Market Update

Reading the tea leaves when your house isn’t selling

by John Rice

House not selling? Wondering how to interpret what is going on? Here are a few of my thoughts on some common situations. The following assumes your house is being presented well online with plenty of good pictures and marketing remarks that describe it with more than trendy generic AI generated verbiage.

The house that gets lots of showings but no offers

Assuming that you don’t have some negative that wasn’t obvious like backing to a highway, apartments, or having an Eiffel Tower looking electrical thing in your yard, this situation simply means that the house doesn’t live up to what buyers expected. The good news with this one is that buyers think the price for what they thought the house would be is okay or else they wouldn’t come at all. The solution here is to either lower the price or improve the house so that it meets the expectations buyers have. Whichever is easiest.

I once had a condo that got tons of showings. I kept encouraging the seller to paint. Once we did, it sold. I recently had another listing that was getting tons of showings. It was a nice place, but just felt like a 15 year old house that needed a fresh vibe. The seller did some painting and replaced the flooring in all the bathrooms. As soon as it was done, it sold. Both of these places looked great online, and just needed to match what buyers thought they were getting. Both were improved for far less than the price reduction we would have needed, so both sellers actually came out better by going that route.

The house that gets no showings

This one is easy, but hard for sellers to accept. The price is too high. If a house is presented well on the MLS, and still nobody comes to see it, all you can do is lower the price. Real estate is all about price, location, and condition. You can’t change the location, but the other two you have some control over.

Also something to think about is this: If you have a $400k house and you’re asking $475k for it, buyers are comparing it to other houses that are really worth the asking price. The buyers who are going to spend what your house is really worth aren’t even going to see it since the list price is over their budget.

The house that gets the same bad feedback over and over

This is the least fun thing that can happen to a seller. I mean, they get kicked out of their house for showing after showing with no offers AND get to hear what people hate about their house.

Several years ago I had this really cool older house that had been mostly remodeled. It had the smallest living room I have ever seen……must have been the smallest anybody had ever seen since that is all I kept hearing after the showings. I’d ask for feedback and the buyer’s realtor would go on and on about how beautiful the place was, how unexpected it was to have walk-in closets in such an old house….then they would say their client wasn’t going to buy it since the living room was so small.

We tried putting in smaller scale furniture, but that didn’t help. After that, all we could do was drop the price. A price reduction opens the house up to a larger pool of buyers as well as enticing them to overlook a shortcoming if they are getting a better deal. We got that one sold too.

If you have a situation that doesn’t fit into these scenarios, give me a shout and I’ll let you know what to do.

What will 2026 be like?

by John Rice

I think it will be like 2008. Don’t panic though. Next year shouldn’t be like the 2009 market.

In 2008, we were starting to feel the market slow down. It peaked in 2005 just as it did a couple years ago. We were all in denial back then, hoping what we were seeing in California and Arizona would not come here. It did, but not as severe. The Lexington/Bluegrass market has always been pretty stable and resiliant.

So, by 2008 we were seeing a lot of price reductions. A lot of rising inventory. Only the best houses were selling fast. A seller had to do some prep work to make their house stand out. Many sellers were in denial because they had bought in a frenzy. They were shocked not to have a line of buyers wanting their house the first day on the market. Being a realtor began to be a real job that required skills where you really need to know the market, know how to negotiate, and know how to present a house so it stands out among all the competing listings.

I would normally use this paragraph to contrast 2008 to the current market. Since it is identical, just go back up there and substitute 2026 where I wrote 2008.

Don’t worry though. There are no signs of a coming crash. This slow down is driven by lack of demand due to affordability. Back then, the market crashed due to bad mortgages causing forclosures.

I think the rest of this year will see little appreciation, frustrated sellers, cautious buyers and a lot of realtors getting out of the business.

A bridge not to burn

by John Rice

We are back in a market where buyers want to test sellers and see how far they will bend.

