40 replies to this topic

[Carl G]

I've noticed more and more homes coming up for sale.  If I stand on my front lawn, I can see three homes for sale.  Two days ago the home next door went up for sale; it was forclosed on about two years ago.

[Carl G]

Pricing homes apparently is a tricky art.  Two homes on my street that are the same model are priced $130K apart.  The more expensive one is the foreclosed home next door that needs work.

[Steve Heard]

I've noticed more and more homes coming up for sale.  If I stand on my front lawn, I can see three homes for sale.  Two days ago the home next door went up for sale; it was forclosed on about two years ago.

 

This is true. I think more of the folks who were sitting on the fence, waiting for prices to come back are feeling like we're there. I just hope they don't panic and flood the market when they see their neighbors selling, or because they think rates or some other factor will cause a slowing. 

 

Interesting to note, however, that demand doesn't seem to be slowing, and in fact is increasing. While we had 74 new listings in Folsom last month, we had 112 listings go pending and 104 were sold. 

 

Right now, there are 111 homes on the market. We haven't had a month with 100 listings since the end of 2011. On the other hand, we haven't had 100 sold in a month in several years either. 

 

Of the 111 active listings, 41 came on the market on or after June 1 (3 of them bank-owned, zero short-sales).

 

43 sellers have accepted offers on their homes and gone pending since June 1.

 

So, while inventory is increasing, sales continue to out pace new listings. 

 

 

Pricing homes apparently is a tricky art.  Two homes on my street that are the same model are priced $130K apart.  The more expensive one is the foreclosed home next door that needs work.

 

It can be easy when there are similar models recently sold, trickier when there are custom homes, no recent neighborhood sales, or when there's a mix of old and new. Still, you drill down to the averages and give some pluses and minuses to come up with a figure. 

 

If you're wrong, the market will let you know immediately. 

 

The 2 models are the same? There could be some major differences in terms of upgrades, lot size and other features, but $130K is a pretty large spread. 

 

If you want to give me the addresses or street name, either here or on PM, I can do a little research. 

 

See below for the trend in sales.

 

[Carl G]

Steve - the two homes are 103 Elkins Cir, Folsom, CA 95630 and 150 Elkins Cir, Folsom, CA 95630.  The square footage is slightly different (15 sq ft) and one has a larger lot (the less expensive one).  I know the builder made slight changes to the homes as they built out this area; my home is 50-100 sq ft larger than the first builds of my model.  The less expensive one have this in the description "Home needs a little care."  I wonder if that is the difference.

 

It is nice to see the housing market recover.  Hopefully the momentum will continue, but with sanity in the process.

[mac_convert]

There will be one less house on the market since I'm taking mine off tomorrow. I will lose the house I was planning to buy tomorrow since I didn't get a buyer in time. I'll wait a phase because it is not a good time to sell a house in October and November!

[Steve Heard]

Steve - the two homes are 103 Elkins Cir, Folsom, CA 95630 and 150 Elkins Cir, Folsom, CA 95630.  The square footage is slightly different (15 sq ft) and one has a larger lot (the less expensive one).  I know the builder made slight changes to the homes as they built out this area; my home is 50-100 sq ft larger than the first builds of my model.  The less expensive one have this in the description "Home needs a little care."  I wonder if that is the difference.

 

It is nice to see the housing market recover.  Hopefully the momentum will continue, but with sanity in the process.

 

150 Elkins is on the market, but 103 does not show up on MLS. I do recall seeing a Facebook post from a Realtor saying that he/she had a home coming up on Elkins, but I don't recall who that was and couldn't find it on my Facebook. 

 

 

There will be one less house on the market since I'm taking mine off tomorrow. I will lose the house I was planning to buy tomorrow since I didn't get a buyer in time. I'll wait a phase because it is not a good time to sell a house in October and November!

 

Mac, pull it off the market if you want to, but don't believe that it's not a good time to sell a home in October and November. While many people shop during the spring and summer months, homes sell year-round. See the chart above. October and November were very strong for sales last year. 

 

You don't know what the market or rates will be like next year. If rates are low and prices continue to rise, you're golden. 

