From the Wall Street Journal:
As the spring selling season moves into high gear, the cooling housing market is upending the conventional wisdom that guided buyers and sellers during the housing boom.
The changing dynamics have implications for a wide variety of players in the real-estate market. Some brokers are advising sellers to price their homes in the bottom 25% of comparable properties. People looking to enter the market for the first time are being told not to overly stretch their finances because rising home prices may no longer bail them out. Employees who are relocating are being advised to steer clear of new subdivisions where competition from brand new construction could make reselling soon difficult.
Say goodbye to the days when sellers could simply look at what their neighbor’s house sold for and then list theirs for 10% more. Brokers are advising sellers to make sure their house comes across as a good value relative to other homes on the market.
David D’Ausilio, a broker-associate with Re/Max Heritage in Westport, Conn., is counseling his clients to price their homes in the “bottom 25%” of comparable homes and to cut their asking price by 3% to 5% if the listing doesn’t generate several showings or written offers within three weeks.
As the housing market cools, first-time buyers have the opportunity to be more thoughtful about their purchases and to negotiate for a lower price, a more flexible move-in date, or incentives such as seller-paid closing costs.
Jill Green, a Realtor with Century 21 Award in Carlsbad, Calif., a coastal community north of San Diego, has been making offers that are 1% to 5% below the low end of the seller’s price range. “Sellers are entertaining the offers and are taking them,” she says.
Some brokers are advising first-time buyers to leave a financial cushion instead of stretching as much as possible and counting on rising home prices to bail them out. They are also asking sellers to help with closing costs.
Just further examples of the shift in psychology that is currently hitting the market. We’re currently coming off the top of the largest bubble ever to hit North Jersey real estate. Buying at this time should still be considered a very risky proposition. A mere 5% below asking is nowhere near the reduction necessary to bring prices back inline with fundamentals. Don’t look at the price drops and sales under asking as purchase opportunities, they are not, they are indicators of a rapidly weakening market.
(thanks to chicagofinance for the link)