The asking price is the starting point for all home sales, a ballpark figure typically close to what buyers end up paying. But the nation’s real estate market is so out of whack, experts say, that in many cities the gap between the asking and purchase prices has grown enormous. In fact, while home sales are on the decline nationally, list prices keep rising.
Existing single-family home sales fell 2.6% in March from a month earlier to a seasonally adjusted rate of 4.48 million units, according to data released Thursday by the National Association of Realtors. Meanwhile, the median sales price rose to $163,800, up 5% from February and up 2.5% from a year prior. On a national level, the data suggests that individuals who are buying homes are willing to pay more. On a regional level, however, buyers’ offers vary significantly.
In some markets, sellers aren’t getting what they’re asking for or anywhere near it. In the Atlanta metro area, for instance, the median list price was $150,000 in December, according to Realtor.com. But the median sales price was just $90,600 at the end of the year, according to the latest data from the NAR. In Jacksonville, Fla., the median listing price is 34% higher than the median sales price, while in Washington D.C. it’s 13% higher.
It appears these price gaps between asking and actual sales prices continued into March. This week, Realtor.com reported that median list prices rose 5.6% in March from a year prior. Meanwhile, national median sales prices over this period rose just 2.5%, according to the NAR. March marks the beginning of the peak home buying season that stretches through the summer. List prices tend to rise with the temperature, says Julie Reynolds, a spokeswoman for Realtor.com.
Still, experts say asking prices in some cities appear to be way off. When there’s a $50,000 or more difference between the asking and selling price, that’s a sign that the house is likely overpriced, says Mark Goldman, real estate lecturer at San Diego State University’s Corky McMillin Real Estate Center. “Sellers and their agents are more optimistic than the buyers closing on deals,” he says.
For their part, realtors in Atlanta and Washington, D.C., say that the difference is largely due to lagging buyer demand for homes in the suburbs that’s led to homes selling at discounted prices. They say real estate in the city is in high demand and selling near asking prices. In some areas, foreclosure sales, which typically sell at a discount, are pulling selling prices of non-distressed homes down.
SmartMoney crunched the numbers to find the metro areas where the gap between listing prices and the actual purchase prices are the largest and the areas where they’re the smallest:
3 Least Realistic:
Median list price: $150,000
Median sales price: $90,600
Of major U.S. metro areas, Atlanta had widest gap — $59,400 — between the price home sellers ask and the amount they actually get. A glut of unsold new homes and condominiums is largely to blame, says Bill Golden, a realtor with RE/MAX Metro Atlanta. “They’ve been sitting on the market a long time, and sellers are willing to take a pretty big hit to sell them,” he says.
There’s also been a spike in distressed properties. Lenders repossessed nearly 11,000 homes during the first three months of the year, up 21% from the same period a year ago, according to RealtyTrac.com. These properties typically sell at a discount and they also impact the values of nearby non-distressed homes. Experts say buyers who are studying sales in a market with distressed properties are likely to offer less than the asking price on a regular home.
Worsening matters for sellers, Atlanta’s unemployment rate is high — 9% as of February, according to the latest data from the Bureau of Labor Statistics. Though it’s dropped from a year ago, it’s still well above the national unemployment rate of 8.2%. High unemployment means fewer people can afford to buy a home, lessening demand for real estate. In turn, homeowners eager to sell could be more willing to accept lower offers by the buyers who are in the market.
Median listing price: $184,775
Median sales price: $121,600
Jacksonville’s real estate market is experiencing a dilemma it hasn’t dealt with since before the property crash of 2008, brokers say. “Our available inventory is down drastically from last year,” says Carey Frankel, a realtor based in Ponte Vedra Beach, which is part of the metro area of Jacksonville. Multiple offers on foreclosures and well priced short sales are common, he says. In fact, there are about 8,000 homes on the market in the Greater Jacksonville Area — about half of what was available four years ago, says Tobin Bossola, a realtor based in Jacksonville. Before 2008, Jacksonville suffered from less speculation than popular tourist destinations like Miami, Bossola says. “We also don’t have a big transient population,” he says.
