Successful listings are called “comps”, or “comparables.”
Failed listings are called “guideposts.”
As an “Agent Economist” it is my goal to provide you with a clear understanding of what affects your property value.
What did your Velocity Report indicate about your market? Is there a 90% history of listings selling in your area? Is it 70%?
We hope these concepts below provide insight to the health of your market. Keep in mind, the Success vs. Failure Rate of listings is just one of several factors that drive appreciation and depreciation.
When 9 out of 10 listings sell, and only 1 out of 10 fail to sell, there is an oversupply of buyers shopping for homes in your area. Your home does not have to be “perfect” to sell. Buyer demand is your greatest ally. Hang on and watch for multiple offers! Clearly a sellers market.
When 2 out of 10 listings fail, you are still in a relatively healthy market, but it is not on fire. Generally in a market like this, about 30% of listings will still sell at full price or above. This is a healthy sellers market.
This is more typical of a normal market in the USA. Failed listings are a part of any market. This is often not a buyers or sellers market. Rather it is balanced. Generally, if one of your first 5 buyer showings does not make an offer, those buyers “have voted” and have often indicated that the asking price does match the features offered.
When 60% of listings sell and approximately 40% fail, this could be called a warning sign of a market slowdown and much slower appreciation if it even exists. Expect longer days on the market and possibly quite a few price reductions.
If your area is experiencing 50% failure rate of listings, there is almost zero chance of appreciation. Depreciation has set in quite possibly years ago. Sellers often think “it is a seasonal blip” when this occurs. However, it is more likely that the cause of this is too much new construction in the area, not enough job growth, or just too much housing inventory over the past 2-5 years.
Depreciation does not occur “all of the sudden.” It is usually not evident until someone tries to sell the asset. However, with 50% failing to sell, it is clear that those homeowners may feel “that depreciation did not stop at their doorstop.”
In 2008, when the “real estate bubble burst” the country was experiencing huge failure rates of listings. There were far to many sellers and buyers were scarce. New construction in many areas ceased to exist because many builders were going out of business. Ground value plummeted. When an area has a 40% or less success rate, there is a very low probability that a homeowner will sell their property for what they paid for it.
When the success rate of listings is this low, it is clear that buyers are rejecting the area and prices are on the decline. With a 60% failure rate or higher, properties may sell at 2005 price points.
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