“A Funny Thing Happened On The Way To The Fire Sale”
The Providence Journal reports from Rhode Island. “The Villages on Mount Hope Bay is a 55-plus residential development nestled along a stretch of waterfront. The project, which is more than halfway completed, will include a total of 290 condominiums.”
“The decision to auction the 33 lowest-priced condominiums was inspired by lagging sales of the units, said Robert Cole, managing director of Velocity Marketing of Boston, which represents the owner. The minimum bid prices for the units being auctioned ranged from $240,000 to $380,000, prices that, if not bid up, were not even enough to cover the developer’s costs, Cole had said.”
“About 85 bidders registered for yesterday’s auction but were stopped short when, around noon, bidding was halted after the sale of only 17 units…with 16 units unsold. The smallest unit, a one-bedroom, went for $342,000. The original asking price on the unit was $460,000. The largest unit, a two-bedroom condo, went for $510,000; the original price was $690,000.”
“As the auction wore on, the prices continued to decline, said Robert Gaudreau, of Cranston, who was sitting in the audience tracking every sale. Gaudreau, a developer, wasn’t at the auction to bid, but rather to gauge how the market responded to the condos.”
“‘[The Villages’ developers] were following the trend, too, and it was going down, down, down,’ Gaudreau said. ‘They started at about $300 per square foot, and the last sale was around $265 per square foot.’”
“Condo sales in Rhode Island have substantially declined this year, dipping by 22.6 percent in the second quarter and 13.4 percent in the third, compared with the same periods in 2005. At the same time, inventory has increased by 76 percent, according to the Rhode Island Association of Realtors.”
“Gail Whitfield and her husband, Jeff, bought the 1,492-square-foot, two-bedroom unit they’d come to the auction to snag. The stressful sale was more than worth it, said Jeff Whitfield, though they’ll probablybe paying for their extravagancy for years to come.”
“‘We finally have a retirement home we can come to on the weekends,’ he said with a smile. ‘But we might not be able to afford furniture for a couple of years.’”
The Boston Globe. “After they returned to Long Island from their Cape Cod vacation this summer, Julius and Jody Rao just couldn’t get back into a groove. The Raos decided to buy on the Cape. Even with retirement a few years off, the couple decided to look now, to see if the soft Massachusetts real estate market offered any bargains.”
“But a funny thing happened on the way to the fire sale: ‘We found prices were a little high,’ Jody Rao said. So they’ll wait.”
“As will James and Rose Mulligan , who are at the other end of the sales spectrum. The Mulligans have listed the house they built for $980,000. The house has been on the market since June, and if it doesn’t sell for the price the Mulligans want, no big deal.”
“‘The market is quiet. We understand it’s quiet. So we’ll patiently wait,’ said James Mulligan, who lives in Lady Lake, Fla.”
“Welcome to the vacation market on Cape Cod, where the vexing standoff between sellers and buyers that is bedeviling the broader real estate arena is especially pronounced.”
“Single-family home sales through October were down 22 percent from a year earlier, compared to a statewide decline of 15 percent, according to Warren Group,. There are also 51 percent more homes available for sale now than a year ago this time.”
“And Barnstable County had the steepest increase in the number of foreclosures, 84 percent, among Massachusetts counties for the 12 months ended Sept. 30.”
“Real estate brokers said some sellers are reluctant to acknowledge that their homes, the setting for countless cherished memories, may not fetch the price they expect. ‘If your neighbor sold his house 18 to 24 months ago for a fair bit more than you’re going to get, that’s really, really hard to accept,’ Robert Wilkinson said.”
“As sanguine as they might be, sellers of some long-idle Cape homes may one day be forced to adjust expectations to market realities. For example, sellers of a post-and-beam home on 1 1/3 acres in Yarmouth Port relisted the house in October for $829,000 after first putting it on the market in July 2005 for $50,000 more.”
“And for three years, the owner of a 3-acre spread overlooking Nantucket Sound in Harwich Port stuck to a $4.3 million asking price, until dropping it to $3.75 million during the summer.”
“‘Buyers right now are cautious because of what they’re seeing on TV and reading,’ said Steve Perry, the Osterville buyer broker. ‘They think that the theoretical bottom hasn’t hit yet.’”
