Real estate is cyclical. There is no doubt about that. And although today’s buyer’s market is unprecedented, the market will inevitably shift into one in which sellers are in control.
Those that have been unable to sell during this down market will be set on vengeance for all of the low-ball offers and one-sided terms.
Additionally, since many of today’s buyer’s will at some point become sellers, there is a good chance that the “demand it all” philosophy will be in full force in the opposite direction.
It’s going to happen at some point. The only question is when.
And when it does, there is going to be heck to pay!
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Good point to remember as the market changes. Best wishes for continued success. We are already seeing multiple contracts on well priced properties.
I think in my area, 2011 will be the defining point. Home prices have come down so far 1% compared to 15% last year when that was compared to 2008. Sellers will have their turn. We need the job market to come back, unemployment has to go down and salaries have to rise. And no more tax credit!
Richard....we've seen this happen before but not to this degree.....and I hope it happens sooner rather than later but I fear it will be many, many years before we see a turn around....
Richard, I think that the real estate business is in for many changes with advent of all this technology, changing business models etc. I think books like Shift are going to be standard reading, it will come back, but will it come back as the market that we now know it? Great post
Interesting post as I wonder too about the buyers who are getting such a good deal on the homes they are buying now, if they will insist on that mind set when they move.
We shall see!
Richard, memories are short. I don't think we'll be back to a sellers' market for some time and it will be gradual and sporadic when we do.
Oh, I wish there would be a turn around in our market soon, but we have to stop the bleeding first and on my side of town, that has not happened yet!
Happy Sunday Richard.
Today's buyers will be the ones who make the money as sellers....much like the sellers of the early 2000s!
Good morning Richard,
For areas where home prices have fallen so low it's going to be a long time coming back! Our area hasn't been hit so hard. Sellers are making decisions to make their move up or move down and are pleased with the interest rates and the prices of the homes they are buying and not focused on the lower sale price of their homes. They feel it is the best time to make that move as they don't want to wait for their home to increase in value because the one they want will be doing the same and they will not have these fabulous interest rates in the future!
I am wondering if there will ever be a point in time that both the buyer and the seller will be realistic in their expectations of one another. Or am I just looking at things thru ROSE colored glasses?
When the bulk of buyers and sellers stop worrying about how much money they make or lose in real estate and think more about long term living solutions for their family, the market will be stable. When people get all hyped up about the market going one way or the other the sharks come out and as they are professional hunters, they make the most of the confused masses. Who makes the most in the stock market (besides executive paying themselves big bonuses)? The steady Eddie, long term investor. Who makes the most in real estate investing? The same type, long term, pay down the mortgage, weather the storms, homeowner and investor.
Richard I think that is precisely why buyers are so rough in this market. Sellers were making them jump through hoops in the boom, and now is payback. Each cycle one "gets back" at the other.
There will alsways be buyers and sellers who try to keep the upper hand no matter what the market is.
Richard,
It will be interesting to see what the mindset of today's buyers are when it is their turn to be sellers....
Hi Richard. Hmmmmm.
I don't expect any payback.
Just supply and demand shifting...
Thanks for writing,
Ken
Charles: The answer is yes although I expect it to be a minimum of 3 years out; at least in our area. Thanks for the post!
Hi Richard
Like many of the other responses I think it will be some time before the market turns - I do not think that we will see 2005 prices again- but one never knows. Time will tell !!!
Hi Richard -- I think it all boils down to motivation of the seller as well as today, some artificial constraints regarding equity that are forcing some sellers to over-inflate their asking prices to avoid being a distress sale -- a minefield indeed for an unsuspecting buyer/buyer's agent.
How in the world did you get that photo? Aquarium I presume? Wow -- perfect!
Richard I don't know about payback, but price increases will never be as dramatic
Richard, thanks for your post. My local market hasn't seen the bottom yet. Probably end of next year. We have unbelievable high unemployment, and any homeowner with equity is going to wait it out, unless they need to sell. Buying a home this year may be underwater next year. It may be 2028 before we see prices before the downturn, and that may be optimistic.
