Some of my buyer clients had been looking casually for the last 2-3 years and now are in a bit of a panic. Not just any panic, but an exhausted, sick-of-looking panic, accentuated by the fact that prices are now rising pretty noticeably and their buying power is diminishing.
Why is it than when it’s a buyer’s market, and prices are soft and inventory plentiful, buyers are so picky – and when inventory is scarce, and buying conditions terrible and there are gobs of multiple offers, most of them clamor to purchase something, almost at any cost or in any condition?
As real estate professionals, we see this happen as the cycles change. But it’s very hard, in a buyer’s market, to tell a Silicon Valley home buyer: “hey, you’re lucky, buy now, while it’s easy!” because it always looks so self-serving (since we are only paid if the buyer buys and closes on the transaction) and a buyer’s natural response to this is “hey, don’t push, I’m in no hurry!” So we tend to step back and let the buyers go at their own pace. When the market turns, we tell our clients that it is a different game now, but often these home buyers don’t believe us for several months. Eventually, though, it sinks in and gets so bad that they are nearly despondent and wondering how this could have happened.
Tonight I got an email from avery discouraged San Jose area home buyer. She told me that they saw an open house of a place that seemed like a good fit, but that it was so packed with people that it felt like a “black Friday sale”. She told me that when they left that house, she was in tears. I knew what she meant. I have seen that frenzy, too, due to far more demand than supply. In fact, I showed a Sunnyvale townhouse during an open house on Saturday and it was exactly like that. I bet the agent gets 20 or 30 offers.
The truth is, at this part of the cycle, it’s probably not going to get better for awhile. At some point, prices will have risen enough that more sellers will come onto the market and conditions will balance out some. Eventually, there will be more sellers than buyers, and then, of course, with the supply and demand pendulum swinging again in the other direction, prices will level off and then drop (and then buyers will be picky again….). When that happens is anyone’s guess. Maybe next year, maybe the year after. But it won’t happen until prices are at least back up to the prior peak.
What can you do if you want to buy NOW? Two ideas come to mind: first, if you are bidding on a home, get ahead of the curve. Look where prices are going and jump ahead. (When the market is bad, this is the advice that we give to our sellers, by the way. Same principle, only we suggest that they cut prices to get ahead when it’s a declining market.) Are prices rising at $10,000 per week? Then if you want the house, see where the market is going and get there first. No, you will most certainly not have a bargain or a “good deal”. There are no good deals for buyers now, there is only getting the property or not getting it and buying later, when it’s more expensive.
Another approach is to buy the house that no one wants but which has fixable issues. (Or issues that you can live with.) You cannot change the location of the freeway or the high voltage power lines, but you can improve the property’s condition, upgrade the plumbing, add some skylights, and fix the curb appeal. Most buyers target the remodeled home that appears worry free. The best bargains are often the home which require some time, effort and money or “sweat equity”. Those are the properties with far less competition. You simply must remember all this when you go to sell, and price the property appropriately then.
Whether it is a buyer’s market or a seller’s market, your real estate agent will have feedback for you and is likely to share it if you “give permission” for that advice. Often consumers don’t want to hear it, but this guidance is part of what you’re paying for. So take a deep breath and ask them what they think is best. At the end of the day, it’s your house, your money, and therefore your choice. But wouldn’t it be good to have the input from someone who has weathered many of these cycles before?