News Roundup: Jobs, Everett Condos, Illusions…

Here are a few relevant news stories that have popped into my inbox in the last few days:

In the last article, Aubrey Cohen picks up on the pending story we explored on here a couple weeks ago. The NWMLS representative he spoke with provided the same two explanations for the pending/closed discrepancy that we independently deducted here: short sales and the NWMLS definition change.

From Aubrey’s article:

Bob Gent, director of business development and member relations for the listing service, acknowledged the definition change had an impact. In fact, he provided statistics showing that the rate of pending listings going back on the market jumped from 1.5 percent in January through May of 2008 to 4 percent in June 2008 through April 2009.

But said the change could only account for part of the recent increase in pending sales. Take out all the pending sales that went back on the market last April and this April, and there’s still a 6-percent increase.

”Did it have an impact? Yes,” Gent said. “It’s not big enough to explain the situation.”

So why are the increased pending sales not yet showing up in closed deals?

“The length of time from going pending to close has increased dramatically in the past few months due to short sales,” Gent said.

You may notice of course that Mr. Gent avoids addressing the issue of how many of these “pending” short sales simply never close. Local agent and Seattle Bubble regular Kary L. Krismer points out some common reasons why short sales are often failing to close in the P-I comments:

There are a number of reasons a short sale could fall out, including:

  1. Buyer gets tired of waiting.
  2. Bank refuses to accept unrealistically low price, and buyer refuses to pay more.
  3. Seller figures out that the bank isn’t going to release the balance, and that they’re better off being foreclosed.

Again, I’m not contending that sales are not increasing. In fact I have predicted that they will increase as prices continue to fall, just as they have in other parts of the country further along the bust cycle than Seattle. I just think the combination of short sales (which fail more often than normal sales) and the NWMLS “pending” definition change are overstating the increase.

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About The Tim

Tim Ellis is the founder of Seattle Bubble. His background in engineering and computer / internet technology, a fondness of data-based analysis of problems, and an addiction to spreadsheets all influence his perspective on the Seattle-area real estate market. Tim also hosts the weekly improv comedy sci-fi podcast Dispatches from the Multiverse.

49 comments:

  1. 1
    b says:

    How much longer before they change the definition of “sold price”?

  2. 2

    AND YOU GOT LIVE SOMEWHERE

    If you already own a house [especially little or no debt] and you move to Dallas to get a job; you’re going to need to sell the old one and buy a new one, in most cases.

    I’ve been reading a new novel way to buy/sell homes is simply trade titles [perhaps a bit of cash thrown in too to make it fair], assuming both sellers own 100% of their homes. The beauty: “No precarious banks to deal with” and pending sales that turn into toilet flush a lot of the time. Even your credit score becomes a joke too.

  3. 3
    Kary L. Krismer says:

    By b @ 1:

    How much longer before they change the definition of “sold price”?

    I’m not sure if you’re thinking the same thing I am, but I wish they would exclude seller paid contributions to closing costs and loan fees, etc. The problem is, not all seller concessions can be easily valued–e.g. a builder upgrade. But at least it would be a start.

  4. 4
    patient says:

    It still doesn’t add up. 2.5 increase due to the status change and if i recall correct our nwmls members here ( Kary, Greg et all ) has mentioned that short sales are currently only in the single digit of percentage of all sales. So combined maybe 10% of all pendings that do not close in the historic timeframe can be explained with short sales and the change in the pendings definition, what about the other 50%? Is the short sales percentage and rules impact reliable?

  5. 5
    patient says:

    RE: patient @ 4 – Sorry that should be “the other 30%” since I think about 60% of March’s pendings closed in April, making the “fallout/delay” 40%

  6. 6
    Kary L. Krismer says:

    RE: patient @ 4 – Single digit of all sales. For pendings it’s higher, but not clear how much higher because not all of the pendings have changed status since the new rule went into effect. Today in the P-I comments I said it wouldn’t surprise me if the SS and REO pendings exceed 25% of the pendings, based on what I’m seeing so far.

