Lenn Harley is one of my gurus. She's my mentor and doesn't even know it. I want to be like Lenn when I grow up. For those who don't know, Lenn is a woman despite her name! She's also a REALTOR® of great wisdom, professionalism, and common sense insight. She's a straight shooter as well. But this post is NOT about Lenn albeit it was inspired by one of Lenn's recent blog entries.
Lenn's no nonsense approach says it all. Despite what the media is saying about the real estate market. Despite what the economic experts might be saying about the real estate market. Despite what the National Association of REALTORS® might be saying about the real estate market. Despite the many people who have an opinion about the real estate market, the only people that have the truth about the real estate market are the ones who matter, the buyers. They are the ones that are creating the trend in lower prices, longer days on the market, and reduced number of sales. Buyers are the ones St. Paul home sellers and their listing agents should be listening to.
What buyers are telling me is that some are still buying, but they are unwilling or unable to pay the price that sellers are asking. They are still buying, but they have lots of houses to choose from so they're choosing the exceptional house for the exceptional price. They are still buying, but they expect sellers to give some kind of concession or they'll move on to the next seller.
Some of my St. Paul sellers have heard the message. These sellers are pricing their homes lower than the competition. These sellers are making their homes look like models for Pier 1 Imports! These sellers are repairing their deferred maintenance items. These sellers are negotiating to find where the buyers' requests overlap the sellers' ability to meet the requests.
Some St. Paul sellers have not heard the message. They haven't looked at the figures. Lenn was right in checking out how family income has risen compared to housing costs. In St. Paul, the median family income in 2000 was $48,925 and in 2006 it was $52,809. Income increased by 7.8%. The median cost of a home in 2000 was $119,900 and in 2006 it was $199,900**. The cost of home purchases increased by 66.6%! No matter how much a buyer might want to live in a home, the inflated prices have removed many buyers from the market! The cost of housing has outstripped income in the last 6 years.
The story continues. Fewer qualified buyers mean less homes sell. The lack of sales increases inventory. The supply of homes outstrips the demand for homes. The old economic principle of supply and demand asserts its authority once again. Too much supply forces prices down. Once prices decrease to an affordability level, buyers can, and will, return to buying. Until that time, home sellers are going to have to look at the painful truth. The house they own today cannot sell today for what it might have sold in 2004. The market has turned. The prices hit the glass ceiling and now must come down. If selling is necessary, the seller is going to have to price according to today's market, not the market of 2003 or 2004.
**Based on information from the REGIONAL MULTIPLE LISTING SERVICE OF MINNESOTA, INC for the period 2000 through 2006.
Now that is common sense, Bonnie you say it so well. It's nice to see the median income rise - I keep thinking...if we don't list a home because the seller is expecting a 'too high' listing price then maybe things will get back to normal. Lenn always tells it like it is too!
Posted by: Carole Cohen | July 24, 2007 at 08:32 AM