During the bubble housing market, a price reduction was considered a stigma. This was a time when most listings sold reasonably quickly. A price reduction meant there was probably something wrong with the property.
That’s not the case today. Price reductions are common. Often a search of the multiple listing service (MLS) will reveal more price reductions in a day than pending sales or sold listings. Now, a price reduction may simply mean that the listing is priced too high for the market.
To be priced right for today’s market, your home needs to appeal to buyers who are looking for a good deal. They are buying into an uncertain future. They are nervous about the direction of home prices. Have they bottomed out? Will they drop considerably from the current level? Will they remain flat for awhile? Or will they steadily improve from here?
Most economists agree that if home prices continue to decline, and many believe they will, the declines will be less precipitous than they were in 2008 and 2009. Ken Rosen, chairman of the Fisher Center for Real Estate and Urban Economics at the University of California, Berkeley, thinks that we have hit bottom price-wise and are now bouncing along the bottom.
This means that there will be periods where the home-sale market will strengthen — usually following good economic news — followed by periods of stagnation. Home prices could bounce up and down until a sustainable housing recovery is reached.
According to Rosen, the housing market is now in recovery. But it will take some time before we see price increases, except in areas with strong local economies and employment growth. Buyers need jobs — and confidence that their employment will remain stable — before making large purchases such as a home.
HOUSE HUNTING TIP: Sellers need to look at their home through the eyes of today’s buyers when they select a list price or price reduction. Today’s buyers are critical and, with rare exception, are in no hurry to buy. Interest rates and home prices are both low, but they don’t appear to be moving significantly higher soon.
Sellers often wait too long to lower their price, even though they are getting zero or minimal showing activity and other homes in the area are selling. In areas where prices are declining, sellers who wait too long to reduce their price may have to reduce it again because the market has changed.
Try to avoid chasing the market by reducing the price on your home after your competitors have dropped their price. Be ahead of the pack and reduce your list price before the competition does to avoid further price reductions.
It can be difficult to price right for a market that is continually changing. Sellers may list at a price that seems reasonable. But, after a month or two of preparing the home for sale, they could find that their price is out of date by the time they are ready to submit the listing to the MLS.
Don’t let the sales prices of past listings keep you from making the right decision about where to price your home today. If you discover you are priced too high for the market, it’s usually wise to lower the price by 5 to 10 percent. Most sellers opt for a modest price reduction and are disappointed when the showing activity doesn’t pick up.
It’s better to make a bigger, impressive price reduction and complete the sale more quickly, particularly if prices are still declining.
THE CLOSING: Sellers who play hard ball and stick firm at a price that’s too high for the market are likely to find themselves playing alone.