Sometimes you just don’t know
Bernanke is certainly earning his pay. He is sitting in the hot
seat now. You say you don’t know who Bernanke is? Ben Bernanke
replaced Alan Greenspan as chairman of the Federal Reserve. Oh,
yeah. Now you remember.
Sometimes you just don’t know
Bernanke is certainly earning his pay. He is sitting in the hot seat now. You say you don’t know who Bernanke is? Ben Bernanke replaced Alan Greenspan as chairman of the Federal Reserve. Oh, yeah. Now you remember.
Anyway, he has just lowered the interest rate between meeting sessions of the Federal Reserve Bank board and issued a statement of concern. This extraordinary action comes on the heels of an earlier statement that the Fed, while watching the housing market with concern, believed the economy was in a healthy growth position. This statement had done nothing to calm Wall Street’s jitters.
Now Bernanke is taking some heat because he took this more proactive course. “Why,” ask his detractors, “did he not act sooner?” Others criticize him for waffling. Others still think he should be moving forward more aggressively. Whoa, doggies! How about we just assume he continues to assess conditions and takes what he deems to be the appropriate action? Wouldn’t we rather have someone who moves with the currents over someone who carves a course of action in stone on an immovable granite face of the financial mountain?
Bernanke is an economist in the classic mold of John Maynard Keynes, known as the founder of macroeconomics. If you think back to when Keynes was criticized for changing his opinion about government intervention in markets during the Great Depression, he said, “When the facts change, I change my mind. What do you do, sir?”
So let’s look at the changes in the local real estate market. Currently in San Benito County there are 449-single family homes available for sale. In the last week, 66 new listings became available. There were 24 listings that were cancelled or withdrawn or allowed to expire. Only four homes went into contract and five closed escrow, which means the deal is done and the property changed hands.
Let’s look at pricing on those five sold homes. One was originally listed at $729,000. In order to attract an offer, it was reduced to $569,000. The sales price was $550,000. Two was originally listed at $720,000, reduced to $699,000 and sold at $640,000. Three went on the market at $937,000, reduced to $897,000 and closed at $840,000. Four listed at $529,000 and sold for $521,000. Five listed at $659,000, reduced to $595,000 and sold at $595,000.
These figures serve to illustrate the fact that buyers are steering the boat these days. A few years ago sellers were filled with glee, wading through stacks of offers to pick the best one. Today buyers are wading through stacks of listings striving to pick the best one. This situation is happening up and down the state of California to varying degrees of intensity.
I heard on the radio (I have no way of checking the veracity) that two houses on each street in Stockton is in foreclosure. Stockton has now superseded Sacramento in the foreclosure debacle. While things are not of that magnitude here, there is no doubt the foreclosures have affected our market.
To make a complex situation simple, what happens is this: A home goes into foreclosure. It is auctioned off at the courthouse steps. If it is not purchased, it belongs to the lending institution. The lender puts it on the market at current market value. If it doesn’t sell pretty quickly, the price is reduced until it does. This essentially undercuts the value of all the homes of its customer because the lowered sales price is the one used to appraise the value of the area’s homes. Hmmm. Something doesn’t smell right here, does it?
As Realtors, we are asked, “What will my home sell for?” These days the answer is, “I don’t know.” Beautiful homes are not getting shown. As Realtors we are asked, “How can I get buyers to come see my home?” Again the answer is, “I don’t know.”
Open Houses go unattended. Ads do not make the phone ring. Lovely staging and attention to detail don’t do the trick. Virtual tours, postcards announcing, “Just listed!” or “Price reduced!” and increased commissions for agents bringing in the buyer are fruitless efforts.
We currently have a strong economy and low interest rates, historically the two major factors needed to bring out the buyers. But buyers are few and far between. So we all sail along in uncharted waters. We do know that in the last three months in San Benito County 80 houses have closed. And we do know that 449 homes are out there. So if the current sale rate continues, we currently are looking at a year and a half (roughly) to deplete the existing inventory stock. But wait! If 66 new listings come on board each week … well, you see the trend.
If you are selling a home, your only question must be, “How can I get my home sold competing against other sellers similarly motivated to sell their home?” The answer is price, condition of the property and buyer incentives such as interest rate buy-downs. To sell a home you need to face the current situation and meet it head on or remove your home from the market and wait until – as it always does – the market changes.
And be kind to your Realtor.
