It would be natural to assume that home buyers are much more concerned about paying the right price today. Certainly, they will be perusing the recent sales very carefully, won’t they?
I’m not so sure.
Putting a sharp price on a home stopped being a priority about 25 years ago with value-range pricing. Then the frenzy obliterated it when paying $100,000 to $1,000,000 over the list price became the norm.
Have we succumbed to relying on the zestimates? Pretty much, and buyers who are in a hurry and think the zestimates are close enough will proceed with the purchase unless the spread between the zestimate and the list price is more than 10%.
What matters more is the condition of the home.
Back in the day, people were more tolerant of doing home repairs – but not now. They don’t have the time or know-how, and if they have to pay these prices, they expect more…and you can’t blame them.
Maybe the idea about pricing your home attractively isn’t for you. If the plan for selling your home in the spring is to set a new record-high list price, then it would be smart to fix everything that is visibly wrong.
Because at this point, we can say that buyers prefer to purchase an immaculate home in top condition, more than they worry about getting the price exactly right.
If you hire a salesman (like me) who knows how to pit buyers against one another to run up the score, the attractive pricing is the critical part of the equation. But if there is a struggle with attractive pricing, then doing more to spruce it up will at least ensure that you’ll get more eyeballs. Hopefully, that will be enough!
There’s a big difference between low offers, and no offers.
If you are getting low offers, you probably didn’t fix it up enough.
No problem, you figured you’d have to sell it for less, didn’t you? Expect that buyers will want a discount that will be 2x the actual cost of repairs/improvements, because it will be a hassle for them too. Whoever does the work deserves to be compensated for the time-and-hassle factor.
If you aren’t getting any offers, well then that’s different. Your price is wrong.
I know, I know…..what does it hurt to start a little high? You can always come down later, right? Unless a neighbor beats you to it, which can leave you hung out to dry.
Think of what happened in Carmel Valley when the active listing down the street lowered their list price from $1,750,000 to $1,650,000. My listing was superior in almost every way, so when I came on at $1,599,000, mine was the obvious deal.
I still helped them out by closing two weeks later for $1,660,000, but only because I recognized that somebody had to stop the bleeding. Look at how the others that sold had been bludgeoned on price after testing the market for weeks:
If you are getting no offers, you should react quickly and get in the game by lowering your price – before someone else beats you to it. Once a home is on the market for 30+ days, they are going to get low offers.
You can’t count on the one who submarines you to be so good at this that they will start a bidding war and sell it for more. If theirs sells for less, where does that leave you? Higher and drier.
Shadash said, “Right now the only thing propping up prices is limited supply.”
Indeed, and it’s how the pricing got here in the first place. The demand for homes in the San Diego coastal regions has been higher then the supply for decades now, and it’s probably not going to change that much – at least, not until more of the existing homeowners want to leave town or they go out feet first.
When selling, those who own the one-story homes will fare better.
It’s already happening – the market is splitting into one-story homes, and everything else:
The buyers who need a big house are comforted in knowing they will pay less per-sf, but their appreciation rate will lag behind. The only thing that will inhibit an even-greater appreciation rate among the one-story homes is that we are transitioning into a market with more estate sales – which will primarily be fixers.
Either way, the current NSDCC pricing averages and medians are still very positive year-over-year. Nobody who sells next year should mind selling for more than they could have gotten in 2021.
It’s not that bad!
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It’s tempting to believe that it just takes longer to sell now. It’s brought on by the common thought among most home sellers; “Heck, I’m in no rush, I don’t need to sell, and I’m not giving it away!”
This is especially true for the higher-end homes.
I’ll never forget the RSF agent a few years back who mentioned that her listing was having its 1-year anniversary, and she spoke about it with pride, like it was her child having their first birthday. But we’ve been hired to sell the home, not just stay busy with showing it forever.
There is a fact about real estate sales in every market, everywhere:
The home that is the best buy in the marketplace will be the next one to sell. The reason your home isn’t selling is because the other homes for sale are offering a better value.
