Is the Listing Price Important? - Searching for Facts not Opinions in Lexington Kentucky

The purpose for these next series of articles is to research how the original listing price does or doesn't affect the selling price of a home.   We read and hear Realtors consistantly arguing that setting a high price will usually lead to a low selling price. Is that true here in Lexington?  When I do listing presentations I show my clients how listing prices correlate to selling prices in their area.  However to my knowledge there is no systematic study of that correlation in Lexington.

My goal over the next 10 days is to look carefully at the primary zip codes of 40502, 40503, 40504, 40511, 40514, 40515, and 40517.  I will analyze each zip code and see if the statistics will reveal anything of significance.  The study will include only single family residences with selling prices between $10,000 and $999,999.  In all of Lexington this past year there were only a handful of homes that sold for more than a million dollars.

My conclusions are listed first followed by the information that supports them.

•  Realtors must be careful not to generalize about "Days on the Market" having an adverse affect on prices.
• Sellers need to determine if waiting to sell their home for a greater price after an additional 134 days is worth the risk. 
• Fewer than 25 % of homes sell for more in the longer time.  Will that continue to hold true in the other zip code areas of Lexington.
• Buyers, be patient.  With the large number of homes currently on the market  for longer than 90 days one can assume that those homes will not sell soon.  If one of those homes is high on your list work with your buyer's agent to make a reasonable offer.  Then be patient.  Give the seller time to digest what is happenning in this market.

This study is for the Zip Code 40503.
Geographic Data: 40503 consists of two distinct areas.

•      The first area extends from near the Universtity of Kentucky south between Tates Creek Road and Harrodsburg Road to New Circle Road.
•      The second is south of New Circle Road  between Nicholasville Road and Harrodsburg Road and oy  extends mostly to Man of War Blvd.
•      New Circle Road is an average of less than four  miles to downtown Lexington which makes it a natural landmark.  Homes within "The Circle" are generally desired by people wanting to live "close to the action."  

Detailed Profile Estimated (2008) Data for Zip Code 40503:

• Population - 28,835
• Houses and Condos - 13,702
• % of renters - 43
• Estimated Real Estate Tax - 1.2% = $1,394
• Annual Household Income = $58,000
  

The table below shows how I broke down the prices into certain increments.  All numbers are from The Lexington Bluegrass MLS on 02/01/2010
Before analyzing these numbers there are other factors to consider.

1.      There are 99 active listings for 40503 and 53 of those have been on the market more than 90 days. The average is 172 days.
2.      There were 156 properties which were expired, withdrawn or deleted during this time frame. Of course many of those are back on the market and would be also be include in the current active listings.  
3.      The average days on the market for all of 40503 for the homes selling in fewer days was 28.76 days.  Those on the market more than 90 days sold in an average of 162.87 days.  How much money does it cost to keep a home on the market an additional  134 days? That is an important question to present to home owners.

So, what is significant about the numbers in the chart below?

1.     There is no direct correlation between days on the market and price, but there are some trends worth exploring. 
2.         Deduction:  Be careful about generalities.  Sweeping statements about price and days on the market cannot be supported by the facts in this area code.
3.     Homes that sold for more when on the market longer than 90days, adding columns 3,5 and 6 in row 7 totalled  31.
4.     Homes that sold for more when on the market fewer than 90 days, adding colums 2,4,7,8, and 9 in row 2 totalled 138.
5.         Deduction: A larger sample is always more trustworthy in statistical analysis.  The homes that sold for more in fewer than 90 days more than quadrupled those homes that sold for more in over 90 days.
6.    There is no obvious difference because of price range.  The three highest price ranges seem to suffer the most from a long market time but the sample number is so few we cannot make that correlation.   It will be interesting to see if this trend holds in other area codes.