## 03 Dec There’s A Reason 96 Percent Of All Home Prices End In Zero

Jed Kolko, Trulia|Nov. 12, 2012

What tricks do sellers and their agents use when setting the price of a home? To find out, we looked at the asking prices of homes for sale on Trulia since October 2011, excluding foreclosures, to see whether certain numbers show up in home prices more than others. We found that some numbers are a lot more popular than others, and different lucky numbers turn up in home prices in different regions of country. Of course, lucky numbers aren’t the only factor sellers and their agents use in setting asking prices. A seller who loves the number 54 isn’t going to price a home at \$540,000 if it’s really worth \$200,000. But they might work “54” somewhere into the price without straying too much from the home’s expected value, such as pricing at \$200,540. To find patterns, we looked for numbers that appeared anywhere in the asking price, and we paid special attention to the “last non-zero digit” in the price. For instance, in the above example, the last non-zero digit of \$200,540 is 4, and the last non-zero digit is 9 in \$149,999, \$259,900, and \$11,900,000.

Nearly all home prices – 96% – end in 0, and the vast majority – 91% – end in 00. The last non-zero digit is the number that “costs” the least to set based on marketing psychology, tradition, or superstition because it won’t change the value of the home as much as digits further up in the price. It turns out that 9 is, by far, the most popular last non-zero digit in asking prices, so let’s start there.

The Power of 9
The number 9 shows up in a lot of everyday prices. A Ronco knife set costs \$39.99, the featured product on Trader Joe’s website last week was roasted & mashed sweet potatoes for \$2.49, and my 16-gig iPad mini is \$329. Why do prices of goods so often end in 9? One theory is that people rarely have exact change when a price ends in 9, and in a traditional retail store the cashier needs to open the register to make change, and therefore can’t cheat the storeowner by pocketing the cash and not recording the sale. Of course, that’s irrelevant in a world of credit cards , debit cards, and online shopping, so another reason prices end in 9 is perception: those Ronco knives sound like a much better deal at \$39.99 than at \$40 because the price is in the \$30 range, rather than in the \$40 range.

Do home prices use the same psychology? Absolutely. Even though the vast majority of home prices end in 0, the most common last non-zero digit is 9: more than half – 53% – of home prices have 9 as their last non-zero digit. The next most common is 5, which is a nice halfway point between round numbers. No other digit comes close to 9 and 5.

Do sellers use 9’s to make asking prices seem cheaper? We put on our data-miner hardhats and dug a little deeper to find out. It looks like the answer is yes, for a couple of reasons:

1. Expensive homes are less likely to have a 9 in the price. Only 25% of homes listed for one million dollars or more have a 9 as the last non-zero digit, compared to 53% of all listed homes. Perhaps sellers think buyers who are ready to spend two million on a home won’t be fooled into thinking it’s a bargain at \$1,999,900, and those buyers probably aren’t looking for bargains in the first place.

2. On homes with price reductions, the reduced price is even more likely to have a 9 as the last non-zero digit than the original price was. In other words, as sellers get more eager – or desperate – to sell, they’re more likely to price with a 9. On homes with reductions, the original price had 9 as the last non-zero digit 52% of the time, while the reduced price had 9 as the last non-zero digit 54% of the time.

Since lower-cost homes and reduced-price homes are more likely to have 9 in the price, it seems sellers or their agents use 9’s to signal a good deal.

Lucky Numbers Across the USA
Pricing with 9’s is a strategic move to make homes (or Ronco knives) seem like a better bargain. But what about lucky 7, unlucky 13, and other numbers with special meaning? Let’s spin through the digits: