Business - Business News

POSTED: Sunday, Feb. 22, 2009

Long waits, big reductions for homes not priced right in Whatcom Co.

January was a slow month for local home sales, with drops in prices and volume continuing the trend from last year. Setting a price that's too high can really hurt the home seller, too.

Gragg Miller of Coldwell Banker Miller-Arnason wanted to show his agents the importance of pricing a home to reflect current market conditions, so he did some research about what happens when a seller is forced to reduce the original price. He suspected that it would take longer to sell the home, but he was still surprised by how much.

Looking at January sales, Miller split the number of homes sold into two categories: Homes sold where there was no price reduction and homes sold that had at least one price reduction. He factored out newly constructed homes, since those tend to be difficult to price correctly. For homes that were "priced right," the home sold at 95 percent of the list price, averaging 55 days on the market. The homes that needed at least one price reduction sold at an average of 80 percent of the list price, taking an average of 200 days to sell. The average price reduction was $68,000.

In January, there were 28 homes that fell in the "priced right" category, while 44 homes had at least one price reduction.

"It just shows that if you start off too high, it becomes very difficult once you start doing price reductions," said Miller, noting that there is sometimes a psychology that sets in where buyers will wait to see how low a price will drop.

Miller did this research because he expects this year to be a very challenging in terms of figuring out the right price for a house, particularly in the high-end market, which has dropped off dramatically in recent months.

"It is very difficult to figure out the value of anything above $500,000 right now," Miller said. "We don't have people moving into the area looking at that price range like we once did. It's also difficult to tell someone the price of a house might not be what they think it is, but more sellers are being flexible. They read the news and see what's happening in the market."

The news about dropping home prices is having an impact nationally as well. Earlier this month Zillow.com came out with its Zillow Q4 Homeowner Confidence Survey, which found that 70 percent of people in the west region believe their own home lost value in 2008. According to Zillow, 90 percent of homes in the west region lost value in 2008. The disparity between perception and reality was much wider earlier in 2008.

In trying to price a home correctly, Miller said the key is looking at the most recent sales and comparing similar homes. Six months - before the financial meltdown - won't work. It needs to be sales within the past 60 days.

"Even with comparables, pricing a home is still more an art than a science," Miller said. "There are other factors, such as neighborhood and the price range, which also make a difference."

He said so far in 2009 there has been an uptick in the number of people at open houses, but it hasn't translated into increased sales yet. So it appears there are people, looking for that right price. As we head further into 2009, we'll soon see what that right price is.