Are prices dropping?

There is a lot of concern out there about real estate prices. People are worried that after last year's great gain in real estate values in the Phoenix metropolitan area, that we are now going to see prices drop. Certainly, if you look at the "Price Changes" report on the MLS on any given day you will see many properties that have reduced their prices. I have looked at these changes to get a feel for what is happening. A very un-scientific process that I use is to randomly pick a property on the list and take a look at the price of the home and the market.

Today I picked a home in Scottsdale. This home just dropped its price from $515,000 to $499,000. A pretty substantial drop, yes? Well, while this home has dropped its price it is still listed at $24.00 more per square foot than a comparable home that recently sold in the same neighborhood.

Time and time again I have seen this same scenario play out. The seller convinces himself that this is Spring, 2005 and that they should get more money for their home than anyone else in the neighborhood. The seller puts their home on the market and it sits there doing nothing. After a few weeks the seller reluctantly lowers the price but usually to a level that is still above market value. The property sits and the listing gets old. A few more weeks go by - the seller is now 'anxious and will look at all offers' yet, while they may lower their price a few more dollars they have probably not yet hit the level that would make them competitively priced.

It is important in these times to take a long hard look at what is really going on. Although a customer may look at a property and see that the price has been lowered on multiple occasions, that does not necessarily mean that they are now looking at a bargain. Over the past few months I have found that the vast majority of price reductions have just brought the homes to the price that they should have been at to begin with.