Reduction Reduction

Recently, I discovered that Zip Realty.com not only enables you to see the number of “days on the market” for a particular property but also allows you to view the various individual price reductions a house has had over its listing span. Couple that with the ability to return only properties that have had price reductions and to sort by original listing date and you’ve got yourself one “class A” bottom feeding machine!

The following home data from Massachusetts is anonymous as I would hate to make these sellers lives any more difficult than they already are but I thought presenting some basic data would serve to illustrate some of the markets current woes without doing too much harm.

Some Interesting points:

1. Since early spring 2006, price reductions seem to have really picked up the pace especially for the homes sitting on the market longest. For many homes, the pattern of price reductions went from little or no reductions (sometimes for over a year) to a sudden month by month slash and burn.
2. For the homes that have the most number of price reductions, many seem “sloppy” or inconsistent indicating that there may be other, external factors prompting the reduction such as direct competition with other properties.
3. Many builders seem to play games with the price as it is very typical to see new constructions being price increased for a period of weeks and then decreased again back to or below the original asking price.
4. Although a surprising percentage of homes show price reductions, many have yet to really dig deep and give up significant percentage of their asking price. It’s typical to see 5% to 10% reductions but not enough sellers have really capitulated to the new market climate of few buyers and bloated inventories. Remember, many of these sellers selected their list prices with the “back in the heyday” pricing model so they have lots of room to reduce.

$500,000 (25%) Slashed and counting in Concord MA! [358 days on the market]

This listing was particularly interesting as it showed that the seller seemed to have some measure of stamina going some five months without a price reduction before knocking 12% off the list price. That bought them three months whereby they seemingly became either more aggressive or possibly even panicky, knocking an additional $250,000 off in the span of two months bringing it to a grand total of 25% price reduction from its original list.

25% in Price Reductions:

12/08/05 -- $1,995,000 to $1,750,000 (- $245,000)
03/08/06 -- $1,750,000 to $1,675,000 (- $ 75,000)
04/26/06 -- $1,675,000 to $1,595,000 (- $ 80,000)
05/30/06 -- $1,595,000 to $1,499,000 (- $ 96,000)

$130,000 (14%) Slashed and counting in Concord MA! [261 days on the market]

After having the house on the market for roughly fifty days (the average here in MA is currently more like 100 – 120 days for a sale) the seller knocked 30K off the top. That bought them another two months whereby they commenced reducing another 99K in the next 2 months. Take a look at the reduction on 03/01/06 then 03/09/06. I have been noticing this pattern (abrupt reduction out of step with the overall reduction pattern) and I have concluded that it is most likely a cause of direct competition. So possibly a roughly equivalent home nearby either came on the market or had a price reduction that forced this seller to adjust for competitive purposes.

14% in Price Reductions:

11/21/05 -- $929,900 to $899,000 (- $ 30,900)
02/02/06 -- $899,000 to $869,000 (- $ 30,000)
03/01/06 -- $869,000 to $859,000 (- $ 10,000)
03/09/06 -- $859,000 to $839,000 (- $ 20,000)
04/06/06 -- $839,000 to $799,990 (- $ 39,010)

$500,000 (20%) Slashed and counting in Lexington MA! [470 days on the market]

This listing has panic and fear written all over it. The seller lasted just over a year without a single price reduction then abruptly knocked 20% off the top in a series of sloppy reductions. Again, it appears that the reductions of 05/01/06 and 05/12/06 are the result of direct competition.

20% in Price Reductions:

03/30/06 -- $2,499,000 to $2,390,000 (- $109,000)
05/01/06 -- $2,390,000 to $2,275,000 (- $115,000)
05/12/06 -- $2,275,000 to $2,245,000 (- $ 30,000)
06/23/06 -- $2,245,000 to $1,999,900 (- $245,100)

$4,900 (.006%) Slashed and counting?? In Ipswich MA [614 days on the market!!!!]

This one is in the category of “step up the pace!!” What’s wrong with this seller? This house has been on the market for nearly two years and they have reduced it a .006%!! I suppose they just don’t want to give up on that 700K figure. Talk about penny wise pound foolish… this will surely be an interesting one to watch.

.006% in Price Reductions:

06/18/06 -- $749,900 to $745,000 (- $ 4,900)