{"id":831,"date":"2013-08-14T12:51:12","date_gmt":"2013-08-14T19:51:12","guid":{"rendered":"http:\/\/www.ingridjarisz.com\/blog\/?p=831"},"modified":"2013-08-14T12:51:12","modified_gmt":"2013-08-14T19:51:12","slug":"who-cares-about-price","status":"publish","type":"post","link":"https:\/\/www.ingridjarisz.com\/blog\/who-cares-about-price\/","title":{"rendered":"Who cares about price?"},"content":{"rendered":"

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A REALTOR\u00ae once told me, \u201cIf you ever want to lose somebody at hello, just say \u2018statistics.\u2019\u201d Maybe the same can be said for \u201ceconomics\u201d \u2013 but tuning out fundamental economic concepts like supply and demand turns a blind eye to forces that shape the price of everything. Most people pay attention to the bottom line if the price is big enough. The price of real estate certainly gets buyers\u2019 and sellers\u2019 attention, so the economics behind it matters. Advice from Greg Klump of the Canadian Real Estate Association. \u00a0[NOTE: See the Inset Graph from the Victoria Real Estate Board <\/a>statistics showing a decline in months of inventory of current Greater Victoria Area properties for sale; Victoria was at a high of 14 months of inventory in January 2013 and today, we are now down to just above 7 months. ]<\/strong><\/p>\n

The bottom line for price is that it\u2019s dictated by a meeting of minds between sellers and buyers. REALTORS\u00ae know that without that, there\u2019s no deal. Who knew basic economics could be so simple and intuitive?<\/p>\n

Of course, getting agreement on the price at which real estate can trade hands is rarely simple. That\u2019s because psychology and expectations play such a major role. Many factors influence psychology and expectations, including the news media, family, and friends. Mindset affects both buyers and sellers, and can affect entire markets when a big enough group of buyers and\/or sellers hold a similar mindset.<\/p>\n

Predicting shifts in prevailing crowd psychology among buyers and sellers with any precision is difficult to say the least. However, the monthly trend for the number of months of inventory provides an important glimpse into the near future for price trends.<\/p>\n

The number of months of inventory reflects how long it would take to completely liquidate inventories at the end of the month given current sales activity. The monthly trend for months of inventory is the thing to watch. If its trend drops to unusually low levels and stays there, demand is outstripping supply and big price increases should be expected. If its trend climbs to abnormally high levels and stays there, price stagnation and erosion is likely. The longer the trend persists, the more likely an outright price correction may occur.<\/p>\n

In the absence of an economic shock, like an abrupt and lasting drop in employment, supply declines in response to lower demand. If supply falls quickly enough, an outright price correction is prevented. In the absence of financial distress or other motivation, sellers unwilling to accept offers too far below asking price either hold out awaiting \u201cthe right buyer\u201d (i.e. one whose offer comes close enough to asking) or they take it off the market until demand improves. Whether the listing is taken off the market once it expires or languishes on the market unsold, supply effectively declines until there\u2019s a shift in buyer and\/or seller mindset when it comes to price.\u00a0 That\u2019s why real estate prices are, in the parlance of economists, \u201csticky downward\u201d as sales activity recedes.<\/p>\n

Few sellers are eager to accept offers well under what their neighbour sold for (presuming their homes are reasonably comparable). A major and sudden price correction requires more sellers to drop their asking price en masse than is typically the case in the absence of an economic cataclysm.<\/p>\n

While the timing as to where in a housing market cycle one buys and sells matters, typical real estate market dynamics in a growing economy mean that prices don\u2019t go down as much as they go up over the long term. REALTORS\u00ae know this. Everybody else should too.<\/p>\n

\"CREA_GREG_95x95\"CREA\u2019s<\/a> Chief Economist,\u00a0Greg Klump<\/strong>\u00a0provides his views on the state of and outlook for Canadian housing markets to news media, policy makers, and real estate industry stakeholders. In 2012, Greg celebrated his 20th<\/span><\/sup>\u00a0anniversary as a member of the team at CREA.\u00a0He\u2019s an avid skier and snowboarder during the winter and a year-round crossfit enthusiast.<\/p>\n<\/div>\n","protected":false},"excerpt":{"rendered":"

A REALTOR\u00ae once told me, \u201cIf you ever want to lose somebody at hello, just say \u2018statistics.\u2019\u201d Maybe the same can be said for \u201ceconomics\u201d \u2013 but tuning out fundamental economic concepts like supply and demand turns a blind eye to forces that shape the price of everything. Most people pay attention to the bottom  Continue Reading »<\/a><\/p>\n","protected":false},"author":4,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":[],"categories":[32,33,5,40,4],"tags":[59,48,36,15,35,13,9,14],"_links":{"self":[{"href":"https:\/\/www.ingridjarisz.com\/blog\/wp-json\/wp\/v2\/posts\/831"}],"collection":[{"href":"https:\/\/www.ingridjarisz.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.ingridjarisz.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.ingridjarisz.com\/blog\/wp-json\/wp\/v2\/users\/4"}],"replies":[{"embeddable":true,"href":"https:\/\/www.ingridjarisz.com\/blog\/wp-json\/wp\/v2\/comments?post=831"}],"version-history":[{"count":10,"href":"https:\/\/www.ingridjarisz.com\/blog\/wp-json\/wp\/v2\/posts\/831\/revisions"}],"predecessor-version":[{"id":843,"href":"https:\/\/www.ingridjarisz.com\/blog\/wp-json\/wp\/v2\/posts\/831\/revisions\/843"}],"wp:attachment":[{"href":"https:\/\/www.ingridjarisz.com\/blog\/wp-json\/wp\/v2\/media?parent=831"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.ingridjarisz.com\/blog\/wp-json\/wp\/v2\/categories?post=831"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.ingridjarisz.com\/blog\/wp-json\/wp\/v2\/tags?post=831"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}