“It’s Common Now To Shave An Asking Price”
A housing report from the Baltimore Sun. “The number of homes sold last month in metropolitan Baltimore posted the smallest decline in 10 months as sellers became increasingly willing to forgo price gains.”
“‘Baltimore prices are still positive, and they haven’t gotten into negative territory,’ as prices have done elsewhere in the nation, including Washington and Northern Virginia, said John McClain, at George Mason University. ‘I think Baltimore is going to have a softer landing than Washington or a lot of other places.’”
“Baltimore’s market could still see some declines in average sales price in the coming months, McClain said. The city has seen double-digit price increases that at times topped 20 percent during the housing boom.”
“The November MRIS report showed price declines in Anne Arundel and Harford counties, with prices flat in Baltimore and Carroll counties. And with inventory still high, homes sat on the market last month nearly twice as long, the MRIS said.”
“‘With mortgage rates having fallen over the past six months, and home prices turning negative in this area, that will be a strong inducement for the buyers to enter the market,’ said Lawrence Yun, a senior economist with the Realtors association.”
“It has helped that sellers have begun to come to terms with the current pricing in the market and are realizing it is unrealistic to expect to get last year’s prices for their home, he said.”
“‘A large majority of the sellers have had to go through that denial period,’ said (broker) Carl J. Galler. ‘The new sellers coming into the market are educated as to what’s going on. Sellers are willing to give back money for closing, and going into the process knowing they’ll give concessions and steeling themselves for that.’”
“Real estate agent David L. Jefferson said it is common now to see a seller shave as much as $20,000 to $40,000 from an asking price, especially in higher-priced areas such as Fells Point, Canton and the Inner Harbor, where listings remain high.”
“Many of those sellers are investors who bought houses or condos during the boom, and some are now dropping their prices to the amount they paid originally, he said.”
“‘At this point, the market is in a transition; it’s kind of bottoming out,’ he said. ‘It won’t turn from a buyer’s back to a seller’s market, but you’ll see more interest from buyers.’”
‘With mortgage rates having fallen over the past six months, and home prices turning negative in this area, that will be a strong inducement for the buyers to enter the market,’ said Lawrence Yun, a senior economist with the Realtors association.’
Everybody knows that when prices are falling, it is a ‘good time to buy!’
You beat me to it. It is human nature not to want to buy into a falling market. Personally, I would rather buy near the peak of the interest rate cycle as the home (theorectically) should be near its lowest price. As the interest rate cycle moves lower I can always refi to a lower rate. I cannot refi the price of the home. The whole mantra of “interest rates are low” is total BS. Low rates have no begun to dent the affordability issues.
Anyone who doubts what you and Ben are saying ought to take a careful look at what Japanese interest rates (near 0%) and prices (falling) were doing throughout the 1990s.
Personally, I would rather buy near the peak of the interest rate cycle as the home (theorectically) should be near its lowest price. As the interest rate cycle moves lower I can always refi to a lower rate.
Funny, that is exactly the advice my dad keeps giving me…
Neil
Neil,
Does your dad have any sage advice on how many years from now the interest rate cycle will peak again? (The last peak was a quarter of a century ago…)
GS
http://research.stlouisfed.org/fred2/series/MORTG?&cid=114
don’t you guys know:
when prices are going up, it’s a good time to buy before they go higher.
when prices are going down, it’s a good time to buy because they’ve gone down.
that’s realtorspeak.
GetStucco,
To add to your point, if you go back to the turn of the century (1900, that is), using railroad bonds as a proxy for low-risk yields, you find that our current interest rate environment is more common than the rates in the 70’s/80’s would imply.
It is possible that the spike in the 70’s could be a once in a lifetime event for many people. I’m bearish on housing generally, but I don’t think I’ll let the interest rate tail wag the dog.
yeah, but that’s only if you think interest rates are as low as they can go. the inverted yield curve says something else…
My comment (see below) was more theoretical. It is impossible to pick the top/bottom of any cycle. I was merely trying to show that “low rates” are basically irrelavent at this point and should not entice people to buy just like higher rates should not discourage you from buying. I prefer to get the price of the house as low as possible and pay a higher rate knowing I could always refi to a lower rate.
