August 2016 – The Shift Has Started?

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At last week’s Keller Williams Mega Camp in Austin, Texas, Co-Founder and Chairman Gary Keller focused heavily on the Shift that is beginning in the real estate market and how sellers, buyers and agents must be preparing for it.

What’s the Shift? It’s the inevitable cyclicality of the real estate sales market. It is the constant tide flowing from a sellers market to a balanced market to a buyers market to a balanced market and back to a sellers market. It has been happening as long as real estate sales have been recorded and, in San Mateo County, the shift has
started from a sellers market to a balanced market.

In 2016, the number of new listings of both single family homes and condo/townhomes has risen significantly – by 8.8%, or 280 homes; and by 17.6%, or 166 condos/townhomes. This has been great news for buyers, who have been competing for too little inventory for the past three years, and they have bought more homes this year than last. However, the rise in the number of sales has not kept pace with the rise in new properties on the market, resulting in months of inventory increasing year-on-year by 25% for single family homes and 37.5% for condos/townhomes. Anecdotally, we hear an increasing number of stories of homes going with no or few offers on the offer date.

Another indicator of the shifting market is the sales price to list price ratio. It peaked for residential properties in May, 2015, at 110.8% for single family homes and 110% for condo/townhomes. Now, those numbers stand at 105.8% and 105.9%, respectively.

How to prepare? When pricing property, sellers and agents should be looking at three sets of data:

  • Past Sales
  • Current Competition
  • Forecasted Trending

Once the market has started shifting, the critical action is to get out ahead of a falling curve. A great question to ask is “How much of the gain from the last three years do you want to give up? Because in a down-trending market, that’s the cost of incorrect pricing – the longer the property is on the market, the more of that gain is lost.

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This post was written by Rumana Jabeen

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