Home Sellers Get ‘Creative’ With Prices, Incentives
Thw Wall Street Journal has this report on the nations housing markets. “With the key spring selling season about to get under way, the inventory of homes on the market is climbing sharply in a number of major cities. It is the latest sign that the balance of power between buyers and sellers is shifting as the once red-hot housing market continues to cool. The slowdown is affecting both existing homes and new homes.”
“Nationwide, there were 2.8 million existing houses and condominiums on the market at year end. That is down slightly from November’s 2.9 million listings, but up 26% from a year earlier. Adjusted for seasonal variations, inventories have climbed 38% since April.”
“In Phoenix, where inventories have climbed steadily since last spring, open houses are attracting a steady stream of lookers, says Charles McLean. ‘But people are taking their time,’ he says. ‘They’re not just jumping and writing a contract.’ Mr. McLean says that if a listing doesn’t attract enough traffic, within 30 days they will consider lowering the price.”
“‘The creativity to sell homes is coming back,’ says Dan Elsea. ‘We haven’t needed it for years.’”
“With the number of listings rising and the pace of sales slowing, there is now a 5.1-month supply of existing homes on the market, according to the NAR. Historically, a 5.5-to-six-month supply has been considered a balanced market, says NAR Chief Economist David Lereah. But with the Internet making shopping for a home easier, he says, it is no longer clear just what a balanced market is.”
“Another uncertainty: how much of the increase in inventories is due to speculators looking to sell, and whether they will be more willing to cut prices as the market cools. Brokers in markets such as Phoenix and South Florida say they’ve seen an increase in investor-owned properties for sale.”
“As orders slow, builders are engaged in heavy discounting and promotional activity, particularly among homes for the second-time, move-up and luxury buyer. A survey conducted last month by the NAHB found that 64% of builders are now using incentives such as offers to pay closing costs and free upgrades; 19% are cutting prices.”
“The supply of unoccupied condominiums is also climbing in many areas. In New York’s Westchester County, the number of condos on the market jumped to 617 at the end of 2005 from 397 a year earlier. In the Boston area, the number of condos listed at the end of January was 5,114, up from 2,876 a year earlier. In the Washington, D.C., metro area, new-home inventory climbed by more than 900% to 2, 413 in the fourth quarter over the same period a year earlier, largely because of the completion of several condo projects.”
Yeah, most of the creativity was in the financing. I don’t know how a lot of the speculators are going to be able to dump properties on the market and continue to drop prices when we’ve constantly read about all the bozos that bought numerous homes with no money down. I imagine there are a whole slew of individuals who are immediately under water with a minimal price decrease. Many if not most of these folks don’t have any money to bring to the table to get out of these homes. The biggest thing to watch will be the foreclosure activity which is already out of this world in Dallas and the neighboring suburbs.
I tried to buy a house in Naples from a guy a few weeks ago. I know, I know . . . it was overpriced but I lowballed him, but not by that much. He wouldn’t budge. I told him I’ll buy it a year from now from his lender.
Simply brilliant.
What was the asking and what was your bid? It would be nice to remind the seller of your bid one year from now.
new topic
anyone feeling side effects yet ?
I sold some equipment to a cement finisher in SAc , CA and no word from them lately
Rudekarl,
I’m seeing so much more informercial about buying properties with no down and craps. This is so similar to daytrading informercial during dotcom
” is the latest sign that the balance of power between buyers and sellers is shifting as the once red-hot housing market continues to cool. The slowdown is affecting both existing homes and new homes”
Notice the terms ’slowdown’ and ‘cool.’ These are the words of choice by the David ‘Soft Landing’ Lereah crowd. No mention of the words ‘decline’, ‘fall’ or ‘bubble.’
David
Bubble Meter Blog
anyone see the inventory chart at the bottom? wow, too bad they didn’t put PHX up.
What is certain is we’ve built way more homes than we need over the last 5 years and people haven’t been buying homes, they’ve been buying payments.
