What Is The Correct Pricing Strategy in Today’s Market?

In the Tri-Valley, which includes Dublin, Danville, Pleasanton and San Ramon, I have started to notice more price reductions, especially homes that are over $1.4 million.  Does this mean there is a market slowdown, or is it just because of incorrect pricing strategy?  It seems as though many homes have been listed anticipating that prices will continue going up as it has in the past few years.  I think this is starting to slow down.  For example, Dublin Ranch has been super hot in the past few years but there is currently a home on the golf course that was originally listed for $1,5888,888 and recently cut its price to $1,399,999.  This is nearly a $200,000 drop!  Two years ago, this would not have happened.  I am starting to see more and more examples of this.

Make no mistake, the market is still very good and this is not to say all homes in this price range need price cuts, but that pricing strategy should be in line with what buyers are feeling.  If a home is priced in anticipation of a 14% increase, then it might be priced too high and will need to be adjusted down.  When a home is priced too high to start, it will get less attention than if it is priced at market value or slightly less.  If a homeowner must reduce the price on a home, they have much less leverage in negotiations moving forward.  On the other hand, if a home is priced at market value or slightly below, it will get much more attention and potentially more offers. I recently listed a home for $1,299,900 and it ended up getting eight offers and will close much higher due to multiple offers.  The end result was that the sellers got the number they were looking for.  I am not saying this strategy is the correct one for every situation but you must be aware of the market conditions in your specific neighborhood to come up with an effective pricing strategy.

 

Dublin Housing Market Trends

For those of you interested in the housing market trends in Dublin, CA here is what’s happening as of August 2009.  Data was obtained from Bay East Assoc. of Realtors.

Median Sold Price Per Month

August 08 vs. August 09: The median price is down 17% from $657,200 to $543,000 for ALL housing types.  However, based on the chart below it appears median price has begun to stabilize.

August 2009 Median Sales Price
August 2009 Median Sales Price

The Number of Sold Properties by Month

August 08 vs. August 09: The number of sold properties is down 12%.  As you can see from the below graph the numbers are up and down each month and there is no clear trend established.

The Number of Sold Properties by Month

The Number of Properties For Sale by Month

August 08 vs. August 09: The number of houses for sale is down 47%.   This may  help to explain the declining sales numbers- much less inventory!

The Number of For Sale Properties by Month

The Number of Under Contract Properties by Month

August 08 vs. August 09: The number of under contract properties is up 115%!  Although the number of sales is down overall from August 2008, it appears the trend may be going up since the number of under contract properties has increased by 115%- a significant increase.

The Number of Under Contract Properties by Month

 

The Average Days on the Market by Month

August 2008 vs. August 2009: The average days on the market is down 9%.  This makes sense since the number of homes in contract has gone up 115% from Aug. 2008 to Aug. 2009.

Average Days on the Market by Month

 

Months Supply of Inventory

August 2008 vs. August 2009: The average months of supply inventory is down 84%.   In August 2008 there was over 7  months of inventory and in August 2009 there is just over 1 month of inventory.  This is also a significant change.

Months Supply of Inventory

Summary

Due to significantly reduced median prices from August 2008 in addition to currently low interest rates, homes in Dublin have become much more affordable.  Although the number of sold homes in Aug. 2009 is down from August 2008, the trend appears to be going up since number of homes in contract is up significantly and inventory and days on market is down significantly.  It appears buyers are taking advantage of the lower prices and interest rates and also taking advantage of the federal first time homebuyer’s credit.  Will this trend continue?  I’d love to hear your thoughts!