As a broker in Portland, I have seen years of continually rising home prices with the ongoing demand of people looking to move here. However, this year things have started to shift. Each day my inbox is full of emails about price reductions, my buyers offers are no longer competing with 10 others, and listings sit on market for weeks (or even months) at a time.
The problem: many brokers and sellers still expect to get 5-10% over asking, but those days are behind us.
Here are some nation wide stats to back me up:
- Approximately 14 percent of all listings in June had undergone a price cut, that’s up from a recent low of 11.7 percent at the end of 2016, according to a new report from Zillow.
- Home price growth is slowing in nearly half of the 35 largest U.S. metropolitan markets.
- In San Diego, 20 percent of all listings had a price cut in June, up from 12 percent a year ago.
It’s worth highlighting that in Seattle, which continues to be the hottest market in the nation, 12 percent of all listings had a cut, the largest share in nearly four years.
What does this mean for buyers and sellers?
- Listing price does not determine value, it simply determines the length of time it will take to sell.
- Listing over value will scare away buyers when you sit on market for weeks while you slowly lower your price. At that point, whomever makes the eventually offer will have you at their mercy. It’s best to list at value or just slightly under to draw the crowds.
- Trust the comps! Many brokers are still listing over value who have not paid attention to the shift. Those listings sit. Some brokers will even “buy the listing” by telling sellers their home is worth more than it is. This hurts your bottom line. Trust the broker who shows you the comps and is not afraid to tell you the truth. Relationships are built on trust and if they are bold enough to tell you the truth then they are likely bold enough to negotiate well on your behalf.
- Interest Rates Likely to Go Up. Trends show us that rates are rising. For every 1% of interest rate increase you lose 10% buying power. Say you were able to buy $400,000 at 4% interest rate, well now you qualify for $360,000 and pay 5%! Less home and more costs.
- Run Comps for Every Offer. Ask your agent to pull comps to make sure you are getting the right value. With sellers still thinking they can shoot for the moon and still get multiple offers, many list too high. Let the data tell the true story of value.
If you are intersted in buying or selling a home, feel free to reach out. We are happy to provide a complimentary consultation!