Personally, I would rather buy near the peak of the interest rate cycle as the home (theorectically) should be near its lowest price. As the interest rate cycle moves lower I can always refi to a lower rate.
The biggest difference between pre 1970 economics and post 1970 economics is going from gold backed dollars to a fiat currency under no constraint. A gold backed currency has a lot less chance of inflation. I would like to find any fiat currency that did not inflate.
Score one for the goldbugs. I guess all governments are free to print as they please these days…
“The Swiss franc has historically been considered a safe haven currency with virtually zero inflation and a legal requirement that a minimum 40% is backed by gold reserves. However this link to gold, which dates from the 1920s, was terminated on 1 May 2000 following an amendment to the Swiss Constitution. The Swiss franc has suffered devaluation only once, on 27 September 1936 during the Great Depression, when the currency was devalued by 30% following the devaluations of the British pound, U.S. dollar and French franc.”
http://en.wikipedia.org/wiki/Swiss_franc
We’ve dropped slightly from a 100-year peak in prices, time to buy!
http://graphics10.nytimes.com/images/2006/08/26/weekinreview/27leon_graph2.large.gif
Well you shave it with a chainsaw.
‘I think Baltimore is going to have a softer landing than Washington or a lot of other places.’”
Hmmm… even with the buses driving speculators around that were so famous? That was what, 18 months ago…
Oh yes, “its different here.” Pardon me if I drop by your local Starbucks and sit and watch the for sale signs accumulate this spring.
Neil
I was thinking about the ‘cash flow bus’ too. Maybe John Law can post a link.
National Real Estate Investors’ Conference at BWI this week drew about 500 people, and many of them hopped on a bus to Baltimore for a tour of potentially lucrative investments
You guys are cracking me up. Cut it out, I got work to do.
John Law,
Unfortunately, that link isn’t working for me.
Do you know what date the article was from. I think the link is Oct7th… but what year?
Thanks in advance,
Neil
sorry about the link.
Bodymore Murderland. Anyone watch ‘The Wire’ on HBO?
talk about urban blight and vacant homes!
I used to fix lasers at Johns Hopkins and I would stop and light a candle before I’d exit for the Pulasi highway from 95. I guess it helped me but not Bawdimore. (Love The Wire!)
Pulasi=Pulaski
According to the TV show ‘the wire’ there are over 15,000 vacants in the city per last episode. (as in abanonded crack homes, not for sale )
According to this article they are correct. I’m glad to see I’m learning about the RE bubble from HBO! There’s even a junkie name Bubbles on the show, don’t tell me the writers aren’t playing a joke on us…
http://www.ubalt.edu/bnia/indicators/DailyRecord%20January.htm
Yep, 15,000 vacants, some of them complete with a corpse, courtesy of Marlo Stanfield.
http://photos1.blogger.com/blogger/1783/1012/1600/rundownhousesinbmore.jpg
ot- i love the wire -best show on pay tv bar none
the tour bus for investments is hysterical
my how things change quickly
Hard times for RE Tour Bus Company - now changing over to ‘See The Wire Filming Locations’ tour company.
Bus disclaimer sign reads:
Do NOT exit bus at any time.
Do NOT stick hands/arms outiside windows at any time.
Do NOT attempt to place food order with ‘corner boys’.
I think we should organize a housing bubble bloggers bus tour. We can visit the areas that are posed to decline the most and hand out Beanie Babies to anyone who bought in 2004 and 2005.
(OK, that’s it. I’m going to hell for my evil thoughts. But at least I wouldn’t be alone. And yes, I am kidding. The FB’s will have enough hardship over the next few years. They don’t need me telling them “I told you so.” But I did!)
