Category: Market Observations
Posted: 5/15/2012
You can sell your home -- if you're willing to accept the market price
By John Dixon
Here’s good news for people with a home to sell: Homes are selling again. Indeed, even Bloomberg is writing about markets such as Silicon Valley, where real estate agents are now wrestling with a problem from a bygone era: Too many buyers chasing too few homes.

But there’s a caveat: Home prices still aren’t rising. New numbers from the DataQuick service show that home sales are down 3.6 percent from a year ago and down 8.9 percent from three years ago. But the prices people are paying? Up a mere 1.1 percent compared to three years ago.

That probably means a lot of homeowners who are under water on their mortgages may still have to get the bank to agree to a short sale.

The reality is that whether you sell in a rip roaring market like the one we had in 2005 or a soggy one like we have now, you’re going to have to accept the market’s judgment for what your home is worth.

It’s hard to be realistic and objective about the value of your home. For decades, homeowners watched the values of their homes go up and calculated the effect of a growing equity on their retirement. Some still hang on to an appraisal they got several years ago, before the mortgage crisis hit and homeowners fell into default. On the flip side, we tend to discount the impact of foreclosed homes that are sitting empty. Or buyers who can’t get a mortgage.

The reality that a home sells at the market price may be easier for me to accept because I sell real estate at auction. I love the auction method, because it strips away any uncertainty and establishes a firm market value. And that’s the only number that really matters.

Time to start building soon?

In its article, Bloomberg noted that the inventory of new homes in March was the lowest of any year since 1963. (After all, builders haven’t been building a lot of spec homes.) But as the inventory of new homes (144,000 in March) shrinks, smart builders are starting to look ahead to a time when they can once again make a profit with spec homes. That’s why we’ve seen an increased demand in the hundreds of home sites and lots we’re selling these days.
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