Back when I was still in the shoe business a friend – and terrific retailer – leased a small space in Washington Square Mall. There weren’t more than ten chairs; he could have three people in the store and it would look mobbed. Business was fabulous, growing at double digit rates.
When a neighboring space came available, he took advantage and nearly tripled his footage, adding commensurately to the inventory. He hired more people and prepared for a windfall.
But: His sales immediately dropped. He found that even with ten people in the store after the addition it looked empty: the smaller space created a buying frenzy, the larger buyer skepticism, skepticism additionally fueled by too many choices. He was still offering the same quality product and service, but the perception had changed, and he had to close the door within a year.
That’s the best allegory I can think of for the current real estate market.
The economic fundamentals are still in place, and mostly good. More people are moving into than out of the Portland Metro area, unemployment is low, the economy is growing, and interest rates, though higher than a year ago, are still historically low. Home values are appreciating, though at a slower rate than the last three years. Skittishness has hit the mortgage markets – fallout of the sub-prime failures – nearly panicking the Oregon senate into a poorly thought out remedy, but what’s happening here is nothing when compared to most of the rest of the country. In reality this is a good market.
But perception has changed.
It’s the negative that gets all the press, and buyers have turned seriously skeptical. Two years ago was the frenzy: buyers thought if they didn’t buy now! they'd overpay. Today the fear is if they do buy now … they’ll overpay. Agents have watched this for several months: people walking away from $10,000 in earnest money the day of signing because it ‘just doesn’t feel right’, buyers faced with a confusing array of choices, so many any choice is permanently postponed. On the other side sellers are anxious to get their homes on the market for fear the market will begin to drop.
And in a self-fulfilling sort of way, they’re all right, and the stats are beginning to catch up. At the end of June the Portland metro area had 57% more active listings than a year ago. Year over year sales were down almost 20%. Median and average sales were up year over year – 5% and 6% respectively – but down slightly over May’s median. Both median and average prices of active listings are down and will be reflected in sales shortly. Etcetera.
Does that mean it’s a bad time to be buying or selling?
Absolutely, unequivocally: No. It requires patience, reasonable pricing and excellent presentation on the selling side; a knowledge of the market and market history on the buying side. Homes are still selling, and there are many, many good bargains for buyers if you don’t let emotions fog the decision.
To wit: I helped a buyer a few months ago find a home in Lake Oswego. It took five months of ‘Should I or shouldn’t I?’, but we finally found exactly what she wanted. It was an older listing, had started at $456k, was now listed at $430k. She loved it, offered $400k…and it was accepted, an exceptional, exceptional value. In the first week we made it through a very clean inspection. The seller was gracious enough to begin what few repairs there were to do even before the inspection addendum was written. But she began looking for things to be wrong, finally settling on – ‘It just doesn’t feel right…’ – and backed out.
Epilogue: the home sold the next day for $420k.
All the happy spin in the world isn’t going to change the current perception; that’s going to require a couple months of diminishing inventory.
But don’t allow that perception to keep you from buying or selling! If you know what you’re doing – or hire an agent who does – you’ll do juuuuust fine.