Subscribe to the NewsHolding on to Your Price
By Admin
An article in last week’s Wall St Journal titled “The Holdouts” describes how the ultra high end real estate market has been adjusting to current weak sales by slashing asking prices, except for a few reluctant home owners, who justify hanging on to their price because it would take far more than the current asking price to replicate their mansion. It turns out that a significant number of homeowners in our own market may be using a similar line of reasoning to hold onto their price.
Few car buyers expect to receive the same amount upon trade that they originally paid for their new vehicle - cars depreciate. Yet many homeowners look purely at how much they have in their homes to determine a minimum of what they expect to receive when they sell. Homes depreciate just like cars. There are different forces that cause home prices to rise in spite of the declining value of the home itself. One factor is the scarcity of land - each year a significant number of new households are created (marriage, immigration, domestic partnerships, etc.) and a portion buy houses. The increase in households makes the relatively fixed amount of land more valuable, especially the land in the most desirable locations. Inflation raises prices even though the underlying value may be falling. Economic incentives (like the mortgage interest tax break and the large write off of capital gains on the sale of your personal residence) boost the market by creating an advantage to purchase a home versus other forms of saving and investment. Obviously maintenance and improvements of the structure can help to counter depreciation. For these reasons among others, we have this expectation that home prices will rise, and with this in mind, some sellers lose sight of what it takes to be competitive in the current real estate market.
Let’s take the North Kitsap real estate market for instance - from Poulsbo to Hansville. In the last 6 months there have been 286 non new construction homes sold in an average of 87 days on the market. 178 of the 286 (62%) sales closed in fewer than 87 days. Of the 38% that took longer than average to sell, 14 of 108 (13%) were still at their original asking price. None received an accepted offer for full price. If we take a look at the 326 non-new construction homes currently on the market in North Kitsap, there are 48 of the 168 (nearly 30%) that have been listed for more than 87 days (the average sale time) and have not yet reduced their asking price. It’s difficult to say how many of the 326 homes will actually sell. We can probably say that in this market fewer than 286 will sell in the next 6 months, since the last 6 months included market incentives like the home buyer tax credit to boost sales.
Only about 14 of the 48 sellers still at original price after 87 days might receive an acceptable offer, and probably none at full price. Even 14 is not conservative because new competitively priced homes will come on the market during that period and because we expect weaker sales in the next 6 months. So of the 286 estimated sales in the next 6 months, the homeowner who did not reduce price after more than 87 days on the market has about a 5% chance of sale. While every seller’s situation is different, the market does provide a good deal of useful information for a successful strategy to sell your home.
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