There is good demand for relatively low-priced condos between $40,000 and $70,000 among investors, Bossola says: “The conversation is going to start changing from this being a buyer’s market to a seller’s market.” Still, there are 3.6 foreclosures per 1,000 loans in Jacksonville, higher than the 1.5 per 1,000 nationally, according to RealTrac.com.
Median listing price: $359,900
Median sales price: $313,300
While housing is relatively healthy in and near the capital’s center, Washington’s metro area makes this list because of the stagnant market on the periphery. Residential real estate within a 10-mile radius of the Beltway is selling quickly and for close to asking prices, but homes 25 miles away or more tend to linger on the market, says Mehmet Halici, associate broker with Weichert Realtors in Bethesda, Md., who sells real estate in the D.C. metro area. Most of those homes have been listed for at least three months and have slashed their asking prices by 10% or more, he says.
Experts say that disparity is part of a trend underway in pockets throughout the country: More buyers are choosing to settle down in or near major cities to be near work and save on transportation costs rather than move to the suburbs, says Halici. The diminished demand for homes in the suburbs then pushes the eventual purchase price of homes down.
Going forward, an even greater spread between the listing and sales prices could materialize, experts say. In February, 232 homes in the area received a foreclosure notice – that’s the first step in a foreclosure process – and while that number isn’t big it’s a 130% jump from a year prior, according to RealtyTrac.com. Those homeowners who manage to sell may have to accept a lower price.
3 Most Realistic:
Median listing price: $120,000
Median sales price: $121,800
Some cities are actually posting median sales prices that are higher than asking prices. Experts say investor demand for distressed homes in Las Vegas often leads to bidding wards that drive purchase prices up to the asking price or more. An epicenter of the housing crisis, the Las Vegas market by some accounts is treading along the bottom. As lenders try to sell the homes they previously foreclosed, they’re pricing them either at or slightly below current market value, says Brad Snyder, a Las Vegas realtor with ZipRealty. That’s also the case with homeowners trying to avoid a foreclosure by selling their home in a short sale, he says. (With a short sale, a home sells at a price that’s lower than the amount the borrower owes the lender.)
Collectively, foreclosures and short sales account for about 80% of sales in the metro area, Snyder says. It’s unclear how long that trend can last. The narrow difference between the listing and the sales price could get bigger if foreclosures spike again. Last year, the Nevada legislature passed a bill requiring lenders to clear more hurdles before foreclosing on a home. That’s helped restrict the number of properties selling on the cheap in the area for the time being.
Median listing price: $319,000
Median sales price: $325,000
Percent difference: +2%
Boston’s market wasn’t as clobbered as much as some regions of the country and remained fairly stable throughout the recession, experts say. But recent signs indicate sales are picking up in earnest. “Properties that have been sitting for a long period of time are starting to move,” says David Cary, managing director of Integra Realty Resources in Boston. “We didn’t have the tremendous explosion of growth in Arizona, Florida or Nevada,” he says, “so we didn’t have to absorb that excess inventory.” What’s more, increased demand for high-end condos and homes in the South End bodes well for the wider real estate market there, says Matthew Cloutier, a realtor based there.
Higher earners see value at current prices, Cloutier says – in fact, a third of his buyers are paying all cash. “We started noticing we weren’t in a typical winter market last Thanksgiving or Christmas,” he says. “It didn’t slow down the way it usually does.” But inventory is still tight: of the 140 South End residences on the market, 33 have offers, while an additional 102 units were recently pulled off the market, Cloutier says.
Median listing price: $139,900
Median sales price: $135,500
Tampa took a heavier hit on home values than Jacksonville during the recession, says Frankel. As such, property prices took longer to recover. While investors, second-home buyers and retirees are slowly coming back into the Florida market, more of the activity is in larger cities like Miami, Frankel says. But the rise in asking prices in Tampa shows that it’s shadowing the recovery of some larger markets, he says.
There have been signs of life in the market, but they’ve been spotty, says Willy Culkar, an estate agent in Lipply Real Estate in Clearwater, Fla. “One month it seems like we’re improving and the next we’re not,” he says. And inventories in the Greater Tampa Area are about half of what they were 12 months ago. “Good properties are going quick,” he says.