What a difference six years makes in real estate! The peak for condo & co-op inventory in the history of DC occurred six years ago in June of 2006. On the sixth anniversary of the peak, inventory has dropped 49.1% (827 vs. 1,684) according to the most recent data released by the Greater Capital Area Association of Realtors. (Click here for the report)
Supply Side
On a monthly view, new inventory coming on the market dropped 6.4% from a year ago (470 vs. 440), while that’s good news it lags the pace that was set in the spring of the year. The total available homes to buy is down 31.5% compared to last year, which is incredibly strong. (1,027 vs. 827).
Unlike the house market, the condominium inventory is down pretty evenly across all price ranges except the $600,000-$700,000 and $800,000-$900,000 ranges where the inventory is actually up year over year.
Demand Side
One major divergence between the condo/co-op market and the house market is on the demand side. Unlike houses, condos and co-ops have seen demand pick up in the last month versus the year as a whole. The total number of contracts for the month is up 21.9% last month vs. 2011 (283 vs. 345); this compares to the total contracts for the year which is “only” up 17.5% (1,512 vs. 1,777).
Summary
It’s interesting to see that the market for condos/co-ops is able to absorb everything on the market and continue to bring down the inventory levels. This inventory decline is drawing the “shadow inventory” onto the market.
In the past six years owners who could not sell their condos/co-ops chose to rent their homes to defray costs. Now that the inventory is shrinking and pricing is starting to firm up, the owners are putting their units on the market. But, we are not going to see a flood of shadow inventory come on the market. Here's why:
The ridiculous tenancy laws in DC effectively prevent owners from selling their homes for market price while tenants are occupying the home. This means that landlords are waiting until tenants leave their properties before marketing them. This process of getting rid of tenants can take months or years and this artificial restraint on the market is slowing the pace at which the shadow inventory reappears.
Sunday, July 15, 2012
Saturday, July 14, 2012
DC House Market Tightens Further - Lowest Inventory Since 2005
The market for houses in Washington continues to tighten according the most recent sales statistics for released by the Greater Capital Area Association of Realtors (Click here for the report). The available inventory of houses is the lowest it has been in seven years and the cheapest homes on the market lead the way.
Supply Side
For the month, inventory dropped 11.9% compared to a year ago (486 vs. 428), which is still strong, but not a strong as the spring season was. The number of available houses declined 35.1% this year compared to last (1,092 vs. 709) and is now at its lowest level since August of 2005, which was two months before the market started to slip.
Generally the inventory rises and falls at all price ranges at approximately the same rate, but that’s not the case this month – the low end of the market is much tighter than the high end. Last month the number of new listings for properties under $400,000 dropped 39.2% (214 vs. 130). Whereas number of new listings for properties that are $900,000+ increased 32.1% (78 vs. 103); the highest priced homes had a 53.8% increase in inventory this month (40 vs. 26)!
Demand Side
As supply is constricting, demand is waning. Total number of contracts accepted last month declined 9.7% from a year ago (408 vs. 452).
The reason for this is mostly due to the restricted supply, had there been more properties available, the number of contracts would have increased as well. The proof of that is that the demand for properties has the same disparity as the supply side. Low-end properties are showing weak demand, while the high-end side has shown strength.
Pricing is King
These market trends show an important difference between the current market and the peak of the market in 2005. Buyers are willing to wait for the right home at the right price. There is not the insane desire to buy “anything.” If a home is priced too high, buyers will simply wait for the seller to lower the price of the home.
Summary
If you have a house that is $900,000 or more, it’s critical to price correctly at the beginning. With large numbers of competitors coming on the market and finicky buyers it’s a tougher market on the high-end. If you have a home that languishes for 2-3 weeks without interest it would be prudent to cut the price sooner rather than later.
Supply Side
For the month, inventory dropped 11.9% compared to a year ago (486 vs. 428), which is still strong, but not a strong as the spring season was. The number of available houses declined 35.1% this year compared to last (1,092 vs. 709) and is now at its lowest level since August of 2005, which was two months before the market started to slip.
Generally the inventory rises and falls at all price ranges at approximately the same rate, but that’s not the case this month – the low end of the market is much tighter than the high end. Last month the number of new listings for properties under $400,000 dropped 39.2% (214 vs. 130). Whereas number of new listings for properties that are $900,000+ increased 32.1% (78 vs. 103); the highest priced homes had a 53.8% increase in inventory this month (40 vs. 26)!
Demand Side
As supply is constricting, demand is waning. Total number of contracts accepted last month declined 9.7% from a year ago (408 vs. 452).
The reason for this is mostly due to the restricted supply, had there been more properties available, the number of contracts would have increased as well. The proof of that is that the demand for properties has the same disparity as the supply side. Low-end properties are showing weak demand, while the high-end side has shown strength.
Pricing is King
These market trends show an important difference between the current market and the peak of the market in 2005. Buyers are willing to wait for the right home at the right price. There is not the insane desire to buy “anything.” If a home is priced too high, buyers will simply wait for the seller to lower the price of the home.
Summary
If you have a house that is $900,000 or more, it’s critical to price correctly at the beginning. With large numbers of competitors coming on the market and finicky buyers it’s a tougher market on the high-end. If you have a home that languishes for 2-3 weeks without interest it would be prudent to cut the price sooner rather than later.
Thursday, July 5, 2012
The Only 3 Reasons a Home Doesn't Sell
Everyone has seen it. A house languishes on the market month after month. Why isn’t the house selling? Sellers have a thousand excuses, but at the end of the day there are only three reasons a home does not sell:
1. It’s priced too high
2. It’s not properly marketed
3. It’s hard to show
That’s it. There are no other reasons.
