A Tale of Two Cities (Part Two)


The paradoxical nature of the great Dickens novel could be easily paralleled to our current real estate market. One might naturally assume it’s simply “the best of times” for Buyers and the “the worst of times” for sellers, due to the dynamics present in our current real estate market. However, I would argue this might not necessarily be the case. The real estate market is simply a set of “circumstances”, which impacts both Buyers and Sellers. With this in mind, what might the circumstances look like from a seller’s point of view?

Favorable circumstances for Sellers include:

• Inventory – In January 2009 there were 45,393 Active Residential Detached Listings. Compare that to 33,983 Active Residential Detached Listings in January 2010 and you have 25% less inventory today than you did a year ago. Less inventory means less competition, which is good for sellers.

• Interest Rates – Currently still at historic lows, homeownership is still attainable and remains the American Dream. Interest rates are anticipated to increase as a result of the Fed terminating their purchases of mortgage backed securities as of March 31st, therefore buyers may be further incentivized to buy now.

• Time – With the deadline looming for Buyers to take advantage of the current Home Buyer tax credits (both 1st Time and Move-Up), Buyers need to take action quickly in order to capitalize on this opportunity.

Circumstances perhaps not so favorable:

• Composition of Inventory – Every month, the percentage of homes either in a short sale situation or in Foreclosure increases. Properties of this nature typically sell for less than a home that is not in a “Distressed” situation, thereby causing continued downward pressure on pricing overall.

• Looming “Shadow Inventory” – There is a tremendous amount of “Shadow Inventory” (properties that are either Real Estate Owned or in a serious state of mortgage delinquency) that is set to be released to the marketplace in the next several months. The result, an increased in supply and additional competition.

• Expiration of the Tax Credits – In order to keep 1st Time Homebuyers and Move-Up Buyers in the market place beyond the expiration of the Tax Credit on April 30th, Sellers may potentially have to make additional pricing concessions to offset the expiration of these credits.

Keep in mind the current real estate market is just a set of circumstances, and circumstances are neutral. Some might consider them “good”, while others may view them as “not so good”. Regardless of your point of view, they are just circumstances. What’s more important to consider is the advice and wise counsel you receive as it relates to how to best position your home in light of the “circumstances”.