For Realtors - Are current sellers still in denial? (RE market, insurance, for sale)
Please register to participate in our discussions with 2 million other members - it's free and quick! Some forums can only be seen by registered members. After you create your account, you'll be able to customize options and access all our 15,000 new posts/day with fewer ads.
KC, when I refer to perfection, I'm not talking about house condition. What I mean is that the home as envisioned in the buyers mind is not the perfect dream home.
It may have a few square feet too much, or too little.
It may not have a den (without closet), etc.
The home could be in perfect condition, but they have a particular home in mind and they're looking of that. It's almost like they should be having the home custom built.
Many of the issues raised in this article have been mentioned many times, both on this board and elsewhere. However, this article was written in 2004, without the currently available benefit of hindsight. It also gives a succinct overview of pretty much everything that has happened up to and in the current downturn. Again, it may not be "new news" to the professionals here, but I found it to be interesting and informative without the addition of the now-common more generic gloom and doom emotional spin.
The concluding paragraph ends with "...But to the extent that credit conditions are driving home price trends, the implication would be that a reversal in mortgage market conditions–where interest rates rise and lenders tighten their standards–could contribute to an end of the housing boom. While our analysis shows that boom does not necessarily lead to bust, it remains to be seen to what degree the current situation might differ from our previous experience in U.S. housing markets."
It is a pivotal question, and to me is the most frightening issue. In another FDIC report (linked in the footnotes of the report quoted above) Housing Bubble Concerns and the Outlook for Mortgage Credit Quality I read this:
"...Although reliable price histories do not exist, it is recognized that home prices fell precipitously in many areas of the nation during the Great Depression. This drop could be likened to a national boom/bust or bubble in housing. However, the structure of mortgage finance, which played an important role in that episode, has changed profoundly since that time. Before the 1930s, mortgage credit typically took the form of short-term, callable, nonamortizing loans. As home prices fell, homeowners often could not refinance when their loans came due or were called by the bank. The result was a wave of real estate liquidation that drove prices downward. In response, federal mortgage programs established in the aftermath of the Depression took the form of long-term, noncallable, amortizing notes that created the standard of modern U.S. mortgage finance. These institutional changes eliminated a major avenue for any systemic price collapse in U.S. housing markets resulting from a severe nationwide economic shock."
Seems to me we are not quite so immune as this report seems to indicate. While modern day mortgages are not "callable" per se, massive defaults could have the same effect as the callable mortgages of the 1930s, no? - especially when you consider the other, more ominous similarity of the momentum of hysteria (both contributing to the boom as well as to the current situation). The underlying numbers do not seem to be in line with the near-daily media reports we hear, yet it is the dire predictions that stick with us more than any set of facts and figures. I hope that I am wrong and the media will not create more news than it reports.
Or it could be that there are lot of willing sellers-just look at all the inventory of houses for sale and DOM- and that there are a lot less (or no) willing buyers at the sellers price. So for the market to return to equilibrium, the market price has to be a lot lower to be able to attract the buyers. It gives to reason that the prices have to drop to restore normalcy in the market.
ch, I don't think it's the price that has to drop to return to normalcy. It's the inventory that needs to drop below a 9 month supply . There are fewer building permits now, so that will reduce inventory. Sellers are taking their homes off the market, which is reducing inventory. Some are holding off to list, that keeps the inventory from rising.
Well shame on me for not waiting by my computer for the new numbers so I could be the first to post them. I'll try to do better next time.
I do appreciate you posting them.
I agree with that statement, however, there are many other factors and statistics that one should study in order to make an educated guess for themselves regarding the market.
Let's look at the new listings from 2001, plus the year end total new listings.
Year........Dec......Total New Listingsfor year (not total inventory)
2001........5509........114,402
2002........7663........125,738
2003........8008........133,424
2004........7117........127,625
2005........8653........143,988
2006........8565........173,363
2007........8837.......165,615
Looking at all the new listings year over year gives a larger picture for anyone to use. You'll see that The Total New Listings for the year declined from 2006..
Bill the 2nd half of '07 was much worse in terms of historicals than the 1st half of '07, so saying "inventory is down" is misleading because you're not using the most up to date data.
