Ah, the good old days.  For years and years I could repeat the following mantra, for South Orange County real estate:  Around Super Bowl time buyers would start coming out in droves, and their activity ( opening and closing escrows.) would increase from February 1st, through about the end of July.  Last year was a notable exception, in that things were going great - for about a month and a half - until the sub-prime mortgage mess hit Wall Street and Main Street, in mid March.  So much for history repeating itself.

This year started off the old usual way, with a couple of startling exceptions.  First, there were way fewer buyers, than usual, and second, there were considerably more houses on the market.  So, while there was positive sales activity, and houses were selling - it just wasn’t a great time to be a "normal" seller.  Allow me to define a normal seller.  In a normal market, there's an equilibrium between buyers and sellers, unlike today's higher number of sellers, to buyers.

Additionally, in a normal market, prospective sellers are usually out looking at bigger or better houses, eager to become move-up buyers.  Since there is usually an abundance of prospective buyers for their present house, they feel confidant that they will sell with no problem, making it easier to buy up.  Such buyers and sellers steadily move up the normal housing food chain.

The big problem this year has been this: While there are plenty of first time buyers down at the bottom of the totem pole, a high percentage ( over 50% of transactions, in my area.) of them are buying short sales or foreclosures, where there is NO move-up seller, looking to become a bigger house buyer.  Many of those former owners are either moving away, or becoming renters, instead of local, move-up buyers.

The problem for a normal prospective seller, in this market, is that he has to vigorously compete with the short sales and REOs ( Lender owned properties.) that comprise 50% or more of his competition, and most normal ( read non-distressed.) sellers don't want to compete at such drastically reduced prices.  That's why the majority of normal sellers are leaving the market, unsold, after testing the market, trying to attract a normal buyer, for a month or two, or six. 

Yes, there ARE some normal buyers out there - buyers who just want to get into a home, don't want to hassle with fixer-uppers, multiple offers, or being a bottom-fisher, and who offer a normal seller, a normal value, for their nice house.  The number of such transaction happening in today's market?  Probably somewhere around 10-20% of all transactions.  Not very good odds.

Think your house is special?  That it will buck the odds because of a superior location, a great view, sensational decorating?  Well, some do buck those odds, but usually they need a whole bunch of those amenities to attract that normal buyer.  And the bottom-fisher buyers out there couldn't care less - they're just looking for a bargain. 

So, when will this market change, to one that's more equal?  It's really difficult to predict, but probably when the number of distressed sellers starts to become significantly smaller.  Until then, your best alternative to selling, may very well be becoming a landlord - renting your house to one of those foreclosed out former owners, if their credit hasn't taken too big a hit. 

In many cases, if you've lived in the house for 5 years or more, there will be sufficient equity to borrow against, ( if needed.) to help purchase a bigger house, while having a break-even or positive cash-flow, on your new rental property.  Make no mistake, this IS a great time to buy, especially one of those distressed listings.

I have been helping my neighbors in South Orange County navigate such transactions for over 31 years, through good markets, and through markets even worse than this one.  Drop me an email or give me a call, if you'd like to talk about the possibilities.

Send me an email ( agent.BobPhillips@cox.net  ) or give me a call.