More price reductions with no effect

We’re seeing lots of price reductions now (112 in 30 days)  without a rise in sales. Why? There is still so far to go. I noticed four more reductions this morning, two of which dropped the price a cumulative million bucks from each one’s asking price. In the case of one, that’s a third off the price. My reaction? They still aren’t worth what they’re asking. And if I feel that way, imagine what a buyer who’d be parting with cash, rather than mere theory, thinks. Going down?

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4 responses to “More price reductions with no effect

  1. anonymous

    Not many want to “catch a falling knife”

    Recall those “brave”, once-deep-pocketed folks from Mideast and China who bought equity in various US financials in ~’07…what a fun ride down the toilet…

  2. Retired IB'er

    Chris,

    I thought your comment yesterday about not wasting your time (and gas) going to open houses was very telling and funny (I see them in August!).

    Seems even those that “get it” (ie they are making price cuts) still don’t get it.

    When do you think capitulation will occur… after the failed spring selling season… will it take a dead summer?

  3. CEA

    Retired IB’er:

    It’s what you and I were “talking” about earlier. How many people are “forced” sellers due to the “3-D”‘s? 5%? 10%?

    The rest of the sellers have proven themselves content to wait, until they are confronted with one of the “D”‘s.

    If spec houses are at $630 0per-sq-ft “bid” versus $1,000-per-sq-ft “asked” – we are talking 35-40% downside.

    Sellers may psychologically be able to take 10% down. Maybe 20%. But past that it will be “wait it out until I can no longer do so financially”.

    Even the banks don’t want to write this stuff off, they aren’t eager to foreclose – and just this morning JP Morgan Chase (soon to be followed by everyone else) is suspending foreclosures for several weeks.

    I think you won’t see capitulation unless the market doesn’t come back by year-end, and that only because more of the “non-3Ds” will become “3Ds” (because of their debt load).

    CEA

  4. Retired IB'er

    CEA,

    Can you spell Z-O-M-B-I-E economy? 🙂

    At least to me, all we are doing is pushing ourselves squarely in that direction.

    The real estate policies being tossed about are a perfect example of delaying, for they will not eradicate, the pain: giving sellers false hope the market will get better and so kicking the can down the road a piece. Something our “political leaders” have been very good at for the last thirty years (and hence the reason we are in this mess).

    Still, there is no question in my mind that at some point the log jam will burst and it will burst big to the benefit of buyers and the detriment of sellers.

    The only question is when.

    I would like to hear Chris’s view on market capitulation timing.

    Chris don’t be shy… what do you think?