Real estate buyers behave like cars on the freeway. In
this analogy, the normal buyer’s cruising speed was about
65 to 70 mph in the years
leading up to COVID. If you
wanted to be the winner in
a multiple offer, you had to
punch it to 80.
Remember when COVID
hit? The speed dropped to 50
mph and the market tanked
for a month or two.
With the new “work from home” paradigm, the market speed up
again until it was cruising at 110 mph! Buyers found themselves driving 125 to win a bidding war.
Speeds were fast! Last year, usually after losing a few rounds of multiple offers, luxury buyers could be heard roaring along in their Porsches at 150 mph. These buyers were willing to overbid by $500,000 to get a Montecito estate.
Now those Porsches are all off the road. No one is driving
110 anymore, and the Teslas are parked for charging.
Speeds are back to about 75. An occasional driver will gun
it to 90, but few drivers will follow.
If you have an A+ home and the road is smooth, you might still get several cars racing. For B and C homes, the road is noticeably bumpier, and buyers are driving more slowly.
Homes requiring a lot of fix up work have a “ONE YEAR DETOUR” sign in the front yard. The few buyers driving
by will expect a seller to reduce the price for the long delay required to fix-up the house.
I hope this driving analogy makes it easier to understand what is going on. The number of South Coast houses sold this year are down by half, including Montecito and most local neighborhoods. Mesa sales are down 25 percent. Loan interest rates are 7 percent.
Prices are still rising, but that is a statistic left over from the faster speeds. There are fewer cars on the road and everyone’s speed is slower. If the driving speed falls below 60, prices may follow. We aren’t sure what the new cruising speed will be….
You may plan to get in your car for a drive or invite a new driver to park in your driveway. You will need an agile navigator for your trip. I have a good driving record, whether at 50 or 150 mph. Please contact me. I would be happy to help you assess the road conditions.
Client Talk…
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