Pricing:
The marketplace knows what homes are worth. Anyone with an Internet connection can find out what homes are selling for now and what they’ve sold for in the past. When buyers see a home they will decide what to pay based on what other homes that are similar have sold for. If a particular home is priced outside of the right range, buyers simply won’t buy the home.
What are the telltale signs the home is overpriced? When the feedback includes:
1. It’s too small – That means the buyers expect a bigger home for the price.
2. It’s on a busy street – For the price the buyers expect the house to be quieter
3. The rooms are too small – Other houses in the price range have bigger rooms
4. The house is a mess – if it were priced low enough the condition would not matter
5. The home has been on the market for a long time – The price is too high.
But pricing isn’t everything.
Marketing:
Let’s pretend for a moment that you are a seller who is willing to give away your home for free to anyone who brings an offer; but you never tell a soul that you’re willing to sell. How long will it take to sell your home? The answer is “forever” because nobody knows it’s for sale. You can’t sell something unless buyers know it’s for sale!
If the home is not properly marketed it does not matter how well priced the home is. Sometimes a property can be entered in the multiple listing service (MLS) and still be badly marketed. How is that possible? Because the listing agent does not fill out information about a home completely. For example, a listing agent may have a 3,000 square foot home but does not fill in the square footage for a home. The MLS shows the home as being ZERO square feet. When a buyer looks online and enters “Find homes over 2,000 square feet” the MLS will not find the home that has “0” square feet! Thus, the home is hiding in plain sight.
But marketing isn’t everything either!
If you have a house that is overpriced it does not matter how much marketing you do. Let’s pretend you are a seller who is selling a house for one-billion dollars. It wouldn’t matter if your agent gave the world’s best individualized presentation to every human on the planet, the house would not sell because the price is too high.
Access:
You can’t sell what you can’t see. When owners don’t allow easy access the home won’t sell. Ideally, the home should be available 24-hours a day, seven days a week on a lockbox without an appointment required. The more restrictions on easy showings the harder it is to sell. You’d be amazed at how many houses require appointments to be seen, or require the listing agent to be present for showings, or only allow showings at inconvenient times. All of these are obstacles to the sale of the home.
Whose Fault Is It?
When a home is not to selling the seller naturally wants to know why that’s happening. The answer is simple, it’s either the agent’s fault or the sellers fault. That’s because the agent is responsible for marketing the home. The seller is responsible for the price and access.
As a seller you must determine if the house is being properly marketed. Frequently, when a home fails to sell, it’s because the agent is working for such a low commission that he/she doesn’t have enough money to properly market the home. Even if the agent has the money, the question is whether the right marketing is being done. If not, find an agent who can properly market the house.
If the marketing is being done well and the home isn’t selling, make it easier to show.
If the home is properly marketed and easy to show, but has not sold: Lower the Price!
1. It’s priced too high
2. It’s not properly marketed
3. It’s hard to show
That’s it. There are no other reasons.
Pricing:
The marketplace knows what homes are worth. Anyone with an Internet connection can find out what homes are selling for now and what they’ve sold for in the past. When buyers see a home they will decide what to pay based on what other homes that are similar have sold for. If a particular home is priced outside of the right range, buyers simply won’t buy the home.
What are the telltale signs the home is overpriced? When the feedback includes:
1. It’s too small – That means the buyers expect a bigger home for the price.
2. It’s on a busy street – For the price the buyers expect the house to be quieter
3. The rooms are too small – Other houses in the price range have bigger rooms
4. The house is a mess – if it were priced low enough the condition would not matter
5. The home has been on the market for a long time – The price is too high.
But pricing isn’t everything.
Marketing:
Let’s pretend for a moment that you are a seller who is willing to give away your home for free to anyone who brings an offer; but you never tell a soul that you’re willing to sell. How long will it take to sell your home? The answer is “forever” because nobody knows it’s for sale. You can’t sell something unless buyers know it’s for sale!
If the home is not properly marketed it does not matter how well priced the home is. Sometimes a property can be entered in the multiple listing service (MLS) and still be badly marketed. How is that possible? Because the listing agent does not fill out information about a home completely. For example, a listing agent may have a 3,000 square foot home but does not fill in the square footage for a home. The MLS shows the home as being ZERO square feet. When a buyer looks online and enters “Find homes over 2,000 square feet” the MLS will not find the home that has “0” square feet! Thus, the home is hiding in plain sight.
But marketing isn’t everything either!
If you have a house that is overpriced it does not matter how much marketing you do. Let’s pretend you are a seller who is selling a house for one-billion dollars. It wouldn’t matter if your agent gave the world’s best individualized presentation to every human on the planet, the house would not sell because the price is too high.
Access:
You can’t sell what you can’t see. When owners don’t allow easy access the home won’t sell. Ideally, the home should be available 24-hours a day, seven days a week on a lockbox without an appointment required. The more restrictions on easy showings the harder it is to sell. You’d be amazed at how many houses require appointments to be seen, or require the listing agent to be present for showings, or only allow showings at inconvenient times. All of these are obstacles to the sale of the home.
Whose Fault Is It?
When a home is not to selling the seller naturally wants to know why that’s happening. The answer is simple, it’s either the agent’s fault or the sellers fault. That’s because the agent is responsible for marketing the home. The seller is responsible for the price and access.
As a seller you must determine if the house is being properly marketed. Frequently, when a home fails to sell, it’s because the agent is working for such a low commission that he/she doesn’t have enough money to properly market the home. Even if the agent has the money, the question is whether the right marketing is being done. If not, find an agent who can properly market the house.
If the marketing is being done well and the home isn’t selling, make it easier to show.
If the home is properly marketed and easy to show, but has not sold: Lower the Price!
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