There are a LOT of homes on the market in the $300k - $400k price range, and I have recently been showing a lot of them to buyers.  I will then have follow up calls from the Realtors representing the sellers, wondering how things went.  Some of the houses are priced more competitively than others, and those sellers (and their Realtors) are often confused and frustrated when my buyer clients aren't ready to make an offer on their home.

Why aren't buyers necessarily jumping at the "best-priced" house on the block?  The main conclusion I have come to is that the layout of the house seems to be a significant trump card above all other factors. 

• A house can offer a compelling cost per square foot, be in immaculate condition, on a beautiful lot --- but if a family spends lots of time preparing for and enjoying family meals --- and the house has a small kitchen and small dining room --- the house probably won't work.
• A couple looking for a three bedroom house can find one in a great neighborhood, with many compelling features, but if the main living spaces are chopped up, and the couple wants an open and airy feel -- no go.
• A house might be priced at the lowest possible price in a neighborhood, and might boast more square footage than all of the neighboring homes --- but if the prospective buyers are looking for privacy in the backyard --- and the house is on a bare lot with no trees and an immediate view of all close neighbors --- the buyers will keep on looking.

The good news here is that even though there are a LOT of homes on the market, YOUR home might offer the perfect layout for a home buyer that has been waiting in the wings patiently viewing each new listing as it comes on the market.

The bad news is that if the layout or floor plan of your house is unpalatable to most buyers, your home may languish on the market.

Back in 2002-2006, just about any home would sell (regardless of the layout) because there were very few choices in homes.  Now that buyers have so many choices, they are often quite specific in wanting a layout in a home that works well for their day to day needs.

Click here to view my full June 2010 Harrisonburg & Rockingham County Real Estate Market Report.

Exciting Fact #1 --- May 2010 home sales declined 5% as compared to May 2009, but year-to-date sales (January through May) are up 10% over last January through May.




Exciting Fact #2 --- After three and a half years of steadily declining home sales (quantity, not prices), we have now seen stabilization or increases in home sales for over six months.




Not-So-Exciting Fact #3 --- Sales volume has declined sharply for four years now (red line), and median home values have declined gradually for two years (green line).  Despite early positive indicators for the past several months, we're not out of the woods yet.




Other tidbits that you'll discover in my June 2010 Harrisonburg & Rockingham County Real Estate Market Report include:

• Average days on market is down in May 2010.
• Inventory levels have hit a new high.
• Land sales (1+ acres) are soooo slow this year.

Click the image below to read the full report...

Click here or on the image below to view the full April 2010 Harrisonburg & Rockingham County Real Estate Market Report (PDF).  Read on below for a few highlights.



Mixed indicators this month . . .

• Home sales declined 18% from 57 sales in March 2009 to 47 sales in March.
• The median sales price decreased 5% from $211k in March 2009 to $200k in March 2010.
• The average sales price increased 3% from $237k in March 2009 to $245k in March 2010.

As can be seen below, March sales were the first month this year where the sales pace was not equal to or greater than last year.  We'll need strong April sales to catch back up to the 2009 sales pace.



Also of note, we have seen a steady increase in Inventory over the past several months.  Lots of options for buyers --- lots of competition for sellers!




Don't delay -- get all of the exciting (and not as exciting) details and beautiful charts by downloading the full April 2010 Harrisonburg & Rockingham County Real Estate Market Report (PDF). 


If you find the information in this report to be helpful....

• Feel free to share it with your friends or colleagues.
• Let me know if you'd like to meet to discuss this report and/or the particulars of your real estate situation.
• If you'd like to know even more about the housing market in Harrisonburg and Rockingham County, click here to subscribe to HarrisonburgHousingToday by e-mail or by RSS.
• Though I spend a considerable amount of time analyzing our local housing market,the majority of my time is spent helping people like you buy and sell real estate.  If you (or someone you know) will be buying or selling real estate sometime in the near future, I'd be delighted to have the opportunity to be of service.

 

Despite high inventory levels in the upper end price ranges in Harrisonburg and Rockngham County, large homes (3,000+ square feet) are currently selling faster than they have since at least 2006.



The graph above examines first quarter sales (Jan 1 - Mar 31) of homes larger than 3,000 square feet in Harrisonburg and Rockingham County per the HRAR MLS.  As you can see, the seventeen sales in first quarter 2010 has surpassed the number of homes sold in any other year back to 2006.

During this time, median prices have shifted up quite a bit ($78k between 2006 and 2008) and then back down quite a bit ($93k between 2008 and 2010). 

