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September 22, 2010

How much are home sellers dropping their prices?

With the ongoing tug-of-war between home buyers and sellers, lots of people are curious to know how much homeowners have to drop their prices to get a contract.

Here's the answer for those in the Baltimore region who sold in August: almost 9 percent on average. (That's the difference between asking $323,000 and getting less than $295,000.)

So says Metropolitan Regional Information Systems, which runs the multiple-listing service used to buy and sell homes in this part of the country.

Now, I was under the impression that this list price vs. sales price statistic looked at the last asking price, which means it wouldn't capture any and all of the price drops along the way to the final figure. But I asked  MRIS recently -- you know what They say about assuming -- and learned that the company compares the original and final asking price before using the higher of the two.

In this sort of market, that almost always means the original figure.

What if a home is pulled off the market for, say, three months and put back on at a lower price? Then which figure matters when it sells? That I don't know. (Oh, the questions that occur to me after hours.)

Buyers think some homes are closer to the right price than others, which probably explains why 31 percent of properties were on the market for a month or less while 24 percent sat for four months or more.

Posted by Jamie Smith Hopkins at 7:00 AM | | Comments (9)
Categories: For sale, Housing stats
        

Comments

IF you want to see some high comedy, go to the Trulia website and sort homes by "price reduced date". There are people that list their homes for 500k, then watch them sit for a couple months and then reduce the price by 5k. As if someone wouldn’t simply offer 5k less if they were interested in the home. The denial is laughable. Even the homeowners that do get it and cut their asking price by 50k are still seeing their homes languish.

Jamie- you should really dig into the MRIS data for the folks on this blog. I took 2 zip codes, 21236 (Nottingham) and 21014 (Belair).

For 21236 there were about 58 homes for sale in August at 300k and above. Of those, 2 sold. That means you had 58 people competing for 2 buyers. Of course, everyone of those sellers will rationalize why there home is so "special" and deserves a premium on price. Yeah, yeah, yeah, no other home has the view of the sunset between the poplar and the willow, we get it.
Now, for 21014, a slightly more affluent area. In August there were 56 homes listed at 400K and above. 1 sold.

Sellers- the lesson here is that buyers are going to win this tug of war. Buyers know they have the upper hand and don’t have the smothering weight of a $2800 mortgage payment forcing them to make a move like sellers do. If you want to sell, slash the price and slash it big or you can ride the market all the way to the bottom, 5k in reductions at a time.

Haha Jamie you seem to be lost in the realm of the real estate math. It is not the real math. It is more like the not really excelling pre-k level with added zeros.

I agree with elweedz with slashing prices by 10-20% if you want to catch a buyer.

I laugh when I see listing with an all caps "REDUCED $5000!" or "$1000 REDUCTION EVERY WEEK".

Buyers, including myself don't want to play games or have our time wasted.

The problem is that many sellers cannot afford to drop their sale price by 10-20% because they'd be underwater on the house. So even when you give them that truth, they don't/won't listen.

I had a seller list his house at $280k. Everything I saw said market value was $220k. He was determined and resolute that this was a unique house/area and the house was worth that much. It sat on the market for 6 months. Got one offer at $250k, and he flat out rejected it. Didn't even counter.

Well, it's still listed - at $240k - with another agent now.

Elweedz - Totally agree except to say that it's not always about slashing price - see above. Oh, and it was actually 3 sold and 4 went under contract. :) Still paltry numbers, but August is a bad month... I have several buyers looking in Bel Air and we didn't look at many last month with vacations and such.

The RE market's biggest problem is that it is highly illiquid. The root cause of that illiquidity is the National Association of Realtors. They are allowed to hold a monopoly as gatekeeper to the Multiple Listing Service (MLS or MRIS). I can sell $1000 worth of stock for total transaction costs of less than 1%. I can get a professionally managed investment portfolio for an annual fee of around 1%. But it costs me almost 10% to sell my house? A closed MLS system is textbook monopoly power and benefits only Realtors at the expense of everyone else. An open MLS would go a long way to improving liquidity in the housing market which is the first step to realizing losses and moving on.

As we all know it's tough going everywhere. I can appreciate dropping a price to move a property. Either way, sellers have always had to price it right if they want to sell.

Regards,
Mike

@ John K.

I dont understand your point? Your post illustrates the exact point i was making about riding the market down a little bit at a time. As for your buyers being too preoccupied with vacations.....soon to be Thanksgiving, then xmas, then new years, then tax time, then graduation, then vacation again- its all BullShip.

You dont make excuses if i offer to sell you a 2500 sq ft home in pristine condition in a good hood for 100k, you hop to it. Your "buyers" are my brethren. They have nothing motivating them to buy because they know that the longer they wait, the cheaper and better home they get.

Sellers will bleed them selves dry of their savings so that they dont "give it away".

-ship of fools.

The Anonymous comment was actually from me, elweedz. Forgot to tag it.

Why do listing agents list homes without photos? Do they really not want to get people in the door?????

I'm pretty close to raising the white flag on the real estate hunt in Baltimore.

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About Jamie Smith Hopkins
Jamie Smith Hopkins, a Baltimore Sun reporter since 1999, writes about the regional economy. Her reporting on the housing market has won national and local awards. Hopkins is a Columbia native and has lived in Maryland all her life, save for 10 months spent covering schools in Ames, Iowa.
She trained to become a wonk by spending large chunks of time as a geek and an insufferable know-it-all.
Baltimore Sun articles by Jamie
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