From the WSJ:
Finding a House Gets Easier
Inventories Rise Sharply In Many Major Markets As Some Buyers Hang Back
By RUTH SIMON and JAMES R. HAGERTY
Staff Reporters of THE WALL STREET JOURNAL
February 8, 2006; Page D1
With the key spring selling season about to get under way, the inventory of homes on the market is climbing sharply in a number of major cities.
Nationwide, there were 2.8 million existing houses and condominiums on the market at year end, according to the National Association of Realtors. That is down slightly from November’s 2.9 million listings, but up 26% from a year earlier. Adjusted for seasonal variations, inventories have climbed 38% since April, according to Goldman Sachs Chief U.S. Economist Jan Hatzius, the largest eight-month increase on record.
The changing climate is particularly noticeable in once-hot markets such as Miami, Phoenix and Washington, D.C., and in areas such as Detroit, where price increases have been modest but the job market is weak. Some brokers report that traffic has increased in recent weeks. But with plenty of properties to choose from, buyers have become more selective.
…
Economists and real-estate experts are watching the inventory numbers closely for signs of whether the housing market is poised for a soft landing — or something worse. When inventories are tight, buyers competing for scarce properties bid up prices. As the supply of homes on the market increases, price increases slow and buyers gain negotiating power.
…
With the number of listings rising and the pace of sales slowing, there is now a 5.1-month supply of existing homes on the market, based on the current rate of sales, according to the National Association of Realtors, compared with a record low of 3.8 months in January 2005. Historically, a 5.5-to-six-month supply has been considered a balanced market, says NAR Chief Economist David Lereah. But with the Internet making shopping for a home easier, he says, it is no longer clear just what a balanced market is.
…
The supply of unoccupied condominiums is also climbing in many areas. In New York’s Westchester County, the number of condos on the market jumped to 617 at the end of 2005 from 397 a year earlier. In the Boston area, the number of condos listed at the end of January was 5,114, up from 2,876 a year earlier. In the Washington, D.C., metro area, new-home inventory climbed by more than 900% to 2, 413 in the fourth quarter over the same period a year earlier, largely because of the completion of several condo projects, according to Hanley Wood.
Caveat Emptor!
Grim
WOOOOOO here comes the avalanche.
It’s happening fast very fast.
Sellers are feeling uneasy. Realtors spin is failing to work.
lol!
It’s a “Buyer’s market” watch the realtors spin this term.
Do NOT believe them It IT NOT A BUYERS MARKET yet!!!!!!!!!!
It will be.
Take the pacifier out and wait.
Agree, we are far from a buyers market. That’s just spin to try to lure the buyers back in.
grim
First, I love the blog, it’s always an informative and interesting read.
Here’s a suggestion for a new thread topic: people to post their offer ‘war stories’ from the past year.
Here’s my story from last month:
We’ve been looking in Northern NJ for awhile, and have been waiting for about 3 years for the real estate market insanity to stop, to no avail.
We finally spotted a decent property, and made the first offer, which was well above recent comps, but below the crazy asking price. We made the offer on the night of the first open house.
The listing agent then apparently called every visitor to the Open House and asked them to beat our offer, and the next day there were several more offers. We upped our bid, but still not up to the crazy asking price. We lost the bidding war.
Lesson learned: realtors are scum, and their practice of inciting a bidding war is unethical at best.
Is it better to let a house sit for awhile before making an offer, even when you’ve found ‘the right house’? With realtor scum like that, I’d rather let them choke on the house, than have them attempt to manipulate buyers into a bidding war to pay ridiculous above-market prices for a home.
So I don’t know about the “buyer’s market” just yet for towns that are located near convenient commuter train lines (e.g., NJ Transit Midtown Direct.
Thoughts?
That’s why you should not be looking at houses.
Forget it!
The ethics in the Real esttae business are in the gutter. i would not trust a realtor. You are on your own out there.
Anon at 9:17, we were involved in numerous bidding wars, in both NJ and NY. None were out of control (the largest was a 6 bidder war and it still only went 20 above asking). But in one, we had a realtor (not the one we were working with) do the same thing – that was in Hoboken.
I think it’s disgusting. I thought it was on this blog that someone mentioned that Burgdorff practically pioneered the bidding war and creates them on purpose all the time, so that NNJ is a particularly bad area for it.
I disagree with the idea that there is something unethical about initiating a bidding war. The responsibility of a selling broker is to the seller and to the extent the seller can get more money, the broker is just doing their job.
