I can understand your confusion. As of the end of last month, the average list price was $1,493,000 but the average sales price was $992,000. Itâ€™s unfortunate that we cannot put graphics here or I could show you exactly what is happening. Keep in mind one thing: the difference between list price and sold price DOES NOT mean that homes at the high end of the market (1.4 million) are selling for the lower prices (.99 million). It actually means that the homes at the lower end of the spectrum are selling while the homes at the top are not. And, of the homes over a million that HAVE sold since January, most of them saw large price reductions reflected in the final sales prices. This really means the homes were really marketed too high to begin with. And there is currently a glut of homes over $1,000,000 in Orinda.
This trend is currently consistent throughout the entire Bay Area.
When you look at trends in an area, you have to look at list price/sales price averages AND price per square foot. In Orinda, the average price per square foot has actually been sliding downward for the 6 months. It was $448/sq. ft. in October and finished at the end of April at $338/sq. ft. This is a whopping 25% reduction. In other words, home buyers in Orinda can expect to buy 25% more house today than they could in October, 2009.
There are a number of factors influencing this. Jumbo money is still in short supply, and there are increasing numbers of short sales and foreclosures in the upper market tiers. The upper end of the market is still VERY soft in the East Bay and will continue to be so for some time.
To answer your specific question about the home that dropped from 1.9 to 1.5, it was a short sale and had been on the market almost a year. This tactic of drastically reducing prices to get an offer is frequently used throughout the bay area; however, it can backfire if the bank renegotiates the price back up at settlement.
Rather than rewrite previous posts that address this same issue, let me provide a few links that may be helpful. In addition, I can provide detailed data by email upon request.
Tax credit's impact on SF market still unknown
Danville Housing Market Facing Unprecedented Reality Gap (read all the comments)
Conversely, because of the fact we are on the bottom of the market, we tend to discover the "bottom feeders" (those that routinely bid on properties way below fair market value) are out in full force. So, you are correct, pricing it high to begin with offers a specific selling strategy that lends itself to negotiating back and forth.
Remember to do your homework and see as many houses in your price range for you to know and understand what current fair market value is when you see it. That way, when the deal of the decade comes by, you will be ready to jump on it without any reservations.
Best of luck!
The listing prices are usually determined from the historical sales data; sold price based on property size, condition and location. Not all realtors or sellers want to believe the prices are declining. Many realtors will list a property for what a seller thinks their home is worth or what the seller NEEDS with the hope the seller will be convinced to reduce the list price when the home doesn't sell. This is more of a realtor strategy for getting business. It can be a very expensive and discouraging strategy. Many sellers who 'don't have to sell' will hold fast on their price making it very difficult to attract a buyer.
But I see listing prices declining in the higher end market. If you look at the Orinda homes that have sold in the past year for over $1.4 million compared to the ones that have not sold, there is a very distinct difference in desirability. Orinda is seeing a decline in value in the higher end market.
For more information or to make an appt. to discuss your buying needs, call me, Maureen Wilbur, Coldwell Banker Orinda, at 925-253-6311 Direct or email me at Maureen@MaureenWilbur.com.
There are many different factors that play into the price of a home as the other agents have noted. In Orinda there are different neighborhoods that command higher prices than others that also weigh into the price on top of the usual, square feet of house & property, condition, layout, average $/ sq ft, etc. Additionally, the trend for sold price versus original list price is currently hovering at about 90% for the last 15 months. This number fluctuates from month to month depending on what was sold in a particular month. See the list below from February 2009 (95%) through April 2010 (87%).
Sold/Orig LP Diff. % 95 92 96 90 89 87 92 94 91 87 85 90 88 99 87
The other factor that weighs heavily on list price is the seller's motivation. Some seller's are more motivated than others. Sometimes it takes the Seller a while to adjust to the realities of the market and thus you see homes in this price range sitting on the market for over 60 days which means the market is telling the seller their home is not priced properly for current market conditions. If it is priced correctly, it will sell swiftly and close to list price. Comparing all of the factors from city to city and neighborhood to neighborhood is what a skilled agent can do for you.
Happy House Hunting!
