This is the first in a series of real-time, agent-off-the-record blog posts on what Redfin agents and market managers are seeing in different markets. We promise to tell it like it is even when the way it is is pretty bad…
Time was, the problem with real estate was too many listings, at unrealistic prices. But with home-owners anxious to sell before the holiday season, we recently saw the average cumulative price drop exceed 10%. And with almost no new listings entering the market, across the markets we cover the number of homes for sale has actually decreased, by about 3% since August. In some places, transaction volumes increased.
But the problem now is with buyers, some of whom simply don’t have the money anymore to afford a house.
Plenty of Offers, Very Few Deals
“It was a weird week,” said Seattle agent Allie Howard. “Things were looking good, then deals started going in reverse.” By the end of it all, only four of the 15 offers she prepared were still under contract, about half the usual success rate.
In five or six cases, the buyers backed out.
Bay Area agent Jim Holt had one client beat out four other offers on a $750,000 home then ask for a $50,000 discount (they settled on a $5,000 discount). “I saw people go from ‘gung-ho’ to ‘never mind,’ all in just a few days.” Another client of Jim’s who was out-bid shrugged and said, “It’s only going to get better for me.”
As Boston market manager Alex Coon noted, one problem has been just coming up with the down-payment, which for most folks means selling already-battered stocks. But Alex also saw buyers who had already crossed the Rubicon hurrying to complete deals before their financing fell apart. “These cycles work themselves out,” Alex said. “But short-term, consumer confidence is shot.”
Cash is King
The credit crunch has given financially strong buyers lots of leverage negotiating deals with sellers nervous about financing. “If you have a 20% down-payment,” Allie said, “you can really call the shots.”
And across the board our agents saw a flood of new incentives being offered by builders and banks, either in the form of increased commissions to the buyer’s agent (4% instead of the usual 3%) or offers to subsidize a mortgage. In San Francisco especially, a lot of the incentives were focused on October deals. “We’re talking about big buy-downs,” Allie said, “I saw one worth $20,000 just last week.”
OK, So What Do You Think?
Of course, this is only what we’ve seen. If you have hair-raising tales of deals getting done or deals going south, or if your plans have changed or remained the same, just leave a comment!