Anyway, the bottom line is that inventory is still at record high levels and there are no indications that there are long terms trends on the downside.
ch, I don't think it's the price that has to drop to return to normalcy. It's the inventory that needs to drop below a 9 month supply . There are fewer building permits now, so that will reduce inventory. Sellers are taking their homes off the market, which is reducing inventory. Some are holding off to list, that keeps the inventory from rising.
fewer building permits will help, however starting in January is when inventory will take off again. It always does. (its already evident in my subdivision).
Pricing DOES have to return to affordability at some point in markets like yours Bill whether people like it or not. Its an awful cycle we're in. The same goes for CA, NY/NJ, LV, FL.
As more lookers/unqualified/qualified potential buyers start to come out of the woodwork, this is the time of year where inventory starts to rapidly increase again YOY for most markets (FL is one exception I could think of).
Anyway, with all the new listings your working on/popping up, I'm curious, are the new batch/crop of sellers starting to understand or "get it" about what it takes to sell their home? Are they more realistic then the ones who's homes have been sitting for months not listening to what market forces have been telling them all along?
I know its still early in the season, but I'm curious if reality has set in more so to new sellers or not? Are they finally listening about being priced ahead of the curve or are you finding the same old story?
Just curious....
Disclosure: I'm not a realtor, but I know this thread was intended for realtors.
What I'm finding as I shop for properties, its not that sellers are being unreasonable, its that sellers are in a situation where they cant be reasonable, usually due to upside down mortgages. Many would like to sell their homes, but when they owe more on it then its worth, add in closing costs, realtor fees etc, and its hard for a seller to come in with a reasonable asking price in todays market.
Some of the best Agents where I live in Southwest Florida are still listing properties too high. I'm talking about the high end. Talk about Denial, Talk about buying a listing. These homes just sit on the market for weeks on end. Within 4 to 6 weeks mass emailings to all the agents of 70,000 price reduction. Why are agents still doing this?
Bill the 2nd half of '07 was much worse in terms of historicals than the 1st half of '07, so saying "inventory is down" is misleading because you're not using the most up to date data.
Anyway, the bottom line is that inventory is still at record high levels and there are no indications that there are long terms trends on the downside.
CJ, you wanted YOY, stating that by not using YOY that was misleading. The December results came out and I posted YOY.
Now you're referring to only a portion of the year and saying the YOY that I posted is misleading. So which are you going to use, YOY, or selected sections of the year
It's up to each individual to interpret the data.
This statistic that I posted show that the December 2007 new listings is not that much more than 2005 and 2006. (About 3%) The Total New Listings for the year is 165,616, which is down YOY from the 173,363 in 2006.
Year........Dec......Total New Listingsfor year (not total inventory)
2001........5509........114,402
2002........7663........125,738
2003........8008........133,424
2004........7117........127,625
2005........8653........143,988
2006........8565........173,363
2007........8837.......165,615
You make the general statement in your next post that "prices have to come down to affordability".
How do you define "affordabilty"?
John Doe can't afford a one million dollar house today. Does that mean that houses must come down to his affordability level so he can buy a million dollar home? Why shouldn't he just buy a home that costs less?
I'm talking about today's "current market value" in each of these.
Jane Que can't afford a 300k house. Does that mean prices have to come down to her affordability level? Why shouldn't she just buy a $200k house if that's what she can afford? Or wait?
I have a home in California that's listed for just under $1.3mil. It's in a highly desirable location, remodeled, updated, and is priced lower than the comps. I've had two lowball offers in the 900k range. If 900k is all the buyer can afford, then why don't they offer on a 900k home? Or wait?
The lowball offers are usually the ones, and this is what I'm getting, where the agent faxes an offer to my agent, and the fax has the statement: "Here's an offer from my client. See what you can do." What else can he say when presenting an offer that he knows is lowball?
When I first got married I couldn't afford to buy a home - period. We rented for three years, and finally saved enough money for a down payment on a $15k home. Yes $15k. We couldn't afford a $50k home, so we bought one that was affordable for us.
I don't know what this market will do in the next few months, or the next 12 months. I have some idea, and will continue to look at the trends and watch for merging of the trend lines, and keep track of all of the economic data that I can, which will help me to understand more about the market, and give me indications of where it's going.
However, I have not seen anything that supports the opinions that the market will return to the 2001 level, of even the 2004 level.
Please register to post and access all features of our very popular forum. It is free and quick. Over $68,000 in prizes has already been given out to active posters on our forum. Additional giveaways are planned.
Detailed information about all U.S. cities, counties, and zip codes on our site: City-data.com.