it's not different this time

I have this theory about real estate, that every year things go much the same way. Early in the new year there are very few properties for sale. Home owners who plan to sell wait for the spring. But the buyers come out early, and swarm through the few open houses that they can find. Multiple offers abound, as there's not much to choose from. Home owners notice, and think wow, this is the year we should sell! Suddenly there are hordes of listings, and lots of choice. The buyers who lost the bidding wars start to take their time. Numbers of sales go down. Prices start to drop. Buyers back off as prices become more reasonable. The newspapers report how the market is falling. The summer brings doldrums. Maybe in the fall it'll pick up, maybe not. People take their properties off the market. Winter comes. People cook turkey. Then, voila, the new year comes, and there's very little on the market, and buyers start to buy because this might be their last chance to get into the market. Prices move up.

I think this is what's happened to me. (It can't be that I'm deluded about how much my place is worth!) I've had two offers for my place that I considered to be fishing expeditions by bargain hunters. If I really needed to sell, I'd have had to concede. But I don't, so if I can't get what I think is fair value, then I see no reason to sell. So yes, I've taken my place off the market.

Perhaps I'm not alone in this testing of the waters. Lots of listings get canceled. Real estate is an example of an illiquid asset. Doesn't mean it's not worth what it's worth. It's just harder to withdraw from than, say, a bank account.

I was late getting my place listed this year; I hesitated first  because of the Olympics, and then I just wasn't quite ready, when there were those few listings at the end of February. A month later I had all kinds of people come to open houses and say they really liked the place, but, alas, there were a whole lot of listings at the same time, so lots of choice. Comparison shopping was possible.

I read recently about a study that demonstrated that too much choice paralyzes decision-making. Offer people sixty flavours of ice cream, and they'll have a hard time choosing. Offer six, no problem. I think house-buying works the same way. Too many listings, and people freeze up. On the news tonight they said listings were up, what, 40% over this time last year? And guess what. Sales are down. Even though rates are still at historically low points. You tell me if it makes any sense. Next year, rates will be higher, and I believe we'll see a surge in sales at the beginning of the year, because there will be very little available. If prices are down, it'll be because the banks are making up the difference in higher rates. I may eventually have to take less than I want for my place, but it'll cost the buyer as much. (Forget real estate and buy bank stocks?)

I think it actually was a bit different in 2009 because of the great recession that happened towards the end of 2008. You couldn't sell a place in the beginning of the year, because everything was so cheap that there were no listings. Then what listings there were began to get bidding wars. What can I say? People like to buy high. That's all I can figure. Unless there's lots of choice. Then they'll hold off.

Realtors will tell you this is nonsense. And they're right, of course. No one can predict the markets.