Over the past couple years home sellers have experienced what we call a seller's market, which is low inventory compared to demand for housing. However, the 4th quarter sales statistics showed that inventory increased and demand decreased, resulting in a shift in the market. That means the market is shifting from being a seller's market into a more balanced market, and for the higher priced homes it is already in favor of buyers.

I'm bring this up because quite a few home sellers are starting to question why their homes are sitting on the market. Here are some of the questions and statements made by sellers to agents currently:

1)Why hasn't my home sold?
2)What market shift?
3)I know what homes in my neighborhood have been selling for
4)My house is better
5)That article wasn't talking about my town
6)This is just a seasonal thing

I'm going to try to address each of these statements so you can have a better understanding of how to approach selling your home in 2006.

1)Why hasn't my home sold?
We are going to assume your house is being marketed in all the advertising mediums available to your agent. I recommend starting with a current market analysis to see what homes have recently sold for in your neighborhood. When I say current, I mean within the last 2 months, not last summer when homes sales reached their peak in 2005. Your neighbor may have sold their home, which was identical to yours, and received multiple offers last spring/summer driving up the price. However, since the demand (number of buyers) has decreased, chances are you will not experience the same scenario.


You need to be competitive in your pricing. Take a look at what is currently available on the market in your area. If you need to sell, you will need to beat your competition's price. That's right, I said competition. If a buyer is interested in your neighborhood and there are multiple similar properties available all priced at say $299,000 and your home is one of them, or priced above them, you drastically reduce your odds of receiving an offer. Your best bet in this scenario is pricing below your competition. Create a price gap between you and the other similar homes so that you increase your chances of showings and receiving an offer.

2)What Market Shift?
There have been numerous articles and press releases published in regards to the market slow down. I've posted the 4th quarter sales data for this area which shows the drop in sales and the increased inventory. I highly recommend any home seller who has their home on the market, or soon to be placing their home on the market, to evaluate their area's current market activity and the trend that is taking place. Statistics are available for each municipality. In some areas the slow down may not be as noticeable, especially those areas where the average sales price is well below $300,000. However, those areas that are close to the $300k mark, or going over it, the inventory accumulation has already moved to a balanced market, if not into what we consider a buyer's market. In a buyer's market we see the average number of days on the market increase, price reductions, and over priced homes just sitting. I highly recommend any home seller requesting the statistics for their area every thirty days so you can adjust your marketing or price accordingly. For those home sellers in South Jersey, the statistics are available after the 10th of the following month (usually).

3)I Know What Homes in my Neighborhood Have Been Selling For
As with any investment, there is no guarentee. If you have ever invested in stocks, bonds, mutual funds, etc. they all have a disclaimer that reads something like:

The performance data shown represents past performance, which is not a guarantee of future results. Investment returns and principal value will fluctuate, so that investors' shares, when sold, may be worth more or less than their original cost.

There is no difference in real estate. The historical "norm" is not what we have experienced the past couple years with the double digit housing inflation. Depending on the area ,the "norm" could be 3%, 5%, or even 7% a year. However, the 12%, 18%, and 27% increases seen in some areas cannot and will not continue forever. Housing prices can and will stabalize, and in some areas will take a downturn if the demand for housing consitantly decreases and inventory consistantly increases.

I will reword the disclaimer so it applies to real estate:

The housing sales data shown represents past performance, which does not guarentee future results

Keep this in mind as you enter the real estate market in 2006.

4)My House is Better
You may think your home is better than it's competition because of the various upgrades and amenities. However, a potential buyer may not have the same tastes in home decor, or place the same level of importance that you have on amenities within the home. So, a potential buyer may not be willing to spend $15,000 more on your property for upgrades they don't care for or have a need for.

If the home sales in your neighborhood have slowed, keep your competition in mind. If a buyer realizes they "get more for the money" by purchasing your home instead of the home down the street for the same price, your chances increase for receiving an acceptable offer.

5)That Article Wasn't Talking About My Town
While that may be true, if you intend to place your home on the market my advice is to stay on top of the sales trend in your area. If you place your home on the market over and above the current market values, there is a good chance your home will sit for a long period of time. The longer the property sits on the market, the more inclined potential buyers are to think there is something wrong with it. If the homes sales have slowed in your area, and price reductions are taking place, you need to be aware of the market activity and price your home accordingly.

6)This is Just a Seasonal Thing
As I have mentioned before, South Jersey experiences the seasonal decline September through February, and the seasonal incline March through August. So, yes, this time of year usually experiences a slow down in homes sales. But... all signs point to a much slower year in 2006 than what we experienced in 2005 and probably 2004 as well. That means sellers will need to be more competitive in their pricing, more negotiable in their terms, and to keep a careful eye on local market trends.

If you have any questions or concerns post a comment. I'd like to hear your thoughts.