Is it a good time to sell?

My last post here talked about the continuing decline in property values in SE Michigan – down an average of 16% in my area year-over-year. That is the third consecutive year where we’ve had property value declines. Properties in the area are now 30-40% below their highs (which many put in the 2004-5 calendar years). So, given the decline in values; how can I even pose the question, “Is it a good time to sell?”

The answer to that question is less complex than it might seem. If you take current value out of the picture and look just at the other market factors that might impact a sale, the answer is yes, it’s a good time to sell. Why do I say that?

First, we have the extended first-time homebuyer tax credit, which now is expanded to include people who are current homeowners. That means that a segment of the market that has been effectively frozen in place – the move-up buyers making their first jump up the real estate value chain – now have incentive to do something. These will normally be people who have a starter home now and want to make the leap to that next home. They have an incentive from this tax break to put their current homes on the market and start looking for a bigger home. The new May 2010 deadline also adds a sense of urgency for potential homebuyers. There are tons of first-time buyers out in the market.

The second factor is that we are seeing and hearing more and more reports that we are at or near the bottom of this “great recession.” Economists are providing encouraging reports on most economic sectors that support that thought. Even in the housing industry there is positive news – home sales up for several quarters in a row. The new home building side of the business is still stuck in neutral, but rising sales of existing homes points to a recovery. We still have an unemployment issue to get over (a huge issue here in Michigan); however, consumer confidence seems to be making a comeback.

Third, there may also be some “pent-up demand” at work in the market, especially in the mid to upper end of the market. Lots of people backed off of plans to buy, whether it be a move up or even downsizing for retirement, because they wanted to wait and see what would happen in the market. Many wanted to wait until prices dropped. Now they are seeing and hearing encouraging news about the economy in general and seeing stories about real estate sales going up. There is a natural tendency not to want to miss the opportunity. In this case the opportunity is there to get the homes that they want at or near the bottom of the market. Many economists are saying that real estate prices should stabilize in 2010 and will start back up shortly after that. People who have waited may end up with a bad case of the “could, woulda, shoulda’s” if they don’t act soon. There is a “don’t miss the boat” mentality on the buyer side that is helping drive traffic through listed homes.

But, all of that being said; how do we deal with the loss of value issue? The good news, if it can be called that, is that most of the shock is out of the system. People have been bludgeoned with the news stories of how bad things are and of the losses that all have suffered. There is more of a collective acceptance now of what has happened. Even the older homeowners who held out the longest against this truth have now acquiesced. Nobody likes what has happened, but just about everybody now acknowledges that it did happen to them, as well as others – their home is worth less today than it was 4-5 years ago. Most still have no real idea of the current worth of their homes, so that detail work remains; however, there is more resignation to the inevitable. The thoughts of waiting out the storm have also receded’ since there is growing consensus that it may take a decade or more to recoup the lost value, once things turn around.

The key to getting people moving on the seller side may be as simple as asking “do you want to sell?” Not do you have to sell; but rather, do you want to sell? The people that have to sell will continue to list as short sales or go into foreclosure. The people who may want to sell, but who have been just sitting on the sidelines, waiting for some reason or sign that it’s time to act, need to have this conversation with a Realtor. Sometimes it just takes that little push, that call to action, to overcome the inertia that is in the system. They should talk to their Realtor about why it is a good time to go ahead with their life plans. There is certainly also a case to be made that they will make up some or all of their ”loss”, if their plans include buying another home, even if they are downsizing.

So, is it a good time to sell? It sure is. This is the best that it’s been in several years for sellers. Buyers are out and have incentives to buy before summer 2010. What are your potential sellers waiting for?