The Government Has Made Me Stupid About Real Estate

supply and demand

As we head into the final weekend preceding the final work week of April, and the $8,000 1st time homebuyer tax credit winds down (thank God), I’m seeing a surge of new Austin real estate listings coming on the market each day as well as a huge increase in the number of showings for most of our own listings.

In other words, supply and demand are in a foot race with each other, and both have kicked in the after-burners.

This has caused us, as real estate agents, to behave in abnormal ways as we advise buyers and sellers. I had to tell a seller last week, “I think it’s better that we get your home on the market right away in ‘good enough’ condition rather than burn up a week of market time putting it into ‘perfect’ condition”. Mainly, I didn’t want to burn through one of only two remaining weekends waiting for new flooring to be installed or our professional stager and photographer to do their thing.

Instead, Sylvia staged the house herself, the seller bought some mulch and plants, we left some worn out old sheet vinyl on the kitchen floor, didn’t have the carpets shampooed, and I took my own photos, which look ok but not great. We got that sucker listed and in the MLS 2 days after I first met the seller at the property. Met on a Monday, had it in the MLS on Wednesday. Had our first offer that weekend, though that one didn’t pan out because it was too low.

Why the rush, and is this the right thing to do? I don’t know.

I think it’s probably the right approach, but as I said in an email to one of my sellers, “I confess that government intervention in the real estate market has rendered me stupid. These are my best guesses”.

Normally, we’d never rush a listing onto the market. We always preach that it’s best to NOT go on the market until the home is fully and completely prepared, landscaped, staged and professionally photographed because first impressions matter. But with the tax credit ending, buyers are swarming the cheaper listings. Would it therefore be unwise to forgo a week of market exposure in favor of prettying up the place a bit more? Yes, I think having the home available for buyers to see for a longer period of time is more advantageous to the seller than coming late to the party impeccably dressed.

How do we make decisions under abnormal circumstances? We try to make the best judgement calls possible. That means asking the right questions. For me, it’s easier to ask “which wold be worse?” rather than “what’s the best approach?”. To me, losing market exposure hurts more than anything else. We know the tax credit is ending. On May 1st, if we have no offer, we can always hit reset and re-prep a home if needed. So wasting 5 or 7 days and one of the last two weekends seems like the worse choice to me.

And I don’t like not knowing what will happen May 1st. Is the market going to come to a screeching halt that day, or have we given too much credit to the amount of activity being generated by the tax credit buyers? Are these first timers 10% of the showings or 50% of the showings? On listings priced less than $200K, I’m betting a high percentage of buyers are motivated by the tax credit simply because no other obvious motivation exists. If not for the tax credit, what other economic news or condition would be causing gobs of buyers to be out looking at cheaper listings?

So my best guess is we’re going to see a record April and a dead May. Just my guess. Who knows for sure? But if you’re a seller thinking of getting your sub-$200K home listed in the coming days, better get after it. The final weekend for first time buyers is upon us.

Posted by Steve
6 years ago
Steve

Steve is a Real Estate Blogger, Husband and Dad, UT Austin Grad, Runner, Real Estate Broker and owner of Crossland Team and Crossland Real Estate in Austin TX.

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Jim - 6 years ago

I think the tax credit was a good idea. Letting prices naturally crash really low screws over everyone: the future sellers who’ll have bad comps, the neighborhood flooded with foreclosures and our city budgets who depend on prices for tax revenue. It may have been offered too long but at least it helped. Now we’ll see how the market stands on its own.

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Michael @ The Stage Coach - 6 years ago

Happy Friday, Steve:
If it makes you feel any better, you’re not the only one doing things out of order… I’ve been in to meet with a few home owners to find out the photographer had already been through… heard that painters were on the schedule for the first week of May for an active listing… , etc… etc…
I think you’re right that after the program ends things will halt. I’ve had the best Spring since I started Staging in 2006. I would bet 50% of the clients were homes that would have been listed in May or June had there not been an incentive. I would also bet that a lot of bad purchasing decisions are being made this week and next just to “save” $8k/$6k.
It will be interesting to see what the “True Cost” of these consecutive programs was… And it will be interesting to see what kind of change (dip?) the Avg/Median prices take in May. I would guess NAR and other lobbying groups will be back in D.C. pleading for another extension – but it just can’t go on… The market has to stabilize on its own before recovery can truly begin…
Frankly, it chaps my hide that our [our children’s?] tax dollars are being spent in this manner. I can’t believe for a minute that this was the best option to stabilize the Real Estate Market. It was likely the most popular in a poll. Then again, Austin has not been hit as hard as many areas, so I don’t know what kind of effect it’s having on FL/NV/CA markets. Maybe it has worked on a National scale.
All we can do is wait and see.

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Steve - 6 years ago

Ji Jim,

I too think the tax credit was probably needed at first, But the extension was a bad idea. They should have declared it finished, then waited and done round two, if needed, to coincide with the start of our normal selling cycle. Instead, they timed it to end right at the start of our normal Spring selling cycle, thus creating off-cycle demand and making it hard to predict the implications of having so many front-loaded buyers.

Michael,
You said:
“I think you’re right that after the program ends things will halt. I’ve had the best Spring since I started Staging in 2006.”

Yes, us too. We ran out of signs and lockboxes and have been working late into the night some days trying to keep up with paperwork, emails, etc.

Steve

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allbread - 6 years ago

Steve –

Do you think the tax credit has had any affect on the prices for homes in the +200k price brackets… say 300-400k?

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Steve - 6 years ago

Hi Allbread,

I don’t recall ever having a first time buyer above $300K. I can remember one right at $300K, but most are below $250K, at lease in Austin, and the majority below $200K.

I do think that strong buyer activity in general can be contagious thoough. Maybe the 1st timer at the water cooler, glowing ebulliently to co-workers about her new house, causes others to start thinking about moving up, or buying. So I think there might be an indirect benefit to the move-up range. After all, the 1st timers are usually buying homes from people moving up, so the fact that it’s easy to sell the starter home for a good price might cause more move-up activity than normal, But we haven’t seen enough of that to say it’s a trend.

Steve

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TH - 6 years ago

I just sold a $400k+ home to a first time buyer. I was definitely a little surprised – didn’t think I would ever see a first time buyer make that kind of jump. The buyer was relocating from San Jose, CA, and had never been able to afford to buy out there, but amassed quite a down payment after years of apartment living.

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KH - 6 years ago

I thought our buyers were first timers too and we were in the above $300 range…maybe I’m mistaken. Seems like a lot of the younger generation of married couples in Austin and similar areas are making pretty hefty dual incomes allowing them to step up in price range. Just watching a few shows on HGTV (like Property Virgins) and seeing the price line of many first time buyers is a shock to the system but seems to be the new “norm.”

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Steve - 6 years ago

Hi KH,

That’s right, I forgot about your place since it just happened. That would be the highest 1st timer I know of.

Yeah, I forget that Austin has such low price points compared to some cost prohibitive areas that we can and do have buyers who might have previously rented in more expensive areas, or may just have waited.

Steve

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