Why are listings priced like grapefruit?
Real estate agents price homes like produce in a super market. They go into a listing presentation and they close the deal. Everyone agrees the home is worth $300,000 so the agent suggests that they put it on the market for $299,900. Everyone knows the psychological advantage of slipping under a price point by a penny or a dollar or a hundred dollars or even one thousand dollars. It just makes the price look like a bargin.
Why?
You are not selling grapefruit. You don't put a big sign in the yard "For Sale, ABC Realty, $299,900."
You put the home into the multiple listing service. I have never met an agent that pulled up listings and highlighted all of the "almost" numbers. Agents representing buyers, usually do a search based on what the buyer is qualified to spend. Does anyone ever get an approval letter that states the buyer is approved for $299,900? Does anyone ever get an approval letter that is not in round numbers that always end in 000? I don't think so.
I think you have someone in your office that can spend up to $325,000 and you enter a search with the list price range $300,000 to $325,000. And I know (even with my limited understanding of search engines and bells and whistles in computers), the home that is listed at $299,900 will never appear in that search.
What does this mean JMac?
It means that by listing the home at $299,900 you have precluded a large segment of the buying population from ever seeing your listing. It means that the buyers that would find your property a true bargin (remember $300,000 is at the bottom of their search) will never see your listing. Anyone looking between X and $300,000 will find your listing but it will be at the top rung of their search, and your listing will be competing with what they may deem more affordable homes.
They are not buying grapefruit and their purchase will not initially be swayed by the difference you create using the 999 or 900 in your price. You are just using yesterday's produce pricing mentality and losing traffic to an archaic way of marketing.
Maybe it is time we understood the tools we use and dropped the 9's.
Just a thought.
jmac
Thursday, April 27, 2006
Bricks, mortar, fear mixed up in a new real estate chess match and stalemate means no check.
O.K., I think I have figured out our current market. Everyday I check the multiple listings to see what is new on the market, what has been marked down and who has given up trying to sell. It is important. Someone may actually call hoping to buy or sell a home and I like to have enough knowledge to guide them in the right direction.
Today there are twice as many listings as there were this time last year. I checked public records and we have not seen a double in population in the last year. Babies are being born, people are dying and folks continue to be transferred into and out of the area. Hmmmm.
Prices are leveling off and even dropping below sales figures of a year ago. Fear is taking hold of the market. Those that are attempting to sell are discovering that unless they price their home correctly, they will not get any offers. Those that do price their home correctly are finding out that buyers are still coming in with an offer that is a bit lower than hoped for and the buyers want to actually be able to have the home inspected. Some people are even realizing that they will have to make needed repairs to sell the home.
Buyers are sitting on the couch. Nobody wants to buy at the top of the market. Nobody wants to buy at the top of a market that may see values go down a bit. Interest rates are rising. Some buyers are paralyzed by the notion that last year they could have gotten more money for the monthly payment they can afford.
It is an emotional stalemate and no checks are being passed from buyers to sellers.
There is hope.
At some point, sellers will become educated about the shift in the market and they will sit with a Realtor that understands the market and they will price their home to sell. They may not realize the same gain as folks did last year, but they will sell their home and they will move into a nicer home. They will be able to buy more home for the dollar this year than they could have last year! If they price their home favorably, they may even receive multiple offers. It is still occuring everyday on homes that are priced for the current market.
At some point, buyers will realize that there has not been a better market for them in a long time. While interest rates are going up, they are still well below what we have seen in the past 20 years. As a matter of fact, they are half of what they have been in the not so distant past. It may be true that your monthly amount does not buy as much house this year as it did last year. The facts are, you can get more house for your money today than you could have gotten last summer. If a buyer works with a good Realtor, they will benefit. Any dip in property values will be short lived. It will not take long for your home to increase in equity. Interest rates are always in flux. When they take a downward turn in the future, you can refinance your home and at that point you will be in more house for less money. It is a great time to buy.
F.D.R. may have said a lot of things, but he was never more accurate than when he shared the following - "We have nothing to fear but fear itself".
Just remember, those that step boldly forward are rewarded with the spoils of those that feared to step at all.
O.K., I think I have figured out our current market. Everyday I check the multiple listings to see what is new on the market, what has been marked down and who has given up trying to sell. It is important. Someone may actually call hoping to buy or sell a home and I like to have enough knowledge to guide them in the right direction.
Today there are twice as many listings as there were this time last year. I checked public records and we have not seen a double in population in the last year. Babies are being born, people are dying and folks continue to be transferred into and out of the area. Hmmmm.
