Price Cut

By
Real Estate Agent with COSMO REALTY, INC.

Is the real estate price really going down? How do you feel it? And, how much, if any? What about the commercial real estate market?

The price analysis of sold items in the NJMLS data helps have a small taste of how much price changes sellers and buyers think acceptable with time lapses.

BERGEN           Palisades Park      
COMMERCIAL         RESIDENTIAL      
2Yr as of 7/31/08         2007&2008        
OVERALL Price Cut No Change Price Up TOTAL   OVERALL Price Cut No Change Price Up TOTAL
Count 137 16 14 167   Count 251 9 6 266
  82.0% 9.6% 8.4% 100.0%     94.4% 3.4% 2.3% 100.0%
Amount 135,032,500 15,513,000 12,889,900 163,435,400   Amount 142,897,615 5,199,000 3,388,000 151,484,615
  82.6% 9.5% 7.9% 100.0%     94.3% 3.4% 2.2% 100.0%
AVG DOM 146 90 92 136   AVG DOM 147 46 47 142
                     
Price Change -10.8% 0.0% 4.6% -8.8%   Price Change -5.6% 0.0% 5.6% -5.2%
vs. Listing Pr           vs. Listing Pr        
Price Change -13.8% 0.0% 5.4% -11.3%   Price Change -8.3% 0.0% 2.4% -7.8%
vs. Original Pr           vs. Original Pr        

The above chart shows most sold items went through a considerable price cut. Commercial properties, generally speaking, were sold at a much higher discount. In other words, commercial wouldn't be as transparent as residential in figuring out the right market price.

BERGEN           Palisades Park    
COMMERCIAL         RESIDENTIAL    
2Yr as of 7/31/08         2007&2008      
PRICE CUT' Sold 1Yr Sold 2Yr TOTAL     PRICE CUT' Sold 2008 Sold 2007 TOTAL
Count 55 82 137     Count 58 193 251
  40.0% 60.0% 100.0%       23.1% 60.0% 100.0%
Amount 56,297,500 78,735,000 135,032,500     Amount 31,841,975 111,055,640 142,897,615
  41.7% 58.3% 100.0%       22.3% 77.7% 100.0%
AVG DOM 144 148 146     AVG DOM 151 146 147
                   
Price Change -12.5% -9.6% -10.8%     Price Change -6.6% -5.4% -5.6%
vs. Listing Pr           vs. Listing Pr      
Price Change -15.4% -12.6% -13.8%     Price Change -9.0% -8.1% -8.3%
vs. Original Pr           vs. Original Pr      

Commercial properties in Bergen County were sold less in count and amount and at a deeper discount last one year than the previous one year ending 7/31/07. The price cut got deeper  by 3.0% point in one year. Residential properties in Palisades Park were sold much less so far in 2008 comapred to 2007, but the price cut change remained 1.0% point deeper.

BERGEN           Palisades Park      
COMMERCIAL         RESIDENTIAL      
2Yr as of 7/31/08         2007&2008        
PRICE CUT Under 500K 501K~1M Over 1M TOTAL   PRICE CUT Under 500K 501K~650K Over 650K TOTAL
Count 39 67 31 137   Count 68 112 71 251
  28.5% 48.9% 22.6% 100.0%     27.1% 44.6% 28.3% 100.0%
Amount 14,618,000 50,691,000 69,723,500 135,032,500   Amount 24,754,475 64,805,140 53,338,000 142,897,615
  10.8% 37.5% 51.6% 100.0%     17.3% 45.4% 37.3% 100.0%
AVG DOM 165 141 135 146   AVG DOM 111 138 197 147
                     
Price Change -12.8% -11.2% -10.1% -10.8%   Price Change -7.7% -5.3% -5.1% -5.6%
vs. Listing Pr           vs. Listing Pr        
Price Change -19.2% -15.3% -11.3% -13.8%   Price Change -10.3% -8.1% -7.5% -8.3%
vs. Original Pr           vs. Original Pr        

Commercial properties under $500,000 went through a deeper price cut comapred to large ones and average days on market prolonged by about a month. In contrast, residential properties under $500,000 in Palisades Park were sold at a deeper price cut, but relatively handy houses were absorbed much faster than larger ones.

BERGEN           Palisades Park        
COMMERCIAL         RESIDENTIAL        
2Yr as of 7/31/08         2007&2008          
PRICE CUT DOM 1/2YR DOM 1YR DOM Over 1 TOTAL   PRICE CUT DOM 3Mon DOM 1/2YR DOM 1YR DOM Over1 TOTAL
Count 97 31 9 137   Count 97 81 58 15 251
  70.8% 22.6% 6.6% 100.0%     38.6% 32.3% 23.1% 6.0% 100.0%
Amount 97,599,500 29,843,000 7,590,000 135,032,500   Amount 52,052,975 44,644,500 35,007,640 11,592,500 143,297,615
  72.3% 22.1% 5.6% 100.0%     36.3% 31.2% 24.4% 8.1% 100.0%
AVG DOM 82 254 470 146   AVG DOM 50.33 128.7 244 502.5 147.4
                       
Price Change -10.3% -12.1% -12.5% -10.8%   Price Change -5.6% -6.0% -5.2% -5.8% -5.6%
vs. Listing Pr           vs. Listing Pr          
Price Change -11.6% -16.2% -28.0% -13.8%   Price Change -6.9% -8.4% -9.0% -11.8% -8.3%
vs. Original Pr           vs. Original Pr          

The more stressed on the market, the more price cut, in general. Commercial properties that stay less than a half year on the market barely lower their listing prices. But most commercial properties take a more than 10% discount on average when sold.

Residential properries in Plisades Park show some reasonable cuts in listing prices with time lapses and also take a 5.5% discount on average when sold.

Of course, there may be rare cases where multiple offers compete to wind up going over the listing prices, but these seem as yet far from the reality most people stand on.

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