Good overview of Case/Schiller numbers

[The Outback Oracle]

Re: Good overview of Case/Schiller numbers

Just for a bit of international flavour!! The Australian market for houses is supposed to be still booming (more or less). However I have had my house on the market for some 6 months. I missed the peak of the market by about 2 weeks. The house was listed at $749,000 which was a compromise price between the opinions of three agents. I had it sold once at A$720,000 but the sale fell through because of a technical matter in respect of some materials and a Chines woman who didn't know what she was talking about. We are now asking $669,000 with a clear willingness to sell at $649,000. So far no offers. This is a 4 bedroom Brick (including a granny flat) with a swimming pool and a tennis court about 15 mins from ther city centre and 150 yards from the electric train station! So it is not out in 4WD country! Everyone here still believes Real Estate can't go down.

One of the problems is that it is just a good family home, not flash, and a great place to bring up kids and give them a healthy active life. There are trees and a nice garden. The market wants a McMansion with nothing for the kids to do but play computer games and no yard for anyone to do any damned thing in, so the whole family can sit around, watch the flat screen TV and get fat together!!! Pardon my disillusionment with the modern world. I must be getting too effing old!

[SeanO]

Re: Good overview of Case/Schiller numbers

We are now asking $669,000 with a clear willingness to sell at $649,000.

Do you plan to continue to >follow< the market to the bottom? Sorry for being harsh but this is an idiotic strategy. Unless there is a systemic problem and no homes are selling, the ONLY reason you have not sold your house for 6 months is price.

Take it off the market for 2 weeks. Look at local comps. Determine what it would take to be the BEST deal in the market. Now lower your price 5% BELOW that and put it back on the market with a new agent (better they think your old agent was the problem, then the house).

As long as there is reasonable sales activity in your area this will sell your home. You may even get multiple offers. You may think this is crazy, but consider this -- had you done it when you first listed your house, it would now be sold, and you'd have thousands more in your pocket than you now HOPE to get.

Sean

[The Outback Oracle]

Re: Good overview of Case/Schiller numbers

I keep wondering why everyone in the world thinks i am an idiot......I suppose it must be true!

[ASH]

Re: good overview of current news April 29, especially new Case/Schiller numbers

ASH: I was in a very similar situation to yourself after I graduated and began working.

The danger for someone like yourself is to be too anxious and buy too soon. It may not play out exactly the same way this time, but I bet it's not too dissimilar. iTulip expects a USA national bottom is still perhaps 3 years away. Local markets will undoubtedly vary somewhat. Even then the recovery will be slow so you will have plenty of time to make the right decision, provided you are patient.

Thanks for the tip, GRG55. I hadn't thought too much about what would happen AFTER the period of relatively high inflation. I lack the understanding to predict how long that period might last, so I didn't attempt to make plans for the other side. My immediate thoughts about the US housing market are framed as if history ends around 2010 -- not because I think the world ends in 2010, but because I don't have a strong sense of how things are likely to play out beyond that time horizon. When imagination fails, it is very helpful to have a historical analog to think about -- and I thank you for providing one.

I take your point to be that a prolonged buying opportunity may exist on the far side of the inflationary peak. That's a very valuable thought to me, because I had only identified a transitory buying opportunity on the leading edge of the inflationary period -- when house prices had been falling for awhile, but a mortgage under reasonable terms was still possible to obtain. I was never wholly satisfied with that analysis, because it was apparent to me that credit would disappear before home prices truly hit bottom. I had thought to console myself with holding a fixed-rate mortgage through a period of high inflation.

In any event, I'm expecting my first child this summer, which has temporarily halved my household income -- I may have a down payment burning a hole in my pocket, but I'm in no rush to buy a house anytime soon. Sometimes circumstances enforce patience!

[FRED]

Re: Good overview of Case/Schiller numbers

I keep wondering why everyone in the world thinks i am an idiot......I suppose it must be true!

We are all idiots when confronted with sudden market shifts. Getting in front of a falling market is easier discussed in the abstract than acted upon because it means selling at a lower price than one hopes to. We are reminded of the trader's rule when faced with a market that is falling faster than expected when a string of losses stretches out ahead: "Your first loss is your best loss."

