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Another reason for a price change.

Posted by trilobite (My Page) on
Sun, Oct 6, 13 at 12:01

I was looking at local inventory yesterday and realized something interesting.

We all know lowering your price makes your house more attractive to the potential buyer. But in my local market, a relatively small price drop changes the market for your house.

My local market is extremely tight at the 175K-275K range. Most of what sits for any length of time is not appealing (small, very dated, terrible location). Anything halfway decent goes pretty quick.

In contrast, once you get in the high two hundreds/low three hundreds, there's lots of inventory, even at this time of year. The market really opens up.

Anyway, it had never occurred to me that a price drop could so dramatically expand your pool of prospective buyers, literally going from a pool of large inventory to a pool of small inventory. I think this may be an underappreciated aspect to price changes, at least in some markets. I know I've always casually assumed that that inventory looked something like a pyramid, with the greatest number of homes available being at the low end. But, my local inventory looks more like a bell curve. Just something to consider.

This post was edited by trilobite on Sun, Oct 6, 13 at 12:17

Follow-Up Postings:

RE: Another reason for a price change.

Yeah, a price drop to get you into the next lower pricing tier can be a really good strategy if you are a good value. It can even ignite a bidding war if that next tier down is full of stale listings that aren't updated. That can lead to getting a higher price than before your price drop!

RE: Another reason for a price change.

It really depends on the market and potential finances of buyer. In the current financing market - UW somewhat care about qualifications which is different from the past so the term 'bidding war' is not what it use to be.
If a couple qualifies for $200-225k comfortably and attempts to bid on a house 190k - they have wiggle room but if they are competitively forced up to 240k - their ability to close might be compromise so I wouldn't strongly encourage forcing a bidding war as typically it works but the description of falling into a 250k bracket from a 280k bracket might introduce LTI which was not a big deal 5-6+ yrs ago.

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