The Property Escalator

The Property Escalator

The property market is like an escalator. Sometimes it goes up – as it has recently and sometimes it goes down. In different areas, it may move at different speeds, even in different directions. One area may be falling while others are still rising. Sometimes the escalator stops. In some areas, right now, the escalator is moving down. Other areas are sure to follow. In some areas, homesellers are starting to find it tough to get prices they expected to get. Some are getting edgy. The offers they rejected a few weeks ago are now looking like good offers. unfortunately those offers are gone. The buyers have bought something else. “If only we’d taken that early offer,” they moan. It’s the old cliche about the wisdom of hindsight. Although the frenzy is fading and homes are taking longer to sell, many sellers are still confident – at lease outwardly. One echoed a typical comment, “We are prepared to wait to get our price.” Okay, but for those who decide to wait, there’s a question they should ask – How long will we have to wait? Well, instead of hindsight, let’s use foresight.

Among the warning signs are the fact that real capital city house prices are 27 per cent above their long-term trend, the surge in household debt to income, a deterioration in lending standards and the surge in apartments, particulary in Sydney, raising concerns about oversupply. Although no one likes to say it, it’s fairly obvious what this means. Prices may be going down. It has happened before – many times. The last time it happened – or started to happen – a lot of sellers ignored the signals and paid a terrible price. They said the same thing, “If we can’t get the price we want, we’ll wait” and wait they did. It happens at the end of every boom. Go back to the eighties in Sydney. If you rejected a great offer in 1981, you’d have waited seven years to get a similar offer. The trickiest time to be selling property is when the escalator starts going down. This is the time when the offer you get today is often higher than the one you’ll get tomorrow. However, based on the prices you may have seen other homes selling for, today’s offer may seem low. But tomorrow the offer may be lower still. Weeks may pass – and nothing happens. You live in hope.But it’s false hope, because the escalator is on the way down.

The longer you wait, the lower your price. You may wait years. So, how do you know if you should sell and for what price? Or, should you wait? It depends on your personal circumstances. What you want to do with your life is the most important factor you should consider. If you have to sell, be careful you don’t make the mistake of following the escalator down in price. Typically here’s what, many sellers do when the property escalator starts going down. They reject an early offer then if they don’ get another offer, they start to become a tad anxious. Although they are not desperate – not yet anyway – they realise they may have to lower their asking price. Not too much, just a little. they may lower their asking price say $10,000. Often, however, the market prices have dropped by more than $10,000 so they start to follow the escalator down in price – always one step behind. The market price may fall by $20,000. They lower their price by $10,000. The market price falls again then they lower their price again. Too late. They are following the escalator down. It’s a costly mistake. While their asking price may seem low to them – they are still above the level to which the market has fallen and on it goes, down, down, down. Finally the sellers are desperate. They have to sell immediately. But their home, having been on the market for several weeks, even months – and often with several agents – is stale. Everyone wonders what’s wrong with it. Stale properties and desperate sellers. It’s a recipe for financial disaster. A recent example of ignoring the property escalator was a home which came for sale at the end of the last boom. The sellers wanted $689,950. It was at the time a hugely optimistice price. Way too much. the home was worth closer to $640,000. The sellers expected the property escalator to keep going up. But it was going down. they rejected several early offers, one at $625,000. Months passed. then they began to lower their asking price. But never enough to catch the best price. They kept rejecting offers and then, a few weeks later, they would lower their asking price again – always below the offers they had received earlier. Finally, in desperation, they were forced to accept an offer of $610,000. their stubbonness cost them about $30,000.

The property escalator is tricky. When it’s moving down, it’s hard to accept that your gorgeous home is worth less than the shocker up the road that sold for a whopping price a few months ago. But that shocker sold at yesterday’s prices. Today’s prices are not the same as yesterday’s prices. When the escalator is moving down, it means tomorrow’s prices will not be as high as today’s prices. If you get an offer today, it may be the best you will get for many a day. if that offer enables you to sell – and get on with your life, seriously consider it. Perhaps, if you are buying again’ you’ll be paying less – so it will all work out okay.

If you hold out for yesterday’s price, you could be waiting for a lot of tomorrows.

You could be waiting years.

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The Property Escalator