We recently found a lot where we want to build and decided to list our house. We thought we priced it right for the condition, quality and the view, but it’s been two weeks and activity has been slow. Is it time to lower the price?
In the last 90 days in our subdivision, there have been six sales. The two most recent comparable sales were priced at $224.22 and $242.55 per square foot.
Our home is newer, has an abundance of comparable high-end upgrades and is located on one of the best view lots in the subdivision. Since we lack the pool that the $242.55 property had, we decided to price our property at $217 per square foot.
This put us lower than all the other comparably priced homes based upon square footage, but at the most expensive price point because we are about 400 square feet larger than competing properties.
Broker feedback
Two days after we listed, my gut started telling me that we were listed too high — even though the comps more than supported the price. I asked our broker to have the brokers who attended our Tuesday caravan to give us their feedback. They confirmed that we were about $20,000-$30,000 high in terms of where they thought the property should sell.
After reviewing the results, our broker recommended that we wait two weeks and see what happened. During that time, we had five showings but no offers. Surprisingly, the brokers who showed the property and their clients had no issue (at least that they noted) with the price.
I have always told my sellers that if you are in a good market and you have 10 showings and no offers, it’s time to lower your price. We hadn’t hit the 10 showings mark, but our broker asked us to review the price again in two weeks. We know the issue is not the location or the condition — our house shows like a model, and everyone has commented on that.
The ‘honeymoon chart’
From my perspective, a key factor in making our decision is the “honeymoon chart.” If you’re unfamiliar with concept, the honeymoon chart illustrates that you have the bulk of your showings during the first three weeks that you’re on the market. After that, the showings slow down dramatically because they are limited to new buyers coming into the market.
Most of the comparable sales sold within the first month on the market.
Subdivision vs. overall market
When we priced our property, everything indicated a strong sellers’ market. In the last five months, there have been ten listings in our subdivision and seven have gone under contract. Our Web hits are approaching 8,000 pageviews from the local MLS and Trulia alone. Everything looked good.
But what if what we are experiencing is a widespread market slowdown? We had our broker look at activity across the Austin area in our price range.
The numbers shocked me. Depending upon the location, there were 12 to 25 months of inventory.
This level of inventory isn’t just a buyer’s market — it’s a deep recession buyer’s market that should lead to serious price declines soon.
A major downturn may be in the wind
I asked the members of the Raise the Bar in Real Estate Facebook group what was happening in their market areas. Many agents commented that there had been a slowdown, especially in the luxury end of the market. Even those who had yet to observe a slowdown sense a change is coming.
Given the bad stock market news coupled with a potential rate hike, this could be an early harbinger of troubles ahead for the real estate market as well. Personally, my gut has been telling me that we’re already on the front end of the next downturn, even though all the experts I speak with assure me this is not the case.
Inventory rules
For the last 30 years, I have always looked to the inventory as my guide in terms of pricing. The one thing I know from the three previous downturns: If you’re in a buyer’s market, don’t dally. Cut the price and get ahead of the drop. There’s nothing worse than chasing the market down, and it’s the best way to make sure you don’t receive the maximum price possible.
Based upon these facts, we dropped our price to $209 per foot. Our current competition is priced at $219 to $231 per square foot. Closed sales since June 15 have had one sale at $182 per square foot, with the balance at $216 to $242.
We’re not just priced to sell — we should be a bargain as compared to what’s on the market and in terms of what has closed. Time will tell.
Editor’s note: Since writing this column at the beginning of October, Bernice Ross has sold her house.
Bernice Ross, CEO of RealEstateCoach.com, is a national speaker, author and trainer with over 1,000 published articles and two best-selling real estate books. Learn about her training programs at www.RealEstateCoach.com/