A Rising Tide or Just a Ripple?

It’s always nice to experience so much of what we’ve talked about. A few weeks ago, Christine talked about a shift in the lower end of the market and seeing significant signs of pick-up in activity. Considering the relatively limited inventory of <$400k properties, it’s not surprising that first time home-buyers may be using this time to swoop into the market and take advantage of historically low interest rates. The question is: is the shift spreading upwards to higher price-points or is this just a last hurrah before the expected anemic holiday months arrive?

Though far from arguing that this is representative of the market as a whole, here is one recent on-the-ground example to chew on:

- The property: A $750k 1-bedroom in West Chelsea, on the market for a mere three weeks from listing to a signed contract.
- Three open houses were held: 14, 2 and 6 visitors, respectively, with an overlay of 5-8 showings per week excluding open house traffic.
- Five offers altogether (one direct, four co-brokes); interestingly, yet as expected, all offers were generated from the first week of showings and inquiries. Further, three of the five offers came from investors, with only two representing first time home buyers.
- The kicker: the final price (upon closing) will have been less than 3% away from ask. And no, this particular property did not represent a distressed situation, nor is the buyer flush with cash.

So here are a few take-aways:

For do-it-yourself sellers: a vast majority of activity comes from customers engaging buyer’s brokers. In this case, 80% of the offers came from this sub-segment (lower than the 85%-90% we normally see). If you are listing the property yourself and not getting the traffic you’d like, visit the open houses of comparable properties in your area and gauge their activity. If they’re hopping and you’re not, consider at least welcoming buyers with representation (i.e. paying their broker’s fee). For that matter, consider open listing with 1-2 firms to get that additional exposure that could well make the difference. If that doesn’t yield material results after a couple of weeks, officially list your property to get on the brokerage radar screen. [This is what happened with a $1.5mm seller whom we were advising; the disparity between his open house traffic and that of broker-represented comparables he toured was so great that it served as the tipping point to finally list.]

For all sellers: it’s worth repeating that the first two to three weeks of a property’s life on the market are the most critical (here’s an UrbanDigs oldie but goodie as a reminder). Don’t squander it: maximize open house success and test different times on both weekends and weekday evenings. Lastly, be flexible with when your apartment can be shown (i.e. last-minute and evening requests); in this market, every show counts. Your highest & best offer usually comes in those first 2-3 weeks!

For buyers: it’s understandable that you want to test the price elasticity of the property you like by starting out low in negotiations. That said, try to determine the maximum price you’d be willing to pay on the property BEFORE fully engaging (though clearly after having done your due diligence). This will not only help you avoid getting sucked into the emotional trap of bidding the property up just to stay in the game, but will allow you to confidently present your last and final offer, knowing that it’s just that: your last and final (preferably with an expiration date).

We’d love to hear from you. Do you see activity (and more importantly, conversions) oozing up into higher price-points or are examples such as the one above exceptions rather than the rule?

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