Financial Markets and the Housing Market
As I wrote about on January 4th, election years are bad for real estate sales because the market abhors uncertainty. This is true of any market, including other financial markets. Unfortunately, especially when it comes to upscale and expensive sales, swooning and tepid financial markets spook home buyers.
How do turbulent financial markets affect buyers? First, they frequently rethink selling assets to fund down payments. For example, why sell stocks at a loss when they can wait and sell after prices recover? Second, even if the buyer truly wants to buy, financial losses often translate to inability to buy. Third, buyers with occupations tied to declining markets get pinched and often must leave the housing market. Finally, previously all-cash buyers get forced into mortgages, which can sometimes kill deals.
Sellers aren’t immune to bad financial markets either. As the number of offers (i.e. demand) plummet, accepted offer prices also fall. The number of closing delays and outright cancellations rises. Additional price reductions and longer days on market become the norm. In turn, sellers’ purchases and future plans get put on hold or completely cancelled.
Stepping outside of the luxury world, commodity prices directly affect a seller’s ability to sell farmland. Standard land sales, including investment, development properties, and basic buildable lots, also suffer as investors and builders join buyers on the sidelines.
My partner and I personally witnessed all of these issues come into play in 2015. Quality upscale listings sat on market for extended time frames. These fine homes often sold for less than we expected. We lost buyers who either lost too much value on paper or whose jobs were crunched by declining markets. My own farm and raw land listings languished after commodities prices went in the tank.
The best way for sellers to avoid problems is to retrench and to craft a plan. Tough markets are an expert’s market; this is not the time to pin hopes on the low bidder with poor, minimal marketing. Seek out a professional who understands the market, who comes prepared to discuss realities and what buyers seek, and who is in it with you for the long run. While you don’t have the power to bring certainty to troubled financial markets, you do have the power to pick a professional who will bring stability to your sale.
It is my pleasure to be that person. Please don’t hesitate to call or email; it will be my pleasure to help you ignore this market and achieve success!
Source: “Volatile Stocks Spook Home Buyers.” Nancy Keats, page M4 of the 09/11/15 Wall Street Journal