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...Depends on how far the market value has to drop for things to reach equilibrium. If he refuses an offer that's $50k less, and the market bottoms out where his house is now worth $100K less, I think he missed an opportunity...
KC, to this seller, if the home sells at his required price, which is today's market value, he's happy. That is Plan A.
If it doesn't sell, then it's on to his Plan B and that is to stay where he is. He doesn't have to sell.
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True, but without selling the home you don't know what market value is. Especially in falling markets, comps and appraisals are just estimates of what the price used to be.
You're correct. It takes two to make a market, and if one isn't willing to buy, or if one isn't willing to sell, then there is no market.
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To portray this as a problem created by bad news has cause and effect reversed.
You may have misunderstand my meaning, or I maybe I didn't make it clear. I didn't say that bad news caused the problem. We all know the market problem was caused by several things. What I was saying is that many would be buyers are being frightened away by the negative media and are holding off to see if the market stabilizes.
I also said that of the buyers out there, many are being extremely picky (no problem with that) However, because someone doesn't get an offer doesn't mean the price is too high, unless the potential buyer has stated an objection to the price. It could just be that the house is not the perfect house for them. With so many choices available, buyers are looking for perfection. Most agents ask the showing agents for feedback, and if the price is too high they will tell their agent, and the agent will provide that feedback to the listing agent.
The seller doesn't set the market
at least not in a
buyer's market, as most of the country is in.
The only thing an unrealistic seller can do is buy his own house BY not pricing it where someone else would be willing to buy it.
The value is what someone is willing to pay for it (and by the book, a combo of what the seller is wanting vs. what the buyer will pay).........but in the end
[quote=Captain Bill;2512887]However, because someone doesn't get an offer doesn't mean the price is too high, unless the potential buyer has stated an objection to the price. It could just be that the house is not the perfect house for them. With so many choices available, buyers are looking for perfection..[/QUOTE]
Ahhh, Bill, you answered your own question to what we are saying all along!
If there is tons of inventory that means there's too much supply.
What happens in when there's abundant supply? (and consequently the sellers are not getting offers...)
You have to lower your price to make it worthwhile for the seller.
That's what people have been doing for the past year.
Here are a few more statistics from the Arizona Regional MLS in the Phoenix area. The December 2007 numbers are not out yet.
AVERAGE SALES PRICE PER MONTH
.............. October.......November........December...
2001.........170,800........171,000..........175,6 00
2002.........182,800........185,200..........184,5 00
2003.........287,200........199,300..........208,3 00
2004.........231,100........232,600..........237,0 00
2005.........321,400........320,500..........329,1 00
2006.........330,200........338,200..........334,4 00
2007.........324,000........319,000...........N/A
Everyone will find a way to use the statistics for their own purpose to see how the pattern of averages has been during the last three months of the past seven years. When the December number comes out I'll post it.
I couldn't copy and paste so I had to type, and it was too much to type all 12 months for 7 years.
The average sale price in January 2007 was 342,400.
The averaage sale price in November 2007 was 319,000.
That is a 6.7% decline for the first 11 months in 2007.
In 2006 the decline was less than 1%. (from 336,900 to 334,400)
At that rate of decline, those who are waiting for the prices to drop to the 2001 level will only have to wait 14.9 more years.
But I used simple math so I could be off a few years.
Here's something interesting:
Moody's expects to bottom out in early 2008.
The NAR sees existing home prices remaining flat.
What does that mean?
Have fun with the numbers. I'm not making any public projections until I get my Crystal Ball Certification (CBC)
Bill, December #'s are out and I understand that you wouldn't be eager to post them.....
I am posting YOY #'s since the industry would agree that this is the most RELIABLE way to interpret data.
December '07 avg sales price is $313K. (-6.5% YOY)
December '07 # of units sold is DOWN 37% YOY (5411 in Dec' 06 vs 3420 Dec' 07)
December '07 New Listings (INVENTORY): 8827. This is probably the worst news of all since this # is the highest December # for inventory pre 2001.[/b]
Look at the bright side Bill, at the current pace it will only take your bubble market 2 years (not 14.9) years to get to at least '04 levels which is a good start.
You're correct. It takes two to make a market, and if one isn't willing to buy, or if one isn't willing to sell, then there is no market.
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.
I also said that of the buyers out there, many are being extremely picky (no problem with that) However, because someone doesn't get an offer doesn't mean the price is too high, unless the potential buyer has stated an objection to the price. It could just be that the house is not the perfect house for them. With so many choices available, buyers are looking for perfection. Most agents ask the showing agents for feedback, and if the price is too high they will tell their agent, and the agent will provide that feedback to the listing agent.
I'm not sure about this. I see what you're saying, which is basically that there is no market for the seller's house, period. I think if you dropped the price by 75%, even some picky buyers would be willing to consider this less than perfect house. 75% is obviously an extreme drop and overkill for most markets, but it shows that at some point price would overcome the negatives on the house. Finding the correct middle ground between "reasonable selling point" and "giving it away" is an exercise for the reader, though - I don't envy having to make that decision. The seller just has to come to terms with the fact that their house is less desirable, and the laws of supply and demand work for them just like everyone else.
