December Discounts the Deepest?

Weighing 8/10 of a Bird in the Hand

It's always tougher for a Seller to reject an offer when the alternative is . . . nothing.

That's never more true in the housing market than in the waning days of December, with the holidays upon us and Buyer activity slowing to a crawl.

So, instead of representing the proverbial "bird in the hand," at least some Buyers try to snatch properties by dangling 9/10 of a bird, or even 8/10.

And every year, some home Sellers -- suffering from market fatigue, and worried about competing, new inventory after the 1st -- surprise Buyers by accepting.

Creating A Sense of Urgency or . . .

. . . Capitulation?

Here's the latest pricing activity at what I'll call "Motivated in Minnetonka":

7/17/09: old price - $595k; new price - $585k
8/7/09: old price - $585k; new price - $575k
8/19/09: old price- $575k; new price - $565k
8/26/09: old price - $565k; new price - $555k
9/3/09: old price - $555k; new price - $545k
9/9/09: old price - $545k; new price; $535k

So what happened next?

Three hours after dropping the price $10k on Wednesday, the Sellers did something unexpected: they took a whopping, $35k price cut -- to $500k.

"Motivated in Minnetonka"

Only the listing agent and Seller know for sure, but you'd guess one of two things is going on: the Seller is out of time, and is capitulating on price in order to get a deal; or, there are a couple of prospective Buyers circling but "sitting on the fence."

If the latter scenario applies, the rationale for taking one, last dramatic price cut is to create a sense of urgency amongst the "fence-sitters."

Often times, the ensuing competition for the home results in the Seller recouping at least some of the last price drop -- a phenomenon I refer to as "bouncing off the bottom."