In 2020, Sellers Will Need to Meet the Market

Next year, sellers will need to meet new real estate pricing expectations in the market. We are in the tenth year of a bull run, and pricing has continued to reach record levels. As a result, investment volumes have stabilized, but next year, Steve Jacobs of Ten-X Commercial expects pricing to decrease. When that happens, buyers will be lining up to purchase properties, driving investment volumes up.

“There is always a massive appetite for investors to purchase real estate, no matter where we are in our economy,” Jacobs, CEO of Ten-X, tells GlobeSt.com. “It is the dynamics that architect the behavior. In 2019, pricing has been very strong and interest rates have been very low. This year, I am seeing a big appetite in all sectors, and sellers are holding pretty strong on pricing. Going into 2020, I expect to see that same pattern of behavior, but a lot of economists are predicting a dip in the market. If we have a dip, sellers are going to have to lower their pricing expectations, and the buyers will be there.”

It might be challenging for some sellers to meet those expectations, particularly owners that have purchased properties at peak levels in 2015 to 2017. That segment of buyers might try to hold through a market correction next year. “If a seller can hold a property longer, they may be willing to hold it for a few more years through the dip and after the recovery,” says Jacobs. “Buying has been very different than in the last cycle. If buyers were financing at 100%, they would not be able to sell or if they had to, they would take a loss from a debt perspective. If someone has 75% LTV, they could meet the dip, although they might lose their accretive value or some of their equity. Sellers won’t want to do that, but they might not have a choice.”