  7. 7
    patient says:

    RE: Kary L. Krismer @ 6 – Thanks Kary, it would need to be about 35% of pendings to expalin the gap. That would be a very significant and interresting development of the market.

  8. 8
    PhinneyDawg says:

    All anecdotal, but I’ve noticed a LOT of sold homes in my Phinney/Greenwood neighborhood in the last two months. I even know a first time buyer who bought a home in Phinney just the other day.

    Is this backed up by any of the data out there? Is there any data on the average home price sale for the specific neighborhoods? Any data on how many of these sales are short sales/foreclosures?

    I know area 705 (Greenwood/Phinney/Ballard) has a very low surplus of homes around 2.5 months, but this seems like a lot of sold homes for such a tough economic climate. Are a lot of people buying some really good deals or is the recovery time only being delayed in this area?

  9. 9
    Rojo says:

    RE: PhinneyDawg @ 8

    Seems like a lot of home sales below or around 500K. I have been watching the capitol hill market very closely and I am seeing that homes priced right are going very fast. People are taking advantage of 8000 tax credit, low interest rates and 20-30% lower prices. I wish I was a first time buyer today!!

  10. 10
    Greg Perry says:

    By patient @ 4:

    It still doesn’t add up. 2.5 increase due to the status change and if i recall correct our nwmls members here ( Kary, Greg et all ) has mentioned that short sales are currently only in the single digit of percentage of all sales. So combined maybe 10% of all pendings that do not close in the historic timeframe can be explained with short sales and the change in the pendings definition, what about the other 50%? Is the short sales percentage and rules impact reliable?

    No doubt SS and REO’s contribute to fall out, but also the spring lag between pending sales and closed sales is very normal. In recent history, however, we not seen such a significant jump, month to month, as we did from February to April. Here’s this year graph:
    http://www.workingforyou.typepad.com//.a/6a00d83451cc6269e20115708aee0f970b-popup

    And a historical 4 year graph:
    http://www.workingforyou.typepad.com//.a/6a00d83451cc6269e20115708af219970b-popup

    The graphs clearly show early year lag, later year catch up. This year, January, February and March were well off historical pending levels DESPITE the change in the pending accounting procedure.

    The last 6 weeks for KC SFH pendings look like this:

    487,497,532,560,571,592

    The long weekend will likely make a break in the weekly increases, but they should resume with the next full week.

    I predicted a 2000+ month for closings in 2009. I’m sticking with it.

  11. 11
    Greg Perry says:

    By Rojo @ 9:

    RE: PhinneyDawg @ 8

    Seems like a lot of home sales below or around 500K. I have been watching the capitol hill market very closely and I am seeing that homes priced right are going very fast. People are taking advantage of 8000 tax credit, low interest rates and 20-30% lower prices. I wish I was a first time buyer today!!

    Last week in the metro seattle areas of 140,380,385,390,700,705,710,715 and 720, 75% of the pending sales were under $500,000. The week before, it was above 83%.

    BTW, for my post #10, Statistics compiled, but not verified and published by the NWMLS

  12. 12
    Greg Perry says:

    By PhinneyDawg @ 8:

    All anecdotal, but I’ve noticed a LOT of sold homes in my Phinney/Greenwood neighborhood in the last two months. I even know a first time buyer who bought a home in Phinney just the other day.

    Is this backed up by any of the data out there? Is there any data on the average home price sale for the specific neighborhoods? Any data on how many of these sales are short sales/foreclosures?

    I know area 705 (Greenwood/Phinney/Ballard) has a very low surplus of homes around 2.5 months, but this seems like a lot of sold homes for such a tough economic climate. Are a lot of people buying some really good deals or is the recovery time only being delayed in this area?

    I watch all KC NWMLS areas by location and price range. If you want to see price range breakout for Metro Seattle and the Eastside:

    http://www.workingforyou.typepad.com//realestate/2009/05/king-county-pending-sale-count-approaches-600-for-week.html

    Hit the “Market Watch” button for plenty of price range breakouts.

