“These Days, Buyers Are Often Dictating What Is Fair”
A housing report from the Philadelphia Inquirer. “When Jeremy Ross began condominium shopping last summer, he knew he had an edge. A sluggish market and cautious buyers had begun nudging developers into doling out incentives. Ross said that, going in, he knew that the developer ‘needed me more than I needed him.’”
“He paid 8 percent less than the asking price on a penthouse at the Arch Street Exchange. He also haggled for free parking for a year at an adjacent garage, new windows, extra storage in the basement, and a later closing date.”
“‘If I wouldn’t have got a fair deal, I wouldn’t have done it,’ he said. These days, buyers are often dictating what is ‘fair.’”
“With condo prices down significantly for the first time in more than eight years, some developers are finding they have to be generous, cutting prices by thousands of dollars and throwing in all sorts of extras. Prices of comparable units in Center City fell 5.6 percent on a seasonally adjusted basis from the second quarter to the third, according to Kevin Gillen, a research fellow at the Wharton School.”
“‘This was the first significant down-tick we saw in the indices in the last eight years,’ Gillen said.”
“Some who watch the industry attribute the cooling market to an abundance of inventory. There were more than 2,000 units for sale in the third quarter in Philadelphia, Gillen said. That is more than double the number for sale in the same period a year earlier.”
“‘With the slowdown in the market, people had to become more realistic about pricing,’ said (realtor) Joanne Davidow. Depending on the unit, Davidow said, prices have been slashed anywhere from $10,000 to $1 million.”
The Daily Times from Maryland. “While the numbers of housing units sold in Somerset, Wicomico and Worcester counties have dropped since last year, the amount of active inventory has almost doubled, said Kevin White, president of the Coastal Board of Realtors.”
“‘The market is about as confusing as I’ve ever seen it,’ (builder) Tom Ruark said. ‘Part of that is because it was the best market we’ve ever had. It was probably unrealistic to think that would continue.’”
“In Ocean City, building permits for new residential homes are down from last year, which is indicative of the housing market slowdown there, said Mike Richardson, building official for Ocean City. The town is usually insulated from a down turn, but now the housing market is saturated and people are holding their breath, Richardson said.”
“‘There’s just an awful lot of units sitting out there in a price range of half a million and up,’ Richardson said.”
The Brown Daily Herald from Rhode Island. “While students on College Hill may pay little attention to the backdrop of constant construction in downtown Providence, some can remember when the cityscape was devoid of the several high-rises that have cropped up in recent months. Many of these projects are luxury condominiums and mixed-use spaces.”
“While investors are optimistic, the constructions of these luxury units, coupled with the construction of new luxury units such as the Westminster Lofts and the Jefferson condominiums behind Providence Place, threaten to overwhelm the condominium market.”
“Despite a recent downturn in housing prices and demand, Iselin said there is plenty of market demand for condominiums in the $300,000 to $2.5 million range, the anticipated cost of the new luxury units. ‘I am convinced that we will be able to sell all of our units,’ said Nicholas Iselin, for the Boston-based Intercontinental group, which is building Waterplace.”
“‘We know that the housing market is fluctuating and that some people have been talking about a decreased demand for housing, and that is bad news, but I am confident that the Providence market will more than absorb these units, ‘ said (developer) Ari Heckman.”
“‘Looking at what has happened (in the past few years), people are moving (to Providence) from the Boston area, Connecticut and New York,’ said Thom Deller, director of Providence’s Department of Planning and Development. ‘I am sure the developers are convinced they will be able to move (their condominiums).’”
“The market is about as confusing as I’ve ever seen it,’ (builder) Tom Ruark said.
Doubled inventory. Decling demand. Falling prices. That is confusing alright.
Find a house you like , offer on it,if the seller wants to sell they say yes end of bad market, nothing confusing at all really Mr Ruark?