Yet, all you sellers of large homes out there, please bear in mind that although sales in first quarter 2010 are brisk (compared to the recent past), that does not change the fact that there are 102 such homes currently for sale.  At the current pace of sales (17 in 2010-Q1), it would take 6 quarters (18 months) to sell through all existing inventory.
 

Explain this....



The number of properties viewed online (on our company site and all of our company's agent sites) has increased dramatically over the past year.  Thus, it seems that more buyers are hunting for homes.

But when we compare the number of closings in the first 28 days of last March and this March, we see a rather significant decline.

What is going on here?

• Will the last three days of March this year be much more exciting (in terms of closings) than the last three days of March 2009?
• Are a smaller percentage of potential buyers deciding to actually buy as compared to last year?
  
• Are our web sites simply more popular than they were last year, and a higher percentage of buyers are using our sites now?

What are your theories?

Click here or on the image below to view the full March 2010 Harrisonburg & Rockingham County Real Estate Market Report (PDF).  Read on below for a few highlights.



Some high level February 2009 to February 2010 observations include:

• Inventory increased by 3%.
  
• Sales held steady (no change).
• Prices (median) declined by 3%.
• Days on market held steady (no change).

As can be seen below, we may be entering a new period of growth in our local real estate market.  Between 2004 and 2006, the pace of sales increased steadily.  Between 2006 and 2009, the pace of sales decreased drastically.  Over the past four months, we have seen the pace of sales stabilize and start to increase.



Don't delay -- get all of the exciting (and not as exciting) details and beautiful charts by downloading the full March 2010 Harrisonburg & Rockingham County Real Estate Market Report (PDF). 


If you find the information in this report to be helpful....

• Feel free to share it with your friends or colleagues.
• Let me know if you'd like to meet to discuss this report and/or the particulars of your real estate situation.
• Let me know if you would like to schedule a time for me to come speak to your company or an organization in which you are involved.
• If you'd like to re-publish all or part of this information on your web site or in an article, just let me know if you need any additional information or graphics.
• If you'd like to know even more about the housing market in Harrisonburg and Rockingham County, click here to subscribe to HarrisonburgHousingToday by e-mail or by RSS.
• Though I spend a considerable amount of time analyzing our local housing market,the majority of my time is spent helping people like you buy and sell real estate.  If you (or someone you know) will be buying or selling real estate sometime in the near future, I'd be delighted to have the opportunity to be of service.

Good News!

• An amazing 31% of homes currently selling do so within 90 days of being listed.
• An additional 35% (for a total of 66%) sell in 3 to 6 months of being listed.

BUT WAIT . . . Many homeowners who are trying to sell their homes right now are not experiencing these joys of a speedy sale.  So, if your house isn't selling, what can you do?  The most common approaches are:

• adjust the price
• adjust the marketing
• add incentives (closing costs, allowances, etc)
• (what else can you think of that would work here?)
  

Inspired by discovering that 26% of homes in the Charlottesville market have had price decreases, I thought I'd check the local stats for our market.

When considering all residential properties In Harrisonburg and Rockingham County:

• 859 properties are currently FOR SALE
• 368 of these properties have had a price change

So, it seems that 43% of homes for sale in Harrisonburg and Rockingham County have had price reductions, as compared to only 26% in the Charlottesville / Albemarle area.

To put this in a bit of a historical context, when I checked the same data nearly two years ago, 40% of homes for sale had experienced a price change. 

OF NOTE:  Our MLS simply searches for price changes, therefor some of the 368 price changes could be price increases, though it seems doubtful.

Harrisonburg has steadily grown over the past ten years, and thus I would expect that we would see a gradual, steady increase of home purchases.  The recent history of home sales has not followed the slow and steady theory for the last ten years.  Below I have charted a gradually increasing rate of home sales (the red line) as I might expect them to be occurring. 



As you can see above, if there were approximately 900 home sales in 2000, I'd expect that we might be around 1100 home sales per year here in 2010.  Let's examine why sales history strayed so far from this path....



While I didn't think to ask this at the time, I now think it would have been reasonable to ask between 2001 and 2007 why there were so many people buying houses.  The blue sections of the yellow bars show the unexpectedly high home sales levels (per my rough calculations).  Here are my theories on why so many people were buying at that time:

1. Financing guidelines were loose --- you didn't need much income, or assets, or creditworthiness to obtain a loan.  You could even finance your closing costs!  These relaxed financing guidelines pumped buyers into the market that otherwise would have rented.
   
