Buyers, sellers split on view of market
WASHINGTON — Where do you side in the great real estate buy-sell divide of 2012? If you're a homeowner considering selling in the new year, are you apprehensive that you won't get the price you need or want, and therefore it's possible you won't even try to sell?
If you're a buyer, do you agree that with 30-year fixed mortgage rates below 4 percent and home prices near cyclical bottom in many areas, 2012 offers extraordinary opportunities, even if listings are fewer than you might prefer?
A new study by the Research Institute for Housing America, the think tank affiliate of the Mortgage Bankers Association, documents a profound market fissure caused by owners' fears and hesitation — what researchers call "negative selling sentiment." While nearly 80 percent of consumers in the study's survey think this is a great time to buy a house, more than 92 percent of current owners think it's not a great time to sell.
The study was conducted by Syracuse University economist Gary Engelhardt using extensive data from the University of Michigan's Survey Research Center, which is generally recognized as an authoritative source on consumer attitudes.
Engelhardt said that unlike earlier postrecession periods, owners have been more deeply shocked by the extent and severe side effects of foreclosures, short sales and unemployment. Many owners "have not adjusted their price expectations downward" to keep pace with declines in property values after the mortgage bust, Engelhardt said, thereby contributing to the sharp divergence in their real estate visions compared with buyers.
How are such seller perceptions affecting real estate market dynamics? For one thing, they keep owners out of the game. But they also bring more motivated and committed sellers to the fore. Glenn Kelman, chief executive of Redfin, a national realty brokerage in Seattle, says the shortages of listings in some markets are the byproduct of owners "waiting for better times to sell."
But owners who feel they need to sell now — they're moving to a new area, for example — turn out to be "more reasonable" in general, Kelman says.
David Howell, executive vice president of McEnearney Associates, a large realty firm in the Washington area, says the absence of substantial numbers of people who would otherwise be sellers may also be a "healthy" development. Having fewer houses for buyers to choose from exerts a slight upward pressure on prices.
Howell says his firm's agents use a technique to bridge the seller-buyer divide: pre-authorized price reduction clauses in the listing contract that reduce the asking number. The initial reduction kicks in within the first two to three weeks if the house fails to attract buyer interest.
"It works," Howell said. "And both sides stand to benefit."
Kenneth R. Harney can be reached at firstname.lastname@example.org.