True…..but it’s going to take a LOT of buyers “beating up” sellers and agents to get the ship turned around. To have the process really move it’s way through to a “NO” by the sellers, you have to get the agents to invest themselves in the process. If they have a lot of time and effort into the deal, they will see it through rather than blow you off and say you are wasting their time. It took me a couple of “drive by” offers to figure out how to play the agents and sellers, but in the end, raise their anxiety level as high as you can. You might not get your offer accepted, but the next guy might…….the the house you do end up buying will be the result of someone else doing the same. In time, it will become a TRUE buyer’s market. Right now it’s a frustrated seller’s market and media circus…….
Iselin said there is plenty of market demand for condominiums in the $300,000 to $2.5 million range
That’s a pretty wide range of prices. So he’s basically saying that there is plenty of demand for all condos. Hmmm - I highly doubt it.
Well, maybe if he prices the units that he normally would have priced at 2.5m at something like 300k he’ll get some demand…
I think these permabulls might be infected with a little ‘mad cow’ disease.
I am going to use that one!! That is funny.
Stop the presses! We have market demand within a 2.2 million dollar range! I wonder what the domain value would be in an equation with a range of 2.2 million dollars?
Wow.
“‘Looking at what has happened (in the past few years), people are moving (to Providence) from the Boston area, Connecticut and New York,’ said Thom Deller,
When my wife and I moved to New York City it was a very difficult decision. We kept asking ourselves, “should me move to Manhattan or should we move to Providence, Rhode Island?” WTF? This guy is smoking crack.
“Iselin said there is plenty of market demand for condominiums in the $300,000 to $2.5 million range”
That’s quite a range you got there, guy. Almost 1 order of magnitude.
Are these shmucks using a dart board to set prices?
Every product has a target market. I think a lot of the high rise developers think wealthy baby boomers/empty nesters are going to sell their McMansions in the burbs to move into these things, or they market these as 2nd or 3rd homes for the jet set.
SFer,
Isn’t it remarkable how just about everything we thought we knew about boomers turned out to be wrong? T h e y d o n ‘t have tons of retirement m o n e y…… A recent CNBC survey showed that 89% of those approaching retirement age intend to live in their primary home as long as they possibly can! (So much for the 2 and 3 home retiree RE model!)
Well, we’ve either been wrong, or mis-lead?
“A recent CNBC survey showed that 89% of those approaching retirement age intend to live in their primary home as long as they possibly can!”
The realtors in Chicago seem to think that the boomers are going to ride to the rescue, sell their suburban homes and buy city condos. Oops! So much for that.
Chicago is a good place to spend your working life. But the only people who want to stay here once they’re done working are old money or more generally folks who have large extended families here. It’s very much like NYC in that respect.
there are’nt that many seniors in San Francisco. Only ones live on the street or are the ultra rich. The ‘in-between’ could not afford or handle living in many parts of the SF City or Bay Area in general. Most are moving out to more quiter area.
“He paid 8 percent less than the asking price on a penthouse at the Arch Street Exchange. ”
In a year this guy is going to feel he overpayd by 16% or more. Prices will continue to decline further. No folks 40% or more than and only than will be back to normal.
What?? Probably half of San Francisco’s population consists of elderly Chinese.
I predict that the baby boomers won’t retire en masse like their parents did. Why not? Because they won’t be able to afford it.
I talked to my Boomer co-worker the other day. It is amazing how many people in a financial field have no clue about finances. I mentioned retirement and he looked at me like he was going to cry. I felt bad. I told him he better be getting at least the max on our 401k match. Nope. And our company matches 100% of the first 10% of our pay. That is almost unheard of. I told him he needed to do everything possible to make sure he takes advantage of this. He is fully vested in the plan so it is a true 100% return. He told me how he just can’t afford to do it.
Five minutes later he did mention to me that he puts into a Christmas Club account every 2 weeks. Somebody just shoot me!
How about a second job. No he doesn’t want out of debt that badly…
Haha, these “officials” who are are often quoted in the papers first said there is no slowdown………..when there was. Then they said “we are immune” because it’s the beach. Then it was “it’s not as bad” as other areas. And they are still talking foolishness like this area is immune from any sort of bubble. Simply because it’s “the beach”.
