Knowing the trends in price reductions of active listings can be quite
telling. Not only does it give you a hint as to how effectively other
agents are pricing and marketing comparable properties, it can also
give you a sense of overall market trends (see our recent press release) and timing and help you find meaning other market stats.
As you probably know, one of the measures in our ILHM National Luxury Market Report is "Percent of Properties with Price Decrease." It is a measure of the percentage of active listings in the national data that have experienced a price reduction in the last 90 days. While this is useful in interpreting the national trend and for the sake of comparison, we all know that the important stats are ones where the rubber meets the road--from your local market. So, many of you will be happy to know that we have added "Percent of Properties with Price Decrease" charts for all of the 31 metro areas covered in the members-only verson of our ILHM Luxury Market Report.
Let's look a little more closely at this measure. Here's the national trend in "Percent of Properties with Price Decreases":
As you might expect, this mirrors fairly closely the inventory trend for the same period:
As inventories rise, so does the pressure to reduce price. Knowing the direction and strength of the trends can be important information to consider in your pricing discussions with sellers. Note the magnitude of the change on the left vertical axis of the chart above. While the trends are clear, and track inventory trends quite closely, the range of change has only been about four percentage points--between about 38.5% and 43%.
When we look at local markets compared to the national composite, we often see more volatility--bigger moves. For example here is Charlotte compared to National. We see that Charlotte tracks closely the national trend, but with slightly bigger peaks and lower valleys:
Austin, which has been a strong market, nonetheless shows a relatively rapid increase in price reductions at the end of 2008 after which is tracks the national trend fairly closely, but with a slightly higher rate of price reductions:
Boston, which has managed a consistently lower rate of price reductions than our national composite shows twice the volatility moving between 30% and 40% within the period--a range of 10% :
At the local level too, you'll see changes in inventory driving trends in price reductions, as you can see in the Charlotte and Dallas graphs respectively:
As Scott from Altos Research noted in our webinar last month, "How's the market?" and "What's my home worth?" are questions that agents hear all the time. Your business depends on your answer--and don't forget that they want the answers to these questions not just when clients and potential clients are in front of you--but also when they are exploring your website, and looking at your marketing pieces too..