“I think we should organize a housing bubble bloggers bus tour…”
YES!! Make it on a weekend so we can visit all the open houses that the FBs are holding. Cupcakes! Squirrel meat! Woohoo!
i often lamented over some of the poor financial decisions ive made in my life. Most of it timing issues, didnt exit the stock bubble early enough, didnt buy a big house 5 years ago (i own a townhome bought in 98 for 118k, now specu bubble priced at 275k) but, sometimes the best decisions are the ones you never made. I thought about supersizing all thru the price run up but, every time i looked at a home, i came to the same conclusion. these low rates arent getting me anymore house, they are just letting me pay more for the same size house and same payment. So, i never did. I hate living in a townhome, my neighbor bangs on the walls the 3-4 times a year that i turn my music up. I do love however, having a 1200/month payment at 4.8% for the next 13 years to be free and clear.
Interesting reading. I’d put this in the bits bucket but it done tipped over already
http://www.creditslips.org/creditslips/
Here’s some folks having a good time:
http://www.ocregister.com/ocregister/money/housing/article_1381194.php
that OC register article is pretty much the housing bubble in a nutshell.
These poor folks. They should not be able to reproduce. I will be laughing when there 200k in the whole.
Can we please not turn every post into a California thread? I’ll probably get to that, but this is a Maryland/DC thread.
No argument here…
I also post comment’s in David’s blog and I’m very curious on the DC market (its one area my company *might* relocate too… My 2nd choice).
Man is the DC/Maryland area toast. Does anyone have stats on how much money they have invested in other markets?
Supposidly 30% to 40% of the “affluents wealth” is invested into speculative real estate. However, that’s very leveraged wealth. Yikes!
Neil
i guess the californians comments in the 300 plus comments of each cali page
meant to say comments get lost in the 300 plus of each post
First, equity locusts; now we have blog comment locusts!
thanks for the article. My fave quote:
They [homeowners] maintain that their builder, Brandywine Homes of Irvine, has cut prices well below market values, regardless of how that affects the earlier buyers.
Someone needs to explain to them what “market values” are.
(Though I do feel some sympathy for Christy Vu, the MILF in the pic.)
A post dripping with such distain and superiority would be more effective if you didn’t simultaneously expose yourself as an illiterate…
What is the definition of “distain?”
Bwwaaahhhhaaaa.
Distain on my tie won’t come out.
Aks me anothur, I’m up for it.
LOL!
Ha!!
Any thoughts on how what is happening in California will impact secondary bubble markets (like Austin TX or others)?
I thought California was the secondary bubble….
Austin is not a bubble market, you fool. Furthermore, appreciation in CA is based on the fundamentals. The only thing that is happening in CA is strong demand and rapidly appreciating home prices. If you can, I strong suggest getting a liar loan and buying as big of house as possible in CA. You’ll get rich. Rich, rich, rich, I tell you. You are a chosen one.
Without 20% annual appreciation or whatever, CA homeowners won’t be able to pull “equity” out of their primary residence to purchase investment properties in the secondary markets. That will significantly reduce the potential pool of new buyers.
Worse (for the native homeowners in the secondary bubbles), the CA “investors” might face real financial hardship as a result of the housing market collapse, which could result in a surge of REOs from the foolish (aka Casey Serin) as well as better capitalized/rational investors seeking to cut their losses by selling significantly under-comp. The result could be a secondary housing market correction approaching (or even exceeding) that seen in California.
Ultimately, there’s a finite number of people who actually WANT to live in the desert or Idaho or wherever. As housing prices in major metropolitan areas reset, it seems to me like a lot of the mass exodus to rural areas will be curtailed. Until a strong, well-paying job market exists in these secondary markets (some have it, others aren’t even close), people will be forced to remain in high-paying/high-cost established areas because they racked up so much personal debt trying to make it in SF, LA, NYC, etc. Unless you’re pretty much debt free, I don’t see how people can afford the cheap cost of living because the reduction in paychecks is more or less proportional.
good post.
People in CA think TX is so cheap but prop tax is double and get re-assed every year. That pretty much wipes out the no state income tax when comparing to CA - especially considering the locusts buy a pricey home by local standards(200k+)
Also i could be wrong but buying alligator neg cash flow rentals in red states simply is financial suicide. Did that ever work?
