Home prices in Orinda--Making sense of why listing price keeps going up while sold price keeps going down. Tips for buyers?

Asked by Lamorinda Home Buyer, Orinda, CA Wed May 19, 2010

My husband and I are looking to purchase a SFR in Orinda in the $1.5 million ball park. Just looking at the listing and sold price trends we are a little confused. Typically, one would expect to see the two trends pretty close to each other, reflecting that the property is priced at fair market value. But in Orinda, what we saw was two trends diverging with listing price continue to go up yet sold price continue to go down (as of April 2010). How could this be? Isn't listing price supposed to be based on price of recently sold properties? Also some of the price reductions don't make much sense either--how can one property go from $1.9 million to $1.5 million? Should we interpret this as most of the listing price as over-priced (maybe as a selling strategy)? We'd like to buy in Orinda but certainly do not want to pay for an over-priced house. Help!

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Bill & Elijah…, Agent, Oakland, CA
Wed May 19, 2010
Hi, The data you're looking at suggests that there is one market for Orinda that these statistics apply to. The reality is that Orinda and most communities have multiple markets. This has been compounded by the housing bubble and recession where the banks have become big players with REOs and short sales. There are as many mrkets as there are ecosystems! In a place like Orinda one additional high end home can have a big effect on the data. My advise is to learn which market you are in and educate yourself about it. A good raltor can help a lot too. Good luck in whatever venture you choose.
Best wishes,
2 votes
The Medford…, Agent, Fremont, CA
Wed May 19, 2010
Lamorinda Home Buyer:

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. It’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)
2 votes
Jonathan Y.…, Agent, Belmont, CA
Tue Jun 8, 2010
This phenomenon is more common than you might think in the upper ended market range. Often it is the unrealistic expectations of the owners that are fueled on by their agents. Agents will knowingly take an over priced listing just to attract more buyers as their clients and/or to gain more exposure for themselves by planting more for sale signs in and around that city. Competition to be the top listing agent can be fierce.

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!
0 votes
John Souerbry, Agent, Fairfield, CA
Tue Jun 8, 2010
It's not about statistics, or the prices would be flat or going down. It's about a belief that the market is coming back. Go hunting with confidence that you should be able to negotiate hard and get a good deal.
0 votes
Maureen Wilb…, Agent, Orinda, CA
Tue Jun 8, 2010
Good Question. As a realtor in Orinda, I see a downward trend in sales price too.

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.
Web Reference:  http://www.MaureenWilbur.com
0 votes
Cheryl Hata, Agent, Orinda, CA
Thu Jun 3, 2010
Hello Orinda Home Buyer,
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!
Web Reference:  http://www.hatahomes.com
0 votes
Bob Georgiou, Agent, Danville, CA
Wed May 19, 2010
Lamorinda Homebuyer,

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.
Web Reference:  http://bob2sell.com
0 votes
Bob Wegener, Agent, Moraga, CA
Wed May 19, 2010
Dear Home Buyer,

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. Bill’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, we’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 “feel” 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.

We’ve toured 31 properties in the last 2 weeks alone. We’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 haven’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.
Web Reference:  http://www.bobwegener.com
0 votes
Suzanne Look…, Agent, Lafayette, CA
Wed May 19, 2010
Hi Lamorinda Homebuyer,

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.

Suzanne Looker
Web Reference:  http://www.suzannelooker.com
0 votes
Dave Sutton, Agent, Portland, OR
Wed May 19, 2010
April is the first month since November that more than four $1MM+ homes have sold. That is just too small a data base from which to draw accurate conclusions about trends, or even averages.
0 votes
Eric J Soder…, , Pleasanton, CA
Wed May 19, 2010
What often happens is there is a conflict between what a seller wants to sell their house for and what the market will actually bear. This also explains the large price reductions. It can be difficult for some agents to show the value of pricing correctly. They are afraid of losing the listing so at the insistence of their client, they put the house on the market at a price point that they know it will not sell for. After two to three weeks when they receive no offers, they decide to listen to their agent and price it at or just above market value.

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.
0 votes
Kenneth Lee, Agent, Piedmont, CA
Wed May 19, 2010
My suggestion is that you work with a Realtor that knows the Orinda market and all of the individual neighborhoods. He or she will be able to decipher if the listing price is wishful thinking on the seller's part or a fair market value.
0 votes
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