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Home Values Are Supply and Demand Driven

Regina DaltonThe historical protocol that real estate agents use to determine the price of your home is a Comparative Market Analysis (CMA) and is still used today. The inherent problem with a CMA is that it only takes into consideration the sale of a small sampling of homes in your competitive range, without considering the reason why those homes may or may not have sold at a specific price, e.g., condition, loss of job, underpriced, dated interior, a divorce situation, low curb appeal, vacant home, staging, etc.

Real estate is supply and demand driven. Determining the absorption rate, which is an estimate of how fast listings are currently selling measured in months, is an important factor in determining your home’s value. This overlooked factor can tell you if your home should sell quickly and for more money or if you should expect a longer market time. Statistically, homes that sell in 90 days or less will sell at or slightly below (around 97 percent) of the listed price.  Homes on the market longer than 90 days sell around 94 percent of the listed price on average and have a 73.5 percent chance of not selling at all. On a home priced at $400,000, the three percent difference can cost the seller $12,000.

In reviewing supply and demand, you must consider the total number of homes on the market: entering the market, selling per month in your price range as well as the total number of homes selling per month in your neighborhood.

As many as 27 separate outside influences can threaten your home’s value. Some of these threats include:

  • Economic Indicators: being sensitive to these changes on the overall local, state and national economy, you can understand more intimately how your home value changes along with the economy.
  • Trends Analysis: encompasses current and detailed market trends related to style, location, features, demand, etc., for your home.
  • Absorption Rates: within the local market to clarify the regular consumption of homes month over month being purchased because the market always determines your home’s perceived value.
  • Quality of Inventory: can positively or negatively affect the overall prices of homes. For example, if your home is located near a new home subdivision, your price, and therefore value, will be compared against the new homes for sale.
  • Rent verses Buy Trends: give evidence whether people are more inclined to buy or rent property in your local market and how the ratios of rents to purchases affect the area’s buying appetite.
  • Job Stability/Unemployment: I have never seen a CMA factor how stable the job market in the area is and whether major employers are coming in or leaving the area in the time frame you want to sell. Understanding these threats and knowing how they relate to your home’s value is a strategy that can win you more money when you’re ready to sell your home.

While CMAs are useful when estimating your home’s value, an expert advisor won’t solely rely on their results without further market considerations. If your listing price is not accurately determined before going on the market, you stand to lose money. This happens by under-valuing or by losing potential buyer interest by overpricing. Get clarity from an expert advisor that you trust and someone who is not clouded by personal finances. You have a choice, and you deserve extraordinary. FBN

 

Georgina Dalton, PLLC is a Realtor and Principal of RELATES Group for Russ Lyon Sotheby’s International Realty. A member of the National Association of Expert Advisors and a Certified Home Selling Advisor, she has been elected by her peers as the 2014 Treasurer of the Northern Arizona Association of REALTORS. You can reach Georgina and her team via email atGeorgina.Dalton@RussLyon.com or call 928-863-8562.  Her office is located at 1750 S. Woodlands Village Blvd, Suite 200 in Flagstaff.

 

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