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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A poster on the Real Estate Cafe blog raises the question whether "seller incentives" are masking the true decline in housing values. I've read elsewhere about sellers offering a one-year lease on a car (if not an actual car) to... [Read More]
Tracked on Aug 28, 2006 6:15:57 PM
The blog is great. You're doing a great job. I've also been using Seeking Alpha's write ups of the housing market, and thought you might also find them useful.
Posted by: Daniel | Aug 31, 2006 9:57:54 AM
Seller credits of up to $10,000 to pay for recurring and non recurring closing costs is becoming the norm for first time home buyers here in the San Fernando Valley; Los Angeles County.
Posted by: Richard Johnston | Sep 7, 2006 4:08:15 AM
The shift in the market has completely changed the rules of the game. The number of pre-foreclosures that have any equity to leverage are getting lower and lower, in spite of the overall foreclosure rate rising. What worked a year ago now will definately not.
Posted by: Barrett Niehus | Sep 14, 2006 2:38:43 AM
The crazy marketing schemes do need to stop. Whether it plays into a deeper discount for the buyer...not to sure...but it is really getting outrageous at this point.
Posted by: new condos | Sep 16, 2006 2:56:59 PM
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