My New Blog

I just got my data from the National Association of Realtors that states homes are at their highest supply in 15 years and that demand is down as gross sales are dropping.  Yet also in that notice there was a poll done by a Boston firm that said 55% think they could sell their home for more than they bought it a year ago.  And 75% of respondents think they are confident they could sell their properties within six months at their desired prices. The general public still doesn't get it.  I guess there was a lack of economics taught in school.  When supply goes up and demand goes down the unalterable fact of reality is that prices will go down until there is equilibrium in the market.

What this prevailing misconception is doing is simply continuing to drive the supply of homes up.  When sellers do not react properly to the market by dropping their prices the supply will continue to grow.  This is unchartered territory for many real estate agents.  We have never had this happen in real estate before.  Agents are the ones that are to advise their clients appropriately.  But I still see real estate agents pricing properties at levels that are unsustainable in the market.  Consequently homes languish on the market longer and longer.

Home builders understand this principle of supply and demand.  That is why on one web site I was reading in their locality it is actually cheaper to buy a brand new home than an existing similar home.  Why?  Builders have a better grasp of reality and are trying to get rid of inventory.  What this does however is drive down the appraised value of existing homes.  We have been finding that out in some of the areas we are appraising in.

So if you are trying to sell your home you really need to think very carefully about what that market value really is.  Maybe you will get lucky and someone will pay your price.  But as more homes go on the market that will become less likely.  Sellers need to price their homes according to the market and not according to some fuzzy feeling that values will just continue to climb without any market correction.