Obviously this strategy would have worked in coastal states the last 10 years so the locusts try to export the strategy….
One should buy for cash flow, not appreciation in red states. (and dont buy in blue states) boy is that a generaliziation!
I guess the same way the DC bust will affect Baltimore. There are people who live in Baltimore and commute to DC now. A long ride, but think of the price appreciation!
i hear the traffic on the beltway is murder
personally i never liked dc too much
have not been there since the dead busted out
casey jones at rfk in like 92 or 93
Have you seen the ads on the Metro touting Baltimore as a cheaper place to live than DC? They are actively encouraging the commute (which I hear isn’t too bad on the train.) Funny tho, we had a Baltimore thread a few weeks ago and the prices for townhomes were not much cheaper than right inside DC.
I-95 moves at the speed of a glacier during rush hour. You’d be crazy to try that commute everyday. I had a neighbor who did it, and it was often two-hours each way.
Prices in Baltimore City are a bit lower, but most people who make the drive don’t live in the city. They live in Howard or Anne Arundel Counties. Neither is a bargain. Have you seen the prices in Columbia? Frederick has the train, too, but you’re out in the middle of nowhere, and prices are still outrageous.
I know someone who has been commuting from Rockville to Springfield for at least the last 10 years. I wonder if he realizes he’s sat behind the wheel for over a year in that time.
But the end is in sight. He bought an expensive home in Florida (!) earlier this year that he’ll retire to next summer.
the commute from Baltimore to DC is not pretty . . . wonder if people will move back to DC when the prices start to fall though.
If DC prices correct, they won’t be able to get rid of the Baltimore house for what they have in it, so no, they won’t be able to afford to move back to DC. They will be stuck in Balt in an overpriced dump with the commute from hell while DC prices revert to the price range they paid for their Baltimore place when it was bubbly.
Oh the pain of it.
“…some are now dropping their prices to the amount they paid originally”
The market doesn’t give a hoot about the seller’s cost basis.
The demand side of the market may not give a hoot, but the supply side certainly does. Sellers with a low cost basis and large accumulated equity gains obviously see the world differently than do recent buyers or those who spent all their home equity at Starbucks and Wal-mart.
Ben, I’m jumping back & forth between this and some positions I’m trying to watch but this might be worthy of discussion in a future post.
http://www.creditslips.org/creditslips/2006/12/why_comparisons.html
Yuck. I would never want to own if I were forced to finance subprime in order to do so.
Should there even be subprime home lending???? IMHO, that extra 5% of homeownership will evaporate quicker than it materialized.
I know, I know… there’s significant subprime among the other 64%. Still, subprime is pretty much predatory by nature.
I don’t believe the YOY and other price change statistics are fully capturing the situation. With lots of inventory and few buyers only the “best” homes are selling- best location, best quality of finish, best condition, etc. IMHO this is masking the true extent of the price declines.
“Sellers are willing to give back money for closing, and going into the process knowing they’ll give concessions and steeling themselves for that.’”
Sellers steeling themselves…steeling themselves…?
For what - it’s not like someone’s going to drill a hole through their skull without anesthesia…
Who cares about shaving $20,000 off the asking price. They should consider shaving $120,000 off the price just to get started.
people are still in denial here in Baltimore. Newspaper still harps on how “it’s different here” Prices here rose just as much of a percentage as the rest of the major bubble areas, and wages sure didn’t go up. I see listings on ziprealty all the time for homes that are listed WAY too high for where they are located, or the amenities. Prices need to fall a lot . . .
Baltimore is actually a great city . . . so much negativity about it though - I don’t understand why. And yes, I’ve seen The Wire and love it … but that’s not the whole city
Is there a piece of software that will count how many times “but it’s different here” has been used on this blog — or in print anywhere? Why aren’t we doing an ancronym on this? I propose: BIDH be introduced to save time and to make it easier for us to skip the crap.
Baltimore is actually a great city . . . so much negativity about it though - I don’t understand why. And yes, I’ve seen The Wire and love it … but that’s not the whole city.
