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As Sellers Gain Confidence, They Engage in ‘Risky’ Pricing Approach

Two-Story-HouseAs home sellers become more confident in the housing market, many are taking on what Redfin [1] calls a “risky pricing strategy,” according to the online real estate brokerage’s latest survey. A little more than 40 percent of home sellers plan to price their homes above market value, Redfin’s data shows [2].

More than half—52.4 percent—of home survey respondents said now is a good time to sell a home in their neighborhood, as of the second quarter of this year. This is up from 45 percent in the year-ago quarter.

Regardless of this bolstered confidence, Redfin warns overpricing a home is not a wise strategy in today’s market.

“Buyers this year are far less tolerant of overpricing, and homes that aren’t priced appropriately are likely to sit on the market until the seller is forced to reduce the price,” said Paul Reid, a Redfin agent in Riverside, California.

Furthermore, dropping the price on a home can send a negative message to buyers, according to Reid. “Buyers often interpret a price drop as a sign there is something wrong with the home, leading some to negotiate even more aggressively or lose interest altogether,” he said.

About 51.3 percent of sellers plan to price their homes in the mid-range of local comparables, which is advisable, according to Redfin.

While sellers may be gaining confidence that their homes will sell, they do harbor concerns regarding their next home purchases.

Affordability was a top concern in the second quarter, cited among 40.9 percent of survey respondents. Competition and low inventory also ranked high, cited among 36.5 percent and 35.6 percent of respondents, respectively.

On the other hand, concern over rising mortgage rates is waning. About 19.9 percent of respondents cited this concern, down from 22 percent in the previous quarter.

Rising prices have led some home sellers to regain confidence that a home purchase is a good investment, but the trend hasn’t convinced everyone.

Price gains over the past year led 30 percent of home sellers to say they feel more confident in the security of a home investment. However, 60.2 percent say rising prices have not affected their confidence in the security of a home purchase, according to Redfin.