(If you are not a country music fan, you may have a serious character flaw, but that is the subject of another post on another Blog. For now, here is a video that will help you “get” the title of this post.)
Across the nation, in most markets, we not only have too many listings, we also have too many overpriced listings. It is true in Charlottesville; it’s true in Atlanta, Austin, and Atlantic City. I know it is true even without looking at the local statistics for all these markets because “too many listings” and “too many overpriced listings” goes hand in hand. The basic law of economics – supply and demand – dictates that prices will adjust downward when supply is too high.
Following that logic, what we need is a good old fashion INVENTORY REDUCTION SALE! Can you picture this ad as part of the NAR public awareness campaign?
“Hi, I’m Charles McMillan, President-elect of the National Association of REALTORS® and I’m here to announce an across the board 30% reduction in home prices. That’s right, this is the REALTOR® Spring Spectacular event of a lifetime. Buy before July 1st and save BIG on any home in any market.”
Okay, that’s not going to happen, nor could it. The real estate market is not like the market for toilet paper at Wal-Mart. In real estate, we have something like five million owners (sellers) of the “company” that would have to approve an across the board price reduction. That’s a lot of decision makers even by Wal-Marts standards.
Some sellers have figured out the economics of the current market and agreed to price their home correctly. Guess what? Those are the homes that are selling. In the CAAR MLS, homes that sold in March sold after and average of 130 days on the market (DOM). That’s not a particularly good number, but it beats the 149 days (and counting) that the current active inventory is averaging for DOM. In addition, a closer look at the numbers will show that many of the homes that sold in March, sold quickly; likewise, many homes that are currently on the market have been there a very long time.
My Way or the Highway
So, why are there so many overpriced homes on the market? Is it unrealistic sellers, or REALTORS® that are willing to take overpriced listings? Yes, to both I suspect. Sellers, if you really want to save your house from being stuck on the market, ride the advice of your REALTOR® and agree to a proper price. A proper price is one that reflects the current market and not one that is based on what you want/need.
REALTORS® also need to accept their role in adding to the overpriced inventory. Most experienced REALTORS® will tell you the best thing (and the hardest thing) to do when a seller insists on pricing a property too high is to walk away. Maybe if a seller has a few REALTORS® show them tough love, then they will start to understand that the market sets the price at which a home will sell, not the seller. In addition, allowing a seller to overprice their home is a disservice because it generally results in a seller netting less than could have been gained with a quick sale.
In this market, more than ever, REALTORS® are in position to help the bottom line of both buyers and sellers. Buyers need to be careful not to buy overpriced listings and sellers need to understand this rapidly changing market. Save a house, ride a REALTOR®.
Bob Wilson says:
We are well on our way to a 30% drop in my market. Dataquik suggests that of an expected/estimated 25k closed sales this year, 15k will be REOs.
April 28, 2008 — 1:54 pm
Jayson says:
Nice SALE!
It seems like things are looking a little better in Arizona, we didn’t show up on the 10 worst real estate markets list last week, but that doesn’t mean we’re close to recovery.
Most agents I speak with say that one of their biggest challenges is to get sellers to understand that they need to price their homes according to this market. Maybe they don’t understand that they’re still paying the mortgage on a home that is sitting on the market.
I wonder if buyers would wait for another price decrease if all sellers did adjust – I guess that depends on the media.
April 28, 2008 — 4:22 pm
Cheryl Johnson says:
Here’s one reason that overpricing occurs around L.A.: The seller owes more than the property’s current value, and for some reason or other, a short sale approval isn’t in the cards… so the property gets listed near or at the “Break-Even” number.
Good business practice for the agent? No. But maybe it will help towards getting the short sale approval a little further down the line.
April 29, 2008 — 7:06 am
Glenn says:
“A proper price is one that reflects the current market and not one that is based on what you want/need.” Very true statement – had a client tell me they need x dollars – told them market determines what a property will sell at.
One other thing to consider, is how willing the seller is to cooperate with showings – some put up 24 hour barriers to showing or no lock box or no short notice showings.
Sellers need to think that is more competition out there with less prospective buyers.
April 29, 2008 — 7:58 am
Sue says:
Sellers need to think that is more competition out there with less prospective buyers.
Glenn, this is very true. I do see sellers getting a little wiser, but its a long hard road.
May 2, 2008 — 10:01 pm