If you’ve never experienced a buyer’s market before, everything you know about selling real estate is about to be shocked. Coach Bernice Ross is here with the strategies that helped her successfully overcome multiple push-ups.
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As of July 28, 2022, the United States is officially in recession. The days of multiple offers, short time-to-market, rising prices, and high buyer demand are fast becoming a distant memory. If you’ve never experienced a buyer’s market before, keep in mind: everything you know about selling real estate over the past decade is about to be upset.
Are we headed for an epic crash?
NAR reports that pending sales fell by 8.6% in June, down 20% from June 2021. Laurence Yun, chief economist at NAR, also predicted,
The signing of home purchase contracts will continue to fall as long as mortgage rates continue to rise, as has been the case this year to date. This may interest you : Airline ticket prices are finally starting to cool down as the peak summer travel season comes to an end. Now what?.
ZeroHedge cited 14 signs that the economy is heading for an epic crash, including three factors directly related to the real estate sector:
Three phases of the downturn
During the previous four recessions, the housing market went through the following three phases from the seller’s to the buyer’s market.
Take these 5 steps now to be prepared for a down market
Here are five of the strategies that have worked in previous downturns and are sure to come in handy if your market starts to fall. See the article : The real estate sector fell 21% in the first half of the 22nd, focusing on mortgage rates.
1. Prepare for the ‘sticky pricing phenomenon’
In a buyer’s (falling) market, you need to shift your focus from price appreciation to price depreciation. This may interest you : McDonald’s Puts Hacks, Merch Drops, Music Performances, and Food Deals on Its ‘Camp’ Menu – RetailWire. The turning point from a seller’s to a buyer’s market occurs when there are seven or more months of inventory on the market.
In a seller’s market, prices will rise rapidly to meet market demand. Conversely, prices slowly drop in bear markets. This is known as the “sticky price phenomenon”. As noted above, this occurs because price declines lag behind actual market conditions for six to 12 months.
According to First Tuesday, the “sticky price phenomenon” is already occurring in six of California’s major markets:
Across the state, home sales volume reached an initial peak in March 2022. Since then, sales volume has been bucking normal seasonal trends, decreasing during the spring season, typically the longest time of the year. congested for real estate agents.
At this rate, total annual sales volume will drop below the previous two years, but also below 2019 (the last “normal” year for sales volume before the pandemic in 2020).
2. Help sellers avoid ‘chasing the market down’
Anyone who has experienced a buyer’s market with few transactions, falling prices, and high foreclosure rates is familiar with the concept of “chasing the market down”. Here’s how it works.
To illustrate this point, Sacramento inventory, as noted above, was up 39% with 24% of sellers lowering the price. Assuming the market peaked in March 2022, as of August 2022, prices would have been falling for four months already.
3. Prepare to show sellers that the market is declining
Helping sellers move from the psychology of a rising market to a falling market is no easy task. The three strategies below can help you do this.
Repeat the process for the previous 60 days. If the current average price per square foot has decreased, you can estimate how quickly the market has declined over the past 60 days by subtracting that number from the current average. Multiply that by the improvement square footage on your ad and this will tell you how much the home has fallen in value over the past couple of months.
4. Make these two key changes to your purchase agreements
Mortgage interest rates are volatile, even though Laurence Yun, chief economist at NAR, doesn’t see a big swing in interest rates right now. To make sure your deals are closed, the interest rate in any lonely contingency should be written at least ½ to one point higher than the prevailing rate.
The second step applies when the buyer plans to get a fixed rate mortgage. Be sure to include a provision that states, “If the buyer is not eligible for a fixed rate mortgage, the buyer agrees to take an adjustable rate mortgage.” Be sure to specify the rate and whether the mortgage has a fixed rate component. (A typical example is an ARM where the first five years are at a fixed rate.)
Keep in mind that never write “prevailing rate”. For the purchase agreement to be valid, it must indicate the exact interest rate that the buyer can waive.
5. Employ this tried-and-true strategy that has worked in every downturn since 1980
The “absorption rate statistics” along with the “probability to sell” script are golden in bear markets. Here are the steps to follow:
Based on previous downturns, a buyer’s market with falling prices is the most difficult type of market you have ever experienced. On the other hand, agents who are prepared and who understand price dynamics and negotiating deals in a falling market may have their best year ever. This has certainly been the case for me in the previous four push-ups and it can happen for you if you are properly prepared.
