Originally published at West Bank Living
This week, the news came out that Starbucks projects a more than 90% drop in 4th quarter 2008 earnings. As changes in the economy are forcing some consumers to tighten their budgets, high priced coffee is no longer selling at the rapid pace that it once was. At the same time, McDonald's posted an increase in third quarter 2008 earnings, with much of the continued growth attributed to the value levels of its menu.
As the economy tightens, how long will consumers continue to justify paying $4 for a cup of coffee when they can get an entire breakfast, coffee included, right down the block?
I don't think that it's a stretch to apply this same question to the current West Bank real estate market as many sellers cling to their higher listing prices while loudly and proudly proclaiming "I'm not giving my house away".
Sellers need to review the current market and their pricing and ask themselves: How many buyers are dismissing you as the Starbucks of the neighborhood and driving down the street to order from the value menu at McDonald's?
Take a close look at the 2008 and 2007 year to date average sale prices on the West Bank. There is not a single community that hasn't been affected by falling real estate values. Obviously, some areas have been affected more than others, and individual neighborhoods may be performing better or worse, but the general trend is for lower sales prices.
Now look at the average listing prices in the same areas.
It seems to me that there is a large supply of $4 lattes on the market. That's too bad, because I'm taking my qualified buyers to McDonald's.
Buying or selling on the West Bank of New Orleans? Contact Lisa Heindel. It would be my pleasure to assist you with all of your real estate needs.
Copyright 2008. Lisa Heindel and West Bank Living. All rights reserved.
Lisa, I'm sure buyers would want to call you, this is an excellent post with information we can ALL understand! I've cut back on my Starbucks these days--and make coffee at home more.
Lisa, This is a great analogy. I used a similar one to a client who wanted to sale their home on a street where there were 3 short sale homes listed!!!
Lisa, this is brilliant! Yes, I said Brilliant! lol! Living in the home land of Starbucks I love how you explained this to your area sellers!! Yes, I would rather buy an iced coffee from Mickey D's than from Starbucks!
Great article. The range between list and sold is dramatic. I like to study averages too. They tell me a lot.
The Starbucks matter is funny. The day McDonalds added quality coffee to their menu was the day Starbucks started to go downhill. McDonald's sold swill for coffee before adding the gourmet line.
Things are different now.
Lisa i believe your graph shows the drop in home prices better than words can. I guess it really depends how bad one wants to move.
Lisa, I have to repeat what Jo said, "This is absolutely brilliant!" Great analogy! Easy to understand -- the chart tells it like it is!
The numbers are amazing. It's just irrational that the current average is so high in a declining market.
I'll take a large coffee, please. Not venti, not grande. Large.
Lisa - From your chart, it is obvious that many West Bank agents don't get it either. The current average list price indicates that the sellers and their agents believe homes in some areas have appreciated as much as 30%. Clearly this is not true. Sellers (especially those in Belle Chasse) need to seek out someone like you who understands reality before they lose even more moeny.
Carole, thank you - and you are helping to prove my point!
Mana, so they love Starbucks, huh? LOL!
Jo, ::BLUSHING:: Thank you very much :)
Lenn, until the sellers are shown the real numbers and grasp that the market has change, we will continue to experience this problem - which really is a problem for the sellers.
John, it's up to us to SHOW the sellers what the real market data is - and then guide them to best way to succeed.
Judi, thank you! The numbers don't lie.
Elaine, I knew there was a disconnect, but until I put it in the chart I didn't realize quite how large it was. One coffee coming up...
Erik, that's a very insightful comment and you are correct - we, as the real estate professionals, have an obligation to truly educate our clients and are not providing them the service they expect when we allow for these huge gaps between the listing price and the reality.
Lisa, this was very well written! I love the analogy and it is so true. Miss you girl! xxoo
Susan, thanks! Hope your weekend is great.
And the dollar menu is thriving in this economy. Pause for thought. Great way to relay this information to consumers Lisa.
Rebecca, yes it is, for a reason. It doesn't seem to matter whether it actually offers the best value or not - it's all in the perception and right now the buyers are not perceiving value in the market.