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Real estate information site Trulia.com says that as of July 1, one out every four people trying to sell a home in the U.S. has had to lower their asking price at least once this year. The average listing has been reduced by 10%. The grand total of the price reductions adds up to $27.1 billion.
The markets with the most homes experiencing price reductions include some surprising names. Jacksonville, Florida tops the list. Boston, Minneapolis, Milwaukee and Honolulu follow. On a positive note, the survey sees improvement in some of the hardest-hit markets. Las Vegas and Los Angeles, for example, both saw declines in the numbers of home owners lowering their asking prices.
Ben Kolkman, a broker at Sotheby’s Realty in Minneapolis, shared this listing with us. It’s a 3,300 square foot contemporary home in Minnetonka that’s had its price knocked down five times, for a total of 24%, since September.
Here’s the price history:
6/17/09 – $829,000
5/18/09 – $859,000
4/3/09 – $899,000
2/17/09 - $1,000,079
9/30/08 - $1,079,000
Kolkman says the city has a particular glut of homes in the high end and a much hotter market for those priced $250,000 and below. “A lot of times to get a buyer off the fence, you have to reduce the price,” Kolkman says. “They all want to get a deal.”
Some agents deliberately over price, knowing they’ll have to reduce the price later. That creates the perception of value. Agents have to balance that strategy with the concern that they don’t want the property on the market for too long.
Kolkman says that’s becoming less of stigma though. “In the past you’d see homes 60 to 90 days on the market and think what’s wrong?” he says. “Nowadays, it’s just overpriced.”
One big issue at the high end is getting jumbo mortgages. “When in the past you might have been able to do more creative financing,” Kolkman notes. “Now with the tightening of the credit markets there are fewer million dollar buyers.” Buyers in the upper price ranges tend to be older, he notes. “If they make a bad decision today it could effect their retirement in ten years,” he says. “In lower prices, younger people are not as worried.”
He thinks he’s got the house priced right now. At $260 a square foot is on the low end for the neighborhood.
BusinessWeek editors Chris Palmeri, Prashant Gopal and Peter Coy chronicle the highs and lows of the housing and mortgage markets on their Hot Property blog. In print and online, the Hot Property team first wrote about the potential downside of lenders pushing riskier, "option ARM" mortgages and the rise in mortgage fraud back in 2005—well ahead of many other media outlets. In 2008, Hot Property bloggers finished #1 in a ranking of the world's top 100 "most powerful property people" by the British real estate website Global edge. Hot Property was named among the 25 most influential real estate blogs of 2007 by Inman News.