Pricing is STILL the Key

As Published in The News-Press August 28, 2010

By D. Michael Burke

We’ve been getting a lot of good news about the real estate market lately. Projections for the year turned out to be true: Sales increased dramatically during the first two quarters of 2010, fueled by the first time homebuyer tax credit. In July, after the tax credit ended, sales dropped – but we expected that. Inventory is now down to less than a year’s supply, so we’ve still come out ahead.

My point is, we have been getting a lot of good news lately. It is important, however, not to let it go to our heads. Just because we have seen a strong increase in sales for at least the last year, doesn’t mean we can forget everything we’ve learned in the last few years.

Competitive pricing still trumps everything else.

Yes, we have seen small but significant increases in prices in the last year. But don’t forget, the competitively priced homes that have been driving all of the improvements we have seen in the market. Just like with the tax credit, competitive prices draw out potential buyers by promising them a good deal that won’t wait. The tax credit had a deadline; likewise, as the market improves prices are bound to go up, so if buyers snooze, they lose.

Even more importantly, we may be looking at another wave of foreclosures in the near future, if action isn’t taken to head them off. In June, the Florida Bar Journal ran an article discussing the local mortgage foreclosure crisis. According to the article, a second wave of foreclosures is expected as homeowners in trouble with their adjustable rate mortgages default and lose their homes. Another, smaller group of homeowners may even intentionally default on their mortgages, in order to get out from under homes that are no longer worth as much as they owe on them. Other experts have also noted that there are a lot of real estate owned properties that the lenders have just not listed on the market yet, indicating that the delayed sale of these homes could also prolong the impact that foreclosures have had on our housing market.

The Florida Bar and other experts have been discussing solutions to prevent these foreclosures from hitting the market all at once, such as measures that lenders can take to help homeowners stay in their homes. There are some very good ideas circulating, and hopefully some of these will be implemented. However, the threat of these additional foreclosures highlights the ongoing need for competitive pricing.

I recently talked to an appraiser I know about how the high number of foreclosures are impacting market values. Obviously, a lot of foreclosures drive prices down, forcing even those sales that are not distressed to lower their prices accordingly. The fact of the matter is, besides driving down the closing values that are used in an appraisal, a high number of foreclosures bring out buyers who are looking for good deals.

Despite the small increase in prices recently, the same holds true as 12 months ago: Competitively priced homes get the most showings and sell the fastest. In order to determine a competitive price for your home, it is important to have your real estate agent perform a comparative market analysis (CMA). This is one of the most powerful tools at your disposal, as it analyzes all of the closing prices for comparable homes to yours during the last six months – including foreclosures. With this data, you and your agent can come up with a fair asking price that walks the fine line between too much and too little.

As a selling agent specializing in the neighborhoods of Lee and Collier Counties, I have watched the pricing trends of the last few years, and I know what to expect. Experience and specialization in a neighborhood is invaluable when added to important tools such as the CMA. Please feel free to call me for more information on pricing your home competitively. In today’s market, there is no reason why your home shouldn’t sell – if it’s priced right!

Contributed by D. Michael Burke, P.A. Keller Williams Elite Realty
Michael@CoconutPointRealEstate.com / www.CoconutPointRealEstate.com