Further Analysis of the Quarterly Comparisons & Some Suggestions

I usually laugh when I hear national news regarding "the housing market" or "the real estate market". My reasoning is simple: All real estate is local. You've probably heard this statement a lot lately, so I apologize for adding to the cliche parade. This statement, however, is not only true, but it helps provide perspective when all of the housing news is dire.

Don't get me wrong, I am not here to sugar coat anything. Many markets across the country are down in some shape or form. Inventory is high, loan commitments are harder to obtain, and therefore, there are fewer buyers capable of absorbing the large inventory of listings. Still, depending on how one measures the different housing numbers, not every market is suffering.

I've analyzed three zip codes in the Louisville area for the past couple of years. My comparisons measure sales volume (total number of single-family home sold), high sale price, low sale price, median sale price, & average sale price. I then compare those categories for each quarter against the previous year's applicable quarter (i.e. year over year). To me, this is a more accurate comparison than to compare in a straight line quarterly sale figures. Granted, no measurement timeframe is perfect, but at least this type of analysis should help to equalize weather conditions & the frequency of holidays. Both of these factors are influential with regard to home sales.

Just looking at the 1st quarter of 2007 versus the 1st quarter of 2008, a few trends appear to hold across the board: Sales volume decreased substantially (20% in the 40205 zip; 54% in the 40206 zip; 32% in the 40207 zip), median prices are up in all three zip codes (11% in 40205; 9% in 40206; 11% in 40207), & average prices are up in all three zip codes (9% in 40205; 36% in 40206; 15% in 40207). So how do we make sense of such conflicting data?

From my perspective, it's pretty simple: The best products still sell, and they still sell for a good price. The problem for home sellers is, there's not as much overflow to help diminish the inflated inventory. Simply put, the buyers that are out there & actually capable of purchasing a home have the luxury of being picky. Once they find a home to purchase, there's still plenty of good choices available for the remainder of the smaller buyer pool. Buyers are more patient. They expect to get a fair, if not, great deal, and they're willing to look long & hard to find it. Since there's fewer buyers competing for the available properies, homes that look tired, cluttered, dumpy, and/or out-dated don't sell--unless they are offered at a discount. Few home sellers want to discount their price to a level that is required to sell it, and even fewer are willing to do a few things to their home to make it stand out. Thus, inventory remains high, and sellers remained convinced that the reason their home isn't selling has to do with something other than these two factors.

My question is: WHY? Many buyer objections can be mitigated with little expense to the seller. Simple things like cleanliness, fresh paint, & minimal landscaping can mean thousands to a seller, or at worst, these changes could be the difference between a sale & a home sitting on the market for months.

It's time for sellers to be proactive in regaining leverage in the transaction. Everyone believes leverage is clearly on the side of buyers, however, sellers can put serious pressure on prospective buyers to act fast by pricing their homes accordingly & sprucing up their homes so that every buyer that walks through the door perceives that this home is too good to pass up. In this current market, leverage might be more important even than location, location, location.