Even at this close distance, I look back with extreme fondness on the recessionary years. I don’t do this to be vindictive, nor do I do it to dance on the graves of those whose real estate fortunes died during those difficult years, rather I feel this warmth because of what those years meant for the business of real estate. Markets were easy to understand then. Buyers were shy, sellers were terrified, and all were looking for advice as to what was happening and what was possibly to come next. These were good times to be in the business, so long as you understood what indeed was happening and where the market was possibly heading.
I took a negative approach early on, even while other agents adopted more positive, misplaced perspectives. Prices were dropping, this was obvious, but to what levels? Where would the bottom be found for each individual market, both geographically and demographically? If entry level lakefront was at $1.8MM, and 2010 prices found it closer to $1.5MM, would the market drop to $1.2MM? I thought it would, and then it did, and having some vision in a clouded market proved to be a tremendous benefit to me and to my clients. To say those things is to lose the greater point of why those years were such memorable ones for me. It wasn’t that I loved a bad market, it was just that I loved a time when clients didn’t know more than I did about real estate.
This is rapidly becoming the case. That the markets have recovered is obvious. To state that our recessionary years of tumult and chaos are behind us is to be redundant. What isn’t known now, however, is where the markets head and how quickly they get there. The danger in our market today, and something that has been bothering me for most of this year, is the decision of some agents, and their sellers, to price properties with an eye towards a nearly immediate pricing rebound. To forecast downward price movement is to be prescient, but to imagine an upward trajectory in the face of any true comparable evidence of the same may simply be dumb.
Earlier this year, I found myself at the dining room table inside an entry level lakefront home. The price, as I saw it, would need to be in the $1.3MM range, with an ultimate sales price potentially around $1.2MM. There was nothing to suggest that the price, even at $1.25MM, was a slam dunk. I can say that with some authority, as I had one particularly enthusiastic summer of my life wherein I could indeed, marginally and with no conviction at all, dunk a basketball. It was a girls’ basketball, but a basketball it was. Anyway, the price had to be where I knew it had to be, and the owner, after some hesitation, told me that I didn’t wear a sport coat and that I would have to leave. The sport coat was the symptom, the illness was the price.
And so it went, that listing came to market with another agent, at a $1.5MM price handle. The listing settled in and before too long the price was lowered to, wait for it, wait… a $1.3MM type number. Justification of a price target? Yes. Proof that upward looking price targets for certain homes are big swings and embarrassing misses? Yep. A few weeks ago, I had the honor of sitting at another dining room table, in a similarly unique lakefront home, with a price on my mind and shoes on my feet. The price of this home, it seemed obvious to me, should be in the $2MM range, potentially a little above it, knowing that buyers will have in mind a price a little below it. Sellers like the idea of shooting high, which is fine so long as the price is within the realm. We needn’t hit the bulls eye, but we should at least hit the white space that surrounds the outer ring that defines the target.
That property came to market later on, even after I thought the initial presentation went rather well. The price? High $2MMs. A price that would be difficult to warrant no matter what. This is what buyers are up against, and this is what makes this market today clouded when compared with the clear sailing that we had back when times were much more difficult. Sellers see a recovered market and fail to understand that prices cannot recover at the same pace as volume, no matter how badly they wish it would. Agents find justification for higher prices now, much in the way that we did back in 2005 and 2006. The thinking then was, if I don’t list this for this sellers’ insane number, someone else will. And if someone else does, it just might sell. This wasn’t a risk we could afford to take. Unfortunately, that pricing trend is back, making it all the more important which agent you choose to listen to for your market advice. Prices are subjective, which is a fact that many sellers today are banking on.