Beware the Too-Precise Price
Today’s New York Times’ Business section has an article that calculates how much the largest U.S. housing markets are still over — or under — valued (“In Their Various Ways, Economists Try to Find Right Price for a Home”; The New York Times, 8/9/08). The calculations — by a Columbia Business School academic, Christopher Mayer — indicate that Miami is still overvalued by 13%, while Detroit is undervalued 12%. Mayer calculates that Minneapolis is 7% overvalued.
Hmmm . . . 7%, not 8% or 6%, or perhaps even a more realistic range??
Forgetting Mayer’s sophisticated methodology (read the article if you’re interested), the precision of his calculations strikes me as, well, pretentious garbage (I actually had another word in mind).
Realtors who have studied pricing know that putting a very specific price on a home conveys a certain scientific objectivity and precision. Thus, the $500,000 home isn’t listed at $500k, it’s listed at . . . $498,756. I advise my selling clients against doing that, because I think it’s a transparent gimmick that turns off prospective buyers.
I put Mayer’s research in the same category.
P.S.: Maybe Mayer didn’t want to be lumped together with all the economists whose research and conclusions are impossibly equivocal (“if you lined up all the economists in the world end-to-end . . they wouldn’t reach a conclusion“).
PPS: in my experience, sales gimmicks are like cockroaches: you never just see one.