A recent article on April 28, 2007 in the local newspaper, The Desert Sun, headlined, “Resale home prices up 11 %,” has provoked a short comment here in Reflections.
Generally, I think most pundits agree that this is a great time to be BUYING property in the valley. The inventory of available properties has never been higher. Even Sellers can experience positive results in this market, if their expectations are realistic and if they understand the competition relevant to their own house.
So, it’s a great market for Buyers and a challenging one for Sellers. But, whether you are a Buyer or a Seller, what should you make of this “… home prices up…” headline?
The simple answer is NOTHING much. It’s an interesting, if not confusing statistic, but it doesn’t really mean much when you are trying to decide on a specific offering price for a
property you want to buy, or a listing price for a property you want to sell. As mentioned in other Reflections articles, BEWARE OF GENERALITIES; what may be true valley wide, or even city wide, isn’t necessarily relevant to your specific area and neighborhood.
If you know any Sellers out here, please don’t quote that headline to them. With no offer in hand, many sellers are waiting as their property languishes on the market, with the days inexorably rolling by, to the end that they will finally reduce their expectations and thus their asking prices.
The statistic won’t be helpful either to that Realtor asked by his/her Sellers to determine the selling price of their house. If the sellers bought a house in the last year or so, they probably will face at least a 5 % DECREASE in selling price from when they made their purchase. If they sell now, the result will likely be a sale price not even high enough to cover their closing costs. That’s one sad result of this market, especially for the many folks that obtained those zero down, variable rate loans last year or bought as the market peaked in 2005. Whether median prices, valley wide, go up or down, it is unlikely that such statistics for the entire valley will be relevant to a seller.
For Buyers, let’s assume that the increase in the “median” price of resale housing, valley wide has gone up 11%, as the paper states. What does this mean? Not much. With inventories of unsold houses now at 9200, an increase of over one thousand unsold properties in less than a year and with over 100 new individual listing price REDUCTIONS appearing EACH DAY on the MLS. The only thing that is important to Buyers today; is what someone paid for a similar property in their neighborhood of interest recently, how long that property has been on the market, and the frame of mind of the Seller. Some Sellers will wait until “the cows come home” to get their asking price, while others, impatient to sell, will be a lot more flexible.
Whether you are planning to buy or sell, find out what is happening in your own specific market and disregard what is happening in the valley. Even after you have determined your neighborhood sales statistics, you will need to test them for relevance to your own property, as to the specific features and the condition of those homes compared to yours, to ensure that you are comparing apples to apples.
My experience today is that there is a general trend DOWNWARD both in listing prices and selling prices in many neighborhoods. At least, that is what I have found and continue to find in the neighborhoods that I evaluate in detail. This results in an opportunity for Buyers and a challenge for Sellers.
NOW is a great time to be BUYING real estate in Palm Springs. Selling, on the other hand, requires a bit more effort; Sellers must be realistic in their expectations, and they must do their homework to be successful. As always, whether you are buying or selling real estate, your understanding of what is happening in your specific market of interest is most important.