Real estate is cyclical. Yes, the sellers of the future will want it all. Time will tell.
The tables have already started to shift here. We have huge buyer demand, but low prices. The first thing to go, if a buyer really wants a house, is the seller subsidy. Buyer's seem to think that it's a market favorable to them when prices are low. They have no clue about inventory and demand...and how that can set the stage for them to not get the seller to pay for everything in closing costs, home warranties, etc.
True, It will be interesting to see if this market will turn around and bite them on the butt...
We all learned in Corporate America be nice to the people on the way up on the corporate ladder cause you will be passing them on the way down...or what goes around comes around or treat they neighbor as you would treat yourself.
Richard, I think you are right to a point. I do believe it is going to be awhile before it happens.
Richard - today's buyers will more than likely demand top dollar and strong terms when it becomes a sellers market again. However, I think that will not happen until after I am out of the business in about 7 - 10 years.
It is always a buyer's market ... always, always.
Richard - I think when the market turns sellers will be out for everything... not as revenge for the low ball offers they received in this market but because that's the way it works when power swings. 4 years ago was the same thing, and everyone was used to a market where there was no need to negotiated on price or a home inspection because 3 other buyers were lined up waiting for your house if this deal fell through.
It will be interesting, when that happens, to see what the public perception is. What will we remember and forget about why we're in this mess in the first place.
Yeah, I think the sellers had their way 3-5 years ago and so it is really the buyers revenge..... but yes positioning in any market is key.
Hi Richard, You're absolutely right on this one ! The buyers of today are no less ruthless than the sellers were when the market was overheated !
I don't think revenge is a motivator so much as fear, greed, and arrogance. Fear that they're leaving money on the table, the greed to get every penny possible, and the arrogance to think they can pull off the impossible.
Not sure what you mean by the term "demand it all" but I would imagine that when we go back to a sellers market and when the number of foreclosures and short sales go back to historic levels (low), Sellers will still have to sell at market value, just like they do now. The difference will be that sellers will be trying to push the market higher as opposed to now when buyers are trying to push it lower. It really dosent make any difference everything will always sell at market value, no more and no less
I think we're witnessing an ugly and unpleasant side to basic human nature.
Everyone tries to gain the upper hand in any negotiation. If there is blood in the water or chips on the table there will be those who try to maximize their perceived advantage.
If the seller is seen as weak the buyer will push. If the buyer is needy the seller will squeeze. Its been that way since the beginning of time and there is no reason to think that it will change. Right now the buyers feel stronger in most areas, but this will change just as it always has in the past.
The trick is to call the turn in the market. Being too early or too late can be expensive.
Payback for what? For buyers purchasing at market value? Are the buyers responsible for the decline in property values?
The market goes up and the market goes down. Other posted have pretty much had the same point. I do think that if you are a qualified buyer, this is a window of opportunity to purchase a first of second home that will not come again in the remaining years of my life. With interest rates this low, and home prices down, there is no better time to buy even though homes are still double what they were in 1999 when I bought my last primary residence. In otherw words, houses go up and down but the down is never as low as the low from the previous down turn.
Good question....your post makes me wonder what the climate will be like when it all comes full circle.
Richard:
Here in San Diego we are seeing some pay back happening now -- who knows if it will get to the degree that you speak about.
It wasn't such a distant past that the Seller's Market was alive and well in Central Florida with buyers waiving the right to inspections, appraisals and refundable deposits. Life and business is a cycle, we will see a seller's market again and the tides will change; we will adjust and advise, but supply and demand controls the market.
It would be interesting to see when this type of shift will take place. ALthough I don't see it happening for the next few years.
But buyers who bought low and will be selling in the next three to five years, will be in a great position again...but this time, as a seller.
Richard, I still am baffled at all the discussions about the real estate market being so bad... it has always been cyclical... there's a couple of quotes that keep coming to mind; what goes UP must come down AND, what goes around comes around. There's nothing new.
fortunately, the Real Estate market is not like stocks: Buy low/ sell high. It's a parallel type of market: Buy low/ sell low. Buy high/ sell high. But in the end, you make some great points Richard. I'm looking forward to the next phase of the cycle.
