Questions Considered
- If a house is overpriced, how does that affect how long it will take to sell?
- For every week a house is on the market, how much less are buyers willing to pay?
- How long is it taking for newly listed homes in our area to sell?
- How important is setting the “right price” when listing a home for sale?
Data Analyzed
- Montgomery County (City of Rockville results were nearly identical so are not included here)
- New listings from September 2013 to August 2014 which resulted in a sale
- “Distressed” sales (i.e., short sales, foreclosures and bank-owned properties) were excluded
- Data source: MRIS (our area’s multiple listing service)
Results of Analysis (click on the graphs above to enlarge)
- Homes under contract in the first week have been realizing, on average, the full listing price. Homes on the market more than one week realize a decreasing percentage of the original listing price – the more weeks, the lower the price realization. For example, listings which took 2 weeks to come under contract realized, on average, 97.9% of the original listing price. In contrast, listings which took 12 weeks realized, on average, only 92.9%.
- Another way to interpret this data:
| Listings which were under contract in… | Potentially could have been under contract in… | Had they originally been priced… |
|---|---|---|
| 2 weeks | 1 week | 2.1% lower |
| 3 weeks | 1 week | 3.4% lower |
| 4 weeks | 1 week | 4.1% lower |
| 5 weeks | 1 week | 4.9% lower |
| 6 weeks | 1 week | 5.4% lower |
| 7 weeks | 1 week | 5.4% lower |
| 8 weeks | 1 week | 6.3% lower |
| 9 weeks | 1 week | 6.6% lower |
| 10 weeks | 1 week | 6.9% lower |
| 11 weeks | 1 week | 7.2% lower |
| 12 weeks | 1 week | 7.1% lower |
| > 12 weeks | 1 week | 9.3% lower |
- In the last year, many homes in Montgomery County sold quickly. Over one-third of new listings were under contract in the first week. A total of nearly two-thirds were under contract within the first month. However, nearly 12% took more than 12 weeks to come under contract.
Insights & Conclusions
- Getting the original listing price right matters. A lot. Too high and the result could be a house sitting on the market for weeks, or even months. And, what constitutes “too high” isn’t dramatic – a difference of just four or five percent can make a considerable difference.
- A big part of what’s at play here is perception among prospective buyers. In the current market, once a home’s been on the market for more than a month or two, prospective buyers begin to presume a home is over-priced and/or has some problems.
- So, the importance of a relevant, rigorous, up-to-date analysis to inform the setting of a home’s listing price cannot be overemphasized. In a future blog post, I’ll define what I think makes for a solid, confidence-inspiring pricing analysis.
- Good news for home sellers: In our area, homes that are priced appropriately have been selling quickly. In future blog posts, I’ll illustrate how the homes that are selling quickly are not only priced appropriately, but often are what I somewhat jokingly refer to as “HGTV homes” – they’re turn-key, need no renovation or updating, and shine as far as condition and presentation.