Tucson Real Estate 2006 Sellers Didn’t Get The Memo
October 29, 2008
Post Tags: house of cards , real estate always goes up , Tucson Real Estate Market Update
If you're new here, you may want to subscribe to my RSS feed. Thanks for visiting!
The Speculators Left the Tucson Real Estate Market
The Speculators left the market in late 2005 but Tucson sellers didn’t get the memo. They thought it was just a pause, that activity would return and they would “cash in” on the next wave. After all “Real Estate Always Goes UP” Right? Of course it doesn’t always go up. Anyone even remotely familiar with volatility in a real estate market knows there are times when it goes down. Remember Huston when the oil fields went dark and there were whole neighborhoods of new construction vacant and needing buyers.
How about Southern California, there have been several boom to bust cycles in their real estate market in the past 30 years.
The one thing about building a house of cards market, You know it won’t stand for long, the question becomes, when it falls and will I be out of the market or in the rubble?
Determining Listing Price (Looking Back)
Because many sellers were not aware of the change in the market from a sellers market to a (where have all the buyers gone) market they were looking back at what their neighbors, relatives, friend and business acquaintances got last year as a way to determine the listing price of their property.
I’ve used this illustration before (many times) selling roses on Valentine’s Day is different than selling roses a week later. Much of 2006 and 2007 were the years after Valentine’s Day.
Value is determined by what someone is willing to pay for it. But when you hand someone a blank check and tell them to spend it however they want, it skews the process of determining Value.
Looking back lead to a lot of homes sitting on the market which were priced way beyond what the market could or would bear. Asking prices had continued to escalate in 2005 and when the speculators left the market it was easy to see in the figures that asking prices kept increasing while sale prices were declining. Some sellers were getting the message and the memo. Those that did often saw their property sold in 30 days or less. The end result for those that didn’t, an increase in listing inventory referred in the media as a Flooding of the Tucson Housing Market with homes “Languishing on the Market“.
Determining Listing Price (Looking Around)
This was a favorite of many who were deciding to put there house on the market. Go around the neighborhood and collect listing fliers. Then compare what others of comparable homes were asking and that was your asking price. This method never even considers the neighbors might be asking a “Make Me Move” price not based on anything other than “I want this much” or “I have to have this much to move” neither of which is a valid means of arriving at a market listing price
Determining Listing Price (Make Me Move)
Mentioned above the make me move price is the one where the seller would say. “Hey, I’m going to test the market. Lets set a ridiculous price and see if anyone is willing to pay this much. If I can get this much then we will move. After all, I’m in no hurry to move, I’m just “Testing the Waters”. Of course these testing the waters listings were creating an illusion of high inventory. At this time I called this the difference between “Homes on the Market” and “Homes For Sale”.
I remember one weekend in particular, we had buyers in town for 1 day to look at homes. It was a Saturday and of the 12 homes we had selected to show 6 said it wasn’t convenient for one reason or another and they didn’t want to show the home. Those are “Homes on the Market” but not for sale.
Determining Listing Price (Ego centrism)
This is similar to “Make Me Move” but with a twist. Ego centrism is “My stuff is worth a lot, stuff belonging to others isn’t worth any ways as much as they are asking. This resulted in a Seller putting a property on the market priced way over market value and looking to buy another place but only willing to offer “Low Ball Offers” looking for a “Steal”. These were a total waste of time for everyone involved. Many, many hours were wasted in presenting and writing offers on these types of listings.
Determining Listing Price?
One question being asked among the real estate community during the early months of 2006 “If there are no buyers in the market how do you know if you have it price right?” That is a very good question and is right up there with “If a tree fall in the forest and no one is around to hear it is there a sound?” It was a difficult time to try and establish a valid listing price.
The usual method of looking at closed transactions over the previous 6 months was inadequate due to the surreal market of 2005. Using Price Per Square Foot wasn’t much help either. It became a matter of trial and error methodologies (list range pricing, scheduled price reductions till showing activity increased, etc.) during 2006 and on into 2007.
Looking back was not going to work in 2006. Now it is a different story. In the past 8 months we have seen a more stable market. It might not look like it, but it is. Comparing the market today to the market before the Frantic Market and after the “Mortgage Meltdown Crisis” of August 2007 we find many similarities to what is referred loosely as a normal market.
We are in uncharted waters at the moment. However, there are markers along the way to help chart a course in uncharted waters.
Using a combination of Comps sold in the past 6 months and price per square foot weighting for sales in the past month will provide more realistic List Price in today’s market.
What Happened in 2007
Tomorrow we will take a look back to last year, a year that brought about its own challenges for Buyers, Sellers, Agents, and the local community and economy. For the most part, Sellers got the MEMO in 2007. But, 2007 turned out to be the beginning of “The Buyers Revenge” Or “There is Blood in the Water”.