Here are the numbers for Ocean City;
http://coastalassociationofrealtors.com/statistics/default.htm
Condo sales or settlements in Ocean City were down in November 53.2% over last year and down 44.9% for the year. Contracts are down 45% for the year and listings are up by 35.9% for the year. Days on the market averaged 227 and the median is 155 days. Average list price is $470K while average sale price is $438K.
The only industry in this area is tourism. But it’s the beach, it’s different and we are immune. Yeah right, they keep telling themselves that as the building boom continues in town.
I wonder what spring ‘07 will look like?
Hey OCMD,
OCNJ here. How was your season? We had a slow year judging by my How Hard Is It To Find A Parking Space indicator.
I expect a lot more vacancies this year.
The summer season was O.K., nothing out of the norm. I think it was a little softer than last year according to demoflush statistics. (Demoflush counts toilet flushes to determine how many people in town, kid you not)
With only 100 days in the season many places are a real rip off and I think the word is getting out. I hear it’s cheaper to vacation in the carribean for a week, including airfare, then it is to vacation here for a week.
Agree with the Carribean angle. I think it’s just lack of imagination and habit that keeps people coming back at these prices.
OCMD, have we chatted? My hubby and I went to Barbados last Oct from BWI for $1300 total, including air on AA, beachfront resort and buffet breakfast daily. A condo bayside in OC for a week would have put us back at least $1700, if not more.
I don’t think we have spoke, but I have heard it’s cheaper by many people for a couple years now.
Realtors have used the rental investment angle for many years now, from seminars to including rental income in the advertisements. I think this contributed to the rapid run up of housing prices in the area. $400+K for a condo in a seasonal town where annual income averages around $30K/year? Only 5% of all properties in town are owner occupied.
Looking at what has happened (in the past few years), people are moving (to Providence) from the Boston area, Connecticut and New York,’ said Thom Deller, director of Providence’s Department of Planning and Development. ‘I am sure the developers are convinced they will be able to move (their condominiums).
Providence is special! Everyone wants to live there!
You need to be somewhat familiar with New England to realize how funny this is.
People are moving to Cincinnati from the Boston area, Connecticut and New York also. Hasn’t had any effect on housing here, though.
Funny thing is, just a many people from Cincinnati are moving to Boston, NY, Ct. Bet the same is true for Providence.
They will be lucky to sell those Providence condos at half those prices. Providence is nothing special. Its not bad but its nowhere NEAR worth those prices. Its a glorified Hartford for crying out loud.
It’s freaking Providence for godssakes. No city in the US has as big an inferiority complex as Providence does. Not Chicago. Not Fort Worth. Not Charlotte.
Well, in RI the strippers can go completely nudie. That has to count for *something* right?
I think Rhode Island is a cool place. Or it used to be. I used to enjoy that Burlingame State Park and the strip at Misquamicut (forget how to spell it) Beach. Rented a place in Charlestown for a while. Lots of nice seaside areas. But I haven’t been there for a while. One thing I liked, you could swim in the ocean without freezing your butt off, like on the Cape.
I am just so curious to see what is going to happen in Philly after the limited (10 years?) property tax abatement on new construction (like all these new condos) runs out.
The prices on these things more than made up for any tax savings - I’m assuming no one who purchased one expects to stay in them long enough for it to matter. But those mystery people who they will sell their condos too will certainly have to pay property taxes (which are pretty significant in Philadelphia).
Should be interesting.
Black Orchid,
And it’s not just Philly! Here in Portland, OR we have handed out tax abatements like extasy tablets at a rave club! On local radio host had the nerve to ask why do we need to subsidize something where there is so clearly an abundant demand? (Think 2002-2005). There are entire areas of the city where they are getting almost NO revenue from. When you paint these people into a corner and ask them how is it that they paid more than Manhattan prices they always come back at you w/ this HUGE tax abatement angle!
Well whoop-dee-do.
That’s the downside of government by referendum.
Proposition 287: Do you like having to pay for stuff? [ ] Yes [ ] No
Proposition 362: Do you give a damn whether the government can afford it? [ ] Yes [ ] No
Know a guy who bought a condo for his daughter in Phillie. She’s moved to DC and its empty. He just told me “the damn realtor set the price ‘too high’ and, naturally, hasn’t been able to sell it for months.
