What Sells Homes in This Market: Price, Price, and Price
There is an interesting editorial over at Bloomberg by John Wasik today on selling homes in a down market. He goes through the typical litany of how down the housing market is, but inside of the piece he discusses what will sell a home in this market.
He focuses on pricing a home correctly, and I think he is dead on. I was out doing an information look at housing recently in a seaside southern city and was amazed at the huge distribution in housing prices. The city had seen a huge run up in housing costs, from an average of 185,000 in 2001 to over 400,000 in 2006. Now there is not a street that does not have a home for sale.
But driving around the housing prices were still priced with the full appreciation even though any logical person would scream that there are way to many homes on the market. It seems that the paper profit has been locked in by all parties and no one wants to be the first to cut their prices.
So the inventory is just sitting, lots of empty homes, builders asking for the moon, and real estate agents living on beans and rice. Yet we did come across a couple of homes that accepted reality and had cut their prices. My guess is that the next time I am looking in this city these homes will have been long been sold while the others whither on the vine.
When you price your property, you need to employ a strategy that can run counter to your emotional perception of the home’s value. That sometimes means listing at a price far below what you have anchored upon.
Like any commodity, a home’s price will follow supply-and- demand trends. In theory, custom homes in desirable neighborhoods should hold their value. Other properties should be discounted depending on how many similar homes or condos are on the market. Every market is different, though.
“If you don’t get any calls on your listing price after a week, drop your price $10,000 or about 2 percent of your original asking price,” Morgan says.
“The market will tell you what the price of your home is. You better be priced 10 percent under your competition — and then be prepared to think about accepting offers under that.”
I know that’s a disheartening strategy. Yet if you have to sell now, you need to take an honest look at housing inventories in your area. via John Wasik at Bloomberg.com
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Comment by Louisville real estate on 19 November 2007:
Great article, and I definitely agree with what you’re saying!
Comment by Real Estate Investor Girl on 19 November 2007:
Although setting a proper price is important, lowering the price will not necessarily sell the home in this market. What I would use for an article is What Sells A Home In This Market: Financing, Financing, Financing
You are still subscribing to the theory that a lower price will sell, when in this market getting the financing is the problem.
Comment by Briggs in Hawaii on 20 November 2007:
I have to agree on the pricing and disagree on the financing. If you’re not priced at or below (okay…below) the competition, financing doesn’t come into play because there are no offers. Of course, convincing the sellers of that (because the KNOW how much their house is worth) is quite a challenge…
Comment by Greg Loe on 20 November 2007:
Can we please stop all of the doom and gloom?
As you have probably have seen in the news, the real estate market has been going through some big changes, good and bad. Our local market had years of double digit growth that became unsustainable. At the same time as the slow down, lenders were getting hit hard with record foreclosure rates. The driving force behind the problem was a meltdown of the sub prime mortgage market that had been making risky loans.
While many other areas of the country are reeling from all of this, Washington State has held strong with low unemployment and economic growth. Although, the pool of real estate buyers in our area has dried up, buyers from California with all cash offers and high risk loans for buyers with questionable credit scores have gone away the home values are NOT in a free fall as has been reported in some of our local papers. The high inventory is a direct result of the scarcity of buyers due to the stricter lender guidelines, seller’s high expectations and public opinion. Recently a story was printed that the average sales price in Pierce County had slipped twelve thousand dollars yet, in reality, last summer and fall, it was difficult to find a jumbo loan. A jumbo loan is a purchase price over $417,000. The average reported on did not include many of the upper end properties we normally see selling in the late summer, thus pushing down the average. I believe that the average prices on homes under $417,000. have been steady increasing, though not at the double digit rate that sellers have come to expect.
On a positive note, this situation has created new opportunities for investors looking to purchase rental properties that can cash flow now. The rental market is hotter than it’s been in years and the reality is people are working and everyone needs somewhere to live.
Buyers looking to move up from a starter home to a jumbo type property have lots of good properties out there to choose from. Mortgage interest rates have remained low and available for those with good credit and the jumbo programs have started to make a comeback. Analysts are saying that the market is poised to come storming back this spring.
Remember when the high tech stocks crashed, I still scratch my head and wonder why I didn’t buy, buy, buy!
Gregory Loe
Better Properties North Proctor
2609 North Proctor
Tacoma, WA 98407
253-906-4563
gregloe@hotmail.com
Comment by Eric Rojas on 20 November 2007:
As an “honorary” Cuban, I like beans and rice.
That said… it’sprice, location, location, location and… condition of the home.
I have a listing in a building where two other exact floor plans went on sale. The one that shined the most, sold for more than our asking price in a week (condition). The price was comprable to market the last couple years.
Than, one unit with less updates but priced 15K below us, sold in a week (price).
So, we were in the middle of these two in Price and Condition… and we are last man standing. Geez.