  13. 13
    unearthly says:

    Much of the sales in Greenwood are under the new conforming loan limit ($567k). Under that magic number the loans are 3% down with $8k in free money; meaning homeowners only have to risk up to $9k of their own money. Of the 25 Single Family House Sales in Greenwood, 24 or 95% are under the conforming limit. This is all part of the new Government sponsered mortgage bubble; it too will burst.

    Stevens (Capitol Hill/Madison Valley in 98112) has had 5 single family home sales in the last 3-months with only 1 under the conforming loan limit (20%). There are 35 Single Family houses for sale in that area.

  14. 14
    deejayoh says:

    By Greg Perry @ 10:

    The last 6 weeks for KC SFH pendings look like this:

    487,497,532,560,571,592

    The long weekend will likely make a break in the weekly increases, but they should resume with the next full week.

    I predicted a 2000+ month for closings in 2009. I’m sticking with it.

    Greg – are you able to look at closings? are they trending upwards as well?

  15. 15
    waitingforseattletocool says:

    RE: Greg Perry @ 10

    I’ll give you a hint, make your prediction your best “wild-donkey” prediction.

    That way if your right, you get to gloat.

    If your wrong, it was just a “wild-donkey” guess.

  16. 16
    Greg Perry says:

    By deejayoh @ 14:

    By Greg Perry @ 10:

    The last 6 weeks for KC SFH pendings look like this:

    487,497,532,560,571,592

    The long weekend will likely make a break in the weekly increases, but they should resume with the next full week.

    I predicted a 2000+ month for closings in 2009. I’m sticking with it.

    Greg – are you able to look at closings? are they trending upwards as well?

    Yes, this week 217, previous week 175.

  17. 17
    Haybaler says:

    Tim,

    Another news story that you might reference is the new “Protecting Tenants At Foreclosure Act of 2009” signed by President Obama yesterday.

    Apparently this Federal Law will provide current Tenant/Leaseholders some protection from immediate eviction upon completion of a Foreclosure with a minimum notice of termination at 90 days and some leases required to be honored after Foreclosure.

    My source was on Patrick.net.

  18. 18
    Racket says:

    By Rojo @ 9:

    RE: PhinneyDawg @ 8

    . People are taking advantage of 8000 tax credit, low interest rates and 20-30% lower prices. I wish I was a first time buyer today!!

    Why for and $8000 tax credit. My first time buying a house I failed, the second time around I can do better than that 8k tax break.

  19. 19
    Kary L. Krismer says:

    RE: deejayoh @ 14 – From the sales closed so far this month it appears that May will be an increase over April. Less than 10% are reported at SS or REO.

    The median seems to be holding too, which is another indication that a lot of these pendings are simply not closing. December, January, March and April all had closed sale medians above the prior month’s median pending number, and February was equal to January’s pending. April’s closed median was above March’s pending median by $20,000.00! In this market the pendings are no longer an indicator of the next month’s price. In 2007, which was a transition year, it was a useful predictor in 10 of the 12 months, and it did predict the steep declines in August-October 2008. Gotta be the short sales.

  20. 20
    deejayoh says:

    RE: Kary L. Krismer @ 19RE: Greg Perry @ 16

    Yes, this week 217, previous week 175.

    That seems surprisingly low relative to pendings. About 1/3 the volume?

    Kary, I take your point about short sales.

    One thing that puzzles me – if 75-80% of the sales are in the LT $500k range, I would think the median would be dropping. Seems like the volume shift would drag the median down.

    In any case, in a market like this where the mix is shifting around and volumes are relatively low, I find the median to be a very unreliable indicator of where prices are going. I prefer to look at indexed values like Case Shiller and Radarlogic – the time lag is fine with me as I don’t plan on day-trading houses.

  21. 21
    masaba says:

    RE: Greg Perry @ 16

    I was thinking the same thing as deejayoh. That’s fewer than 500 closings over a two week period. Not really an upward trend from March or April.

    Of course, it could still turn around, but it would seem that unless the last two weeks of May really generate a lot of closings, we can expect to see ~1000 closed sales volume again for May.

  22. 22
    Racket says:

    Median prices simply give the media something to talk about. They may have some value to people planning on moving to an area, but that’s about it.

