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

Sell­ers and buy­ers do not see the same 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:

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.