Who is to blame then for bidding wars ? Buyers, who are willing to pay ridiculous prices fueled by cheap money.
Moral of the story?
Don’t be emotionally involved, just walk away.
Same reason sellers love eBay. Set the starting price low and watch emotionally charged bidders push the price higher than retail.
If you had set the price at the high bid initially, nobody would have even taken a look.
grim
Well, at least with bidding on ebay you know the current top price, and are not flying in the dark.
I think the current realtor practice is clearly unethical. If they want to have a bidding session on a house, have prospective buyers show up at a certain time, and call out their bids, as in any other public auction.
The way realtor scum operate now, you don’t even know if another bidder actually exists, and could be bidding against yourself.
We did walk away, and didn’t get too emotionally involved in the bidding process (a spreadsheet was my best buddy), but when you see the house you’re looking for, after looking for awhile, it’s worth making a move on it, IMHO.
It is hard for a would-be owner not to vest some emotional attachment in a house. Its different for flipper scum or “investors”.
I agree that it is definitely unethical for a realtor to claim there is another offer where there is not. However, you can typically make a rough estimate of how likely that is. If a house has been on the market for months and the realtor has claimed that someone made an offer just when you did, its probably suspicious.
I had the opposite problem – I bid on a house in attorney review and I think the agent did not communicate the bid to the seller out of a desire not to rock the transaction.
anony said…
…The way realtor scum operate now, you don’t even know if another bidder actually exists, and could be bidding against yourself.
…
REPLY:
If you feel you have been scammed by the scum, then sue them. The realtor will have to produce the other “offers” in court. The retention on those contracts you signed are for 6 years.
What’s up with the fact that you have to wait until the Realtors open house before viewing a potential property you are interested in seeing? Do you think they want to sell it, or are they fishing to see what they can catch!
Looking to see what the homes in your neighborhood sold for?
Find them on http://www.domania.com
“If you feel you have been scammed by the scum, then sue them.”
It’s hardly practical for most buyers to sue listing agents on a hunch.
But you highlight the point: there is no knowing. You’re relying on the ‘honesty’ of someone who stands to make $30,000 in commission on the sale of a $500,000 home.
There is no realtor conscience with those dollars at stake — which is why I think it should be illegal to have realtors instigate bidding wars, unless it is an open auction, where all bidders know who is putting what on the table.
The way things work now, all trust must go to someone who has a great financial incentive to deceive buyers.
The laws should be changed.
“What’s up with the fact that you have to wait until the Realtors open house before viewing a potential property you are interested in seeing?”
The house came on the market only the day before. Open House on Sunday, house sold on Tuesday.
I disagree with the idea that there is something unethical about initiating a bidding war. The responsibility of a selling broker is to the seller and to the extent the seller can get more money, the broker is just doing their job.
And that’s why there should be only one broker / house. No more “sellers agent”, “buyers agent”.
“And that’s why there should be only one broker / house. No more ‘sellers agent’, ‘buyers agent’.”
And how would that prevent a shady bidding war? The problem described is with the selling agent, and you’re suggesting only to have a selling agent?
“You can hae your realtor add a clause to the written offer indicating that your offer is good for 2 days.”
That sounds like a good idea, perhaps 24 hours would be better. But I’m not sure it would have mattered in my case, as the house sold in 2 days.
And I’m not talking about emotions at all, only the facts of the deal.
You’re relying on the ‘honesty’ of someone who stands to make $30,000 in commission on the sale of a $500,000 home
Not exactly. The rate today is more likely to be 5%, and the listing agent gets about half of that, and part foes to the lsiting firm, so they agent gets around 1.5 – 2%. Still a nice chunk of change, but not 6%.
Furthermore, as the book Freakonomics has pointed out, listing agents have more of an incentive to see the transaction close than to get more money for the seller. Even if the house price goes by 20K, the listing agent will get only around $400, which is not a huge incentive when you consider the risk of torpedoing the deal. Again, I think the agent is fulfilling his or her responsibilities to the buyer. If I were a buyer, I want bidding wars !!
When I sold my house I had a bidding war for 16 hours and it yielded anywhere from $5K – $70K over my sky-high asking price, and the idiot with $70K over waived the home inspection and mortgage contingency. Got to love it! But that was this past spring when things were HOT!
Would I have purchased the house for what the buyer paid? NEVER!! But the buyer was so emotional, I just had to give it to her at that wonderful high price.
Funny thing, my realtor wanted me to list the price lower, but I knew what my neighor had just sold her house for the day before listing.