  23. 23
    Kary L. Krismer says:

    By masaba @ 21:

    I was thinking the same thing as deejayoh. That’s fewer than 500 closings over a two week period. Not really an upward trend from March or April. .

    It’s really better to look at monthly numbers because there are so many properties that close at the end of the month. That last week is almost always, if not always, the biggest week by far.

  24. 24
    Kary L. Krismer says:

    RE: Racket @ 22 – Median numbers are an indicator of the strength of the market, but to the individual buyer, seller or homeowner, none of the indicators mean a heck of a lot, especially if you’re house is not similar to the median (e.g. a 1 bath or a 5 bedroom 6,000 square foot house on Lake Washington).

  25. 25
    Greg Perry says:

    RE: masaba @ 21RE: deejayoh @ 20

    On the medians shift downward.

    Yes, I think you have something there. Something that I’ve introduced, but hasn’t built too much steam in conversation –yet– is market compression.

    As the 2nd tier and high end struggle, and the vast majority of sales being made in the low end, the market is bottom weighted. IMO will cause broad indicators like KC medians to continue to fall. YET prices could (and will) shore up in the the bottom tier where the sales are happening. (the law of supply and demand will work here).

    Closed sales are still off the pendings by a considerable margin. This week will also be a bad week for closings because my reporting period (Thurs – Wed) will be missing county recording days on Friday and Monday. (I wouldn’t be surprised to see the first down week in pendings either because of the weekend).

    Then I think we’ll start to see the gap narrow considerably. In looking at historical trends, there is ALWAYS a gap between pendings and closings in the early year that catches up later in the year. In recent reporting we have never seen the market go from pending numbers from the low 200’s to the high 500’s as quickly as we have this spring (with such a high percentage in the low tier). In addition, we have other factors like the SS’s to factor.

    Basic math and the shear volume of pendings will cause a dramatic uptick in closings —- soon.

    This is a most fascinating market to watch and try to figure out.

  26. 26
    Greg Perry says:

    By deejayoh @ 20:

    RE: Kary L. Krismer @ 19RE: Greg Perry @ 16

    Yes, this week 217, previous week 175.

    One thing that puzzles me – if 75-80% of the sales are in the LT $500k range, I would think the median would be dropping. Seems like the volume shift would drag the median down.

    In any case, in a market like this where the mix is shifting around and volumes are relatively low, I find the median to be a very unreliable indicator of where prices are going. I prefer to look at indexed values like Case Shiller and Radarlogic – the time lag is fine with me as I don’t plan on day-trading houses.

    Yet, when you look at CS index numbers against KC medians, they look pretty darn close to me, What so you see?
    http://www.workingforyou.typepad.com//.a/6a00d83451cc6269e20115707fe5f3970b-popup

    I do think this market is bottom weighted and this will strongly influence median prices.

  27. 27
    per_se says:

    The median price is based on closed, right?

    Would it be wrong to infer that if the gap in total pending vs closed is due to short sales taking longer to close then there is also a lag in the median price falling? Short sales are typically sold at a discount to what would be considered the market rate. So once all these short sales start closing they should lower the median price accordingly, even in the CS index.

  28. 28
    deejayoh says:

    RE: Greg Perry @ 26

    Yet, when you look at CS index numbers against KC medians, they look pretty darn close to me, What so you see?
    http://www.workingforyou.typepad.com//.a/6a00d83451cc6269e20115707fe5f3970b-popup

    I think the median tracks pretty closely to the Radarlogic 28-day index, not so close to C-S. It is much too volatile, the CS index smooths that out

    here is a chart that compares all the major indexes for the area zero-based to 2000. You can see they are all generally close, but not exactly the same

    http://img7.imageshack.us/img7/1024/indexcomparison.png

  29. 29
    Kary L. Krismer says:

    By per_se @ 27:

    The median price is based on closed, right?

    Would it be wrong to infer that if the gap in total pending vs closed is due to short sales taking longer to close then there is also a lag in the median price falling? Short sales are typically sold at a discount to what would be considered the market rate. So once all these short sales start closing they should lower the median price accordingly, even in the CS index.

