Normal is such a nebulous word. What does it even mean? Whose normal are we talking about? In real estate, this word is thrown around all the time and quite frankly, it is nearly meaningless. “Normal” is so fact dependent and unique for situations it is almost impossible to define. Here is what I know, we have a few things at a time that define a moment in time that could be called “normal.” Last three years have had some things that were fairly normal in that time that are historically not normal–waived or limited appraisals, waived or limited inspections, over asking price offers, absence of home sale contingencies, massive scrutiny on the type of loan behind an offer, multiple offers in hours. Those things are historically ABnormal but kind of defined the last few years. Now we are seeing those things change again. We are actually NORMALizing from a historical perspective. Here are some perspectives:
–“New Normal” now contains the options of the past three years. People now know how to compete even more aggressively than they did 5 years ago. People acknowledge that an over asking price, waived appraisal, offer CAN happen. It is part of the conversation. On a very special home, you will still see competitive techniques applied. I doubt this will ever fully go away. It is part of the arsenal now.
–Days on market is a better measure of the market activity than price. Price does what it does. If demand is high, price is high. If it is low, it reacts. Price tends to react much more slowly than days on market. In our market, DOM can show almost immediately if there is a drop in demand or a surge in supply. It also measures people’s willingness to compromise. Think about it, EVERY house had short DOM in the last 3 years. Now, houses that have a flaw or are not 100% market ready can sit. Even sitting 2-3 weeks feels like eternity and starts the price reduction conversation. Historically, 2-3 weeks is still a short DOM. But that measure has absolutely reacted more instantaneously than price. Price is historical and tied to time (whether appreciating or depreciating). DOM is 100% tied to activity and confidence in market.
–The 4 P’s are back baby! Price, placement, promotion and product HAVE to be considered again! Over the past 3 years, it was just product. Here is a house. It is available. It is sold. Now we are back to marketing a home and being strategic again. This is great news for actual professionals that care about their craft. You have to be strategic in your pricing. You have to evaluate pricing as a function of time and perception. You have to be purposeful about placement and promotion. You have to actually pay attention to the product you are selling.
I am personally excited about the state of our market. It presents opportunities. It separates the wheat from the chaff. It allows a bit more gamesmanship in the market. It also makes the buying part a bit more two sided. We needed that.
If you have some questions. If you have concerns. If you just want to talk about real estate, hit us up. We are excited to discuss the market and what is happening.
Originally published on November 7, 2022.