[Jim Nickerson]

Re: Good overview of Case/Schiller numbers

I keep wondering why everyone in the world thinks i am an idiot......I suppose it must be true!

Where I grew up, if anyone had a pool or tennis court, they were generally the wealthiest individuals in the community. Whatever you get for your house, assuming it sells, suggests at least to me, idiot or not, you have done a lot correctly, and you won't catch me suggesting you are an idiot--any moreso that the rest of us. You know Sean is a real estate "guru"? I thought about your dilemma, I think it boils down to the same thing everything else to do with money boils down to--greed or fear.

Mark that mother down and sell it.

[c1ue]

Re: Good overview of Case/Schiller numbers

Folks, you aren't going to get a smoking deal unless you have cash.

20% of those who will eventually sell will sell at a low price - for one of many reasons:

1) Tax evasion
2) Divorce
3) Convenience
4) Desperation to pay bills (medical)

the list goes on and on.

If you don't have the cash, then you're stuck both with the need to predict prices 3-6 months ahead of time (loan process), plus finding the house, plus competing with the large herd of everyone else once loans become more available.

Moral of story: save your cash if you want to buy a home

As for those owning: take the money and run. Is 2% or 3% higher sale price worth the risk of 10% or 20% downside for failing to sell? Your call.

[SeanO]

Re: Good overview of Case/Schiller numbers

I keep wondering why everyone in the world thinks i am an idiot......I suppose it must be true!

The "strategy" is idiotic, not you. And this strategy of pricing higher than what you are willing to take is the norm so you should not take it personally. I understand the desire to leave room to negotiate, but understand that in the end you have no control over price - only whether or not to sell.

Your only goal with selecting a price is to create interest, activity, and offers. The more interest you create the better chance you have of maximizing price. This is the theory behind real estate auction sales. By holding out the possibility of a lower price you can often sell for a higher price because you bring more buyers to the table and force them to compete. Note that the buyer at an auction is called the "winner" - and everyone wants to win.

The one caveat I'd add is that if there simply aren't buyers in your area because of economic or other problems then setting the price a little low won't help.

Sean

[The Outback Oracle]

Re: Good overview of Case/Schiller numbers

The POINT of the post was (as Fred managed to discern) that I think the market here is shifting very quickly. Australains, at the moment, are tending to think we are shielded from the scourges that are plaguing the rest of the world in some magic way. I doubt we are.
SeanO I think you need a little more information about the circumstances of the house, its location, the market and how it is moving, what type of buyers are around etc before you describe what I have done as idiotic.
Suffice to say what you propose was exactly what i have tried to do!

[Spartacus]

Re: speaking of Australia

Your recent posts reminded me of this guy who I used to read as a counterpoint to iTulip and others calling a housing bubble.

Interesting couterpoint - this guy for the longest time maintained there was no housing bubble, and only idiots with no knowledge of economics claimed there was a housing bubble

http://www.institutional-economics.com/

He also constantly wrote that the US current account deficit was just hunky-dory because Australia ran these types of deficits for most of its history.

Just for a bit of international flavour!! The Australian market for houses is supposed to be still booming (more or less). However I have had my house on the market for some 6 months. I missed the peak of the market by about 2 weeks. The house was listed at $749,000 which was a compromise price between the opinions of three agents. I had it sold once at A$720,000 but the sale fell through because of a technical matter in respect of some materials and a Chines woman who didn't know what she was talking about. We are now asking $669,000 with a clear willingness to sell at $649,000. So far no offers. This is a 4 bedroom Brick (including a granny flat) with a swimming pool and a tennis court about 15 mins from ther city centre and 150 yards from the electric train station! So it is not out in 4WD country! Everyone here still believes Real Estate can't go down.

One of the problems is that it is just a good family home, not flash, and a great place to bring up kids and give them a healthy active life. There are trees and a nice garden. The market wants a McMansion with nothing for the kids to do but play computer games and no yard for anyone to do any damned thing in, so the whole family can sit around, watch the flat screen TV and get fat together!!! Pardon my disillusionment with the modern world. I must be getting too effing old!

