I’m reading a book right now called “Animal Spirits”by George Akerlof and Robert Shiller. At one point, the authors tell a story of an economist who’s turn it was to sell his own home in a down market. This economist gave up after a few months of trying sell and reported back to his circle that he “couldn’t sell”. This was laughable to his other economist friends. Here was an economist making an irrational statement that simply defies the basic theory of supply and demand. Eventually and much later, he was able to sell the house after finally deciding to reduce the price. I love that story.
Selling your home is not a function of whether or not it can sell. Rather it is a matter of whether or not you are “willing” and “able” to sell at current market prices. The trouble with today’s real estate market is a function of lots and lots of sellers who aren’t willing to except the reality of the current market. There is a price at which any home, in any condition will sell. Price the home close to that amount and you will find a buyer. Price the home well above that expected sale price and you will likely experience very little showing traffic, few, if any offers, and ultimately, no sale.
Many homes on the market today are priced way above the realistic market value in today’s economy. These homes will not sell, yet they are factored into the overall supply of available homes. When comparing the rate of sales against the number of available homes, these overpriced, not-going-to-sell listings are causing the market statistics to look really bad. Bad market data causes fear and therefore buyers are afraid to buy. On comes the downward spiral as prices continue to fall.
In the Carolina Multiple Listings over the past 12 months, only about 30% of listings entered into the system have sold. The rest are either still waiting or have expired / been withdrawn. These numbers can be improved if sellers of the overpriced homes would just reconsider listing until conditions will work for their respective situations. I realize this is a pipe dream, but knowledge is powerful and change can only happen one listing at a time.
Motivated sellers who are priced to market will find buyers. Those sellers who aren’t “willing” or “able” to sell at current market prices really ought to stay off the market until conditions are such that they can make a sale work. Otherwise, they are making the market worse for everyone else and ultimately themselves because it will just take that much longer for the glut of inventory to clear.
Fortunately, I am seeing many sellers who are beginning to get the message. In my blog last week, I reported the statistics for the Mecklenburg County real estate market in August. The numbers show that supply is slowly beginning to fall. But supply is not falling because sales are outpacing new listings. They are falling because overpriced listings are expiring or being withdrawn and not re-listed. As long as the total number of homes that go off the market, (be it through a bona fide sale or withdrawal), outpace new listings then supply will continue to fall. That would be a good thing for the Charlotte real estate market.