This past week our listings saw an average of 0.5 showings each. That is only one showing for every other listing and that is probably the slowest traffic pattern I’ve seen in a very long time. It is the beginning of summer. School is letting out and last week was a holiday week so many people may have gone on vacation. Hopefully, that is the explanation for the slowdown. We can’t have peaks without valleys, so hopefully we’ll seen things pickup again shortly.
Since the tax credit expired on April 30th, I have seen a clear slowdown both in showing traffic and offer activity. I have had many conversations with other Realtors who are seeing the same pattern. I fully expected a dip in sales immediately after the expiration but also expect things to pick back up again after a short time. Unfortunately, I believe we are right in the middle of that dip. The tax credit was an excellent tool to help encourage home sales and it worked. However, I think it created overly bullish hopes about the speed of our real estate recovery.
When the market first started to come apart toward the end of 2008, home sales came to a screeching halt. This was because buyers were afraid there would be no end to the falling prices and sellers thought that the situation was only temporary. Buyer and seller expectations about pricing diverged in a matter of a few short months.
As the recession dragged on over the course of 2009 and the stock markets began to recover, buyers started getting more comfortable that we’d hit bottom and were willing to purchase homes, albeit at excellent prices. As those prices were reported to the public through the media, sellers realized that home values weren’t coming back up anytime soon and their expectations started to come back down. At the end of 2009, buyer and seller expectations about price were coming together and with the help of the tax credit, sales were made.
However, now those past tax credit sales are giving sellers false hopes that the market has recovered. They hear that the real estate markets are back on track and they are holding out (unsuccessfully) for higher prices. Unfortunately, buyers that are looking to make offers are using comparables from earlier in the year to determine an appropriate price. Most of those comparables sold at bargain prices.
So, now I am seeing the expectations of buyers and sellers, that had finally started to come together, begin to diverge again. Its almost as though we are back in mid 2009. The difference this year is that there are lot more buyers out there. Things are better this year, but its still a strong buyers market and there is still a huge inventory of homes to choose from.
In real estate sales, the buyer has to be willing to buy and the seller has to be willing to sell. It takes both to make a deal. And when the expectations of one or both parties are exaggerated one way or the other, sales simply can’t happen.