Advice for Home Sellers in a Shifting Market: Don’t Freak Out

Media reports about today’s cooling real estate market can be alarming for home sellers. Rising interest rates, homes taking longer to sell, price cuts, recession coming... sweat, gasp, panic.

Listen, here's the real talk. The Bay Area housing market isn’t currently imploding. Instead, we're seeing a reckoning – a righting – of a hyper-inflated market.

“Imagine you’ve been flying down the freeway at 100 mph. You see a cop and slow to 70 mph. Now it feels like you’re crawling. But you’re still going fast and probably over the speed limit. That’s what’s happening with Bay Area real estate,” explains Abio Properties Broker Cameron Platt.

When a market downshifts, buyers hesitate, re-evaluate, and even underbid, Cameron says. But they're still speeding along at a relatively fast pace and paying relatively high prices. Why? Because of supply and demand. Even though some buyers dropped out of the market in recent weeks, many more remain in the game and are competing for very limited inventory.

Still worried that the market's tanking? If you're selling a home or thinking about it, make sure you base your decisions on facts, not fear.

6 Things Home Sellers Should Know & Do When the Market Shifts

1. Median prices may still rise year-over-year

Even after the Fed hiked historically low interest rates, the median price of a detached single-family home in the Bay Area rose 13% year-over-year in May. In all the East Bay cities we track, homes sold on average for 5%-50% over the initial asking price.

June sales data is due out soon, so stay tuned. We’ll report how much things have changed since May.

2. Clinging to the past is counter-productive

Are you living in the past? Yesterday’s market – bidding wars, offer deadlines, 7-day sales, off-market buyers, and over-asking offers – is gone. Move on. Shift your expectations. Today, your listing might move relatively slower (maybe three weeks instead of seven days) and attract fewer offers (like two instead of 10). But your home is going to sell, and probably for a lot more than you paid five or more years ago.

3. Reducing your asking price is not a loss

It is true, we're seeing an increase in the number of sellers who are dropping their asking price after a few weeks on the market. You're going to hear a lot more about this in the coming weeks, but please don't freak out. These reductions aren't true "losses" for most home sellers. Here's why:

Let’s say you bought your Berkeley home for $550,000 in 2014 and listed it in May for $1.27 million but didn’t get as many bites as you expected. So, you reduced the price a few weeks later to $1.24 million to attract more offers. If you sell at that price, is it a net loss?

Maybe you bought your Lafayette house for $1.3 million in 2013 and listed it for $3.1 this May but didn’t get the offers you wanted. So, you dropped it to $2.9 million (real world example). Is that a loss?

Or are you just not getting what you've come to expect from the super-charged market we’ve experienced in the last few years? As our friend Jay Voorhees of JVM Lending blogged the other day, we’ve been “spoiled by the all-too-frothy market conditions that existed until this spring.”

Also, as Bloomberg recently reported: "Most sellers are in a position to reap big profits because they’re sitting on a mountain of equity. In May, US single-family house prices jumped almost 45% from May 2020, the biggest two-year increase on record, according to an analysis of National Association of Realtors data going back to 1968."

4. Setting the right price is everything

Setting the right price is the most important decision you’ll make as a home seller. During the last few years, sellers got used to “teaser” pricing where they set an attractively low starting figure meant to draw lots of attention and spark a bidding war.

Cameron says that with fewer bidders in the market, “transparent” pricing could be a more effective strategy. That’s when sellers set the price they truly want instead of gambling on teaser pricing.

Your best bet: Partner with a knowledgeable, no-B.S. real estate agent who doesn’t just tell you what you want to hear. A good agent will push back if you insist on an unrealistic price, and they will base their recommendations on up-to-the-moment local data.

5. Be open to buyer incentives and contingencies

During the height of a sellers’ market, buyers commonly drop contingencies like inspections and appraisals. Not so much during a shifting market. Today's sellers should be open to incentives such as closing cost credits (given to a buyer to credit home repairs), interest rate buydowns (the seller credits points to the buyer to buy down the interest rate), and termite report clearances. You also can ask if your listing agent is willing to offer a bonus to the buyer’s agent. These incentives and others were effective during the 2018 cooldown.

6. Buyers will be more choosey, so make it pretty

Yesterday, you could slap fresh paint on the walls, stage some pretty pillows, and your home would attract dozens of bidders and sell for over asking. Today’s buyers are going to be more selective. Take our word for it: Well-prepped and staged homes sell for more, faster. It’s 100% worth the upfront investment.

The bottom line

Don’t be misled or alarmed by national media reports. As you know, the Bay Area market is a unique beast. If you’re unsure about whether you should sell now or wait, talk to an expert in your neighborhood market – like the agents at Abio Properties. We’ll give you the data and tell it to you straight.

Stay tuned for our next market report with the latest East Bay sales trends.

--

Got questions about the shifting real estate market? Get in touch at 888-400-ABIO (2246) or [email protected].