NAPLES, Fla. – Nov. 10, 2014 – Pricing homes in a rapidly rising market like Southwest Florida is a lot like shooting skeet.
That's because prices are always on the fly.
And because it often takes weeks for sales to close and data to be recorded in public databases, changes in the direction often aren't apparent until months after they've occurred.
Add in influences that can move prices like gusts in the breeze – cash buyers, institutional investors, foreclosures and newly built homes – and the target can be particularly hard to hit.
That's especially true on the Paradise Coast, where sellers have been aiming high and buyers have become increasingly nervous about pulling the trigger.
"No one wants to overpay for something and homebuyers are no different," said Fort Myers appraiser Matthew Simmons.
When you compare the same month year-over-year, prices have risen 38 consecutive months in Collier County and 14 consecutive months in Lee.
Yet finding the sweet spot in a rapidly changing market can be mystifying, as Lori Dejarnette, 84, discovered when she put her three-bedroom home in Windstar on the market for $689,000 eight months ago.
It didn't sell, so after a few months she slashed the price $50,000 on the advice of her real estate agent, Anthony Soulia. He thought a below-market price would create a bidding war.
Instead it only brought out the bottom feeders, so the price was raised back to $689,000 – and is now under contract at a price that's within 5 percent of the asking price.
The sales price was "higher than my expectation," said Dejarnette, who figures that it just took a while for the rising market to catch up with what she wanted.
For both buyers and sellers, coming to terms on prices in a volatile market can be difficult. The stakes are high for both parties, since homes represent the bulk of most people's net worth.
Emotions tend to run high as well, says Naples real estate agent Cindy Reyf.
Buyers who lose bidding wars are getting increasingly frustrated, while sellers who have seen their neighbors' homes getting top dollar are pushing the limits on asking prices.
"People are putting outrageous prices on their homes," said the Fifth Avenue-based agent. "I say to them, 'do you want to sit on it or do you want to sell it?'"
Although sellers can use numerous tools to try to estimate a market value for their homes, including online automated home value tools, comparative market analyses from real estate agents and appraisers' reports, ultimately determining a price is an inexact science.
"It's a moving target," says Glenn Ginsburg, broker and owner of A Delta Realty in Naples.
Moreover, buyers look at properties through the lens of their own needs; for instance buyers with young children will value certain aspects of a property more than those whose kids have flown the nest.
Each buyer has "a built-in personal value and is willing to pay a price to satisfy it," said Kathy Zorn, owner and broker at Florida Home Realty in Naples.
Agents and appraisers typically look at the per-square-foot price of comparable homes within a certain radius of the home to come up with what they think is the market price – defined as the price a willing and knowledgeable buyer and seller agree on.
But whether that price hits the mark depends on a number of factors, including how many other homes have sold within a certain timeframe; their relative condition and improvements; the listing price of homes currently on the market; and how many discounted foreclosures have occurred.
While agents doing a comparative market analysis typically look at sales in the previous six months, in a rapidly changing market such as this, they may only consider the previous three months, said Brenda Fioretti, managing broker of Berkshire Hathaway Home Services in Naples.
The supply of new homes and their prices have an impact too, though what that is may be hard to determine from a comparable market analysis, which relies on multiple listing statistics. That's because many builders do not list their homes on the MLS.
Though prices in the region have been on a tear, a recent weakening in pending and closed sales hints that the party may be winding down.
Another sign is that price cuts are happening all over the region.
According to the listing website Trulia, in the past week alone, sellers cut prices on 102 properties in Naples, 125 in Fort Myers, 13 in Bonita Springs, 13 in Estero and 11 in Marco Island.
But price growth isn't slowing everywhere, which underscores the problem of using aggregate numbers for a county when setting a price, says Ginsburg.
"There are pockets where prices are not doing well, and others which are doing exceptionally well," he said.
Sellers who think they have overpriced their homes should compare the number of showings their home has received to the number of offers, said Zorn.
"In this market, if a seller hasn't had an offer after many showings, their home is being used to sell someone else's who is reasonably priced," she said.
But it's not always easy to drop your price in a market, which has been trumpeted as hot for months, as Sandy and Butch Monson can attest.
They put their four-bedroom, three-bath waterfront home in Marco Island on the market for $725,000 in July.
But though it's surrounded by more expensive homes, they got no offers.
The couple, both in their early 70s, recognize their home is a little dated, but have done plenty to make it attractive by clearing out clutter, painting and sprucing up landscaping. But they realize that to make their house as appealing as the competition, they'll have to spend thousands more to upgrade their '80s-era kitchen – something they're not sure they want to do. So they recently dropped the price to $700,000.
In this market, Butch says, "Buyers have to be prepared that they may not get what they're asking."
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