[Carl G]

 

150 Elkins is on the market, but 103 does not show up on MLS. I do recall seeing a Facebook post from a Realtor saying that he/she had a home coming up on Elkins, but I don't recall who that was and couldn't find it on my Facebook. 

 

I saw the 103 Elkins house on Zillow; it now shows as being there for three days.  There are no pictures so I'm guessing it still in the process of getting setup and when I drove by last night I didn't see a sign yet.

[SacKen]

Pricing homes apparently is a tricky art.  Two homes on my street that are the same model are priced $130K apart.  The more expensive one is the foreclosed home next door that needs work.

 

I don't think the method for pricing homes is a tricky art. It is just an obsolete methodology since it still uses price per square foot as the key determination. That's like pricing a car based on the weight. That's why improvements and even lot size do not affect the price as much as you would expect. People will pay a little more for extras, but not what they are really worth since they always reference the square foot price as the baseline and feel they are over-paying if they get too far from it. Yet they have no problem paying $100k more today for the exact same home that is just a couple of years older for totally arbitrary reasons.

 

It would be a paradigm shift, but not too difficult to have true valuation based on all the parts. It would align home ownership more with real value and not this beanie-baby style arbitrary valuation we have been convinced is real.

[Redone]

 

I don't think the method for pricing homes is a tricky art. It is just an obsolete methodology since it still uses price per square foot as the key determination. That's like pricing a car based on the weight. That's why improvements and even lot size do not affect the price as much as you would expect. People will pay a little more for extras, but not what they are really worth since they always reference the square foot price as the baseline and feel they are over-paying if they get too far from it. Yet they have no problem paying $100k more today for the exact same home that is just a couple of years older for totally arbitrary reasons.

 

It would be a paradigm shift, but not too difficult to have true valuation based on all the parts. It would align home ownership more with real value and not this beanie-baby style arbitrary valuation we have been convinced is real.

Great post.   If you know an appraiser or talk with one you'll find out that they don't use  price per sq foot at all in determining  a properties value.   They use comparable sales as you point out, which may or may not have the same price per sq foot.     

[Steve Heard]

 

I don't think the method for pricing homes is a tricky art. It is just an obsolete methodology since it still uses price per square foot as the key determination. That's like pricing a car based on the weight. That's why improvements and even lot size do not affect the price as much as you would expect. People will pay a little more for extras, but not what they are really worth since they always reference the square foot price as the baseline and feel they are over-paying if they get too far from it. Yet they have no problem paying $100k more today for the exact same home that is just a couple of years older for totally arbitrary reasons.

 

It would be a paradigm shift, but not too difficult to have true valuation based on all the parts. It would align home ownership more with real value and not this beanie-baby style arbitrary valuation we have been convinced is real.

 

In a perfect world, yes, but we as consumers have made some homes (and cars) more valuable by our desire to own them.

 

Is a Toyota really that much better than a Ford or a Hyundai? I remember many years ago talking to a financial advisor. We were talking about purchasing cars. He advised me that the best value in a car was a less than 5 year old Japanese car, preferably a Mitsubishi and Nissan. In his opinion, these cars were better made than American cars and close to the quality of a Toyota or Honda, yet those brands were selling far higher than they should, since they were similar in reliability.

 

I know plenty of people who disagree with that assessment.

 

With houses, we could add up the cost of the parts to determine value, but what if you have 3 homes of exactly the same size and materials, but one is at the end of a cul-de-sac in Folsom, one is next to power lines in Folsom, and the third is in Rancho Cordova?

 

Should they all be priced the same?

 

The use of comparable sales is the key, when they exist, but even that method is flawed because comparable sales last month were lower than this month, and comparable sales on busy streets go for less than comps on cul-de-sacs and comps with linoleum and formica go for less than comps with granite and stone.

 

The use of average price per foot, market trends, location and upgrades all have to come into play when determining what to list your home for, but the market decides what it's worth on the day it is sold.

[rip]

You took the words right out of my mouth Steve.  Realtors and appraisers don't set prices, the market does.  Although I guess you could get into a chicken and egg style discussion over this.  One thing I learned through hard experience is, if you price too high for condition/location/market the home just won't sell.  For me personally, price per square foot is only one tool of several I use when I'm considering buying a particular home.