John Philip Mason is a residential appraiser with 20 years experience and covers the Hudson Valley region of New York. He’s a good friend and a true professional who believes that all appraisers need to have a macro-economic perspective in order to be effective. This week, he thinks cosmically about the black hole between buyers and sellers in Solid Masonry. …Jonathan Miller
Source: Westchester/Putnam Multiple Listing Service
It’s no secret that sellers and buyers are from different planets, each having evolved to survive the world they live in. Hostile at times, while gentle at others. As the real estate market ebbs and flows, they take turns being the lion and the lamb. Often at odds with one another, but none the less locked in a co-dependant relationship of mutual survival. And then there are the more peaceful times when they lie down together.
Up until about a year ago, it was the sellers who had something to roar about, while buyers were required to pay ever increasing prices, or forced to sit out and watch others gladly take their place. But, by the second half of 2005 it became clear to buyers that the landscape had changed. Buyers began to notice increasing inventory, as less of their fellow comrades were jumping in front of them to snap the next deal, at any price. Thus began a cycle of falling demand combined with increasing inventory.
Sellers were slow to understand, much less react, having been in the driver seat for so many years. It was as though they had forgotten how to survive in a more balanced and competitive market. So while the market cooled, sellers continued to raise their asking prices, assuming buyers would come begging eventually. Sellers felt they had the goods and there would never be enough to satisfy the needs of all, but the offers didn’t come. When real estate agents suggested reducing their asking prices, the sellers replied with comments like “advertise and show my home more often” and “bring me some buyers.” One agent reportedly got so fed up with such repeated requests she brought her sister and some friends to a client’s house and had them pretend to be potential buyers, just to shut the seller up.
All this is to say that sellers are beginning to wake up and adjust to a new market. Or is it closer to the same market we had before the sellers got giddy? Since the third quarter just ended, I went into the Westchester/Putnam Multiple Listing Service and researched single family sales activity for the past year. I focused on Westchester County, which lies directly north of New York City, has a population of 950,000 and had (unofficially) 5,266 single family home sales during this time period.
While it’s been somewhat of a wild ride, the chart clearly demonstrates the gap between average and median asking price indicators are closing in on the average and median selling price indicators. More specifically, asking price indicators have dropped sharply, while selling price indicators are leveling off. And yes, the median asking and selling price indicators do invert in the latest quarter. I keep mentioning “indicators” as many sellers and agents realize values have actually dropped, evidenced by the fact that recent sales are not achieving the same price levels of similar nearby homes, which sold during the peak of the 2005 Spring-Summer market. At the same time, despite growing inventory and days on market, some markets or sub-markets (i.e. price levels within specific locations) have held up well and prices are not off at all. (FYI The reason indicators can rise while values decline is simply a matter of which sectors of the market are selling and are therefore most influencing the overall “indicators.” That is, if high prices force a larger portion of the buyer pool into the lower price levels, that increased demand pushes up the “bottom” of the market sharply, giving the “indicators” a disproportionate boost.)
So are sellers from Venus and buyers from Mars; or are the planets simply realigning?