2. Investors were eager --- with home values escalating as quickly as they were at the time, many investors were buying properties they wouldn't have purchased in prior years when appreciation was more modest.  Rapid appreciation made longstanding investors buy more properties, and created lots of new investors in the market as well.
   
3. Appreciation was high --- you could buy a house one year, sell it a year later, and make money.  This increased the number of buyers in the market considerably, since in the past if you were only going to stay put for a year or two, you would have rented.
   

But now, as seen above, there are (if my red trend line is correct) fewer buyers in the market that could be or should be expected.  If we flip around the three factors listed above, we'll understand why:

1. Financing guidelines are strict --- some would-be buyers are being turned away by lenders, as the pendulum has swung significantly past center, to where many lenders are quite hesitant to write loans unless a buyer looks perfect from credit, asset and income perspectives.  This decreases the number of buyers in the market.
   
2. Investors are hesitant --- with several years of (slight) depreciation in our market, and significant depreciation in other markets, most investors are hesitant to buy right now.  I believe we have a lower than normal amount of investors buying residential properties right now.
3. Appreciation is low --- with median home values dropping slightly for each of the last several years, some would-be buyers are quite hesitant to buy right now.  Flat housing values at the present time mean that a buyer must stay put a bit longer in their home to have paid down their loan balance some before selling.  This has decreased the number of buyers who are in the market.

I believe that we will soon see an increase in the number of buyers in the market.  I believe that in 2010 we will see at least as many buyers as in 2009.  Only time will tell, but we may just be rounding a corner!

Good Luck!  There are only two listings on the market right now labeled as Dutch Colonial homes.  Let's take a look at what IS for sale . . . .



As you can see, ranches, townhomes, contemporary homes and colonial homes are your best (or at least most prolific) option in Harrisonburg and Rockingham County.  Also of note, here's what sold in 2009 . . . .



We find the same leaders -- ranches, townhomes, contemporary homes and colonials.  Thus, we have a bit of a chicken/egg dilemma.  Are these types of homes being sold because that's what people want, or because that's what is available.

Here are the full numbers for those who are curious . . . .

  . 

Jennifer Chapman, one of my associates at Coldwell Banker Funkhouser Realtors brought some very interesting data to light yesterday.  She noticed that there are fewer and fewer homes selling over $300k.  I thought I'd take a look . . . .

First, bear in mind that the median sales price has gone largely unchanged between 2006 and 2009, showing only a 3.5% decrease.  (full market report)  This would suggest (in some ways) that we've probably seen a roughly equivalent number of inexpensive and expensive homes selling over the past several years.  This actually does not turn out to be true . . . .



I can make plenty of guesses as to why we're seeing these shifts, including:

• The first time buyer tax credit has likely increased the number offirst time buyers, and thus the number of inexpensive home sales. 
  
• Most upper end home buyers have to sell an existing home before buying.  A slower market has likely slowed down this trading up process, and thus decreasing the number of high end homes.

Do you have other explanations for the shift in what types of buyers are actually buying in Harrisonburg and Rockingham County?  Let me know what your guesses are.  The fascinating part ot me is that despite a 35% increase in sales of inexpensive homes (sub $175k) and a 27% decrease in sales of expensive homes ($300k plus), we still only saw a 3% decrease in median sales price over the past three years!?!

It is wonderful that the median sales price, and thus home values, have not significantly eroded in the Harrisonburg and Rockingham County real estate market.  In fact:

• The median sales price increased 61% over the past nine years, at an average rate of 6.7% per year.
• Housing values in many other parts of the country have fallen significantly over the past three years, but the median sales price in Harrisonburg and Rockingham County has only declined by 3% over the past three years, at an average rate of 1% per year.

Yet, despite the fact that home values are holding rather steady in our market, that doesn't necessarily mean that you'll be able to sell your home for the same amount that you could have sold it in 2006.  What is the problem here, you might ask?  It's your neighbor!

You see, if you bought a townhome in Harrisonburg for $160,000 in 2006, you might think you could sell it for about $155,200 now (3% less) given the statistics above.  But......if your neighbor bought their townhouse several years earlier for $130,000.....they may be competing with you by listing their house at only $140,000.  They can, you see, sell for less and still make a profit.

Likewise, if you bought a home in Rockingham County for $400,000 in 2006,you might think you could sell it for about $388,000 now (3% less)given the statistics above.  But......if your neighbor bought theirhome several years earlier for $325,000.....they may be competingwith you by listing their house at only $350,000.  They can, you see,sell for less and still make a profit.

