Is the RE Market Changing?

[SHELLY]

As I see it (no surprises here):

(1) Sellers proclaim in their ads how their properties are listed at "below market price"...I say "market price" of a house or property that no one wants to buy is $0

(2) There is not a property inventory glut...there is an overpriced property inventory glut

(3) Five Emotional Stages of Housing Boom and Bust: Euphoria, Doubt, Denial, Disillusion, Realism. Judging from the increase in inventory and "last year's" asking prices, I say we're swinging back and forth from Doubt to Denial at this point. There's still a while for this thing to play out.

(4) In the past, RE markets were regional--this time it IS different with almost every major city in the nation caught up in the RE boom. This means that folks in LA can't unload their ranch house to buy a McMansion in NJ; old folks in NJ can't unload their McMansion to buy a beach condo in Florida, and folks in Atlanta who tapped out their home's equity to buy pre-construction condos they were hoping to flip are finding they may have to walk away from a $30,000 deposit because they can't find someone (the folks from NJ?) to buy the beach condo.

(5) Investulators were THE key players in Florida's RE Boom--if you take them out of the equation, who is going to buy? Many people who "invested" in property in the first place were hoping to get a 15% y-o-y return on their investment. Now they can see that's not going to happen anymore--in fact the best case scenario is that the value will "plateau" for years to come or possibly crank out single-digit returns close to inflation. Subtract carrying costs and 6% sales commission and the "investment" is a loser--far too much risk for buyers of any ilk to jump in at this point so all are staying away.

(6) High insurance and taxes, and low wages in Florida are deal breakers. Ditto for an active hurricane season.

(7) This is only the beginning...unwinding this mess will take years, not months.

 

[Kurt]

If agents do not accept the listings at the elevated prices, they will have to find another way -For Sale By Owner.

I have a lot listed right now priced at $159K. The adjacent lot, similar in most every way is For Sale by Owner - $325K. Go figure. Price for FSBO is marked on sign and mine is on a flyer sheet at property. Spoke with the seller of the FSBO the other day and he said he didn't have to sell. My question is, "what the heck is he thinking?" I spoke at length with him about his overpriced properties, another which is just down the street. I still don't think he gets it.

There are always realtors willing to take listings at whatever price the seller requests.

 

[SHELLY]

If agents do not accept the listings at the elevated prices, they will have to find another way -For Sale By Owner.

In light of the changing RE markets, an article in Saturday's WSJ addresses the old "traditional vs. discount broker" war:

"With house prices surging in recent years, a number of people are seeking ways to cut commission costs, which are based on a percentage of a home's selling price. More home buyers are turning to discount brokers that offer to rebate a portion of the commission if you are willing to do much of the work in finding a home. And sellers are hiring discounters who, for a flat fee of a few hundred dollars, will include your home in a multiple-listing service, a database on houses for sale used by agents.

About 11% of home sellers last year used "alternative" brokers (ones offering flat fees or other forms of discounting), up from less than 2% in 2002, according to surveys by Real Trends, a publishing and consulting firm.

The competition from discounters has prompted some traditional brokers to use a variety of tactics to fight back, and this can end up hurting consumers. The controversy will get a public airing Monday (June 19) when the Consumer Federation of America, a nonprofit research and advocacy group, releases a report on "how the real estate brokerage industry functions as a price-setting cartel."

 

[Smiling JOe]

As I see it (no surprises here):

(1) Sellers proclaim in their ads how their properties are listed at "below market price"...I say "market price" of a house or property that no one wants to buy is $0
...

Shelly, you are close, but not quite on target. Market price is the price a buyer is willing to pay for a particular property. Even for a property which no one wants, if offered at the right price, the property changes in appeal to buyers who would otherwise not be interested. Therefore, the market price is not $zero, but somewhere between zero and asking price. ;-)

 

[redfisher]

Once again Shelly's points are knee jerk, knuckleheaded overreactions to get a reaction...Mmm, which point to dispel first...

 

[SHELLY]

Therefore, the market price is not $zero, but somewhere between zero and asking price. ;-)

OK, I'll give you partial credit... but the market price can be between $0 and the "selling" price.

