One of Webster’s definitions for evolution includes: “the process by which different kinds of living organisms are thought to have developed and diversified from earlier forms during the history of the earth.”
Everything evolves over time — from the finches in the Galapagos, to the technology we hold in our hands. And with evolution comes a change in behaviors to help us adapt to the ever changing environment that surrounds us.
Buyer Evolution
If you are considering buying (or selling) a home, and you have not been in the market in 3, 5, or even 10 years, the environment has evolved substantially from what you experienced the last time you were in it.
Phase One – 2009-10: The inexpensive listings sell out
When the economy began a full-fledged crash in 2008, around two million new homes were being built. Unfortunately, there weren’t two million buyers to buy them and as a result, the real estate market was left floating belly up in inventory.
In order to get this ‘overhang’ of inventory absorbed, builders (and their banks) had to cure prices by as much as 50%.
So if you are expecting to see these types of deals still available, they aren’t. By and large, the excess new home inventory was absorbed by 2011 or so.
Phase Two: Now you see it, now you don’t
Though it couldn’t come soon enough, I think every Realtor expected that when the market did return, it would about-face rapidly.
By about 2012, with much of the excess inventory absorbed, prices stabilized and even began to inch up slightly as buyers started to return to the market. And what began as a slow drip of buyers in 2012, became a full-blown gully washer by 2014 as the buyers returned in droves.
More buyers combined with a limited supply of new housing meant multiple offers, competitive bids, and accelerating pricing. Those who were quick to adapt were rewarded by some of the most aggressive price growth of any time in our nation’s history (excluding the housing bubble). Those who still expected the same deals as in 2011 were left to wonder what might have been.
Looking Backwards is Not Always the Best Strategy
Looking into the past provides good clues, but isn’t a great predictor of what is to come. The entire valuation model is based on past ‘comparable’ sales. But when pricing is going up, looking backwards is not a great strategy.
Appraisers, tax assessors, sites like Trulia and Zillow— they all rely on past sales in order to determine their estimates of value. Unless you’re in a market that’s on cruise control, this isn’t a good way to establish value. The best answer includes using not just past sales data, but also combining that information with the intuition of an experienced Realtor—one who knows their market in and out and has the ability to sense which way home prices are trending and at what rate.
Evolutionary end phases
Now here we are, in 2018. And while the market is always in flux, the best way to assess how you should act as a homebuyer in any real estate climate comes down to understanding not just where the market has been, but where it’s heading. You must evolve with the latest conditions, which includes looking forward, and it includes involving an expert (that’s us!) who has seen the twists and turns and can advise you based on data, community trends, experience, intuition, and all the other intangible inputs that determine what a home will sell for.
Leave a Reply