“This Indecisiveness We’re Seeing? It’s Fear”

Washington, D.C. Housing Market at a crossroads.

By Melissa Terzis, Realtor, City Chic Real Estate, Washington, DC:

Clients change their minds. But historically, with the low home inventory levels we have had in Washington, D.C., buyers don’t often walk away from a house they successfully place under contract. Typically, buyers see a bunch of houses and zero in on “the one.” They shoot first, and we can ask questions later because someone else may get this house.

Occasionally, someone changes their mind. Maybe after a night of sleep. Maybe after the home inspection when there were a few more things that needed repair than they expected. Maybe after getting the homeowner’s association documents and finding something they don’t like. This is all totally normal, and it’s how most buyers seem to operate. They either get over those little hurdles and buy the house or they rescind the offer.

But in the last several months, I have noticed a lot of indecisiveness in the market – much more than usual. I’ve had several buyer clients change their mind – not just once, but up to a dozen times about buying the same home.

After the first of my many indecisive clients started to waver back and forth nearly a dozen times within a day – all about the same home, I thought it was situational. The home had downsides as every home does, but this one didn’t seem to line up with the client’s wish list so I understood.

She was trying to talk herself into it based on a few big positives but there were definite downsides. I pulled the old trick out of my hat, and asked, “Don’t think about the individual pros and cons. What is this house, to you, on a scale of 1-10?”

When she said it was a 7, I said, “Don’t buy this house, let’s go.” I knew it wasn’t the house for her. No one should make that many compromises in my opinion to only get something that’s a 7 out of 10. She ultimately moved on and found a house she was excited to purchase. It’s almost like those mediocre relationships you talk yourself into believing are right, but then when you finally break up, the next person you meet is fantastic and there’s never a doubt.

This same process then played out with several more buyers, all in the same month, as well as several buyers for one of my listings. They want it. They don’t. They want it. They don’t. They wake their Real Estate Agent at 3 a.m. (not me) canceling their contract. Then bypass their Real Estate agent and email the listing agent (me) at midnight a few nights later, apologizing for walking away but saying they want it now and will pay over the asking price. Then they change their mind again.

I can’t describe some of what we’re seeing now in just a word or two – it’s more than indecisive or commitment phobic.

My explanation for this sudden spastic mind-changing by so many buyers is rooted in one place and it’s not the election. Sure, 95% of DC was stunned by the outcome. But a lot of people have jobs that are not tied to an Administration. This indecisiveness we’re seeing? It’s fear.

Buyers are scared. A few months before the election, the email subjects were screaming “Price Reduced,” “Price Improved” or some variation that indicated there was a listing out there where the seller not only did not enjoy a bidding war, they didn’t get their initial asking price either. The tide was starting to turn a bit even back in late summer and early fall.

Everyone has been so conditioned to this long-time seller’s market that they are actually suspicious now of a reduced price or a house that didn’t sell in the first weekend. It’s as if the fact that no one else wants the house makes a buyer unable to proceed.

Whether it’s the thrill of the chase they miss, or their fear that the house is overpriced, election woes, or just genuine apathy toward the current inventory, things will soon shake out.

And this lull in the market? Combine it with the holidays and dead of winter upon us and the deals are about to get really good. By Melissa Terzis, Realtor, City Chic Real Estate.

Not all is well at this glamorous piece of real estate in Midtown Manhattan. Read…  Is it Just Trump Tower? Or is the Entire New York City Housing Bubble Unwinding?

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  28 comments for ““This Indecisiveness We’re Seeing? It’s Fear”

  1. polecat says:

    fear ..in the lack of ‘swamp control’ … lol

    ‘Those who control the Swamp, control the Mosquitoes’

    • polecat says:

      ‘Those who lose control of the Swamp … spread political malaria’

  2. interesting says:

    houses in socal are so far out of reach i don’t understand who’s buying them and where they are getting the money…..$560K for just an average house is the norm…..if you wanna go upscale in nice neighborhood it’s over a million.

    that’s like 10X local area income.

    • Ethan in Northern VA says:

      The upscale buyers are the people that sold their old crapshacks for $560K to someone and are rolling that money forward?

    • Lawson says:

      ‘houses in socal are so far out of reach i don’t understand who’s buying them’

      People with a wife and kids and a decent job. Those people don’t read Wolfstreet and they know nothing of finance. Yield curve? – what’s that?.

      They do know that commute times to cheaper homes in SoCAl are so bad (1.5-2.5 hrs each way) that buying the overpriced home is an easy temptation.

