Expectation Fatigue
If you're a regular reader of my market conditions columns and blog, you know that lately I haven't reserved a lot of sympathy for sellers or their agents that support, consciously or unconsciously, their unrealistic price expectations. But I'm becoming more sympathetic — not to the sellers necessarily, but to their agents. Because the mirror of the price expectation gap is intensifying on my side, the buyer side of the table.
In the past few months I've emailed, talked and been out to see property with a lot of buyers who have wildly unrealistic expectations, in terms of price and what they can get for that price. (Not all buyers, by any means, but a noticeable and growing percentage, from what I'm gleaning in talks with other real estate pros.)
For the sake of illustration, I'm going to use a hypothetical composite here. A potential buyer wants to spend $200,000 to $250,000. They want something charming, on some acreage on a quiet country road. That's possible here — for something small, 1,000 to 1,200 sq. ft. with 2 bedrooms, 1 or 1 1/2 baths on 1 to 3 acres, not totally secluded or private. It will be structurally sound, but might need updating. But that's not what the buyer wants for $200,000 to $250,000. They're often looking for a larger traditional farmhouse, 1,800 or more sq. ft., with 3+ bedrooms and 2 baths with privacy and seclusion on 5 or more acres — renovated or with a lot of original woodwork and detailing. A pond, stream or view would be nice. Now, that is available here, too — generally for $400,000+.
In this case, I usually show the buyers a few houses in their price range that I know don't hit on all cylinders because of their price ceiling. And I'll usually do a few drive bys of houses that have sold recently that do hit on all cylinders and note their sales prices, which are in another budget range. A year or two ago this scenario would crop up occasionally, and the result would usually be that the buyers would get the message and decide to compromise on what they're looking for or up their budget. Today, the response of buyers is often "Thank you so much for showing us those houses. What you showed us was really 1) too small, 2) too new, 3) too ugly or 4) too near neighbors. But we're not in a hurry and willing to wait until a larger, charming house on acreage with view and privacy comes on the market at the price we want to pay."
Its sort of the equivalent of a seller saying to a listing agent, "Thanks for taking the time to show me all the comps and share your thoughts that you think that I should list my house for $399,000. However, I want to list it for $550,000. Let's put it out there and see what happens." Listing agents are saying to me all the time lately that they're giving feedback to their sellers, showing them comps and encouraging them to list at a realistic price. But they shrug their shoulders and say its like talking to the wind. The sellers just aren't listening to the advice and guidance of their agent.
I gotta say, the same thing is happening on the buyer side. I can show houses, discuss the trade offs at the buyers' price point and advise on price and value. But recently, I might as well be talking to the wind, too. It often has little effect on the buyers' expectation. Sometimes I say, "I don't think I can find you what you want at the price you're looking to pay. If you'd be willing to make this or that trade-off, though, I think we could find something you'd really enjoy." In many cases, the people kind of disappear. Either they drop out of the market or they look further away from NYC where prices are lower. But I think its better say that than to imply that what their expectations are realistic and its just a matter of time for the right house to come on the market.
Its not a lot different than taking the listing for the seller who wants to price their house at $550,000 when the market for similar houses is $399,000. Getting that $550,000 is not a matter of time. Sure, the market could rise to that, but right now, and in the foreseeable future, it isn't. Likewise, for the buyer looking for that larger $250,000 farmhouse, the market could drop sometime in the future so that would be a realistic price. But right now, and what I see over the next few months, it isn't. So to keep looking for it at that price now is wheel spinning. Could market factors and seller circumstances result in a house with a 'value range' around $400,000 sell for $350,000 in the near term? Sure. That's within the realm of circumstances, negotiation and timing. But it would take a huge turn in the market, and not just savvy shopping, to bring that house into the $250,000 range.
I want to make one thing clear. This scenario is not universal among all buyers. I'm working with a number of clients right now who have realistic expectations about what they want. We're just waiting for the right house to come on the market, or for the right house to drop in price to what we consider its supportable value range. Sure, they're waiting — but their waiting is different. It doesn't require a huge market downturn to make their house dreams come true.
Louis Capelli, the owner of the old Concord Hotel, has announced a deal with Empire Resorts to move the Racino and Raceway to the site of the Concord as the centerpiece of a 160 acre, $700 million entertainment complex. The latest plan calls for 500 to 750 hotel rooms, a convention center and retail. Capelli does have a track record with multi-use entertainment complexes, having developed New Roc City in New Rochelle. The announcement indicates that demolition of the existing Concord tower to start in 45 days, construction will start this year and be complete in 2010.