[The Outback Oracle]

Re: Good overview of Case/Schiller numbers

Thanks for that reference Spartacus. I hadn't seen it before.

[SeanO]

Re: Good overview of Case/Schiller numbers

The POINT of the post was (as Fred managed to discern) that I think the market here is shifting very quickly. Australains, at the moment, are tending to think we are shielded from the scourges that are plaguing the rest of the world in some magic way. I doubt we are.
SeanO I think you need a little more information about the circumstances of the house, its location, the market and how it is moving, what type of buyers are around etc before you describe what I have done as idiotic.
Suffice to say what you propose was exactly what i have tried to do!

I did clearly add the caveat that there needs to be sales activity. And I did understand you weren't looking for advice, but instead trying to share world conditions. But you happened to hit a hot button for me - as it kills me to see people continue to deal themselves a losing hand by following the market.

You clearly stated that you originally priced at a "compromise" which indicates that at least one agent felt you should price lower... and agents are typically optimistic as they are trying to win listings.

Then you stated you are priced at $669k even though you are "clearly" willing to sell for $649k. Clear to who?? Certainly not anyone looking at the listing.

I didn't mean to offend you when I referred to the strategy as idiotic, but I have watched friends and family lose 100's of thousands doing similar things and I frankly think it is time to call a spade a spade.

I've flipped more than 150 homes. I've sold properties in every condition imaginable - from fully staged, to near tear down. In towns so small they have only a handful of sales a year. In white hot markets. And in the fastest changing market in recent history - Stockton, CA - the "foreclosure capital" of the world. I've never seen many of these properties. My average time from listing to sold is under 60 days. The only thing in the end that gets properties sold is price. If your property is not sold it is due to price. I really don't need to know more.

I apologize if this comes across as unfriendly or as an attack. It is meant as neither.

[jtabeb]

Re: good overview of current news April 29, especially new Case/Schiller numbers

Here in the real world...

I'm interested in buying a home I'll live in for at least ten years, I find myself among the 99%+ of the population who is unable to pay cash even if I wanted to and I'm currently renting, so don't have to worry about selling before I buy.

Keep renting. Unless you plan on executing the implicit "walk-away clause" in your mortgage.

Price drops are a great bargin, unless the price drops even more!

I see pain but no "blood" in the streets yet. That tells me we ain't near the bottom yet. The best deals in the late 70's early 80's crash came for folks who could walk up and offer a distressed homeowner cash, yes CASH (hard to finance a house at 19%). It happened once and I'm betting will happen again.

Hence pay cash, if not now, then when the price is cheap enough that you can. (or if your assets would allow you to pay cash even if you don't want to)

Flexibility is NOT strapping a 10 ton weight to your back. If you do that and get pushed backwards, YOU WILL FALL DOWN!

[Guest]

Re: good overview of current news April 29, especially new Case/Schiller numbers

Here in the real world... I'm interested in buying a home I'll live in for at least ten years, I find myself among the 99%+ of the population who is unable to pay cash even if I wanted to and I'm currently renting, so don't have to worry about selling before I buy.

WDCRob - you should come on down to San Diego. I've seen two or three deals pass me by in the past couple of weeks for 3 bedroom homes in the center of town (decent neighborhoods too) that were foreclosures selling for 275K. This is in San Diego, where two years ago the median price was 600K. When I bought a house here in early 2000, the median price was about 250K, so there's a really hard floor under any 275K foreclosure in central San Diego. If it was spruced up it would rent for minimum $1800 a month. Oh, we got a nice climate too (boring town though).

[jimmygu3]

Re: good overview of current news April 29, especially new Case/Schiller numbers

Another scenario is that the bond market wakes up and mortgage rates go sky high. Prices will drop dramatically and those with cash will pick up bargains at the bottom. Then as rates ease, prices will again begin to ascend. The transfer of wealth from the middle class back to the ultra rich will be complete and they can begin selling the same houses back to us at huge profits.

The more I think about it, the more I think this could be the way it plays out, where the housing bottom correlates with a top in mortgage rates.