What’s really, really certain is that until this inventory gets absorbed things are going to be painful for the people who own a home and need to sell it. And, if the builders, don’t slow down, this could drag on for years, perhaps even a decade or more.
You don’t need a bunch of statistics from NAR, the FED or anybody else to figure this out, just get in your car and have a look around. For sale signs everywhere, yet builders with tracts and tracts of homes under construction. That’s a problem.
Here’s a little tip for you: If it don’t make sense then it don’t make sense. No need to overthink it, just sit tight and watch what happens, oh, and fasten your seatbelts folks, its going to get wild.
“Another uncertainty: how much of the increase in inventories is due to speculators looking to sell, and whether they will be more willing to cut prices as the market cools.”
so buyers are dependent on whether speculators are “more willing” to cut prices? Other way around. Sellers are now dependent on what buyers are willing and able to pay. Speculators are getting what they deserve, for trying to take advantage of average folks just wanting a place to live.
Yes, the Bay Area inventory is on the rise this week. 65 new listings in just two days for Santa Clara County.
Haven’t seen much buildup in San Mateo county yet, and the lemmings are still buying from time to time. A lot of houses are sitting, though, including one I made a low ball (by $198k) offer on over a month ago. It has now been on the market 3 months.
The build up seems to be ramping up over the last few days - 10 more listings since I checked an hour ago. I’m seeing the same thing as you — some of the nicer homes with lower prices are selling while others are just sitting. I’ve seen places snapped up after two days while others have been out there for a couple of months.
It is getting interesting.
“‘The creativity to sell homes is coming back,’ says Dan Elsea. ‘We haven’t needed it for years.’”
Aw shucks, you mean realtors will actually have to work again for a living? …and just when they were planning their next big vacation to Europe, signing their new BMW lease and buying that new boat, plastic surgery, etc., etc.
Without the ‘creative’ (read: cheap/toxic) loans available, the only ‘creative marketing’ I can see working at this point is dropping the price.
bottomfisherman-
with prices dropping like a rock it going to take more than that believe me been there done that
also, I collected a few articles with the “it’s different here” comments for about 8-10 areas. one of these days I’ll get some sort of post on that together.
The Idaho real estate agents are still pumping up the “investment” potential in Boise.
“Come buy a house in Idaho so it can sit empty with a rental sign out front! You will never sell it because buyers can rent for 75% of the cost of buying your house. Jobs growth in Boise is huge- average pay is $11 an hour! Let’s not talk about Albertsons being sold and 2000 corporate jobs leaving town. Too bad they can’t afford to buy your investment home! Maybe they can rent from you for negative cash flow! Buy Now!”
While I took some liberties, the realtors are still pumping up the market in this manner.
Definitely! I want to send that collection to all of my “it’s different here” friends in various areas.
The most creative thing that can be done to sell a home is lower the price.
For example, last year I was trying to sell me really, really nice, clean, and excellent pickup truck. I asked $12K. No calls. I reduced it by about $500 each week. Finally, I hit $9K and it sold. Look, I was really disappointed that it didn’t sell for more, but I didn’t take it personally.
So all of you trying to sell a home, please don’t take the low ball offers seriously. If you want to sell your home, you’re going to have to lower your price. Just get used to it.
Peterbob, I guess it’s much harder to get a bank loan for a used car than a zero down, stated income I/O loan. Goes to show the housing market long ago ceased being traded in real money and entered the world of fake monopoly money finance. The recent “valuations” are likewise a fiction and we will soon see what the true values of these properties are. Like some on this board, I agree that we could see prices drop literally to replacement value - the cost of the bricks and mortar to put these shacks together.
It is absolutely harder to get a loan for a used car than any other type of loan! It requires substantiated good credit and real worth. New car loans are subsidized by the manufacturer. New houses are subsidized by the builder. Existing houses are subsidized by the “origination, processing and servicing fees”. I am amazed that most people think anyone can get a used car when it is easier to get a new car with 0% financing.
