Sunday, November 11, 2007

Manhattan Beach-Beach Cities: Selling in a Buyer's Market

Unless you have been living in a cave in Sibera you know that the market has turned from the hottest Sellers real estate market in history to a very slow Buyers market. Aside from the fact that it was time for a market correction the subprime loan crisis and subsequent credit crunch have punched up the number of foreclosures to record numbers in most areas and created a fear of buying even in fairly stable markets.

As expected more foreclosures are showing up in North Redondo and we can expect to see an increase in Manhattan Beach, Hermosa Beach, South Redondo and El Segundo in the next few months. The question has never been whether we would have short sales and foreclosures but rather the number we will see in each city compared to other parts of LA County and California. So far we are still doing better then most areas but it doesn't mean sellers can ignore the facts.

Walking along The Strand in Manhattan and Hermosa one would think that the market is booming.. it seems as if half of the homes are either new construction or undergoing major renovations. While Strand property may continue to see some hefty prices being paid.. the rest of the market is seeing price adjustments that are going down not up. That doesn't mean the 40%+ decline in the Beach Cities some are predicting but it does mean that Sellers will need to price their homes more agressively if they want to sell.

Most of the properties that have sold in the last few months have been either on the high end or the low end with not much happening in the middle. This seems to be true in all the Beach Cities. I think part of the answer lies in the fact that Buyers seem more in tune with the market conditions then Sellers. They will pay a fair price ... even a hefty price.. for a property they feel has great value. They will reject properties they consider to be above market value.... no matter what the price.

In a Sellers market... Buyers get it and understand that if they want to buy they have to step up and pay the price.... Sellers only partially get it because they think they can push up prices forever and the market will always favor them. In a Buyers market.. Sellers often don't get it and continue to price their property well over market value... Buyers get it and refuse to buy if the property is not priced right and in great condition. I suppose this is what makes life interesting.. but it also creates some bad situations for Sellers who are not in tune with the market.

If you are a seller who has to sell and you refuse to price your home right you may wind up losing a lot of money and possibly your home trying to chase a down market. This is especially true if you purchased within the last two years. I see a lot of property in all the Beach Cities that has been on the market for well over 6 months with minimal price changes. It's as if sellers hope that if they keep it on the market long enough someone will finally pay their price. Sadly it doesn't work that way. Properties that are on the market too long become like last year's fashion mistake.. nothing except a major markdown will make them move.

If you are a seller and need to sell then you should be evaluating your price every week in this market. Your home must be in good condition. If it doesn't show well or has big flaws or a poor location then you will have to consider some major discounting on price. Forget what has sold or what is still on the market.. your competition is what has recently gone into escrow. You need to look at what sold and why.. then price you home at slightly less not more if you want to sell quickly.

1725 Oak in Manhattan Beach is a classic example.. It's on Oak.. not the best street..but it has lots of charm. The sellers could have priced the home at $2.2 million and watched it sit with the other homes that haven't moved in that range...but they didn't. They priced at $1.979m slightly under the $2 million mark. It sold immediately with multiple offers over list price at $2,050,000. Why.. it was charming and well priced and buyers recognized that fact. If they had listed at $2.2 it would still be there. They were smart...the home is sold and they can get on with their lives.

This is not a market to test the water. If you must sell then price your home to sell. If you don't have to sell take it off the market and wait for a better market. Whatever you choose to do.. be a smart seller and deal with the market realistically..... wishing only works in fairy tales.


Laurie Manny said...

Excellent advice Kaye. Chasing the market down is never a good idea. The first 2-3 weeks of a new listing are critical, pricing is the most important factor when listing your home in todays market. If you don't need to sell it is not a good time to be on the market.

Kaye Thomas said...

You are so right about timing.. Once a listing gets "old" buyers view it differently. Sellers who chase markets always lose in the long run...

I can think of at least 10 just in the tree section that could have sold for more 4 months ago then they will receive today if they had priced their property at market value.