    Sort of. All things being equal, in this type of market you would expect the median closed for a month to be below the median pending for the prior month, because the sale price on the pendings is likely to be lower. But right now you’re seeing the median pending being much lower without dragging down the median closed.

    Case-Shiller might be likely to exclude short sales, because they exclude any sale where the price drop is abnormal (or rise too high).

  30. 30
    Kary L. Krismer says:

    These numbers are since August 2007 of the difference between how far the C-S is off from peak compared to the NWMLS median. A positive number means C-S is higher than the NWMLS median. Thus if C-S is 93% of peak, and the NWMLS 87% of peak, the number would be 6.

    0.6766719 (Aug, 07)
    6.1120931
    6.4338519
    6.8801022
    5.7048552
    4.0095874
    4.1494417
    1.2592071
    0.136892
    1.436025
    -0.783415
    -0.726721
    2.989152
    3.6766547
    7.2144748 (Oct, 08)
    4.2595883
    -0.646204
    0.695381
    1.085437

    I think the main difference is probably due to the fact that C-S uses a 3 month average, and thus when you have rapid price decreases the NWMLS would appear more volatile.

    But again remember, the NWMLS data I’m using is just for King County, and C-S uses King, Pierce and Snohomish.

  31. 31
    Jonness says:

    Note to all bottom callers: It”s time for a reality check. The sky is falling in Tacoma. Seattle is next in line.

    http://www.redfin.com/WA/Tacoma/1729-N-Jackson-Ave-98406/home/2976215

    Jan 31, 2007 Sold $673,500
    Oct 28, 2005 Sold $565,000
    Sep 14, 1990 Sold $177,500

    Cumulative days on Redfin: 126

    Asking price: $287,000

    Features: Bank owned, large Swimming Pool, private back yard, indoor Jacuzzi, hardwood floors, view of Puget Sound, private non-busy street, close to Hwy 16, bright airy basement rooms.
    ————————————————-

    http://www.redfin.com/WA/Tacoma/1353-N-Heatherwood-W-98406/home/2922613

    Dec 15, 2005 Sold $575,000
    Feb 22, 2005 Sold $452,360
    Aug 21, 2000 Sold $267,582

    Cumulative days on Redfin: 349

    Asking price: $385,000

    Features: 3635 sq ft, indoor swimming pool, very nice lot, nice floorplan, nice kitchen, hardwood floors, private non-busy street, close to HWy 16, professional landscape design. This home is sitting empty and has apparantly gone back to the bank. The pool is sitting half full of musty water, and IMO the home will get ruined if it’s not drained and put back in order (it’s already starting to mold the pool room walls). Interestingly, the sinks have winterized stickers on them. Why was the pool not winterized? This one might be in transition between the buyer and the bank, so I’m not sure I completely trust the price. It could turn out to be lower :)

    I won’t be showing my favorites because I might want to buy one next year after they get beaten up some more. Tacoma is in trouble, and Seattle can’t be far behind. Too bad for the people who bought last year because “now was a good time to buy, and interest rates were about ready to shoot up so high any future depreciation would be eaten up.” Note to bottom callers: The overall trend is still down. 25% of the subprime loans in WA are going to reset in 2009. Commercial is starting to take a hit, and there is a massive wave of Alt-a on the horizon. Speaking of Alt-a, we won’t be out of the woods for years. Here is a recently updated chart of recasts:

    http://mortgage.freedomblogging.com/files/2009/05/reset-chart-for-blog-april.jpg

    Oh, it’s going to get ugly. I’m starting to think home values are going to sink all the way to 2000 prices. Now is a scary time to buy. “I’m turning Japanese. Yes, I’m turning Japanese. I really think so.”

    https://seattlebubble.com/blog/wp-content/uploads/2008/10/japanes-and-us-housing-bubbles.png

  32. 32
    Jonness says:

    Interestingly, my alarmist post is awaiting moderation. Editing appears to have been locked after I linked deejayoh’s chart of the Japanese housing bubble.

