Barry Ritholtz’s reader Steve Barry has updated the New York Times chart of Case Shiller housing prices to account for the latest data (April).
We can quibble about about precision, but here’s the bottom line: Prices still have a bit further to fall just to get back to fair value. And “fair value” is fair value because prices have spent about half the time below that level. So, if anything, Steve’s projection is probably optimistic.
Nationwide, prices are now down 33% from the peak. They’ll likely be down 40%-50% before we’re through. And they’ll probably stay there for a while.
Tag Archives: Market conditions
Bloomberg: San Francisco median house values drop 41% from last year. Foreclosures, inability to get “jumbo” mortgages major factors. Just saying ….
11 Hycliff Road (off Riversville) is a “California Ranch”, whatever that is, on six acres of nice land. It’s been for sale pretty much constantly since February, 2007, first at $4.995 and now, three agents and a bunch of price cuts later, at $3.250. This may or may not be the right price today I’m pretty sure, however, that had they started here in 2007 the owners would be long rid of the place and already settled in a wherever they preferred to be. This isn’t all about a falling market – overpricing in Greenwich ahs been going on for a long time, but there’s just no margin for error any more.
Russ Pruner, Big Chief of Shore & Country Realty, sent me a fascinating spread sheet yesterday and when I can figure out how to post it, I will. He analyzed all sales this year – 91 single family houses (some of which went to contract in 2008) and compared their selling price with their full market value in 2005. On average, they were down 11%. But, as you’ll see once I post it, the real significance, at least to me, is that the few houses that beat the 2005 valuation were up a teeny bit – many, many others got hammered. Of course, that’s along the lines of what I pointed out yesterday: these low-priced sellers aren’t the exception, they’re the rule.
We did see two contracts for single families today, 15 Maher Ave (asking $2.75 million) and 10 Druid Lane, in Riverside ($1.9ish). So something is selling, however slowly. Most of the new listings that appeared today were really just old Country Living inventory being moved to Greenwich Fine Properties. The only interest there is to see that Greenwich Fine Properties picked up some excellent people, like Kathy Adams and Candy Durniack (sp? – sorry,Candy). Ive always thought tht GFP had some great agents, desite my petty personal squabbles with its principal, and now it’s even stronger. Good for them.
Then there’s 10 Spezzano Drive, a failed spec house in Riverside now owned by the lender. I estimated its worth at $1.675, maximum, back in the glory days of 2007, when it was priced well over $2 million. Viewing it again the other day, in this market, and taking in its dead lawn, the dreary, abandoned look of the place, the cheap building decisions (an electric water heater, despite gas being led to the house, apparently because the builder didn’t want to spend $100 to have a plumber hook up a gas heater, is just one example) and I figured it’s selling price at $1.1, if the lender gets lucky. Today it dropped the price from $1.89 to $1.81 million, which I suspect means that the weeds in that backyard will be knee-high by the fourth of July.
Actually, most telling, is an anecdote about a couple who purchased a home for $1.65 million in 2006, who tried selling it recently for $2.2 million. Nobody bit and they’ve been steadily dropping the price back down to where they’d merely be breakeven. We’re guessing they’ll have to cut further, since there’s no reason to think that inflated 2006 prices are market-rate anymore. But there’s something about the housing mentality that no matter the market conditions, people still think they should make a profit, or at least get their money back.
Once sellers finally give in though, watch out below.
From Shore & Country’s Russ Pruner, who obviously has been stashing so much money away with Swiss bankers that they’re willing to pass on their secrets, comes this market report. Conclusion (and to think I couldda had an MBA!) : low price equals increased sales.
Buyer Price Sensitivity Limits New Home Sales
Price sensitivity remained the theme in February; low prices necessary to spur traffic. Our Monthly Survey of Real Estate Agents in February saw a continuation of buyer price sensitivity, with sales generally occurring at low
price points (often foreclosure sales) and in markets where prices have fallen significantly. These areas that have experienced sharp price declines are the markets that generated traffic, whereas other markets likely have
further to fall before seeing improved sales activity. Our main concern continues to be that homebuilders will find difficulty competing against the lower-priced foreclosures, resulting in few orders and limited cash flow.
