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That’s a winning headline, isn’t it? I can just see the existing sellers rushing to fill out my contact form excited to have me come and list their home. (sarcasm). All kidding aside, it’s time for some straight talk to quote John McCain.
I just ran some analysis on Plymouth, MN upper bracket single family homes. (The data source was the NorthStarMLS Matrix System – 13 county metro). I consider upper bracket homes priced between $500,000 to $1,000,000. Some would consider million dollar plus homes upper bracket, and certainly they are, but for this exercise, I excluded those homes. (BTW, publishing this information is bad for my listing business…most sellers don’t want to hear this and there are agents who will tell them they can get a higher price for their home if only they hire that particular agent – because he/she can work magic and do better than the market – yeah, right…but people believe it).
In the upper bracket, there are two distinct markets in Plymouth, MN. There is new construction which is booming and then there is everything else. For the sake of this analysis, new construction was just for homes built from 2010 forward. 2009 is considered older stock in my data run.
In new construction, there are 28 homes for sale in this key price range. There are 14 homes that are currently pending, thus, there is only a 2 months supply of new construction houses. This market may be as hot as it’s ever been. The public’s appetite is extremely strong for new construction homes in Plymouth priced between $600-$700k.
Active listings: 28
Average Price: $650,583
Average Year Built: 2010
Days on Market: 139
Square Footage: 4,347 with 5BRs, and 4.79 Baths
Foundation Size: 1,582
Price per square foot: $151
And how about the rest of the market…those old homes that were built in 2009 or later. There are currently 42 homes for sale in this price range and 4 are pending. That means there is a 10 month supply of houses for sales right now and it’s only March 3, 2011.
Active listings: 42
Average Price: $667,138
Average Year Built: 1988
Days on Market: 242 (for the math challenged, that’s 8 months…and still not sold!)
Square Footage: 4,167 with 4.43 BRs, and 3.93 Baths
Foundation Size: 1,862
Price per square foot: $166
So for existing homeowners trying to compete with new construction, consider this based upon the averages with the data provided for above:
- Your price per square foot is 10% higher than the new construction homes
- Your home is 22 years older on average
- You offer fewer bedrooms and baths
Based upon these numbers, existing sellers need to drop their prices by 10% just to be “even” with the new construction homes based upon a finished square footage number. Then take in to account the public’s interest in new floor plans versus your dated plan and honestly consider the updating that will be needed to your existing home and try to figure out what that value is to determine an appropriate discount. Is it 10%. Is it 15%? Might it be 20% It certainly could be.
If you want to sell, it’s time to be realistic. There are too many dated and overpriced existing upper bracket homes for sale. You’re free to pray that you will find that one in a million person who will pay you your price or close to it. You can pray to find an anxious and uneducated out-of-towner who relocating to the Twin Cities and might be willing to overpay for your house. You can also play the Minnesota Lottery and see what your odds are there.
If you want to sell, you are likely going to have to spend some money on improvements and lower your price. If the price you lower it to doesn’t do it, you’ll need to lower it again. I believe EVERYTHING is saleable in this market…the question is, are you ready to sell? Will you hire an agent who will tell you the truth to help you sell or will you hire one that you hope can get you the price you want or need. If it’s the latter, I wish you luck. And you’ll have no problem finding agents who will tell you what you want to hear to get your listing…because after all, they won’t be able to sell it, but they can use that listing to pick up a prospective buyer and they get free advertising with their sign.
Good luck.
Great Article. I’ve been searching for a home in the $350-450k range, in the Wayzata, Minnetonka, and Orono school districts and what I found (not so quantitatively) is the exact same thing. Typically only the worst lots and/or dated offered noticeably lowered pricing. I’ve agreed to buy a new home that offers everything I want.
However, I’m still worried about what the future holds. I still feel that at $420k – a slight discount for not being new, and – the realtor fee, I’d immediately be down 10-15% on what I could get out of it if I lost my job. It seems as if the realtor fees that inflated the price to get to the current level, and the realtor fee to get out of the house, is the overwhelming problem for most sellers? All other factors for the market could be ignored. Add any negativity in and it really seems dismal.
Hi Todd, thanks for stopping by and adding your comments. It sounds like you’ve done what many are doing…shopping the existing inventory and seeing what the sellers are asking for in their price but you know how much it’s going to cost you to update their home and decide to go buy new. The sellers need to get realistic.
Given Realtor fees and that most buyers expect some compensation from the seller to help offset their closing costs it’s easily 9-10% to sell. That of course doesn’t account for any potential loss of equity from the time you’ve bought it. The Realtors fees do seem high but that’s in part because any Joe or Suzy can be a Realtor. The really good ones basically charge the same as the beginners. It doesn’t make any sense to me, but that’s generally how the industry works. Unfortunately, most buyers and sellers don’t really realize that.
Thanks again for stopping by. Please feel free to comment on anything else you see here.