October 29th, 2013 4:14 PM by Nick Rapplean
Redfin Real Estate, which does an unusually large amount of number-crunching, recently reported that 58.3 percent of offers written by Redfin agents across the country faced bidding wars in September, down from 60.5 percent in August. Last September, 62.7 percent of offers faced competing bids. Competition peaked at 76 percent in March.
Multiple offers, it seems, are on the decline. And, unsurprisingly, the number of homes selling above the seller’s asking prices is also falling. Only 0.4% of those buying Redfin-listed properties sold above the asking price.
I relay this information to you because, though you’re doubtless aware of this trend already, real estate sales are slowing somewhat and that has brought out into public discourse once again some of the stern-faced economists who love to talk about how we can expect the real estate market to slow seriously.
Most economists, I hasten to add, are still reasonably happy with the real estate market. Instead of buying into the crazy notion that real estate has to sell the moment it reaches the market or were obviously in for a fall, these economists point out that a market cannot be sustained for much longer than it was on all-cash transactions (which made up about 50% of sales this past year). A sustainable recovery, in fact, needs to resemble a ladder somewhat, with the lower rungs of home ownership creating sales that actually allow the next levels higher to experience THEIR sales. Thus, the pent-up demand for a home works its way up the price ladder and we watch a prosperous real estate market for quite some time. According to people who have watched real estate markets recover many times like, for example, Frank Nothaft, Freddie Macs chief economist were moving closer and closer to that wonderful word, Sustainable, even as cash-rich investors pack their bags and move on to the next big thing in the investment world.
The fly in the ointment here, though, is that we are living with so tremendously much economic uncertainty. Leslie Appleton-Young, the fine chief economist for the California Association of Realtors, recently presented her organizations forecast for real estate in 2014, and she felt compelled to offer up a litany of economic Wild Cards before she could actually talk about the real estate market itself. Her list included:
And that’s just the beginning. It’s enough to permanently curdle your egg nog, Id say.
But let’s not say that. Let’s notice instead that this real estate market still has good fundamentals going for it and though there are many reasons to worry, most of them have their origins outside of the day-to-day business of real estate.
In the spirit of Thanksgiving, I offer the following forecast, which results about 50% from a careful reading of the numbers and facts, and another 50% perhaps from a lot of reasonable hope, justified, I hope, by my own years of experience:
It goes like this:
For quite some time, a great many economists, having little else to bring excitement into their lives, have been working diligently to increase our worries. This coming year, however, most people are likely to notice how much more profitable and, indeed, FUN it is to actually do the work described on our business cards, and most of us, including the economists will return to the task of making real estate work better now, leaving the worries about the past to our historians.