September/October 2018 Market Pulse Boston: Should We Get the Crash Cart?
According to the National Association of Realtors, the pace of existing home sales is expected to decline slightly by the end of 2018. I will not argue that overall the economy is great with population and economic growth up and that these should be great things for the real estate market, however we are seeing an impact on the market with mortgage rates rising above 5%. Although this is still low compared to when I purchased my 1st home in 2001, the increase is affecting buyers. Declining affordability is the issue.
The market has been cooling off a bit in recent weeks, as more homes are available and demand is less. We’re already seeing prices move lower as a result. Expect this trend to continue especially if the market moves closer to a buyer’s market.
Boots on The Ground: What Did You Hear on the Frontline?
I don’t like to working in vacuum, so I often solicit real time data from people in and around my business. The most obvious place for a Realtor® to get an understanding would be from a loan officer. I recently had a meeting with Adam Bibber, a loan officer with Loan Depot and asked him what he was seeing with buyers and loans. Here is what he had to say:
“A lot of potential buyers seem to have become fed up with the super high sales prices this year, and losing out to cash buyers. A lot of them are sitting out – waiting for prices to go down – which creates a shift in the market as there is now less demand.”
The only thing I would add is that if you wait too long, then you will pay a higher interest rate. You can always buy a less expensive home, but chances are you will not be able to change the interest rate too much. To get the latest on rates and loans, please reach out to Adam Bibber at The Loan Depot
Why “Well If Thinking” Leads to the Slaughterhouse?
Is the Market Slowing or are People Just Being More Realistic?
I think that we see a typical run up in prices in the 2nd and 3rd quarter in any given year. Each year sellers eyewitness what their neighbors homes sell for and then randomly add some factor onto the value of their house and find a real estate agent who is dumb enough to listen to them. This moved is based largely on their own personal perspective and what I like to call “well if thinking”. “Well if thinking” is simply a stance that sellers take which essentially says well if the neighbor’s house is worth that, then mine is certainly worth more.
If you base your pricing on “well if thinking” and not true market value, then you will certainly become one of the 13 of 15 homes on the market who have to reduce their price by 4.6% just to get interested parties to look at it.
Properties seem to be taking a little longer than they had been taking to get under agreement. In my opinion, it’s not crashing – it’s simply balancing out.
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A Real Snapshot: Market Pricing in Walpole Massachusetts
To put this into context, I recently was working on property in Walpole, Massachusetts which is a suburb just outside of Boston by about 15 miles. The property I was working on was priced under 500k. This property should have gone under agreement rather quickly based on where the market has been in the last year or so. It actually took about 30 days to get an offer on the property.
As of today, there are 15 properties on the market in Walpole with a list price under 500k. The average time these have been on the market is 57 days. Of the 15 properties on the market, 13 properties have been reduced.
In a couple of instances, some of properties were reduced twice. The average price adjustment was about 4.6% or just around $20,000.
Regardless of interest rates and “buyer frustration” families are created everyday and people need to live somewhere. The right house in the right condition with the right price sells everyday. In the United States, 5.5 million homes sell on average per year. Essentially, 15,068 homes sell per day in the United States. If you are planning on making a move, it’s always best to get the advice of professional.
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