‘Fashion designer Yves Saint Laurent and his business partner, Pierre Berge, have again cut the price of their Manhattan apartment, now two years on the market.’
‘The two-bedroom co-op went on the market in 2004 for $9 million. The price was later cut to $8.5 million, and the apartment is now listed for $7.75 million.’
Ben, thank you so much for posting this. My wife and I have been waiting for Yves to drop the asking price. It is now in our price range. We love 5th Avenue. I hope it has a nice view of the Washington Square Arch. I better go. I have to tell her. She will be so happy!
I drove by an auction that was held yesterday in St. Pete Beach, FL. I didn’t see anybody there.
O.k., I lied. I saw the realtor there, but no bidders. Not a good sign for those destined for capitulation.
“I saw the realtor there, but no bidders.”
Sounds like the open houses around my hood
I’m noticing what looks like a lot of bogus housing auctions in Denver and Colorado Springs. Advertised by signs stuck up at intersections - never a sign of legitimacy - and I’m guessing the “auction” has a reserve price set pretty close to some flipper’s wish price. I might have to feign interest just to sniff out if this is a scam or not.
Be sure to mention that reserve prices are unacceptable and you won’t be attending any further auctions that have those. Everyone needs to start setting the tone with these dolts that this type of shenanigans is not going to work.
“About 85 bidders registered for yesterday’s auction but were stopped short when, around noon, bidding was halted after the sale of only 17 units…with 16 units unsold.”
So this wasn’t really an auction, was it? They halted it when the prices were dropping. What a sham. That’s fine, let them eat these units. Eventually they will be available much lower once the BK proceedings begin.
“Gail Whitfield and her husband, Jeff, bought the 1,492-square-foot, two-bedroom unit they’d come to the auction to snag. The stressful sale was more than worth it, said Jeff Whitfield, though they’ll probablybe paying for their extravagancy for years to come.”
And then the units fell from $300/sqft, to $265/sqft. Wow, lost 52k before you can even get back to your car. Nice shootin’ Tex ….
I read about this auction and I realized something, this auction showed hare rare the final GF’s are. The first few units sucked up the few remaining.
Why did the seller stop the auction? Its not like prices are going to go up in the spring, only inventory…
Tell me this didn’t punctuate for everyone else on this blog a fast forward version of chasing the market down! An auction is supposed to be just that… A quick snapshot of the market (mind you, with a ~10% to 15% discount).
Neil
Also, there were 68 buyers at the auction who would not buy at the last & lowest price offered by the “motivated” seller. How in the hell then is that last unit sold not necessary to be used as a comp for future sales, since this was an auction? 68 people said no to that price, which tells anyone THEY ARE STILL TOO HIGH!!! If just one of the 68 was “motivated”, then that last sale sets the new bar. You might be able to argue, one buyer - one house, could qualify as an unmotivated transaction. 68 buyers and the builder …. uh, no.
The new price is at or less than $265 sq/ft, even next spring. I don’t see how an appraisal can come in over that amount.
(what did I just say…..?)
I’m surprised that the earlier bidders didn’t experience buyer’s remorse and pull their bids after seeing the prices go down. Perhaps they halted the auction so that the previous buyers wouldn’t change their minds. I’m also surprised that the earlier bids were above reserve. There weren’t that many people in the room and there were a lot of units to sell.
The couple bought the largest condo at the auction. You can’t compare it to the prices of the smaller condo’s sold later in the auction. They haven’t tried to resell that 2BR condo so don’t know how much money they lost on it.
However they did buy it for a lot less than the listing price.
Price per square foot, not price, fell from 300 to 265.
Once ebay added the “buy it now” feature it ceased being an auction site and became an online store. That’s all this is. These people have their “buy it now” price. They aren’t about to let it go into a true auction. It looks like they learned from the ebay masters.
Hey, any of you all in L.A.
Someone wants to talk to me out there but before I even waste my time going out for that, what am I going to have to pay to rent a 2500 square foot decent house in the Manhattan Beach/Huntington Beach area or maybe even a little south of that?
TXChick - the L.A rental market is in a state of flux at the moment - some owners are realising the downturn in the housing market and trying to compensate by asking high rental prices, and very large ‘deposits’. Prices seem to vary wildly too, for similar places in similar areas.