      All they see is the monthly payment now. A whole new generation now thinks that real estate only moves up.

      If Trump doesn’t get his infrastructure plan, then rates will drop and housing will continue to move up.

      • nhz says:

        agree, I see the same in my country where 10x income buys you absolutely nothing in most areas; if I remember correctly in parts of Australia 15x income is ‘cheap’ too …

        The low rates are distorting everything, buying is 2-4x cheaper here than renting on a monthly basis. A buyer doesn’t need a down payment (a renter usually has to pony up 1-2 months rent and some other costs, and often extensive documentation of income etc). The average home buyer doesn’t WANT to understand why buying is so much cheaper, and that there could be some risk involved (officially all the risk is backed by the taxpayers, but for how long?).

        However … rates cannot keep moving down forever, unless central banks want to completely destroy the economy. After 30 years of declining rates in most of the developed world, the only way it up. It might take a few years before the downtrend in rates is broken for good, but then all hell will break lose and home buyers will discover why their monthly cost was so low.

        • Mark says:

          The game is far from over. If/when rates rise, we’ll see the 50 year mortgage get rolled out and/or some sort of government program allowing financing of the down payment at 0%. The so called middle class has essentially no financial assets or savings beyond the value of their homes. So, prices cannot decline or the political consequences would be disastrous…

        • nhz says:

          50 year mortgage doesn’t make much difference in monthly cost with 30 year, especially with current low rates. They have been available theoretically in several countries in EU and Japan in the last few years, but it’s a niche product.

          As to financing the down payment: not needed in my country, we already have 104% mortages as standard. Down payments are sooo oldfashioned ;-) Of course people still complain because 10-15 years ago 120% mortgages were the norm: buy a home and get a free Porsche or big SUV to go with it, you deserve it if you are so brilliant to buy a home! But looking at the US market you are right, there are plenty of idiot plans that the US could copy from the Netherlands to make their housing bubble even bigger.

          Don’t know what is judged ‘middle class’ in the US, but in Europe this usually is considered to be small business owners and self-employed people. They are a small minority, less than 10% of the population in most EU countries. They are the only group with real savings although these are quickly disappearing thanks to the magic tricks of the ECB. The many government workers of course have gold plated pensions and sometimes lots of equity in their homes, but one can question how much real assets are present there when the Ponzi starts unraveling.

          Disastrous consequences have never in history prevented that nature runs its course. Bubbles burst, always.

        • nhz says:

          P.S.: I should add that of course the elite have savings (loot …) as well, but they usually have just a small part of their assets in (domestic) RE; more likely most assets are in directly owned companies, stocks/bonds, foreign RE and maybe bank vaults in tax paradises.

        • interesting says:

          “buying is 2-4x cheaper here than renting on a monthly basis”

          that’s not true on my planet……not by a long shot.

          in many cases buying is almost double the rent……you think I’d be scratching my head about who’s buying if that were true around here?

        • nhz says:

          I don’t know where you live but I’m in the Netherlands as I have mentioned above. We have fixed rate mortgages of about 1%, full mortgage deduction from income tax (makes the effective rate around 0.5%), countless homeowner subsidies and guarantees, very low property taxes and an all-out effort from the government to jack up rents (for those without rental subsidies) or otherwise make life like hell for renters.

          Of course this fun also means sky-high home prices relative to income; but who cares about ‘price’, it’s all about the monthly payments. I know mortgage rates are significantly higher in e.g. the US and Oz but in general I think the Netherlands is just a more extreme case of what is going on in most of the Western RE market. People here think you are an idiot if you are renting outside the subsidized rental market (which is on accessible nowadays to migrants and maybe those with very low income).

          Some of that Dutch “fun” for homeowners might still be coming to the US and other countries in the next years, there is no telling how desperate they are to keep the Ponzi going. But whatever they come up with, I’m 100% sure at some point the market will crash as it has been totally disconnected from fundamentals for years (in my country for over 15 years already).

    • Lee says:

      Yeah, the boom in the upscale areas in Melbourne have pushed the median house to just under A$800,000.

      While that may ‘seem’ high, Sydney is well over A$1,000,000.

      Melbourne also has the largest population increase of any city in Australia so the demand is still there.

      Unfortunately that high median price masks the prices in outer areas which are still quite cheap. Many times the price increases over the past year in these areas is MORE than the price of a house in the suburbs.

      The last big auction week for the next six weeks or so went off without any problems.

      “Dead time” in RE markets over the Christmas/New Year’s/School holiday seasons.

      • nhz says:

        At least some people will then be able to escape the madness then by selling and moving to another area of the country.

