Originally Published February 1, 2009
I was reading The Bubble Blog as I do most days, and as normal there were various comments that readers made that I thought were interesting, insightful, and sometimes spot on. But there are also the comments that make me think for a while and say, “Why?” In general, readers of the Bubble Blog are in agreement with the authors and support the notion that Charlottesville prices are too high. Given the current stall in sales, I tend to agree that movement is necessary in prices. But I’m not sure why everyone on the Bubble Blog is so convinced that it is all the Sellers who need to move. No, I’m not arguing that we have hit the bottom and we are about to skyrocket to 2005 price appreciation rates.
A year or so ago I was approached by another local Realtor who asked if I would be interested in selling my home. I told her, “Absolutely.” And I then proceeded to quote her a price somewhere North of 40% above my assessment. She said, “You’re crazy, your house isn’t worth nearly that much.” Well, she was right and wrong. It wasn’t worth that much on an open market, and it wasn’t going to be worth that much to her client, but to me, it’s absolutely worth that much. I had no interest in moving, and I still don’t. If someone wanted me to move, they were going to have to make it so worth my while to move that I would never have thought twice about it. And for me, that was about a 40% premium. And frankly, I’m not even sure I would have sold it for that.
Right now, I have lots of buyers looking for a steal. They don’t want a fair market price, they want a steal. They want to know that in five years when they look back at this period, that they took advantage of some pathetic seller who had no choice than to sell, at an absurd price. Today’s buyers want to know that there was no blood left. Well, guess what… today’s sellers aren’t all that desperate. Some are, but not all.
I have sellers who want to sell for various reasons. Some to move up, some to downsize, some who have been offered jobs in other areas, some who are having more children and want a bigger house. But on the news, you hear all about the millions who are losing their houses to foreclosure, and the banks are willing to sell for less than the debt. Not all sellers are bankrupt, and not all are willing to bleed for you to get your steal.
Market value is not just the price that a buyer is wiling to pay. It is also the price at which a seller is willing to sell. When the seller wants too much, or the buyer is willing to pay too little, no transaction occurs. It doesn’t always mean that the seller is over pricing. It can mean that Buyers are not wiling to pay market value.
And that brings us to the last few months of real estate. Buyers are convinced that Sellers are going to drop prices, but they haven’t. And when you look at my research into the city neighborhoods, most have not fallen in price more than 5%. And that does not represent the “steal” that buyers are looking for. Sellers on the other hand, may or may not have to sell. No one wants to be taken advantage of. Sellers are willing to drop prices when offers are being made that are fair and represent a market value transaction. But few are asking to be robbed.
I am not saying that values have not fallen in the Charlottesville area. They absolutely have. On Thursday night on 29 News I said as much. Transactions are occurring below assessments, and in 2009 we should expect to see that spread widen. But there is no indication that we are in a free fall, or that we should expect 20% price reductions anytime soon.
For Sellers, my recommendation is to seriously look at your reason for moving, and set your price accordingly. It could be that you won’t sell your house. But if you don’t need to sell, you certainly don’t need to be robbed in the process. For Buyers, assess why you are purchasing a home. For many, this is purely an investment decision. To you, I say watch for the short sales and foreclosures. You may not get the perfect home with the perfect view in the perfect school district, but you will find a good deal. There are many to be had. But don’t search for the perfect home, and then expect to steal it. It rarely happens that way.