But there is no "market" price for THAT PROPERTY until the $$$ transfer from buyer to seller. Therefore the "asking" price is simply that.

(If I put a For Sale sign on my '65 Rambler and "ask" $50,000, that does not make the market price $50,000.)

My biggest fan Redfisher can probably quote my "melting snowflake in your hand" market price analogy if you ask nice.

 

[Smiling JOe]

OK, I'll give you partial credit... but the market price can be between $0 and the "selling" price.

But there is no "market" price for THAT PROPERTY until the $$$ transfer from buyer to seller. Therefore the "asking" price is simply that.

(If I put a For Sale sign on my '65 Rambler and "ask" $50,000, that does not make the market price $50,000.)

My biggest fan Redfisher can probably quote my "melting snowflake in your hand" market price analogy if you ask nice.

I think we both understand what each other is stating. Going back to that ad to which you refer, the seller is wrong stating his price is below market price. Not much different from stating an asking price is below appraised value. Give me three appraisals on one particular property, and I will show you three different appraised values. Who's will you use?

 

[beclareesq]

I may be the lonely voice on the planet, but I agree with most of what Shelly argues on this board. However, I don't think that the market stays relatively flat for years, though. The market is reestablishing itself. The sellers that have need to sell are doing that. Those that want the big payday, but don't have cash flow crunches, will ultimately pull back and off the market. That will help to shore things up. Then demand will return to creep up and appreciation will occur, keeping pace with other coastal areas that offer the same amenities. I think as recently as four to five years ago SOWAL was relatively undervalued. At least those areas outside of the Seasides and Watercolors were very competitive. The area is supporting year round rentals more so than North, South Carolina and Georgia. The pace, the restaurants, the fresh water, the arts culture, the close proximity to so many large southern metropolitan areas will continue to make the 30A stretch unique and desirable. I think if you can buy at 75% of the spring of 05 prices then that's buying on the dip. Like Charles Barkley says: I could be wrong but I doubt it! The hedge is I wouldn't rather be any[place else.

 

[SHELLY]

Give me three appraisals on one particular property, and I will show you three different appraised values. Who's will you use?

I'd use the one that was the predetermined target number I paid the appraiser to hit?

 

[Mango]

I'd use the one that was the predetermined target number I paid the appraiser to hit?

Shelly:
I agree with quite a bit you have to say in your threads about the market, but I have to disagree with what you state above.

Appraisers have a license to protect, and it's high risk for them to be "bought" to bring in a price. I am sure there are some unscrupulous ones out there, but eventually, if they start bringing prices over-valued, they get banned from lists that banks use as approved appraisers.
I work with appraisers in the New York market in my business, and most of them tend to err to the conservative side.

That being said, yes, SJ is correct in that you can have 3 different values from 3 different appraisers, and depending on the purchase price, you could have as a 5-10% difference. It's also a very different market to appraise.

Appraisers use sales that have occured within the last 6 months, the more recent the better. They only go past that in my area if a property that sold 8 months ago is on the same street, then may make possible time adjustments to value if warranted.
Out there, its been such a roller-coaster ride and it isn't helping that people have listings out there at over-inflated values just to see if some lugnut will bite.
Hopefully the seasoned professional realtors who have come back to earth will just take listings that they feel will sell. I was shocked when I was looking at property when a realtor who had "hip pocket" listings told me they would sell me a property and then re-list for $100K more or so immediately. I thought their job was to get the best possible price for their buyer! In New York, a realtor could lose their license for that.

I wound up keeping the couple of properties I bought, and wound up buying them from a professional realtor who priced the properties at the correct market values for that time. Seemed like everyone from their cousin to their grandmother had a realtors license looking to cash in on referral fees. Now I hear they are all waiting tables.

The ones who have been around will hopefully contribute to correcting the excessive listings, price properties based on what people are willing to pay, and then we may possibly see a return to more purchasers entering the market.

All in all, I think SoWal is still a good value compared to other coastal communites nationwide and a place with a feel unlike others.