This past week our listings saw an average of 2.5 showings each. Scanning through my blogs from last year, it looks as though the showing traffic is about the same as it was last year. This year however, buyers seem to be a little more hesitant to pull the trigger. That’s understandable because last year there was a tax incentive to act before the end of April. But then we also saw sales drop off tremendously in July after the credits expired. Hopefully we won’t see that same ebb and flow this year.
A couple of weeks ago, I painted a picture of the current real estate market in the Charlotte area describing a gap between those homes that are selling and those that are sitting. Interestingly, there was an article in the Wall Street Journal yesterday describing the same phenomena. Basically, it goes on to describe that although the numbers in most markets indicate a severe buyer’s market, many buyers are finding themselves in multiple offer situations and getting outbid. Much of what’s being reported is happening in California where things are starting to heat back up. But to a lesser degree, we are seeing the same thing here in the Charlotte area. The problem is finding the so called diamonds in the rough. Those diamonds are the exceptional, move in ready homes that are owned by motivated sellers ready to make a deal. There are ample houses that fit that bill in our area right now, but finding them amongst the even larger pool of unmotivated sellers with high price expectations is proving to be a challenge. In my experience with buyers this year, it often takes writing several offers on several different properties and LOTS of patience before a deal is made.
So while the numbers show that inventory is in a state of oversupply, many buyers are finding that there is a limited supply of great homes at fair prices. In the Wall Street Journal article, the author points out that Charlotte is currently facing an imbalance with a 16 month supply of housing. I find that to be inflated as my stats (as reported just last week in my E-Newsletter) show that Mecklenburg County supply is currently at 12.5 months which is down 10% from the same time last year. Nonetheless, we are still in a buyers market.
The solution to the housing situation right now really centers around value in my mind. There are plenty of buyers back in the market. But there are a limited number of sellers that understand where the market is. When buyer and seller expectations meet, then a sale is made. Without that meeting of the minds, we have oversupply.
I have to disagree with your analysis. I think the multiple offer situations indicated that we are moving into a seller’s market- regardless of inventory. The multiple offer situations show that demand is there (perhaps a bit of pent up demand even), and that when a seller prices a property such that they have eliminated nearly all downside risk to the buyer- people are jumping all over it, and probably pushing the final price higher than list.
I think months and months of doom and gloom media coverage has buyers focused too much on price and not on VALUE.
What is missing in the price reporting is a distinction between move in ready and foreclosed homes. In many cases foreclosures are dwellings that have been stripped of an asortment of fixtures (appliances, cabinetry, lghting, even HVAC) making them no longer comparible to their previous sale, or move in ready sales in their area.
Buyers need to start to think in terms of "replacement" costs to get back in line with sellers. Closing prices are so miserable that builders refuse to build new homes because they can’t get them built (replacement cost) for what people are willing to pay.
At the end of the day- it isn’t really a buyer’s market. It is a vulture’s market when buyers are waiting around for sellers to give up and price a lovely move in ready house as if it were a foreclosure in need of thousands of dollars worth of work.
Hey Rob…great comments. I think you’ve coined a new term because to a degree, it IS a ‘vulture’s market’. Buyers are definitely calling the shots. And because a home has to "appraise" in order for financing to be approved, values are being held down because of foreclosures and other distressed sales that are being used as comparables. Ultimately, the market is based on supply and demand. When prices get to a certain point on the supply demand curve, we will get back to ‘equilibrium’ where there is a balanced supply. We may already be there but its hard to tell right now. Stay tuned…my monthly E-Newsletter will come out next week with the stats for April and the current pending home sales which will give us the best prediction of what’s to come in the near future. Keep the comments coming!