A couple of weeks ago I reported on the fact that the Reno/Sparks real estate market is cooling a bit. A recent update from the California Association of Realtors reveals a similar trend in virtually every segment of their market. Just so we’re clear, I’m not anticipating a “crash” or “bubble”, but I do see a slow-down on the horizon. A well-informed client of mine asked this question of me yesterday and my short answer was, wait for it… “Maybe”, which is to say that it depends on your priorities. It’s a good question and it generated a lengthy conversation. Today I’d like to take a few minutes to relate the highlights of that discussion.
Is getting a great deal your highest priority? First you must define the term great deal but for most people it comes down price, value and the promise of built-in equity. For these folks my answer may be a yes but with some qualifications. It’s quite possible that we’ll find certain sellers in a pinch this fall. Some of them may even be listed for sale now at an overly optimistic price. Sadly, these sellers may be stigmatizing their own property because regardless of the pricing history, too many days on the market sends a signal that something’s wrong. The biggest downside for buyers prioritizing the best deal is that they have fewer homes to choose from. In the end they tend to settle on a house rather than selecting their ideal home.
The timing may not be perfect. If the seller has a for sale sign in the yard and a Christmas tree in the living room, they are not “testing the market”. You of course will be moving and perhaps making repairs in January or February.
Meanwhile watch for big price reductions. I’m thinking 5% or more in one price drop which equates to over $22,000 on a $450,000 house. This is often a strong indicator that the sellers have absorbed a dose of reality and/or that something has changed in their circumstances. They may be open to offers under market value.
Inventory will increase. Ironically, more options and choices tend to make it harder for some buyers to make their decisions. Rather than touring 5 - 10 houses then realizing you’ve tapped all the available inventory, perhaps you’ll have 20 or more homes to consider. By the time you’ve looked at all of them, new ones have come on board. I've seen buyers second guess themselves right out of the market in conditions such as this. Creating a list of clear wants, needs and objectives will help you avoid this.
Speaking of inventory. Keep an eye open for reduced pricing on new, standing inventory homes this winter. Over the past couple of years builders have been forced to build homes before they’re sold. This is mainly due to the many relocating buyers that simply won’t, or can’t, wait out the typical 6 – 12 months. These quick delivery homes are being built right now, particularly in the $500,000 - $800,000 range.
All of this is very market specific. The overall market may flatten but there will be remaining hot spots. For example, I’m thinking about brick houses near the university or cute, single level homes in Caughlin Ranch. My guess is that the demand for these homes will remain strong.
In the end there are inherent risks in owning a home, but I don’t see anything on the horizon that would scare me away from owning or buying one now. One thing is certain, attempting to time your home purchase with the bottom of the market is a somewhat unrealistic. You won’t know where the bottom is until you’ve passed it.