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.

 

Market Stats- Dublin, CA for January 2014

In January 2014 the to date average days on market is 21. However, average days on market has been going up. In Dec. 2013 it was 28 days and in Jan. 2014 it went up to 39 days. This doesn’t say a whole lot because just 1 or 2 homes that have been on the market for a long time (like the ones well over $1million) will skew the average days on market. Homes in the “sweet spot” of under $850k sell very quickly. Median sales price was $685,000 in Dublin for detached single family homes in January. This is down from December 2013 when median price sold was $848,000. To me, average price is more telling because it gives an overall view of the market, whereas median price just tells you the price that was in the middle. It just depends on what kind of homes happened to sell that month. That being said, average sales price in Dublin for single family homes was $787,931 in January.

Interestingly, average price per/sq. ft went up to $369 from $360 in Dec. 2013. There is only about 1 month of inventory in Dublin right now, which is quite low. Homes are selling for an average of 99.12% of list price now. This will be an interesting stat to keep track of. Last July homes were selling for an average of 105% of list price. As of this writing, there are 39 single family homes active on the market with an average price of $1,098,000.

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Dublin, CA Housing Stats for October 2013

Although we are well into Fall and headed toward Winter, buyer demand in Dublin, CA remains strong.  Currently, there is only one month of inventory available.  As you can see from the graph below, homes sell for 100% of list price in Dublin.  Days on the market for detached single family homes is about 19 year to date.  As of the end of October 2013, there were 35 active homes on the market, 49 pending and 38 sold, with average selling price of $798,000 for detached homes.  However, the market is slower than it was this past summer.  Inventory is down to 35 active homes compared to 55 in August.  Average days on market is up to 26 compared to 12 days in August. (click on images to make larger)

Graph DOM                       Monthly Stats

As of today, average 30 year fixed loans are 4.38%, which is higher than this year’s low but still good.  It will be interesting to see how the market responds in 2014.

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