Buyer-seller disconnect

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Highlights:

  • Guest Column.
  • Written by Lane Hornung, Angela Moss.
  • Front Range heading for a “no drama” market.

By Lane Hornung and Angela Moss

Angela Moss

Angela Moss

There seems to be a growing disconnect in our market between buyers and sellers.

Buyers are still out in force but remain cautious and choosy, and sellers have been slower to adjust to a market that is moderating and less frenzied.

Unable to build on the momentum of June and July, the pace of sales dropped in August. Of course, a seasonal slowdown in August is typical as the summer selling season comes to an end, but this pull back was more pronounced than usual this year.

The volume of real estate sold across all Front Range markets in August decreased 1.1 percent compared to August 2013, and was down 10.1 percent on a month-over-month basis. The inventory of homes for sale was unchanged at 2.1 months.

In the city and county of Denver, sales volume decreased 15.6 percent on a year-over-year basis and 14.3 percent on a month-over-month basis. The supply of available homes in Denver County increased to 1.6 months.

No doubt, a shortage of listings continues to hamper the market. The inventory supply remains well below the six-month benchmark that indicates a balanced market favoring neither sellers nor buyers. Nothing new there.

What’s new is what appears to be a growing disconnect between buyers and sellers. Today’s buyers are extremely selective. Despite the shortage of properties for sale, a listing that is not priced well or is not move-in ready will probably languish on the market, even while other listings sell in days, if not hours.

The underlying cause is a difference in expectations between buyers and sellers. Specifically, some sellers are not willing or are not able to make the repairs or improvements needed to bring their home up to the top notch showing condition today’s buyers are expecting and demanding.

Lane Hornung

Lane Hornung

These sellers think because the market is a sellers’ market, they can “get away” with foregoing repairs and updates, and that these blemishes will be ignored in the frenzy. In some markets, they would be right, but not in today’s market.

A similar disconnect between buyers and sellers is occurring in the area of price. Sellers who witnessed the frenzied market in the first half of the year may understandably think those rapid price increases will continue indefinitely. As a result, many want to test the market and price aggressively.

So rather than pricing at today’s values, they “forward” price at what values will be a few months from now if price increases continue. In a market that is moving up rapidly, this is not a bad strategy.

However, in a moderating market in which prices are increasing but at a slower rate, forward pricing creates a disconnect with buyers. Sellers need to price for the market we have today, which by the way is still a strong sellers’ market at all- time record high home values.

Overall, it’s not a huge surprise that buyers have been quicker to adjust to our moderating market than sellers. As a seller, who wouldn’t want the frenzy of multiple offers and bidding wars that result in price jumps of 5 or 10 percent? That’s still possible in this tight inventory market, but not nearly as prevalent as it was 4 months ago, and only if the list price and showing condition are both attractive to buyers.

We are slowly trending back to a “no drama” market. A balanced market with inventory levels of 5 to 7 months and historical price appreciation of 3 percent to 5 percent is good for both buyers and sellers. That said, there will be a few disconnects between buyers and sellers along the way that will take a month or two to sort out.

Angela Moss is an 8z Realtor in Boulder. She can be reached at 303-775-5295 or Angela.Moss@8z.com. Lane Hornung is the founder and CEO of 8z Real Estate, a sponsor of InsideRealEstateNews.com.  Universal Lending  and  Land Title Guarantee also are sponsors of IREN. To read more articles by John Rebchook, subscribe to the Colorado Real Estate Journal. Contact John Rebchook at JRCHOOK@gmail.com.

 

 

 

 

 

 

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John Rebchook

John Rebchook has more than 30 years of experience in writing and communications. As the Real Estate Editor for the Rocky Mountain News, he wrote about residential and commercial real estate for 26 years. He has won numerous awards for business stories and columns that he wrote, both as an individual and part of teams. In addition to real estate, he also covered economic development, banking and financing, the airlines, and cable TV for the Rocky. In addition, he was one of the original freelance writers for GlobeSt.com, covering commercial real estate for the Internet publication.

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