Last week, we published research showing that more than half of all listings activated in 2009 failed to sell by August 2010. We argued then that would-be home-sellers should hire the agent with the best track record, not the one promising the best price, because the most likely outcome was that the listing agent wouldn’t sell the property at all.
Judging from the reaction to that post, we aren’t likely to deter many sellers or their agents from experimenting with price, debuting at a high price on the rationale that you can always lower it later.
There are two problems with this approach. First, that price reductions are a signal to buyers to ask for further price reductions. Once there’s blood in the water, most sharks want another bite.
More importantly, a listing gets the most attention on its debut. As the Wall Street Journal reports today, the week that a listing goes on the market, we estimate that it gets nearly four times more visits on real estate websites than it does a month later, which is the earliest that most sellers will consider a price reduction.
Now that is one jackhammer of a graph, showing traffic declining drastically from a listing’s debut. The red line represents visits to the listing from the day of debut. The green line represents visits to the listing from the day of an update, whether that entails lowering the price or re-listing the property, with day zero set to the date of the update.
And the green line never gets anywhere near the peak of the red line. Even when a listing agent lowers the price or removes the listing from the market and re-lists it, the listing gets less than half the attention that it did on its debut.
Interestingly, we saw upticks in activity after 30 and 60 days, since some bargain hunters get alerts whenever a listing sits on the market for a month or two. About one in eight searches on Redfin filter by days on market, most to see only new listings, but some to see only old listings.
There is of course another way to look at that graph. It not only represents what happens to your individual listing, but also what would happen in aggregate to a real estate website if no more listings came on the market. Since new listings drive traffic growth, an absence of new listings drives a decline. And as the pace of new listings has declined this summer, that is exactly what has been happening to real estate websites across the U.S. The Wall Street Journal’s website wouldn’t get much traffic either if it stopped publishing new articles.
To prepare this analysis, Redfin analyzed traffic to listings in Seattle, San Francisco, Los Angeles, Irvine, Washington DC, Boston and Chicago. We considered all listings that:
- Debuted in the first three months of 2010 (since traffic increases as the home-buying season progresses, the debut effect is likely stronger for listings that debut in April than in January);
- Sat on the market for at least 60 days.
- Had undergone at least one update: either a price reduction or a re-listing.
All told, this included 15,650 listings.
Extrapolating from its own traffic, Redfin projected how many visits these listings also got on the eight other listing search sites in the Hitwise top-20. Since real estate search is actually fragmented across hundreds of local brokerage sites, the absolute number of visits is probably significantly higher, though the ratios would be unchanged.
Star Redfin software engineer Michael “Raj” Brauwerman performed the analysis, almost entirely in the enigmatic hours between 1 and 3 a.m. Michael often talks so fast that I have to ask him what he just said. I asked him for a funny picture of himself, which he obligingly sent, but I like better this sexy surfing photo.
Many thanks to Raj for the analysis. As always, we’re anxious to hear what you think!