Welcome to another episode of Selling Greenville your favorite real estate podcast here in Greenville South Carolina I'm your host as always Stan McCune Realtor right here in Greenville you can find all my contact information in the show notes if you need to reach out to me for any of your real estate needs and please like rate review subscribe all of those good things with regard to the show to make sure you don't miss future episodes remember we're on YouTube and I would like to see more traction on there obviously I didn't start the show on YouTube I started it on audio only and so I get most of my listens that way but I'd like for you guys to see this face I am pointing out my face and if you can't see it you can't see it but you could see it if you want on YouTube so I'd appreciate if you guys would go ahead and do that so I really thought long and hard about what to do this episode on and we've talked I feel like we've been talking ad nauseam about mortgage rates and the state of the economy all this all this stuff that's really big picture but does directly affect the Greenville market cause Greenville Spartanburg Anderson Pickens a Coney etcetera Laurens all these areas around us in the upstate of South Carolina are very very rate sensitive more so than other parts of the country well I decided to go in a different direction because with the market changing the way it has we've had a lot of price reductions and what makes sense and I've done this actually in the past is to actually look at price reductions what their frequency is what they look like what are sellers actually doing right now and how are buyers responding with regard to this so rather than talking about what's you know big picture what's happening what's the actual effect we've been talking about the cause now let's talk about the effect the mortgage rates are the cause price reductions are the effect but price reductions aren't just something that happened in a vacuum there's a whole lot that goes together with them and I'm really excited to dig into this to all of this data I've got several things that I want to share with you guys with regard to price reduction so here's what I did I went back closings the past six months analyzed the data and cleaned it up removed some outliers that seemed to be data entry related things errors in the data got rid of that as best I could and then analyze the data basically every closing in the Greater Greenville Association of Realtors MLS from the past six months and here's some of the conclusions that I drew from that first off nearly half of the homes sold had a price reduction all right when we say price reduction we're not talking about from list price to sold price what we're talking about is from list price to second list price okay that's very important and so a home that's been on the market for a while typically has some sort of a price reduction before it ends up selling and 44.3% of homes that sold the past six months had to reduce their price at some point in time during the transaction among those reduced listings the median reduction was $15,000 and the median percentage reduction was 4.2% so reality of the situation is nearly half of sellers have had to reduce their price the past six months and typically that price reduction median wise comes in around 4.2% below so if you if you had your home listed for 200,000 for instance 4.2% of that is what 8,400 that would be the reduction that it would take in order to get your home sold again we're talking medians big still talking big picture even though we're zeroing down and really going down the rabbit hole of these things I understand 4.2 that doesn't mean okay this is the formula I've got to reduce my price 4.2% no that's just the median that happened but that gives you a sense of what is typically happening in the market right now what's the price point that most frequently had reductions and this is going to be surprising to some of you but it did not surprise me at all when I saw the data the most obvious point that has the most price reductions is the 200,000 to the 400,000 dollar price point that price point from 200,000 to 400,000 on average well 2 to 300 they had to reduce their price 48.2% of the time and then 300 to 400,000 had to reduce their price 49.9% literally half of sellers in the 300 to 400,000 dollar price point have had to reduce their home before selling the past six months I'll come back to that here in a second the 4 to 500 price point 43.6% had to reduce their price the 500 to 7 50 35.1% 7:00 50 to 1 million 35.6% reduce the price and then a million above 32.4% so less than a third so literally as you get higher the number of people having to reduce their price point for the most part gets lower and there is a very very obvious reason for this alright let's go back to the 200 to 400,000 dollar price point that is what I am calling no man's land right now in real estate because traditionally the 2 to 400,000 dollar price point you know if you go back 5 6 7 years ago that would have been a step up home for a lot of buyers now maybe not the 200,000 dollar price point even five years ago 5 6 years ago that was still a first time home buyer price point but not anymore not anymore not anymore can first time home buyers generally speaking afford a 200 to 250 thousand dollar house no longer can a first time home buyer purchase a step up home that is a 300 to 400,000 dollar house why because of mortgage rates okay there let me look at Mortgage News Daily to see you know this is the closest we have to you know being able to tell you what the average rate is it's not as simple as that you need to talk to your lender about that to see what you can specifically afford but this is an aggregator Mortgage News Daily thinks that rates are 7.19% on average right now that's