  33. 33
    Kary L. Krismer says:

    Bank owned properties are not really a good judge of the market. The last time I checked medians, they were $50,000 below even the short sales.

    There are reasons for this. First they’re generally in poor condition. Second, the banks are very poor at marketing them. Third, the banks often have very poorly drafted contracts that turn off a lot of buyers.

    If you want to know what not to do to sell a property, go look at a number of bank listings and learn.

  34. 34
    waitingforseattletocool says:

    Why don’t the agents representing the short-sale properties just keep the listings as Active instead of changing them to Pending – Inspection if there is such a high fallout?

    Once the listings go Pending – Inspection, they are not visable on websites for potential buyers.

    Under the old MLS definition, Active – STI were still displayed on websites for potential buyers.

  35. 35
    Kary L. Krismer says:

    RE: waitingforseattletocool @ 34 – The rule is ambiguous, but IMHO it doesn’t allow that. The agent can take the listing Pending BU, which means backup offers will be accepted.

    But that would only help where it’s the buyer that backs out. It wouldn’t help at all where the bank didn’t approve the short sale and has totally unreasonable expectations as to what they should get.

    In that regard, in my regular search of Renton and Kent I noted that two bank owned properties had expired listings. The one I looked at the history on had been on the market 5 months with price reductions. I didn’t dig into it further to see if it had been a short sale earlier, but if the bank thought it was worth more 5 months ago, it isn’t inconceivable that they would have turned down a short sale 7 months ago, before they foreclosed.

    Finally, keep in mind that one of the problems the NWMLS is dealing with is agents setting short sale prices too low–below what the bank would realistically accept. So sometimes the fallout is the agent’s fault. I don’t know how the NWMLS can deal with that issue, because how can you determine what a bank is willing to accept when the bank won’t talk to you until 3 months after you have an offer?

  36. 36
    waitingforseattletocool says:

    RE: Kary L. Krismer @ 35

    Thanks for the insight.

    In any case, why don’t the websites (Windermere, John L. Scott, etc.) just change their postings to show some or all of the Pending listings, whether they are “Active” or not?

  37. 37
    Kary L. Krismer says:

    I don’t know if there’s a rule against that, or if they just figure there’s little interest in it.

  38. 38
    waitingforseattletocool says:

    RE: Kary L. Krismer @ 37

    This is mostly for my own curiosity:

    “agents setting short sale prices too low–below what the bank would realistically accept”

    Are you saying the listing agent establishes the list price on short sales without consultation from the lender?

  39. 39
    Kary L. Krismer says:

    RE: waitingforseattletocool @ 38 – Yes. The lender typically won’t tell you a thing until you have an offer.

    Keep in mind that the bank doesn’t necessarily release the owner from the deficiency, but many agents price these things as if they will be released.

    Last year the NWMLS amended the rules and provided a new form that basically catered to short sales. I wish they had gone the other way. For normal listings you cannot list them unless the sale will go through at the list price. They make an exception to that for short sales and court approval type situations. I wish they’d gone the other way on short sales, and said that the listing cannot be listed until the bank approves the listing. That would have sent a strong message out, but it would also have been a somewhat risky move for the NWMLS, so I fully understand why they didn’t move that direction.

  40. 40
    Jonness says:

    “Bank owned properties are not really a good judge of the market. The last time I checked medians, they were $50,000 below even the short sales.”

    My favorite property (not shown) is not bank-owned. It’s an estate sale, and the price is perhaps 50% of what it would have cost at the bubble peak. I’m going to wait it out and get something comparable next year for an extra $100K off though.

    I hear you that bank-owned doesn’t reflect the value of the entire market. It’s just that when a house sells for almost $700K in 2007, and is in basically the same condition in 2009, and is listed at less than $300K, all the non-bankowned properties in the neighborhood are pressured to compete. This is exactly the situation I witnessed in Las Vegas about a year to a year-and-a-half ago. We’re on the same path. Once we come out of the current ARM lull and start into the Option-ARM mess of 2010, we’ll see a whole new round of pain. Then again, WA is lagging the subprime mess, and 25% of all subprimes in the state will reset this year. Thus, we might not have to wait until the Option-ARM’s start imploding to see another big round of price drops. It could start happening right after the current Spring bounce. If so, the people buying now are going to be freaked.