Traffic in February consistent with trends in January. Our traffic index was effectively unchanged in February, measuring 36.0 from 36.5 in January.
Better traffic was generally found in the foreclosure-rich markets of Florida, Southern California, and Nevada, along with Washington, DC. Once again, we saw the highest levels of traffic in hard-hit markets facing significant
foreclosure activity, as the foreclosure prices are low enough to spur traffic.
Pressure on home prices, demand focused on low-end of market. Our price index increased 1.2 points in February to 17.1, up from 15.9 in January. However, readings below 50 imply sequentially lower prices. We expect
further pressure on home prices due to the continued supply of foreclosures, as loan modifications likely won’t fix the problem of negative equity. In addition, we think there will be a continued downward bias to pricing stats, as most buyers focus on the entry-level homes. Our home listings
(inventory) index declined to 40.5 from 43.5 in January, with levels below 50 indicating rising inventory (which we would expect as inventory increases at the start of the Spring season). Our time to sell index, which is a good
leading indicator of pricing trends, improved slightly to 28.2 (up from 26.6 in January), with anything below 50 indicating a lengthening time needed to sell a home.
Pending resales are considered a leading indicator because they track contract signings. The Realtors’ existing-home sales report tallies closings, which typically occur a month or two later. The pending index was first published in March 2005 and included data going back to January 2001.
The group’s index decreased to 80.4 in January, the lowest level since records began.
Three of four regions dropped, led by a 13 percent slump in the Northeast and a 12 percent slide in the South. Pending sales increased 2.4 percent in the West.
Compared with January 2008, pending sales decreased 6.4 percent.
Sales of previously owned homes, which account for about 90 percent of the market, fell in January to the lowest level since 1997, according to the Realtors group. New-home purchases, which make up the rest, plunged to the lowest level since records began in 1963, Commerce Department figures showed.
The median price for existing and new houses decreased in January from a year ago, the reports showed.
There are, I think, two groups of sellers in town right now, the desperate and the willing. If you’re just willing to sell, either brace yourself for a long wait and hope that the market comes back a little or join the desperate,who will have to price their house at fifty cents on the dollar to grab the current pool of buyers’ attention. I know that sounds a little negative, and I’m sure to hear about it from my peers, but that’s what I see right now. Your vision may well be better. I hope so.
But not all (and not here, yet, I don’t believe). Here’s the part I like:
“I think house prices will be done declining within the year,” says Morris Davis, a University of Wisconsin economist who studies real estate. But, given today’s uncertainties, he cautions that “anyone that tells you that they know, doesn’t know.”
52 Pecksland Road, a smallish, 3 bedroom, 2 bath house on an acre, sold for $3.495 million in November 2005, right at the height of the market. I suspect that a 3 bedroom house, even on Pecksland, won’t be fetching that kind of moeny again for awhile but the new owners were more optimistic than I and listed it this past September for $3.995. Wrong move.
But now it’s down to $3.1 million. That may still not move it but for those skeptical readers who didn’t like my suggestion that people rent, rather than buy, here’s one couple that probably wishes it had.
In case you’re wondering, we now have 584 single family houses on the market, 169 of which are priced above $4.5 million. Four houses in that price category have gone to contract in the past 90 days, 15 in the past 6 months and 47 in the past 12 months. Readers with a long memory will recall that 12 months ago, there was still an active real estate market (although even at 47 per year, we’d have a 3.6 year inventory).
I assume that we’ll soon see some kind of pick up from the current four- sales-per-quarter rate, which is pretty dismal even for a recession. One hundred-sixteen $4.5 million + houses sold in 2007, 101 in 2006 and 107 in 2005, and if we come close to those numbers again, we’ll be in good shape. If not, we’re looking at a 10 1/2 year inventory of expensive houses and that would be interesting, eh?