a huge increase from a year ago and so the end result is if you're in a home that you bought for $225,000 right typically the next home that you would buy would be maybe around three 50 to 4 hundred thousand dollars the problem is your mortgage payment is not going to go up the way you would expect it to like let's say you're in a 200,000 dollar house you're buying a 400,000 dollar house you think oh my mortgage payment's gonna double yeah but if your if your interest rate is 3% now your interest rate is about to be 7% so your mortgage rate is also going to not just double more than double and your principal is going to more than double so your price point is going to be like quadruple in terms of your monthly payment what it currently is that is maybe not quadruple but three to four times I need to actually get out of calculator and do all that math but you're talking at three to four times what you're currently paying for not that much of a nicer house most likely you're just getting a little bit more square footage but you're probably losing a yard you're probably having to sacrifice things people don't want to do that and so guess what's happening is that we're having to see and we're seeing a lot of price reductions nearly half of all listings below $400,000 are having to reduce their price because there's not a market for that price point right now that market's gone all right there's not investors buying those homes hardly anymore first time home buyers are priced out people wanting to purchase that step up home they're waiting in a lot of instances unless they unless they're doing very well in this economy which a lot of people a lot of people are but a lot of people aren't and so if you're selling below $400,000 be prepared it's a murderer's row out there right now and you know even the below even the 4 to 500 crowd they're having to reduce their price 43.6% of the time and so you don't start to get into more palatable numbers until you get above $500,000 why because those people aren't affected by rates as much there's a lot of cash buyers people putting huge down payments people that that have money and are not as worried at or even as affected by these higher mortgage rates as those on the lower end of the price point and this is what happens very very often the rich get richer when the economy gets squirrely like this usually the rich get richer the poor get poorer that's exactly what we're seeing today here's another thing with regard to the rich getting richer millionaire homes we've already said they cut their list price less often but it is important to note that they do make substantially larger cuts right and it's a percentage thing at the end of the day if you've got a two million dollar home a 10% price reduction is $200,000 okay and we see that happen we see I mean I saw there was a home that that was originally listed for like nearly it was like 4.5 million and ended up getting the price reduced reduced reduced and ended up selling for 2.5 million you know like that's a huge spread between what it listed for and what it ended up selling for that's a lot more common for that kind of spread to be seen once you start in this market getting into million dollar homes so of the 132 reduced listings originally priced at a million dollars or more the median price cut was $105,000 with a median percentage reduction of 6.5% so even the percent reduction is higher and some of that is just it can be harder to price those multi million dollar homes in the Greenville market cause sometimes there's not comps to go off of sometimes it's a little bit of a dart throw there's a little bit of an art and science to it all and I've kind of already alluded to this but for reduced listings in the 300 to 400 dollar price range to contrast with the million dollar or more price range the median reduction in the price point in the list price was $12,090 which came up to 3.7% on median so homes in the if you're selling a million dollar home don't be shocked if you find yourself having to reduce it by a six figure reduction at some point that's happening quite a bit in this market now counties looking at this data by county reveals some very interesting conclusions specifically Lawrence and Spartanburg counties had more frequent price reductions than Greenville and Pickens County so reductions were 57.3% of listings so 57.3% of listings in Lawrence County had a price reduction from their original list price 49.7% in Spartanburg County so nearly half Anderson County that number goes down to 42.7% Greenville County down to 40.5% and Pickens County came in lowest at 39.2% and so I don't have any massive conclusions from why this is happening just be aware that it is Lawrence County nearly 2/3 I mean a little bit less than 2/3 maybe a number I like to say is 3/5 right 3/5 is a great is a great number in between 1/2 and 2/3 nearly 3/5 of homes in Lawrence County had to reduce the price from their original list price be prepared for that if you're a seller or a buyer in Lawrence County be prepared for that Spartanburg County 49.7% so half of listings in Spartanburg County had a price reduction then Anderson Greenville Pickens County all hovering around 40% still very high numbers very very high numbers you know it wasn't that long ago that we had no price reductions ever happening you could just wait you know when prices were appreciating by 20% a year all you had to do was wait a few months and your home went up thousands of dollars in value and now all of a sudden it's worth what you listed it for no longer the case and people need to be prepared for that another interesting thing here is and this is something that sometimes people don't fully comprehend not all price reductions are equal and frequent reductions don't necessarily mean deep reductions and a great