So there’s all this “stale” inventory, much of which looks very attractive to me (once prices finish correcting). I’m just not seeing why it should be discounted as the rejects.

These tend to be lots where I think the owners might not totally understand the value of development potential / land plunges much faster than housing in general.

Unless they bought at the peak with plans to develop, and are now looking to unload. In that case, they are probably becoming educated very quickly!

I highlighted seven Seattle properties in the forums less that 2 months ago. Only one listing has disappeared (sold?) and the other six are all showing significant price drops. Most are underwater vs. their purchase price.

It’s worth clicking through and checking out. I am too busy to deal with all the links here.

These tend to be lots where I think the owners might not totally understand the value of development potential / land plunges much faster than housing in general.

Have you had any involvement with rental properties?

The 1:1 comparison that is always made on the tubes does not really match what I have seen. If you have one house and rent it out and try and make it pencil on the day you buy it will never work, nor should it. Run the numbers for 5 an 10 years out and the picture can change a little, but with one property it still not going to come out with a huge profit in a calculator.

I think these tv shows have jaded people into believing that owning 1-3 properties using short term loans and constantly flipping one of them is the way to be a successful real estate investor. That method is risky and generates a lot of transactional and tax costs. In the real cases I have seen success in real estate comes from it being a long term investment that is part of a greater portfolio. The example that magnolia44 gave of a $670,000 house selling and then renting for $2400 makes no sense if it is the only rental you own. However if you have a larger portfolio of properties purchased over time with cash flow to deploy and profits to reduce it might make sense.

One of the homes I was watching on Redfin transferred to another agent as a short sale and was relisted at 10K over what the last agent had it at. What are these guys thinking? So instead of 369 DOM, it now shows as 4. Hurry and grab it while you still can!!!

Maybe someone has commented on this already – but I would bet you that part of the uptick in “new” listings that we are seeing so far this year is really just “stale” listings being relisted. I have seen plenty of houses disappear and then reappear as new listings.

So in reality, the picture is probably even more skewed to “Stale” than it appears.

Do you think that is a big number or pretty much in the noise — i.e. a small number.

I think the bigger point is there are MORE FOR SALE SIGNS.

I guess I don’t understand what Fred’s actual point was for posting.

You realize Fred was using his recent personal experience to make a point related to the topic of this post, not looking for affirmation, don’t you?

Totally valid points. I am not trying to get an precise metric, more of just a general sense if things are close or not. They are so off base right now that the error in such data is minimized by the size of the gap. I would not use it for any kind of precision, but its easy to see there is very likely a pricing problem when $2100/mo rentals have neighbors trying to sell a similar 3/2 house for $600k (zillow is fun for this). Even if you take just the zestimates for a rental and subtract 20% for error, things still are not even close.

I don’t disagree with the metric in general, but don’t think it is valid when you use a small sample of craigslist data that has no historical component for half of the equation.

Craigslist has one week of active listing information and no transactional or historical data available at all. The research companies that charge for their data at least know what places actually rented for.

That kind of payment suggests you sunk something like $200k as a down payment on a 3/2 in magnolia. If thats the case then I don’t know what to tell you, obviously you value ownership a whole lot more than most people.

However, I must respectfully disagree with the thrust of this story, Tim. You are making some assumptions about the real estate market that are not correct.

There is a reason why this type of market (MOS 6+) is called a buyers’ market. Any buyer shopping right now has many properties to choose from. If he chooses to make an offer on a property that appeals to him, chances are he will have little competition from other buyers, and will have all the time in the world to grind and haggle to his heart’s content. If the seller of this property is not willing to give it away, the buyer can move on to any of the many other properties that increasingly desperate sellers are trying to flog.

In a hot market, however, such as you (and we) experienced for the last several years, the situation is dramatically different.

When I am shopping on behalf of a buyer in a hot market, if I find 10 possibly suitable properties on MLS, when I call the listing realtors, 8, 9, or even all 10 of these properties will already have accepted offers on them that have not yet removed their “subject-to” clauses or have not yet been processed by the MLS.

While you are correct that in a hot market many properties pass through the market, it can be almost impossible to actually buy anything worth having because when you find something, someone else has already had their offer accepted or you will find yourself competing with several other buyers, at least one of whom will probably outbid you with some ridiculous price.

The selection is infinitely better now. (But I am still recommending to my friend that she not buy yet.)

Rents would have to double or sometimes triple to even make it even money. There is no way these rentals pencil out for a very long time and by that point you have sunk even more money into upkeep and taxes then you are ever going to make back. You could cash flow a property pretty easily with a standard investment 30% down back in 2002. Today that same house would take more like 60-70% down to even get the mortgage to break even, not including taxes, upkeep, vacancy and any return overall. The rental numbers are much more accurate gauge of real (non-credit bubble) market values and they clearly point that todays prices are incredibly unrealistic still.

magnolia44 -

If you think that renting from the bank is worth a 100-200% monthly premium, then today’s prices would be fine. However, history has shown that most people do not place that much of a premium on mortgaging a home over renting it. To each his own I suppose.

