Each year around this time, I always hear from people in the business telling me that the good times are over, or, for those less dramatic, tell me that the market is “soft.” Or, I hear complaints that things “just aren’t selling.” Even in the best of years, it always seems that prices are falling in the fall.
It is no illusion. Prices usually peak at some point in the late winter or early spring. By late September, the time when rocker Rod Stewart famously said, in his song Maggie May, “I really should be back at school,” the properties currently on the market are usually a mix between properties that didn’t sell in the spring and are now “priced to sell,” or, in more clear terminology, are just priced lower than they had been in the spring. Quite possibly, the particular set of properties on the market in the fall were merely overpriced in the spring.
The biggest issue in the fall is that there’s no sense of urgency among most buyers. The biggest reasons why a buyer is looking to buy a property are, in no specific order, the start of a new job, the end of a lease, or the start of a new school year (or the end of an old school year). Many new jobs begin at the end of an academic year, or, more specifically, at the beginning of July, or right after Labor Day. The most common ending date for a lease is the end of August. The second most common ending date for a lease is on June 30, and the third most common ending date is July 31.
So, by late September, the most common reasons for someone needing to purchase a home, whether a house or a condo, have passed their expiration date, so to speak. Thus, properties that are still on the market by late September have a smaller pool of buyers with immediate need to find a property.
So, who is buying at this time of year? The most common autumn buyer is the person who did not have an urgent need to purchase a new property. This Buyer might like to do it right away, but there’s no event forthcoming that creates a deadline for that potential buyer to make a final decision. Thus, there are no properties that are just being sold to a buyer who is taking the best of what is left. Marginal properties, specifically, a property in a less desirable location, or one that needs some updating, but isn’t so bad to be of interest to a builder, are the properties that will sit for the longest time at this time of year, and they will sit on the market until they hit a price that they seem like a relative steal, a veritable bargain.
Thus, it always appears the prices are falling in the fall when compared to the prior spring. They may indeed be falling off of their high price for the year, but, year over year, prices are up about 2 1/2% for single-family houses in Newton, and about 2.1% for all types of properties. The number of sales for the year is also up slightly when compared to last year on this same date. The market is still healthy!
But, unlike in the spring, Sellers no longer have the upper hand. Buyers have some degree of control back, just because there is a smaller pool of Buyers. However, if a house hits the market in the fall for the first time, and it is priced to sell, or, in other words, under priced for the comparable properties that have recently sold, there will still be multiple offers on the property.
The biggest mistake that a Seller can make when putting a house on the market at any point in the year is to try to build-in a price increase when compared to the prior year. In the late winter or early spring, that Seller may, indeed, get lucky! All a property needs is for two or more people to feel that a property is perfect for their needs, and for many reasons, the Buyer really wants to end his or her search. The better advice for Sellers, at any time of year, but especially in the fall, would be to price the house like the sale price of comparable houses that sold last year, and let the marketplace determine the price, likely through multiple offers.
The other thing about the fall is that by early October, very few new listings are hitting the market. Properties that are new to market are being sold as a trigger because the Seller’s next destination is finally ready for them, or the Seller is moving to a warmer climate, and selling in the fall makes sense for their needs. New listings may also be new construction that is finally ready for sale after whatever unforeseen delays have stalled the construction. The rest of new listings really aren’t new at all; rather, they are old listings priced more realistically, or some needed updates have been made to the house that have previously come up as an issue.
As the fall moves closer toward winter, there will be fewer and fewer listings on the market, as properties that go under agreement are not replaced by the same number of new listings on the market. As the inventory wanes in November and December, it has often created a mini buying frenzy. In the most recent years, I have usually found the marketplace to be busier toward the end of the calendar year than early in the fall!
Until next time,
Terry
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