What a Bargain

So what do you consider a bargain? For many of we look for the big sign in the story that tells us that the product is 10%, 20%, 30% or more off the original price. In Real Estate customers watch for price reductions.

The difference between the consumer product and a home is a little harder to figure out. A product usually has an acceptable retail range that it is sold for in the story. In tough times, retail does resort to huge discounts, Christmas 2008. The housing market is extremely fluid and a home has so many factors that go into pricing a home that have nothing to do with the actual structure. The philosophy of discounting just does not work.

I think the hardest part is that many of can not tell the difference between a house and a home. A house is sold on the market; a home is where you live. Even in the best market people have a tough time selling their home because they almost always think that it is worth more than the market will allow.

The National Association of Realtors has seven tips for sellers (click on link for details):

1. Consider comparables
2. Consider competition
3. Consider your contingencies
4. Get an appraisal
5. Ask a lender
6. Be accurate
7. Know what you’ll take

The most important, in my opinion, is number six; BE ACCURATE!  Studies show that homes priced more than 3 percent over the correct price take longer to sell. Then when you start reducing the price you begin chasing the market.

So what does this have to do with the Alameda Housing Market?

As I track the weekly inventory the price reduction number has been jumping out at me, because inventory changes daily, I took a look at all 54 reductions in the market. Price reductions represent 37% of the inventory and more than anything I was curious to see if this strategy is working.

What I found was that most of the homes in town have only used one price reduction. A third of the properties listed have had two or more price reductions. I do not track homes that are re-listed so the numbers may be a little skewed. One home has had five reductions and is now the lowest priced listing in Alameda; 965 Shorepoint Ct, #211.

Seven homes have given up more than a $100,000 from their original list price. Here are the Top 5: 613 Haight , $256,000; 568 Central, $225,450; 609 Haight $198,000; 1417 Page, $185,000; 361 Ansel, $150,000; 1530 Grand, $105,000; 1534 Buena Vista, $100,000.

So for those thinking of selling the current information should be a warning signal that they should really focus on pricing their house to meet the market. For Buyers this should give you some guidence in how much to pay for home.

Link to Larger Version of Chart

I See the Future . . .well sort of

The Wall Street Journal published an article “The Future of Home Prices” on Tuesday in an attempt to gauge the mood of consumers and how they view the market in the coming year

The over all impression I got from the article is that people trust real estate more than the stock market and believe that it is their only true path to acquire wealth. Over the long homes do not rise in leaps and bounds and follows and the expertrs expect about a 4% return. The quote an investor that real estate is a way to “Get rich slowly.”

The article is lengthy, but it focuses on the location of the property, growing communities, and the impact of Baby Boomers. Overall the article takes a conservative approach to home ownership.

This article prompted an immediate response from the National Association of Realtors Chief Economist Lawrence Yun. Yun’s Future of Home Prices is a point-by-point spin on items that the association would like to redefine from the piece. Here is an example:

WSJ: Many Americans still see real estate as their best shot at wealth. In survey after survey, people expect prices to bounce back -- in some cases, as soon as six months from now. Those hoping for a quick rebound are likely to be disappointed. Economists and other pros generally say home prices won't bottom out before the second half of 2009, and some don't see a bottom until 2011 or 2012. Even when they stop falling, prices may scrape along the bottom of the rut for years.

My response: Market timing is always difficult and all real estate is local. The latest government data on prices shows 43 states with home price declines of 5% or less, and 18 states with a positive price gain. Only four states - Arizona, California, Florida, and Nevada - showed home price collapses in the double digits. This government data has narrow coverage on homes with subprime loans, so the data should be viewed as price trends in neighborhoods with little subprime loan exposure. Currently less than 10 percent of homes have subprime loans. Interestingly, these very four states are the ones showing recent notable sales increases as buyers take advantage of the knocked-down prices. Anecdotal reports of multiple bids suggest prices may be bottoming in these areas.

You get the idea of how this goes but it gave me the bright idea fior 94501Real Estate to do its own survey. I will run the survey until December 31, but please pass it along to anyone that has an interest in the local real estate market. It should be obvious that this is not very scientific but it may give us a couple of things to think about.

Please follow the link to Survey Monkey:

Click Here to take survey

A little "Back to the Future"