If The Market Is Slowing, Then What?

by Tim Freund

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If The Market Is Slowing, Then What?

By the looks of things, the real estate market is slowing.  This can mean any of a variety of things.  So what if it is, then what?  Should you hold off buying, selling?

As I always write, real estate is local and can even be hyper local so observations I might have for my area along the LA/Ventura County Line, (Search listings here) may or may not be applicable to your neighborhood.  LA’s westside shows little signs of slowing down except that maybe at the ultra luxury level of 8 and 9 figure homes.  That said, there are strategies for how to approach real estate buying and selling when a market shows signs of stress and is slowing down.

If I’m a seller (Check out Tim’s listings here) and I see the number of homes for sale increasing in my neighborhood, should I change my plans and not sell, waiting for a better market or should I sell anyway?  If I’m a buyer should I wait and see if the market is going to go down more, or do I buy now?  Let’s start with selling and come back to buying as the strategies aren’t the same.

If you are selling, the answer is, that it depends on why you are selling?  If you are selling because you either really want to be somewhere else or perhaps you have to be for work, staying is not an option, you sell.  If my grandkids are in Prescott, AZ and darn it, I want to be with my grandkids, I’m selling.  If the market is slowing you have to ask yourself, is it going substantially lower or is this just a seasonal blip?  Obviously if you had a crystal ball that said prices were on the path of a 10% correction, you’d price more aggressively than your competition and get it out there and sold right away.  Unfortunately, we don’t have a crystal ball.  In the face of a correcting market however, I usually assume the worst.  I’d rather get out early, leaving a little money on the table, than look back and say I should have sold then.  It’s a bit like musical chairs and I just want to make sure I get a chair.

Buying is a little different because if I sense the market is getting soft and I can afford to take my time and be selective, I seek out a home that I really like and then, not lowball, but definitely try and use the softer market to my advantage.  Ask your agent about the absorption rate.  Are there 3 month’s supply of homes or 9 month’s?  If I’m in the lower end of that spectrum (3 being balanced for my market here) then it won’t feel like a buyer’s market and therefore the seller won’t believe it, but if the absorption rate is north of 6 months, I’m pressing the seller and they’re likely to know it and be more pliable (Contact Tim here).  In this scenario, every seller is competing for the same buyer, me.  That gives me the opportunity to push the seller of the home I really want.  Keep in mind the best transaction is a win-win, so success will usually come if you aren’t totally obnoxious, trying to grind every penny out of your seller.  This is how I’d approach buying.  Ultimately since no two homes are the same, there will be one you favor more than the others and on this one, make your lower offer but don’t insult the seller and don’t lose your dream home over some principled “the market is crashing don’t you get it?” approach.  If the market is really crashing and obviously so, then that’s a different discussion.  Remember, this is advice for you buying your home, not an investment where it’s “All about the deal.”  Since most corrections are modest in nature, the goal shouldn’t be to steal the property, rather to get a better price, move in and live happily ever after!

Published on 2018-08-13 13:16:55

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