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Are you realistic about prices?

We often read about how people undervalue themselves and underprice their services.  Well, when it comes to the housing market, the opposite is more often the case.

How emotions can fool us.

If you’ve been reading this blog for any length of time you know that we recently moved from Seattle to Phoenix.  What I haven’t mentioned is that the housing market exploded in Phoenix in the last couple of years.  Sellers’ greed and the thought of making quick money, along with buyers’ fears about not being able to get into the market, drove prices up. [1]

Developers moved in, bought "fixer-uppers" did some quick cosmetics changes and flipped the properties.  Many apartments buildings were "condo-ized" and renters had to look elsewhere for a place to live.  Not wanting to miss the boom, lots of people bought on speculation using "Interest Only" mortgages.

The frenzy of the summer of 2005 continued until the early Spring of 2006. What we’ve found are ridiculous prices and even more ridiculous descriptions of some of those *perfect* homes.

In May of 2005, there were 8,000 properties on the market in the greater Phoenix area.  Today there are 40,000 homes for sale and some have been on the market for more than 100 days.  Each weekend we diligently go to the Open Houses.  Sometimes we are the only people who’ve been there are all day and the agents (or homeowners) are eager to speak with us. [2]

Even though the housing bubble in Phoenix has not burst, it has developed a leak.  So we are patient, we do the research and we keep looking.

What’s the Leadership Lesson to be learned from all of this?  Whether it’s pricing your products or services, deciding how much to pay your new employee, or how much you’ll pay for your own home, be realistic. Pay attention to market conditions and adjust accordingly.  If the salaries you offer are below your competitors you’ll lose employees.  If you pay blindly for anything without any type of comparison, how do you know if you are not paying too much?  That means keeping your emotions out of the mix and doing your research.