I lived there for two years and would definitely go back. Nice people, well-educated, and very ethnically diverse. (Although, not a good Mexican restaurant anywhere. Go figure!)
I will concede that there are some scary places in the city, but the burbs are nice. Maryland has lots of historic sites to explore and beautiful scenery. There weren’t too many things I didn’t like, with the major exception of I-95 during rush hour.
I now live in Colorado, and besides the mountains, there isn’t much that interests me here. The burbs are all lily white & culturally homogenous. Boring, boring, boring.
“There weren’t too many things I didn’t like…”
And the taxes. Yikes!
“Boring, boring, boring”
Yes, life without crime can be soooooo dull, dahling. Why, I havn’t been raped in a week!
Oh, please. You’ve been watching too much late night TV.
What’s the latest on all those McMansions built way out in western NoVa, toward West Virginia? For a while there were a lot of posts about the area (near Warrenton?), but lately not much.
I’m in Florida, on the Atlantic, mid-way up the state. North of the Miami-Lauderdale-Boca-West Palm madness.
I’ve got an offer in on a condo. I hate to buy in this market but that’s what I’m going to do.
The unit I want has been on the market since August of 2005 with no offers. Its asking price history is $ 371k, $ 345 and now $ 319.
I offered $ 255 and insisted – she really didn’t want to – that my realtor include a five-page letter from me to the sellers.
I pointed out that in the 38-unit condo there are eight units for sale (20%), that there has been no sale in 2006 or the fall of 2005. (!)
I’m offering cash, no contingencies . . . Etc., etc., etc.
Tomorrow they counter and I’m warned they’ll counter very close to the ask.
Locals I tell about this say, “Oh, you’re probably the only offer that’s open on the whole Treasure Coast.”
My realtor and the listing agent both couldn’t understand why my letter was so “negative.” As I was writing that sentence the realtor called and we discussed the change to “substantive” by the Fed.
Argh…
If anyone has any good words here – other than, “Don’t buy you fool,” I’d really appreciate hearing them.
Tell me about hyperinflation coming next . . .
I know, I’m crazy for wanting to buy.
My only question is “WHY???”. You say yourself that you hate to buy in this market. Is there pressure from a significant other involved??
Otherwise, assuming you can afford losing everything you put into it, go right ahead. Just append a clause to your offer stating that it will decline by $1000/day every day they don’t accept it.
Make exact same offer to other 7 units for sale in same building.
Accept the lowest counter or walk if no one plays ball. Time is YOUR friend and THIER enemy, have no fear.
Good advice, but take it one step further. Submit a copy of your offer letter to the other 7 units. Ask them if they are willing to entertain an offer (don’t make it official, ask if they will entertain the offer). If none bite, go to the next building.
If its what you want, buy. Just negotiate like an a**hole.
Good luck Bill and promise you’ll post the results.
Neil
Not sure why you are asking a bunch of housing bears about buying but if you want to buy, go ahead. It’s your money.
One thing to consider in your negotiation is what your buyer actually paid. It maybe that she bought at $300K and has no money to bring to the table: She cannot afford to support the sale at $255k.
As for the 5 page letter, she probably just thinks you are a nutcase! (Like the rest of us here are all nutty in that we don’t follow mainstream ‘commonsense’ of housing always goes up). It may have pushed her buttons in that you’ve made the sale more emotional now and it will be harder to get her to backdown.
Bill M — I agree with Stan — the 5-page letter will be counterproductive. Before I knew about the bubble, I was offering on a house at a discount in an up market. The agent who was writing up the offer talked me into giving the reasons I thought the selling price should be so low. Biiiig mistake. She passed that to the owner, it pissed him off, and we couldn’t negotiate further.
You probably aren’t aware of the most-notorious letter issue ever to entertain Ben’s posters — concerned the woman in San Francisco who required hopefuls to pledge they’d feed the squirrels if they were lucky enough to be accepted as the buyers.
You’re in the driver’s seat, big-time, assuming you are determined to buy. Don’t blow it with extraneous crap.
