The Supply & Demand of Housing Market
In my job as a real estate appraiser, I analyze market value for every home I inspect. Today’s market is as confusing for me as it is for you. As I see home prices all over the map, I have been spending many long nights at my computer with the MLS (Multiple Listing Service) and my public records data, Real Quest, trying to make some sense of it. I have noticed that in every area that I work in (northern Los Angeles County), I find one or two properties that sold or listed below market value for the area. In my attempt to search out an answer why this trend is happening, I have concluded that many sellers are being pressured by their listing agents to under-cut the market, so they can generate a quick sale.
Just two years ago, realtors were selling their listed property before it even hit the MLS. They were getting multiple bids, pushing the selling price over and above what the seller was asking. This is why home prices escalated so fast. Agents were spoiled by this buying frenzy and made a lot of money in a very short amount of time. Now typical marketing times, or days on market, in the areas that I work in, runs approximately 90 days. This is actually considered normal. Before the housing boom that ran from 2002-2005, it was typical to see a house marketed for sale anywhere from 3 to 6 months. So now that we are back to a time where a realtor has to actually spend some money and time on advertising, open houses and flyers, they don’t like it. A few months ago, I was appraising a house in Mission Hills, CA. The owner told me that he was considering selling the house and asked if I could recommend a good listing agent. I called a friend of mine and told him about the lead. My friend said to me, “ Oh Ron, by the time I spend money on advertising and having to wait 120 days or more on the market …and maybe the house won’t sell; It’s not worth it for me. I am gonna have to pass.” Several other listing agents that I have talked to also echo his response. Therefore, I noticed, by talking to sellers, agents are pressuring their clients to lower their listed price below market value, so that the agent will make the sale and get commission from the deal. Again, I have seen this happen in my own neighborhood. In an adjacent housing tract, most of the homes are selling in the low $800,000, but there is one house that is listed at $715,000. The agent’s comments in the MLS reads, “ The lowest priced home in the tract. Great Deal! Come grab it now!” But no one has grabbed it. It has been on the market for 6 months because every buyer thinks there is something wrong with it. This proves my theory that a low price will not guarantee a fast sale.
I am not down on all realtors. Many of them are good, hard working, reputable and honest people. If the home has been priced correctly and they don’t receive a good offer in a reasonable amount of time, they tell their clients to take their home off the market and consider re-listing their house in 6-8 months from now. If you do not have to sell, take your home off the market. Remember the basic theory of supply and demand. If the housing inventory shrinks, demand will increase. Wait till you see a number of active listings in your neighborhood come off the market, and then consider re-listing your house. And don’t let an agent talk you into anything you are uncomfortable with.
More advice to come…
