The Slinky Factor

07/09/2004

Last month I suggested that August might be a wild card month and I’m happy to report that it was just that. Sales were quite brisk this past month and as always, listings were ample. Sale prices remain strong, however certain price ranges are practically overflowing with inventory. And that is what I want to address today.

When a market begins to slow in activity in what would normally be a hot price range, prudent Sellers in all price ranges should take notice. In our local market today, the price range that appears to be overloaded is $249,900 to $289,900. A glut of well-priced and overpriced properties is stagnating in this range. It would appear that the only sales in this range are those that are very good value. Many homes in this range are being reduced due to the lack of activity and still more are being listed each week. So where does this leave us?

When a price range becomes sluggish and competition is thick, anxious Sellers reduce to the next lowest price bracket and their homes become very good value. These properties are snatched up by discerning Buyers. When enough of these properties eventually sell in the lower bracket, a trend is set and a new price point for similar quality homes is established. This leaves a gap between the subject price range and its next highest price bracket which has no choice but to fall. Similarly, the next lower priced bracket which the subject price range is now infringing upon becomes compressed and has no choice but to exert pressure on the next lower price group of homes – and so on and so on in each direction. I call this the slinky factor, as market fluctuations work much the same as the popular toy.

Although prices have not begun to fall on mass, I believe strongly that after the American election is over, interest rates will rise and that will put even more strain on this overloaded price range. Eventually something has got to give, the slinky factor will take over and prices across the board will fall.

Now, don’t panic. Unlike the stock market, real estate prices do not fall over night, but make no mistake – This Market has long since peaked and prices will fall within the next quarter or so.

Bottom Line If you’re planning a move, don’t delay, just get on with it and above all – Be Realistic! Thanks for listening!

This is Rob Thompson saying, “Good Luck and Good Selling!”

Rob Thompson has been helping families make the right real estate decisions since 1985 and continues to do so with his Team Of Professionals in the communities of the 416 and 31 corridors. rob@robthompson.ca / 258-MAXX (6299)

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