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Pricing and supply: Yep, here’s the real story


Blog by Robert Matthews | October 18th, 2021


Yes, this can be a busy time of year for real estate sales. Many people assume that homes, once listed, will sell in a week and all is good! But the reality can be quite different. A home priced too high will generate minimal interest and will likely not sell. Properties must be priced realistically, based on comparables sales – not active listing prices – in the immediate neighbourhood (and building, if a condo). I emphasize "sales" as many home sellers base their initial price expectations on current listing prices, not sale prices. This can lead to disappointment. Most people do not have easy access to comprehensive sale/cancel/terminate history for a given property, although we do see progress on this front. A deeper dive through our MLS system shows days on market, price history, past cancellations, re-lists and much more. As difficult as it is to believe, a sizable number of properties do not sell in the first week, month or year! You don't want to base your price expectations on these properties. If you'd like to know the history of a particular property (or many), drop me a note and I'll dig it up for you.

Some properties are on the market for many months, with no price changes. These properties are not for sale in my mind. They are simply listed on MLS at a price the home seller and Realtor have agreed to, no matter what the reality of the market is saying. And there's a risk with this strategy. Here's what happens: When a property is listed, the MLS system sends out alerts to often hundreds of interested home buyers and their Realtors who've signed up for alerts of properties meeting their criteria. Many of these potential home buyers have had alerts set for months or longer. Think of the buyer pool building in the system for many months, with, e.g., 300 potential buyers alerted to your property on day one. Within a week those 300 have seen your listing and, if sufficiently interested, viewed the photos, done a virtual walk-through, viewed in person if still keen, and decided yes or no. Hopefully it will sell a few days later.

However, if an offer is not generated in ten days or so, it's a different story. You don't have another 300 new buyers next week to consider it. That group of 300 built up over a few months is done and gone. Now just a trickle of new buyers will be entering the market for a home such as yours. It could easily happen that you have 300 potential buyers made aware of it the first week, and two potential buyers the week following! You can re-introduce it to the initial 300, but only by adjusting the price and re-listing it as new. If your properly is not priced appropriately it will not generate much interest, even in that initial first week burst. And with new buyer supply dropping to a trickle after that first week, the odds of a buyer stepping up are stacked against you.

Reported supply vs. real supply
When you hear that the inventory of properties for sale – the supply – in a given area is the lowest it's been since 2016, or at 20-year-lows, etc., you need to dig deeper to get the true story. As I've noted above, a proportion of currently listed properties are effectively not really for sale at all due to their unrealistic pricing. An inventory of 1000 homes for sale may have only 750 – or less – that will actually find a buyer.  
 
Based on relevant comparables, I recently listed a North Vancouver home for $2,488,000. 714 people received alerts from the MLS system in the first couple of days based on their search parameters. I conducted forty individual showings; basically lived at the house for a week! Eight people made offers and several others indicated they considered offering but did not want to compete. The selling price was some $250k higher than list price. One happy buyer family, and many disappointed families still looking for a home. So yes, at the most popular price points for a given type of property and area we do see a strong supply/demand imbalance. And this is only exacerbated when we remove inappropriately priced listings from the actual supply.
 
The cause of, and solutions for, our current housing supply/demand imbalance can be argued endlessly. But the reality is that we see tens of thousands of new buyers entering the Metro Van home-buying market each year, but not tens of thousands of new homes for them to buy! Much of this disparity is the result of political intervention and policies from all levels of government. A story for another day!

As always, individual situations vary. Feel free to contact me if you'd like to discuss the specifics of your situation and plans to sell and/or buy.