Youngsville residents Chuck and Sharon were sellers who called me recently. Chuck had just escaped the threat of a transfer, and it seemed all the talk about selling and moving had left them craving a new home.
“How much do you think we can get for our home?” Chuck asked.
“Are we crazy to even try to buy right now? Shouldn’t we wait until prices really drop?” Sharon asked. “Everybody’s saying they will.”
Chuck and Sharon were on the right track. They had identified three key issues tied to the psychology of buying and selling a home.
If you’re involved in the local real estate industry, no doubt you’ve observed a shift in the attitude of sellers over the last several months. It’s a mental change that does not happen quickly (with the exception of abnormal events like Hurricane Katrina). But what we’re observing now marks a trend that is likely to continue into the first half of 2009.
The first shift deals with a change in the attitude of sellers, such as Chuck expressed. In recent years, sellers priced their homes based on how much money they wanted to pocket from the sale. Only the sky seemed the limit. In the last few months, however, we’ve seen that change. Homeowners are now looking first to identify their competition and are then properly pricing their homes to sell. So what’s changed? They’re more willing to negotiate. Researching. Pricing. Negotiating. It’s a return to the basics.
The second shift involves the fear-laced emotion Sharon expressed: “Are we crazy to buy right now?” Her family was caught up in the excitement of moving into a new home, but comments from their friends and co-workers made them feel nervous. Attitudes and opinions of others, not the facts, were affecting their decision. Could they obtain a realistic price for their home? What is their equity position? Would they qualify for the lowest interest rate? Did their expectations for a new home match what they could realistically afford?
The suggestion that buying in a down market is ideal may be another attitude rife with problems. The price of a 4,000-square-foot home may drop, but so will the price of the home you plan to leave. The “deal” you dream of doesn’t look so dreamy when the shoe is on the other foot.
Plus, as recent Multiple Listing Service statistics have shown, inventory among resale properties is still pretty high. In fact, compared to 2004 (the pre-Katrina benchmark), current inventory is ahead by 42.2 percent.
Wisely, however, new construction inventory is slowing down as builders have cut their inventory from last year to this year by 12.28 percent.
If a serious market slowdown does occur, your family will have fewer options from which to choose among resales as sellers decide to stay where they are. And, if new construction is what you envision, those selections will become even slimmer, as builders shorten their new product rosters.
That said, the Acadiana real estate market might be at a critical mass right now. We’re at the point when both buyers and sellers are realistic and reasonably negotiable, and the inventory — particularly new construction — is still plentiful.
Combine that with a recent drop in interest rates and a prediction of 4 percent rates to come, and you’ve got yourself some incentive to beef up the investment that is so much more than a roof over your head.
It is hard to keep emotion out of a transaction as personal as your family’s residence, but it is also likely to be your largest investment. Unlike many financial portfolios of late, your home still represents a solid, safe part of that overall picture.
I always remember the words of negotiation and management guru Harvey Mackay, author of the bestselling Swim With the Sharks. Mackay urges readers who are examining their expenditures to buy the largest, most expensive home they can reasonably afford and drive a nice but basic car if they must, rather than the reverse.
Many Acadiana business people have not had to make that choice as our area has been blessed for many years. Mackay’s advice rings true if you are looking at operating smarter and behaving from fact-based rather than emotion-based decisions.
As we look to the beginning of 2009 and the status of real estate at this moment, the synergy of the pendulum shift could well be with you.
Teresa Hamilton of Van Eaton & Romero has been one of Lafayette’s top agents for more than two decades. This representation is based in whole or in part on data supplied by the Realtor Association of Acadiana Multiple Listing Service. Neither the board nor its MLS guarantees or is in any way responsible for its accuracy.