Inventories on the rise – Where are the buyers?

Like it or not, whether you are buying real estate or selling lakefront real estate, this subprime mess is affecting us all. Inventories are rising, prices are falling, lenders are tightening, and everyday seems to bring another alarming headline about how the sky is falling. Well, fear not, my friends.

“This environment may not be ideal in the world of lakefront real estate, but was it reasonable to think there would be an unlimited amount of buyers continually coming into the market?”

When properties are appreciating 15% per year, year over year – even when sufficient capital is available to lend to most anyone who wanted to borrow – buyers will eventually balk at the prices and stand on the sidelines.

Bernanke Shows the Way

It seemed the greatest fear in 2003, 2004,and 2005 was being left behind in the great real estate goldrush. Now the shoe is on the other foot. These are times that call for a steady hand, clear thinking, and the calming affect of perspective and, even if you don’t have those attributes, we have a federal government who does. Agree with the policy or not, Ben Bernanke seems to be hellbent on doing all he can to keep this economy out of a recession. And now Treasury Secretary Paulson is strongarming some banks and lenders to hold the line on those adjustable rate mortgages. He’s hoping to hold the rates down long enough so the Fed can catch up with rate cuts so that when the new adjustable rate does kick in the new rate won’t be so hard to deal with.

Not Out of the Woods – Yet

We have a ways to go to get out of this mess and I don’t think anyone will call the crises over until there is convincing growth in new housing starts, a decrease in the inventory of existing homes for sale, and a leveling in the price of homes. But until that day comes – in a year? 18 months? – take heart in knowing that the market will sort itself out with the steadying hand of the Fed, the Treasury, and the financial institutions.

Message to Buyers and Sellers – “Get Real!”

In the meantime, if you’re a buyer of real estate, do not be cavalier about this market by thinking there will always be lots of properties to look at and if “I don’t buy something today there is always tomorrow”. Several times I have seen buyers walk away from a great property because they couldn’t get the seller to lower the price enough and thought that there were greener pastures elsewhere. There is also the fear that maybe the market will continue to go down and, if they had just waited that extra three or four months, they could buy the same property at a lower price. Maybe so – and maybe not!

My advice to buyers is simple – if you find a property you like, negotiate a reasonable price, and buy it. What are you waiting for? A cheaper interest rate? Talk to someone who borrowed money in 1980 and ask them if a 6% fixed rate mortgage is a good deal. Trying to time the bottom of the market is a sucker’s bet. Most buyers I know plan to own their property a minimum of five years – and often for a lifetime. History tells us that, while it’s impossible to know which direction the next 2% move in the real estate market is going to be – up or down – the next 20% move in the market is going to be up. Nobody can predict movements in the market day to day, or even year to year, but, over the long haul, the movement is up, not down.

And what are sellers supposed to do in this climate? Tons of listings competing for attention, buyers playing hardball, and the sickening feeling that you should have sold two years ago, not now. You are right on all counts. Your medicine is to take a dose of reality. The market has come down some, a simple product of our great economic system, supply and demand. Just as buyers want to buy at the very bottom so, too, do the sellers want to sell at the very top.

How realistic is this?

Not very. And while this might not be very comforting to sellers who had a market evaluation done two years ago that came in ten percent higher than today’s price, there are still buyers out there and the mortgage rates are still quite reasonable. So, how do you get someone to buy your property? Well, like I said, take a dose of reality, really look at the local market, then set your price. Look at all the similar properties in your market, the properties that you are competing with to attract buyers. Price your property so that every one of your competitors will drive buyers back to you because you have the most reasonable and attractive price point. Buyers are fewer, but they are out there. Make sure buyers buy your property. Don’t give them the incentive to buy someone else’s.

A fearful market presents opportunities

The next year or so in the real estate market is going to be hard on a lot of people – especially on lenders who lent recklessly and borrowers who borrowed foolishly. For the rest of us, hopefully this will be a time to gain perspective – but don’t be inactive out of fear or greed. The market will sort itself out just as time continues to heal all wounds. If you’re in the market to buy there is a lot to look at and a lot of reasonably priced homes. Find one, fall in love with it, and buy it. If you have a property to sell, do not be afraid.get aggressive There are buyers out there. Sharpen your pencil, do your homework, and about postioning your property in the market to sell, not sit.