Richard,
I don't think most sellers will think that way. Most sellers should know by now that they do not control market value....neither do buyers for that matter The bottom lines is value is determined by what the buyers and sellers are negotiating in the market but that still doesn't make it definite..... Of course the appraisers are really the ones who are controlling value. It sounds as if you are saying there might be spiteful sellers out there?..also we have a long long time before we see a shift back to a sellers market.
I think it is all about "JOBS"! Until the high unemployment comes down, there's going to be fewer home buyers, no matter what kind of artificial home buyer tax incentive program they try to hook them with. Many with jobs are still worried about down-sizing or their position being eliminated.
The number of homes on the market in my market area has not really changed since this time last year. There is a lot of inventory on the market and the banks still have thousands in backlog of foreclosures to go here.
In my opinion, 2012-2013 could be the turning point of the real estate market. And even so it will take years to return to 2005 prices. Those homeowners that did 100% financing have long, long road to build any equity if they can hold on that long. I think we are going to see-saw for the next few years.
In a few subdivisions builders have bought up a few lots and started building but it is not the same product standards as the subdivision began with. The first homeowners in the subdivision are going to lose equity because the newer product is generally cheaper and of lesser quality.
I don't know Richard I think we are years away from this happening. We shall see.
Ha....It'll be awhile before we have a "sellers market" again.
Patricia
Love the picture. We already see it in our market. The best areas are seeing low inventory and multiple offers and the sellers are getting more demanding.
Marcy
Boy I hope I don't run into any sharks like that.
Richard,
It does go in cycles, but we're five years away at least.
Funny reading this Richard.
Here in SW Riverside county... Temecula to be exact. We have no properties to sell - sure, there are short sales galore, but for properties you can bid on today and close in 30... Not much. Maybe 10 a week, so they go kinda hot.
I think the market here has turned, and we are seeing prices going back up. It's a good feeling.
The more things change the more they stay the same. Many of the buyer's will be seller's and they will still want it all.
Interesting comments on your blog Richard...in my area i think it will be years before we see a turn around...we need jobs & we need demand for housing...will re-blog this post!
Hi Richard,
The ironic part is the buyers who demanded the "world" when buying will also be equaling demanding when selling.
~Lisa
Richard, if you are looking for a seller's market, make a trip to S. Calif. and work the under $250k range. Multiple offers on everything and many sellers (the banks and investors) make all manner of odd requests.
Interesting notion. I hope it is payback time for ME if sellers do ok along the way so be it . Nice post Richard
Some sellers may want some kind of vengeance but sellers don't really control the price - even in a "seller's market". It's always about what the buyers are willing to pay - it's just than in low inventory situation the buyers are willing to pay more.
This isn't a cycle in the traditional sense - it's the new market.
As Ken (#15) said it's always about supply and demand. The market will shift to a seller's market when there are more buyers than inventory. There's a lot of inventory not yet on the market that will be hitting in he next 18 - 24 months so I don't see a shift for several years.
What goes around, comes around. It will be interesting to see how today's buyers become sellers and how they behave in the market. I think that they expect to make a killing with top price & no terms for the buyers.
Richard, I have a little more faith in the sellers than you do....I think most want to sell their homes not play games.
I think sellers enjoyed their time a few years ago - but when the tides changed buyers have still been hesitant even with low prices and interest rates. In the boom time buyers were scarfing up everything on the market in spite of high prices. It's a confusing time.
Today's home purchasers are paying what properties are truly worth. The banks will not have to foreclose anymore because there will be less properties to take back. To further support that statement, rents have caught up with mortgages making it easier to keep and rent instead of having to sell. There are exceptions and pockets dynamics everywhere......One thing stands out though. If you offer a good clean value, then you will always get a healthy response. Gone are the days where you can make a killing. We know this. Real Estate is returning to the land of long term investments and that will take time....until it stabilizes
Thank you
I'm glad you brought this up because there is going to be hell to pay, but I don't think it's going to happen anytime soon, unfortunately.