Tallahassee Housing Market - The Chase Is On
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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I had this very situation when selling my house (post divorve) in 2008. I sold it at a $10,000.00 loss, took the first offer that came my way. My father told me that I "really" needed to sell. If I waited any longer the next offer (if any) would be $15,000-$20,000 less than what I paid for the home. Today the value of that house I sold in 2008 is $30,000 less than what I paid for it in 2006. Today I am happy as can be with my decision. I've recoverd from the loss and I'm looking to buy again in this favorable buyers market. Like Joe has stated in this blog, you don't want to chase the market. To be ahead you must bite the bullet and price ahead of a falling price curve; sell the home quickly. In a depreciating market time is definately money.
You are lucky you received good advice two years ago. Many people on the market today wish they had your father's advice then.
Great explaination and graphic. It also shows why you need to detach yourself emotionally from your home when selling.
Agreed AHF. Very easy to understand... but very hard to do.
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