Sell or hold?

Beats me. Another week is passing without any significant market activity (26 Circle Drive, discussed here a couple of times, was reported as “pending” today but that’s old news and asking price was just $2.1 million). We have essentially no data to use to guide clients on what the current market price for a given property is, or should be. I’m using 2000 prices as agood starting point for buyers, but is that the bottom? I have no idea.

I had been advising readers that if they didn’t have to sell now, they shouldn’t, but in effect, that’s promising that we’ll see a rebound and I have no reasonable expectation that will happen any time soon. If it doesn’t, and prices keep dropping, then holding on to property now may look like a horrible idea nine months from now.

I suppose this all just struck me while reading the post below on what’s happened to financial stocks. They dropped 50% last year and another 40% this year. They could come back – stranger things have happened – or they could get nationalized and wiped out. You tell me which. But I’d have advised (thank God,no one asked me) a bank stock owner to hold on last December rather than realize his losses. Oops.

My brother Gideon, who is more of an optimist than I, thinks, or hopes, that warm weather will bring out buyers who will start buying. When sellers see what the new market value is they will, according to this sunny scenario, gulp hard and whack the bejesus out of their prices, thereby rejuvenating the market, albeit at a much lower “reset” price. I, on the other hand, have a deep, abiding awe at the power of the human being to deny reality no matter how hard it smacks him in the face. In this Eeyore scenario, sellers won’t budge, buyers won’t budge, and we’ll all sit around in a thickening morass of unsold houses that slowly lose their value.

I do hope Gideon’s plan wins out.


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6 responses to “Sell or hold?

  1. anonymous

    Would guess distressed inventory of unemployed IBers will only start hitting mkt in late ’09

    High-end residential real estate tends to operate at a far slower, multi-year pace vs public securities markets….took about 5yrs for RE to bottom in ’90s (~’89 peak to ~’94 bottom)

    High-end RE only peaked in ?early ’07….would be surprised if this cycle bottoms by ’12….economy and credit are far worse than early ’90s

    And even public securities markets didn’t quickly “price in” the various credit toxins back in Summer ’07 when Meltdown started….it’s a glacial process of denial, talking the book and “keeping up appearances” in any market

    And most smart, creditworthy guys calmly move to sidelines; put feet up on the desk as they watch market action on their various computer monitors….and wait a few yrs before pulling out their checkbook, esp for something as discretionary as high-end shelter expense (not investment)…thus, delayed price discovery

    • christopherfountain

      I agree – I’ve had buyers looking for bargains for six months and I’ve told the that the sellers are six months to a year behind them in seeing how the market is.

  2. Pink Fuzzy Slippers

    I say sell. Swallow the bitter pill now. I show 12 plus houses each weekend and my buyers simply say “thanks for the memories” and I thank them back. As a realtor, it’s better for me to build trusting relationships and educate buyers than push them to buy (not that I’d ever push). Not that it pays the bills, but that’s what rentals are for.

    The test for me is “would I buy right now?” Probably, if I found the perfect house and planned to stay put. Rates are good and prices have come down.

    If I were a seller, “would I sell today?” Oh, yes! I don’t think were going to see things go up for a very long time.

    The days of wine’n roses have been replaced with hope’n change. Even the animals are sensing it…crazed primate, mad swan, lost seal…read the Greenwich Time and you will see that life as we once knew it is taking a very odd path.

    But that’s just my humble opinion.

  3. kidding really?

    I am sitting on my hands… As a patient buyer here’s my thinking…

    Why would ANYONE buy now if they work for a bank, broker or hedge fund? Tomorrow anyone can be out of a job and one’s bank or brokerage stock could be a zero. (not like anyone has any equity in stock) Way too much uncertainty and not enough price cuts to warrant taking the risk of buying.

    I figure there will be massive supply that will hit during the “Spring selling season” thus hitting prices down and don’t forget the stock market hitting multi year lows while Citi and Bank of America are nearly nationalized (read: equity is worthless) adds up to do nothing for me.

    I am 30% below the recent ask on 2 houses listed for now over 1 year. I have not put in a bid since I am in no hurry and really don’t need to piss off the current owners (it’s a small town you know). The two houses are 4m (mostly done but needs cosmetics) and 3m (needs everything.)

    So there you have the mindset of a buyer in the Greenwich market. I’ve heard the bitter sellers on this blog rant to hold prices but until prices come into equilibrium with other assets and incomes, I am waiting VERY patiently.

    • christopherfountain

      My advice, if a buyer is sure of either his employment or his (or her, you get the drill) stash, is to look for a house whose asking price has been knocked down 40% already and then offer 80% of that. There are some sellers that will work on now and I think there will be far more in the coming months.

  4. Anonymous

    ” look for a house whose asking price has been knocked down 40% already and then offer 80% of that”

    Wow – first time in the 4+ years I have been reading you that you are more agressive / pessimistic than I about pricing in the greenwich market

    Maybe time for me to start to consider buying or at least getting back out there to look