What is a “Tornado real estate market?” Hint: you could be in 1 right now

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It is difficult to know exactly what is happening in the real estate market today.

Wall Street is all over the map, interest rates go up and down and up again, and inflation continues to linger, leaving buyers and sellers uncertain about the market situation.

These factors resulted in market activity that was difficult for real estate agents to predict, prompting Coldwell Banker Warburg Chairman Frederick Warburg Peters to coin the term “tornado market” to describe a phenomenon where a property trades quickly while a similar property languishes on the market. , presumably with little rhyme or reason.

“You can easily see Property A selling quickly with multiple offers while Property B, which is very similar, apparently doesn’t get any attention – that’s the tornado part,” Peter told Inman following the report. of the New York market brokerage in the third quarter, which was published this week alongside several other New York-based brokerage reports. “A tornado can hit the ground and completely wipe out a house, and two houses down they’re untouched.”

In addition to this attribute, there are likely more crucial factors at play when it comes to specific properties now, agents said. Namely, two homes that at first glance may seem very similar may actually be further apart in terms of condition or uniqueness, and because some sellers still feel ambitious about price – despite the market downturn. – they might unknowingly deter buyers from their properties.

Frederick Warburg Peters | Coldwell Banker Warburg

“There are two things that could go on,” Susan Abrams of Coldwell Banker Warburg told Inman. “A property can be unique – it can be a condo in a place where there isn’t a lot of condo inventory, and all of a sudden someone is building a condo and a lot of buyers want it, and so it will sell quickly in the right location, priced in the right range or maybe even priced in a luxury range But this is special and you don’t often find a property like this .”

Suzanne Abrams | Coldwell Banker Warburg Real Estate

“The other thing that I think happens is that even if you think a property is the same, you can have the exact same property in the exact same row in the building and one is in bad condition and the other is refurbished and their prices aren’t all that different,” Abrams continued. “And the refurbished gets a lot more interest than the unrenovated in this market, where people have chain chain issues. supply and inflation issues and they don’t really want to renovate, which sits idle.”

This scenario often occurs when a seller insists on a certain list price for their property when the agent has advised otherwise, Abrams noted. Unfortunately, this often ends in a tough lesson for the seller, who should have listened to their agent to begin with. Once they finally lower the price to what matches the quality and degree of uniqueness (or lack thereof) of the property, that’s when the tornado has a chance to strike.

Or, for those who prefer a different comparison, it’s like dating, Abrams said.

“I always say it’s like the girl who doesn’t have a date and then all of a sudden she has several,” she told Inman. “I’m way beyond dating…but I remember when I was in this phase of my life, I was like, ‘Oh my god’ and then all of a sudden, you know, everything just would pass at the same time.”

The data released this week out of New York certainly reflects a market that appears to be taking a breather. Across all property types, new business was down 32.2% year-over-year, SERHANT. reported, with one-bedroom units making up the largest share of condo and co-op contracts.

Peters suspected that the tornado market was having a particularly big impact on high-end markets right now during the transition of the country as a whole, and luxury agents in Los Angeles confirmed the phenomenon in their market.

Data from Douglas Elliman and Miller Samuel also reflected a slowing market with newly signed single-family contracts down 37.8% year-over-year and newly signed condo contracts down 42% year-over-year. year-over-year in Los Angeles County in September 2022.

Mia Trudeau | Beverly Hills Estates

Mia Trudeau of The Beverly Hills Estates said the gap between properties that currently sell and those that don’t comes down to the details, whether it’s the views of a specific condo or the pedigree of the property. architect of a building. For single-family residences, it can be the square footage of a property or the degree of privacy it offers.

“You’ve got a lot of really beautiful homes that are up in the hills here, but they’re on very small parcels of land and you’re pretty close to your neighbor,” Trudeau said. “So depending on the degree of privacy offered, there can be a very big setback when it comes to a specific property not offering as much privacy, even if it’s a house incredibly rigged.”

Globl Red’s Kofi Nartey echoed Abrams’ thoughts on homebuyers unwilling to work on their new home due to persistent supply chain delays and inflation and catching their eye. on properties ready to move into.

He added that door-to-door sellers who lag price trends as the market evolves were also a driving factor in the tornado market where he is based in Beverly Hills.

Kofi Nartey | GLOBL Red

“A lot of times, price is the #1 factor in terms of something moving faster in this market because it’s obvious the market is correcting and softening,” Nartey said. “But we also have interest rates that have gone up, so buyers are more picky consumers about what they’re going to buy, because now they’re still a little more stretched in terms of affordability…”

“When sellers are now pricing their properties, you have to price based on the direction of the market or you’ll be stuck playing catch-up,” he added. “Pricing ahead of the direction of the market is sometimes on par with some of the properties that have sold or even slightly lower than where similar properties have sold because that is where the market is now in the frame of this fix.”

But, what is another cause why these diverse properties don’t attract much attention from buyers? An agent who may not be doing his job well, both Trudeau and Nartey noted.

“It’s actually related to strategy,” Nartey said. “Strategy around pitching and marketing properties, creating buzz and using social media, and all the tools we have.”

But for properties where the agent isn’t the issue, Peters said it’s hard to say exactly when the property market might move into more predictable territory, but he suggested it could still be a good wait. .

“I think it really depends on what’s happening with the stock market, what’s happening with interest rates,” he said. “I think there are a number of factors that a civilian like me has no control over that will ultimately determine that… And so, I think it’s just hard for everyone to understand the value on the market in transition. And that’s why there’s this element of unpredictability that’s a bit like a tornado.

Email to Lillian Dickerson

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