“Fall” is in the Air?

Falling-House
My last newsletter, entitled “The Crash That Wasn’t (At Least Not Yet ),” was among my most popular ever. The teaser headline may have had something to do with it. We continue the sensationalist theme here with some observations on the start of the Fall housing market season – typically one of the busiest times.

At our regular sales meeting this morning, attended by around 60 of our finest San Francisco agents, the main topic was whether collectively we were seeing a significant change in market conditions from say, the Spring of 2015. As I’ve said before, things generally slow down a bit in the summer and then heat up in September before cooling off again at Thanksgiving as the holidays and the cold weather kick in. The consensus was that this summer followed the typical pattern. But is what we’ve seen over the last few months just seasonal or is something more fundamental going on, and how would the (also seasonal) burst of new September/October listings affect the market? Between a very savvy group of agents and a research department that’s the best in the business, I thought the responses were instructive:

  • When asked if they expected that new listings would receive 5+ offers and go for 10-20% over list price, only a handful of agents raised their hands.
  • When asked if they expected that new listings would languish without receiving offers at all, only a handful of agents raised their hands.

We are generally an opinionated bunch, so the lack of enthusiasm for either option was telling. In this case, I read the results to mean that agents are uncertain which direction the market is headed. I’ve previously described the market as “choppy” – or put another way, very dependent on the pluses and minuses of the particular property and what may be available nearby at the same time.

Here are some other observations that agents shared:
  • Clients are eying the stock market and taking it into greater consideration when making their buying decisions.
  • Listing agents who assume they will be get half a dozen offers, and prices well over asking may find themselves with just one or two, or none at all.
  • With more properties on the market, buyers are less willing to rush into an offer without looking at the competition. This is especially true if the listing agents aren’t giving them a reasonable amount of time to review disclosures.(What’s reasonable? – Around a week.)
  • Where an offer contains a loan contingency – ie., most of the time – sellers need to be more careful than ever about whether buyers will actually be able to get their loans. With some deals falling apart due to financing falling through, savvy sellers are increasingly willing to accept less cash in return for better-qualified buyers. (Of course, all-cash buyers remain the, er, gold standard.)
Here are the takeaways:
  • Buyers, if you like a property make an offer. Don’t assume that it’s not worth the effort because you think you’ll be bidding against too many people. You may be pleasantly surprised.
  • Buyers, make sure that your financing pre-approval is rock solid. Whenever possible, make sure you’ve been through your lender’s entire underwriting process so that there are no nasty surprises.
  • Sellers, the market may be in a period of readjustment. Don’t assume that you’ll necessarily get a ton of offers and a price well in excess of the list price. And remember, your property is most likely still worth more than it’s ever been, and much more than you expected just a few years ago.
  • Sellers, with more listings in the market, it’s more important than ever to prepare your property so that it shows well.

In a nutshell, we may, just may, be heading into something of a more normal market. With a lot of buyers having given up and some sellers assuming that prices will only continue to rise, it might be time for everyone to get moving again.

Oh, and about that teaser headline? No one at our meeting was predicting anything like a crash in home prices.

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