Last week this column detailed a few of the indicators that reflect the changes taking place in our local real estate market. Included in the mix were statistics showing that some sellers are receiving a lower percentage of their asking prices, the inventory of homes for sale and number of days it takes to sell a home are both increasing, and fewer new purchase contracts are being signed.
The most perplexing statistic of all, according to an Aug. 8 report from the Las Cruces Association of Realtors, was that July’s median sales price slipped 2.1 percent below June’s median sales price. While a one-month decline doesn’t necessarily constitute a trend in the making, it is consistent with price declines reported in other areas of the country.
So, what’s a seller to do? The answer depends on the type of property, its location and its condition. Sellers have an easy time figuring out how to price their properties when trends are obvious. In an appreciating market, a common strategy is to lead the market by a few thousand dollars and let the value catch up to the asking price. I recall that in 2005, when the annual appreciation rate was approaching 20 percent, a local Las Cruces Realtor added to the description of the home she was selling that the price would “increase by $1,000 per month until sold”.
On the other side of the coin, Las Cruces-area home prices declined by almost $1,000 per month between 2008 and 2012. A seller who chose to employ the price-high-and-let-the-value-catch-up strategy during that time quickly learned that the longer they waited for a buyer, the less their property was worth. A “kiss of death” phrase often uttered by sellers in a declining market is “I’m in no hurry.” The bottom line is that sellers in a declining market should be in a hurry to sell. How much of a hurry is the $64,000 question.
Here’s a fictitious example of how such a scenario might play out. Let’s say a seller asks a Realtor for a market analysis in anticipation of listing his home for sale. The broker presents sales comps showing closings that took place over the past 30 days. This is where a potential problem arises. The sales prices of the recently closed comps were set six to eight weeks prior when the purchase agreement was signed. Had values declined over that period, the lower prices wouldn’t be revealed until six to eight weeks into the future. Meanwhile, the seller who relied on the comps to set his price based on one- to two-month-old sales could be over market the day the listing is activated. Should prices continue to decline over the coming weeks and months, the amount by which the property is overpriced grows each and every day. It is not uncommon for sellers who overprice to receive less for their properties than had they priced correctly right out of the gate.
The fact remains that our market is currently a mixed bag. While there are not enough buyers roaming the streets today to put pressure on our growing inventory, there are far more buyers than the number of “best homes for the money” currently listed for sale. As a result, some sellers must reduce their prices, add incentives or improve the condition of their properties, while others will receive multiple over-asking price offers without lifting a finger. The ultimate challenge is to determine into which category or categories a particular home fits.
Sellers whose homes are in terrific shape, or that are listed at a price point consistent with demand, or that are located in the most desirable neighborhoods, continue to receive multiple offers. Demand is currently waning somewhat for homes not meeting those criteria. The key is to become in expert in your particular micro market. Homes whose prices are balanced against demand and are the best for the money, irrespective of their prices, condition or locations, will always sell at, near or over the asking price.
See you at closing.
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Gary Sandler is a full-time Realtor and president of Gary Sandler Inc., Realtors in Las Cruces. He loves to answer questions and can be reached at 575-642-2292 or Gary@GarySandler.com.