The realtors will become our friends on the way down. Since their income is transaction based they will start to pressure sellers to lower prices to effect transactions. Also, there will be a lot discussion in the realty camp about it not being a “Housing Bubble” so much as a financing bubble; they don’t want the public to think owning property = bubble. They will come out STRONG against no doc Ne Am etc once the tide has fully turned to shift the focus away from their role in this insanity (JMHO)
Your right about realtor’s becoming your friend but realtor’s try to become everyone’s friend. No there’s been talk about a bubble in realtor’s circle for yrs. Not the talking heads you see on T.V. or in the paper. But the ones who are out here with databases full of people who can no longer afford the median income home.
No those loans have been around for yrs and at realtors disposal a lot use them for their personal gain why slam them now. They only became mainstream because the prices got out of wack.
I just used Zillow.com. Holy crap! It really works. This is suuuuWEEET. It uses a nice overlay of price data over a satellite photo of your neighborhood. You can zoom in and out to see what houses in the neighborhood are worth. Yow!
Zillow is neat. Unfortuantely my region (Southeastern Virginia) is composed of 7 cities, and so far not all of the cities have data. Virginia Beach and Chesapeake, VA do.
I’m going to suggest to them they make an attempt to include school district information, crime statistic information, and demographic (if availible house by house) if availible.
based upon somes initial searching on areas I am familar with, zillow.com is an incredibly well thought out and well done site.
(I’m a web developer and first impressions are often key).
It is beta and all. But, I see in this website the first nail in the coffin for stealtors and their 3-6% commissions. Why pay stealtors $50K when you can browse comparables this easily???
I just used Zillow.com for a few homes that I know. It is interesting, and close, but not entirely accurate. One home appraised about 50k too high, the other about 100k too low. (I am a licensed agent).
I don’t know if this new info helps or hurts. I’d hate for a buyer to make an offer based on the appraisal that was too high. Also, if and when prices begin to meaningfully decline, I wonder how quick the system will be to pick up on that?
YIKES! I just did one more on Zillow.com out of curriousity, and it came in about $150k OVER MARKET (about 15%) what the house just sold for last week, after sitting on the market for MONTHS. This was not a hard house to comp either (for a human, anyway). That’s a scary tool for buyers.
Zillow was over-estimating the values in Avondale, zip 85323 by a factor of 15%. Deb makes a good point about the accuracy in time of zillow’s data. Nevertheless, this is an extremely useful tool.
Now there’s a new, well-designed, free online service for finding the value of a home that doesn’t require you to identify yourself or to communicate with an agent or broker, and provides heaps of information directly to consumers. It’s called Zillow, and it is launching today, in beta, or test, form at zillow.com.
Zillow uses data such as tax records, sales history and the actual prices of “comparables” — homes in your area that are similar to yours — to come up with an estimate, which it calls a “Zestimate.” It backs up the estimate with lavish data — aerial photos and maps showing prices in a neighborhood; loads of charts and graphs displaying historical data and price movements, as well as details on the size and room totals of a home. It even allows you to enter information, like the types and prices of recent renovations, that might change an estimate.
A home needn’t be for sale to be searched in Zillow, which claims to cover 62 million houses and to update its estimates daily. The company, founded by people who formerly ran the Expedia travel Web site, hopes to make money through advertising.
I just tested it but it’s down. This could be a great tool once it’s working.
I hope they can bring Zillow.com back online soon. It sounds like a great tool for both buyers and sellers. Lou’s point is of value, this is a beta site so give it some time to get tuned. I wonder how much traffic they got from this blog?
For those who say Zillow.com is incorrect, keep this in mind: It’s in beta.
Lou-
I’m curious why are you so hyped about this product. He’s offering you nothing more than what you can drive down any neighborhood and get
Zillow offers a google-maps style interface combined with the data from the municipalities. Some of the local municipalities have this data availible via the cities website, but not all do. I’m wondering how they manage to interface to all of these different cities that most likely use different systems for storing the information.