Prices are leveling off and even dropping below sales figures of a year ago. Fear is taking hold of the market. Those that are attempting to sell are discovering that unless they price their home correctly, they will not get any offers. Those that do price their home correctly are finding out that buyers are still coming in with an offer that is a bit lower than hoped for and the buyers want to actually be able to have the home inspected. Some people are even realizing that they will have to make needed repairs to sell the home.
Buyers are sitting on the couch. Nobody wants to buy at the top of the market. Nobody wants to buy at the top of a market that may see values go down a bit. Interest rates are rising. Some buyers are paralyzed by the notion that last year they could have gotten more money for the monthly payment they can afford.
It is an emotional stalemate and no checks are being passed from buyers to sellers.
There is hope.
At some point, sellers will become educated about the shift in the market and they will sit with a Realtor that understands the market and they will price their home to sell. They may not realize the same gain as folks did last year, but they will sell their home and they will move into a nicer home. They will be able to buy more home for the dollar this year than they could have last year! If they price their home favorably, they may even receive multiple offers. It is still occuring everyday on homes that are priced for the current market.
At some point, buyers will realize that there has not been a better market for them in a long time. While interest rates are going up, they are still well below what we have seen in the past 20 years. As a matter of fact, they are half of what they have been in the not so distant past. It may be true that your monthly amount does not buy as much house this year as it did last year. The facts are, you can get more house for your money today than you could have gotten last summer. If a buyer works with a good Realtor, they will benefit. Any dip in property values will be short lived. It will not take long for your home to increase in equity. Interest rates are always in flux. When they take a downward turn in the future, you can refinance your home and at that point you will be in more house for less money. It is a great time to buy.
F.D.R. may have said a lot of things, but he was never more accurate than when he shared the following - "We have nothing to fear but fear itself".
Just remember, those that step boldly forward are rewarded with the spoils of those that feared to step at all.
Thursday, April 20, 2006
What, me worry?
The Washington Post continued it's attack on the housing market this morning. Those of us that work in real estate have watched the market change from optimistic to "running scared" as the Post has continued to print articles predicting a burst of the housing bubble. Today's offering, under full color photo, questioned the stability of the DC housing market. The column written by Tomoeh Murakami Tse went to great lengths to reveal that no one agrees which direction the market is taking. Different experts and institutions are quoted to support widely diverse theories on whether or not the market is up, down or sideways. Who to believe?
I live this industry. I work in a very active office. The market has changed. That being said, the market is always changing. There is a normal ebb and flow that occurs in this market. Buyers and sellers are impacted by interest rates, the cost of living, government policies and the amount of first time buyers in the market. This area does not feel the pain of a fluctuating job market. Local governments continue to support the housing industry. The market is alive and well in the Maryland suburbs.
The one thing that impacts the housing market above all other factors is the media. If the press begins reporting gloom and doom, the populace seems to follow. If reports tell of a booming market, sellers end up receiving multiple offers and prices soar. Local and national papers can offer findings from all the ivory tower institutes that support both sides of every equation. Thousands of dollars can be spent to produce reports that are then in turn analyzed to explain pricing of property. No one can seem to agree on the reason that home values shot up in the last two years, nor can the offer a concrete reason why things have leveled off.
A visit to your local library and reviewing news articles will reveal stories that told of the wild market we were experiencing over the last couple years. Agents were unlocking doors at open houses while a parking lot full of buyers waited a chance to quickly walk through and make an offer. Homes were listed at one price that was the starting point of a bidding war that rivaled EBay. Sellers were accepting offers at a certain point in time (a deadline to the bidding war) and then review multiple escalating offers for their property. As one house sold, another up the block came on the market at a higher price and the cycle began again. Stories continued to be printed.
As last fall began, the natural slow down in home buying occurred. One reporter after another began to herald this annual event as the actual end of the wild market. Housing sales began to slow somewhat, but the media continued to predict the bubble was bursting and lean times were ahead. Interest rates began to creep up and the market slowed some more.
Spring is here and the market is not as frenzied. Today the Post printed the story I mentioned. I do not have concerns. I have been around long enough to understand the natural cycle of our market. It is slower. There was no bursting bubble. The cost for the first time homebuyer has increased beyond the comfort zone. It is not just interest rates, they remain very low from a historical perspective. It is the ugly appearance of points which have re-entered the loan approval process. Points translate to increased cash needed to purchase a home (on a $300,000 purchase, 2 points equal an additional $6,000 needed at settlement). The uncontrolled cost of living increases such as gasoline headed above $3.00 per gallon and Pepco rates increasing 40% are an example of items that are depleting expendable cash available to first time buyers. As budgets are adjusted, the market will become more active.
