|What is Happening to the Value of Our Homes?|
Published: Monday, 09 May 2011 00:00
Everyone should now be aware that the value of homes has declined over the course of the last five years. The decline is more pronounced in some areas than in others. HomeGain, the first company to provide free instant online home values, recently polled 750 real estate agents and 1600 homeowners around the country to get their opinion on the direction of home prices over the course of the next six months to a year.
In reviewing the survey results, it is apparent that real estate is localized or, at best regionalized. Though there are broad trends and opinions which are national, home values and opinions about them are specific to certain areas and do not follow a specific national trend.
For instance, in Florida and California, home values have plummeted. However, in Texas, property values have held up reasonably well. Yet this does not tell the whole story.
Although the real estate values in Detroit have fallen tremendously, the property values in Ann Arbor have increased. Stockton, California once topped the list as having the highest number of foreclosures in the nation and values declined proportionately. However, Madera and Merced, CA have experienced increases in home values in the 2 – 3% range.
It is interesting to note that the opinions of buyers and sellers reflect what they want the value of a home to be, not what it really is. Whether it is an up or down market, sellers want to sell their homes for more than they are worth and buyers want to purchase homes for less than they are worth.
This is the battle that a real estate agent fights every day. It is also interesting that, frequently, a home seller blames their agent for not selling their home for a high enough price. If the homeowner considered the situation, they would find that the agent wants to sell for the highest price because the agent's commission is higher when the house sells for a higher price.
Plus, it is in the agent's interest to sell for a higher price because it keeps the value of adjacent homes higher and any future sales would net the agent a higher commission.
The HomeGain survey illustrates a difference in perspective between agents and homeowners. 61% of homeowners polled felt that property values had declined in the last year. However, 75% of agents remarked on a decline over the same time frame. Clearly, there is more than one way of looking at the situation.
We all know that it takes agreement from both parties, home buyers and sellers, to close a deal. The HomeGain survey asked an interesting question of real estate agents. "What is the average difference in price between what the home is listed at and what the home sells for?"
The majority of agents, 58%, responded that the variance was less than 5 – 10%. 23% of agents said that there was a variance of less than 11 – 20%. In any case, buyers are generally leveraging the sales price down and sellers are having to accommodate them.
Real estate agents also mentioned that 33% of their buyer clients felt that homes were overpriced by less than 10%. 32% said that homes were overpriced by 10 – 20%. So, the perception of buyers, despite massive declines in value in most areas, is that homes are still overpriced.
In reviewing the survey responses, it has become clear that consumers on both sides of the fence, homeowners and home buyers, have opposite perspectives when it comes to the value of homes.
It is understandable that a homeowner feels their home is valuable and more so than anyone else might feel. It is equally as understandable for a buyer to want to get the best price possible to take advantage of current market conditions. Ultimately, if the deal is to be done, they must come to common grounds and agree on a price.
This is why the real estate agent plays such an important role in the process. Without the agent to present the property, negotiate the price and to ensure that all necessary paperwork is completed, there would be no deal at all.