Knowing residential pricing trends makes you a smarter buyer. Period. Whether you’re chasing an REO investment or competing against multiple offers for your personal dream house, you need to know what other people are doing. Real estate brokers and agents are very good at protecting the confidentiality of their current offers, so the only way to get a sense of the market is to look at recent history.
This chart for the city of Sonoma shows the results of the first six months of 2011 broken down by whether the property is an REO, short sale, or open market sale (indicated by NONE). The scale on the left shows what percent of the listing price was paid by the successful buyers. Any column taller than the 1.0 mark indicates buyers are paying more than asking price.
What we see is a very strong performance by REO properties during the first half of the year. In June the average price for a sold REO property was nearly 4% over the listed price. You don’t have to be a rocket scientist to understand that buyers are waking up to the fact that prices are probably about as low as they are going to get. Unexpected shocks to the economy may change that, but we have seen pretty stable pricing for several years.
This chart tracks home sale prices for the last five years. You can see the dramatic decline that reached bottom in February of 2009. Since then prices have been more or less stable with the normal fluctuation you will see in a market with limited sales and the occasional mansions or luxury estates tossed in to skew the average.
In addition to the excellent performance of REO properties in Sonoma during the first half of 2011, open market sales and short sales have also done reasonably well. They are being discounted from the asking price, but the modest discounts are in the range of around 4% to 5%. When you are planning to make an offer on any property in Sonoma County, knowing the recent history of pricing discounts will help you make an intelligent offer.
If you are interested in an analysis of another area or a specific property, please talk to your agent. If you don’t have an agent, I’m happy to offer my services.