Chasing the market is a sales pricing method that is killing many of today's homeowners, and they do not seem to understand why it is happening. I am hoping that with a few simple pictures, I can convey what is happening now in the Tallahassee housing market and how it can be prevented.
"Hey Joe, let's go ahead and try it at our price, we can always drop it down if it doesn't sell."
Most people feel like they are not in a hurry to sell their home, so this statement is one that every REALTOR® has heard a million times. But there is major breach in logic that is occurring and must be addressed.
The Tallahassee Housing Market Is Still Depreciating
Home values are dropping in the Tallahassee housing market, so "waiting for later" is equivalent to "waiting until the home is worth less than today." If you really need to sell your home, you really are in a hurry. Values are dropping, so now is better than next year.
If you do not need to sell your home, I am very bullish on the long-term housing market and the market will return once we consume the glut of homes available. But do not think that prices will spring back to today's levels, they will have to climb back to today's prices from the bottom that they reach. I suspect we are looking at a 5 to 7 year wait to "get some of your equity back."
Chasing The Market Explained Graphically
I created the following graph a few years ago when we first started to encounter falling prices. It shows how over-pricing a home in a traditional market just makes it take longer to sell. But using this technique in a depreciating market might create a situation where the home will never sell.
What this roughly shows (I was never much of an artist) is that every time a homeowner lowers the asking price, they are just maintaining their "over-the-market" price margin, and thus are not getting sold. The buyers that see the house do not see the value, as the market value is always below the asking price. This is how we coined the "chasing the market" term, because a seller in this situation appears to be chasing the market all the way down.
The sad irony in this is that many current sellers in Tallahassee would have sold their homes last year at the prices that they are asking today. Had they hit the market then at this price, it would have sold. How many of them next year will be saying "I should have sold it last year when I could."
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Joe Manausa, MBA is a 26 year veteran of real estate brokerage in Tallahassee, Florida and has owned and managed his own company since 1992. He is a daily blogger with content that focuses on real estate analytics and providing his clients with a tactical advantage in today's challenging market.