How Should You Price Your Home? If It’s in One of These Places, Consider Pricing Just Below or Just Above the -0,000 or 5,000 Mark

Real Estate News & Analysis

How Should You Price Your Home? If It’s in One of These Places, Consider Pricing Just Below or Just Above the -0,000 or 5,000 Mark

In San Jose, Oakland and Los Angeles, pricing a home just below the -0,000 or -5,000 mark pays off. And in Minneapolis and Phoenix, pricing a home just above that threshold pans out. Read on to find out where else those pricing strategies are worthwhileand where they’re not.

Pricing your home at $599,000 rather than $600,000 could help you sell it for more money—but only if you live in certain parts of the country.

Nationwide, homes priced with a dollar figure ending in -4,000 or -9,000 sell for an average of $482 more relative to their list price than those with prices ending in -5,000 or -0,000.

“Psychologists have found that people tend to think in round numbers,” said Redfin chief economist Daryl Fairweather. “When a home is priced just below a buyer’s round-number budget, buyers may feel like the asking price is a good deal. If a home is priced just above budget, buyers may be more likely to overlook the home or put in an offer below list price.”

But if your strategy is to list your home for $599,000 to elicit more interest and sell for $600,000 or more, then you’d need to achieve a premium of at least $1,000 in order for it to pay off. This strategy only tends to pay off in six metros, with four in California packing the biggest premium: San Jose, Oakland, Los Angeles and Santa Rosa. San Antonio, Texas and Miami were the other two places where this strategy tends to be worthwhile.

This is according to a Redfin analysis of about 685,000 U.S. homes listed and sold during 2017 or 2018 whose list prices before going under contract ranged from $400,000 to $600,000. The analysis compares the final sale prices of homes listed at the -0,000 and -5,000 marks with those of homes listed at the -9,000 or  -4,000 mark, respectively. In this report, we refer to the former pricing strategy as “even” and the latter as “just below.” The analysis also compares homes listed at the -0,000 or -5,000 mark with homes priced ending at the -1,000 or -6,000 mark, respectively, which we’ll call “just above.” We only uncovered statistically significant results in a few dozen metros, with findings varying from place to place.

Below is a look at the metros where pricing just below is correlated with a higher ultimate sale price, followed by a look at the places where sellers using that pricing strategy tend to sell the homes for less than asking. Italic text indicates places where pricing just below tends to pay off.

Metro Areas Where Homes Priced Just Below Tend to Sell for More Than List Price
Metro area Average premium added to list price when homes are priced just below Percentage of homes priced just below
San Jose, CA $5,370.79 57%
Oakland, CA $4,827.47 57%
Los Angeles, CA $2,003.35 56%
Santa Rosa, CA $1,549.50 53%
San Antonio, TX $1,339.91 51%
Miami, FL $1,188.66 48%
Honolulu, HI $935.80 30%
Newark, NJ $895.74 63%
Vallejo, CA $865.53 45%
Orange County, CA $754.86 56%
Washington, D.C. $422.93 57%
Phoenix, AZ $367.02 52%
National $482 56%

 

Metro Areas Where Homes Priced Just Below Tend to Sell for Less Than List Price
Metro area Average discount from list price when homes are priced just below Percentage of homes priced just below
Seattle, WA -$3,534.60 47%
Milwaukee, WI -$1,595.54 72%
Charlotte, NC -$952.61 49%
Salt Lake City, UT -$737.22 56%
Minneapolis, MN -$714.65 58%
Chicago, IL -$623.18 59%
Denver, CO -$590.00 38%
Atlanta, GA -$464.53 47%

What About Pricing Your Home at $501,000?

Pricing a home just over the -0,000 or -5,000 mark isn’t nearly as common as the opposite, and for good reason: Nationwide, homes priced just above sold for $1,899 less on average relative to their list price than homes priced evenly.

Metro Areas Where Homes Priced Just Above Tend to Sell for Below the Asking Price
Metro area Average discount from list price when homes are priced just above Percentage of homes priced just above
Richmond, VA -$11,361.15 0.9%
Oakland, CA -$7,260.94 0.9%
Philadelphia, PA -$7,047.70 0.7%
Atlanta, GA -$6,623.91 0.5%
Newark, NJ -$6,458.50 0.7%
Charleston, SC -$4,998.36 0.6%
Chicago, IL -$2,814.45 0.7%
National -$1,899 0.9%

Pricing a home just above the -0,000 or -5,000 mark can also mean that your listing will reach fewer serious homebuyers because it’s just above the price threshold of their online saved search. There are 1.2 percent more saved searches on Redfin.com that include homes priced at $500,000 or below than saved searches that include homes priced at $501,000 or above, according to an analysis of saved searches on Redfin.com from 2017 to present.

But in five metro areas, pricing just above actually pays off. All the places where that pricing strategy is correlated with a premium are located in warm-weather climates, with the exception of Minneapolis. We’re not sure why pricing just above tends to pay off in these metros.  Possible explanations include price drops that may have resulted in homes being priced just above an even value before going under contract, or the fact that sunbirds and other people relocating from more expensive housing markets to South Florida, Phoenix or San Diego were less price sensitive than homebuyers in other parts of the country.

Metro Areas Where Homes Priced Just Above Tend to Sell for More Than List Price
Metro area Average premium added to list price when homes are priced just above Percentage of homes priced just above
Cape Coral, FL $7,947.16 0.7%
Minneapolis, MN $7,142.65 0.5%
Fort Lauderdale, FL $3,613.97 1.1%
San Diego, CA $2,657.34 0.8%
Phoenix, AZ $2,396.83 1.4%

Additional Notes on the Methodology
The final three digits of home prices were not taken into account for this analysis; the majority (65%) of homes  have list prices ending in -000, and another quarter of homes are listed for prices ending in -900. New construction listings were excluded from this analysis. 

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