A broker typically works hard to help homebuyers and sellers close a deal. Ongoing economic uncertainties and a climate of fear have some notable agents doing the opposite these days.
High-end brokers in Orange County are cautioning sellers against making drastic moves to make a deal, as coronavirus concerns and its effect on the economy have made it challenging to understand where the current market is—and how much pricing will be impacted.
“We are operating in a vacuum, and we won’t be able to see what market we have until normal buying activity resumes,” said Rob Giem of Compass. “When it does, we will likely be at an impasse for a period of time as buyers and sellers navigate the new market.”
While some notable homes have traded recently, many were put in place before the stay-at-home orders were issued in March, notes Giem.
A price reduction as a move to gain new buyer interest might even go unnoticed, said Arlen Raubach, also of Compass.
“It’s like there are Fourth of July fireworks happening; nobody will notice anything else,” Raubach said.
No Proof for Now
There will ultimately be an adjustment period; brokers point to a potential 10% to 15% drop in sales volume in 2020.
Still, “few of these owners will be forced to sell,” Giem said.
“They may adjust, but I am doubtful it will be enough to incentivize many buyers.”
But with “no proof” as to where the market currently stands, sellers in the high-end market range of $10 million and above, often non-necessity deals, are better off holding on transactions rather than give into a preemptive price reduction before the new market is better understood.
“Giving in to lower prices is giving in to the fear mongering,” Raubach said.
“A price reduction is not going to change anything, especially since very few individuals are willing to spend $10 (million) to $30 million on a home they aren’t able to tour in person.”
Meanwhile, potential buyers are hoping for discounts, a wish that might not come true for some time.
“The year started off incredibly strong, and when the pandemic hit, some buyers thought they could exploit the opportunity to find discounts and drive deals, but sellers held their position,” said John Cain of Pacific Sotheby’s International Realty.
Cain notes that he is optimistic about recent market dynamics, noting that new signs of consumer confidence, low interest rates and a shortage of inventory have driven increased demand.
“While it’s not going to be gangbusters, I think we will be on better footing as we head into June,” Cain said.
LA Demand
Recent demand has been driven by interested buyers from Los Angeles, with many looking at Orange County as an opportunity to stay close while being removed from the city.
“It’s like what the Hamptons saw with buyers from New York City,” Giem said. “In the digital age, many executives can manage their business interests remotely—allowing them to live where they please.”
Raubach notes this is true for The Strand in Dana Point.
“I’ve heard from several Los Angeles buyers that are interested in The Strand, which offers the best parts of L.A., plus added privacy, with brand new homes.”