Unless they're willing to do a major remodel, it's about the only thing they can control - location, macroeconomic conditions, buyer preferences, and so on are all out of their control. So saying that people are "looking for perfection" could also be a way of avoiding the fact that you're not pricing in the appropriate "lack of perfection" in this particular home.
But I don't totally disagree with you. In buyer's markets where there are more homes for sale than buyers, some people sellers are going to be left out of the market totally. I do think that lowering price is a way to in essence create more buyers, both by attracting people who are looking but were looking at other homes and by getting people who aren't able to afford high prices into the market in the first place.
This is a perfect example of a "bubble" market. Prices have almost "doubled" since 2001. Have incomes kept up w/home appreciation? Doubt it
This is no different than most of CA, NJ/NY, LV......and you know what's going on in those markets.
.....
If people want to believe that we are close to the bottom in your market or those other markets I listed, go right ahead.
I live in northern NJ - according to an 8/07 article at CNNMoney Latest home prices - out of 7 locations, 5 NJ markets increased in value, as much as 12.8%. Of the two that lost, one was relatively small (0.7%) and the other is a very troubled area that has been hit with a number of issues ranging from political woes, skyrocketing taxes, increased crime and reduced gov't funding due to prior "irregularities", so I'm not so sure their decline is "indicative" of the state. NY had 9 out of 11 areas increase in price. It also shows a net increase (albeit a paltry 0.7%) for the entire Northeast. (Obviously, the volume is down significantly - there is no argument there. I also would not argue with the idea that too many sellers continued to overprice their homes, looking for the same growth percentage as was occurring during the boom times.)
I readily admit I am not a realtor and do not have access to the data you do, but based on this and other similar articles, I am wondering where you are getting your info to include NJ/NY in your statement? I would be interested to see similar stats as used for Az, if there is a place where such stats are readily available to the general public.
I live in northern NJ - according to an 8/07 article at CNNMoney Latest home prices - out of 7 locations, 5 NJ markets increased in value, as much as 12.8%. Of the two that lost, one was relatively small (0.7%) and the other is a very troubled area that has been hit with a number of issues ranging from political woes, skyrocketing taxes, increased crime and reduced gov't funding due to prior "irregularities", so I'm not so sure their decline is "indicative" of the state. NY had 9 out of 11 areas increase in price. It also shows a net increase (albeit a paltry 0.7%) for the entire Northeast. (Obviously, the volume is down significantly - there is no argument there. I also would not argue with the idea that too many sellers continued to overprice their homes, looking for the same growth percentage as was occurring during the boom times.)
I readily admit I am not a realtor and do not have access to the data you do, but based on this and other similar articles, I am wondering where you are getting your info to include NJ/NY in your statement? I would be interested to see similar stats as used for Az, if there is a place where such stats are readily available to the general public.
Couple things....
1. First of all, the link you provide was to an article back in August 2007 which is ancient in Resi RE.
2. The article cut and pasted "median" home prices from the 2nd quarter. Median home prices are a lousy indicator of the "health" of a market, very unreliable. If you want to judge the health of a market, check its inventory levels YOY, # of contracts YOY, # of units sold YOY & avg prices are a better indicator than median.
3. I am not a realtor, I'm just a guy behind a keyboard who's interested in real estate. All the information I've been citing is PUBLIC information posted on various blogs throughout the country. You just have to DIG for it. Its not easy to find (understandably so considering how protective the real estate industry is).
4. I received the information for NJ from the NJMLS & GSMLS. I can PM you the website that posted it if you'd like. The data covers northern & central Jersey from Middlesex, Monmouth county all the way up to Sussex, including Bergen, hudson, etc.....
NJ is still in a world of trouble w/excess inventory & overvalued existing homes/condos compared to historicals....
Bill, December #'s are out and I understand that you wouldn't be eager to post them.....
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.
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I am posting YOY #'s since the industry would agree that this is the most RELIABLE way to interpret data.
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.
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December '07 avg sales price is $313K. (-6.5% YOY)
December '07 # of units sold is DOWN 37% YOY (5411 in Dec' 06 vs 3420 Dec' 07)
December '07 New Listings (INVENTORY): 8827. This is probably the worst news of all since this # is the highest December # for inventory pre 2001.
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.
The Homes Sold in December was 3430 vs 3318 in November.
Here are the Total Homes Sold YOY
Look at the bright side Bill, at the current pace it will only take your bubble market 2 years (not 14.9) years to get to at least '04 levels which is a good start.
These #'s are taken direct from your MLS.
CJ, you're mixing my numbers. I didn't say it would take 14 years to get to the 04 levels. Some here have said that prices should go back to the 01 levels. At the 6.7% decline I figured it would take about 14 years to get back to the 2001 level.
Do you see anything in the national, or the Arizona economic news that suggests that will happen? I don't. I can't see anything that even suggests the 2004 level.
The statistics we see here are only a small part of what we should be looking at to make our educated guesses.
I'll keep looking at all the data, and especially the trend lines that are a great help. Plus the number of people entering AZ, the job market, the interest rates, and everything else that affects the real estate market.
Last night at the AZREIA meeting, the executive director showed about 15 charts with various statistics with graphs and trendlines. These were from a company that compiles all of these statistics. It will be posted on the AZREIA site on Wednesday. Members of the club will have access to them. I'm anxious to study them because they were just breezed over last night.
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I'll try to do better next time. 
