Does 6 Offers in 4 Days Sound Like a Down Market?

A couple weeks ago my phone would not stop ringing, and my email alerts were going non-stop. I had just listed a condo in Alexandria that is selling as a Short Sale, and come to find out, several potential buyers had been sitting on the sidelines just waiting for the next listing in this community to come on the market.

Suffice it to say, I was taken by surprise by this flood of activity. After all, condos are the first down, and the last out in a troubled real estate market, AND it was a short sale… no one wants to buy a short sale, right? Within the first 24 hours there were several showings, an offer in hand, and several more on the way. See, in my experience of late, buyers have been avoiding short sales. The threat of protracted contract periods that often go on without any indication of progress as they waited for an owners bank to give the thumbs up or thumbs down to a deal has deterred the majority of buyers. But not in this case.

On the surface this looks like a great thing, and one might wonder why someone like me wouldn’t go knocking on doors and telling every owner in the place that I could bring them a buyer if they were interested in selling. Well, it’s not that simple.

The values in this, and many other condo developments took a precipitous drop in the downturn. This is the precise reason that so many people are interested in them, ie. low prices. The problem is, few of the owners in these buildings are in a position to sell because they are so far upside down on their loans. If there are no extraneous circumstances in their lives and they are able to make the payments owners will not qualify for a short sale, and in this case many owners would need to bring six figures worth of their own cash in order to bridge the gap of any loan payoff if they were to sell.

So, we have a situation where demand is on the rise, but inventory is quite literally incapable of rising to meet that demand. If this continues we could see quite a unique environment that becomes ripe for accelerated increases in home prices. Unique in that supply could remain low simply because people are not able to sell. So the down market, could (and maybe is) creating a hot market.

However, yet again, it is not that simple. The buyer sentiment is still firmly in the “we don’t want to feel like we’re overpaying range”. In any given development you may have 5 condos that sell in just days for between $230k and $239k, but the one who tries to push the market and ask $241k? Forget it. They may spend 60 days on the market and end up selling for $228k (this is based on an actual example). Buyers are punishing owners who start out “overpriced”. The other issue is with appraisal. Very few appraisers are, after the portion of the blame thrown at them for the housing bubble, interested in pushing the market.

So, there is a tension in the market that can make it feel hot, or feel like prices should be clearly on the rise, but it is this same tension that is keeping many areas in and around DC on level ground. Which I say all the time, is a huge win compared to much of the rest of the country.

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