The internet throws things in your face that pertain to you as a consumer. And it follows you around. You may have noticed when you were shopping for loafers online one day (btw it's so hard to find a good pair of loafers!) and then all of a sudden, there’s loafer ads on every site you go to and all over your social media feeds. It's the same with real estate. If you’re interested in buying a home, you’ve probably searched something related, and therefore seen the articles titled “cheaper to buy than rent” and others referencing great interest rates—it must be a great time to buy, right?! On the selling side, you’ll see articles talking about all-time highs for home sales, forecasting value increases, and “we’re back to 2008 prices” etc. It must be a good time to sell, right?! All these articles are simply there to sway you in a direction that is best for the person posting it, but they can’t both be right, right? Technically it’s a great time to sell and a great time to buy, as long as you’re selling a quality product or willing to buy that product for a little more money. Poor buyers and sellers are being manipulated by the artciles on the internet and running into some rude awakenings when they enter the market. Let’s talk about some stuff... What the hell is The Market?
Pricing and Quality
Current Market Status
What the Hell is… The Market
The Market, yes it has capital letters… it’s like a scary pronoun! In most markets, you don’t run into long periods of “buyer” or “seller” markets like you do in the real estate market. Most other markets can go from bull to bear in a second because of one world/business event. In real estate, however, things move much slower. When the market gains the titles of Buyer or Seller it typically means there’s irregular activity within that market, or there’s a major correction occurring to the market. Without the irregularities or corrections, it’s just “The Market.” I get asked this question all the time, “So, is it a buyer’s or sellers’ market?” It’s not anyone’s fault because we’ve all been brainwashed over the past decade to think that it must be one or the other.
As the market tanked, we DID experience a buyer’s market; furthermore, as the market rose, we DID experience a seller’s market. It’s not as if they weren’t existent, when they in fact were, but it doesn’t have to be categorized with one or the other forever. To my point above, there was a major correction happening during both of these time periods. When I get the question about whether “The Market” is a buyers’ or sellers’ market, my answer is that it’s a fair market. The Market…in its true form… is fair.
The Market…in its true form… is fair
Disclaimer: Not all markets are the same nationwide. I’m speaking to what I’m seeing in most Chicago suburbs. If you’re in Seattle, you might see 250 showings in a week… for a $1M home (true story of one of my clients). Obviously, Seattle is a currently an example of a seller’s market. Again, demonstrating the other part of my point above, there’s an irregularity, and therefore and unfair market, in that case benefiting sellers.
In Chicagoland, and in most places across the nation, markets are correcting themselves. The market is becoming fair and buyers and sellers need to understand this. In order to understand how you’ll fare (see what I did there?) in your home buying/selling process, you need to understand a couple of things. Pricing and Quality.
Pricing and Quality
Let’s break down some words. Overpriced and underpriced. Determining whether something is over/underpriced is the important piece, and it can be challenging for many buyers and sellers (even agents sometimes). To understand pricing, you need to understand quality. I’ll spare you the boring definitions, but we need to change quality as you know it so that it applies to real estate. We need to add the cosmetics of homes under the “quality” umbrella. An outdated home is not a quality product; it’s undesirable. Start thinking of quality not just as builder quality and quality of care/upkeep, but also desirability. If something is low quality—whether it’s in disrepair or cosmetically outdated—it needs to be priced lower, or it will not sell. You cannot make a pricing distinction without knowing the quality factors first. We also need to add impracticality and dysfunctionality to the “quality” umbrella. A home can be built with quality, updated, and kept up well, but will take a hit on its quality if there’s a dysfunctional space or something impractical. Examples would include bedrooms that are inaccessible without walking through another bedroom, a master bedroom with no walls/doors (loft), small kitchen sinks, awkward door patterns, extra narrow staircases, poor entry locations, lack of closet space, no bathroom on the main floor of a 2 story home, etc. These things are large deterrents for buyers because it usually takes structural reconfiguration or a change/replacement of existing quality fixtures and/or finishes in the home. These major changes are costly, and therefore lower the quality of a home. Now, understanding this, including all aspects of quality, it’s still possible for a “quality” home to be overpriced. Shameless plug, be sure to use an agent that can assess these things accurately. Is your home actually “updated” based on what buyers are looking for? Or based you and your agent’s taste?
An outdated home is not a quality product; it’s undesirable
Current Market Status
The market is fair. This means no extremes scenarios, irregularities, or large corrections. Quality homes are selling faster and for more money. Low quality homes are sitting, and sellers are learning that their homes are overpriced the hard/long way. The inventory is mainly low quality homes because the high quality homes have been sold already. Profit margins for investors are smaller. Buyers are not in any rush to buy either; they will not be forced to buy a low quality home at an inflated price. The overpay/undersell margins are getting lower and lower. This is The Market becoming itself again.
I’ve been capitalizing the letters in “The Market” throughout this whole article, and every time I’ve typed it, there’s a small pause that happens, and I hear a trumpeted intro play in my head. This is just me trying to be funny (Unless you hear it too!? *gasp*) The Market isn’t really this big scary thing ready to do battle on the consumer… we, the consumer, ARE “the market.” The supply and demand of the market is based on the buyers, sellers, and product, which are you and I.
Know that the market itself is fair. There are still some small corrections being made to the market all over the county, but it’s getting closer and closer to being fair. A fair market means you need to buy/sell a home for a fair price. Please reach out if you need help finding a fair price for your home or the home you'd like to buy.
Thank you for reading!
Comments and Questions are Welcomed!