And you know what his “plan” is?
“I’ll put it back on in the spring”
I’ve forwarded him that article and suggested he might bite the bullet now as, come spring, he’s going to be competing with the same boatload of sellers and it won’t get any easier if recession is in the air or even more sellers come out of their hibernation.
Don’t worry, he can take the hit but he’s a classic “investor”; buy at the top of every trend.
The media here in Philly seems to spend every moment talking about the “Renisance” (I know I spelled the word wrong, but I am too lazy to look it up, but you know what I mean) that Philly is going through. Who cares that we average over one murder a day and the homeless situation is getting worse. The talk is about EVERYONE wanting to move to Center City! Aging empty-nester Baby Boomers are bolting the suburbs to move to Philly. Silly.
“‘Looking at what has happened (in the past few years), people are moving (to Providence) from the Boston area, Connecticut and New York,’ said Thom Deller, director of Providence’s Department of Planning and Development. ‘I am sure the developers are convinced they will be able to move (their condominiums).’”
I see a problem here. What if people were moving to Providence because they were priced out of other markets? How many times have you heard about someone moving to some far out suburb so they could afford a home? I think when prices start falling in the closer more desirable neighborhoods these other areas are going to be trouble too.
Price would be only a part of the reason for moving to Providence. People who like to use automobiles can actually do so in Providence. Next to impossible in Boston, never mind New York. Someone above said Providence is a “glorified Hartford”. Maybe: certainly Brown U is superior to any academic institution in Hartford; Providence is close to ocean; milder winters than Hartford. I’m not planning to move to Providence, but it does have one of the most civilized airports in the east, and is served by SWA.
Wow, a big 8% off. You da man, Jerry.
Sheesh
yeah, 92% of alot is still alot.
After Jerry left I can imagine the developer sales people pounding the table in laughter about how badly they just got screwed as they light their cigars with Jerrys deposit check.
“Hey Lou ! What’s our profit down to now that “Mr. Trump” there just lowballed us ?” “60% ! Bwah Ha Ha !”
That’s what I though. 8% on say 500K is nothing to these guys even with the “extras” factored in. Yeah, I saved 16K. Bully for you. You still overpaid by 250K, you moron! It’s jokers like Jerry that are going to keep some of these places inflated for another 2-5 years or as long as the junk loans keep coming from devlopers and their banksters, wink, wink.
And to think, I didn’t think there were any greater FBs out there. When will this madness stop? I can’t imagine ever paying more than a 200K for a residence anywhere I live. these peopl must have loads of meoney to burn, don’t care about debt, and/or have no sense of waiting for a “real” bargain. What clowns!
I paid about 8% to get out in 2005.
This reminds me of an experience I had years ago. My father, brother and I went backpacking into the Marble Mountains (CA). we hiked in several miles and set up camp. About 2 hours into enjoying the campsite, it started to rain. The rain turned into a torrential downpour, so strong it hurt to stand in it. Hiding under a tree simply meant you were only getting soaked, but not beaten. We finally realized the only refuge from the pouring was to get in the little tube tent we brought, so we hastily set it up, jumped in our sleeping bags and all three of us crammed into that little tent at about 3:00 in the afternoon. 16 HOURS later ….we’d had enough, so we got up, shoved all the soaked gear back in our packs and got the hell out of there. As we are heading back down the trail, what do we encounter? Friends of ours hiking in! We have they typical social encounter, but all the while I’m thinking, what is the matter with you guys? We’re fleeing from a 16 hour nightmare, and you’re hiking in? They’ve got no clue what’s in store for them.
I feel like I’m passing Jeremy Ross on the housing trail, and while we’re at about an equal location on the path now, I think I’m headed in the right direction.
Excellent analogy! It is amazing that people are still getting in with the toxic loans and the loss of equity. It’s bad enough buying a car and losing the value. I know I would puke if I bought a 500K PoS, know ing my loan would never adjust for the lose of value. Oh, that sinking feeling!
