What Does It Mean For a Home Seller If House Prices Fall?

How do you handle a drop in the market as a seller?

If we know anything about the stock market it is there is one key fundamental and two key ways to achieve it.

Fundamental - Buy low. Sell high. 

Achievement method one - Look for quick short term gains.  Under valued stock and/or companies that are on the verge of something new, big or wonderful. (Usually individual stocks) 

Achievement method two - Buy something stable and dependable now and put it away and know that in 25 years it will be worth more than it is today. (Usually mutual funds or bonds)

The housing market really isn't that different.  If you buy in a hot market you are poised to get quick returns. For the most part the big gain in housing happens over time.  If you purchased just before the market crashed in the early 90's and tried to sell after the crash, you would have lost thousands. That same house would show a total value increase today worth much more than any loss you would have felt.  Long term smooths out the ups and downs of the market with a general overall increase.

With fear starting to penetrate into the media about the "cooling of the market" people are starting to wonder what will happen. How will people deal with the news that their house they just purchased 2 years ago is worth 10 or 15 percent less then what they bought it for?  Is that even going to happen?

The good news for us here in the Kitchener, Waterloo, Cambridge and Guelph is that predictions for 2013 are to be steady through the year.  The bad news is if there is a correction in the major markets it could send a spiral through the media that will affect the market here.

As someone looking to sell a home in a market that is flat at best with potential for decline the most important factor in selling is price.  Anyone looking to buy will also be aware of the market conditions and they will be looking for homes that are more aggressively priced.  If you purchased a few years ago for $300,000 and your home has only seen a moderate increase and market value is $310,000 a $15,000+ real estate commission puts you at a loss. A $1,500 marketing package puts you at a gain plus gives you the advantage of being better priced then your competition using a real estate agent because in order to break even they end up over pricing at $320,000.

Typically in a volatile market it is best to hold on for the long term increase, specially with the low interest rates.  If you have to sell though, you really need to look at the dollars and sense (yes I meant sense and not cents).

M