Does Birmingham Have Aspirational Pricing?

What is Aspirational Pricing?

7 Montagel Way

Photo courtesy of Greater Alabama Multiple Listing Service

I was reading my friend and appraisal colleague Jonathan Miller’s Housing Notes newsletter this week about aspirational pricing and it got me to thinking. Does Birmingham have aspirational pricing?

Miller is an appraiser in Manhattan where high-priced properties are the norm and you can’t swing a dead cat without hitting a luxury apartment. Aspirational pricing is a term that Jonathan coined several years ago when a high-profile seller listed their upscale property for a considerable price that no other property had ever sold for.

It just so happened that the property sold, so sellers now had a new “comp” that they could use to justify the high price of their own listing. While I don’t have proof, it is highly likely that the sale was for cash or some other payment method that did not require a mortgage or appraisal. I say this because if an appraisal was done it might have revealed that there were no other properties selling for that high of a price.

Birmingham Luxury Homes By The Numbers

This phenomenon of aspirational pricing got me to wondering if any of this has happened in my own market area of Birmingham, Alabama. The current data provided by the Greater Alabama Multiple Listing Service goes back to 1998. Here are some statistics that I found:

  • The highest selling price of a single-family home:$4,806,000
  • There have been three homes to sell over $4 million in the past 20 years and they range from $4 million to $4.8 million.
  • There are currently 7 listings ranging from $4,350,000 to $6,995,000
  • There have been 48 properties that were priced over $4 million that were either taken off the market or the listing expired. These listings range from $4.2 million to $10.65 million.

One of the most recent of these sales occurred in 2017. While the final sale price was $4.8 million, it was originally listed for $17.9 million. After being on the market for several years the price was dropped by almost half and it eventually sold. This house was bank owned.

After looking at these stats I came to the conclusion that there appears to have been some aspirational pricing in the past. Even at the current time, we do have marginal over pricing on several of the active listings as they are just under the $7 million dollar mark, where in the past nothing has gone over $4.8 million.

A Deeper Look

So, you may ask, what does this “aspirational pricing” thing have to do with the current market of lower-pricedBirmingham luxury home sales homes that the majority of the rest of us can afford?

There are two points that I would like you to consider. The first is concerned with comps that we use to price our listings. There is always going to be that outlier sale that somehow ended up selling for way over what everything else has sold for. We should proceed with caution before making that one sale the benchmark of what our house is worth.

Often times these types of sales are cash transactions that were closed without getting an appraisal. This is important to keep in mind because an appraisal could possibly have shown that there was no market support for the high price. That price was paid due to the motivations of ONE buyer who probably had extra incentive to purchase the property. That is not true market value. True market value considers what the majority of buyers would pay, not just one buyer.

The second point I would like for sellers to consider is the reasonableness of your asking price. At the current time, we are in a seller’s market due to limited inventory. This does not mean that you can price your home way above what others have sold for and expect to get it just because there are not many homes for buyers to choose from.

If you consider the 48 properties mentioned earlier that were overpriced you’ll see that they did not sell. That is because the asking price was most likely not based on market data. These sellers saw a home sell for a high amount and did not consider that price within the context of other sales and listings.

The best method would be to use comparables that were not outliers but were instead sales that reflected true buyer and seller behavior for both closed sales and active listings. If you do this then the likelihood of the deal falling through due to the contract being higher than the appraisal is minimized.


While aspirational pricing may be more prevalent in larger metropolitan areas like New York, we can still learn from it when pricing homes in the lower price ranges. Just keep in mind that market value considers what the majority of buyers would pay for a  property. In addition to this, we should always keep in mind what is reasonable given the current economic climate

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  1. Hi Tom! You made some great points regarding outliers, cash sales and being reasonable in pricing. Sometimes people are so focused on one outlier sale that is not reflective of the overall market that they get tunnel vision. I appreciate your thoughts and see the same things taking place in my market. Great read as always

  2. Tom, this is an awesome post. Wow, that house is incredible. I think your stats are telling with only three sales above 4M yet so many people trying to price at that point. It’s like they are chasing an outlier market rather than the real market. I see something very similar in Sacramento too.

    • That is an incredible house. It was owned by a health industry exec. and the inside is amazing. I think looking at what happens in this price range can help us in the lower price ranges as well. Rather than hang everything on that one outlier sellers need to look at the majority of homes are selling for in order to competitively price their home.

  3. Nice post Tom. It can be surprising what the top of the local market really is and how many homes are listed above that top….

    • Yeah, it surprised me for sure. I do some high-end homes but none at the very top. It opened up my eyes as to the number of listings that have not sold and how high above the top sales they were.

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