Price as a Function of Time

"For Sale" Homes, Wine, & First-Run Movies

Some things become richer and more valuable with time. Fine wine. Love. Collectibles like antique cars or rare paintings.

A home for sale isn't one of those things.

Rather, a home on the market is like a newly released movie.

The most fanfare accompanies the "premiere," when the stars, director, and other VIP's gather at an invitation-only event. For a home, the equivalent event is the Broker open -- or Tuesday tour -- when Realtors check out the new inventory.

Next comes the first few weeks on the market, when the most motivated fans pay top dollar to see the movie at first-run theatres. For a home, the first few weeks on the market are also typically the period when it commands the highest price.

Eventually, the first wave of demand is exhausted, and the movie is released on DVD, where it reaches a second, less price-sensitive audience. Ditto for homes after 40-60 days on the market, when the first price reduction is in order (if not before).

Finally, movies show up on TV, where the general public can watch it for "free" (networks make money on the ads).

Thankfully, for-sale homes never reach that stage. However, after six months or so of market time, their initial asking price is usually just a dream . .