OT: guy I work with still on the market for a buyer after……7 weeks. This is going to get brutal. SHould of taken the 575 offer. But NOOOOOOOOOOOOOOOOOOOO! I am going to get my 600K for the house I bought a zillion years ago for 200K. What an idiot, like 25K matters at this point!
Oh man I know a few of those. Dude, with 300k in your pocket you can make that 25K back in a wink.
Aint that the truth! Sheesh, all he would have to do is buy a dip on the S&P 500. Bingo, right back. But he’d have to pay taxes on that. Heaven forbid.
You can’t just turn around and “hike” back out of these bad situations/decisions like we did, ie, the “illiquid” aspect of these assets.
You’re so right about being an idiot for him not taking the 25k reduction. This is the exact price hit we took for our Bay Area home in the summer of 2001. Had it listed for 619k, and then 599k. Our house was the gem of the street, but the stock market slide gave us only 9 lookers in 2 months. Finally got an offer of 575k, and closed on the house September 7th. We all know what happened 4 days later.
While these people wish things will get better, you just don’t know what’s around the corner that might make it a whole lot worse. This housing “evidence” is even more evident than the rumblings of a “terrorist plot”.
“OT: guy I work with still on the market for a buyer after……7 weeks. This is going to get brutal. SHould of taken the 575 offer. But NOOOOOOOOOOOOOOOOOOOO! I am going to get my 600K”
You gotta be kiddin’ me. Where I live, the buyer would have a right to be insulted. For years and years, there seemed to be an unwritten rule: The seller asks 10% more than he/she will ultimately accept. What’s the ask? $55K? Ok, that means I offer $50K. Done deal.
That dude in the southwestern Oregon forest coulda learned a lesson from you.
We were probably just as brilliant at researching the weather. They found his pants, I’m sure he’s fine ….
The finish to my story was I saw the hiker buddies about a week later back home, and they lasted until the next day, just like us. It’s amazing to watch someone walk right past your advice, headed for hell with a smile on their face. I can still remember stopping and looking back at them, plodding up that muddy trail. But they’ve already made the plan, drove this far ….. apparently the bad weather isn’t going to deter this camping trip.
Kind of like, we’ve made the plan, saved the money…. let’s not let this bubble talk spoil our home buying dream.
Actually, the guy’s dead. Some clever sort labels routes like the one they took as scenic…without any winter weather warning. We lose folk out there from time to time….
does every city and town have a dept of debelopement , yo ?
they get to keep thier jobs as the developers die
With more sellers than buyers, we sure are hearing the term “Buyer’s Market” a lot now. Has anyone had friends/family think it’s a good time to buy based on this? Do you try to reason with them? (The last time my local paper had the headline “Buyer’s Market”, it was right before a 35% price drop)
People who insist on buying now cannot be reasoned with.
Was talking to my brother in law from Tucson, last night and he dropped the whammy on me. My sister and he bought a 2nd house in San Diego a month ago, “because prices seemed like they’d gone down”
If it was a just an acquaintence, i’da let him have it with both barrels blazing, but what was I gonna gain unloading on him, being family and all?
Don’t unload on him in person. Unload on him here. That’s what this blog is for .
I hope he likes overpaying for something. That loan amount can only be down, never adjusted for a value losing asset. Also, can’t imagine carrying 2 mortgages. He must be doing very well.
I try to reason with them, but it’s difficult. Unfortunately, many people seem to think that RE will start going up again once they buy - complete blind optimism. Once emotion gets involved, logic goes out the window.
Andy nice post> emotion is always the red herring in life do i give in or do i stay stubborn and lose my shirt.
Really in new housing the builders have a choice (like Iraq) stay the course or change course now and lower the prices to get their homes sold.
Tango in Uniform,
Do you recall when that was? You’re up in Billings, right?
A nephew is buying a coop in NY suburbs. I sent him REAMS of information and practically begged him to forget about buying for the forseeable future.
When he didn’t respond to some of my emails I knew something was up. No, he did not want to discuss it. Seems his father-in-law and brother-in-law “know” the market there better than I. Well, I didn’t fight him, its a done deal. He and his bride are lovely kids but I’m afraid they are going to pay a pretty big price for being young, inexperienced and impatient.
