Just about any real estate agent will tell you that for almost four years now, buyers and sellers have had one trait in common — procrastination.
Although the desire to delay is frustrating for agents, the trepidation of buyers and sellers is not unjustified. After all, the average price of homes in the Mid-Atlantic region has fallen from $384,000 in November 2007 to around $309,000 today, a decline of almost 20 percent.
Plus, in the middle of all that, the stock market also took a nasty tumble. During the beginning of October 2008, the Dow Jones industrial average fell 2,380 points, or 22 percent, in just eight days. And to top it off, the unemployment rate in Maryland more than doubled from 3.6 percent in November 2007 to its current level of 7.4 percent.
The good news is that much of that pain might finally be in our rear view mirror. Nevertheless, living through such an experience is likely to make anyone step carefully going forward. In real estate, the general anxiety people are feeling encourages the desire to postpone big decisions, like buying or selling a house.
And during this time of year, the tendency to put off making a move can become even more pronounced, as families become preoccupied with the holiday season.
Unfortunately, the waiting game can lead buyers and sellers to make decisions that aren’t always to their benefit. Lee Iacocca, the famous auto executive, once said, “The trick is to make sure you don’t die waiting for prosperity to come.”
In our current economic climate, it’s a rational response to pull in your horns and sit things out, until there’s more visibility down the road. But in this period of transition for real estate, things have turned into a bit of a circular firing squad between buyers and sellers, with real estate agents standing in the middle. Buyers are waiting for prices to go down, and sellers are waiting for prices to go up. It’s a slack tide sort of situation, where everyone is looking for direction.
So, is “waiting” a good thing, or a bad thing? It all depends on what you’re waiting for.
-Waiting for spring: Most any house looks better with the azaleas blooming than it does with snow piled on the porch. But for sellers, waiting until spring is a two-edged sword. Although there are more buyers around in the spring, there are also considerably more sellers.
The number of new listings that come to market in March, April and May is 65 percent higher than what we normally see in October, November and December; however, the number of new contracts written in the spring increases by only 46 percent. The result is a situation where supply significantly exceeds demand, and that’s not the best scenario for realizing the highest possible price.
Also, the kind of buyers who venture out in the cold and snow tend to be higher quality prospects, people who are serious about finding a new place to live.
-Waiting for days on the market to disappear: For sellers, it’s a common belief that a large number of days on the market works against them. As a result, sellers will take their house off the market for a period of time (it takes 90 days), so that the “days on the market” in their listing can reset to zero.
In today’s market, a short number of days on the market may not really help. Many buyers see a short-time seller as someone who has yet to capitulate to market conditions. In reality, a lot of days on the market might actually work to a seller’s advantage by indicating a “readiness” to sell. Consequently, reducing the “days on the market” may no longer be worth the wait.
-Waiting for interest rates: With rates falling below 5 percent for a 30-year fixed mortgage, looking to get a better deal isn’t likely to happen. Historically, mortgage rates have never seen levels this low. It’s hard to predict the future, but expecting that mortgage rates will go much lower is probably wishful thinking. The general consensus is that rates will go up, not down.
If you find the house of your dreams, an eighth of a point on the interest rate probably won’t make a material difference in your lifestyle or enjoyment of the home.
-Waiting for price changes: Like we said, buyers are waiting for prices to go down, while sellers are equally optimistic about prices going up. When both parties are at a standoff regarding the direction of home prices, the net result is that the cost of homes probably won’t move a whole lot in one direction or the other.
-Waiting for the “right” house: Some buyers will endlessly look for homes, expecting to find a place that is perfect in every way. And, with a large number of homes on the market, it’s easy to do that into perpetuity.
The reality is that there is no “perfect” house. Buying a home is a set of compromises. It’s practically impossible to find a place that has it all — the right price, the right place and essentially everything you’re looking for in a house. If you get 85 percent of what you want, that’s doing pretty well.
-Waiting for the economy: If you’re trading in stocks or gold, the ebb and flow of the economy can make a real difference in your return.
Buying or selling a house is a little different. Your home isn’t strictly a financial decision. It’s where you live and a major component in the quality of your life. So don’t get too preoccupied by trying to time the purchase of your home with the completely unpredictable state of today’s economy.
In conclusion, “waiting” can sometimes pay off. But, the act of doing nothing is a decision in itself and can have the same ramifications as making a move.
In today’s real estate market, it’s easy to become frozen with indecision. Just talk to your agent, and recognize that there’s no sure thing in buying or selling a house, just like there’s no sure thing in life.
Bob and Donna McWilliams are practicing real estate agents in Maryland with more than 25 years of combined experience. Their email address is McWilliams@BobDonna.com.