Tuesday, February 12, 2008

Price gridlock

Why do so called real estate "professionals" have such a hard time pricing a home. 98% of the homes on the market are overpriced. How do I know, because they are not selling. If they were priced correctly they would sell!

The market is declining. Only an idiot would dispute that fact today. Nearly every economist worth a damn is predicting California prices to continue falling into 2009. The IE is in especially bad shape as is the central valley. We are likely to see prices decline 50% to 65% from peak according to some of the more bearish economists. So far prices in the IE are down nearly 30% from peak prices.

So, once again I ask "why do real estate professionals not price homes correctly?"

We are in a declining market. The riverside median price is dropping at roughly 4% per MONTH. If a comp that is 3 months old is used to set a price, that price is already 12% too high when it hits the market. What should be done is to take a recent comp and price the home 10% to 20% below that. If the house is "below market" it will get multiple offers. If it does not get any offers then it is still too high. Drop the price 5% per month until you get an offer. DO NOT CHASE THE MARKET DOWN. It's a race, get ahead of the declining market and it will sell.

I have seen a few (very few) homes that came onto the market well below the other homes in their area. Guess what? THEY SOLD! All of them sold for above asking.

Here's a tip for any realtors that might read this. PRICE THE HOME WELL BELOW THE COMPS! It's not like the home is going to sell for 50% below market. If it is indeed priced below current market it will get offers above asking. It's like every realtor in SoCal has forgotten how to SELL a house. It's the price stupid!

This applies to delusional sellers too. Pull your heads out of your butts long enough to get a whiff of reality. Price your home below recent comps!


Anonymous said...

Amen!! Your right on the money!

Buttermonkey said...

X, the problem is the home owners. Most of them are still delusional right now and the agents can't force them to list their homes at reasonable prices. So, the agents take the listing in hopes that the owners will figure it out after 6 months of no offers and drop the price.

Anonymous said...

The agents can force the sellers by refusing to list the home. If all the agents refused to list homes at stupid prices they would have no choice other than FSBO. They could get the ball rolling by pricing all the repo's better. They are still pricing repo's like it was mid 2007. Hell I've been to several up in Lake Hills that are priced higher than I can go buy a brand new home for from the builder. Who's going to pay $500k for a repo when you can get a new home (same plan) for $450k or less. Oh yes, please let me pay an extra $50k for those stained carpets and dead lawn. god damned retards....

Anonymous said...

"They are still pricing repo's like it was mid 2007."


Anonymous said...

The refusals are happening, but as long as there are inept realtors--no shortage it seems--someone will whore themselves out for the listing.

A year after I sold in Oside, the purchasing couple got divorced and called my agent--Chris Heller. I sold 2005, they decided to sell summer 2006.

Market was starting down and Chris told em what he could sell it for. They balked, he walked. They wanted to list at 10% over the 2005 purchase price to "cover expenses." They did have some flesh in the deal (20% down, 30 yr fixed).

They found a realtor who would say what they wanted to here, than another, than a third before finally selling 10% off orig. purchase price.

Assume the only saave for that wound is the fact they got out early 2007. Their neighbor 'jingle mailed' his place back to the bank and sits unsold at 25% off his orig. purchase price.

Anonymous said...

I don't think sellers CAN go much lower, for they owe too much on the home!! Maybe this should be directed to the banks who now own a lot of homes.

papasmurf said...

Boy, I wish every realtor in the US would read this post....

If sellers can't go lower then they should pull the home off the market and continue to make the payments if they can. What is the point of listing a home at a price where it will not sell. If they HAVE to move and can't sell the home for what they owe, then save us all the trouble of weeding through another useless listing and mail the keys to the bank.

Everyone likes to think their home is worth a gazillion dollars but it's only worth what the market is willing to pay. Right now the market is willing to pay 2003 prices (roughly). In six months it will probably be 2002 prices. If a seller cannot sell at that price then the home should NOT be on the market. It justs wastes everyones time.

Briar said...

Not really a bubble sale, but back in 1999 I had to sell my townhouse in Tennessee because I'd accepted a faculty position at a university in Mississippi. There were several others for sale and they had been for sale for months and months. I looked them up and they were all asking unbelievable prices. I knew what they paid since we all bought new from the developer. I priced mine 99k to be sure I got all the "under 100k" shoppers and I sold it to the first person who looked at it. My neighbors all rushed over when they saw "sold" put up on the sign the same day it went up. "How did you do it?" they asked. "Your agent must be incredible!" I just had to chuckle. They would find out how I did it when their agents told them the comps in the development had just taken a big hit. Sure, I could have sold it for more if I'd been willing to let it sit for months, and pay a mortgage in Tennessee while paying rent in Mississippi, a hit my budget wouldn't have taken.

I guess I've always been a housing bear.

golfer_X said...

That's the CORRECT way to sell anything. Price it aggressively and you will probably sell it. It's human nature to want to get as much as you can. But the unfortunate fact of this market is that a home will be worth less next month and way less in 6 months. Holding out for top dollar is a sure way to end up with bottom dollar or worse no sale at all and maybe a foreclosure.

In 93 my neighbor listed his house for $124k, he paid around $100k in 88. After about 6 months he got an offer for $114k but did not take it. He said "he was not going to give it away". THREE years later he finally sold it for.....$104k.