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Reality Check: Real Estate Market Has Returned to Earth

Patience, Perseverance and Perspective are Keys to Selling a Home

If Michael Matese could offer one piece of advice to anyone selling a home right now, it would be this: Don’t dwell on the past.

It’s no secret that the real estate market has taken a substantial hit in the last year-and-a-half, but Matese, a Long & Foster Realtor based in Potomac Village, doesn’t necessarily think that is a bad thing.

“It’s more of a real market now, as opposed to a market that was just craziness” when the local — and national — real estate market peaked in the spring of 2005. Sellers can no longer name their price and expect to have their homes sold in a flash, said Matese.

Laura Gilley, who runs her own real estate firm in Montgomery County and works in Potomac says the market has dipped, but is far from crashing and likely won’t.

“The market has softened, but now it has leveled off a bit,” said Gilley. “I don’t see it going down much more than it is right now.”

The key, Gilley said, is patience and practicality, and Matese agrees.

“A year and a half ago you could just put some signs in the yard, post a couple of advertisements and you could sell a house in a weekend,” Matese said.

The turnaround time on a house isn’t quite that fast any more, said Matese, who estimated that 60 days on the market is about average for Potomac now, assuming the sellers have put an effort into making their house look as presentable as possible, Matese said.

That trend is supported by Metropolitan Regional Information Systems (MRIS), which compiles data on local real estate trends.

Sampling homes that sold for greater than $100,000 and less the $5 million, 54 percent (31) of 58 houses sold in December 2005 sold in 30 days or less of their initial listing, while only five of those 58, or 8.6 percent of those sold had been listed for more than 120 days.

Compare that to November 2006, where only 25 houses were sold and of those only 12 percent (three) of those sales had been listed for 30 days of less, and it is clear that houses are not moving as quickly as they used to — 28 percent (seven) of the 25 Potomac homes sold in November 2006 had spent more than 120 days on the market.

The average time a Potomac house in the price range specified above spent on the market in November 2006 was 98 days, compared to 53 days in December 2005, and 35 days in December 2004, according to MRIS.

“It’s more of a real market now, you have to put [a house] on the market and really sell the house… you have to put some work into it [as a seller],” Matese said.

THE KEY TO moving a house as quickly as possible in this softer market, said Gilley and Matese, is establishing a reasonable price. Sellers should compare their homes with those similar to theirs that have sold in the last two to three months, not those of one or two years ago.

“As an example,” said Matese, who offered the same advice, “you can’t say ‘Gee, my neighbor sold his house down the street a year ago for 1 million dollars, I should get 1.1 million for my house now.’ That won’t happen, you’re probably going to sell it for about 950 [thousand dollars],” Matese said.

The average price of homes has not dropped drastically, but has softened a little bit with the market, according to MRIS.

The average sale price of a Potomac home in November 2006 was $1,033,400, compared to $1,074,686 in 2005 and $1,056,333 in December of 2004.

In November 2006, sellers were averaging a 91 percent return on the original listing price, compared to 93 percent and 97 percent return rates in December 2005 and December 2004, respectively, according to MRIS.

THE RECENT DROP in the market is not a bad thing, as far as Matese sees it, but rather an inevitable turn for a market in which prices were vastly inflated by speculation and demand.

“That was a market of inflated values,” Matese said. “This is a much more normal market,” and one that compares well with historical trends. The last time the market suffered a downturn was in 1996 and 1997, and the situation was a lot worse then than it is now, said Matese.

“Ten years ago was a lot worse than right now, nine months [for a house on the market] was pretty average and six to eight months was very common. We’re not there now; we’re at a very normal market right now.”

As long as sellers are willing to be reasonable and patient, said Gilley, they will be able to sell their homes.

“Keep it priced within the market,” Gilley said. “Don’t overprice it, if you keep it priced in the range where prices jumped up to [in 2004 and 2005], you won’t get what you’re looking for.”

“My advice,” said Gilley, “is just to have patience and wait … there is a buyer for everything. Price the house realistically — that’s the bottom line … and just be patient.”