Jag,
don’t know where your nephew is buying, but a friend bought a coop in Bronxville in 2004-1 bed for just under 200k, no doorman,
but nice building, nice location near park. Did a ARM, even when fixed mortgage rates were at their lowest, because “nobody stays more than 5 years”. Had a 35K downpayment, gift from Grandma.
Now seriously underwater. Huge glut of condos in Bronxville, and prices have really come down. Nice upper class town, close to NYC, nothing much is moving.
That surprises me that coop’s are having the same problem with infalted prices. Here in Chicago we don’t have a lot of coop buildings. The only one that I know of that’s worth living in as far as where it’s at and how nice the building itself is is the Edgewater Beach Co-op. Prices there are very reasonable. The board won’t let investors in, you must have 20% and a standard mortgage with good credit and it must be your primary residence. The most expensive listing it has right now is $665,000 but it’s 3100sqft 3bed/4bath with a heated garage. There are 5 2bed/1bath 1000sqft+ listings under $200,000. Those also come with heated parking. You can’t find that anywhere else in Chicago.
guys- need some help. I have a customer that our bank is offering a 5.875 fixed 30 year loan. He is turning us down to go wth the option arm. Anyone have a clear and consise link explaining the dangers of this loan. The customer is rather simple when it comes to financial matters. Thanks for any help.
Can you give him a little “worse case scenerio” talk on each type of loan.
I have found that people tend to only look at the possible positive outcomes and when the possible negatives are pointed out to them it at least takes a shade of the rosiness off their glasses.
he is being all rain man on me and just keeps saying 2%……like i said, simple
You said he’s rather simple, show him this cartoon then…
http://www.youtube.com/watch?v=7RTqk1NbKJU&mode=related&search=
Doesn’t the new guidelines sample report/sample handout include the example the customer needs? If you click on the links to the new loan guidance, there’s a sample handout designed to be a butt-covering tool for lenders.
http://www.ncua.gov/RegulationsOpinionsLaws/proposed_regs/proposed_regs.html
That page has a link to the Federal Register with the proposed handout.
Here are some comments that were interesting:
http://www.ncua.gov/RegulationsOpinionsLaws/Comments/NonTradMortgageConsumer/indexConsumerNonTradMortgage.htm
sorry, that vid is about IO loans not options arms.
Try this tutorial coupled with the worst case scenario per the Option ARM calculator. Find out how much his annual raises are and show him the percentage of his take home will be eaten by the fully-amortized payment in X years vs the percent the fixed will be at that time.
If that doesn’t work, club him to death like a baby seal. We don’t need that level of stupid in the gene pool.
thanks to all, knew i could get some good stuff quick from the hubba bubble stormtroopers.
Actually, I’d recommend just saving your breath. People this stupid often are also willfully ignorant and will likely resist/resent any of your attempts to “school” them. You might as well give him the option-ARM he wants, take your fees, smile and congratulate the moron on a “splendid deal” and getting “a piece of the American Dream”.
In a couple of years, the rate resets and Darwin will do all the heavy lifting.
If he doesn’t relent, you might as well also sell his contact info to some timeshare and condo-hotel salesmen.
Link
http://www.ncua.gov/RegulationsOpinionsLaws/Comments/NonTradMortgageConsumer/indexConsumerNonTradMortgage.htm
“A housing report from the Philadelphia Inquirer.”
Don’t expect any hard-hitting housing analysis from the Philadelphia Inquirer. The LLC that purchased this newspaper a few months ago is partly owned by none other than Bruce Toll.
what a dope- newspapers are toast
Yes and they are not making any more newspapers. Everyone knows that newspapers only go up in value.
how do you know the price they paid and the financing terms. is a newspaper a bad investment at any price? no. They have steady cash flow that is very attractive to many people.
And aren’t the reporters threatening to strike?
OT for a minute, some of you have said this down turn is like the Dot com bust out, and others have rightly IMO, have said No, this RE landing is not like stocks, whole different animal.
