What Facebook’s IPO and Today’s Housing Market Have in Common:

By now there is little chance you haven’t heard about the LACK of success that the Facbook IPO has had in the last few weeks. The stock has gone nowhere but down since day one.

After more hype, order speculation, seek and excitement than any IPO in recent memory, what went wrong? I am not a expert in financial markets, and there are certainly a multitude of reasons, but one reason in particular is impossible to ignore, and doesn’t take an expert. The stock was overpriced, plain and simple. People wanted in on Facebook, but no one wanted to feel like they were paying too much, at least not without the proof of others buying first. That was the problem, they started at a price where no one wanted to go first.

This is exactly where the housing market in Northern Virginia and DC is right now. Houses that are priced “well” are selling quickly, sometimes the same day they are listed, and often times with competition from buyers. In some instances, this actually creates enough competition to where the price is bid up by competing buyers.

However, just edge the price up slightly above where the market is, and a home often sells for less than it’s direct competition. Price a home far above the market, and in many cases it will simply be ignored until it is priced well below those that were priced properly right out of the gate, and subsequently already sold.

The housing market in Northern Virginia and DC is strong, and buyers are ready to pay market value, but almost no one is ready to push the market upward by paying top dollar. I studied one condo development in particular recently where everything of a certain size was closing between $230k and $239k, all going under contract in a matter of days, and there was a decent number of them.

It would have been reasonable to think that the market was ripe for a rise in prices, right? Well, one owner came along and asked $242k, harmless enough. The unit was just as nice as any of the others, but closed for $228k. Pricing just $3k above what the market was willing to spend cost that owner as much as $10,000.

That is just a microcosm of the market at large, and in some instances the “opportunistic cost” is far greater than a mere $10,000.

The takeaway (for right now in 2012 anyway) here is sometimes difficult for owners to swallow, but is quite straight forward. Price your home at, or even slightly below market right away and you will be better off in the long run in most cases. Price too high, and the market will bring you down to earth and possibly more, price a bit low and the market will tend to take care of you in the end.

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