        In my country this doesn’t work, the most remote locations are a bit cheaper but still extremely overvalued IMHO and the lower prices do not compensate for the far lower incomes and lack of jobs in those areas. Escaping was possible in our earlier bubble phase, 15-20 years ago and some people in the big cities pocketed the money and moved out e.g. to where I live now. Within a short time the prices in the more attractive remote areas were pushed up to similar level as in the major metropolitan areas and it has been like that for many years now.

        There are still cheap spots, e.g. a city close to mine has areas that look like Mogadishu or some remote part of Morocco and you could probably buy a junk apartment there for below 100K euro. But no native Dutch citizen would want to live there (well, maybe some brainwashed lefties …). In another remote area all the younger people are leaving because there is no work, there are no facilities and the environment is polluted by chemical and nuclear industry. You could buy a fixer-upper home there for 75K. But nobody is buying, bad investment … Most of these homes just slowly fall apart which of course makes the neighborhood even worse.

        There are also some ‘bargains’ in the North part of the country where homes get damages by frequent earthquakes due to natural gas extraction (similar to tracking in the US). Might be attractive if you believe the taxpayer will pay for the repairs forever ;-)

  3. Chillbro says:

    I know a lot of people who purchased housing in DC over the last year who have no business purchasing real estate. They were the last wave before the market will correct. DC prices can’t be sustained for much longer so they will come down both for rentals and for purchase. It seems the tail end of the bubble is ways the same: loose credit coupled with heavy marketing to get you in that mortgage today before prices and interest rates go up haha. I will be buying in 2018.

  4. Greatful again says:

    I think this was one of the few areas that saw virtually no price drop in the last crash of 2008.

    • Karl Kolchak says:

      Not quite true–I live in Fairfax County and my home value dropped by about 20% before rebounding to where it is now about 20% above the previous high. In the poorer outlying areas of Prince George’s, MD and Prince William, VA Counties, the drops sometimes exceeded 50% back in 2008-09.

  5. michael engel says:

    Crocodiles live in swamps.
    You come close @ your own risk

  6. unit472 says:

    Interest rates are rising and the ‘Uniparty’ lost the election. A lot of deadwood maybe leaving Federal agencies of ‘retiring’ in the coming year.

    • polecat says:

      The problem is … where will the deadwood retire to ?? … fortified compounds … castles /w moats … where ?

      • Chicken says:

        Government retirees (Civil Servants) tend to retire in Florida, many just stay in DC area b/c they’re too old and decrepit to move.

        I agree the DC housing market began turning last fall but it’s been quite strong, maybe something to do with doubling the national debt?.

        • Frederick says:

          Another good reason NOT to live in the suneshine state

        • nhz says:

          I’m living in the capital of the Dutch version of Florida (chock full of fat pensioned ex-government employees) and prices are holding up pretty well here too, compared to other remote areas of the country or nearby cities where there is less government.

          But it is difficult to know for sure if the market can remain strong, RE statistics don’t show the real picture. Many million euro homes (most of them purchased for pennies 20-30 years ago) were on the market here for years, a large chunk of them have been taken off the market over the last year despite improving sales statistics and strongly increasing average prices. And many trophy homes that were ‘sold’ come on the market again because the buyer didn’t get the mortgage. Even the home of the former state governor, just around the corner, has been ‘sold’ and reduced in asking price several times.

          My former neighbor finally sold his home after it was on the market for over 5 years; he started asking 10x what he paid for the home in 1992 and finally sold it for 4.5x his purchase price despite a 10-15% rise of the average home price of the same five years.

          Most of the million euro properties on RE websites here will never be sold – the people who own them hold out for the lottery and will not accept anything less than stellar gains. And people who have the money for these homes are few, they have plenty of choice. Even though there are a lot of wealthy pensioners, there are very few new jobs (for younger people) that pay well and ultimately these are the people who will have to buy those homes. With mortgage rates around 1% even a million euro property is cheap compared to many rentals, but once interest rates revert, almost no one will be able to afford these homes.

  7. James R. Chaillet Jr., MD says:

    The business of DC is government. As long as the Federal Government continues to grow through more laws, regulations, expanded budgets, increased deficit spending and the like, the DC real estate market will continue to do well. The rest of the country? That’s another matter.

  8. chris Hauser says:

    i’d like to quit the real estate business, but it’s just too hard to quit.

    and yes, there are lots of flaky buyers sellers and agents in dc.

    add in expectations and entitlement to uncertainty, and you get flakiness.

    back to the first sentence.

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