I would like to throw out that the RE crash is more like the Farm melt down years back, we all remember Farm Aid and celebritys comeing out to help the farmers. From my memory [ which is foggy as I get older] the farm crash was caused by government easy money, enticing farms to buy new machinery, buy more land, play with margin calls on there crops etc, Than, like now with credit tightening, farming lost the issue De jour of the time, banks tightened and farms went BK.
Now, the Ag biz is a big part of the economy in a lot of the U.S. Just as Homebuilding and RE is also a big part. I recall a lot of articles and even movies made about this time in the U.S. reflected this melt down.
Now you’ve got me terrified John Mellencamp will write a song about the housing crash.
Amen
My experiences today kind of confirmed the market confusion. I started out in bankruptcy court arguing for relief from stay against some folks who haven’t paid their mortgage. One debtor hadn’t paid since last May. Short version: they now want to pay off the plan by selling the house. Can they? Valuation question: they bought it for $189,000 in 2004, refinanced upward to $232,000.00 in July, 2005, and now insist that the property is “worth” $325,000.00. Problem: they claim to have had the property listed for sale at $285,000.00 for the last two months with no offers of any kind. So listing the property at $285k, a 50% increase over the purchase value in 2004, results in no sale. What is this property really worth? Nobody knows - until a buyer arrives. What will buyers offer? Are they going back to 2004 prices? If so, this lender will take a noticeable loss ($232-189= $43,000.00, or a loss of almost 19% on their “investment”).
From there, I went south about 45 minutes to call another foreclosure. This was a February, 2006 Deed of Trust IAO $550k. No bidders, back to lender.
After that, I headed down to Richmond, where I auctioned two small properties in dubious neighborhoods. For the first time in a while, I saw bidders. Their final bids? In the neighborhood of $60,000.00 to $80,000.00.
If the only properties which are moving are those valued at less than $100k, then the sales numbers being reported still don’t accurately reflect what is going on in the street. Lots of low-value sales do not equate to a housing bottom by any means. The decrease in the first situation, the house in the bankruptcy court, is far more probative than a blanket “x number of houses sold.” We desperately need information about the dollar values of homes sold, not the bare number.
Check your fundamentals. Look at the average AGI for the neighborhood by zip code (see Melissadata.com). Then back into a sales price based on normal FNMA/FHLMC ledning guidelines. In other words what can a normal working class family afford to pay with a down payment and 28%/36% ratios. This is where I would start. Then I would discount that heck out of the sales price due to no buyers. Because this is what bottom feeders are going to do, which is why you only saw a couple of people lowballing on their bids. And they only want the cheap stuff. Homes that they can get out from under quickly and that are widely affordable. Things that if they rent, they can get a cash on cash of at least 20% (with a real calc that includes things like replacement reserves, etc.).
If it were me, I wouldn’t even make offers right now. Because no one is going to entertain what I am offering (generally 60% haricuts to start). So I am not sure where the botom is, but we are a long way from reaching it. When the new RTC gets here then you may have an idea of where the bottom is, assuming that there is anyone left with a job and down payment.
People in Philadelphia are epically screwed. WE have funky ownership laws here that really favor the developer/bank/trades people. If a condo building doesn’t sell out and the people who actually built the building don’t get paid they can put a lien on the sold units. Meaning you lose everything.
my father in law sold their house in the lehigh area, to rent in allentown for a couple of months to be able to buy in philly in the spring. he’s very headstrong on buying even though they love the house they’re renting. this is the first i’ve seen something on philly, so i’ll have to send him this. but most things i see dont have philly going down in value
http://money.cnn.com/2006/10/05/real_estate/moodys/index.htm
Check out the OFHEO data for Philadelphia, it shows a sharp decline in prices this last quarter.
Someone on this blog linked it last week, I think.
Also, see if you can get your FIL to wait until autumn 2007, at least. That’s when the realization will have set in that the spring bounce never happened, and sellers will be more inclined to either drop their prices or or accept low offers.
But I don’t think the PHila market will bottom til autumn 2008, and then it will stay flat or fluctuate +-5% per cent for a while.