In CA, you shouldn’t be paying more than ‘first and last’, plus 1 month rent for a deposit, so be aware. Friend of mine a few months back found a place he really liked, but didn’t take it when he discovered the deposit on a 2K a month place was 14K!!!
Also, make sure you actually see the place before signing anything - common sense anywhere, but particularly so here. Same friend as before was shown a place where the carpet was literally covered in cockroach casings - and the landlord said that he couldn’t get in a pest control company, because he ‘needed’ said friend’s deposit money to afford to hire them! Needless to say, no mention of roach problems was advertised on the listing, and the landlord seemed to think it reasonable to demand money up front to fix the problem…
Anyway, a good place to see what’s available and how much for is West Side Rentals - http://www.westsiderentals.com. They charge for a full listing, but you can search online for free to see prices and areas. It will give you an idea of what rental properties in South Bay areas are renting for.
Thanks for the site. Reviewing it convinced me not to even bother looking.
Yes, it’s nuts. Nice places start around $6K/mo right now in that area, and go up from there. And since you have pets…
As Neil has said, in today’s market, you’re better of commuting by air to SoCal if you have clients here.
LOL..
If i didn’t live here already, I wouldn’t either.
Please keep posting about SoCal. I love it. New York City seems like a bargain. So what if you pay a lot for a small apartment. You get wonderful convenience and a lot to do. You don’t have to drive, thus no worrying about DWIs. That is a huge benefit. I figure my wife and I save $1,000 - $1,200 a month by not having a car. We each pay $76 per month (pre-tax) for an unlimited use MetroCard.
We are by no means wealthy but our “rental” finances are in great shape. We max out 401k and Roth IRA contributions, plus save a little money in a bank account. And we still have to listen to the dip$hit “you have to buy now” crowd. I wish they would get a collective case of laryngitis.
Tx Chick:
I live in Huntington Beach and formerly in Sunset Beach.
A nice newer 2000 SF or so home in Downtown Huntington Beach, walking distance to the beach rents from $2,500-$3,000+.
There are a lot of wishing price rentals with exorbitant deposits. You could probably negotiate down. There is a lot of spec inventory (30+ and still building) for sale and should flip to rentals early next year.
The OC Register’s Real Estate Finder worked better for me than Westside Rentals.
I found a great deal on a large lot older beach home with garage and driveway parking for under $2,000. But that was a 3 month rental search.
Depending on the location but let’s assume near the water in a safe area - I would guess around $3,000 give or take a few hundred $ either way.
You can smell the greed mixed with fear here in rapidly ossifying New England.
It’s all about the later Greatest Gen/early Boomer retirement crowd with their fat pensions and federal entitlements still thinking they can unload the house they bought for $25k to some idiot Gen XYZ’er for a cool million.
I recently escorted my aging father to a college reunion, where he got an award for his WW II service, and sat next to an 85YO, who could do nothing but bitch about the property taxes on his “second” home located on Sebago Lake.
Assessed value was $1.2 million. Purchase price in 1966…$45k
“WE DON”T HAVE TO SELL!!!!!!!”
Cry me a river.
Yeah, listening to someone whine about the burdens of their “second” house gets pretty old.
I think it’s an illustration, too, of why it’s been common to think that housing is such a “safe” and “smart” investment. Adjusted for inflation, that home should cost $270k or so (ran it through a calculator). Even with a generous $100K for improvements, we’re nowhere near the assessed value.
Adjusted for inflation, that home should cost $270k or so (ran it through a calculator).
Quality cold-water, lakefront properties in ME are “nuts” price-wise. Same with the ocean.
No sanity or reason to any of it now.
While, appraiser’s cobble together a general per front foot valuation process, there’s is also the odd duck sale for a bazillion $$$/cash, which everybody then points to as indicative of their “property”-until the tax assessor sticks them with “their” assessment.
Then on appeal, all they go looking for all the seasonal shacks to knock down the taxation number.
For those of us who bought a few years ago, like our neighborhoods and have no intention of selling or going into HELOC hell, the ONLY think we get out of the housing bubble is higher taxes. Now that I think of it, I don’t think that my higher taxes will ENTIRELY eat up the benefit that I have gotten from REFIing to the low interest rates which were the initiator of this RE bubble. So even I can’t whine too loud.
