A few weeks ago I was sitting an open house at one of my colleague's listings. The downside to this listing is that it is overpriced by about 30% or what the value would have been 12 to 15 months ago. I arrived at the unit and the owner was there to show me around. During the tour, she said, I know we are priced high, but it's not my fault that my neighbors can't maintain their mortgage.
Then earlier this week, I was having my truck serviced and naturally my service representative asked about the real estate market. He has his house listed with another REALTOR® and it is not selling. When the topic of comps came up, another service representative piped up and said, comps are meaningless in this market.
These two statements caused me to re-evaluate my beliefs and validate if I agreed with both, either or neither of these statements.
I thought back to the golden rule of residential real estate: Location, Location, Location. We all know that value of your property is determined by your neighborhood. As such the financial status of your neighbors does play a role in the value of your property. Also value is determined by what someone will pay for an item. Look at our crazy stock market. Hewlett-Packard stock for example was valued at $48.87 on September 19th when HP stated they would meet fourth quarter expectations. On November 17th, HP stock closed at $29.79 with no real news regarding the health of the company. On November 18th, after HP pre-announced that they indeed beat fourth quarter estimates, HP stock rose to $33.59. Did the wild ride have anything to do with the health of the company? Absolutely not, it only had to do with what investors were willing to pay. Do comps still matter in this real estate market? Absolutely, comps show us what people are willing to pay, which is the current value of property.
What is the moral of this story? The financial health of your neighbors does impact the value of your property and buyers still set value. We all need to realize, we are all in this together and helping each is the only way out of this difficult time.