So....I'm not encouraging you to get upset with your neighbor, or try to get them to increase the asking price on their home --- but you do need to know that competing list prices affect the value of your home (if you're trying to sell it) just as much as recent sales (as reflected in median sales prices).

Thankfully, the value of homes in Harrisonburg and Rockingham County hasn't taken a nose dive like has happened in many other markets.  As you can see below, modest (normal?) growth in values occurred between 2000 and 2003, unbelievable (and unsustainable) growth in values occurred between 2003 and 2006, and prices became stagnant between 2006 and 2009.



That being said, since we haven't seen consistent growth in home values since 2006, there are some homeowners who are unable to sell their house (after costs) for as much as they bought it. 

Conventional wisdom pre-2003 said that you should only buy a house if you knew you'd be living in it for 5 or more years.  You see, with the principal balance of the mortgage declining SO SLOWLY at the start of a 30-year mortgage, it would take a full five years to have paid down the mortgage enough to cover the costs of selling.

As you might imagine from the graph above (or from talking to your friends), some people bought in 2003, 2004 or 2005, and then sold a year later at a tidy profit.  The market was going up so quickly that they could sell one year later with no financial detriment because of the high rate of appreciation.

Let's take a look at how our market has performed over the past decade by imagining that someone has to sell three years after they buy.



As per the chart above, a homeowner buying 2000 or 2001 would have been experienced a good sized gain.



The gain is starting to be more and more unbelievable at this point.  Buying in 2003 and selling in 2006 would have resulted in a whopping $53,000 gain, or roughly $18,000 per year.



While things are starting to slow down, we see here that someone could have bought as late as 2005 and been just fine, given that there was such a big jump in median home values between 2005 and 2006.



OOPS!  Wait a minute!  A $16,000 loss??  It's true --- if you bought in 2006 or anytime thereafter, and you want to sell your house, you'll need to prepare to do so at a loss, given the costs of selling.

The big question:  When will the median sales price start to stabilize?  When the supply of homes for sale starts decreasing more rapidly than it has, I believe we'll start to see the median price inch upwards again --- though not at the pace it did between 2003 and 2006!

Over the last few days I have had quite a few discussions with developers, builders, buyers, sellers, and other Realtors regarding the exciting change of pace our local real estate market experienced in November 2009.  To remind you of this astonishing news:

• November 2009 sales were 95% higher than November 2008.
  
  
• Home sales increased 30% between October 2009 and November 2009 -- a time period when we typically see a decline.
  
  
• November 2009 outperformed every other month of home sales in 2009 other than June and July.
  
  
• It looks as if 2009-Q4 will be the first quarter in four years with an increase in home sales as compared to the same quarter the prior year.

Read more here and here.

All of these are wonderful indicators, and we find yet another one at the top of this post, showing that while online property views (defined below) have been declining over the past few months, they are much higher than could be expected.  In fact, there were more properties viewed online in November 2009 than in March 2009. 

Wow!  We would typically expect that most buyers would be looking at properties online (and in person) at the start of the spring "buying season" -- but the graph above shows that there are still LOTS of buyers looking (at least online) at properties for sale.

Online property views is the sum of all property views on the Coldwell Banker Funkhouser Realtors network of web sites, including our company web site, and all agent web sites.

Take a look at home sales activity summarized by Quarter . . .



As you may notice, we've seen a steady decline in the number of residential sales in Harrisonburg and Rockingham County since 2005 . . . until the fourth quarter of 2009.  Look again . . .



Please note, first, that the final fourth quarter 2009 sales figure is extrapolated based on data available as of November 30, 2009.  So, my data could be wrong --- but I recently made some wild guesses about November 2009 sales (first I guessed 65, then I guessed 76) and they were both too low (the final figure was 82)!

If we do see an year to year increase when comparing 2008-Q4 versus 2009-Q4, I think we can get excited about 2010 being the year when home sales finally started increasing again in Harrisonburg and Rockingham County.  That being said, I will still allow for skeptics to blame it on the tax credit, or for other factors in the current market.  Any skeptics out there?

Take a look at this graph and see if you notice anything . . .



I notice a few things that are quite exciting:

November 2009 home sales were 95% higher than a year ago (November 2008).  Furthermore, there was a 30% increase between October 2009 and November 2009, when most other years there has been a decrease between October and November.

November 2009 outperformed every other month of 2009 except for June and July.  November is typically a very slow month for home sales, but this year buyers came out in droves!

Read on for more good, bad, and neutral news . . .



Click here to download the PDF.