When people panic and run for the exit, pushing, squeezing and fighting, I’ll take my check book out and start buying….that’s when you know the market has reached the bottom. When others smuggly boast with their iron stiff dress shirts that we have reached the low point….for those who buy into that…I have a collection of pet rocks that are selling fast…don’t delay and miss out!!…Idoits!!
Double D,
Logging on with multiple names will cause the system to think your posts are spam. One set of log-in data please.
“About 85 bidders registered for yesterday’s auction but were stopped short when, around noon, bidding was halted after the sale of only 17 units…with 16 units unsold. The smallest unit, a one-bedroom, went for $342,000. The original asking price on the unit was $460,000. The largest unit, a two-bedroom condo, went for $510,000; the original price was $690,000.
As the auction wore on, the prices continued to decline, said Robert Gaudreau, of Cranston, who was sitting in the audience tracking every sale. Gaudreau, a developer, wasn’t at the auction to bid, but rather to gauge how the market responded to the condos.”
It sounds like they ran out of GFs trying to catch a falling knife a lot faster than they ran out of condos to dump.
Sorry Ben….I’ll be more careful…p.s….EXCELLENT SITE…
this is all good news, buyers. go to auctions and watch the panic rise with every canceled sale. there is no way it cost a developer over $300 per foot to build a condo! maybe, I’d believe it if he bought the land in 06 and put almost maybe 2 units on. All this news is a sure sign of panic in early 2007. They still can’t move the units even after advertising like crazy, pulling in realtors with bonus commissions and then adding upgrades, paying closing fees blah blah. Now its time to lower price and even they don’t know where that should be. Spring ‘07, can’t hardle wait!!
I have family on the Cape, which is reaching a tipping point regarding taxes, affordability and sustainability. They have been closing schools due to plunging enrollments? Why? Because there are not enough young people there to fill the schools. The average age on the Cape must be one of the highest n the nation. Most jobs are seasonal ($9 hour) or people are self-employed (stump grinding seems to be a popular profession). You have to grind a lot of stumps to buy a half-million dollar home on the Cape, and there are virtually no year-round rentals. Taxes are high and rising, the local building codes are draconian, and winters are long and bleak. Second-home owners fight tooth-and-nail against every tax proposal, so libraries have been closed, etc. I can’t imagine a more difficult real estate environment going forward, and I say that from Las Vegas.
Diceman-
Excellent summation of the Cape market.
Same up here on the northshore.
The generational ownership cycle is clearly broken in New England.
“virtually no year-round rentals”
I’m wondering if your family is on the lower Cape. We were year round CC residence in Hyannis. Lots of rentals there in 2002 when we moved out of state, or did the flippers move in for the kill? I always thought Falmouth had lots of year round rentals too.
We went to a really cool annual auction at a Unitarian Church on the Cape this year — average age of the parishioner/volunteers had to be in the late 60s/early 70s. If Florida is God’s waiting room, then the Cape is his cryogenics lab.
My grandparents lived out their last 25-30 years on the Cape as well. They were of average or below-average means, but like most of the other older folks there they lived simply and enjoyed life. No way they could afford it nowadays, a scant 6 years after Grandpa died. We sold their house, right off Route 28 in Yarmouth, for $109K in 2000 I believe.
The Cape is a nice place to visit for a week or two but you do not want to live there. There are two seasons: too crowded (three months) and dead (nine months). Other than stuff catering to vacationers, and RE I guess, there’s no economy. It’s probably fun to work there a summer or two while in college, but it ain’t a place you can earn a living, although family members have tried.
The vast majority of houses there, like 60-70%, are glorified shacks. Two bedrooms on a quarter of an acre. Great for retirees, livable if you have some income coming in (you run a small business or whatever) and no more than one kid. Another 10-15% are a bit nicer, bigger places on golf courses or ponds or somesuch, and then you have the top-end Kennedy compound stuff where the sky’s the limit on price.
And nowadays the Cape has ghettoes: places you don’t want to find yourself in. Not sure how that came about, but it was within the last 15 years or so.
The older folks will complain that the ghettoes, or the traffic, or the taxes have ruined the Cape. But the housing bubble has done far worse.
