In July, 2008, a Zillow.com survey found that only 38% of homeowners across the country thought the value of their homes had declined in the past year. In a more recent survey they conducted in January, that number has risen to 57% of homeowners that now believe their home's value had declined. Still, there is a lot of disbelief out there, as the reality is that almost all homes have lost value (in some areas, significantly) in the last year. Additionally, the same survey found that 70% of homeowners surveyed believed that the value of their homes would either increase or stay the same in the next 6 months. With all the bad economic news out there, those numbers are truly astounding. While nobody can predict the future, all short term indicators are that most areas are going to continue to see some price declines in the short term.
In our local area, the numbers that we see on a daily basis speak for themselves. The median price of a single family home in Walnut Creek fell 15% from the 4th quarter of 2007 to the 4th quarter of 2008, from $870,000 to $740,000. The decline was more pronounced in the townhouse & condo market, as the median price of those types of properties in Walnut Creek saw an 18.7% decrease in that time period, from $490,000 to $398,500.* Still, I see numerous properties listed for sale daily at prices more inline with comparable sales from 1-2 years ago rather than today's more realistic expectations. While it's difficult to watch your home's equity declining, it's even more devastating to convince yourself of a value that isn't realistic and to linger on the market indefinitely waiting for an offer that will never come.
The initial pricing of a property is instrumental in finding a buyer for a home. Even if a price is later reduced, the amount of time spent on the market can give potential buyers great concerns. When potential buyers see a property on the market a long time, they can become concerned that there is something wrong with it, or they may simply shy away from a home that has garnered so little attention. Buyers want homes that are in demand, and by overpricing initially, you risk losing that initial enthusiasm that buyers have when a new property comes on the market. In a declining market, it's also likely that a future price reduction may not be significant enough, forcing you to make a similar move in the future, what's known as "chasing the market downwards". If you're considering selling in the near future, it's wise to be realistic as to the true value of your home.
*Above data compiled from the Contra Costa Association of Realtors MLS on February 11, 2009. This information is not comprehensive, as some sales information may not be included here. The information is deemed reliable, but has not been verified by Ken Jacobs or Empire Realty Associates.
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