Does a home sell itself, or is smart marketing the key?  Or, is it a little of both? 

While most of us realize that targeted marketing is a sound sales strategy, it is tough to sell a lemon in any market.  But most would agree, rarely is a buyer willing to pay more than an item is worth, unless of course, there’s more to the item than meets the eye.  But, that is seldom, if ever the case.  Wouldn’t you agree?

Attempting to accurately price homes requires consideration of various factors including:

1.  Home Inventory

2.  Current Market Conditions

3.  Recent Comparable Property Sales

4.  Condition of the Property

As many who provide valuations of property will tell you, any good Comparative Market Analysis (CMA) will provide a property owner with an accurate price window for his/her property.  If we’re comparing like properties, it is hard to go wrong with a CMA.  But, if you’re expecting an apple to be the same as an orange, you could be in trouble!  So, where do those inflated listing prices come from?  The owner?  Yes, at times.  But, unfortunately, often, the blame lies with the Realtor.

An article in a recent Business Week reviewed William Poundstone’s new book, Priceless: The Myth of Fair Value (and How to Take Advantage of It).   In it, Poundstone examines both the psychology of buyers and sellers, and the logic used when placing a value on a product or service.  The author argues that pricing is anything but an exact science.  In his words, ”In the new psychology of price, values are slippery and contingent….”  According to the article, many “clueless” consumers are vulnerable to the marketing or sales practice of anchoring.  Anchoring, in its purest form, is the act of using of a high priced item that may never sell, in order to make a lesser priced similar item much more attractive.  Often, the same manufacturer may sell two like products, one tagged with a designer name and price, the other, a “great deal” at almost half price.  The “cheap” one sells like gangbusters!

Since it’s hard to ask twice as much for a similar home, overpricing occurs far too frequently.  The good news is, that high price tag makes all the rest of the homes look lots better!  The bad news is, the anchor model is probably going nowhere.  

While pricing or valuing a home isn’t quite as easy as 1-2-3, accuracy is a result of using the proper comparable properties when determining the listing price of a home.  But, if instead, you believe your property to be priceless, and list it accordingly, don’t be disappointed if you find the price you’re offered is only what the educated buyer thinks it is worth.

FAUQUIER COUNTY and the CITY OF FREDERICKSBURG

SPOTSYLVANIA and STAFFORD COUNTIES

Days on Market (DOM) numbers have remained fairly consistent as we head into Spring.  With buying season in full swing, next month’s indications should give us a better picture of what’s in store for this year.  

Moulle-Berteaux mentions the market indicators include:

1. Homes sales peaked in 2005.  New home sales are down 63% from peak levels of 1.4 million.
   • Housing starts have fallen more than 50%, and adjusted for population growth, are back to 1982 levels
2. Many that were priced out of the market during the downturn can now afford to get back in.  Three primary factors have contributed to this:
   • Home values have fallen
   • Mortgage rates have decreased
   • Personal income has increased

Home construction deline is another indicator cited by the author.  New home inventories peaked in July of 2006 at 598,000 homes.  That figure had declined to 482,000 by the end of March.   This decline is due to a drop-off in home completions which have resulted in an increase in the rate of undershooting new home sales.   This “under supply” will reduce the inventory.  He expects a seven month inventory supply by the end of this calendar year.  Once we reach the five month supply mark, which Moulle-Berteaux predicts will occur in ‘09, home prices should hit bottom.

 And, while the WSJ’s news is welcome, these views aren’t shared by all, as evidenced here.

Forecasting the long term direction of any market is risky at best.  I don’t know about you, but, at this point, I’ll take Mr. Moulle-Berteaux at his word.