Home Prices as a Function of Inventory: Part 5 of 8 - How To Effectively Price Your Home For Sale

Home Prices as a Function of Inventory

Let's take a detailed look at the correlation between Median Home Prices and Inventory in Contra Costa County  over the past 10 years.

Graph-1 

Median Homes Prices in Contra Costa County over the last 10 years.

Graph 1 shows the Median Home Price within Contra Costa County over the past 10 years, with a peak of +/- $660k in the summer of 2007.

Graph-2 (below) illustrates "Months of Inventory".  This is not the number of homes on the market, but a relative inventory level.  This take into account not just the number of homes on the market, but the number of willing and able buyers at that given time. In plain English...if no additional homes came on the market, this is how long it would take for current inventory to dwindle to zero.

Graph-2  Months of Inventory in Contra Costa County over the last 10 years. 

The key point of this post is to demonstrate the correlation between the above graphs.  Note how at the very point in time when homes went to their highest median price ever (Graph 1)...the amount of time it took to sell those homes went up dramatically (Graph 2).  Then....look what happened afterward.  With prices at their highest, followed immediately by a surplus of inventory at that price, we suffered arguably the biggest crash in real estate prices in history.

The contrary is also valid.  Today, the "Months of Inventory" is .5.  That means we've gone from 18 months, to 15 days of inventory.  As these two bits of data are always correlated, sellers now know that a) they can list a property at a price higher than in the immediate past, and b) as long as these trends stand true, if the home doesn't sell at this 'optimistic' price, all the seller needs to do is wait until it will.

So what?  What does this mean to you?  That answer is simple.  

• If you're selling, it's OK...be optimistic.  
• If you're buying, realize that:
• a) prices are still VERY low, considering even recent history
• b) mortgage rates are unreasonably low (perhaps an unsustainable rate)
• c) this is a sellers market. You need to submit your very, very strongest offer to be considered.  15, 20, 40 offers on each home is not uncommon in today's market.

If you get nothing else from this post, get this: Housing Inventory is never a function of only one variable.  While reviewing market data, remember what happened with pricing and what might happen with pricing is not the only variable to consider when agreeing on a realistic price to list your property...or to offer for purchase.

Until next time, and thank you in advance for remembering me when the topic of real estate arises, and THANK YOU SO MUCH all the referrals.

Andy Blasquez ~ The last Realtor you'll ever need to look for.
DRE# 01826135

www.andyblasquez.com

Email me at andy.blasquez@gmail.com
Click here to reach Macky Hensel.

Please Follow me on Twitter and Re-Tweet these blogs.
Please Add me as a friend on Facebook 
Finally, please comment or ask questions.  Other readers may be wondering the same thing.  I love the feedback, critical or otherwise, and love the interaction: I love this job.

Thank you always for your support.

Real Estate Trends: Short and Long Term Trends in Home Prices: Part 4 of 8 - How To Effectively Price Your Home For Sale

Graph 1 - Median Homes Prices in Contra Costa Counter over the last 10 years. (Quarterly)

"How Do Pricing Trends (Market Pricing Trends) Affect Home Prices?"

If you get nothing else from this post, get this: Market pricing is NEVER a function of only one variable.  While looking at trends, remember what happened with pricing and what might happen with pricing is not the only data to look at in order to establish a realistic price to list your property.

Market Pricing Trends:

What is a trend, and why do trends matter,...or do they?
A trend is "A general direction in which something is developing or changing." An analysis of trends gives buyers, sellers, and their respective agents an idea of where the market is heading. A Comparative Market Analysis is completed with the understanding that based on what happened in the past we an excellent indicator of what will happen in the future.

Graph 2 - Median Homes Prices in Contra Costa Counter over the last one year. (Monthly)

How long is a trend? A trend might be a two year period, or a two week period depending on the market.  Looking at graph 1, you can see that the last four bars; 1 year (the previous 4 quarters) is relatively stable as compared to the 9 previous years.  However, broken down into months graph 2, we see that there's been a 27% increase in median home prices: Hardly stable. Looking at one without the other could cost you!  Why the big increase in prices, then a big drop, then a rise again?  There are several reasons....OK TRILLIONS of reasons.  And the end of the day, however, simply be aware of trends and price your home accordingly.  

How to price your home if home prices are dropping?

Don't price your home at the top of the market.  This often results in what we call "Chasing the market" as the sellers is forced to drop their asking price over and over and over in order to find a buyer.  Simply pricing the home realistically would have prevented that.  I personally know of a homeowner who was offended by a particular offer...only to accept an offer 15% lower less than a year later.  That's money on the table in my book!  

How to price your home if home prices are increasing?

