One of the time-honored ways to judge the strength of the real estate market is by the months of supply available at any given time. In order to derive this number, we take the houses currently listed, and divide by the average number of sales per month, to get the number of months it would take to "use up" the current supply. During the recession, most parts of the country had a huge backlog of homes listed, including many places with more than a year's worth of homes for sale.
Last week, I was on a call with owners of real estate firms across the country, and recovery was in full swing. The way they expressed this was in the decline of supply, making their areas more sellers' markets than buyers' markets, meaning that buyers no longer had the advantage of dozens (or hundreds) of homes to choose from, since supply had dropped in most places to a few months' worth at most.
In our market, we appear to be lagging, as I have said in recent posts. Although our market has improved a great deal, we still have a greater supply than other places. According to MLS figures, we have 7 months of homes under $300,000 available, 15 months of homes between $300,000 and 1 million available, and 31 months of homes over a million available. This last number means that, if no new homes over a million went on the market from today forward, it would take over 2 and 1/2 years at the current rate of sales for the current inventory to dry up.
It's not quite as black and white as it may sound. Many houses listed now may be overpriced, have something wrong with them, or may never sell. Therefore, a seller putting on a home now should not think that his/her own home won't move for over 2 years. He or she should, however, realize that aggressive pricing, especially in our area, is still important.
Showing posts with label pricing aggressively. Show all posts
Showing posts with label pricing aggressively. Show all posts
Monday, February 4, 2013
Monday, November 16, 2009
More Confirmation on Pricing
The lead article in yesterday's New York Times Real Estate section confirmed yet again what real estate practitioners know, but are often unable to convey persuasively to others. It gave examples of sellers who priced their units aggressively in today's market, and kept lowering the prices without success. It contrasted that with sellers who priced so as to seem to be a "good deal", and told about the bidding wars that have been taking place in such cases.
Underlying this phenomenon is a change in the marketplace from the past: Now buyers, who get more information through the Internet and by looking at more places before buying, are more educated about prices than they used to be. They can tell when something is priced to sell, and they know that they have to move quickly. They also know that, often, there will be multiple offers; therefore, if they want to get the property, they may have to bid over the asking price.
This has happened to us so many times that we can all attest to its effectiveness. We cannot, however, seem to convince sellers that they will actually receive higher offers by pricing the property lower. It's not unlike the psychology of pricing store items at sale prices, to stimulate demand and encourage prompt purchases. Of course, the seller can always reject an offer, if it does not meet his or her specifications. The point is to get offers, particularly to get enough offers to assure that fair market value is established.
Separating oneself from the pack is key in this market. Unfortunately for our business, pricing aggressively does that!
Underlying this phenomenon is a change in the marketplace from the past: Now buyers, who get more information through the Internet and by looking at more places before buying, are more educated about prices than they used to be. They can tell when something is priced to sell, and they know that they have to move quickly. They also know that, often, there will be multiple offers; therefore, if they want to get the property, they may have to bid over the asking price.
This has happened to us so many times that we can all attest to its effectiveness. We cannot, however, seem to convince sellers that they will actually receive higher offers by pricing the property lower. It's not unlike the psychology of pricing store items at sale prices, to stimulate demand and encourage prompt purchases. Of course, the seller can always reject an offer, if it does not meet his or her specifications. The point is to get offers, particularly to get enough offers to assure that fair market value is established.
Separating oneself from the pack is key in this market. Unfortunately for our business, pricing aggressively does that!
Wednesday, September 16, 2009
Market Inventory
We recently received a market inventory study from Madison, Wisconsin, showing that higher-end properties were not selling and lower ones were. Not a big surprise, but we decided to look at our market. What we found was similar, and striking.
Properties over $700,000 are less than 3% of sales now, there are enough homes in that range on the market to represent more than a year's supply, and the sales have fallen almost in half from last year. At the lower end, under $300,000, there exists only a supply of two and a half months, sales have risen by a third, and they represent 41% of all sales. While we knew that first-time homebuyers were driving the current market, it's still fascinating to see that laid out in statistics.
Overall, in our region, prices have fallen 15% since the same time last year. If you put all these facts together, what it tells you is that you are more likely to sell your home quickly if it's in a lower price range and you price it aggressively. But you knew that already!
Properties over $700,000 are less than 3% of sales now, there are enough homes in that range on the market to represent more than a year's supply, and the sales have fallen almost in half from last year. At the lower end, under $300,000, there exists only a supply of two and a half months, sales have risen by a third, and they represent 41% of all sales. While we knew that first-time homebuyers were driving the current market, it's still fascinating to see that laid out in statistics.
Overall, in our region, prices have fallen 15% since the same time last year. If you put all these facts together, what it tells you is that you are more likely to sell your home quickly if it's in a lower price range and you price it aggressively. But you knew that already!
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