Scott Bayens: On the heels of stagnation
Growing up in Texas and having lived in other places in the South, I am intimately familiar with heat, humidity and bugs. I also remember all variety of basins, bayous, canals and ditches we used to play around and sometimes in, mostly catching tadpoles and crawdads. That greenish, mucky standing water didn’t allow much else to live, other than millions upon millions of mosquito larvae. Fact is, still, stale, stagnant water was a fact of life and inevitable.
Perhaps that’s as good a reason as any the term stagnation is used to describe one of the dirty words in the realm of economics and the world of real estate. Wage stagnation as well as market stagnation can have a significant impact on the housing market. Concurrently, low wages and high housing prices can create stagnation in the real estate economy. In many parts of the country, major markets like San Francisco, Seattle and the five boroughs of New York are seeing the number of sales shrink significantly from recent highs, as the gap between the price of a place to crash and amount of money homebuyers have to spend, grows ever wider.
The simple truth is, there is a fundamental limit to what working-class people, even the so-called upper middle-class (those making between $75,000 and $125,000 a year) can afford or are willing to pay for a mortgage or rent. Higher prices also mean those looking to secure a home loan need to save more for a down payment (usually 20 percent). Rising interest rates (although they recently fell back a bit recently) also represent an emerging challenge to growth.
While some experts are warning of future calamity, others see the metrics differently.
In a recent article in Inman News, Patrick Stone, president and CEO of title insurer Williston Financial Group, predicts the return of first time homebuyers.
“We are closing the affordability gap at a noticeable rate,” he says. “By the second half of this year I think you’re going to see a fairly significant surge in new home buying.”
Here in the Roaring Fork Valley, where the cost of living and housing is significantly higher, it’s harder to pinpoint where we are and where we are headed, especially in the midvalley. Homes, townhomes and apartments in Willits are one notable exception, where new inventory continues to fly off the shelves. But overall, after record activity and sales the past few years, inventory is tight, prices are high and the number of transactions are off to a slower start in 2019 in places like Basalt and Carbondale. Real estate veterans expect sales volume to pick up in the spring, when new listings and warm-weather buyers come online again, but no one claims to have a crystal ball.
As I’ve said time and again, it all comes down to prices. Buyers will tend to pay what they can afford. For sellers, that means watching the surrounding market and paying attention to what buyers are willing and able to pay. As the saying goes, “the market never lies.” If your home isn’t new or in a phenomenal location, my advice is to lower your asking price a tick or two this year. And don’t pay attention to asking prices; the only number that matters is what’s selling.
As far as the local luxury markets go, the sale of new inventory at Base Village in Snowmass remains red hot with whole sections of the development nearing sell-out. That means those holding older inventory have to be more realistic about how much equity they aim to cash out given the new competition.
In Aspen, if you want three bedrooms or more in or close to town, there are just 18 options listed in the MLS and none of them are new. As a result, buyers are tending to wait until more listings come up for them to consider, again, likely toward summer and perhaps with a slightly different pricing strategy in mind. Resorts tend to be in no hurry.
Luckily, stagnation tends to be temporary. Demand remains strong among relocating retirees. The millennial set is milling around, too. From what I’ve seen, the buyers are there, but waiting the market out in hopes of a reduction, something for sellers to keep in mind as they enter the market the next three to six months. And with the stock market correcting, the wealthy are looking again to park their money in high-end real estate, but there, too, unless they see quality, opportunity and upside, they might end up sitting on the sidelines.
Unlike the past few years, only realistic, astute and motivated sellers will find success, in my opinion. Those looking over their shoulders at what the last guy got, expecting the same or more, might be disappointed if they don’t set their expectations accordingly.
Scott Bayens (GRI, ABR, CNE) is a realtor with Aspen Snowmass Sotheby’s International Realty with more than a decade of experience with buyers, sellers and investors. He can be reached at email@example.com.
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