I can only share that if you are thinking of buying or selling a home, today is the best day to do so. Housing may go up and down over the short term, but it remains the American Dream. If you must read the Post, understand that they have to sell papers and touching your fears does that much better than just sticking to the facts.
The Washington Post continued it's attack on the housing market this morning. Those of us that work in real estate have watched the market change from optimistic to "running scared" as the Post has continued to print articles predicting a burst of the housing bubble. Today's offering, under full color photo, questioned the stability of the DC housing market. The column written by Tomoeh Murakami Tse went to great lengths to reveal that no one agrees which direction the market is taking. Different experts and institutions are quoted to support widely diverse theories on whether or not the market is up, down or sideways. Who to believe?
I live this industry. I work in a very active office. The market has changed. That being said, the market is always changing. There is a normal ebb and flow that occurs in this market. Buyers and sellers are impacted by interest rates, the cost of living, government policies and the amount of first time buyers in the market. This area does not feel the pain of a fluctuating job market. Local governments continue to support the housing industry. The market is alive and well in the Maryland suburbs.
The one thing that impacts the housing market above all other factors is the media. If the press begins reporting gloom and doom, the populace seems to follow. If reports tell of a booming market, sellers end up receiving multiple offers and prices soar. Local and national papers can offer findings from all the ivory tower institutes that support both sides of every equation. Thousands of dollars can be spent to produce reports that are then in turn analyzed to explain pricing of property. No one can seem to agree on the reason that home values shot up in the last two years, nor can the offer a concrete reason why things have leveled off.
A visit to your local library and reviewing news articles will reveal stories that told of the wild market we were experiencing over the last couple years. Agents were unlocking doors at open houses while a parking lot full of buyers waited a chance to quickly walk through and make an offer. Homes were listed at one price that was the starting point of a bidding war that rivaled EBay. Sellers were accepting offers at a certain point in time (a deadline to the bidding war) and then review multiple escalating offers for their property. As one house sold, another up the block came on the market at a higher price and the cycle began again. Stories continued to be printed.
As last fall began, the natural slow down in home buying occurred. One reporter after another began to herald this annual event as the actual end of the wild market. Housing sales began to slow somewhat, but the media continued to predict the bubble was bursting and lean times were ahead. Interest rates began to creep up and the market slowed some more.
Spring is here and the market is not as frenzied. Today the Post printed the story I mentioned. I do not have concerns. I have been around long enough to understand the natural cycle of our market. It is slower. There was no bursting bubble. The cost for the first time homebuyer has increased beyond the comfort zone. It is not just interest rates, they remain very low from a historical perspective. It is the ugly appearance of points which have re-entered the loan approval process. Points translate to increased cash needed to purchase a home (on a $300,000 purchase, 2 points equal an additional $6,000 needed at settlement). The uncontrolled cost of living increases such as gasoline headed above $3.00 per gallon and Pepco rates increasing 40% are an example of items that are depleting expendable cash available to first time buyers. As budgets are adjusted, the market will become more active.
I can only share that if you are thinking of buying or selling a home, today is the best day to do so. Housing may go up and down over the short term, but it remains the American Dream. If you must read the Post, understand that they have to sell papers and touching your fears does that much better than just sticking to the facts.
Saturday, April 08, 2006
It seems that a lot of the folks I talk to say that they wish they had bought a home two years ago. The market has changed and even the wisest of experts can not predict which direction it will take. We have experienced a few years of price increases that have far exceeded any past predictions. Homes have literally doubled in price in some areas. Oh to have had a crystal ball in January of 2003.
I thought about it. I have to agree. If you are sitting there today, considering purchasing a new home, it is easy to say "we should have done that two years ago." Looking at today's prices, it seems logical that a purchase in 2003 would have been a great investment. I suppose you should remember that you are looking at 2003 prices with a 2006 income. Maybe you were not really in a position to buy two years ago.
I have one hope in talking with these folks. I don't want to be sitting with them in 2008 and hearing them say "we should have bought two years ago." Prices may level off or they may actually go down a bit, but as sure as the sun comes up every morning, those prices will rise again. There is no better time to buy than right now.
The current market stagnation has created an environment that supports buying now. There is more inventory and there are fewer buyers. Everyone seems to be waiting for someone else to make a move. Today's buyer is operating from a position of strength. Prices and terms can be negotiated to create the best deal for a buyer. Home owners are conceding points they held firm just six months ago. This current status will not remain.
People continue to receive jobs that include relocation. Babies are still being born. The need to find a new home remains. Those that act will reap the benefits.
If I hear from you, that will be fine. Just don't say "I should have bought two years ago." Now is the time to say "I'm ready."
jmac
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