Sunday, June 29, 2008

Dave Phillips: Anatomy of an Overpriced Listing

Dave Phillips, CEO of CAAR and a frequent welcome commenter on this blog, has an astute post over at the CAAR Blog about how to accurately price a property in this laggard market.

He notes that every property has a "magic price"--the one at which it will sell. The Bubble Blog fully agrees with this. Part of what we hope we're doing is "encouraging" sellers to find magic prices, to get more people into houses and to keep our local economy moving.

Dave Phillips' post gives a great example of a house that was on the market for one year, from March 07 to March 08, and details the history of its dropping price and how the house finally sold.

Additionally, the post details DOM for the houses sold through the end of May 08, and names the categorizes in which they belong.

Of the 1128 homes that have sold this year:

"Aggressively Priced" - 272 sold in 30 days or less.

“Realistically Priced” - 223 were on the market between 31 and 90 days.

“Wishfully Priced” - 112 sold properties were on the market between 91 to 120 days.

“Unrealistically Priced” - 521 properties took longer than 120 days to be absorbed into the market.

This is a realistic analysis of prices. What we find, though, is that often the Fairy Dust Syndrome, which we mention in this post, often keeps Sellers and Seller's Agents in a "2006 Mindset." As Dave Phillips observes, the market is always moving and changing, based on a variety of factors.

Be sure to read the complete post.


Fred R said...

The Bubble Blog often gives opinions about what the asking for a house should be. This is justified with specific points, and with noting the crazy inflation that's been happening in Charlottesville.

I appreciate the 'hard line' on pricing.

What I wanted from the CAAR post was Guidelines for Realtors to follow about how to "realistically" price properties.

It seems like there are lots of Realtors who just won't accept the "new reality" of declining home values, economy, inflation, and so forth. Maybe there are too many agents who became professionals after prices started rising, and they just can't believe that even in C'ville/Albemarle there is now a decline.

They're doing their sellers grave disservice.

Montpellier said...

I think it's very nice that Dave did this - it shows what kind of price adjustments are needed - in this case, a whopping 15% final reduction. He makes the classic case against 'chasing the market down', and does sellers a service in pointing this (painful) advice out.

The lingering issue I've got with these analyses is that it's very difficult to get a solid grip on these numbers - essentially, I don't trust the DOM and CDOM. There are a few properties I've been watching where the seller keeps taking the property back off the market and switching agents - all in the interest of changing the listing.

Jim Duncan pointed out the problem with the DOM listing/sales pricing in response to one of Dave's earlier posts. It looks like Dave made a good faith effort to really track a property. I also think it's worth pointing out that while parts of NoVa are experiencing 40+% cuts, properties here will move with just a 15% cut - that is the 'it's different here' aspect of c'ville. I still think the credit crunch is worsening, and that prices will further decline.

Real C'ville - The Bubble Blog said...

Below is the link for Jim Duncan's numbers. They were included in his "Friday Links" on June 27 (scroll down to view), and didn't specifically reference Dave Phillips' earlier post.

Interesting material all around.