If your neighbor sold his house 18 to 24 months ago for a fair bit more than you’re going to get, that’s really, really hard to accept,’ Robert Wilkinson said.”
Why is that hard to accept? Are sellers stupid enough to think their cherished are worth a ‘dirty penny’ to the buyers? I think not.
Try one of these, Mr. Wilkenson:
“If your retirement plans were based on continued housing inflation, and you choose wrongly, that’s really, really hard to accept.”
“If you HELOCed your self to the eyeballs and have to bring money to the table, that’s really, really hard to accept.”
“If listened to your realtor and the’ve been lying to you about the housing market or have no clue, that’s really, really hard to accept.”
If your retirement plans were based on NORMAL HISTORIC RATES of housing inflation and you bought a few years ago, you should be laughing all the way to the bank. Prices are STILL far above the trend line, and if you’re dumb enough to whine about “losing money,” than you deserve to follow the market down.
‘They think that the theoretical bottom hasn’t hit yet.’”
And neither has the actual bottom. It’s the media’s fault.
Exactly. He’s implying the bottoming out of an asset is some kind of theoretical, esoteric concept that buyers are foolishly hoping will become real.
(“‘The market is quiet. We understand it’s quiet. So we’ll patiently wait,’ said James Mulligan, who lives in Lady Lake, Fla.”)
and wait and wait and wait and wait.
from a different article.
((”If they’re upside down, they should do everything they can to stay in the house,” Niemoth said. “They are going to have to let this market run.”
Barring that, a seller could use a lease with option to buy to cut their losses.
“If you’re paying $2,000 a month for mortgage, taxes and insurance, but your market will only allow a lease option at $1,600, go ahead and lease-option for $1,600.
“That way, you’re only bleeding $400 a month.”))
http://www.heraldtribune.com/apps/pbcs.dll/article?AID=/20061130/BUSINESS/611300774
Great, waste more than $5,000/year chasing the market down!
Prices have dropped over 20% from the peaks last year in many markets and that 20% drop is about enough to rent the same homes for 10 years, at least the ones I checked. Those sellers who would rather wait are taking lots of risk.
I’m sorry, but people are freaking losing their minds. Since when has PRICE not been a factor in a free market economy? They think that if sales volume just picks back up they’ll be able to unload their house for whatever price they want?
To many of the sellers and agents out there: It’s called capitalism. It’s been around in one form or another for tens of thousands of years. There is supply, demand, and PRICE!
“Welcome to the vacation market on Cape Cod, where the vexing standoff between sellers and buyers that is bedeviling the broader real estate arena is especially pronounced.”
HAHA! The real arena that the standoff is bedeviling is the agent/developer arena. These are the folks who are tearing their hair out the most over this, because if no one is buying, no one is selling either. So no one is making money. Buyers and sellers aren’t blinking, so guess who is getting squeezed? Does my heart good.
“The smallest unit, a one-bedroom, went for $342,000. The original asking price on the unit was $460,000. The largest unit, a two-bedroom condo, went for $510,000; the original price was $690,000.”
Lets put this in perspective… a 1 bedroom condo sells for $342K. 1 bedroom ! Enough for 2 people to live in ! If I would have tried to tell you that was a buy 10 years ago, you would have laughed at me. Only in our current bubble would someone think that a 1 bedroom condo was a buy at $342K.
Nice to see the prices drop though. Both are down 26%. I’d love to see what the comps on the similar condos are in that area. Have they dropped ? Will the auction comps be used or not because they weren’t sold by a realtor ? I bet the later.
http://www.rgemonitor.com/blog/roubini/162056
“Here, if a house sells, ‘OK.’ If not, ‘Oh well, we’ll spend another summer. Ho hum.’ The sellers don’t need to sell and the buyers don’t need to buy.”
Possible - but with enough time some sellers who will have to sell will sell and buyers will rent.
Exactly. Markets are driven by those who have to sell, not by those who don’t. And nobody has to buy, ever.
Boston area sellers need to wake up and sell now. They’re losing money every day:
http://blog.myspace.com/index.cfm?fuseaction=blog.view&friendID=51443639&blogID=203867416&Mytoken=14C0DC8A-A3B3-4BBA-986BA8A517F6DD7C3844830