SIGNALS THE MARKET MAY BE SHIFTING

BASED ON Article: OCT 12, 2018 — by Lindsay M. Mann 
https://www.labcoatagents.com/2018/10/12/small-signals-market-may-shifting/

Unless you’ve been living under a rock, you’ve probably heard the noise surrounding a potential market shift. While there is a lot of talk about if a shift is starting, if it’s already here, and what kind of shift it will be, there hasn’t been a lot of talk about ways to know for sure that a shift may be occurring. How do you know if it’s just seasonal cooling vs. balancing vs. real shifting? Here are a few subtle clues to watch for and some action items to take if a shift does happen.

FIRST OF ALL, WHAT REALLY CONSTITUTES A SHIFT? 

The market shifts ALL the time. Once you learn this, a shift carries less fear and you can be more prepared to handle it. A shift is not just something that takes a great market to a market that’s in the toilet where no one can make a living and the whole country is in recession and no homes are sold. So let’s all just breathe. 

We saw a shift a few years ago when the market swung up really fast and all of a sudden we couldn’t get homes to appraise. We saw a shift this year when new construction started to rebound and the market started to see more new homes popping up again. My market is seeing a dual shift because tech companies are moving in bringing new jobs and long time residents who don’t love the rapid growth are moving out. Shifts are happening all day long. Just like the wind blows in and out, so does a shift. The faster you can do away with the mindset that a shift is a horribly bad thing, the faster you’ll learn to recognize and recover from them.  

THE OBVIOUS SHIFT INDICATOR: 

Days on Market Increase and Prices Decrease.
This is a fairly obvious indicator that a market shift may be occurring. Days on market go up (homes take longer to sell) and prices go down. But this indicator can be tough to use to really gauge your market, as in seasonal markets this happens every year.

While we are feeling that it’s shifted more significantly than the past several years, it is hard to tell whether this is just seasonal cooling or whether this is actual shifting.

LESS OBVIOUS SHIFT INDICATORS

1. More Contention Between Buyers and Sellers.
   When the power balance begins to swing from one party to another (IE from sellers to buyers) the level of contention between parties to a transaction worsens. Why? The power is shifting but the market doesn’t know it yet, and so it resists. Sellers still believe they are in a strong seller’s market and they will sell their homes over asking with multiple offers in a matter of days. Buyers can feel the market has softened a bit and are taking advantage by pushing back on what they feel are overinflated prices. That icky feeling is the power balance shifting. 
2. The Termination Rate Goes Up.
   Deals are harder to put together and even harder to keep together and get to closing. You’ll see more properties popping off and then back on the market again. This has to do with the swing of power I mentioned above, but also as buyers are getting more and more stretched financially by rising prices and interest rates, lenders are having a tougher and tougher time getting deals to closing. Buyer’s debt to income ratios go up with prices and rates, and buyers become less qualified.
3. Open Houses Everywhere. 
   When a home doesn’t sell, we all go back to the basics on how to get more buyers to visit the listing. The first way to do that is to hold an open house. If you’re seeing open houses everywhere, this is a strong indicator that days on market are going up and the market is shifting.
4. Agent Musical Chairs. 
   You’re scrolling through the MLS and notice a great new house pop up on the market. But wait, that’s actually not a new listing… That’s the listing you saw two months ago listed with a new agent. And that’s the third time you’ve seen that this week. Why does this happen? When the general public hasn’t caught up with the fact that the market is shifting, the first natural instinct is to blame their agent. Not enough showings? No offers? If you haven’t been told that’s happening because of a market shift (or if you don’t believe it) you can’t be blamed for considering that it’s your agent’s fault. So, you fire your agent and hope the next will do a better job marketing your home. 
5. It’s Listings Rain.
   People are starting to sell. More listings are coming on the market. If this continues, things will balance as the supply goes up making demand go down.  A shifting market is the WORST time to price a home too high. In a bad/down market, sellers already understand selling is going to be tough and they’re prepared for what that means. In the beginning stages of a shift, they don’t even know or realize a shift is happening. Price it right. Price it right. Price it right.

SO, DO I THINK THE MARKET IS SHIFTING?

Yes. But do I think it’s a catastrophic shift? No. I think it’s a much-needed balancing. If we don’t balance, I believe we will inadvertently cause a catastrophic shift. We need a balancing. Do I think we will all survive? Yes, absolutely.  SHIFT HAPPENS. You’ll get through because you are working with a professional, and that’s what professionals do.

Call GATELY Properties today at 661.220.5506 and get going with GATELY!