Sales that close over their list price are tapering off now.
It’s not as bad as it was in 2022 when rates began their rise, but you can see that last year the percentage was steady through summer. Maybe our faster start this year exhausted the enthusiasm earlier?
Of the 38% of sales that closed over list, just over half of them were under $2,000,000.
The pricing enthusiasm is cooling off too. Note the relationships between the DOM (days on market) and the discounts below. Exactly NONE of the these homes sold over their list price after they were on the market more than seven days:
The controversial local brokerage in Los Altos was offering a measly $10,000 commission to the buyer-agents on their listings, most of which were $4,000,000 and up. They listed a similar house on a quiet street about a mile away for $2,988,000 and then marked it pending a week later.
So I followed their lead and priced my listing at $2,995,000 even though mine needed EVERYTHING and was on a heavily-traveled street.
I wanted to prove that paying 2.5% commission to the buyer-agent would cause a better result.
Theirs closed for $4,200,000 (and was put up for rent for $2,900/mo).
Mine sold for $4,200,000 too, but then our buyer-agent volunteered to cut 1.5% of her 2.5% commission and deduct it from the sales price. In those cases, the lender has to get the appraiser to re-issue their appraisal at the revised price – but she forgot, which delayed closing for another week. I’ve never prayed so hard for an earthquake not to happen!
I don’t know if the agent on the other sale only got paid $10,000 to support her buyer with paying $1,200,000 over their list price, but she deserved more.
But combined with my buyer-agent being so generous, and the other comments at open houses, the agents around the Silicon Valley are so desperate that they are begging for business. The amounts buyers pay over the list prices indicate the same.
I still think my result was better than the $10,000 guy due to our harsh condition and busy street. But I can’t say that the 2.5% made any difference at all.
We can probably come to this conclusion though. In a scorching-hot entry level market, you don’t need to pay much to a buyer-agent, if anything at all. If the buyer-agent is smart, they will have their own agreement with their buyer to cover it.
In areas where the actives-to-pendings ratio is 4:1 or higher (Rancho, I’m looking at you), paying a reward or bounty to a buyer-agent is worth considering. Is that steering? No, it’s America, where paying incentives to get what you want should be legal and encouraged.
There were 23 buyers who paid over the list price last month. There were 29 in the previous month, but because there were 20 fewer sales in December, the percentage looks much larger.
Cash buyers purchased 41 of the 107 sales, or 38%.
Fifteen of the sales were round-tripped (buyer and seller represented by the same agent). Thirteen of the sales had zero days on market. Of those, six were round-tripped.
With all the desperation among realtors due to the lower volume, you’d think the shenanigans would be rising faster, but those numbers are fairly normal. Last January, there were nine of the 105 sales that had zero days-on-market.
Our lousy pricing metrics stayed towards the higher end of the 10% range:
NSDCC Monthly Sales and Pricing
With the hot CPI report today, mortgage rates should be heading higher and take some of the buzz out of the marketplace. Get an FHA or VA mortgage and save 3/4%!
The total number of December sales is up to 86, and there’s a chance it might get to 100 but it will probably take another month before all the late-reporters check in. But we saw that 12 buyers were willing to pay $100,000+ over list , and the 34% is a nice pop for what should have been a very quiet December!
NSDCC Average and Median Prices by Month
The lousy way we measure pricing makes it look softer than it has been over the last few months, but compared to last December, it’s virtually identical. Chalk it up to cheaper houses selling in December!
It’s amazing how resilient the local market has been, and how willing buyers are to paying over the list price.
I don’t have any evidence to suggest that the transparency has improved (most listing agents refuse to say anything about existing offers, if any) and usually there aren’t any recent sales to indicate that today’s listings are underpriced.
Yet in late-2023, buyers were still willing to pay substantially above list! Here are a few examples:
If there was going to be a time when the local market might soften up a bit, it would be around November/December, wouldn’t it? If the majority of the recent sales closed at 10% discounts or more, then it would be nervous time, but most buyers are still paying fairly close to list – or higher.
We’ve had 47 closed sales in December so far, and pricing is holding up. Next year probably will too!
There were 18% of NSDCC November sales that closed over their list price, which was better than 2022. The YoY pricing metrics have popped as well – all are at least 18% HIGHER THAN LAST YEAR:
NSDCC Monthly Sales & Pricing
The number of sales should drift up to last year’s 118, or maybe a tad more.
The number of sales and percentage of homes that closed over their list price were better last month than they were last October, but that’s not saying much.
The late-summer surge has subsided, and the last two months of 2023 should bring in a couple of hundred more sales without much change to the pricing stats.
A look at the individual sales is more volatile though. This price point used to be 100% over list:
