Real estate is really local.
It's a truism in real estate, accepted by those in the know and disputed by those who aren't, that, like politics (our other national pastime) all real estate is local. In either case, what's happening in one region, state, county, city or even neighborhood isn't necessarily what's happening in the next, because each is driven by local issues and local perceptions. And I'm here to tell you that real estate in particular is all about local perceptions—hyper-local perceptions. The following story should dispel all doubt. Best of all, it's true.
In a nearby city is a medium-sized mild-mannered condo development I'll call Shady Acres. In one Shady Acres condo dwells a client I've been working with, off and on, since late 2007. I'll call this client Oberon, for no good reason except that I just ran across the name in a Hawthorne short story. (I'm sure Hawthorne had a good reason for using the name, but no one said I was Hawthorne.) Back in 2007 Oberon tires of condo living and asks me to value and help prepare his condo for sale, while finding him a replacement property, a red-blooded all-American single-family home, of comparable value in a nearby but more affordable area.
Late 2007 was a funny time in local real estate, which hardly makes it unique. Out in the affordable single-family neighborhoods Oberon and I were scouring, short sales, a type of distressed sale, were just starting to appear, along with a trickle of bank-owned homes. At the same time, the condo market, even in unaffordable neighborhoods like his, was weakening. None of this looked too serious—2001 had been far worse around here—but it did look unfamiliar. I'd never run across a short sale before—didn't know what it was—the local MLS didn't yet have a "short sale" checkbox on its listing form—and as for bank-owned homes, they'd been rare even in the depths of the dot-bust. But even as the condo and affordable single-family markets lost momentum, local midrange and top-end single-family homes boomed. So I wasn't concerned—I didn't find out until later that my crystal ball had a faulty vacuum tube—but I knew Oberon was. So concerned that he postponed his move until the market offered more clarity.
He's still waiting. But Oberon and I keep in touch, and I update him from time to time on Shady Acres sales. Until recently those updates weren't encouraging. Sure, the local condo market was struggling, but the market for Shady Acres condos was apparently so weak it couldn't get out of bed without assistance. Yes, they did sell, eventually, usually, but only after months of agonized thrashing, and only after a deep price cut or two, and always for less than list. The reason wasn't hard to figure, at least for me: one after another, agents were pricing their Shady Acres listings like they were still selling in the boom-time 2005 market. Again, and again, and once again. I've never seen anything like it.
But what I was seeing wasn't what Oberon, and most likely every Shady Acres homeowner, was seeing. All they were seeing was a really lousy real estate market, a massacre that made Custer look like he got off pretty good at Little Big Horn. They'd heard things were bad, but wowsers, "bad" seemed to fall from here to Chicago short of describing the real estate market. And here I was, jumping up and down, trying to convince Oberon that, yes, it's not a great market for condos, but, no, it doesn't have to be the catastrophe you're witnessing.
Then, one day, a knight in shining armor appeared, in the form of a new Shady Acres listing that, for once, wasn't priced like the calendar said 2005. In fact, it was, in the best tradition of thinking-man's mid-Peninsula real estate, under-priced. Not by much, but by enough to make it look like a good value. By enough to make it stand out from the crowd of over-priced, so-not-selling condos. The condo was buffed to a high luster, and I knew the agent would have every report ready and every disclosure prepared. I was ecstatic. That's what I'm talking about! But Oberon worried: here's a two-bedroom/two-bath condo priced less than the latest closed sale, a two-bedroom with only one bath. What's up with that? Were Shady Acres prices still crashing? No, I assured him. Instead, he was about to see what a real pro could do, even in a soft market. I predicted the condo would sell in ten to fourteen days, with multiple offers, and that the seller would get every penny he deserved and then some.
Hey, I was wrong: it sold in nine days. But, yes, with multiple offers (seven). And for ten percent above the list price. Finally, an agent with a Shady Acres listing had looked at the comps and hit a home run instead of grounding out with the bases loaded. Oberon was moved. The curse was lifted!
Only for a moment, but I may detect a trend. Because the other day an agent with a Shady Acres listing that won't sell sent me an email exclaiming that his new lower list price was "back to 2004 levels!". As in, "c'mon, guys, we're giving it away!".
I don't think so. Instead, I think "welcome to 2010! The buyers are waiting for you."