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Overpriced home listings add to the supply of houses on the market and increase an individual market’s – Average Days On Market – statistic, neither of these things help a recovery. Sure demand has been down, loans are harder to get, and prices have been falling, but owners over valuing their homes just adds to the mess. Property owners need to realize their property is worth less, let go of their fake equity, and price their property accordingly.
The good news is that it seems like homeowners are more aware of this – I hear agents mention that their buyers are more accepting of their home’s current value and read less about how homeowner’s just won’t let go of the equity they thought they had in ’05. That said, a couple recent surveys from Zillow and Homegain prove that there’s still a small disconnect. Homegain’s survey showed that 45% of homeowners think their property should be priced 10-20% higher than their agent’s recommendation. Zillow’s survey showed that only 60% of homeowners think their property declined in value over the past year, but data from Zillow’s Q2 Real Estate Market Report showed that 83% of U.S. houses declined in the past year.
All this Recession Talk has Made a Difference
I could be wrong, but it seems like many homeowners in America are becoming better educated about the value of their homes. In previous years, a look at some home listings and conversations with homeowners and real estate agents made me believe that most owners thought their home was worth quite a bit more than the actual market value of the property. I attributed this to the crazy market we experienced in the early 2000s and to the fact that some people just watch American Idol too much.
I do believe that years of media coverage about the sharp decline in housing prices, the large number of foreclosures, the flood of unsold (spec and inventory houses) homes on the market and the overall poor health of the economy has made many home owners more aware of the real estate market in their area. Although the Homegain survey mentioned above shows that there are a few homeowners still arguing with their agents about pricing, most American’s do know that their home lost a lot of value. It’s a small step in the right direction.
This new found acceptance of lower home values may have helped clean the market up a tad, and better position us for a recovery. Owners that don’t want to sell and realize a loss on their house are removing their home from the market. The owners that still want or need to move, “better price their home”, which usually decreases the property’s days on the market. These two things may seem like small factors, but they play a big role in supply, and they certainly affect consumer and investor confidence. Three things that I think can make or break any market.
What do you think? Would a better understanding of the market by home owners have helped a recovery? If so, it’s just one more instance of all of us needing a little more education.
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I read in an article that homes will reach the prices of 2007 not before 2022.
With over 30 year in the branch, have I always get to hear from the seller – homeowner, that they think there house is better and more value than there neighbor’s house. And nobody want to sell theirs home cheap.
This is one of the hardest things to do is to tell homeowners their home is worth far less than what they think it is. They have to realize that they are going to make it up on the other end when they buy though. Not easy for homeowners or Realtors.
NO2211 – I’ve read similar articles as well. It might not be a bad thing for home values to increase nice and slow.
Sundream – most people want to get the most for their home and everyone likes to think they have the “best house on the block”.
Mike – Agreed, it seems like it would be a very awkward situation; definitely something that must be handled with care.
I think you are absolutely right. In many markets sellers have begun to understand and are pricing their homes appropriately. It is really not advised right not to over price a home. It is far better to wait until the market strengthens rather than over price a property and have it sit on the market to long.
.-= Chapel Hill Real Estate´s last blog ..Foreclosures in Chapel Hill, Orange County, Durham, Raleigh, etc =-.
I definitely think that the luxury home owners have been the most reluctant to lower prices. We’re still seeing San Diego beachfront property owners who bought their homes in 1998-2000 for $2M expect to get $15M to $30M today. A lot of people are under the mistaken impression that wealthy people will pay anything for location. What’s another $10 Million?
.-= San Diego Homes´s last blog ..MIA San Diego Foreclosure Properties =-.
I have watched sellers in my market let homes go into foreclosure rather than take a small loss on the sale. My agent “friends” say that those sellers have to get a certain amount to pay off their existing mortgage(s), or they will lose money on the sale. My standard answer is always, “It does not make sense to let a home be taken over by the bank rather than take a loss of even a small amount of money. Plus, I am reasonably sure that most mortgage companies would rather work out a deal than go through the hassle and expense of a foreclosure.” I Just do not understand why these agents have this mindset (all or nothing) for their clients.
So from reading this, I have a question. How much do you think that home owner “education” regarding the value of their homes, has affected sale price decisions (counters, etc.) and a “need to” price (agents suggestions)?
Thanks,
Bealed
It was sad to hear one comment about their clients letting their home go into foreclosure instead of bringing down there price to reality. What a horrible decision on the part of the owner of the property.
It’s our jobs as real estate experts to set realistic expectations with our clients. If we don’t were setting ourselves and our clients up for failure.
If you price a property correctly it will take little to no marketing effort to sell! Don’t tell your sellers that but it’s reality.
.-= Greg Dallaire@Green Bay Real Estate´s last blog ..Howard Suamico Wi School District Why are people drawn to it? =-.
Greg,
That is exactly what I was thinking. I could not BELIEVE it when my “agent friend” told me that.
But that still begs the question, “Do you think sellers have become MORE knowledgeable regarding their sale price options?”
Thanks,
Bealed
Interesting read. I think that you may have hit the nail on the head with many owners feeling that their homes are worth more than they really are. Can’t be easy for agents to break the news!
.-= Mesa Chiropractic´s last blog ..Raindrop Massage Therapy =-.
This type of discussion just confirms to me that the prices are still generally inflated. I am concerned that we are in a continued cycle that is eventually going to catch up with again. First home buyers grants is the possible culprit! I welcome others opinion as I am genuinely concerned and I hope I am terribly mistaken.
This seems to be a reflection of the UK housing market. A lot of areas of the country suffered from highly over inflated prices and these seem to be the places that are recovering the slowest. Though the London property auctions are beginning to get busier and not just from the selling of repossessed (foreclosed) homes.
Absolutely home prices have prolonged the recovery – and I’m not second guessing here, I first guessed that.
I cant wait till the recession is over and this short sale mess goes away. Have a great Easter!
In Marbella we recently had a vendor put there property up from 400k to 435k so they had some room for negotiation wheras before people would just knock another 10% off the price but the problem was the property was priced to sell at there lowest price, this obviously opens up a big debate