Used to be that the average List-to-Sale percentage was about 97%. That means that the house sold for 97% of the list price. As the market got hot right before COVID, it inched up. During and immediately after COVID, houses were selling for no less than full price, many going for 10% or more over the list price.

Those days are gone. I occasionally see a house that will go for slightly over the list price. That is only for super amazing houses that got multiple offers immediately. Short of that happening, full price is about the best a seller can expect and not a whole lot sell for that.

I have had many sellers this year get super discouraged when we finally got an offer. Most will tell me they don’t even want to reply to it. I tell them that it doesn’t matter what the initial offer is. What matters is how high the buyer will go. Most of the time the buyer will end up paying an amount that the seller is satisfied with.

If a buyer offers 92% of the list price, odds are they will go to 96%.

If a buyer asks for $5k in repairs after a home inspection, odds are they will settle for $2500.

It is crazy how predictable this is. So much so that when I get an offer or a repair list, I am usually correct on where it will end.

So, if you are a seller, be prepared for this. Don’t be offended. Don’t reject the offer or burn the bridge. Keep playing the game until it is over. Odds are you will be glad you did.

The market is changing

by John Rice

No doubt, there has been a shift this year.

Few sellers have to move. Most just want to. None of them are excited about being a buyer if they need to finance their next home. They don’t want to give up their very low interest rate they got during COVID. They are upset that they can no longer expect to sell their house the first day on the market, get above list price, and the buyer waive a home inspection.

Buyers are only buying if they really need to move. They don’t like the combination of high prices and high interest rates. They have more choices and power in the transaction than ever, but they can’t see the forest for the trees.

First time buyers account for the lowest percentage of buyers in forever. Most first time buyers seem to want to skip the small, boring most affordable houses and rent until they can afford what we used to call the “Move up” house. This is leaving most houses under $250k to investors. Almost every super affordable house I have sold this year has been purchased by an investor. Even in multiple offers, they are easier to work with and will often pay the most for a house.

Basically nobody is happy.

This is the first time in my 20 year career of seeing such pessimism from both sellers and buyers in a fairly good market. The only other time I have seen both parties this discouraged is during the Great Recession. It was an extreme Buyer’s Market so sellers were unhappy. Buyers were worried their house would be worth less than they paid for it after the closing. Nobody was happy.

I think we are stuck here for a while. I don’t see prices going up much in the near future and I don’t see them going down either. I don’t see interest rates going down enough to make much of a difference. I think this is just the new normal.

Two or more negatives are hard to overlook

by John Rice

Sometimes a bunch of negatives are overwhelming when you have to see them all together. This is something I learned when I bought a fixer upper house that was worn out, out-dated, and in disrepair. I was broke back then so I had to live with it for a couple of years. Man, that was rough. I remember thinking that the carpet wouldn’t look so bad if the walls weren’t so bad, and how together they really make the light fixture unbearable. I guess that is when it first hit me how 2 or more negatives seem to compound their effects when viewed in the same room.

I’ve got a listing in my pipeline that I have been working on for a little bit. In general, it just feels like a rental grade property. It has a nice floor plan and all, but just doesn’t feel like something a buyer will fall in love with. Like I have always said, a seller has more power in the deal if the house comes across as something special. The market is getting a glut of “Average” houses. Now is the time to make your house stand out.

This house already has some pluses that could easily be over looked. Things that I bet most buyers wouldn’t even remember after leaving the house if we didn’t do anything to it. So, what is the plan? We just had it painted. That will unify the space to a buyer. You have to remember that buyers are going from room to room in a 20 minute window. They like it all to be consistent. The next step is going to be replacing the vinyl flooring in the baths and kitchen. Then we’ll clean the existing carpet and stage it.

Now, when a buyer comes in this place, they will see fresh paint, clean floors, and new vinyl in the kitchen and baths. They will also probably now notice the few updated items. See, the goal is to make it the best house any buyer can get in the price range. We do not have to make it perfect, just a little better than the second best house currently for sale. After all, as long as there is one buyer out there, you know they’ll pick the best one.