In a market that is trending upward, you can put a higher price on it and some day the market will come up to meet it – eventually the future sellers will price their home higher than yours, and finally make your home the best buy in the marketplace.
But in a downward-trending market, the market can get away from you quickly.
The listing that is priced 10% too high today will look like it’s 15% or 20% too high in a month or two. It’s why the showings stop completely – buyers have forgotten all about you because the price looks worse every day that goes by. It puts the seller in a position to ‘chase’ the market down with price reductions.
We’ve had an upward-trending market for the last 12 years. Those who priced their home too high have gotten away with it, because the market eventually rose high enough to meet them, and their price. The worst part is that people now just think it’s a fact that if you wait long enough, a buyer will come around and pay your price.
It’s probably still true, but instead of taking months to sell, it could take years.
If you are willing to wait for years, don’t put your home on the market now – wait until it’s obvious that your desired price would make your home the best buy in the neighborhood.
It’s doubtful that many will take this advice, and it’s why it’ll be likely that there will be over-priced turkeys (OPTs) starting to pile up in May/June. The selling season could get hot for a couple of months, but then get submarined by the growing amount of unsolds that don’t adjust on price.
Unless rates slide into the 4s, and bless sellers and agents with more frenzy!
Home sellers and agents need to decide on a pricing philosophy.
Do you price it high, and hope for the best? Or do you price it attractively and sell it promptly?
During the frenzy, pricing high was recommended because you couldn’t go wrong – everything was selling, and the worst case was settling for list price. Most sold over. But it’s different now, and you don’t want to be sloppy about price.
If a house doesn’t sell in the first month on the market, the buyers think the price is wrong, and will lowball – and you can’t blame them (wouldn’t you do the same?). The longer on the market, the worse it gets.
Let’s discuss it openly, for everyone’s sake.
If the list price is within 5% of being right, the house will sell in the first 30 days on the market. There is 5% of slush in every market, and there aren’t enough other sales nearby to say otherwise.
Let’s work it backwards. If the house doesn’t sell in the first 30 days, we know the price is at least 5% wrong. Because buyers are going to be conservative, they will want an additional 5% discount to feel secure.
After 30 days on the market, expect a 10% discount.
Sellers can object and try to fight it, but it will take luck to beat the odds – because the quality buyers are paying attention now, and without rising prices forcing them to make hasty decisions, they would rather wait, than to jump – especially when no one else has bit in the first 30 days.
After 30 days on the market, expect a 10% discount.
If it were a widely-publicized fact that pricing attractively avoids future peril, and if we all agreed that the 30+ day penalty was identified as -10%, then sellers could properly calibrate their expectations.
After 30 days on the market, expect a 10% discount.
If you want proof, here is my last graph that charted the NSDCC November sales:
If everyone – buyers, sellers, and agents – knew a discount was necessary after 30 days, the market would behave in a much more orderly and predictable way!
Guesses of the percentage change in the 2023 national home pricing from today’s free WSJ article:
Fannie Mae: -1.5%
Goldman Sachs: -7.5%
Ivy Zelman: -12% (peak-to-trough in late 2024)
John Burns: -20% (peak-to-trough in late 2024)
The article doesn’t cover any new ground because nobody wants to commit to how this plays out.
But I’ll give you my opinion.
Prices will keep declining until realtors tell their sellers that they need to sell in the first week or two on the market, or get lowballed. To do so, they need to make their home look spectacular, price it attractively, and make it easy to show. To really improve your chances, offer a competitive commission rate to buyer-agents. Then the realtor needs to employ terrific salesmanship, and find a qualified buyer quickly.
It’s that simple!
Only 12% of the houses sold last month actually closed over their list price, which sounds normal.
There were 51 of the 115 of the sales (44%) that closed for $100,000+ BELOW their last list price.
The count of 51 broke down to 17 of 19 sales over $3,000,000, and 34 of 96 sales under $3,000,000 – where knocking off $100,000+ off the list price is fairly significant. Either realtors aren’t that great about their pricing, or they wander into lowball territory and get their head tore off.
The median days-on-market was 28 days, and the average was 41 days.
