Are you better off listing your home with a price ending in 9 versus ending in 0?  For example, if your home is worth $300,000, would you be better off listing it for $299,999?

The conventional wisdom is that products sell better when their prices end in a 9, 99, or 95.  Gas stations even go as far as pricing gas at 9/10 of a gallon.  This is called “Psychological Pricing” and the theory is that consumers are more likely to purchase items at these prices because they appear cheaper.

So the thought is if such a pricing structure works for Exxon and Wal-Mart, why would it not work for a house?  This article makes that exact point.

While this works right down to the last digit on a product as small as an iTunes download, it’s also effective on anything from a pair of jeans to a car or house. Homes selling for $299,000 often sell faster than those costing $300,000. The reason? It’s under, rather than at, the upper limit of those shopping for houses in the $250,000 – $300,000 price range.

I was curious and decided to look at the number in the Houston housing market over the past year.  I looked at houses that were listed at or right above $100k, $300k, $500k, and $1M versus those houses listed just below those values.

The results were very surprising.  Homes listed at or right above the “00″ point sell in almost half of the time (17.5 days) compared to those listings using the “99″ strategy (28.5 days).

(I should note here that these “Days on Market” numbers are lower than the Houston average because I only looked at listings that did not change their price.  That way the numbers would not be skewed by listings that were on the market for 4 months listed at $315k and finally sold once the price dropped to $300k.)

Moreover, with the exception of the million dollar homes, the sale price percentage was higher for the houses with list prices at 00 or a bit higher based on the median prices.

For example, in 2012 there were 118 homes listed between $100,000 and $101,000 with a median list price of $100,000.  The median sold price for these homes was also $100,000.  On the other hand, there were 420 homes listed between $99,000 and $99,999 with a median list price of $99,900.  The median sold for these homes was $98,000.  (I prefer to use median instead of average to help smooth out the cases were a $99k home sells for $52k.)

What was not surprising was how more often homes were listed using the 9 strategy.  When combining all 4 price ranges I looked at, 927 were listed in the “9′s” while only 261 were listed at “00″ or higher.  That works out to be about 3.5x more homes were listed using the 9 strategy even though those homes took almost twice as long to sell.

My theory is that “00″ homes sell faster on average because of the way consumers search for homes.  Practically every home search website (including CyFairRealEstate.com) has a “Min $” and a “Max $” field.  If I am a consumer looking in the $300k – $400k price range, there is a good chance I will completely miss some very nice homes listed at $299k.  This is a completely different experience from shopping for cookies at HEB where a $2.99 box might look  much more enticing than a $3.00 box.

My summarized data for all of my price points is below.