EMAIL QUESTION: Thank you for your weekly updates. I am a little puzzled with the low inventory issue and demand for a higher one that you are frequently raising. It seems to contradict the demand/supply equilibrium: the higher the demand and/or the lower the supply, the higher the prices (or vice versa). I am not sure what you mean with an inventory out of balance for buyers’ budget: do you mean the current sellers should reduce their pricing to match the buyer’s demand? Thanks again, MarcMY RESPONSE: A vacation home is a choice not a necessity, which is the driving force of Arrowhead Woods real estate economy. Most sellers are quite rational, can I get the price I like? Most buyers have a yearning, a desire for a retreat, getaway, new lifestyle, etc.
Sellers typically say, “I don’t have to sell… I’m not going to give it away… don’t use the house much anymore – no rush…” Rarely do I hear, we have to sell.
Buyers respond to home prices with “I don’t have to buy…it’s a vacation home… I can afford what I want… I’m not going to pay this price… we’ll wait a year…go elsewhere…
LISTING CAN BE A WIN-WIN. A second home is discretionary money, sellers and buyers affluent enough to own two or more homes with little urgency to act now. Buyers want choices. More sellers could list and control their price by saying NO
INVENTORY; When inventory is low, not enough choices, buyers will say, “maybe we’ll come back in the Spring/Summer… let’s look in another area…
If buyers think the price is too high, “I’m not going to pay this… bye bye”.
A LOSS TO EVERYONE; The bubble of 2006 had a significant number of younger buyers — having been assured again and again, real estate always goes up. This group has plummeted, not buying, now a bit older and wiser.
GAP IS NOT FILLED YET. Bank and Short Sales were up to 25% of sales a few years ago, now down to 5%. We have not added the 100 listings to replace them.
CHOICES. Buyers walk away from limited choices in Arrowhead Woods. As inventory goes down, sales decline, and prices lag behind. This is not an absolute as sales and prices can rise across Southern California but not as rapidly in Arrowhead Woods.
IT’S ALWAYS A SELLER’S MARKET IN ARROWHEAD WOODS. The ability to SAY NO belongs first to the seller who may not even put the home on the market and surely can say no to an agent’s price proposal or a buyer’s low ball offer.
BUYERS ARE NOT DRIVEN TO BUY NOW. The net effect is sales and prices do not rise as high nor as fast as the other communities in Southern California.
NEGOTIATING requires many special skills: 1. don’t push as neither side has a sense of urgency, 2. listen carefully, avoid brinksmanship – don’t say take it or leave it, 3. small steps require patience but it keeps the dialog alive, 4. work to get a win-win, 5. keep in close touch with the clients – buyer and seller.
PROOF: In the best and worst times, Arrowhead Woods ask / sell spread is 4-6%.