The seller is worried. She owns a lovely pre-war duplex on the Upper West Side of Manhattan. It needs renovation and is priced accordingly. She e-mails her agent to note that asking prices seem to have gone up since the first of the year. She is concerned that her listing, which has been widely disseminated and received only two showing requests in two months, seems underpriced.
Does this example resonate with you, either as an agent or as a seller? Every seller lives in fear of leaving money on the table. Ironically, an overly ambitious asking price renders a lower selling price all the more likely. And if you are a seller who feels eager to make this mistake, don’t feel bad. Most agents, when they become sellers, do it too!
Many factors go into the proper pricing of a home, especially in a strengthening market like the one in which we now find ourselves in New York. Sellers are eager to adopt the pricing strategies of hot markets, when you can price up from the comps in the expectation that, even if you overprice today, the market will catch up. Unfortunately, that notion doesn’t hold true in today’s market. We are moving through a no man’s land between buyer’s and seller’s markets today. The acceleration in deal flow owes more to a flattening of seller expectations than anything else. As soon as prices stray outside the narrow band in which buyers feel comfortable making offers, the property stagnates.
Even in the hottest markets, the first weeks of a listing’s availability determine its course. Especially as inventory slims (which it is finally doing now in New York, months after the rest of the country) the importance of playing to pent-up demand increases. Those first days on the market, when buyers who have lost other properties are waiting to pounce, bring a seller their best chance of getting a top price. While an overly ambitious asking price can always be reduced, those crucial first weeks are lost. From that point on, the property no longer counts as a new listing (no matter how anxiously the seller’s agent may market it as one) and a bit of bloom is off the rose. Offers will likely come in lower. For serious sellers, pricing right on target always leads to a better outcome.
It remains difficult to prognosticate about the New York market. The substantial increase in sales volume over the past weeks suggests that New York real estate will enjoy a busy spring. Several factors could, however, still throw a monkey wrench into the works. First, we need inventory. The accelerating pace of sales means that, as more properties go into contract, inventory levels go down. This is especially true with the better properties in more desired neighborhoods. Popular locations already display a lack of good product which leaves many buyers frustrated. As more and more people enter the market, this lack of property could increase, tilting New York back towards market equilibrium.
Second, sellers must remember that, for now, this remains a buyer’s market. Overall prices marketwide still lie between 15% and 25% below where they were in 2015.
While a continuing lack of supply coupled with strong buyer demand could tip the scales back towards sellers over the arc of the next year, that emphatically has not yet occurred. Proper pricing drives buyer enthusiasm.
As more New Yorkers become vaccinated, they can again see a future in which the activities defining our city will become available to us again. More COVID refugees will return, tourists will gradually come back, restaurants, Broadway theaters, and concert halls will re-open, although probably at decreased capacities; residents’ lives will return to a new normal out of which the next phase of New York will arise. In the years ahead, these months will be remembered as a time of real estate opportunity.