All Things Real Estate: Homeowners must be more realistic about listing price

All Things Real Estate: Homeowners must be more realistic about listing price

After all these years in the real estate business, I have come to many conclusions, one being that “buyers are sometimes liars, sellers are sometimes yellers and lawyers are also sometimes destroyers.”

Buyers, sellers and lawyers, please don’t be offended by this real estate slogan (I heard it more than 35 years ago and had my doubts about its truth) as it isn’t meant to insult anyone. It is to bring up a very valid and pertinent point in this column, that people change their minds and say one thing and then do another.

When I am starting to converse with a client on the phone and listen to their specific needs and wants, I have them paint me a picture of their realistic plans and goals. I begin asking probing questions to fine-tune as best as possible what they are trying to accomplish whether, selling, investing, purchasing, or even renting or leasing any type of residential and commercial property.

There are obviously major differences between a seller, investor, a first-time purchaser, move up buyer, downsizer, a renter, someone undergoing a divorce (I have a free book I just put out for those contemplating divorce) whether considering a home, HOA, condo or co-op. Designing a specific search for each client only materializes once enough information is ascertained during the dialogue and conversation phase so I can become more efficient with the least amount of wasted time for both parties. But people constantly change their minds due to personal reasons, shifts in finances, or eventually what they finally purchase. What they don’t want initially sometimes is what they end up buying.

A homeowner needs to become more realistic in pricing their home for sale today as the long lines at open houses are far and few between and multiple offers and bidding wars have slowed. Double digit price increases have decelerated as demand and sales have decreased, although inventory is still historically low.

However, prices have increased 60% for a median-priced home on Long Island from $350,000 in 2012 to $560,000 in 2021. Interest rates have now doubled in the last eight months, while inflation is still running rampant. All the monumental and excessive printing of money during the pandemic, have disrupted the normal real estate cycles leading to increased prices, while also fueling the stock market, supply chain disruptions and the exiting of people and families from the large populated cities out to the suburbs for more space and safety.

The excessive demand in the purchasing of homes has raised prices to unfathomable levels and has been the No. 1 factor in fueling our untenable inflation. So far, the previous rate increases have not yet controlled our inflation, so another increase of  3/4% by our Fed Chair Jerome Powell will be forthcoming by the end of July and more will occur throughout 2022. I firmly believe that no one really knows or has the answers or concrete solutions in curbing our incessant inflation. But raising rates seems to be the typical path, as history has shown us, that Fed chairs use to slow things down.

Too many increases, however, could put us in a worse recession than we are already in as the last two quarters have shown that GDP was slightly negative. Whether we have a more serious recession or a softer landing will be determined going forward.
A depression, simply stated is a much more severe recession and contraction in GDP. During the Great Depression of 1929-1933, real output declined 30% and unemployment rose from 3% to 25%. We are currently not even close to those figures.

When Paul A. Volcker, was the Fed chair in 1979, he was instrumental in making interest rates rise to 18.45% in 1981 to curtail higher than normal inflation of nearly 12%. This was caused by rising oil prices, government overspending and rising wages. (Sounds very familiar, eh?). As history has shown us, the end result was it caused housing price increases to soften at that time, and in the long run created a stronger and more stable economy.

Back then, Paul Volcker created a “tough love” scenario for our economy and it was a success. At that time, for some it was a great time to buy if you had cash; even if you were qualified to finance with those high rates (prices were 5-10 times less than today), many sat on the fence. But some still took the plunge and bought homes when prices weren’t escalating as fast and then refinanced years later as rates came down to more normal levels.

But what will these increased rates do to our housing and the cost of government debt today? The end result doesn’t look very positive for those locations that are currently overvalued where inventory has increased two to three times year over year. The insane prices also were caused by those who went through FOMO (fear of missing out), wild bidding wars, historic low rates and housing inventory that pushed prices way beyond the current inflation. Due to the still severe lack of inventory, decreases in prices will be more moderate in those locations where prices haven’t increase by excessive amounts. Most have equity in their homes and foreclosures are not like they were in 2008 due to stricter lending rules via the Dodd-Frank Law and eliminating no doc loans.!

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Philip A. Raices is the owner/Broker of Turn Key Real Estate at 3 Grace Ave Suite 180 in Great Neck. He has 40 years of experience in the Real Estate industry and has earned designations as a Graduate of the Realtor Institute (G.R.I.) and also as a Certified International Property Specialist (C.I.P.S) as well as the new “Green Industry” Certification for eco-friendly construction and upgrades. For a “FREE” 15 minute consultation, a value analysis of your home, or to answer any of your questions or concerns he can be reached by cell: (516) 647-4289 or by email: [email protected]

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