Only homes that sell within a given month set the market for that given month. Over time, the market setting forms a trend and perception becomes a big factor in future market setting. Last month, July 2010, was a big month for setting both a declining market (-5.3% in SFH average price) and perception (the cat is out of the bag).
There are two simple types of sellers in the local Victoria market right now: those that WANT to sell and those that NEED to sell.
Let's take a look at these two types individually in an effort to better understand their positions.
I want to sell my home.
There's all kinds of reasons for wanting to sell a home: to return to renting, to buy something different, to move across town closer to work etc. But the underlying factor that differentiates a want to sell from a need to sell is financial circumstance. Financially speaking, the want to sell types do not need to sell. Nothing catastrophic will happen if the want to sell doesn't make a move. These people may tend to have a realistic outlook on their home's value, understand the market forces at work and are financially organized and patient enough to not make rash decisions in the sales process. The few buyers left in the market are likely being steered away from homes owned by these folks as the deals may be harder to negotiate/close. Simply put, the want to sells can, and very likely are, being picky in the process.
I need to sell my home.
I've lost my job. I'm getting divorced. I'm being transferred at work. When I bought my home a year ago I thought I could afford it, turns out I can't. My parent(s)/in-laws have passed on, I need to sell their home to get cash now. These folks may prove more emotional, less rational and more attached to their perception of their homes inflated value. But it won't matter. These homes may be more neglected, less appealing to a broader range of buyers and likely more difficult for agents to show (though they'll be forever dubbed as "good bones," "sweat equity options" and "fixer-uppers"). Simply put, the need to sells are home ownership situations undergoing various degrees of distress.
Need to sell homes will set the market.
Only homes that sell will set the market. Only need to sell homes have to be sold. These won't sell fast. Nor will they sell for the home owners' perceived market value. Over the coming months, stories of distressed sales, "haircuts" and "thank goodness we got out just in time" will creep into the public real estate mind.
On the way up, it was greed and the want to sells that set the market. On the way down, fear and the need to sells will drive market prices. Ultimately, the buyers will decide what fair market value is. There are few buyers and lots of homes. Even the buyers ignorant of the true state of the real estate market will be smelling blood. Low ball is the phrase of today. Below assessment will be the phrase of the near future.
This downward market setting is only getting started.
Monday market numbers, courtesy of Marko Juras, REALTOR®:
Net Unconditional Sales: August 1 - 9 = 78 August 2009 = 764 (total)
New Listings: August 1 - 9 = 240 August 2009 = 1,094 (total)
Active Listings: August 1 - 9 = 4,282 August 2009 = 3,509 (total)