Two Steps Back, One Small Step Forward

By the end of January, the market in 22309 showed shrinking sales, shrinking sales prices and longer days on market compared to December’s numbers. But despite this latest dip, all of those figures are a significant improvement over the same period last year. Indeed, those of us who live in 22309 should be relieved to hear that since the end of January 2011, sold volume has risen by nearly 37%, median and average sold prices have risen by about 28% and sellers are getting about 95% of their list price. Even the days on market are lower, down to an average of 67 days.

The term “DOM” is bandied about regularly in the real estate world but what does it really mean? Let’s consider how the days on market impact a home’s value. If you put yourself in the shoes of a buyer, when you see a home that has been sitting for 200 days or longer, you will likely ask, “what’s wrong with it, why hasn’t it sold?” and IF you put in an offer, it most likely will be a low one in the belief that the seller is desperate to sell.  The longer a house sits on the market, the less valuable it becomes in the eyes of the buyer – and it’s the buyer that determines the market price.  Not to mention that depending on the seller’s circumstances, there is a real opportunity cost to holding onto the home rather than lowering the price and getting in an offer.

The fact that DOM in 22309 has reduced to 67 days from 182 days in October of 2011 is a positive sign for our market because it indicates that, in general, sellers are setting more realistic prices. It also means that the buyers remain in the “driver’s seat” in this market.

Sellers face a real dilemma, that is, hold out for the price they want or cut their price and sell more quickly. Some sellers decline a lower-than-expected offer in the first days after putting their house on the market, in the belief that they will get a better offer in days to come. There may be good personal reasons for doing this and holding out for a better price might seem like the right thing to do. But in the current market it is not unusual to see houses sit for weeks or months longer without being sold. Eventually, the price is lowered and the offers subsequently received are usually significantly lower.  If a house has been sitting on the market for more than 90 days and no offers have been made on it and showings are few, then the market is telling the seller what its value is – a lower price.

So, what are buyers looking for? Coldwell Banker recently completed a survey of 600 of the company’s agents nationwide. They found that 51% of the agents reported that their sellers were willing to lower their prices to sell their homes.  Also, buyers favored updated or “nice” kitchens and open floor plan configurations. Buyers remain discerning and in control even though the inventory is low (which would normally translate to a sellers’ market). At a recent open house I held, a buyer walked in and said, “We’re looking for the ‘perfect’ house and when we see it, then we’ll consider buying."  That “perfect” house is elusive and buyers usually find that there is give and take when looking for a home, whether it is a resale or new construction. These are difficult expectations for sellers to live up to.

A home that is priced well, shows well and is in a desirable location, like 22309, will sell quickly. Detached homes in our area have seen a decline in average sales price over the last 4 months. Townhouse and condo sales prices have increased over the last 4 months.  The average price for a detached home is $476,921 and attached is $208,167.  Conventional loans were the most used financial vehicle in January, with cash, VA and FHA loans coming in close behind.  Investors are continuing to find the lower priced homes, condos and townhouses attractive as the migration into the area for jobs at Ft. Belvoir unfolds.

Rentals are becoming more and more scarce. As many military personnel moving into the area decide to rent, demand is high and the supply is quickly snapped up.  Average rent for detached homes is $3,100 per month and condominiums and attached homes are averaging $1,575 per month. These figures include active rentals and those that have rented in the last 90 days.

As the market activity for the spring increases, 22309 may take a few more steps in an upward direction but, like a child learning to walk, there will be some uncertain times in the near future that can cause us to think that we’re stepping backward.  Sellers shouldn’t get dispirited because there are many buyers looking right now.  But will they buy?  The answer is yes, if sellers can make some steps toward meeting their expectations.