I have had an interesting experience that I wanted to share with you. A few weeks ago, I was negotiating on behalf of a buyer in our market. The particular area in which this home resides, which we will call "Selltopia" has not seen a dramatic price slide and these sellers were were not very negotiable, mostly because the Sellers "don't need to sell" (something I am all to familiar with) a phenomenon I call "Seller Immunity". Of course, the Buyer was frustrated, telling me, "don't they realize the market that we are in?" "don't they realize that prices are going down?". Meanwhile the Seller's agent is telling me, "this is one of the lowest priced listings in the Subdivision! Don't the Buyers see that?"
This is a back and forth that I have seen very frequently over the last couple of years. While both parties are probably correct, there is a larger issue plaguing the subdivisions or areas that experience a relatively high degree of Seller Immunity. In Selltopia, for instance, the market is absorbing between 20% & 25% of the homes that come on the market on an annual basis, to put it a different way, that reflects between a 4 and a 5 years supply of inventory. This is down significantly and more to the point is down much more significantly, in terms of number of sales versus the number of sellers, than most other sections of our market. This is mostly I feel because prices are all relative, while Selltopia does typically command a premium, that premium only stretches so far, when another subdivision, which I will call "Buytopia", begin to drop and the Selltopia sellers are unwilling to recognize it or follow it the buyers in the market start to gravitate to Buytopia because they have better homes at a better price.
So how does that all fit together? Here is the way that I see it playing out: Selltopia will probably succeed in not seeing their prices erode because the sellers are relatively more immune to the shocks of the economy and they have relatively very little mortgage debt compared to most of the homes in the area, having owned them for many many years in some cases. If they refuse to reduce their prices, they certainly don't have to, after all it is their home, then buyers will continue to either wait or buy in other areas, such as Buytopia. However, while Buytopia will probably see a relatively stronger recovery when that does come, Selltopia recovery in terms of prices and number of sales will likely be put off for up to another couple of years till the prices catch back up to Seller expectations.
-Kane Schaller