One of the realities we deal with when talking with owners who are considering selling their homes in the current market is that the price they will get for their home is substantially less than what they had expected. Not that this is anything new. In my 30 years of experience, homeowners often want more for their homes than what the broker thinks the home will bring in the market.
The difference now is that the number is so much below expectations that it causes the owners to pause and rethink the whole idea of moving at the present time. We often hear, "this is a terrible time to sell, maybe we should wait until next year when the market is different". There is little doubt that the market will be different, but what makes us think it will be better?
My hope is that perhaps some light can be shed on the whole idea of waiting to sell rather than dealing with the current market and what is sure to be a disappointing price for a home. If the plan is to postpone the sale for a year or two, waiting will likely prove costly. Thus far, there is no evidence that that sales are improving. Without improving sales, prices can't firm up. The odds are overwhelming that prices will continue to fall as we go through the year. How much nobody knows, but it wouldn't be surprising at all if prices were 10% lower at the end of the year. So if you postpone the sale for a year, the price you don't like this year could well be 10% less appealing next year. From my experience, the earliest we can expect prices to bottom out is probably 2011, and the general prices could well be 20% or more below where they are now.
Is it possible that we can solve all the problems that confront us and the market is a happy place again and prices are moving up? Sure it's possible, but for that to happen it would require an almost miraculous chain of events to get us from where we are to where we need to be. And although I have witnessed many interesting things in 30 years in this business, I don't recall any miracles.
Another common conversational thread is that owners wished that they had sold last year or the year before when the market was stronger and prices were higher. I guess what they are suggesting is that, if they could get those prices, they would go ahead and sell. So the question now becomes, when can a person realistically expect to get those prices?
The last time we experienced a market like this was in the late 1980's to early 1990's. Prices peaked in 1987 and then declined by about 30% before bottoming out in the early 1990's. But here is what most people don't realize, it wasn't until 1997, a full ten years, that we got back to the price levels of 1987.
So if history repeats itself, to get 2006, 2007 or even 2008 prices would mean postponing the sale, putting your life on hold, until 2016 to 2018. That's if we follow the same pattern as last time. But will we. The prices went up much more during this bubble than that one, which means they could fall farther than they did last time. If that were to happen, it could take even longer to get back to those peak prices. If prices were to fall 40-45% this time, which is not inconceivable since we are almost half way there and the market continues to weaken, it could take more than 10 years to get back to the top.
Nobody can predict with certainty how long market cycles will last or how much prices will change during the cycle. A couple of things I have learned over the years is that, cycles run longer than people think and prices change more than people think they will change.
I have no doubt prices in 2009 will be disappointing. However, if you postpone a sale for a year or two in the hope of realizing more money, you will likely find that a decision you will wish you hadn't made. To realize even 10% more than what this market will bring will likely mean you will have to put your life on hold for at least 5 years and, quite frankly, it could be 10 years or more.