The banks and real estate agents will place a home on the market for well under what the comps support, but that will result in multiple bids ABOVE the listing price. I have seen some go for 20-25% over listing. In the end, it all comes down to what buyers are willing to pay.
I remember many years ago I had a client who wanted to buy a place in San Francisco. It was listed at $550,000, so she called the listing agent, went to see it and said she'd take it. The listing agent said, "he wants $625,00." "Then why is it listed at $550,000?", she asked. "That's how we do it here. Everyone knows to expect to pay $50,000 to $100,000 more than list price."
With a few exceptions, those days are over, my friend.
Last month, for example, of the 89 homes sold last month in Folsom, only 10 sold for more than asking price. Of the 10, only 3 of them were 5% or more above asking. The average was 97.84% of the price the home was listed for when the offer was accepted.
What does it mean to say the value of your house has gone up when all the other houses you might buy have gone up essentially the same amount? When you buy a second house it's probably going to need to be bigger and more expensive than the prior one. It seems like there's no way to cash out, unless you go live somewhere horrible that you hope is going to improve, and call it an investment.
It's called, 'trading dollars'. When your house goes up in value, so does everyone else's in town and vice versa. If you bought a small house for $200K, sold it for $300K and bought another for $400K, your equity goes a long way rather than coming in cold with only your savings as a downpayment.
People who really do well are those who downsize or move to another region.
About 5 years ago, a friend's dad found himself working at 72 years of age, pushin wheelchairs at SFO to supplement his retirement so he could keep paying on his $360,000 mortgage on his house in Daly City.
One daughter moved up to Sac and convinced him to follow, citing better weather, newer homes, and he'd be close to the grand kids.
I remember he cried while signing the papers. He had bought the house for $35,000 in 1973 and raised his family in it. He felt that by selling he was losing, but he could barely afford to keep it and really needed and deserved retirement.
We listed the house at $778K and it sold in 2 weeks for $835,000. Exactly $800,000 more than he paid for it. He paid off the mortgage and bought a 2 year old, 1500 sq ft single story home in Natomas near his daughter for $345,000 cash. So, when someone asks if homes are a good investment, I guess we could say, 'It depends.' If one bought a home in 2005 for $500,000, it's probably worth about $300,000 now, so no, for that guy a home was not a good investment.
For the guy who bought for $300,000 in 2001 and sold for $500,000 in 2005, it was a great investment!
As for the guy who bought for $35K and sold 30 years later for $835K, he told me it was the smartest thing he ever did.