If you find the information in this report to be helpful....

• Feel free to share it with your friends or colleagues.
• Let me know if you'd like to meet to discuss this report and/or the particulars of your real estate situation.
• Let me know if you would like to schedule a time for me to come speak to your company or an organization in which you are involved.
• If you'd like to re-publish all or part of this information on your web site or in an article, just let me know if you need any additional information or graphics.
• If you'd like to know even more about the housing market in Harrisonburg and Rockingham County, click here to subscribe to HarrisonburgHousingToday by e-mail or by RSS.
• Though I spend a considerable amount of time analyzing our local housing market, the majority of my time is spent helping people like you buy and sell real estate.  If you (or someone you know) will be buying or selling real estate sometime in the near future, I'd be delighted to have the opportunity to be of service.

It seems that there are quite a few people in our current market who want to buy a house --- but they're at a standstill, because they have to sell their current home before they can buy.  It can be a challenge to buy and sell simultaneously, as I pointed out this past September.

But maybe there's another way . . .

I market several neighborhoods of new homes for Scripture Communities, and just recently the builder (Jerry Scripture) has devised a move up program that has worked for him in the past, and is working again now in our current market.

The concept is this: In certain circumstances, Scripture Communities will help you sell your current home, or will even commit to buying your home, if you are buying a new home in a Scripture Community.  Does it sound to good to be true?  It can be of tremendous help to someone who wants to buy, but most sell in order to do so. 

As a real, live, example --- we're in the process of building a home now (at Heritage Estates) for someone who is using the Scripture Community Move Up program.  If they can't sell their current home themselves by the time their new home is complete, Scripture Communities will buy it from them at an already agreed upon price so that they can close on their new home.

There are a few common sense guidelines that we're using when considering these move up scenarios:

• The buyer must be moving up, with a decent margin between the house prices.  It can make sense for Scripture Communities to buy a $200k house to allow someone to close on their purchase of a Scripture Communities $300k house.  Likewise, it can make sense for Scripture Communities to buy a $275k house to allow someone to close on their purchase of a Scripture Communities $400k house.
• The buyer (and builder) must be reasonable in deciding on a purchase price for the buyer's current home.  Scripture Communities will buy (or consider buying) a house a price that is agreeable to all parties --- but sometimes an agreement can't be reached.  
• This won't work for every situation, but it can work for many seller-buyers.  Scripture Communities can't buy every or any home for someone who hopes to buy at one of these new communities, but we'll certainly try to make it work for you to help with your housing transition.

As a reminder, here are the new communities where a move up scenario might work:

• Heritage Estates (55+ community with pool, French Country architecture)
• The Glen at Cross Keys (paired homes from the mid $200k's)
• The Cottages at Stone Spring (energy efficient homes in the $200k's)

Keston recently commented here as follows:


I can follow Keston's logic --- if prices went up 10% per year (or more) as the housing market accelerated, why shouldn't prices go down 10% per year (or more) as the housing market decelerates?!!  Here are my thoughts:

First, I definitely agree with Keston that it is very logical for a buyer to want 10% off a fair asking price. 

Furthermore, I imagine those logical buyers are quite perplexed (and perhaps frustrated) that prices haven't fallen by 10% a year as the market has declined.  The law of supply and demand definitely suggests that prices should have adjusted as demand so drastically declined over the past three years.

But, given that prices haven't fallen in this area, let's examine what is likely happening as those logical buyers try to buy in our local market with the perspective that they ought to be able to negotiate 10% off an asking price.

• The the past three months, 224 residential properties have sold in Harrisonburg and Rockingham County. 
• These 224 properties sold, on average, for 96.37% of their asking price.  Thus, on average, buyers only negotiated 3.63% off the asking price. 
  
• Of the 224 properties, only 19 properties (8.5%) sold at a price of at least 10% below their asking price.  
• Of the 224 properties, only 5 properties (2.2%) sold at a price of at least 15% below their asking price.
  

So, what's a logical buyer to do?  There is nothing wrong with wanting to negotiate 10% off an asking price, or with making offers given such logic.  But such a buyer should know that they may have to make an offer on ten or more properties before they find a seller willing to negotiate 10% or more below their asking price.

You just can't win!  The experience I'm having, on the ground, is this:

• If a house is priced "appropriately", given normal pricing methods of the past few years (see below), it may generate traffic, but it won't generate offers.
• If a house is priced lower than the above referenced "appropriate price" it will generate traffic, and offers, but buyers will want to negotiate lower than sellers are able to (or want to) because of their already aggressive list price.

