Resales are Overpriced

Data in recent National Association of Realtors (“NAR”) reports should not be a surprise to those following the resale housing market. Data reflect a continuing slowing in resale home sales, a trend we here at Belfiore Real Estate Consulting expect to continue through most of 2007. The reason: resales are overpriced.

Despite significant slowing in sales and record listing levels in 2006, resellers increased pricing. According to the Multiple Listing Service, average single-family home prices were up in December compared to one year ago. If the early and midyear slowing in demand and record listings were not enough to drive prices down late in 2006, one might think the drop in new home prices might pressure resellers to drop prices. Net of incentives, Phoenix metro area new home prices dropped 15% in 2006. Yet, as the NAR reported, resale listing prices are remain up, and as a result, fewer sales are occurring and average days on market are increasing.

As long as resale prices remain at their relatively high levels, home builders will benefit from buyers comparing resale and new home prices prior to making their purchasing decision; when given a choice, history shows buyers will choose a similarly priced new home over a resale home. Recent surveys preliminarily indicate the new home market is picking up, with significant traffic increases, particularly in infill submarkets.

Those looking to put their existing home on the market in the early part of 2007 would be wise to research a “fair” price prior to listing the home.