“Bonkers!” This word is so apropos in our current real estate market.

By the way, the current tight market conditions (low inventory vs high demand) have been in place since the end of 2021.

However, there are different degrees of bonkers🤪. For example, let’s compare absorption rates from January 25 to March 28 (I record these stats every Thursday at 3:00 pm for consistency):

(The absorption rate is a factor of the “sales for the last 30 days” compared to the “current inventory.” In a balanced market, it is around 33%.)

Here’s one price segment from each category recorded at the two dates, as mentioned:

Detached $800K-$1M, Jan 25 = 31%, Mar 28 = 97%

Semi-detached $400K-$600K, Jan 25 = 87%, Mar 28 = 198%

Townhouse $550K-$700K, Jan 25 = 28%, Mar 28 = 96%

Condo Apartment $300K-$450K, Jan 25 = 62%, March 28 = 106%

It’s normal for the absorption rate to increase going into the spring market (we’re in it right now despite the persistent white stuff you see everywhere). However, it’s FAR from normal to have absorption rates approaching or exceeding 100%. I picked the $400K-$600K in semi-detached as an extreme example, but it’s far from the only category approaching 200%.

All of the above is the groundwork for today’s topic: Pricing Strategies in a Bonkers🤪Market.

It’s imperative that your REALTOR® clearly understands the current market conditions and makes pricing recommendations based on this data or, at the very least, adjusts comparable sales to take into account the changing market.

Here are some other important considerations:

Many sellers want to wait until the snow is gone and their yard is spruced up because that’s when it shows its best. However, let’s be honest: In Calgary, that means we’re probably talking about June. Well, that might be too late to get the maximum exposure to spring-time buyers.

Think about it this way: The strongest three months of sales are typically April, May, and June. The number varies, but for the sake of argument, let’s say that one-third of spring buyers buy in each of these months. 

That means if you wait until June to list, you’ll already have missed out on two-thirds of the spring buyers!

Also, those “late” buyers tend to be the more conservative types. They refused to “overpay” in April and May and are holding out for a “deal.” You’re left with only one-third of the buyer pool, and they’re the cheap ones! 

Your house may look its best in June, but waiting too long to list can more than offset that advantage. We may even need to adjust the price down slightly to compensate for the reality of fewer buyers.

By the way, I’m speaking in generalities. There may be a case where it is indeed better to wait. The point is that you need an agent who will always tell you the straight truth, based on your unique circumstances, and always with your best interest at heart.

Also, you need an agent who knows how to look ahead, not just behind.

What about purposely under-pricing to create multiple offers?

Actually, this is rarely done. On purpose, I mean. Agents underprice properties, and they’ll tell everyone they did it on purpose after they get 27 offers and the property sells for $50K over asking. However, I often look at these and say to myself, “It still sold for less than the true value.”

The sellers might be thrilled, but they likely don’t realize that they might have gotten much more with a better strategy.

Again, this is not always the case! Sometimes, in a bonkers🤪market, people do crazy things and way overpay for a property.

I’m just saying that underpricing as a strategy is not always wise, and it can backfire on you.

So, what’s the best strategy in a bonkers🤪market?

I recommend that my sellers price the property reasonably close to the actual market value, maybe just a tiny bit under. Then, if we get multiple offers and it sells over asking, that’s a bonus. But you should never go in with the expectation that for sure you’re getting multiple offers.

That said, every one of my listings sold on the open market this year has indeed gotten multiple offers and sold over the asking price. After all, the market is bonkers! 🤪

There’s a lot more to consider when pricing a property. If you’d like to learn more or are curious about your home’s current value (it’s probably way more than you think), give me a call!

Ted