In
a couple of recent posts I discussed the market environment in various
price ranges around the Austin/Central Texas area, and pointed out that
some market segments here are clearly moving well regardless of the
"typical" price range in the area, while others are moving VERY
slowly. (See Austin
sales performance by price range, 05/07/11 and Austin/Central Texas
market performance -- what's selling?, 05/10/11.) There is no
direct correlation across the area between "market velocity" and price
range.
The second of those posts included a table that showed the "Austin
West-Westlake" region with the largest gap between the average list
price of homes on the market and the average sale price of homes that
had sold recently. That statistic understandably prompted a
reader to ask whether they should shop for homes well above the price
range in which they hope to buy. I replied to that question
directly, but the issue of "shopping high" comes up frequently (almost
as often as sellers want to "start high" on list price), so I'll
discuss it again here.
As a starting point, consider all homes in Austin West-Westlake:
First, notice that the inventory of
Active listings (Active + Active-Contingent) represents a 6.5 month
supply based on that 90-day pace of sales -- almost exactly what
most analysts consider a "balanced"
market. But note that this is an extremely
diverse market area, with active list prices ranging from $72,000 to
$12,000,000! The weighted average price of Active and
Active-Contingent listings is $1,316,000. You can see almost the
same range among homes that are under contract -- list prices from
$140,000 to $1,299,000, but the average
list price of pending listings is $595,500 -- less than half the
average Active list price. Looking at Sold properties --
ninety days' history as of the date of that table -- the range is
narrower, but the average
actual sale price was $704,000. That is noticeably higher
than the list prices of Pending listings, but still just
53% of the current average asking price.
The question I received focused specifically on the $800,000 to
$1,000,000 price range:
There is nothing particularly surprising in that data. Inventory
relative to sales is slightly higher at a little over 7 months, but not
badly out of balance. Recent sales closed at 96.5% of their final
list prices -- respectable. The
notable difference in this price range is that actual sale prices
averaged just 90% of their original
list prices
-- a clear sign that many sellers chose to "test" above-market prices
before adjusting to the point at which they received acceptable
contract offers. To make that number a little more real, consider
that 10%
of the average sale price here is almost $90,000!
But by limiting the search above to list prices in the target price
range, did we miss properties that actually sold in in the target range
while actually priced much higher? To answer that, this table
shows only Sold properties with sale
prices from $800,000 to $1,000,000:
Twenty-three sales is not a huge sample, but it is interesting that
over this three-month period not one sale in this price
range was priced outside the range when it went under
contract! And in
the end these homes sold for 97% of list price.
That's not unusual in anything approaching "normal" market
conditions. In this situation, I
suggest that prospective buyers shop for homes that are priced in their
target range.
Sure, you might across your dream house and a seller who is on the
verge of reducing the price to meet the market. But with 55
houses to choose from that are already "priced right," and new listings
still appearing, staying focused on your target makes more sense.
You'll see those other houses IF and when the
sellers finally face reality
anyway.
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