Thorner's Insight Is Correct -- But Here's What It Means To Buyers And Sellers
You may recall that in December I wrote a story called "More Info On Housing". In this story I tried to clarify James Thorner's comments that the median selling price in Pinellas County had dropped about 14-percent in the last year. My point was that Thorner was reporting on a median price, and most people thought that meant that real estate prices had dropped by that amount. Comments using median selling price data can often mislead people. Not everybody took statistics in college -- and not all of us passed it.
In today's St. Petersburg Times, Thorner has clarified his comments -- even though his clarification may have been inadvertant on his part. Thorner has written that "the median home sales price can trend lower even in the absence of genuine price cutting. That's what happens when price-shy buyers steer to smaller, less expensive homes."
That's it! That's perfect. Buyers are steering to less expensive homes. This makes the median price drop but it does not mean that sellers are dropping prices. It just means that more people are buying less expensive homes and passing on the more expensive properties.
That's the point I was trying to make in my story.
You can see this sales trend in the monthly data supplied by the Pinellas Realtor Organization (PRO). Their data breaks out sales based on the selling price of the property. What is selling in today's market are homes of more modest price. Many expensive homes are sitting unsold. Since more people are buying lower priced homes, that drives the median price down even though sellers are holding fast to higher prices.
If you want real price reductions, buyers have to start making lower offers on properties and sellers have to start accepting those lower offers. When you start buying more moderately priced homes you may lower the mean selling price but you may not have any impact at all on overall property pricing. Buyers need to start making offers based on what they believe is the current value of the property in today's market.
I think the prevailing thought among many sellers is that they will price the property high and listen to offers. I can't tell you how often I've suggested to sellers that they set their price lower. The response is pretty much the same: "Buyers can always make me an offer."
A few months later, those same sellers are asking me: "How come nobody wants to make me an offer?"
The reason is pretty simple really, and has to do as much with human nature as selling strategy. Buyers want to make offers that they feel have a pretty good chance of being accepted. If the property is overpriced, buyers feel like they are waisting their time making an offer, and they don't need to do that in a market that is oversupplied with property for sale. Instead of making an offer that might be rejected, they just go to another house that they feel is priced more fairly and make that seller an offer.
Look at it this way, buyers don't like rejection. They'd rather deal with a seller who is more likely to accept their offer than get rejected by a seller who has a home priced at the top of the value scale.
So, if you're a seller, putting your asking price into the realm of reality is the best place to start if you seriously want to sell. Proper pricing will bring you more offers and will ultimately increase sales throughout the county. An increase in sales will most likely result in decreasing prices but may also bring an increase in median sales price as more expensive homes become more affordable and get bought. As more expensive homes get bought, the median price will go up, the average price will probably come down, the oversupply of real estate will be reduced and we'll get back to a more normal real estate market.
And everybody lived happily ever after.
For more information on real estate in the Tampa Bay area, visit my website at http://www.thestpeterealestatesite.com/.
In today's St. Petersburg Times, Thorner has clarified his comments -- even though his clarification may have been inadvertant on his part. Thorner has written that "the median home sales price can trend lower even in the absence of genuine price cutting. That's what happens when price-shy buyers steer to smaller, less expensive homes."
That's it! That's perfect. Buyers are steering to less expensive homes. This makes the median price drop but it does not mean that sellers are dropping prices. It just means that more people are buying less expensive homes and passing on the more expensive properties.
That's the point I was trying to make in my story.
You can see this sales trend in the monthly data supplied by the Pinellas Realtor Organization (PRO). Their data breaks out sales based on the selling price of the property. What is selling in today's market are homes of more modest price. Many expensive homes are sitting unsold. Since more people are buying lower priced homes, that drives the median price down even though sellers are holding fast to higher prices.
If you want real price reductions, buyers have to start making lower offers on properties and sellers have to start accepting those lower offers. When you start buying more moderately priced homes you may lower the mean selling price but you may not have any impact at all on overall property pricing. Buyers need to start making offers based on what they believe is the current value of the property in today's market.
I think the prevailing thought among many sellers is that they will price the property high and listen to offers. I can't tell you how often I've suggested to sellers that they set their price lower. The response is pretty much the same: "Buyers can always make me an offer."
A few months later, those same sellers are asking me: "How come nobody wants to make me an offer?"
The reason is pretty simple really, and has to do as much with human nature as selling strategy. Buyers want to make offers that they feel have a pretty good chance of being accepted. If the property is overpriced, buyers feel like they are waisting their time making an offer, and they don't need to do that in a market that is oversupplied with property for sale. Instead of making an offer that might be rejected, they just go to another house that they feel is priced more fairly and make that seller an offer.
Look at it this way, buyers don't like rejection. They'd rather deal with a seller who is more likely to accept their offer than get rejected by a seller who has a home priced at the top of the value scale.
So, if you're a seller, putting your asking price into the realm of reality is the best place to start if you seriously want to sell. Proper pricing will bring you more offers and will ultimately increase sales throughout the county. An increase in sales will most likely result in decreasing prices but may also bring an increase in median sales price as more expensive homes become more affordable and get bought. As more expensive homes get bought, the median price will go up, the average price will probably come down, the oversupply of real estate will be reduced and we'll get back to a more normal real estate market.
And everybody lived happily ever after.
For more information on real estate in the Tampa Bay area, visit my website at http://www.thestpeterealestatesite.com/.
-30-
posted by Terry Ward at 3:42 AM
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