Magic Thinking
One of the things that is holding up a real recovery in the real estate market is the unwillingness of many would be homesellers to realistically price their properties to where the market is today. Not many want to accept that their property’s market value is as low as the market says that it is. I read an interesting article on this very thing a little over a week ago which called it “Homeowner denial“.
A recent Coldwell Banker report showed that more than three-quarters of its real estate agents surveyed said most sellers have unrealistic initial listing prices for their homes.
Likewise, an unscientific study released last week by real-estate Web site Zillow.com found that half of homeowners polled think their home’s price has increased or stayed the same in the past year.
“We expected people to get a little more in touch with reality especially over the summer, because you couldn’t turn on the TV or read the newspapers without seeing that home prices are falling,” said Amy Bohutinsky, a spokeswoman for Zillow.com. “It was very surprising to see this kind of disconnect.”
In fact, the median sales price of an existing home dropped 9 percent to $191,600 in September from a year ago, according to the National Association of Realtors.
Here in Ada County, that median home sales price has gone from $235,000 in September of 2007 to $207,900 in September of this year, a decline of 12%. We’ve seen home prices decline by roughly 1% per month since the beginning of the year by this measure. In some neighborhoods it is even higher, depending on how many homes are for sale nearby, or how many short sales there are.
Another thing affecting the whole market, besides overpriced listings, is that so many home sellers are drifting down with the market. Already reluctant to put what they feel is “too low of a price” in the first place, many sellers take a small price reduction every month, hoping to find where the buyers will start “biting”. The trouble with this strategy is that most of the other owners are doing it as well. No one is gaining an advantage and getting their sale, so all the houses trickle lower together. Everyone follows the market down.
Some owners finally get a sale, but then run into the other problem with this scenario… difficulty getting the appraisal. After the last few years, who could have imagined a time when a home had trouble appraising at a value sufficient to make the mortgage loan? But that is indeed where we are right now in the Treasure Valley. Our area has been classified as “Declining”. The practical effect of that is many underwriters taking an appraisal and reducing it another 5-8%. Some homes in our area have had problems making value, throwing the whole process into turmoil.
Bottom line? Believe what your Realtor tells you about the market price your home can be expected to bring today. The old trick of pricing it a little high and letting the market reach up to get you has not worked in years, yet we continue to see it. If the goal is to sell the property, and if you really must move on, then price it where it will sell. There is no magic in this market, and there are no agents who can really sell your property for what it might have gotten last year, or what you “need”, or what you “know it’s worth”.
bill | General Information, Real Estate Market
