MIAMI – Dec. 13, 2018 – According to the National Knock Deals Forecast, uses data for both predictive and historical analyses from ATTOM Data Solutions, the percent of home sellers who eventually sold for less-than-asking price in 2018 was about 2 in 3 (62 percent).
Of those homes that sold for less than asking price, six out of 10 are in the South, with Miami at No. 1, followed by New Orleans and Chicago.
As home values rise more slowly, Knock predicts that the trend of lower sale prices will continue into 2019, when 77 percent of on-the-market listings will sell for less than asking price, and half of the “top 10 markets for deals” will be in the South.
“Knock has developed six predictive algorithms to determine how much our Home Trade-in customers’ homes will sell for and when,” says Sean Black, co-founder and CEO of Knock. “By applying these algorithms … we hope to help more home buyers find and act on the best deals, and increase overall market fluidity.”
Knock analyzed on-market listings in the largest U.S. MSAs to determine the markets with the highest percentage of homes predicted to sell below their original list prices, what Knock defines as a “deal.” In November, Knock said that 80 percent of U.S. homes sold within 4 percent of its predicted final sale price, and 50 percent sold within 2 percent of the predicted final sale price.
The number one predicted MSA for deals heading into 2019, Miami, also saw the highest rate of deals in 2018.
“While there’s no denying that home prices have been steadily on the rise, list prices are clearly increasing above realistic levels, corroborated by the study’s findings that over 60 percent of homes sold well below their original list prices in 2018,” says Paul Habibi, economic advisor to Knock and Lecturer at UCLA Anderson School of Management.
The tendency to overprice
While the rate of home price increases has begun to slow, it’s still up 5.1 percent year-over-year, according to the S&P CoreLogic Case-Shiller Indices. As prices have gone up, so have home sellers’ expectations of their home values, and there’s a tendency to list a home for a bit more than recent nearby sales.
When sellers price homes aggressively, however, they can sometimes end up selling it not just below their original list price, but also below market value because buyers wonder about a home that has been on the market for a longer period of time.
For homes sold in November, Knock found that 92 percent of listings that had been on the market two months or more sold below their list prices – 22 percent more than the rate of all listings that sold below their original list prices in November. On average, these homes sold for 1.5 percent less than the overall market.
In Miami, for example: 76 percent of listings sold at least 2 percent below original list prices, compared to 3 percent of listings selling 2 percent or more above original list prices. The ratios are different in a market like San Francisco, where 58 percent of listings sold at least 2 percent above original list prices. But given that the majority of all U.S. listings still sold 2 percent or more below list price, underpriced markets appear to be the exception rather than the norm.
Based on predictions of all listings that hit the market in the past six weeks, five out of the 10 top markets for deals are in the Southern half of the U.S. Miami continues to top the list, with Houston, Texas, Jacksonville, Fla., New Orleans, La. and Tampa, Fla. also having some of the highest predicted rates of deals heading into 2019.
“Given that the slowdown of home price increases is just beginning to take hold, we can expect home sellers to continue to set their original list prices on the higher end, which has the potential to result in greater deals for home buyers,” Knock says it a news release. “Particularly as we head into January, which has historically been one of the best months for deals, the combination of seasonality and the slowing market make the perfect recipe for the increased rate of deals.”