As reported by the National Knock Deals Forecast, uses data equally for predictive and historical analyses from ATTOM Data Solutions, the percent of home sellers who eventually sold for less than list price in 2018 was approximately 2 in 3 (62%).
Of those homes that sold for less than list price, six out of 10 are located in the South, with Miami at No. 1, followed by New Orleans and Chicago..
More homes sell for under list price
As home values rise slower, Knock predicts that the trend of lower sale prices will carry on into 2019, when 77% of on-the-market listings will sell for less than listing price, and 50 % of the “top 10 markets for deals” will be in the South.
“Knock has developed six predictive algorithms to determine how much our Home Trade-in customers’ homes will sell for and when,” says Sean Black, co-founder and CEO of Knock. “By applying these algorithms … we hope to help more home buyers find and act on the best deals, and increase overall market fluidity.”
Knock analyzed on-market listings in the largest U.S. MSAs to look for the markets with the highest percentage of homes predicted to sell below their original list prices, what Knock defines as a “deal.” In November, Knock said that 80% of U.S. homes sold within 4% of its predicted final sale price, and 50% sold within 2% of the predicted final sale price.
The # 1 predicted MSA for deals heading into 2019, Miami, also saw the largest rate of deals in 2018.
“While there’s no denying that home prices have been steadily on the rise, list prices are clearly increasing above realistic levels, corroborated by the study’s findings that over 60% of homes sold well below their original list prices in 2018,” says Paul Habibi, economic advisor to Knock and Lecturer at UCLA Anderson School of Management.
The tendency to overprice
As the rate of home price increases has started to slow, it’s still up 5.1% year-over-year, in accordance with the S&P CoreLogic Case-Shiller Indices. As prices have gone up, so have home sellers’ expectations of their home values, and there’s a tendency to list a home for a bit more than recent nearby sales.
When sellers price homes aggressively, however, they might sometimes wind up selling it not only below their original list price, but additionally below market value because buyers question a home that’s been on the market for a longer period of time.
For homes sold in November, Knock discovered that 92% of listings that had been on the market 60 days or more sold below their list prices – 22% greater than the rate of all listings that sold below their original list prices in November. On average, these homes sold for 1.5% lower than the overall market.
In Miami, for instance: 76% of listings sold a minimum of 2% below original list prices, in comparison to 3% of listings selling 2% or more above original list prices. The ratios are not the same in a market like San Francisco, where 58% of listings sold at least 2% above original list prices. But given that the most of all U.S. listings still sold 2% or more below list price, under-priced markets seem to be the exception as opposed to the norm.
According to predictions of all listings that entered the market in the past 6 weeks, five out of the 10 top markets for deals are located in the Southern 50 % of the U.S. Miami continues to top the list, with Houston, Texas, Jacksonville, Fla., New Orleans, La. and Tampa, Fla. also having several of the highest predicted rates of deals heading into 2019.
“Given that the slowdown of home price increases is just beginning to take hold, we can expect home sellers to continue to set their original list prices on the higher end, which has the potential to result in greater deals for home buyers,” Knock says it a news release. “Particularly as we head into January, which has historically been one of the best months for deals, the combination of seasonality and the slowing market make the perfect recipe for the increased rate of deals.”
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