About half wandered into lowball territory, and about half sold for $100,000+ below their list price – there is a direct connection. People need to figure out how to sell the house in the first couple of weeks of being on the market, or face the same consequences in 2023.
NSDCC Average and Median Prices by Month
||# of Sales
In October, when the average and median sales price spiked, it didn’t mean your home’s value went up – the homes sold that month had a median square footage that was 12% higher than in September. Similarly, the group of homes that sold in November had a median sf that was 8% smaller than in October.
But if you do want to make a big deal of these sales prices, they are similar to those in July, 2021.
At least there were 100+ sales!
This is the first time that social media has had the chance to influence the real estate market, and as you can guess, it ain’t pretty. There are no guardrails or qualifying of the author’s opinion, and as a result, people get away with saying whatever they want.
Logically, the conscious mind will remember that real estate is local, and that you can’t believe what you read from strangers on the internet. However, if you listen to friends and family, and they have been influenced by social media, it can still play a role in your decision-making process.
It’s why we will likely get off to a slow start in 2023 – people won’t believe it, until they see it. Plus, if they don’t see it by the end of March or April, then they might even give up prematurely (buyers and sellers).
But we need to adjust our expectations of the inventory – it’s going to be lower than ever.
Two likely scenarios:
- The inventory of superior homes will be extremely tight. Homeowners are very reluctant to give up a trophy property, and if they do, they sure want top dollar. There weren’t that many sold during the frenzy, and now that they’ve ‘heard’ that the market is bad, there could be even fewer quality choices for buyers.
- The inventory of inferior homes will get picked over, with most buyers in shock over how little the pricing has adjusted for the scratch-and-dent homes. Those listings will languish on the market as the sellers patiently hope that the ‘right’ buyer is coming tomorrow, or some day soon. But once a listing has gone unsold for more than a month, we know what happens – it triggers the lowball offers.
The last two Januarys we have had contests on how many houses between La Jolla and Carlsbad will be listed for sale. In both cases, the actual counts were much lower than most of the guesses. We will do another contest next month, and it should give us a clue on what to expect for the selling season!
But we haven’t had the definitive dump on pricing that would have made it easier on the buyers, so the interpretations of the market’s direction next year will be scattered. Many will think there is more downdraft to go, and wait it out. Some buyers will think prices got more attractive, and if they can just lowball a seller out of another 10% it would be about right. Some will be able to land a top-quality home for a price they can live with – and together, these three groups will make the market in 2023.
I hope it’s obvious that it matters who you hire as your realtor – we’re not all the same. It didn’t matter much during the frenzy, because even an agent who kicked the crap out of the sale could still find their way to close over the list price.
But not now.
In today’s market, sellers risk getting lowballed, or not selling at all.
After one lowball off-market sale and three unbelievable 10% dumps on price, the entry-level market in Carmel Valley looked like it was in freefall. The sellers and I had already decided to list for $1,675,000 – and I advertised it here – but the next day, two of the dumpers closed escrow. The other listing on the street had been unsold since they had listed for $2,150,000 on June 24th, and they had just lowered their price another $100,000 to $1,650,000 on the same Thursday.
I rallied with my clients and they agreed to my strategy of pricing attractively, so we changed our list price and entered the market at $1,599,000 with the intent to sell the first weekend.
But our list price wasn’t way under market – no, it was full retail, based on those most recent sales.
What made the sale was the combined package of a turnkey property with an attractive price that was well-presented and pushed hard by the agent (me). Once I received three offers, I pitted them against each other and bid it up to $61,000 over my list price on the weekend before Thanksgiving!
The buyer who purchased my listing also bought the house on Valerian Vista (which was five years newer and the lot was 42% larger) in the similar and neighboring tract called Manzanita Trails. Yet the same guy was willing to pay $80,000 more for my listing and close in two weeks.
He had just lowballed a better house by $178,000 and it worked.
Yet, he was willing to buy my listing for $80,000 more than he had just paid the same week?
It’s a great example of how critical it is to hire an agent who has an effective strategy to sell your house.
Get Good Help – Hire Jim the Realtor!