John Bowman Homes

A Coldwell Banker colleague recently put an aggressively priced Cambrian home on the market in the low $500,000s; a few days and 17 offers later, it sold for $62,000 above the asking price. Less than a mile away, meanwhile, another Cambrian home remains unsold after 249 days, despite a series of reductions that have dropped the asking price from $645k to $599k.

The housing bust has created a near-stalemate between stubborn sellers and stubborner buyers, resulting in an extremely bifurcated real estate market in which there’s very little middle ground: Homes come on the market and either sell quickly at or above the asking price with multiple offers as buyers recognize a bargain – or they sit unsold … and sit … and sit. Typically, these homes end up selling for even less than they would have had they been priced aggressively from the start, or the listing finally expires and they don’t sell at all.

I’ve watched the above scenario play out many times in the past two years in several neighborhoods, but an anecdote is just that unless it can be backed up with real statistics. A quick examination of the 117 closed escrows in Almaden Valley so far this year should do the trick:

• 39 of those homes sold in 14 days or less. Average sale price was within 0.6% of list price;
• Only 25 sold in days 15-30. They sold on average for 2.07% below list price;
• Just 17 sold in days 31-60. They sold for 6.03% less than list price;
• The remaining 36 homes took an average of 149 days to sell. They went for a whopping 12.05% below asking price.

Now remember, I had to use closed escrows to get a solid number of homes with actual sale prices, so the above statistics don’t account for expired listings, or homes that are still sitting on the market. So the real picture is even more schizophrenic – and depressing – than these numbers show.

The bottom line: Buyers have had things for own way for quite a while now. They know a great bargain when they see one, and they’ll pounce on it and fight for it when they see one. But if a house is overpriced by even a few thousand dollars, they’re going to avoid it like the plague. There’s an old saying on Wall Street for what happens when that happens and the price starts dropping: “Nobody likes to catch a falling knife.”

Unfortunately, every week on the brokers tour I see several homes that are clearly overpriced for today’s market. It seems that many listing agents either don’t understand the market, or are afraid to tell their clients the truth about their home’s current value. Or worse – these agents are dumb like foxes. Watch this brief video to see what I’m talking about: