Facts and Fantasies
According to the Zillow Q2 Homeowner Confidence Survey 62% of homeowners believe their home’s value has increased or stayed the same in the past year yet 77% of U.S. homes actually declined in value.
This contrast of reality and wishful thinking is less pronounced in the West, perhaps because in parts of California and Arizona the signs of the downturn are just too prominent to be ignored. As always, the Northwest is lumped in with the rest of the West, so the company that conducted the poll for Zillow provides no data for our corner of the USA.
Signs of Denial in the Seattle Real Estate Market
To find signs of this denial let’s take a look at the Property History of the listings in the data base of the Northwest Multiple Listing Service (NWMLS). The Property History captures the price trend of every property from when it was listed to when it was sold — if and when and how often and by how much the price was reduced. What is used in many published statistics is the spread between the listing price (at the time of the offer) and the purchase price. However, that tells only part of the story. The listing price at the time of the offer is often lower than the original listing price (first day of listing). Another price factor — not reflected in the selling price — is other seller concessions, such as the seller paying part or all of the buyer’s closing costs. Let’s look at a typical example:
|Orig. Listing Price
(1st day of listing)
(At day of offer)
(Recorded with County)
Some numbers tell only part of the story.
The media will report statistics that reflect the difference between the listing price and the selling price. The real story, however, is told by the difference between the original listing price and the selling price. This real story tells the difference between a seller’s hopes (unrealistic expectations) and the reality of the market. In the example above the seller reduced the price of the home by 3.3% and then sold it 2.5% below the reduced price, making for a total price reduction of 5.8% since the original listing. If the seller paid $6,000 of the buyer’s closing cost then the total price reduction was 7.1% (difference between $450,000 and $418,000). Such seller concessions and these kind of price reductions are representative of what is currently happening in the Seattle real estate market.
Only Motivated Sellers Need Apply
As a real estate agent it is my job to sell your home at the highest possible price. Some would add: “in the shortest possible period of time” but that depends on the circumstances. Still, if you do not want to sell quickly as possible why do you want to sell at all? This is no time to “test the market” just to see what you could get. I know of a street with three similar homes for sale. One of them is priced about 35% lower than the other two. One of the overpriced homes is listed with a comment by the agent: “price set by seller.” In other words: don’t blame me.
The price of the “inexpensive” home reflects the market. After 30 days it is listed as “Pending Sale BU” which means Backup Offers Requested. I don’t know what the offer price is but it is a safe bet that someone spotted a good value and is now trying to get an even better deal.