California Newspapers: Realtors' Lament - Pricing, Pricing, Pricing

I wasn't originally planning to post about the December 3 L.A. Times story "Jump Start That Sale", by Diane Wedner, but when I found "When Sellers Won't Budge", a similarly flavored article by Julie Claremont in the December 3 San Francisco Chronicle, I thought that perhaps this is a milestone in our real estate mood that should be logged.

According to the L.A. Times story, savvier realtors are stressing to their clients that listing their houses at the "correct" price is critical. And to determine what is the "correct" price, looking at what comparables are listed on the market for is not the way to go. After all, most of the homes currently sitting on the market are not selling. When looking at last month's sales (which should be analyzed by square foot), clients should check to see how long those homes sat on the market, and they should compare the features in the homes that sold and price their own homes lower if such features are lacking. Consider pricing the home so it "falls" into a price range that more people will consider. Price the home so it is the "lower" end of the neighborhood price range. And above all, if the property sits on the market for a number of weeks and stirs no interest, lower the price. Other strategies suggested include deciding whether or not to list the home on the MLS (leaving it off tends to work for higher end homes), and making the home available for showing at all times.

San Francisco brokers are so intent on pricing correctly that that is what is getting hammered into the heads of realtors. They realize that sales comparables that are 3 months old are now obsolete. In spite of such attention to this detail, most offers come in below the asking price. The San Francisco story then discusses how difficult it is for realtors to tell sellers that their homes aren't worth what they used to be worth, that a home's improvements and amenities do not mean that the house will sell at last year's prices. One agent recommends pricing 10% to 12% below the most recent relative sales comparables. "In a market where you can't drive down the street without seeing 8 to 10 For Sale signs, you have to stay ahead of the curve." And even when a lot of thought is put into pricing correctly, more homes in the area can suddenly pop up for sale on the market, then the agent must go to the seller and recommend a further price cut. Agents don't want to end up with an overpriced property sitting on the market, a big advertising bill, and a withdrawal form from the seller.

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While almost none of this is new to housing bubble blog readers, I think these stories say something about the psychology fueling the market into the spring selling season. Realtors are in "slash the price" mood, even if sellers are not. Some sellers interviewed in the article were persuaded by their agents to sell when they were reminded of all the properties sitting on the market that haven't sold. Will this "slasher" mentality work and pressure sellers to cave in come spring? Will a flood of new listings hit the market come spring time, changing the rules again and forcing even faster slashing?