IN A SELLER’S MARKET, EVERYTHING SELLS - RIGHT?
Market Watch with David Howell from McEnearney Web Team on Vimeo.
We’ve had a very healthy spring market in the Washington, DC area. Of course, some areas are faring better than others and pockets in DC and some of the close-in suburbs are seeing multiple offers and homes selling for more than list price. By almost every measure, this is a seller’s market. And in a seller’s market, everything sells – right?
Well, not exactly. Despite a strong spring market, there are still plenty of properties that have not sold. And there are three market indicators that can help explain why the wanna-be sellers are not getting their homes sold.
The first is the fall-through rate – those are the homes that go under contract that, ultimately, do not go to settlement. As hard as this may be to believe, 1 in every 8 homes that have received ratified contracts this year have fallen through and did not make it to settlement. This may be due to home inspection issues or purchaser financing – but whatever the cause, 13% of sellers who initially think they have their home sold find that’s not the case.
The second is homes that linger on the market. Right now, there are more than 3,000 homes on the market in the immediate Metro area that have been on the market for 90 days or longer. And it’s not just homes at the upper end of the market. More than 500 of those homes are priced less than $300,000.
And the third is homes that are removed from the Multiple Listing Service (MLS) without selling. In April, there were almost 1,000 homes that were on the market for at least 90 days that had expired as unsold or were withdrawn. Some of those may be re-listed, but to put it in perspective, there were just over 4,000 homes that went to settlement in April and 1,000 that were taken off the market.
Does this mean that the market is shifting or turning softer? No. And we continue to see positive indicators across all jurisdictions. But it does mean that proper marketing matters. Negotiating skills matter. And above all, price matters.
The price at which a home comes on the market is critically important. That requires careful research by a knowledgeable REALTOR® and a seller who is willing to avoid the trap of believing that everything sells. It requires listening to what the market is saying and making a price adjustment sooner rather than later, if an offer doesn’t materialize.
The significant numbers of homes that have been on the market for a long time, and those that have been removed from the market, certainly stand in stark contrast to the homes that are priced right and sell quickly.
It’s still a very good market – for homes that are priced right.
While “private exclusives” exist in all price ranges, they seem to be more prevalent for upper bracket properties. There were 369 homes that sold in the District of Columbia for $1,000,000 or more in the last six months in the MLS. There were 58 different real estate firms, and even more remarkably, 258 different agents representing those buyers.
Additionally, as the table indicates, this broad diversity of firms and agents selling upper bracket homes isn’t any different in Maryland or Virginia. What’s important to note is that most of these buyers never knew about other homes for sale on the market that were tagged “private exclusive” with “quiet” or minimal marketing. Those sellers simply missed out on those buyers – and those buyers missed out on those homes.
Sellers should also consider that privately listing their home could be seen as an intention to screen interested buyers in ways that could appear to be discriminatory. Care has to be taken that no one is excluded from a “private exclusive.”
Think twice if you are a homeowner contemplating a “private exclusive” sale. Ask yourself whether going that route is best for you and whether you would get the best price for your home.
- The number of new contracts ratified in April 2015 was up 12.7% from the number of contracts ratified in April 2014.
- Contract activity year-to-date is up 13.0%, the best in the Metro Area.
- 31.1% of all homes going under contract in April 2015 had at least one price reduction before going under contract.
- The available inventory for April 2015 was up 31.2% from April 2014.
There was an increase for all but the highest price category.
- 32.6% of all homes on the market have had at least one price reduction since coming on the market.
- In April 2014, 24.8% of all homes on the market had at least one price reduction.
Initial pricing strategy is critical to the listing process, regardless of market conditions. The longer a home sits on the market, the deeper the discount to its original list price will likely be.
Homes settling in April 2015 that received contracts their first week on the market sold, on average, 0.32% below list. Those that took more than 120 days to sell sold 6.11% below the original price.