13 single family houses have gone to contract this year, compared to 66 in 2006 and 66 in 2005 during the same period (January 1-February 9). If it’s any consolation to home owners, over-pricing before taking a bath is not a phenomenon new this year. 707 Lake Avenue went to contract in January 2005 and sold for its full asking price of $9,995,000, but that was only after being reduced from its November ’02 price of $15,000,000. The builder, Aberdeen, probably still made money, but imagining that Greenwich buyers will pay any price to live among us swells is obviously a delusion that’s been around for awhile.
In an otherwise-sympathetic posting, a commentator suggests that this blog isn’t helping the market because I report actual information, rather than permitting buyers to dream. The reader is out of touch with the realities of today’s marketplace.
There was a time when realtors held the key to all information concerning listings and selling prices and I’m sure they loved that monopoly because if a buyer wanted to know about a house, he was forced to come to an agent. By the time I entered this business 6-7 years ago, the Internet was shoving that business aside and that transformation is now complete (in a plug for my current employer, the main reason I switched to his firm is that he saw this, and began building up a fantastic website years ago – it improves all the time). Today, buyers prowl the internet when they begin their search and by the time they contact an agent they already know what’s for sale (except for Sotheby’s listings – Soetheby’s for competitive reasons, refuses to release its listings to the Internet – if I were a Sotheby’s customer who wanted my house exposed to as broad a pool of potential buyers as possible, I’d fire them, but that’s just me). They know what’s for sale, what’s sold, what the average price per square foot is in any particular neighborhood (and in no neighborhood does it even approach $1,000 – sorry, Monkey) etc. So what can an agent offer today to justify his pay? More information. At the very least, he or she should know at least as much as his customer – many don’t – and ideally, much more, by virtue of staying ontop of the market hourly or daily.
It’s obvious, judging from some comments, that some of what I reveal here is news to sellers – I assure you, buyers aren’t surprised. Here’s the Monkey again, answering his own question, funny enough, in another post explaining his view of the world:
I had my property on the market for 180 days and buyers repeatedly low balled my asking price by $3mm-$5mm! Do I look stupid?!?!?
Imagine, in this market, having a house that actually attracts multiple bids over time your house must be remarkable indeed. But if every single buyer tells you that your house is worth $3-$5 million less than you think it is, you have a choice: you can accept what the market is saying and adjust your price accordingly or you can stubbornly inisist that the market is wrong and that you’re right. Guess which path will result in a sale?
I’ve been advising readers for months that this is not the time to sell their house if they don’t have to or don’t want to. Certainly, the price of anything you might want to buy as a replacement will also be down, but if you’re trading down, rather than up, you’re going to feel pain. What I will never advise is that you list your house at a dreamed-for number and then complain when buyers don’t share your dream. As Monkey admits, that’s just stupid.
So I plead not guilty to causing any part of the drop in prices. The Buyers decide, I report. Period. If your own agent isn’t giving you the same information, perhaps you should ask her to.
No, not the house pictured – that’s Leona’s place which, despite a $30 million write-down is still for sale. I wonder when Ogilvy or Leona’s heirs will mark that to market? In any event, 8 Hillcrest Park Road in Old Greenwich did go to contract yesterday. This house was built new in 2000, put up for sale in 2003 for $2.650 and eventually sold in June, 2004 for $2.4 million. The buyers returned it to the market in May of this year at $2.750 and when that didn’t work chopped its price until on November 21 it hit $2.495, which has flushed a buyer from the bushes. I would assume that the winning price was less than the asking price so someone lost money here.
And speaking of losing money, two new houses were listed in New Canaan yesterday for $6.775 and $6.895, respectively. They’re both part of the same subdivision on 2 acres each and are sized at 9,500 sf and 10,900 sf. I don’t pretend to know the New Canaan market but these prices, and maybe these sizes, seem out of whack.
With the month winding down and new contract activity not likely to appear, let’s look at what we had this December: 6 single family homes went to contract, with asking prices (selling prices are usually lower) ranging from $375,000 to $2,250,000.
December 2007: 23 houses, $649,000 – $7,750,000.
December, 2006: 49 houses, $780,000 – $12,975,000.
See a trend here?