This kind of horse sense is too good to be relegated to the sidebar. John F. Wasik of Bloomberg has a blunt message for home sellers- Just drop the price:
Nov. 19 (Bloomberg) — Raffles, festive balloons, open houses, car giveaways. Will any of these incentives sell houses? Not at the moment.
You don’t have to be particularly creative in a market glutted with homes for sale. The painful reality is that homes are commodities. There are more than 4 million of them sitting out there unsold and more coming on the market every day due to foreclosures. If you really need to sell a house, price is the one lever that will move a property.
Almost everywhere your competition is abundant while buyers are waiting for prices to fall even more. U.S. existing-home prices are expected to drop almost 2 percent this year nationally, according to the National Association of Realtors, and are likely to fall further in areas oversaturated with homes for sale.
“Buyers just want price,” says Mike Morgan, a Stuart, Florida-based lawyer, real-estate broker and consultant who researches property markets for hedge funds and financial institutions. “Buyers have become educated and they can easily cut through the fluffy incentives.”
Morgan doesn’t see any national rebound until at least 2010; maybe longer if builders keep constructing homes, and if banks continue dumping foreclosed properties on the market.
Anyone who spends any time in the field can see that builders keep building and banks keep collecting REOs, so it’s going to be really bad for a really long time.
When your home is worth less every day, to say "I’m going to sit here until I get my price," is a counterproductive strategy. It makes more sense to be competetively priced for today’s market, rather that waiting for the uncertain world of tomorrow’s.
Gary Watts is telling people to wait it out until the spring. We’ll get a nice bounce then, and pricing will come back.
When he capitulates, the bubble will be over.
I’m with Mike Morgan on this one. At least 2010.
Chuck Ponzi
http://www.socalbubble.com
Chuck-
Rheinberg was the head of the GLVAR- the realtor’s association in Las Vegas. She was advising people in May of 2006 to pull their listing, there were too many homes on the market. If they would only wait six months, the market would be better.
I wonder how many folks took her advice? However many did, I’ll bet 100% of them regretted their decision.
Just drop the price.
I said those same 4 words on this blog about 3 months ago.
I’m watching a house in my zip code of choice that is down 100k from the time the listing first appeared back in July of 2006. (yes I said 2006)
It’s STILL too high by 75k in my opinion., but it’s heading in the right direction.
And there are about a dozen others I am watching that have gone down considerably as well.
Ah, progress.
Nordaq-
Sadly, just dropping the price won’t work for everyone. Too many people don’t have enough equity to move, and even if they did, there just isn’t enough demand for all of these houses at any price.
It’s going to be the sellers who get a grip on reality first that are going to be able to sell, the rest will have to hang tight or turn it over to the bank.
Twist-
I have a different take on it.
I am watching houses that were bought mostly in the early to mid 1990’s at around a third of the asking price.
These sellers are just jumping on the bandwagon and trying to sell at the price their neighbor sold for in 2005.
These are the types of people with tons of equity in many cases.
I offered one seller 275k for a house he inherited and had listed at 425k.
Rather than face reality he decided to take it off the market and let it sit empty until “the market improves and I can get what the neighbors say it would have sold for in 2005 if Mom and Dad had tried to sell when they were still around”.
The house that dropped the most, 100k, is the only house I’m watching where the seller bought recently and overpaid in 2006 for a house they never moved into.
They are out of state investors.
As for the people with no equity, buying at the peak was their mistake and I am a believer in paying for your own mistakes as we have all done at some point in our lives.
Sad, yes, but it happens to be a part of life.
It is a simple numbers game.
In the Phoenix metro area, (Maricopa and Pinal counties) the average number of houses that sell per month is 5,000; there are approx. 60,000 houses available for sale.
That is 12 months supply right there.
The upside-downers can’t sell of course, because they can’t lower their price, and the housebuilders can’t stop themselves from building. So the inventory isn’t going to be reduced any time soon.
2010 might be when things level out, or it may only be when people begin to realize that prices don’t just keep going up.
Try telling someone that the Dow Jones went from 1000 in the summer of ‘66, all the way to 1000 in the summer of ‘82 and see the blank look of disbelief you get.
I just sold my home in Gilbert. A 1,400 SF home around Gilbert/Warner. We bought in in ‘97 for about $105K. We remodeled in May (about $12K). Our same model sold in Aug. ‘05 for about $300K. We’re building a custom home on land we bought 10 years ago in Chandler and needed to sell quickly. We were realistic about the market and knew there was no way we’d get $300K. We took an honest look at recent comps and decided that we needed a strategy that allowed to sell quickly (we hoped for 60 days) and stay firm with price. Recent comps (same model) were around $240K. We listed for $225K. In the first 3 days we had 25 showings, 6 offers and ended up selling for $238K.
The moral is simple…Get ahead of the STEEP decline and you can sell. If you’re greedy and price high…You’re totally hosed. Sellers need to get agressive if they really want to sell. This no market to fish. If you don’t absolutely have to sell, why even try?
Tmitteer-
Congratulations on selling- it’s amazing what a grip on reality can do for you, isn’t it? This market isn’t good enough for sellers to just have a “competitive” price, your home has to be the best deal out there.
I get a kick out of people who moved into places intending to flip them only to see the house empty one day, owners gone, and home not selling for a long time. My greedy neighbor won’t drop his price, I asked his realtor if they were motivated, she said yes, I said oh yeah?, he’s asking 20-30 thousand to much, and he’s going to get less the longer they go like that.
I’m not so sure reality is setting in just yet. I don’t think the builders want to stop building because they need the work. I have noticed that they are building on cheaper less desirable land though.
Toysarefun-
Like most of us, homebuilders aren’t in a position to just shut down and then go back to work a few years down the road. They need to build and sell houses or die. They will cut prices, offer incentives, change their product- whatever it takes to sell- even if they are undercutting last year’s customers.
Resellers who don’t realize this and get aggressive don’t stand a chance.
Homebuilders are in a jamb, for sure. Talking about getting caught between a rock and a hard place.