BTW, there may be a worse market for condos in the U.S. than Florida right now, but I’m not aware of it.
You’re not crazy for wanting to buy, but can’t you just hold off until at least next summer? By then sellers will be aware that the Spring Bounce was just a Spring Bust ,and they’ll be coming to you, and you won’t even have to waste your time composing 5 page letters.
Actually if you wait til autumn ‘07 you’ll be in a better position, but you sound antsy. Also FLA has a lot more inventory than my area and sellers may feel the pressure to cave sooner than in the NE/MidAtlantic region.
Can’t you wait just a little while longer, Bill M?
-
wait 12 months and reevaluate.
I can only hope the Baltimore and DC bust happens sooner than later. I am sick of the locusts. They flock the 50 miles to the north and buy everything that could be almost affordable then flip it to insane. The only way this area will ever get back to earth is “IF” the locust bunch meet the giant can of Raid, held by the lending goofs. If you see signs or adds that say ” We buy houses call 1-800-we pound ass ” you have locust
A friend talked me into giving up a day for Habitat for Humanity a couple of years ago. It’s a worthy cause, and I admired the enthusiasm of the mostly-young, middle-class volunteers. Our rehab project was deep in one of the Baltimore ‘hoods, and it was quite an eye-opener. You would’ve thought the residents would’ve appreciated our efforts, especially when it was helping out one of their own - a single mom with three kids. Oh, no. They were completely indifferent, and of course, none offered to lift a finger to help us, although a few crackhead pan-handlers hit us up for donations. It seemed like everyone in the neighborhood was just hanging out on corners and front steps, doing absolutely nothing productive (this was a Saturday), except for when they congregated in a nearby alley to buy or use drugs, scattering like cockroaches whenever the cops rolled by. The welfare mom we were supposedly helping out was supposed to provide “sweat equity” which in her case consisted of running off at the mouth at the cheap fixtures and some of the quality of the volunteer work. I also couldn’t count the number of times the local gangsta boyz would throw wrappers and other trash on the sidewalk when there was a public trash can just a few steps away.
Needless to say I told the Habitat supervisor that I wouldn’t be back the next day. The poverty I saw there wasn’t so much a lack of money, but rather a complete absence of values and ethics, combined with a huge sense of entitlement. I’d hate to be part of the tax base of that place.
-
typical liberal “feel good” handouts. symbolism over substance. where’s that picture of jimmy carter with a hammer in his hand?
“What then makes up the alienation of labor?
“First, that labor is alien to the laborer, that is, that it does not make up his existence, that he does not affirm himself in his labor, but rather denies himself; he does not feel happy, but rather unhappy; he does not grow physically or mentally, but rather tortures his body and ruins his mind. The laborer feels himself first to be other than his labor and his labor to be other than himself. He is at home when he is not laboring, and when he is laboring he is not at home. His labor is not voluntary, but constrained, forced labor . Therefore, it does not meet a need, but rather it is a means to meet some need alien to it. Its estranged character becomes obvious when one sees that as soon as there is no physical or other coercion, labor is avoided like the plague. This alienated labor, this labor, in which human beings alienate themselves from themselves, is a labor of self-denial and self-torture. Finally, the alienation of labor manifests itself to the laborer in that this labor does not belong to him, but to someone else; it does not belong to him; while he is doing it he does not belong to himself, but to another. . . . the activity of the laborer is not his own activity. It belongs to someone else, it is the loss of his self.
“The result, therefore, is that the human being (the laborer) does not feel himself to be free except in his animal functions: eating, drinking, and reproducing, at his best in his dwelling or in his clothing, etc., and in his human functions he is no more than an animal. The animal becomes human and the human becomes animal.”
I’ve had some good times up in Baltimore, but I find it to be an incredibly insular town. Everybody’s grandparents grew up in the same neighborhood. Seems like if you moved there from someplace else it would take you 20 years to be accepted as a “real” resident. Some of the burbs are nice, and I rather like Catonsville because of all the musical shops.