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!