Something else to keep in mind is that your price point is more fluid than the specific target you have selected. Many buyers in this price point are comparing 1.5 mil in Orinda to Montclair and Alamo. I pulled 680 Corridor homes over 1 million and there were an additional 27 closed sales from 2000 to 6000 sq ft at a price per square fott that ranged from 400 to 700. Talk about meaningless statistics.
The reality is it is very difficult to put a price on a home in this price point based on a shifting market from 1.2 million and up and a improving market under 1 million. If you are ONLY looking in Orinda, get a good agent who can explain the fluctuation in these numbers in a meaningful way.
Generally and if you don;t fullyt trust your agnet of choice, you can always rely on a local appraiser of our own choosing. This is not the ideal way to handle the situation but it is an option.
There are some very good points made in the answers up to this point. Dave is right on target saying there is too small of a database from which to draw accurate conclusions about trends or averages. Billâ€™s line about there are as many markets as there are ecosystems in Orinda is perfect. Eric talks about agents taking listings at prices way above what they know should be the asking price, just to get the listing and later reduce the price. This is a disservice to the seller, ultimately costing them time and money, but it is commonly done, and partially explains the dramatically reduced selling price.
When my broker and I tour Orinda properties every Tuesday, we play a little game to hone in our valuation skills. We will tour a house not knowing the square footage or asking price before walking in. After touring the property, we will take into consideration location (on the street, in the neighborhood, in the city), the condition, the finishes, the updates, the feel, the comparable sales, the current inventory, all of the factors that make up a properties value.
We will first try and guess the square footage. Over the years, weâ€™ve become pretty good at estimating square footage. When we are off on a guess, it says something about the feel of a property, and the price will usually be off in the same direction.
Once we have the accurate square footage, we will put what we think should be the right asking price on the property. We are not basing our asking price on footage, but footage is one factor. If we estimate low on the footage, which says something about the â€œfeelâ€ of the house, we are then usually surprised at the high asking price, since a lot of people use the per foot strategy in setting their asking price.
Tracking where the houses end up selling, or not, usually proves us right in our valuation after many years of this exercise.
Weâ€™ve toured 31 properties in the last 2 weeks alone. Weâ€™ve toured thousands of properties over the years. There is no substitute for experience when it comes to valuing homes in specific neighborhoods.
You should, if you havenâ€™t already, visit as many open houses as you can on the weekends. Visit your price range stretched a little lower and a little higher. Go out with the intention of exercising your valuation muscle. You need to feel confident that when a house hits the market that fits your desires, you know the value. Or, you need to feel confident that your trusted adviser, your Realtor, knows the true value. Statistics do not always reveal the true story.
The explanantions below are very accurate, but in addition to over $1mm properties not being sold in large numbers, the appraisals are also a huge factor in the equation of what it finally sells for. I have been experiencing appraisals that make no sense and ther fore cause the transaction to either fall through or an additional negotiation between seller and buyer brings down the actual sales price, even though the buyer was willing to pay more.
If you are a qualified buyer and looking for property in our county, I would highly suggest you partner with a realtor who can guide you through the intricate maze of the current home purchasing process. We have lots of statistics available to analyze values from many different perspectives, but what really matters is that both parties agree on an equitable purchase price.
There is a perception that the housing market is getting better, so many sellers are pricing their homes a little higher. The reality is that the market isn't getting better everywhere, which results in the lower prices for actual sales. In real estate folklore there are 3 types of sellers, those who: must sell, might sell, and won't sell. I believe that along Highway 24 there are more "must sellers" entering the market, either through foreclosure or for some other reason. Also, many who have wanted to sell but were holding out for a better market have run out of time.
My tip for buyers in this area is to throw out the numbers analysis and just negotiate hard when you find a property you like. Sellers will talk about comparable property values, what they've invested in the property, etc., to which I say - "so what?" Regardless of market conditions it's always about the bottom line and I'd stick to that.
The unfortunate part of this scenario is that it has been proven that interest is highest in the first two weeks of a home being listed. Furthermore, where a home is listed in relation to its market value directly impacts the percentage of interested buyers. At market value the percentage is 60%. Just 10% above and that number drops to 30%. At 15% below market value the number is 90%.
The bottom line is that as an agent it is our duty to show the value of proper pricing and marketing. However, at times, this can be easier said than done.