Over the past five years, normal pricing practices would be (generally speaking) to look at what has sold recently, and what is currently available. 

For our example, let's assume that the three most recent comparable sales are $220k, $225k and $230k.  Certainly, this would indicate that the value is quite likely $225k based on what has recently sold. 

Then, if we look at what's available now, we might find something priced at $225k, $235k and $240k.

Conventional wisdom would thus suggest that we price the house at either $229,900 ($230k) or $234,900 ($235k).  This would allow for some negotiating room down to the perceived value of $225,000, and yet would still be appealing compared to other properties that are currently available.

What I'm seeing these days is that if you're priced above the perceived value, you often will get traffic, but not offers.  Thus, if the home is priced at $230k or $235k buyers will come to look at the home, but they won't make an offer because they perceive the value to be $225k, expect to thus pay $215k to $220k, and then don't make an offer because it would require $10k to $20k of negotiating.

If we accept all of that to be (generally) true, the next logical step is to list the property at either $224,900 ($225k), or perhaps even $219,900 ($220k) depending on how motivated you are to move the property. 

But the problem here is that you'll then likely have buyers who want to pay $210k or $215k --- WAY below where you perceive the value to exist.  Just to bounce back to that "value" (because some people would question it) --- if your three neighbors just sold for $220k, $225k and $230k, would you really reasonably think you'd have to sell at $210k or $215k to make the sale??

What is a seller to do? 

It is a tough call in any regard --- my counsel in a real live scenario differs from client to client and from property to property depending on the urgency of a homeowner's situation, the particular comparable competing properties, etc.  There are ways to successfully navigate this market as a home seller, but they require careful analysis, and patience.

As referenced yesterday, we're seeing quite a few price changes --- nearly 700 so far in 2009 --- so let's examine why they are happening, and whether they are necessary.

First, most (but not all) price changes are reductions.  Price reductions happen primarily because a house isn't selling at the existing asking price, and the hope is that more interest and activity (and perhaps an offer??) will be generated by lowering the price.  Put another way, a price reduction is an indication that the original asking price was too high.  So.....why is it so important to get your price right from the get go?  Mainly because if you don't, you're house will sit on the market until you do.  That's right --- my slightly scientific analysis (below) indicates that your house won't sell until you get the asking price set properly.

It's a long and arduous task to examine price reductions in detail via our Multiple Listing Service, so I was only able to analyze trends based on a small sample size --- the 60 most recent home sales in Harrisonburg and Rockingham County.  Here's what I found....

The 35 homes that did not reduce their asking price:

• sold in 84 days (median)
• sold for 97% of their asking price (median)
  

The 25 homes that did reduce their asking price:

• sold in 196 days (median)
• sold for 97% of their final asking price (median)
• sold for 93% of their original asking price (median)
• were reduced 6% in price by (median)
  

Did you catch that?  Houses that sold quickly, with no price reductions, sold for 97% of their original (and final) asking price.  Houses that took much longer to sell, with one or more price reductions, sold for 97% of their final asking price.  From this information I conclude that the market, largely, won't respond until you get within a certain distance of the price for which your home will ultimately sell.

Thus, if a home is "worth" $200k, there would be two options:

• List it for $206,000 and likely sell it in approximately 3 months, for 97% of the asking price ($200,000)
• List it for $215,000, reduce it over time to $206,000, and sell it in approximately six months, for 97% of the final asking price ($200,000).

My conclusion for home sellers is that (unless you enjoy the waiting game) you ought to price your home reasonably from the start rather than starting higher (with great optimism) and then later reducing it down to where it should have been from the start.

Sort of....but maybe not effectively??

The chart below shows the number of price changes per year of homes that have sold for each of the past nine years.  Some houses that sold may have had multiple price changes --- these figures show the total number of price changes, counting each change on each property.



There was a sharp increase (+29%) in price changes in 2006 (compared to 2005), which would be expected because it was the first year of a reduced number of home sales.  However, there was also a sharp increase (+22%) in 2005 (compared to 2005) when the market was still peaking.

Perhaps of even more interest is that the number of price reductions per year has slowly decreased over the past several years (-4% in 2007, -7% in 2008).  This may be explained by the declining number of home sales, as the number of price changes shown above only accounts for price changes of listings that have sold. 

This year there have been approximately 600 home sales, and roughly 200 price changes of those homes that have sold . . . but nearly 700 price changes when we include the many houses that are still on the market.

Stay tuned for more analysis of how price changes affect the sale of your house.