example of this is fountain in fountain in had reductions on 54.3% of its sales in here and I already said that Lawrence County is the highest county or has the highest number of price reductions percent wise of all of the dataset that we're looking at some of Fountain Inn lies in Lawrence County but even though 54.3% of homes in Fountain Inn had price reductions the median price cut oh I don't know if you guys caught some of that thunder nice little saw a nice little lightning flash out my window nice little thunder blast there for a second there might have come through I don't know but Fountain Inn that's what I was talking about the median price cut amongst reduced listings in Fountain Inn was just 2.3% which came out to 8 thousand eight hundred fifteen dollars on median so even though over half had price reductions those price reductions were fairly minimal in comparison to some of the other numbers we've been talking about on the flip side you've got Woodruff the city of Woodruff their price reduction rate was 58.4% of listings and the medium percentage cut was more than twice that of fountain it was 5.1% or $15,000 so if you're in Woodruff understand that if you have a price cut you might need to be more aggressive whereas fountain in you might need to you if your listing has gone stale you need to make a a price reduction you might not need to be quite as aggressive in that in terms of that price reduction in order to build buzz and I personally experienced this in both of these areas in in in the fountain area and in the Woodruff area so the data matches my personal experience another point here and this is gonna be kind of obvious but longer marketing times are very very clearly associated with price cuts and even though that's obvious on the surface I think the underlying data is interesting so only 13.4% of sales with 30 or fewer recorded days on market had reductions okay so for homes that were on the market for 30 or fewer days before going under contract only 13.4% of those had a price reduction in their listing okay again logical but what's interesting is once you get above 30 days once you go to 31 to 60 days on the market those homes out of those homes 60.6% had a reduced list price at some point during that during days 31 to 60 or over the course of the entire lifespan it's not necessarily the price reduction during that period of time it's just that that home was on the market for 31 to 60 days 60.6% of those in that time frame did in fact have a price reduction for homes on the market 61 to 90 days 75.9% of them are having price reductions and beyond 90 days is 86% nearly everyone once their home has been on the market for 90 days is having some sort of a some sort of a price reduction and so it's very interesting that that basically once you get to a month on the market sellers are reducing their price and they're reducing the price you often times pretty aggressively in order to accomplish what they are trying to do which is to sell their home whereas there's not a whole lot of price reductions in the first month so if you see a home come on the market let's say you're a buyer see a home come on the market you want a deal on it right you might be able to get a deal on it but don't expect the price the list price to be reduced during that first month don't be expecting alright it's been on the market for 2 3 weeks why haven't they reduced the price yet only 13% of sellers are doing that in the first month they wanna see it market marketable for a month and then decide if they want to reduce the price another point on here the full discount on reduced listings was considerably larger than the advertised cut here's what I mean among listings that had their price reduced right they listed for one price eventually they reduced it in order to make it more marketable the median asking price reduction was 4.2% but the median gap between the original asking price and the sold price minus seller concessions was 7.6% or approximately 25,000 in change additionally 65.3% of reduced listings ultimately sold with seller concessions so just because you reduce the price doesn't mean that you're going to get 100% of what you just reduced the price for you can't expect that in fact when I looked at this data another way I found that interestingly homes sell for the same standard basically 2 to 3% below what they're listed for regardless of whether that list price was reduced or not in other words let's say you so let's say you list your home for $300,000 you can reasonably expect in the market if you priced it correctly to get somewhere in the 97 to 98% range 97 to 99% range for your house right you might you know somewhere between 290 and 300,000 is generally speaking what the market is doing again assuming you priced it correctly let's say you didn't price it correctly let's say that's actually worth $250,000 when you reduce the price to $250,000 to market it correctly you're still only gonna get between 97 and 99% of what you have it listed for the market is still going to treat that new price like they do the price of a home correctly priced and so basically there's no there's almost no hundred percent offers anymore now I've gotten a few of them with some of my listings but you have to approach it differently you can't be trying to you know say let's say the range for what a home is worth is 300 to 3 25 if you wanna sell it quickly you gotta price it closer to 300 than 3:25 alright that's how you get it to sell more quickly and for the most part my personal experience and what the data bears out is that sellers are getting more money if they list it more on the lower end than if they start high and then try to reduce later for the most part there are some exceptions and I've talked through some of my clients with some of those exceptions but