Realtors Tackle New Topic: How to Handle Slow Housing Market
The 2,300 California realtors who gathered for their annual convention in Century City last week attended the usual bunch of educational workshops, toured the usual gaggle of trade show booths and visited the usual round of cocktail parties.
But the brokers also did something unusual--for the first time in nearly half a decade, they were talking about a sharp slowdown in sales.
And if that wasn’t enough to dampen the conventioneers’ spirits, a new report by the realtors’ own economists forecasts a further decline in 1990.
The slowdown has already had a dramatic impact on consumers, brokers who attended the California Assn. of Realtors’ 85th annual meeting said.
Homeowners have found that it’s taking much longer to sell their properties, and many have had to slash their asking prices. Buyers, meanwhile, are the chief beneficiaries of those softer prices: Besides discounts, many are also getting sellers to provide below-market financing or pay most of the closing costs.
Even those who aren’t moving have been affected by the cooling because the shrinking number of buyers has slowed the once-torrid rate of home-price appreciation. Statewide, home prices are now rising at an annual rate of about 12%, down from more than 18% last year. A more subdued 9% increase is expected in 1990.
And ironically, some brokers said, the sales decline is putting upward pressure on commission rates because realtors have to spend more time holding open houses and spend more money on advertising slow-moving homes.
“Sales have dropped off, and they’ll drop a little more next year,” said Chuck Lamb, a veteran broker who owns four Century 21 offices in the San Fernando Valley. “Nobody is jumping out of windows, but everybody is feeling the slowdown.”
The first statistical signs of the cooling appeared in the spring, when rising interest rates sent sales sliding in the normally robust months of April and May. A modest decline in rates since then has failed to reignite the market.
The realtors’ economists now say about 525,000 homes will be sold this year, down 6.7% from the 562,759 homes sold in 1988.
And rates are expected to turn upward again next year, a factor which--coupled with the growing number of buyers locked out of the market by prices that are already sky-high--will result in another 9% decline in sales activity in 1990.
“Next year will still be a good year for housing. It just won’t be quite as good as the past couple of years,” said Leslie Appleton-Young, who heads CAR’s economics department. “The problem is that the market has been so hot, it’s hard to keep things in perspective.”
The slowdown isn’t just confirmed through conversations with realtors and sellers: It’s also reflected in the statistical data compiled by CAR, the state’s biggest trade group.
Statewide, sales in August were down nearly 16% from a year earlier. Even steeper declines were posted in several parts of the Southland, including Los Angeles, Orange and Ventura counties.
Gone are the days when homes were selling within days or even hours of when they first went up for sale: Realtors say it’s taking several weeks or even months before most properties sell.
A Sharp Turnaround
Many sellers who needed to unload their homes faster have been forced to slash their asking prices. That’s a sharp turnaround from the last few years, when properties often sold in a matter of hours and it wasn’t uncommon for buyers to get in bidding wars.
“It’s obviously a buyers’ market now. The trouble is, the sellers just don’t realize it,” said Mary Funk of Valencia Realty in Valencia.
Indeed, brokers from across the state say that many sellers are still expecting quick sales for top dollar--and then accusing their realtor of doing a poor marketing job when buyers turn up their noses.
Realtors say they’re trying to avoid potential problems with their new clients by showing the sellers reams of statistical data that documents the recent slowdown. Sometimes it works; sometimes it doesn’t.
“For the first time in 10 years, we’re actually turning some listings down,” said Lamb at Century 21. “If a (prospective) client wants too much for his house, we don’t want the listing. It’s not like last year--if the price isn’t viable, it just won’t sell.”
Harder to Sell
And sellers who think that listing-hungry brokers will be more willing to slash their commission rates may well be disappointed.
Until recently, many realtors were willing to set aside their usual 6% commission and accept 5% or even less, in part because the plethora of anxious buyers would minimize the agent’s marketing duties.
But with those buyers gone and homes taking longer to sell, brokers say they’re being forced to spend more time and money on marketing.
“We’ve gone from a market where just about anybody could sell a house to a market where realtors have to put all their assets and marketing expertise to work,” said Ken Hawkins of Art Leitch Realtors in San Diego. “So, you’re seeing fewer agents willing to discount their commissions. We’re earning every penny we make.”
Many realtors at the convention were working hard to put the best face on the slowdown.
Price Increases
Appleton-Young, the realtors’ economist, noted that the projected 9% increase in prices next year would be about twice the expected inflation rate. While that’s bad news for would-be buyers, it’s good news for people who already own their own home.
There is especially good news for condominium owners, who’ve seen their appreciation rate lag that of single-family houses: For the first time in several years, condo sales and prices are expected to outpace the single-family market.
While Appleton-Young sees a 9% drop in sales of houses and a 9% hike in prices, she says condo sales should rise 10% next year and prices should jump an average 12%.
“The condo market is being fueled by all those people who can’t afford a single-family home,” she said.
ADVICE FOR HOME SELLERS
The recent slowdown in the housing market has caught some sellers off-guard. Here are some tips that will save you headaches and help your property sell faster:
* Realize that it could take weeks or even months to sell your home. If you’re making an offer on a new home, you may want to include a contingency that either lets you back out of the deal or lengthen the escrow period if your current home doesn’t sell fast enough.
* Make sure the property is priced accurately. Have at least three local realtors give you an estimate of the home’s worth, based on recent sales in the area. Be skeptical if one of the estimates is unusually high: The agent may be hoping to get your listing, figuring you’ll slash your asking price later.
* Be prepared to negotiate. If you and a prospective buyer can’t reach agreement on the price, perhaps you’re willing to make some other concession in order to make the sale. For example, you may be willing to provide part of the needed financing at a below-market rate, or you might be willing to let the buyer select the closing date.
* Keep your house looking sharp. Consider giving the place a fresh coat of paint, keep it clean and make sure everything is in good repair. With more houses on the market now, buyers can afford to be fussy.
POINTERS FOR HOME BUYERS
The recent drop in home sales and predictions of further slowing has transformed many California communities from sellers’ markets to buyers’ markets. If you’re looking for a home, here are some pointers that can help you get the best deal:
* Realize that you’re in the driver’s seat. Unlike the past few years, you probably don’t have to reach any snap decisions: If you see a home you like, you’ll probably be able to sleep on your next move for a night or two.
* Get “prequalified” by your agent or a lender to see how much home you can afford. If you can show the seller that you’re qualified to get a loan that’s big enough to close the deal, you’re in an even better bargaining position than buyers who don’t know how much money they can obtain.
* Don’t be afraid to drive a hard bargain. Unless the property that has caught your eye already has a rock-bottom price, the seller should be willing to negotiate. Even if you can’t get the price down as far as you might like, you may be able to obtain advantageous seller-financing or get the homeowner to make other concessions.
* Take a good look at condominiums. Most condos sell for much less than single-family homes, and many are in highly desirable areas. Their appreciation potential is also good: Condo prices across the state should rise an average 12% next year, according to the California Assn. of Realtors, compared to a 9% increase in values of detached houses.
