Buyers Are Still Buying…They’re Just Picky

The Paradox in Today's Market

If you have been following real estate market recently, you've undoubtedly seen this fragmented behavior — some homes are selling quickly and with multiple offers, while others are languishing for weeks on end with no activity. Your first reaction to that statement may likely be “Duh…that's normal for any market”. But you have to realize that the climate we have been in since 2010 has been anything but normal. Since we emerged from the recession of 2008, pretty much everything that was put on the market sold quickly — no matter the location, condition, or price of the home. There's an old parable that says “Even a turkey can fly in a hurricane”. Up until the middle of last year, the real estate market in San Carlos has been the epitome of a real estate hurricane, but those winds have noticeably died down. And the numbers clearly show it.

For the first time in over a decade, home buyers now feel like they finally have the upper hand in the real estate market, and they are taking full advantage. It's debatable that in an environment where home mortgage rates have doubled, the stock market has tumbled, and the tech job market is wobbly that there is indeed an “advantage” for buyers. But the evidence clearly shows that buyers are being far more deliberate and picky in their home buying decisions than they were when the market was rising at a seemingly unabated rate.

What's Hot and What's Not

When you take a closer look at the homes that are still selling quickly versus the ones that are not, you start to see some clear dividing lines:

• Newer Construction versus Original. Many buyers in the market today want homes that are completely turnkey. They don't have either the time, money, or knowledge on how to update a home that they just purchased. Ideally, they'd like to be able to move into a home on Saturday, unpack on Sunday, and go back to work on Monday. So homes that need updating are often times getting passed over for homes that are updated and in “move-in” condition.
• Condos and Townhomes Suffer the Most. In the past 16 years of selling homes on the Peninsula, I've witnessed that when the market faces any kind of a challenge, condos and townhomes are the first to drop when the market gets challenging and the last to rise when the market recovers. And this also applies to single-family residences in communities that have HOA dues. Buyers tend to eschew these properties because of the HOA expenses, the tight living quarters with common walls or ceilings, and the lack of a yard.
• Warts Now Matter. When the market was white hot, buyers were willing to overlook deficiencies in homes just to get into the local area — like the lack of a third bedroom or a second bathroom, a small yard, or living on a busy street. But now, home buyers seem to be circling around these properties and not writing offers unless they feel they can get an exceptional deal.

The Bottom Line

There's an old adage that “ever house has its price” and this is true even in a fragmented market like the one we are experiencing right now. The problem is that prices for homes that suffer from one of the issues outlined above have dropped far more dramatically than homes that don't have those detriments. Home sellers who are caught in this trap have one of two options — lower the price to be in line with the new market dynamics, or hold their ground and wait until home values eventually climb again.

The home buyers are certainly still out there. They are just a lot more picky and deliberate than they've been in a decade.