Buyers want to know: Where are the price drops?
Greetings all. Another beautiful day… as viewed from the windows of my house. I hope you are all happy, healthy and staying sane, safe and satisfied.
We have been hearing a ton of this from our clients and future clients, so I figured I would put it in writing as putting myself on the line in terms of my opinion. That’s the problem with a blog; it’s a history of what I am stating. Clearly, I’ll be wrong on a handful of these, but again, this is based on data and my opinion. If I bat better than .500, I think we’re all going to be happy.
Some buyers are expecting the world to collapse. They are fully expecting the Real Estate Market to ‘Go on Sale’ if you will. One of the most common messages I have been getting from FUTURE CLIENTS is “We are going to wait for the market to collapse and then we’ll buy.” So… where are they getting this from? I’m not saying they are wrong, and I’m not saying we may not see pricing come down, but if you’ve been reading anything I’ve been putting out (and I hope you have), I don’t see statistical evidence that we are going to see a market crash. A couple weeks ago I even stated that the more troublesome thing for our markets would be a Jump in Mortgage Rates (I wrote about that on March 27, and you can read it Here).
Look, we will probably see a decline in Home Values, but we haven’t yet. And if we do, how large will it be? We were at $319,000 in Median Home Prices in Las Vegas (which was an all time high). If we drop 10%, that’s down to $287,000. That’s it… it’s a huge decline, yes…. but do you know how long ago it was that our Median Price was $287,000? April of 2018 - 2 years ago. So a huge, 10% loss in value would only roll our pricing back 2 years.
The other thing people need to remember, is to try and forget the past. This is not what we saw 15 years ago. I keep reminding people that. All we remember is that we had a high, then a low. But do you know how long it took to go from the Top of the last market to the bottom? Five and a half years. It was not an immediate drop off. In fact, from the height of the market in June of 2006 it took 15 months to drop 10%. It didn’t happen over night. So don’t expect a plummet this time overnight either. We will see pricing slide, but by almost every account, we should pull out of this in months, not years, so our correction shouldn’t be as deep, nor as long as it was last time.
So, tying this all in to my point from the beginning. Buyers are waiting for pricing to drop, but at this point, most sellers are in disagreement with the need to drop pricing. This gap is interesting, and one worth keeping an eye on. The National Association of Realtors put together a brief survey at the beginning of April. 63% of Buyers were Expecting Lower Prices, while 72% of Sellers Had not Lowered Prices on homes. So… who is right? Who is wrong? It’s tough to say. In March, homes were selling in Las Vegas at a rate of 99.4% of the List Price, a huge number. The lowest we have seen over the last 15 years was back in January of 2008, when homes sold at 96.8% of List Price. Obviously, if we feel a squeeze on values, we’ll see List Price declining, and that will be something to gauge.
Credit to Keeping Current Matters and NAR Flash Survey
Buyers are going to continue to look for Price Drops. Sellers are not there yet. Ultimately, the length of the slowdown will determine how deep and how long the cuts last. My guess… it won’t be as deep or as long as 15 years ago!
Are you a Buyer? Do you expect to see prices drop? Are you a seller? What are you doing with your pricing? Would love to know! Drop some comments below!
-GZ