Montclair and West Caldwell, NJ Compare Expired Listings

Game Changer^® is an MLS-based, price-point focused, market information system.
It uses the flow of money, time and inventory to analyze residential real estate markets, uncover opportunities for buyers and sellers, and meet client objectives. Use the links on the right to see more Game Changer examples, and be sure to subscribe to my blog in order to watch the game change.

Everyone knows the odds on a coin-toss. It's 50% forheads, and 50% for tails. But what if there was a third possibility? Like the coin landing on it's edge. That would change the odds, for sure! So it is with active listings and sold listings...two sides of the same coin...except in this case there is a third possibility: expired listings.

The chart to the right shows just how significant expired listings were in West Caldwell in 2009. The first figure in the value label is the number of listings and the second is the percent of all listings.

With there being so many expired listings, it's interesting that some Realtors argue that they don't really reflect what's going on in the market, because the homeowners aren't sufficiently motivated.

My belief is that not only do expired listing reflect the current state of the market, they also inform how best to sell houses in the market. Take the following table, for example. On both the West Caldwell and Montclair sides of the ledger, the number of expired listings is consistently distributed across the price points that the towns have in common, irrespective of price point sales volume.

However, the one huge difference between the towns is the ratio of expired listings to sold listings. For West Caldwell it's about 60/40 (sold vs. expire), and it's about 75/25 for Montclair. That variance is directly related to buyer demand. One of the things it means is that a listing which sold in Montclair might very well have expired in West Caldwell.

But I think the most telling and useful information about expired listings comes from the following 2 charts, and their accompanying discount tables. They compare the differences between Original List Prices and List Prices for listings that sold and for those that expired. The following chart notes will walk you through the charts:

• The two charts compare original list prices to list prices for both sold and expired listings.
• Market price range is on the vertical axis: All listings that sold or expired in the 24 months ending June 30, 2010 had prices that fell into a range from ranged between $380,000 - $730,000.
• The horizontal axis shows price points as defined by percentiles: For example, houses priced at the 80^th percentile are higher in price than 80% of the other sold or expired listings. A house at the 20^th percentile is lower in price than 80% of the sold or expired listings.

The charts uncovered 3 significant things:

1. Expired listings are more likely to be higher priced.
2. The spread between OLP and LP for expired listings is more than for sold listings. This is the 800-pound gorilla in the closet, because the greatest amount of buyer interest and activity takes place during the first couple of weeks of marketing. If a house's OLP is too high, buyers and agents will not show up and the homeowner, along with his or her agent, will be on the slippery slope to expired-ville.
3. Regarding the idea that homeowners of expired listings weren't sufficiently motivated to sell, the chart of expired listings dispels it. The reason is that unmotivated sellers wouldn't bother with serious adjustments to their OLPs if they were content to let their listings expire. My personal belief is that what starts out as a trial balloon pricing...let's see if someone will pay more than market value...takes on a life of its own. And, by the time adjustments are made, the market has moved on.

One last thought about expired listings. As it is with most all Game Changer^© calculations, real estate markets behave differently. Those differences have a way of becoming opportunities. Finding them is what Game Changer is all about.

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Interested in west Essex County, NJ, or surrounding towns in Morris and Passaic Counties? Game Changer knows things you should know...things like where deals are, and how to get asking price. But there's a risk? The risk is that you don't reach out to me because you think Game Change is a bunch of hype. If that's you, subscribe to my blog right now so you can see for yourself that Game Changer is the real and that I am, too. Then contact me.

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