Market Psychology
June 7, 2007
Have you ever attended an auction? Some items will sell for less than low end of the estimated range and some will far exceed the range. If you have attended an auction, either a professional one at Southeby's or a local one or a fundraiser at your favorite charity, you have seen that when there is desire on the part of more than one bidder, the price goes up. Conversely, when no one starts the bidding at the low range, the auctioneer will continue to lower the opening bid until someone bids. Of course, it sometimes happens that the item is set aside and removed from the sale.
It has recently occured to me that the real estate market shares some similarities to an auction environment. A property is offered by a seller at a listed price. The property is viewed by prospective buyers who either make a "bid" or wait for the next property to come on the market. Multiple bidders drive prices up; one or no bidders can drive prices down; or the seller can decide to remove the property from the market.
The hot market of the past several years was like the auction last Sunday at the Los Angeles Modern Auctions. It seemed that a multiplicity of buyers wanted an Andy Warhol print of Marilyn Monroe and the final sale price was almost 10 times the estimate. The desire for ownership drove the price. So it was in 2004 and 2005.
We are now in a market where there seem to be few bidders and the prices of properties offered for sale are often higher than the prices buyers(bidders) are willing to pay. Interestingly, this is a market where buyers can acheive a better value than they could in the past hot market. Think about it! Now is really the time to buy.
My question is: Why are buyers so reluctant to make offers? What would cause them to write an offer? Click on "comment" and give your opinion. No need to register or even id yourself. You can just be anonomous.
Have you ever attended an auction? Some items will sell for less than low end of the estimated range and some will far exceed the range. If you have attended an auction, either a professional one at Southeby's or a local one or a fundraiser at your favorite charity, you have seen that when there is desire on the part of more than one bidder, the price goes up. Conversely, when no one starts the bidding at the low range, the auctioneer will continue to lower the opening bid until someone bids. Of course, it sometimes happens that the item is set aside and removed from the sale.
It has recently occured to me that the real estate market shares some similarities to an auction environment. A property is offered by a seller at a listed price. The property is viewed by prospective buyers who either make a "bid" or wait for the next property to come on the market. Multiple bidders drive prices up; one or no bidders can drive prices down; or the seller can decide to remove the property from the market.
The hot market of the past several years was like the auction last Sunday at the Los Angeles Modern Auctions. It seemed that a multiplicity of buyers wanted an Andy Warhol print of Marilyn Monroe and the final sale price was almost 10 times the estimate. The desire for ownership drove the price. So it was in 2004 and 2005.
We are now in a market where there seem to be few bidders and the prices of properties offered for sale are often higher than the prices buyers(bidders) are willing to pay. Interestingly, this is a market where buyers can acheive a better value than they could in the past hot market. Think about it! Now is really the time to buy.
My question is: Why are buyers so reluctant to make offers? What would cause them to write an offer? Click on "comment" and give your opinion. No need to register or even id yourself. You can just be anonomous.
posted by shirley harry at 8:35 AM
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