Berkshire Real Estate: Buy, Sell or Hold?
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That verity aside, I do believe that statistics provide some useful assistance to us as we look ahead, and so does information about the state of the general economy, historical trends and so forth. Taking all of this in to account, it is my expectation that the level of inventory will remain at higher average levels for some time yet to come and will take longer to absorb than has been the case in the past leading to longer days on the market on average as well.
Sellers can respond to these realities in either of two ways; they can lower their prices further to meet the new economic realities (and some are obliged to by financial pressures) or they can stand firm, in hopes that they can wait long enough for prices to begin an upward swing again.
In parts of the nation where the population trends are upward, waiting may be a suitable approach for some who have the luxury of time on their hands. For those living, say, in the Berkshires, where population trends appear to be trending downwards still, waiting could prove a losing proposition over time. When factoring in the costs of ownership, especially if the house is a second home, for example, that is no longer in much use, the costs of inflation, maintenance, obsolescence and so on, then holding on for a better market may indeed turn out to have been based on a false premise.
There is also the case of the owner looking to purchase after selling. In such a scenario, waiting for the market to turn back upwards again makes no sense at all since in most cases the lower value for the home they want to sell will be favorably offset by the lower value of the home they wish to purchase.
In every market decline, there are homeowners who are caught in a very uncomfortable position, having purchased their home in a higher market or having leveraged the home above its current fair-market value during boom times. These homeowners are faced with few options that are attractive. They either have to stay put to wait for values to catch up to their debt levels, find another way to pay down the deficiency or worst case, they may face losing their home if they are unable to meet current costs of ownership.
Fortunately, there are fewer of these difficult scenarios in the Berkshires but they do exist. We happen to know of one party who took a very substantial loss on their home on the west coast in order to be able to move back east. They did however make a favorable purchase here thanks to our much lower costs of housing.
All in all, the future looks conservative for real estate. Not a bad thing. In fact from 2001 to '07, too many people began to look at real estate and homes in particular as means of making big money. Even some thought of flipping as a business amazingly enough. Pretty quickly, there appeared all sorts of video tutorials, books and TV shows devoted to making tons of money buying and selling homes for profit. When that happens that is a sure sign of a bubble forming, which leads to the inevitable bursting of same.
When I began my career in real estate in 1975, people bought homes to live in, as they had done for decades before. There was a short, steep and painful run-up and collapse in prices fueled by low rates and builder speculation back in the late '70s or early '80s, the exact timing of which I have forgotten, but the average homeowner never got involved. Not until our nation's economy began to lose jobs in large numbers and not until rates were dropped to near-zero levels in the aftermath of 9/11, did the average person enter the world of real estate speculation (and many others entered real estate as a career).
Speculators and flippers have almost all been burned and the sensible ones have sworn off doing it again. Others are still struggling to get free. Thousands upon thousands of wishful new real estate licensees have also left the business to find "real jobs." It is a new world order. Real estate will not be the get-rich-quick scheme it was for a brief six years, though for those who prospered and got out in time, they were high times indeed.
Price sensibly, take the advice of a seasoned real estate expert. The more years and successes they have had in the business, the better they will be able to help you either sell in these challenging times or find good value and avoid the pitfalls, if you are purchasing.
Paul Harsch is proprietor of Harsch Associates of Williamstown and has worked in the real estate field for 35 years.
