I’m torn on this thing that we’re doing here. Specificlaly, this thing that I’m doing. I’m selling houses. I’m selling them to buyers and selling them for sellers. I’m working every day, with no days off. That’s the sort of thing someone writes on a post, with dumbbells on the rubber floor next to the incline bench, sweat droplets on the floor. #nodaysoff, they say. But that’s silly, because we all take days off, except in real estate. And especially excepting this particular summer. What a thing to do, to spend a life selling structures to people. I suppose it’s better than selling shower rings, though if you were the top shower ring seller I’m betting that would provide for a very full and comfortable life. What were we talking about?
Right, summer buyers. I see behavior in the market today that is both odd and yet expected, and in that there is some confusion. On one hand, I expect buyers during this summer to act irrationally. I expect them to act with some immediacy, which makes sense since we are all painfully aware of our mortality. We should act with intention, which is how I justify every single thing I’ve ever bought. I think about dying and then I think about my wife’s next husband and all of the nice things he’ll get to buy with the money that I earned, and I think I’ll just buy this thing and that will be one less thing that he can buy. Summer buyers are like that, too. Buy today, because tomorrow when we return to ash there will be nothing left to buy, and our spouses new spouses certainly will excuse that missing hundred, or thousand, or million dollars.
Summer buyers, specifically this variety of summer buyers, act differently than winter buyers. Never mind that winter buyers are smarter buyers, and never mind that winter buyers get to make their decision when things look decidedly unsexy, there are other differences, too. Winter buyers have a tendency to look more casually, whereas summer buyers look with their feet and their eyes and their shiny cars. New listing? Drive up today to see it. Preferred broker can’t show it to me? I’ll call someone else. It’s Sunday morning, did you see that new listing, the one that came to market six months ago, well I want to see it today. How does 1 pm work?
But this isn’t a particular problem. I expect this. What’s happening this summer is buyers are upset about their lack of options. Inventory is miserable, with perhaps 8 true lakefront homes for sale this afternoon. Buyers hate this, as they should. But instead of aligning with the market leader (ME), they align with that leader (ME) and then also sidle up next to some market participants (other brokers). They figure they’ll need to diversify their search in order to have the most success. Feelers, they call them. I have my feelers out, some of them say. So they call some brokers and they email some friends, and they stop and talk to some guy on the shore path and tell him they are interested. They’re buyers, they say. Ready to buy. They tell everyone, thinking they’re being smart and savvy and proactive.
What they’re actually doing is driving up their own purchase prices. Let’s pretend there’s some house on some sweet little street, and that house has some lawn that touches this magical lake. That owner knows her house is in demand, because she reads this blog and she receives dozens of broker post cards each week. I’M THE BEST LOOK AT ALL OF THE HOUSES THAT SOLD CALL ME TO SELL YOURS. This is a rough guess at what those cards say. The owner knows her house is something that could sell this summer. I call the owner and tell her that I have a buyer. A direct buyer. A real, cash, buyer. My buyer, however, told two other brokers to find him a home, so those brokers called this owner, too. And the buyer asked the neighbor about the home, so the neighbor told the owner that he knows a buyer. A cash buyer. The seller’s head is filled with buyer activity, all sorts of people crawling and crashing and scratching to be the one to overpay for this home. The owner’s price was $2M last summer. Now it was going to be $2.5M (an unfortunate but reasonable expectation for this summer), but after word of so many buyers the price goes to $3M.
There’s just one problem. All of those buyers is actually one buyer. The buyer, thinking he’s being smart, bid himself up. He created a bidding war between him and himself, between one broker and another. He drove up the price on a house just because he lacked A. Loyalty B. Intelligence C. Patience. And you thought ABC stood for Always Be Closing.
If you’re a lakefront buyer this summer, please calm down. The market rush will not last forever. If you’d like to frantically jump from broker to broker, and whisper to anyone who has an ear that you’re a buyer, just remember this story. You’re making a tight market worse. You’re making an expensive house more expensive. And you’re creating the perfect storm for every seller who thinks they have ten buyers when they might only have one.