If trends are looking up, don't base your price on dated transactions or you'll again be leaving money on the table.  Determine your motivating factor for moving.  Do you have to sell now?  Could you list the property realistically at the top of the market and see if you get an eager buyer?  Sure!  But be realistic.  "Can't I just pull it off the market if it doesn't sell...then put it back on again later?"  Yep!  But I don't recommend it.  Multiple Listing Services show a property's listing history, and some might look back (as the market continues to change) and think, "Hmmm...why didn't this sell back then?  The price looked right."  leaving doubt in their mind.

Ultimately, be realistic.  Follow the ideas in this post and the expertise of your local area expert...and you'll do phenomenally well.

Part 3 of 8 to come!

As always, I'll leave you with this tip:

There are countless Real Estate websites online now with dozens more on the way.  These sites DO serve a purpose.  They are a wealth of data.  However, "Zestimates" and the like are solely based on just that...data, which can be close to accurate...or way, way off.  No...that house up the street didn't sell for 30% of market value!  It was probably public record of a 2nd lien that was defaulted on. These sites pull data from various sources and do a very good job at combining that data and provide a free service to it's users.  That said, their not vested.  Use your Realtor.  Use a Realtor you can trust.  If you have questions about how to find one...call me...  or just read this post.

Until next time, and thank you in advance for remembering me when the topic of real estate arises, and THANK YOU SO MUCH all the referrals.

Andy Blasquez ~ The last Realtor you'll ever need to look for.
DRE# 01826135

www.andyblasquez.com

Email me at andy.blasquez@gmail.com
Click here to reach Macky Hensel.

Please Follow me on Twitter and Re-Tweet these blogs.
Please Add me as a friend on Facebook 
Finally, please comment or ask questions.  Other readers may be wondering the same thing.  I love the feedback, critical or otherwise, and love the interaction: I love this job.

Thank you always for your support.

How Do Interest Rates Affect Home Prices? Part 3 of 8 - How To Effectively Price Your Home For Sale

This post will cover the 2nd point of the "How To Effectively Price My Home For Sale"  post:

 

"How Do Interest Rates (Mortgage Rates) Affect Home Prices?"

Interest Rates and/or Mortgage Rates:

Interest rates and home prices always inverse coincide: They affect in opposite directions.  Standing alone, when interest rates rise...home prices decrease.  When interest rates decrease...home prices increase.  Why is that?

It's important to remember that when you borrow money to purchase real estate you don't actually just pay for your house.  You pay the price of your house (Principle) + Interest (along with other costs/fees/expenses).  If you've qualified to purchase a home for $500,000, that qualification is based on your ability to pay all of your expenses. Interest is a huge part of that equation; especially in the early years of your mortgage.  That means that the higher the Interest payment is, the less Principle you can afford; the less home you can afford.  Put this inverse relation into the free market and you create a condition in which low Interest rates afford higher Principle amounts attracting more buyers.  More buyers increases demand.  With the number of homes on the market (inventory or supply) remaining equal, the price of homes increase until the market is in balance again.

Simply put, low interest rates means that it's really inexpensive to borrow money.  So borrow is what the market does!

Circumstances to consider:

• What is the current interest rate?
• How long has the interest rate been at that level? Does history show that we're due for a change?
• Looking at longer term trends in mortgage rates, are we likely to have an increase coming next, or a decrease?
• There is no crystal ball.  The Federal Reserve determines the price of money.  They can and do change interest rates as they see fit.  
• Election gaols, fear, optimism, unemployment, recent economic trends, the state of the affairs domestically as well as over seas, and many more factors are the 'food for thought' that the Federal Reserve uses in determining the cost of money.  If anyone other than the Fed had a handle on interest rates...there'd have been no boom...and no bust in our economy.  

The best we can do is to anticipate, educate ourselves, and make the best decision we can with the information we have as to our home's market value.

Part 3 of 8 to come!

As always, I'll leave you with this tip:

We live in an "information era".  Use the internet AND your personal financial resources (banks, credit unions, etc.) to get informed feedback as to the direction of the mortgage industry.  We can't do any better than that.  At least I can't.

Until next time, and thank you in advance for remembering me when the topic of real estate arises, and THANK YOU SO MUCH all the referrals.

Andy Blasquez ~ The last Realtor you'll ever need to look for.
DRE# 01826135

www.andyblasquez.com

Email me at andy.blasquez@gmail.com
Click here to reach Macky Hensel.

Please Follow me on Twitter and Re-Tweet these blogs.
Please Add me as a friend on Facebook 
Finally, please comment or ask questions.  Other readers may be wondering the same thing.  I love the feedback, critical or otherwise, and love the interaction: I love this job.

Thank you always for your support.

