The New York Times reported on Tuesday that, according to a recent study by Zillow, homeowners are having trouble accepting how much their property’s value has fallen in the years post-real estate bubble burst.
The Zillow study found:
Current sellers who bought their homes in 2007 or later, an analysis of the site’s home listings shows, are overpricing their properties by an average of 14 percent.
Sellers who bought their houses before the bubble, and those who bought during the big run-up in home values, also are overpricing their homes, but not by as much. Those who bought before 2002 are pricing their homes roughly 12 percent over market value
One explanation offered by the study suggests that many sellers who purchased their homes post-2008 feel that they were able to avoid for the most part, the damage done to the housing market, and thus tend to overprice their homes as a result. Warns, Stan Humphries, Zillow’s chief economist, warns:
Traditionally, people tend to overprice their homes a bit anyway, to allow room for negotiation. But unrealistic overpricing in the current environment means properties stagnate.
One of the overpricing downfalls sellers often make when pricing their home is taking into consideration how much they paid for the home and how much they owe. This practice does not take into consideration present market conditions, and the market is what determines interest from potential buyers. As Humphries points out, “The buyer doesn’t care what you paid or what your mortgage is.”
What should you consider when pricing your home? Sellers should focus mainly on what comparable properties are selling and asking for in your neighborhood.
Full article available here.