For some time, the common wisdom has been that we are in a buyer's market. In the initial stages, sellers did not agree, optimistically believing that everything would turn around "in the next few months" or "in the Spring".
As Spring turned into Summer and Summer turned into the financial bloodletting that we call Fall, that optimism waned. Finally sellers in my market were becoming reluctantly realistic about where the market was. In fact many, were eagerly reducing prices in the hope of getting ahead of the market.
And what happened? According to an article in The Real Deal, the volume of signed contracts was down 75% in September and October of this year compared to 2007.
Beyond the skittishness that everyone was feeling in those months, was another dynamic.
Buyers, sensing further price declines, are unwilling to pull the trigger. No asking price is taken at face value. I have seen buyers make an offer that is clearly hundreds of thousands of dollars lower than what the seller would accept simply because that is what the buyer could afford.
The assumption was that any offer should be accepted, no matter how low. This perceived imbalance between buyer and seller is one of the main causes of the severe decline in transactions.
As I have noted in my post on housing sales in Brooklyn, transactions have been down 40-50% year over year even as sales prices remained relatively stable. That was the result of the first standoff bedtween buyers and sellers, the one where sellers were holding onto unrealistically high asking prices.
What is happening now is different. Rather than take the seller's willingness to take less, buyers are stubbornly holding onto the idea the lowest price is the objective. It is, in a way.
Let me get on my soapbox for a minute here. I tell my buyers to remember that at whatever price they buy (assuming that they can afford the home), they will actually have to live in it. Finding a home you want to actually live in and can afford is more important than paying the absolutely lowest price for it. Particularly since timing the market is a low probability endeavor. You won't know that it has hit bottom until it starts moving up. By that time, it will be too late. If you are seriously in the market for
a new home, by all means negotiate with the seller. But keep in mind that this home will be where you life your life for many years, regardless of what you paid.
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