February’s Existing Home Sales Best In Two Years
This article was written by Denny Grimes, a friend of Mike's who is a real estate agent in Fort Myers, FL. Denny Grimes is a real estate broker with Denny Grimes & Company
Robust sales leave market in dangerous territory
I have good news and bad news. Which do you want first? Let’s start with the good news.
Last month, over 900 existing homes went under contract, thus making February the best sales month in Lee County since March of 2006. In fact, February’s pending sales were up more than 60 percent from the same month in ’07.
We are on a 60-day winning streak. The first two months of ’08 show that single-family home sales are 36 percent ahead of ’07, and condominium sales are up 16 percent for the same time frame. Notice, I am talking about “pending” sales, which are contracts written and accepted, but not yet closed. Even though there will be sales that fail to close, we will still post a significant sales increase. So, for those that thought our market was flat-lining, put the body bag away, because it appears it has a pulse.
Before you roll the market out of ICU, let me give you the bad news. The bad news is that many people will misinterpret, dismiss or ignore this positive news.
Sellers and agents may misinterpret this surge in sales and believe it signals the return of the glory days. If they do, they will react in a way that would be contrary to further recovery. This is my biggest fear.
Skeptics and nay-sayers may dismiss this information and file it in the folder titled “Propaganda to Trick Fence-sitting Buyers.” Many will even wonder how this tidbit of positive news made it past the good news censors, who seem to be working at every media outlet.
The die-hard wait-for-the-bottom buyers will chalk up this two-month trend as a seasonal blip. They believe sales will tank about the time the last snowbird’s taillights cross Lee County’s northern border.
The continuation of the market’s recovery beyond the winter season is directly related to the correct interpretation of this long-awaited surge in sales. Does it mean the market is fully recovered or that the market has bottomed? No. Does it mean that prices have stabilized? No. Does it mean agents can finally eat something other than peanut butter? That depends, do you like Spam?
The surge in sales was not caused by an influx of European or Canadian buyers. It wasn’t caused by sunburned snowbirds from Sheboygan, Baby Boomers or ball players looking for a spring training home. In fact, buyers did not cause it at all.
Sales are picking up because sellers are getting closer to where the buyers are. After 30 months behind the wheel, sellers are finally driving their prices into the outskirts of buyer’s territory. This is dangerous territory for our market because some sellers will be tempted to slow down, stop or put the car in reverse and drive their prices back up, thinking that the buyers will follow them. All of these reactions will stall our recovery, and heaven knows we don’t need any stalling going on.
Our market began its recovery 2.5 years ago, when prices started falling back toward real values. It’s been a long journey, but we are finally beginning to see evidence that we are getting closer to our destination. We are now faced with the most important and difficult question since the recovery started, and that is “Will we have the fortitude to finish the trip?” We must press on to the final destination, the tipping point, which is the epicenter of the buyer’s territory.
Would you like to see our market fully recovered and prices stabilized? That will not happen until prices in each sub-market reach the point that makes that market tip back toward equilibrium.
So, it really isn’t a question if prices reach the tipping point, it’s a questions of when. For some market segments, like developer homes that can be bought below replacement cost, that’s just around the corner. Other markets should start counting cows or Burma-Shave signs, because there’s still a lot of road ahead.
Regardless, every market segment must meet buyers where they are. Therefore, the more downward pressure sellers keep on the gas pedal and prices, the sooner their journey will be over. Sorry, there aren’t any shortcuts.
Sellers, I know you are tired of driving, but don’t slow down now. There’s a lot of open road ahead because the traffic jam is behind you in seller’s territory. Over 900 sellers entered buyer’s territory last month and picked up a buyer. If you keep pressing forward, you will begin to see buyers thumbing for a ride. When that happens, stop and give them one.
Keep the Faith
