April 24, 2017

A Baseline When Many People Overpaid Is Illogical

A report from Westworld on Colorado. “Thanks to Denver’s red-hot real estate market, more and more people trying to buy a home in the metro area are finding themselves in bidding wars, resulting in offers that frequently blow past the property’s listed price. The incredible demand, as well as the speed with which purchases are being made, explains why some real estate agents have started putting up ‘Coming Soon’ signs on houses before changing them to ‘For Sale.’ Scott Grossman, who chairs the board for the Denver Metro Association of Realtors, elaborates on this point. Local real estate agents have been seeing bids for properties from people who haven’t actually seen them ‘for a little while now — especially buyers who are coming in from out of state, who are somewhat at a disadvantage. There’s no luxury of being able to fly in and look at a house next week, because most likely it will be long gone by then. So they see a listing come on the market and put in the highest bid — but then, over the next week or two, something happens and they back out of the deal.’”

“‘Some of them have buyer’s remorse, thinking, ‘Maybe we’re paying a little too much for this. Let’s get out.’ Or maybe there’s an inspection issue that might cause them to second-guess. And there’s more risk of that happening from people who haven’t walked through it and actually seen it.’”

The Real Deal on New York. “In December 2015, with new development sales beginning to drag, Doug Yearley got poetic about condo sales – or the lack thereof. ‘There are certain units in certain locations within a building that are hot, and then there are other units that may be in a dark, cold corner that you have to incentivize a bit more,’ the CEO of national homebuilding giant Toll Brothers told investors during an earnings call at the time.”

“Since then, Toll Brothers has rolled out an aggressive array of incentives at its condo projects in New York, becoming one of the biggest players to acknowledge the slowdown and spell out its plans to tackle it. And in planning for the future, it’s shifted away from the top-tier luxury product that has saddled so many developers with unsold inventory. ‘They got a little aggressive on their pricing,’ said Stephen Kliegerman of Terra Holdings, and doesn’t work with Toll Brothers. ‘One of the negatives of doing your own in-house sales and marketing is you don’t have boots-on-the-ground brokers to say to decision-makers: ‘You’re going a little too far.’”

The New Journal in Florida. “Regina Marston slowly drove her SUV up and down the section of short, parallel roads that make up the heart of Volusia County’s northernmost beachfront community. One by one she pointed out the abandoned boats, cars, pickups and trailers improperly parked in front yards. Junked yards in plain view. Lawns not maintained. Work being done without proper permits or any concept of deadlines. Marston wearied of the exercise before she ran out of examples of the downturn her neighborhood in the older section of Ormond-by-the-Sea has taken.”

“‘It’s counter-intuitive to have mainland housing be worth more than beachfront housing,’ said Marston, 67, a former Realtor who owns two homes in the area and has pestered county officials for several years in an effort to break what she considers their ongoing indifference to the area.”

“Doug Daniels represented the area on the County Council from 2013 through 2016. He recalled knocking on doors during his campaign in 2012 and being astonished to see so many derelict homes on so many streets throughout the community. ‘You could tell that a lot of the prior owners of those properties were gone,’ he said. ‘They had been foreclosed out and someone else acquired their properties. … You look at some of those streets and it almost seems like blight by design.’”

“‘I am resentful. I admit it,’ said homeowner Janet Jester, 70. ‘I’m not going to picket in front of people’s houses or anything, but I don’t like it. It lowers the value of my property.’”

The Illinois News Network. “Illinois is one of the few states in the nation to still have home foreclosure rates higher than pre-recession levels. A real estate agent in one of the hardest-hit areas of the state says high property taxes send people away. Bob Nieman has been a Realtor in the Rockford area for decades. While the recession was years ago, he says there are still a high number of foreclosed homes there. In a city where the average home price is less than $110,000, he says people still tell him the monthly mortgage payments are too high.”

“‘On a $100,000 home, the taxes are going to be around $4,000. Normally, that’s an objection,’ he said. ‘It has a damper on whether they’re willing to buy it at all. The tax bill is high but the price per square foot, compared to other areas, is low.’”

The Greenwich Free Press in Connecticut. “Just a day after public relations firm Lou Hammond pitched its services to the First Selectman’s Economic Advisory Committee with a goal of making Greenwich more enticing to home buyers and businesses, Bloomberg published a feature reporting that the Greenwich market ‘jolted awake’ in the first quarter of 2017 in tandem with a rising stock market and house price reductions averaging 7.9 percent.”

“Commenting on the Bloomberg article, the director of the Greenwich Association of Realtors, Theresa Hatton was dismissive. ‘The contention about discounts is actually normal in any market and at any price range,’ she said. ‘Homes that are on the market longer sell for less than asking price, homes priced to sell are sold quickly and usually for at or above list price. It is universal across all real estate markets as cited by real estate author and trainer, David Knox.’”

“Some readers have been more sympathetic to the Bloomberg argument. After a March 8 GFP feature about the proposed re-branding campaign – Proposed Greenwich Re-Branding: A Pearls and Mercedes Town No More – GFP reader Marija said she was opposed to her tax money being spent on a PR campaign ‘to increase real estate prices.’ ‘Greenwich housing is already expensive – and a baseline of the height of the market in 2007 when many people overpaid is illogical,’ she argued. ‘Housing is impacted by economic cycles, and we are likely to face another downturn in the upcoming years. PR campaigns will be futile to prevent this.’”

“The reader went on to lament the tear down trend and construction of even larger ‘high end’ houses on speculation that she argued few people can afford. ‘Let those developers and agents pay for their own marketing.’”

“Commenting on GFP’s April 19 feature write-up on the Lou Hammond presentation, local journalist and author Sarah Darer Littman wrote, ‘Those of us who made prudent financial decisions when purchasing homes are being asked for our taxpayer dollars to bail out the bad decisions of people who took out too much debt to invest in McMansions in back country and now can’t unload them for what they paid for them. Never mind that these are many of the same folks who are ardent proponents of free market principles when it comes to those less well off than themselves on issues like healthcare and the carried interest loophole.’”