December 15, 2023

Avoid the pitfalls of price markdowns; price your home right the first time

Prevalent price drops alongside rising prices illustrate another aspect of today’s bizarre housing market – the mismatch between sellers’ high expectations and the reality of buyers’ budgets.

Mortgage rates hit 23-year highs in October, but sale prices were still up 3% from the same month in 2022. Despite slowing demand, lower inventory appears to be propping up prices.

However, nearly 7% of for-sale homes posted price drops in October, the highest level since the metric has been recorded.

Home sellers are naturally inclined to seek the highest possible return on their investment, and while a favorable selling price is understandable, overpriced homes tend to linger on the market. Ultimately, unrealistic initial pricing may contribute to the ongoing housing shortage.

Of course, the housing shortage is due to many factors, including limited supply and economic conditions, but the behavior of home sellers in setting initial asking prices is often underestimated.

The longer a home remains unsold, the more price reductions it is likely to see. Buyers may assume something is wrong with the home or decide there is room for more discounts. These fluctuations can indirectly lead to a lack of trust and create a sense of stagnation. The prolonged market time can start a domino effect; keeping potential buyers waiting, and hindering overall market fluidity.

It is therefore important for sellers to price fairly from the start. When calculating the initial asking price, consider comparable property values, market trends, and economic conditions.

Working with experienced real estate professionals can help estimate a property's true value. Real estate agents conduct thorough market research and understand pricing trends. Their expertise can provide insights to determine an appropriate initial price.

Buyer negotiations are also a natural part of home-selling. Being flexible and open to reasonable offers can expedite the process and alleviate strain for all parties involved.

By adopting a more pragmatic approach to pricing, sellers can contribute to a more balanced and sustainable real estate market. .