Pricing Properly and The Fate of Current Home Sales

Denial. Homesellers can no longer rely on that river in Egypt

They’re old adages, but if the expression, “it ain’t over ’til it’s over,” is true, then America’s home sellers are thinking it still “ain’t over,” according to Realtor’s Keith Griffith.

Citing housing experts, Griffith warns, “Home sellers with unrealistic price expectations are setting themselves up for pain in a softening market that increasingly favors buyers.”

An indicator? Nationally speaking, the share of home listings with price reductions hit another multi-year high in April, indicating that sellers are increasingly overestimating what their house will fetch in the current market. While this is happening primarily in the South and West, nearly every state has seen an uptick in price reductions compared with a year ago, according to Realtor.com data. That, friends, is called a widespread trend.

But sellers aren’t having it. They are convinced they haven’t missed that profit window that persisted through last year, with seller confidence remaining staggeringly high. A full 81% of potential home sellers predicted they would get their asking price or higher in a Realtor.com survey conducted in March.

"The rising share of price reductions suggests that a lot of sellers are anchored to prices that aren't realistic in today's housing market," says Realtor.com Chief Economist Danielle Hale. “Today's sellers would be wise to listen to feedback they are getting from the market.”

Listing agents say this phenomenon of unrealistic price expectations is heard most frequently from sellers who bought their homes during the pandemic-era housing boom, when bidding wars were common. The thing is, while market conditions have changed, most of those sellers still stand to gain handsomely on a sale even if they don’t achieve the price of their dreams.

“Even after setting a more grounded price, they are likely to walk away from a sale with good money in their pocket," says Hale. Despite this, the new reality of flat or softening prices and weak demand can be a bitter pill to swallow.

Overpricing your home based on a gut feeling or wishful thinking can be a dire mistake, according to Florida broker Toni Zarghami. The listing specialist says she frequently encounters sellers who mistakenly believe that routine cosmetic updates such as fresh paint or new molding will command a significant price premium over other homes in the area. Call it the (non)-reality TV effect.

“They very much think that their property is better than everyone else's,” she says. “On HGTV, when you landscape and paint, and add new light fixtures, you just added 20 grand to your list, right? But that's just not the way that our market is.”

While Zarghami says cosmetic updates can help a home sell faster, they are unlikely to raise the sales price. She says she works closely with sellers to set a realistic price at the outset, and isn’t averse to turning down taking on listings from those who won’t budge on a price target that is out of reach.

"Selling a house is like running a marathon, and when you choose to price too high, you have let every other runner get 20 miles ahead of you before you even take your first step,” she says. “It's almost impossible to catch up."

So what happens to listings when sellers price their homes unrealistically? It goes stale, lingering on the market for an unusually long time despite multiple price reductions.

To buyers and their agents, stale listings raise red flags for buyers, who think the home might be “snakebit” — that there must be something wrong with it. And the number of stale listings is increasing.

It may not sound like much to those outside the industry. But it’s a big deal when looking at the big picture. “Nationally, homes typically spent 50 days on the market last month, four more than a year ago and the longest median time on the market for the month of April since 2020,” says Griffith.

Brian Stephens, another Florida based broker, says, “If you overprice your home, it's going to sit on the market, and it's going to get stale, and then you're going to be chasing the price down to what the market's willing to pay for it.”

What’s the chatter online among sellers? On the real estate forums of Reddit, there are regrets. “Laments increasingly abound from home sellers who have seen their listings grow stale due to overpricing,” says Griffith, who cites one of them. “I’m a seller who overpriced my home and learned the hard way,” wrote one Reddit user this week, after getting no offers since listing their home in October. “It's fully remodeled, and I originally priced it way too high—about $100K above breakeven—because I had unrealistic expectations.”

Another expressed frustration that their spouse ignored pricing recommendations from three real estate agents, insisting that their home was worth at least 25% more.

If it truly “ain’t over ’til it’s over,” well… it sure looks like it’s over. And that river in Egypt is no longer going to carry inflated price expectations.

Realtor, TBWS