How did the local home prices go up 40% in two years?
The low rates helped buyers lose their minds, but it was more attributable to how we price homes.
When there was a sale that was 10% or more above comps, it became the new standard – and made the next seller so giddy that they started from there. Prices were leapfrogging higher!
Look at how hot the uber-frenzy was in early 2022:
It was a result of most buyers paying crazy amounts just to win something:
The big difference now? While many are still paying over the list price, they’re not going WAY over. The latest 41% Over List (above) sounds like the market is on fire but the SP:LP ratio of around 100% reflects how it only takes a few bucks over the list price to win these days.
It’s a whole new world of home pricing….just when we were getting comfortable with the last new one!
With these two graphs showing more reluctance to overpaying – even when more are doing it – future sellers need to be smart about pricing their home.
If there happens to be a wild sale that went 10% over the logical comps nearby, it was probably a fluke with no guarantee that another buyer will go for it again. You see it regularly now where listings are stacking up unsold because they relied on a single hyped-up sale nearby.
What to do when pricing the next home near a sale that wildly overpaid?
Use the list price of the comparable sale, not the sales price, and ignore the one-offs.
Their list price was the logical conclusion of value last time, and what the seller was willing to take then. Any extra money paid above list was a gift to him, and not a reflection of the actual value.
Then hire an agent who is an expert at causing prices to go up, not down!
But, but Jim. MY home is so much better than all those houses.