Dooley Real Estate

by Paul Dooley

There is no number more slippery, or more important, than the actual current market value of your home. Whether you would simply like to sell and move on, or whether your financial circumstances are requiring you to sell, it’s critical that you have an accurate understanding of the current value of your property and list it accordingly.

A lot has been written over the past two years about the housing market. You’ve probably read that foreclosures are at unprecedented highs, re-sales and housing starts are way down, and prices have dropped by between 10 and 30% from their pre-recession highs (which, it should be remembered, were unsustainably high).

Like all brokers, we are asked almost daily by prospective sellers what their home is worth in today’s market. All too often a fact-based answer from one broker is rejected by the client in favor of one that is more sanguine offered by the competition. Is it better business to start a relationship with the client on the basis of a too high list price, reasoning that the first goal is to obtain the listing and then after the property attracts few showings and no offers the listing broker, citing the recent dire statistics about the market, recommend price reductions? (A tactic known in the trade as buying a listing which can lead to extended time on market and a succession of price reductions—or chasing the market down). Or does one marshal the best available data to produce a more accurate, but possibly disappointing, estimate?

It’s human nature to prefer the higher number—“After all we can always come down if we have to.” But the evidence is persuasive that properties listed at prices that are only marginally higher (say 10%) than a carefully derived estimate of value will sell more quickly and for more than if they start too high and require a series of price reductions to attract attention. If we had to state the most critical elements of success on today’s market, we’d say thorough data collection and rigorous analysis, candor and trust.

We recently undertook an analysis of home sales since 2000 in Kent and the adjacent towns using MLS data bases (see note). What we found was interesting and, despite the fact that the results were similar in some respects to trends reported in other parts of the country, somewhat reassuring. The most troubling statistic is the number of homes sold in any given year. From 2000 through 2005 the number of homes sold per year in the seven towns averaged around 650. The total dropped in 2006 to around 475 and has continued to drop to under 300 in 2009 (2010 is on pace to remain just under 300 units).

The news is somewhat better however for average prices. The average price of a home in the same area was just under $300,000 in 2000. It rose steadily for the next five years, reaching a high of around $490,000 between 2006 and 2007. Since then the decline has been considerably less than the national average, or around 10%, probably because the level of foreclosures and short sales has been lower in our region than in parts of the country where speculation (both in construction and sales) was more rampant.

The decline in annual sales is troubling and must reverse before there is any upward pressure on prices—probably a matter of years not months. And as the inventory of unsold homes continues to increase, competition for buyers becomes more intense. Sellers are well advised to pay attention to presentation (repairs and staging) and to insist upon a thorough valuation analysis before venturing on the open market.

As always, we’d be glad to try to answer any questions you may have about the market or prepare a valuation report to assist you in properly listing your property.

(Note: Our sample was compiled from MLS data which may not include every sale. Also, we excluded sales of under $100,000 and over $2 million which represent less than 1% of the total market but can skew and distort the averages.)