For our region Zillow is only showing the last price sold, not previous sales prices.
It’s a good start. I see lots of neat things that can be done assuming the data is availible.
deb - you don’t happen to post on the Washington Post message boards, do you? I know - random question but there is a realtor with the same name who often has very useful, informative posts on that board.
All these months of inventory calculations are about to get blown out of the water. Both sides of the equation are working to raise this number.
All those that pulled their listings to wait for spring + all normal listing volume + those chocking on their payments + all the crap allready listed.
All this new inventory will be associated with “price reduced” signs everywhere, this will scare the crap out of any potential buyers.
Feels great to buy property when you think it will rise in value, even the most ignorant sheeple will be scared to buy into a falling market. Investors get stuck with a falling knife, not sheeple. They will just head back out to the field and wait for the press to turn bullish on RE again.
Buyers are becoming more scarce and a buttload of new inventory is gonna hit the market soon.
Listings up / Buyers down = DOM way up!!
Sure hope you’re right… sucks having a giant down payment, household income approaching the top 5% of the state of CA and still being unable to afford to buy a nice family home in a decent area without using a voodoo loan.
dcgirl,
Nope- coincidence, I guess…
Sellers “getting creative”?! Why can’t we call a spade a spade? Why all these word games? They’re *lowering prices*. We’re seeing *price reductions*. What’s so creative about that? It’s simple enough for anyone to understand, and requires all the creativity of a box of rocks. If something isn’t selling, the price isn’t right. There’s nothing wrong with any property or any market that price can’t fix. As a seller, if your property isn’t selling it should take all of one nanosecond-and zero creativity-for you to figure out what to do. Lower the price.
I agree completly with this. Lower the price, everything else is just nonsense.
Speaking of inventory, the post-Super Sunday used home inventory crash seems to be accelerating in greater SD — 200+ homes on ziprealty are listed as “New on the market” since Monday. (That is more than a 1% increase in a couple of days.)
I can’t wait until a service like zillow or anybody else breaks the MLS stranglehold!!!
What stranglehold what information does the MLS have that is not readily available to the public
MjrMjr said-
“It’s simple enough for anyone to understand, and requires all the creativity of a box of rocks. If something isn’t selling, the price isn’t right.”
Couldn’t have said that better myself. Burying voodoo dolls in the yard & trying creative marketing tactics to sell a home is bull. Lower the price and sell it. The market doesn’t care what you paid yesterday only what it is worth today be it for more or less.
Was there some great news for all these HBs + Fannie that made all their stock prices rise in sync today? Because looking at my WSJ this morning, with a prominent article in Section C discussing the gloomy implications of the Toll Bros news for the broad market, I was kinda expecting a selloff today. But maybe I am just not sufficiently contrarian …
Nonetheless, gold futures and long term Treasuries are still dropping. This rally has no legs.
http://tinyurl.com/c47e9
P.S. I know someone will suggest the short covering theory (happens every time I point out strange asset price movements), but it does not hold water, unless you believe short covering explains highly coherent (near-perfectly correlated) movements in the stock prices of multiple companies. I do not buy it.
I think this 5-6 month supply stuff is pure nonsense in many markets. My bet is that they are dividing inventory by a rate of sales that no longer exists. For example, if we used the January sales rate to judge condo inventory in my part of Florida, I’m guessing we could have two year’s supply right now and the number of listings continues to grow. Also, are these people using closed sales, or booked (contingent/pending) sales?
Although this excess inventory on the market points towards a price adjustment downward, I wouldn’t predict anything major. Keep in mind that the cost of land and the timing process to get things approved now is very expensive. Add that to record building material prices (which won’t change with China/India demand), and you quickly figure out that new housing is going to stay expensive. Builders may stop building b/c of the costs, but don’t expect a major price drop, its just too expensive to build. On the flip side, many buyers bought adjustable rate mortgages over the past 3 years, and as those start adjusting upwards, they may have to get out of their houses quickly.