One of the market indicators that people like to get their arms around is the negotiability of housing prices a la the listing discount metric. In other words, what is the spread between asking and sales price? The inference in this metric is that in a weak market (most markets in the US), sellers are more negotiable than they were a few years ago. Of course and this metric’s orientation tends to be toward the seller. If the property is overpriced, the seller has “farther to travel” to meet the buyer for a “meeting of the minds” to occur (a sale).

Trulia now has a Search by price reductiontool which I think is pretty neat and I’m not aware of this available elsewhere.

Trulia’s new price reduction tool enbles home searchers to see new reductions in their neighborhood.  So whether the properties have been reduced by 4% or 14%, buyers know exactly what they’re getting.

More price slashing infers that sellers are more negotiable when the discount is higher. Trulia’s tool allows sellers to see the percentage of listings that have been reduced, the dollar amount and the percentage of reduction off the original list price. While it doesn’t connect the relationship between contract price and list price, it does help consumers understand the asking price trend.

I’d like to take the inference it provides one step further.

Rather than look at this metric as a test for how much or quickly a market is falling or how desperate a seller is, I tend to see it as an indicator of what degree sellers are “behind” the market and perhaps this is related to how quickly the situation has changed in that given market. In other words, if listing prices are declining rapidly, it is more likely for the sellers to be further behind the market when pricing their property because they tend to overprice more at the onset – and have to travel further to meet the buyer on price. It also means that real estate agents are having a more difficult time with more sellers in denial about current market conditions.

In fact, that is how I have always seen the listing discount metric. Less about negotiability or falling prices, and more about how disconnected the sellers are.

At a rate of 39% of listing, NYC is number 1 on the list so everyone else is looking at our disconnect with the market (translation: our behind) caused by our market being the last to join the housing weakness party and the suddenness (never used this word before) of the decline.



2 Responses to “[Listing Discount] Trulia Looks At Our Behind(edness)”

  1. Rudy says:

    Good morning Jonathan!

    I love your insight re: “Less about negotiability or falling prices, and more about how disconnected the sellers are.”

    Pricing a home correctly based on current market conditions from the outset is pretty much the single most important factor in getting the home sold in an expeditious manner. Unfortunately, even when real estate agents provide the data to show where the home is most likely to trade at in this market, some sellers still hope to test the market and then see what happens.

    Hopefully sellers will use our new tool in conjunction with the advice of their agent to help them arrive at a more accurate list price which is attractive to serious home buyers.

    Best,

    Rudy Social Media Guru at Trulia

  2. Edd Gillespie says:

    I guess I have to wonder “as compared to what and when.” Reason being, as a routine matter around here initial listing prices have been in the double digits above selling prices for just about ever and then somehow arrive at 96-97% right at the finish line. But, I guess we are talking listing price slashing unrelated to the sales price. I have commented regarding the agent involvement in this dynamic and been told that it is the seller’s who insist and will list with someone else if the agent doesn’t list it where they want it. Well maybe, but isn’t that still agent complicity in the sellers behind dynamic. I too welcome the information source, particularly since misinformation dominates, for the buyers and hope they can find a buyer’s agent who is alert. The buyer beware doctrine in real estate belongs in the same box as the free market until the buyer’s side of the field isn’t uphill into the wind. I’ll bet Jonathan has been in the sport of announcing the value of a house that didn’t meet with the buyer’s and agent’s expectations. Great fun. Probably the price slashing still leaves the stuff overpriced because the debt bubble hasn’t totally deflated yet.