What Is The Real Market Value Of A Home Today?

I just love when we get questions from readers at the Tallahassee Real Estate Blog, as it usually produces the kind of information that people who are in the market to buy a home or sell a home are seeking.

After a recent post about NAR's "temporary" position on the state of the housing market, I received several questions about my views and market measurements. The question with the best grammar :) came from long-time reader Patrick, who was curious about the real market value of a home. He wrote:

All this talk about another five years of stagnant or declining prices (with which I agree) got me to thinking- If a buyer believes that the market value of a given house will decline by another 10-20% in the near term, and the seller is in the market now to avoid getting hit with that decline, what is the realistic price for the house? Is it today’s price (assuming that price is well-researched and reasonable for the neighborhood comps. etc.,) or is it something less, like what one would expect to see in 3-5 years of the market continuing to trend downward? - Patrick

Market Value Of A Home Is Based Upon Supply And Demand

The good news is that nothing has changed in regards to determining the market value of a home, supply and demand continue to rule the roost. When we look at real estate supply and demand in Tallahassee, it becomes obvious that our current market has far more sellers than buyers, and that means pricing pressures will continue to force depreciation in our housing market.

As far as specifically answering Patrick's question, I think the simplest answer comes from understanding what a buyer is going to do today. Remember, most home buyer's are deciding where to live, not making an investment decision in their retirement portfolio. So they are going to work with a trusted REALTOR®, examine all of the potential homes they can buy, eliminate the ones they do not like, and then make the best choice based upon their perception of value.

That means that homes priced lower are going to sell, and homes priced higher are not (when comparing comparable homes). Sure the market is depreciating, but some homes are over-priced, and some are priced to sell. If the "market" drops another 10-20%, that's the overall drop, not each home falling 10-20% from its current asking price.

So the answer to Patrick's question is "the market value of a home today is an amount a ready, willing, and able buyer offers and a seller accepts."

An experienced real estate professional can look at the supply and demand information from the market and help a seller understand what this price is going to be. So long as there are enough sales occurring in the home seller's price range (liquidity), then a price range analysis can be very accurate and used to help the home owner get the home sold.