“Would I have purchased the house for what the buyer paid? NEVER!! But the buyer was so emotional, I just had to give it to her at that wonderful high price.”
LOL, nice. :)
How much cash do you think waiving an inspection contingency, a mortgage contingency, or both, is worth, generally speaking?
(Assuming a house that appears well-maintained.)
$25K?
” If I were a buyer, I want bidding wars !!”
True enough, but consider that in most cases, that seller will also be a buyer on the next house.
Karma is a bitch. :)
How much cash do you think waiving an inspection contingency, a mortgage contingency, or both, is worth, generally speaking?
(Assuming a house that appears well-maintained.)
$25K?
You can’t just throw out a number like that. There are too many variables involved. If the house is new and in great condition, the waive is generally worth nothing to the seller. However, if the seller believes there may be certain deal-breaker issues the value of waiving that contingency just went way up.
grim
“You can’t just throw out a number like that. There are too many variables involved.”
Fair enough — the houses I’ve been looking at are about 50-60 years old, and are maintained reasonably well (most of the sellers are retiring, so they’re not that concerned with a perfect lawn, perfect exterior paintjob, etc). None appeared to have any structural issues.
Any guesses for a range? $5-10,000? $20-30,000? Just some ballpark guesses.
http://www.propertyshark.com gives you much more information regarding home valuations, including demographics.
Check http://www.local.live.com for a very good aerial view of your home, or next home purchase!
I thought Google maps was good, but that Microsoft site gets even closer!
http://maps.google.com
http://local.live.com
Congrats to that seller that made $70,000 over asking. A buyer that bids that much deserves everything coming to them.
Enjoy the profit.
domania.com is good; information gets updated regularly
propertyshark.com is useless; information seems to be at least 12 months old (at least for the free part of the site).
regarding buyer’s and seller’s agents…
I remember my agent giving me some information describing the roles and duties of buyer’s and seller’s agents and how she was representing me as a buyer’s agent.
However, in reality, and I suspect a court of law, any agent collecting a sale’s commission is really a seller’s agent. So there are really two seller’s agents: the listing agent and the other agent who locates the buyer.
Plus, if you tell your (buyer’s) agent something like, “I’m willing to pay as much as X dollars”, I believe they have a fiduciary duty to repeat this to the seller. Correct me if I’m wrong.
So the only true buyer’s agent is someone that you retain with a fee, regardless of whether you actually end up buying anything, and that could be expensive.
I would never waive an inspection contingency unless
1) I was planning to tear down the place and the land was worth the full price
2) I had stayed in the house myself for a while and had a good idea of what it was like
3) I was an expert in inspections myself (and even then there are things like radon, septic tank, well, oil tank that require specialized inspections)
The risk is just too high. 90% of the time there will be no serious issues, but there could be huge problems. If there are foundation problems, or oil tank leaking problems or the like, the damage is huge.
NEVER waive inspections. Let other people do so if they will.
“Plus, if you tell your (buyer’s) agent something like, “I’m willing to pay as much as X dollars”, I believe they have a fiduciary duty to repeat this to the seller. Correct me if I’m wrong.”
No. The sellers agent has to disclose it, not the buyers agent. The buyers agent responsibility is to you.
However, even buyer agents can deliberately or inadverently drop this information so keep this close to your chest. DOn’t let anyone else know how high you’re willing to go.
Waived inspection and discovered porch was infested with Carpenter Ants, and the front porch fell down after 1.5 years.
Damage $27,000,inspection–priceless.
i need a general opinion, sorry I know the forum is not perfect, but I’m sure someone here will have an opinion on this.
If I don’t bring my agent when purchasing a home then the listing broker gets full commision, not a split. My theory is that the listing broker may convince a seller to accept my offer (assuming not many others have come in) because they will get they will not have to split commision with anyone. Is this true? Wouldn’t a broker be more likely to present my offer in a good way to the seller if the broker stands to make the full commision rather than splitting it? Hopefully my theory is true! could get a lower offer accepted.
anonymous@12:30, I don’t think it make s sense to skip a buyers broker unless you go to an FSBO. If you want comps, if you want an unbiased assesment of the house, you want a buyers agent. You and the seller are paying for them anyway.
thanks for the though Grim ghost. Comps is the only thing I was iffy on. I dont trust comps the listing broker would pull. Other than that even a buyers broker just wants you to buy, so who knows you can really trust them anyway.
Right now in Chatham Township, there is little selling unless its perfect. Sellers are still delusional and asking $1.7 million for houses that my realtor conceds are worth about $1.2 million. Some places will take longer to shake out than others.