A new report out today from online real estate search site, Trulia.com, finds that nearly one in four current sellers, and these are what we call “organic” sellers, not distressed sellers (foreclosures or short sales) have dropped their sale prices at least once.
On average, they’ve dropped prices 10.6 percent from their original list price. If you add it all up, that’s $27.4 billion dollars slashed off either total U.S. home equity, if you choose to see it that way, or at the very least off of seller expectation.
And that’s what I want to focus on: Seller expectation. Yes, we in the big bad media spend all our time shouting out all these nasty numbers of how far home prices have fallen “nationally” (which is bogus since all real estate is local) and how much one foreclosed property takes off the price of neighboring homes.
And yes we say there is no end in sight until the foreclosure crisis ebbs and buyer confidence restores. So why are so many sellers/agents still so far off the mark in gauging their list prices?
In my DC neighborhood, which has seen really minimal foreclosures if any, two nearly identical houses went up for sale this month, within two blocks of each other, at radically different prices: One at $2.2 million and the other at $1.65 million. It’s all about expectations, and clearly sellers, despite all the media blasts about housing, are still unclear where they stand in today’s marketplace.
Neighborhood Realtors told me the first house was radically overpriced, but the sellers were stubborn, and, as expected, they dropped the price after a month of no bites. But they didn’t drop even close to the price of the other house.
These sellers just think that’s what it’s worth. Now the other sellers may be in more of a hurry to get out; I admit I don’t know, but it will be interesting to see if it goes quickly. I’ve seen houses that are aggressively priced move very quickly, and others not so well priced languish for months.
That simply says there is plenty of demand out there, at the right price. I’m already hearing of a return to bidding wars in parts of New York and New Jersey, where prices are too tempting to resist, and out in the most distressed areas of Phoenix and San Diego, sales are bumping up, but I caution that those are mostly on foreclosures.
It’s the organic market that I still see as the conundrum. Organic sales have fallen off much farther than most buyers and sellers know and/or appreciate, especially on the East Coast.
Organic sales are also more sensitive to mortgage rates, since organic sales are not going to be at the rock-bottom discount rates that foreclosures are. Given that mortgage rates are rising, subtracting buying power from those few in the market, more sellers will likely have to lower their prices and their expectations.
Questions? Comments? RealtyCheck@cnbc.com