Right now the market is bloated with listings. Many belong to sellers who think they have a better handle on what their home is worth than the expert agents they hire. Agents themselves feed these hallucinations by deferring to their sellers rather than applying some backbone and good business principles. They’d rather get the listing, own it and pour ad dollars into it for as long as it takes until they can convince the seller to reduce it.
And you wonder why so many agents are living off of credit cards right now.
Flip to the buyer side. They see all these over priced homes sitting on the market. They aren’t buying because their agents – the same people who have the listings – are telling them to sit tight, price reductions are coming.
Now comes the Fed. Rates drop. Once again the housing industry is being pimped out to save the economy from a recession.
Will Realtors view this as a rebirth for real estate?
Will sellers now become convinced that they will be able to get their price?
Will they sit on these prices for an extended period of time thinking the Fed might cut again?
Will buyers now sitting on the sidelines take action, betting the pendulum is about to swing back up?
Seems to me like real estate is just one big wild west show with no sheriff in town.
– Davison
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Reading this post and the Redfin post back to back makes it clear that with the current market, real estate professionals have to be well versed and flexible in a climate of change.
While Redfin may never be financially solid, the business model behind it does bring up the need for Real Estate professionals to look out for new ideas and new ways of approaching an established field. As the market changes and evolves, technology is as important as traditional means of marketing and selling.
I think the Wild West is going to get a little wilder before the dust settles. After all, agents aren't the only ones living off of credit cards, many buyers are too.
Lisa, http://www.lockboxdeals.com
Marc,
You really think the rate reduction will have any real impact on the housing market? I hope it does, but something tells me it won't make much of a difference.
Personally I just don’t know Jonathan. I’m torn. What would be a real impact we could hope for? False confidence in the market and rising home prices? At this rate, my kids will never be able to move out!
What might happen is people will buy into the Fed's propaganda machine aimed at invigorating the American consumer and at warding off the recession citing events from 2001. Then what? A new bubble? The longer we push off the pain the worse the recovery.
Marc,
You've nailed the seller, buyer and agent mentality. I like to think of it in emotional terms–sellers are agraid of leaving money on the table; buyers are afraid of paying too much; and agents are afraid that if they don't say what their clients want to hear they lose the opportunity to someone who will. Plenty of fear to go around…fear and uncertaintly.
In terms of the effect of the apparent the artificial 'injection' from the Feds in lower rates, it doesn't change the basic fundamental dynamic of too much supply and too little demand, but it does create some opportunity for all sides. For example, lower rates can be amplified with the use of discount point to create some serious savings that translate into lowering the 'effective' price of the home significantly. The effect of a 1 percent difference in interest rates on an 80% loan is paramount to a price reduction of as much as 8 to 10% (depending on the price point). This tachnique from the playbook of the 1980's (when rates got as high as 19%) could be applied if savvy agents could explain to sellers that perhaps in concert with a price 'improvement' they offer the buyer the incentive of a lower interest rate by paying discount points. 2 to 3 discount points today will buy down the interest rate about 1 point.
Bottom line: The smart buyer might reason that what they hope to gain in future reduced prices they may well lose as interest rates climb.
That interest rates are likely to go up over time is a pretty good bet given what the artificially low rates do to the dollar; inflationary pressures; etc. That's another story. Meanwhile agents don't use calculators anymore and most of them weren't around in the 1980's. If you hold up a calculator and ask if they've every used one of these they think you're talking about a PDA!
You so right on the money on the sellers side and the agent as well. I just put together an article entitled How to Sell your Home in Four Steps.
http://greatertampabayrealestate.com/blog/listings/sell-your-home-in-4-steps/
I did note: That it would not be easy.