Motivation key for sellers as the real estate market stabilizes
The long-awaited end to a frenzied and unsustainable real estate market is a relief for potential buyers who have been waiting for the market to calm down, but a blow for sellers, especially those caught off guard by the rapid turnaround.
“I have a seller who is not lowering his price because I think he hasn’t understood where the market is going right now,” says Dawn Houlf, a longtime Las Vegas real estate agent. Another potential seller waited on the sidelines, trying to time the market peak. “They took six weeks to prepare the house for sale and missed the mark.”
Thanks to record prices, higher interest rates, headline inflation and signs of recession, the days of multiple offers on the asking price from buyers willing to forgo inspections and appraisals are over.
Supply is up 134% from a year ago, according to Las Vegas Reators. The median price of a home in Las Vegas fell in June for the first time in two years, from $482,000 in May to $480,000. That’s still up 21.5% from $395,000 a year ago.
The party may be over, but the hangover is fierce for some potential sellers with one goal in mind: to maximize their return.
“We’ve seen a lot of sellers driven by greed, for lack of a better word,” says Las Vegas real estate agent Diane Varney. “’If I get my price, I’ll sell. Otherwise, I’ll stay put, ‘It’s not a life event. People usually travel for life events.
Varney says a quarter of listings in Southern Nevada have discounted prices.
“A seller must be motivated by something other than price. Inventory in Las Vegas is almost four times what it was in March,” she says. “I show them the statistics and explain the laws of supply and demand to them.”
“If you get showings and no offers, you’re about 5% overpriced. If you get no shows and no offers, then you’re about 10% overpriced,” Varney says of the rules of a normal market. “We are coming out of a ‘no rules’ era where we have seen 25% to 35% increases in property values over the past 24 months.”
In Reno, where the median home price was $677,500 in June, 32.6% of listings saw price reductions that month, according to Realtor.com, which judge Reno is the first in the country to have reduced real estate prices.
“Pricing your home correctly from the start is essential. I see price reductions of over 20% right now,” says Sarah Scattini, president of the Reno Sparks Association of Realtors. “Sellers offer incentives to buyers – credits for closing costs, credits to lower their interest rate. Motivated sellers are likely to be more realistic.
Scattini agrees that Reno’s ranking as the top market for price reduction indicates that it was among the most inflated markets in the United States.
“Prices are hit hardest in the markets that experienced the hottest time during the pandemic,” she says.
“Eight of the top 10 metro areas with the most price cuts – except for Sacramento, CA (#7) and Colorado Springs, CO (#8) – saw higher appreciation during the COVID pandemic -19 to date (March 2020 – June 2022) than the national increase of 26.2% over the same period,” says Realtor.com.
“These are also markets that have seen rapid price increases due to insufficient housing supply,” says Realtor.com senior economist George Ratiu.
Nationally, listings were up 18.7% in June from a year ago, according to Realtor.com, which reports that 14.9% of listings reduced their list price, up from 7.6 % one year ago.
Varney predicts that the ranks of real estate agents, which have swelled in recent years, will shrink as the market changes and offers stop “landing in their lap”.
Some 3 million people hold real estate licenses in America, according to the Association of Real Estate License Law Officials. The number of agents dropped by more than 140,000 from 2007 to 2008, according to the National Association of Realtors.
“We’re going to see inexperienced agents who don’t have skills or longevity exiting the market,” Varney says, adding that those who survived the Great Recession will be better equipped to navigate the changing market landscape.
As interest rates rise, so-called creative financing, popular before the housing bubble burst in 2007, is making a comeback.
“There’s what we call a bank statement loan, where all they have to do is provide their bank statements and have a FICO score of 650 or 680,” says Houlf. “But it’s at a higher interest rate. You’re looking at seven, seven and a half percent rather than paying five and a half or six.
Adjustable rate mortgages (ARMs) were popular during the predatory lending practices that preceded the Great Recession and fell out of favor. Now they are back.