you gotta be careful with that because not every not every price point not every area is the same when it comes to that another point here well this is kind of ties into the point I just made I kind of went off script here but an unchanged asking price frequently still LED to a discounted deal so of the 5,211 sales with matching original and final asking prices 52.3% sold below that asking price and 52.9% included seller concessions after subtracting seller concessions 76.4% finished below the original asking price so what you list your home for you basically you should not assume you're gonna get 100% of it no matter what even if you price it really really well to the point where you did not need to reduce the price people are still gonna come in with a lower offer only 23.6% of the homes that did not have a price reduction of the listings that did not have a price reduction still ended up selling for full price when you account for seller concessions by the way in that seller concessions is not factoring in any brokerage fees so just FYI on that that's a separate category the MLS can't track that for anti trust reasons all right another point here homes coded under construction combined frequent cuts with substantial concessions okay no surprise here we've talked about the builders how the builders have gotten very very it's really I shouldn't say they've gotten a certain way they've been this way for a while they're very very efficient sellers they know how to pull the strings of the market and you know honestly they're probably happy that mortgage rates have gone up this gives them a huge advantage over resales because they've got all these rate buy down options what not and so of the 1,955 under contract coded sales 60.7% had price reductions 81.4% included seller recession a seller recession seller recession it is a seller recession but seller concessions and the median concession across that entire group was approximately 8,948 if you're competing with new construction you've got to factor this in got to factor this in they're averaging $9,000 in concessions you probably need to match that that's just the reality of the situation new construction is the competition for a lot of people right now and if you don't own that and if you don't take the bull by the horns you'll find yourself having to keep reducing your price until you reach a point where it's just like I don't know what else to do like I'm already below the market well that's not true you can never be below the market the market knows what your home is worth but the market might be looking at the monthly expenses or the closing cost not just the purchase price so you need to factor that in as well okay what are the other strings besides just the purchase price that I can pull and if you're going up against new construction that one of those levers that you can pull is concessions offering closing costs all right last but not least and actually this one might be my favorite data point of all of them because it ties into some of the other things that I've said recently and that's that price reductions became more common among late summer closings well I've talked to you guys a few times the peak season everyone thinks spring summer peak season but the spring season is more peak than the summer season okay very very important and that shows up right here in this data so the share of closed sales with price reductions rose from 39.8% in may to 42.3% in June 46.1% in July 49.1% in August that's crazy so an in a 9.3% point swing happened between may and August from a standpoint of the percentage of sellers having to reduce their price of their listing and I don't think that you can just chalk that up to sellers getting greedier or whatever as the summer goes on I've not seen that personally I think this is literally just that the market slows down so much after Memorial Day and even more after July 4th as it has the past several years and if you're not prepared for that if you're blindsided by that don't be don't be you're listening you're an educated seller realtor whatever whoever you are right now you are educated but I think this is going to continue this is gonna get even worse you know and part of this of course has been mortgage rates going up right mortgage rates let me see what was the point where they hit their hit their lowest earlier this year that happened in February and then you know they came down to another acceptable point in April and then they've just been going up since then and then there's really been a big uptick in in September so I think that this this dynamic is gonna get even more extreme I think going into the fall season here but that's something very very important the summer peak season is a lot slower than it used to be and that's being reflected in the fact that it's reflected in a lot of things but one of the things is here that sellers are having to reduce the price of their listing a lot more often than during the earlier months of the early summer or late spring so that's all I have for you guys today I hope you found that to be very interesting and hopefully useful I think there's a lot of interesting conclusions you can draw from that as a buyer or a seller but that's all I've got for you guys I don't have time to draw more conclusions than that and but I would be happy to discuss any of this with you guys cause I use this data to inform how I coach my clients and you should use it to inform how you act as well so thank you so much for watching and listening my contact information is in the show notes if you need a realtor in the Greenville area please like rate review subscribe if you like this content and if you got something out of it that's all I ask of you guys so thank you so much for watching and listening we'll talk to you guys again next time!