August 26, 2006
Are seller concessions masking deeper discounts on sales prices?
Side-by-side competition driven by the rising inventory of unsold homes across Massachusetts is creating a new kind of bidding war: escalating financial incentives to help sell homes as soon as possible.
Some time ago, the local MLS added a new field to document seller concessions at closing. However, entries are rare and as noted by one prominent critic, "current house price indices are failing to pick up the full decline in prices because they miss the various concessions (seller paid closing costs, buyer-side realtor bonuses, and seller subsidized mortgages) that sellers often use to move their houses."
That problem is compounded by the fact that median prices can be misleading, particularly when rival data sources reported different median prices in Massachusetts in July 2006. The Massachusetts Association of Realtors reported that single-family prices declined 3.5% statewide, while The Warren Group calculated a 6.1% decrease. Adjusted for inflation, year-over-year prices fell 7.8% using MAR's stats and 10.2% using The Warren Group's according to BostonBubble.com.
To help get behind the confusion, The Real Estate Cafe created a real estate bubble map to document falling prices on a property-by-property basis. We'd also love to use the map to document innovative sales incentives being offered by sellers, listings agents, and developers in Boston and beyond. Locally, one listing agent recently mailed fellow agents coupons for $20,000 off a new development in Cambridge. That seems modest by comparison to the ambitious "Summer Full of Savings" being offered by one homebuilder across 17 developments in California.
Please let us know what's happening in your market, either by posting your comment below or on our RealEstateBubbleMap.com. We're particularly interested in learning which sales incentives you find most appealing, as well as seller concessions you've requested in recent offers (like asking sellers to pay your closing costs).
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