Interesting Housing Anecdote
For a few months I have been using a friend's experience to defend my contention that housing was not just softening but dropping.
To re-cap the story, my friends put their house on the market in late February. They live in one of the Bay Areas more desireable areas. At $899K, the house was priced using comps and had a slight year-over-year increase. They had a further advantage in that there was only one other home <$1M at the time.
The home has good and bad points. It's a 3/2 with a decent back yard and almost 1600 square feet. It has outdated features and it needs a major overhaul (kitchen, bathrooms, windows), but that's pretty common for homes here. The biggest drawback is that it is on a main street.
The sellers bought another house and need to sell this one.
Very few folks visited and my friends didn't get any offers. They did get one offer with a contingency and the buyer backed out. The house went back on the market in May and at a lower price $859K. They lowered the price as a low-ball tactic - attract more buyers by offering a steal of a price. Almost 3 months later, the house is still for sale. They have lowered the price to $829K. That's almost a 10% price drop. Meanwhile, the house is costing them almost $5K per month out of pocket because they get no write-off: it's their 2nd home now.
Is my friends' experience unusual? I don't think so. Having options, buyers are once again paying for value and discounting were it applies. In this case, the reality of this being a dumpy house on a busy street in a desireable neighborhood makes it significantly less valuable than a nicer home on a quieter street in the same neighborhood. Common sense is returning.
These folks are close to a fire sale panic - they are staring at taking $100K less than they expected (when you include the ongoing $5K per month carrying costs).
Meanwhile, I'm sitting here and thinking that they will get a low-ball offer of around $790K. And that contributes to the overall trend that will anchor the comps downward. As new buyers emerge for next year, they will use the lower comps and further weakening market to argue for a price lower than this year's.
To re-cap the story, my friends put their house on the market in late February. They live in one of the Bay Areas more desireable areas. At $899K, the house was priced using comps and had a slight year-over-year increase. They had a further advantage in that there was only one other home <$1M at the time.
The home has good and bad points. It's a 3/2 with a decent back yard and almost 1600 square feet. It has outdated features and it needs a major overhaul (kitchen, bathrooms, windows), but that's pretty common for homes here. The biggest drawback is that it is on a main street.
The sellers bought another house and need to sell this one.
Very few folks visited and my friends didn't get any offers. They did get one offer with a contingency and the buyer backed out. The house went back on the market in May and at a lower price $859K. They lowered the price as a low-ball tactic - attract more buyers by offering a steal of a price. Almost 3 months later, the house is still for sale. They have lowered the price to $829K. That's almost a 10% price drop. Meanwhile, the house is costing them almost $5K per month out of pocket because they get no write-off: it's their 2nd home now.
Is my friends' experience unusual? I don't think so. Having options, buyers are once again paying for value and discounting were it applies. In this case, the reality of this being a dumpy house on a busy street in a desireable neighborhood makes it significantly less valuable than a nicer home on a quieter street in the same neighborhood. Common sense is returning.
These folks are close to a fire sale panic - they are staring at taking $100K less than they expected (when you include the ongoing $5K per month carrying costs).
Meanwhile, I'm sitting here and thinking that they will get a low-ball offer of around $790K. And that contributes to the overall trend that will anchor the comps downward. As new buyers emerge for next year, they will use the lower comps and further weakening market to argue for a price lower than this year's.
posted by Andrew at
8:50 AM
0 Comments:
Post a Comment
Subscribe to Post Comments [Atom]
<< Home