Comprehensive Market Analysis: Part 2 of 8 - How To Effectively Price Your Home For Sale

How do Realtors "Comp" homes? - Comprehensive Market Analysis:

Before you continue on this post, please think to yourself for a moment; "Is there someone that I could forward this to who could really benefit from this blog? Someone who is either looking to sell their home, or are in a difficult situation and may consider short selling their property.  If so forward this post or have them give me a call. 

I really appreciate your referrals. 

There's no shortcut answer to this complex topic, but as I stated in my post, "How to Effectively Price Your House for Sale", each of these pricing topics are dynamic enough to get into much greater detail.  This post will cover the 1st point of that post:

 "Current Market Data or "Comps."

Agents, appraisers, and the like arrive at a... 

• "Comps" (Comparable Properties)
• "CMA" (Comprehensive Market Analysis) or
• "BPO" (Broker's Price Opinion) 
• An accurate estimated market value of a subject property

...in their own way.  Varied backgrounds, many or few years of experience, local area expertise, prior mentors and coaches early in their careers, and many other factors created the way each of us arrive at what we believe actual market value of a home may be.  Market Data is a crucial element.  Keep in mind that how this data is drawn can change the results quite a bit.  Below are some commonly used criteria.  Also, please remember that all of this information is completely dependent upon the location, the property, and the unique market condition.

• What has recently sold?
•  Look within your community or development.
• Look within a particular distance of the subject home; 1/2 mile, 1 mile, 5 miles, depending on the area.
• What is pending? 
• Pending on its own is irrelevant.  Right now, in Brentwood, I know a home that has an asking price of $300k.  It's pending at over $400k.  However, the actual "Sold" price won't be known until it is marked "Sold" on MLS.  Just because it's "Pending" doesn't mean anything other than there is a willing buyer and a willing seller at ??? price.
• What is active?  
• Active homes are relevant in the sense that if a "Like" property (objective) is Active, is in sale-ready condition, and has been on the market for a long time (relative to market trends) it may be priced too high.  If a like home is in like condition and went pending in "0" days, it was probably under priced. SOLD is actually concrete data.
• Data is science.  
• Market data is math; it's that simple.  A home sold for $500,000 and is 2,500 square feet.  It sold for $200/sq. ft.   27 similar homes over the last three months were active for an average of 16 days before they entered into contract.  This is data.  It's just math.
• How you pull that data is art.  
• Make sure that you're pulling "Comps" as a buyer would, not as a means to secure the highest price for your home.  Any agent can doctor the statistics to show a higher or lower sales price.  The honest way to do it is to pull comps the same way a typical buyer or buyers agent might.  Then, make appropriate adjustments to the price based on features such as condition, a view, a pool, updated and upgraded features, etc.
• A like home in a like area, in like condition may have an extra bedroom, or one less garage, or 275 additional sq. ft. This might raise or lower the price/sq. ft.  It might.  I do know microclimates where the size and number of bedrooms have very little to do with the sales price, but the location does.  I do know areas where ever home is virtually the same except for the size, number of bedrooms, etc., and these differences are the only thing that increase or decrease the price.
• Don't overlook what Didn't sell!
• Sold/Pending/Active doesn't include what expired or was cancelled.  These listings expired or were cancelled for any number of reasons: Gainful employment, reconciliation, over-priced, lost opportunity, change of heart, etc.  If there are like homes that didn't sell it is worth asking your agent to call the listing agent on that property to see 'what happened'.  "The buyer found out that they're putting a railroad 200 feet away from our front door."  Ahhhhh...that changes the whole story.
• Always use a local area expert.  
• Local area experts are intimately familiar with the otherwise unknown hurdles, obstacles, and opportunities.  Leverage that expertise.  It doesn't cost you a penny.  
• Mello roos
• Special Assesments
• HOA Litigation
• Changes in infrastructure
• Addition of city features
• Micro Climates
• ...and seriously COUNTLESS other unique circumstances that will directly affect the marketability of your home.

As always, I'll leave you with this tip:

Are you going home shopping this weekend?  Have your agents bring their phones!  CALL EVERY LISTING BEFORE YOU GO!  Properties are moving so quickly...half of your list may be gone before you leave your second viewing.  Agents are getting very  sloppy in updating their listings from Active to Pending, or from Pending Show for Backups to Pending.  This can waste a massive amount of time...and ultimately cause you to miss the house that IS actually still for sale.  

Until next time, and thank you in advance for remembering me when the topic of real estate arises.

Andy Blasquez ~ The last Realtor you'll ever need to look for.
DRE# 01826135

www.andyblasquez.com

Email me at andy.blasquez@gmail.com
Click here to reach Macky Hensel.

Please Follow me on Twitter and Re-Tweet these blogs.
Please Add me as a friend on Facebook 
Finally, please comment or ask questions.  Other readers may be wondering the same thing.  I love the feedback, critical or otherwise, and love the interaction: I love this job.

Thank you always for your support.