Counterproductive Homebuying Strategy: Lowballing
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By: Kenneth Harney
It’s not something that economists routinely track, but it provides a rough sense of what’s happening in local real estate markets. Call it the lowball index. A year ago, according to researchers at the National Association of Realtors, one out of 10 members surveyed in a monthly poll complained about lowball offers on houses listed for sale. In the latest survey — conducted during March among a sample of 4,500 agents and brokers across the country and not yet released — there were hardly any. Instead, the focus of volunteered comments has shifted to declining inventory levels — fewer houses available to sell — and multiple offers on well-priced listings.
A lowball offer typically involves a contract submitted to a seller where the price proposed by the purchaser is 25 percent or more below list. Lowballs increase sharply when there’s a glut of properties available, asking prices are out of sync with local economic realities, and values are depressed or uncertain. Buyers figure: Hey, why not? Maybe I’ll get lucky.
Based on the latest survey results, sort of strategy is not a winning move in many communities this spring. In fact, in local markets where inventories are tight and competition for homes rising, real estate agents say that buyers looking to steal houses by lowballing their offers are ending up at the back of the line — their contracts either rejected out of hand or countered close to the original asking price.
Is the Housing Bottom Here?
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From CalculatedRisk.com:
There have been some recent articles arguing the “housing bottom is nowhere in sight”. That isn’t my view.
First there are two bottoms for housing. The first is for new home sales, housing starts and residential investment. The second bottom is for prices. Sometimes these bottoms can happen years apart.
For the economy and jobs, the bottom for housing starts and new home sales is more important than the bottom for prices. However individual homeowners and potential home buyers are naturally more interested in prices. So when we discuss a “bottom” for housing, we need to be clear on what we mean.
For new home sales and housing starts, it appears the bottom is in, and I expect an increase in both starts and sales in 2012.
As the first graph shows, housing starts, both total and single family, bottomed in 2009 and have mostly moved sideways since then – with some distortions due to the ill-conceived housing tax credit.
New Home sales probably bottomed in mid-2010 and have flat lined since then.
To Buyers:
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At Rua Realty we take pleasure in assisting Buyers find their home, financing, contractors, and all necessary aspects of the process to lead deals to closing. With the joy of finding a home also comes the frustration when either Buyers can’t find exactly what they are looking for or they evaluate and reevaluate and end up losing out on a great home. This is normal. With my experience I have developed a sense as to which homes are deals and will be sold relatively quick. I never “hurry” or pressure my clients to purchase a home, unless necessary…
To Buyers (especially first-time homebuyers), I understand your frustration in the current home buying market. It is not easy and it will possibly get a little more difficult as supplies of homes have sharply decreased in comparison to 2008-2010 levels (2009 held a 4 year supply while currently there is 6 month supply of homes in Miami-Dade County). Couple these stats with the 2008 and current credit crisis and it remains difficult for buyers to obtain financing resulting in a “cash buyers” market rather than a “buyers market” and in some cases a “sellers market.”
It is common for every homebuyer especially first-time homebuyers to expect to purchase the “perfect” home. My advice is that no one home will be perfect and there will always be some work required to make the home your “home”.
Our goal remains to always find the “right” home that makes the most sense for our clients.
Please contact one of our agents if you have any questions or comments regarding your home search or any real estate related concerns.
U.S. Real Estate Cheap in Relation with Other Countries
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Even as the world economies remain unstable the U.S. real estate market is a less expensive and affordable option to foreigners that can afford to purchase second homes and investment properties given the circumstances. In particular, Miami has seen an increase in the volume of transactions from foreigners ranging from Russia, Canada, Europe and Central & South American Countries. The positive affect has been a decrease in single family and condominium inventories leading to slight rise in values (depending on the area) benefiting an industry that has been at the forefront of the recent financial crisis.
Bring on the Foreign Buyers!
Recent Miami-Dade Sales Stats
