When the real estate bubble “burst” in 2007, the market as we knew it completely changed. But then, in typical post-bubble-bursting fashion, the market started to recover in 2012.
Since 2012, two things have become very apparent to me…
First, like never before, location has become even more important. Certainly the expression location, location, location has been around for some time and location as a value criterion has always been important.
That said, after the 2012 rebound started, I noticed that, while many properties have fully recovered in their asking price value, those properties in challenged locations did not rebound as fast nor did they ever return to their pre-bubble value. Buyers are no longer willing to compromise on location the way they once did.
The second thing I have noticed since that time is that buyers want to feel like they are getting a value.
For the longest time, especially in the area of the country in which I work, it had been a sellers’ market. In the pre-2007 market dynamics, sellers could make the most terrific demands and buyers had no choice but to meet them if they wanted a particular house. Buyers understood that, even if they didn’t want to meet the demands, there was always a buyer right behind them who would. Buyers didn’t like it, but what choice did they have?
After the bubble burst, buyers got to take a turn in the driver’s seat and they were responsible for determining the value proposition of a deal. All of a sudden, they got a taste for what it’s like to call the shots on a deal and trust me, they liked it! Who could blame them.
Now that we are in post bubble equilibrium, that is one aspect of real estate that buyers are not willing to cede to sellers. Sure, sellers are able to ask for more money for their properties than they were able to ask from 2007 to 2012 and they are likely to get it. BUT, they will only get it if their home offers a good value for that higher price.
Buyers are no longer willing to settle for less-than-perfect houses that are priced like perfect houses. They are not willing to pay when they do not obviously see the value. Buyers simply will not buy when their value ideals are not met.
So, when I read the above quote by Jack Welch, the retired CEO of General Electric, all I could say was, true that!
Welcome to the Value Decade!