the limit. They over inflate their prices and start thinking they could get anything. What my husband’s friend was experiencing was the market clearing saying, “enough is enough.”
If you study days-on-Market numbers in an area you can easily begin to see patterns that either say the pricing is getting too high or the pricing is still right on the money. This is an incredible way to be able to predict where the market is and where it is going. If the days-on-market numbers are increasing that means that pricing will stay steady or go down. If days-on-market numbers are decreasing that means the pricing is either right on or that multiple offers could be a reality. Without data, stats and facts it is negligent to make a statement about exactly where the market is at that moment.
The most valuable tool you have available to you as real estate agent is the stats the MLS provides to you. If you ever want to see whether a market is a buyers or sellers’ market, you first have to do your research before you ever make a sweeping statement of one or the other. The answer to that question should always be, “It depends!”