Monday, August 07, 2006

Too Many Realtors Equal Sticky Prices

Some on this blog and many on others have commented that they have not seen a decrease in prices in New Jersey even though the number of transactions is clearly down. Although it looks like median prices are at best flat throughout the state, I think that if you were to look at prices on a same-house basis, you would see that prices are down at least 5% across the state, if not more. In addition, in high condo markets like Hoboken and Jersey City, I think prices are down at least 10%.

Even still, the price declines so far do not seem to be too severe. Part of the reason for the sticky prices is because too many new inexperienced Realtors entered the market in the past five years. It is my belief that the excess number of Realtors has allowed sellers to essentially “shop” for what they want to hear. The Realtor that suggests the highest asking price is going to be the one that gets the listing, whether they can actually sell the house at that price or not. By next spring, hopefully a sufficient number of Realtors will have exited the market leaving more experienced and rational Realtors to talk asking prices down in order to generate commission checks for themselves.


Anonymous Anonymous said...

Incorrect. 5 years, earns you a lot of experience. No realtor will turn down listings that are reasonable. Many won't turn down unreasonable ones also. The issue here has nothing to do with new brokers not doing their jobs convincing people to lower prices, that is not how it works. A broker advises and shows factual data. The don't sit around begging to waste their time with listing that might not sell.

Sellers on the other hand either are delusional and willing to sweat it out or have not felt enough pain yet. In some towns, you have no choice but to buy the best you can becasue in many communities, there is no opportunity for new construction.

Additionally if you really want to know what the value of a home is it is...

X + (d * mC) - Y

X being the cost of a newly constructed home in the first community you are willing to live in plus the distance to commute from a nearer home to you job times the marginal cost of existing home sales in the nearer community less the cost of living in the nearer community. If X is positive than you buy closer to work, if not then you build.

Saturday, August 12, 2006 4:32:00 PM  

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