How does your theory work if its my “home” not a rental property? The intrinsic value goes up in my book fmore than it can just rent for.

I am comparing the price you can expect to get in rent for the same property to ownership. This is the way real RE investors would value a property and provides a better snapshot of the “intrinsic value” of a house compared to bubble prices. An ownership premium of 1-2x additional rent is so far out of whack with norms it provides an easy way to see how overvalues a bubble price is.

Considering that a rental to ownership comparison for housing is already an imperfect comparison, comparing a purchase with a 30 year obligation to a quick sample of vague craigslist postings has never seemed valid to me.

here is a good cap rate calculator. plug in your purchase price as the “sell price”, and the amount of rent you can probably get from looking at craigslist. Standard houses around the Mag/QA/Fremont/Ballard area go for $1800-2300 depending on how updated they are, from what I have seen in the last few weeks. Those same houses are around the $500-600k range. They are around double what their rental value suggests they should cost.

What are rentals in your neighborhood going for on Craigslist? If you are in the magnolia area, such as your name, then your house will very likely fall 50% in value, although non-inflation adjusted it might just drop 10-15% over the next 5 years. I am looking at rentals there right now, buying the same home would cost a minimum of twice as much per month and thats just for a mortgage with 10% down.

Wait until the FED starts raising rates to combat inflation. 30-50 percent is not ridiculous if the 30yr fixed goes above 10%.

Godd luck with that.

Which bears what I’m seeing when I compare monthly AR’s. Inventory growth from a supply/demand point of view has been relatively flat — to slight improvement (in a few areas).

In Eastside core area medians are flat to -6%, yet sellers original list prices are starting 4-6% above last years original list prices. They’re trying, but not getting an increase. We’re seeing 3-5% price reductions to get in range, then because of market time build, buyers are negotiating another 3%!.

There is a difference in being “on the market” and being “in the market.”

Sellers who are preparing their homes AND pricing correctly for market conditions are being successful — especially in price ranges under $800k.

Inventory is building in the Eastside upper end.

Just pulled this news off Roubini’s blog web comments page, be thankful you’re in America, at least our stocks settled down a bit today [you folks with Chinese stock lost a bunch today]:

CHINESE ECONOMIC MELTDOWN IN PROGRESS

Shanghai down another 6.5% (equal to 780 Dow points). Shanghai is down about 25% (equal to about 3000 Dow points over the last 3 months) and now well more than 50% from its peak. It is inconceivable that this ongoing meltdown does not reflect an underlying crisis in the Chinese economy, regardless of what statistics show. The market apologists regularly point out that emerging market economies will keep the developed economies out of recession. When these folks realize that the rug has been pulled out from under them it is not going to be a pretty sight.

Written by Gloomy on 2008-06-19 06:25:37

As much as I mock their ever-sunny press releases, and despite their heavy-handed member rules, I’m quite grateful for the openness of the NWMLS.

there seems to be a lack of fact-based RE market analysis worldwide. the market should be wide open.

the only question is who is willing to pay for it and how do you sell to them.

I don’t think you’ll be slammed too hard. It sounds like it might be a good deal, as long as you can afford the payments and are planning to stay for a long time. You WILL get slammed if you become another Magnolia44 (bashing people hear to justify your purchase). Enjoy your home.

The reason I’m bringing this up now is due to the length of our transaction. We went through a “short sale” and made the final bid the first week of February. It took 4 months for the lender (Countrywide) to accept our amount offered and a couple more weeks to dot the i(s) and cross the t(s). The home stayed on the market all that time and just came off. This “stale” house was on the market 140+ days but only had action on it for the first two to three months while the rest of the time it was sitting around and waiting for CW to make a decision (it was NOT placed in “pending” because the sellers were afraid of us leaving the deal at midpoint). What I’m trying to get at is that there may be a bunch of short sales on the market that take time to complete which are unavailable to purchase because a deal is in the works yet show up on the inventory as active. I don’t know the percentage of “short sales” out there currently but given the financial situation of some home owners which have purchased within the past few years, I imagine this number is significant enough to artificially influence the home inventory levels. Like I mentioned, CW took 4 months to make a decision on an offer during a non-peak period of the market, how long will it take for acceptance on an offer made in May or June? My money is on “more than 5 months.” We waited and stayed with our transaction due to the percentage less we were obtaining the house for.

Don’t get me wrong, there are a ton of people out there that are clueless which can’t (or won’t) lower their asking price which are also extending the length of stale homes on the inventory as well.

Fear in the economy, slow lender responses on short sales, tighter credit requirements to purchase, unrealistic home owners overvaluing their homes and interest rates slightly rising makes a recipe of slow home sales and increased inventory in my opinion.

Apparently NWMLS is going to be allowing the websites to post the true, cumulative days on the market (CDOM) the the Realtor’s see, though I have yet to see it (Estately has said they will provide it, and I’d be surprised if Redfin doesn’t follow suit). That will improve our data immensely.

We looked for about 6 months only on the internet, driving by places and going to a couple of open houses before we engaged an agent. After we started actually looking at places based on new MLS items it was like there was a whole different set of listings that sold quickly that never made it to any websites until the listing had sold.