Are Prices Falling?

Dear Pat,
Is it just my perception, or is the recent home buying frenzy beginning to die out? Our friends finally got an offer, not quite up to their asking price, after 8 days on the market. What happened to multiple offers? We're going on the market soon, and we're concerned that it may be . . .
--Too Late For Us

Dear Too Late,
Not to worry, house prices in Seward/Longfellow are alive and well. The "frenzy" you long for (a sentiment not shared by frustrated buyers, or their agents) occurs most often in the first quarter of the year. For some mysterious reason the months of January and February feel like Spring to buyers, while still chilling sellers to the bone. Thus every winter we experience a rush of buyers searching furiously through a relatively small selection of available houses, and competing with offers often far above the asking price. Later, in the Spring, inventory begins to catch up to demand and fewer multiple offer situations occur.

But the law of supply and demand isn't the only factor affecting your perception, Too Late. Equally important is the way we price homes in the first place: no one knows how high the market will rise in the new year until the houses start selling, so early-year prices are based on the past year, with a little added in anticipation of high demand. It's not unlike an auction, when bidding from buyers ultimately determines value. Realtors carefully watch the final prices of these early-year sales, as they perform market evaluations for sellers in the Spring. So a house placed on the market in May is likely to be listed at a price equal to what multiple offers brought a similar home in February. If multiples occur less often after the first quarter it's simply because the price increase has already been established-in other words, your friends probably sold their home for more money than any of us thought possible in January, before the first homes sold this year.