Price to Sell

Price to Sell

April 28, 2009

Executive Summary

The National Association of Realtors is reporting that existing home sales declined again in March with numbers that are 7.1 percent lower than a year ago. Despite this decline, Lawrence Yun, NAR chief economist, said the market appears to be stabilizing with modest monthly ups and downs, and that first-time buyers are driving the market. "The share of lower priced home sales has trended up, indicating a return of many first-time buyers, which we also see in a parallel member survey," he said. "Sales in the upper price ranges remain stalled because of higher interest rates on jumbo loans (Market Conditions by Realty Times Staff, April 2009)"

Regionally, all areas except the Midwest saw declines, with the largest decline being in the Northeast. The Northeastern region saw existing home sales fall 8.0 percent in March. This number is now 22.5 percent lower than a year ago. The Midwest remained unchanged in March, but is still 11.1 percent below March 2008. Median prices were down across the board as well, again with the biggest decline in the Northeast at 18.4 percent. The Midwest saw a decline of 6.1 percent to $141,300. The South is down 12.2 percent to $146,900. And then West is down 11.1 percent to $252,400 (Market Conditions by Realty Times Staff, April 2009).

Can a real estate professional give an accurate prediction of the selling price of a house based on a house’s assessed value, time period in which a house sold, and whether the house was new? A sample of 30 recently sold single family homes in St. Louis has been selected. This data can be found in Appendix A.

???Based on the sample of houses selected from the St. Louis area, I found that, in fact, it seems true that using the home’s assessed value, time period in which a house sold, and whether the house was new can in fact be accurately price a house to sell.

Introduction

There's no doubt that a buyer's market can be challenging for...