    “The last time I checked medians, they were $50,000 below even the short sales.”

    That’s exactly what I’m observing. I’m not likelly to pick up a short sale, because I know I can get the same house cheaper a few more months down the road. For instance, the house I linked listed at $287K was originally listed as a short sale at $399K. Why pay for a short sale when it’s such a hassle, and they’re typically way overpriced?

    I would have preferred that house prices track historical norms. Since the bubble happened against my will, I might as well make a few bucks when we overshoot the bottom.

  41. 41
    Kary L. Krismer says:

    RE: Jonness @ 40 – One reason to go the short sale route is you’re more likely to deal with standard contract terms. Some of the bank stuff is pretty scary, and I’m not sure how open they’ll all be to modify it.

    Estate sales are an interesting beast. Some of them go cheap, but some of them the heirs are just as unreasonable as the worst sellers. And that can even be true where there are 4 or more heirs, where any increase in price means relatively little to them.

  42. 42
    Jonness says:

    RE: Kary L. Krismer @ 41

    Kary:

    One short sale I looked at was listed cheap. Wow, what a deal I thought! I promptly asked a realtor to put in a full price offer, but when he called the listing agent, he told us the place had multiple offers for well above the listed price. About 2 months later, the place went inactive. 4 months later, it was relisted for $125,000.00 above the previous list price–same owner, same bank.

    That killed my interest in short sales. It seems like a fraudulent game to me, but perhaps that’s due to my limited exposure to this kind of sale. Quite frankly, I’m surprised it’s legal to advertise at a price way below what the legal owner will accept.

    I’m finding estate sales more interesting than short sales. One place I really like has been on the market forever. It has multiple heirs, and they are slowly dropping the price at about the rate the market is dropping. However, they started too high, so even though they drop the price, the house stays above what it will sell for. It works out well for me, because it keeps it alive long enough to eventually drop into my affordability range and allows me to save a larger downpayment in the meantime. Actually, I’m looking at three different waterfront homes where the heirs are playing this game. I’m glad the heirs don’t know what they’re doing and their RE agents haven’t been able to talk some common sense into them. The more waterfront supply that sits out there, the better my chances are.

    I’m surprised by the realistic price of another estate sale I’m looking at. In addition, the seller drops the price every month it sits out there (3 price drops so far). I expect it to sell this Spring. It’s a great house for the money and will drop faster than the market until it lands in someone’s affordability range. I’m very tempted by the place, but I’m betting the market is headed considerably lower, so I’m passing on it for now.

    As bearish as I am, I don’t think buying a home right now is the worst thing a person can do. But if the buyer doesn’t have 20% down and doesn’t expect to live in the home for 10+ years, I question whether it is a good decision.

    I’ve seen a few distressed new construction deals out there worth considering. If the house is well constructed and selling below replacement value, it provides some peace of mind.

    In addition, I’m seeing some of the better priced REO’s getting snapped up after only being on the market a few days. In some cases, they are great deals. In other cases, the homes have structural problems and should be avoided like the plague.

  43. 43
    Kary L. Krismer says:

    RE: Jonness @ 42 – The NWMLS is trying to crack down on that type of activity (although if it were a “bids reviewed on _____, 2009” they might not). But it’s hard to police because how do you determine what a bank is likely to accept when they don’t talk to anyone?

  44. 44
    Racket says:

    “But if the buyer doesn’t have 20% down and doesn’t expect to live in the home for 10+ years, I question whether it is a good decision.”

    What does that matter at 4.75% its the banks problem if the home doesn’t have proper cash to back it. Why would a buyer not be foolish to put as little as possible down, if the rates are good (-PMI of course).

  45. 45
    Jonness says:

    “What does that matter at 4.75% its the banks problem if the home doesn’t have proper cash to back it. Why would a buyer not be foolish to put as little as possible down, if the rates are good (-PMI of course). ”

    You would have to put 3.5% down and pay closing costs. First time buyers could offset some of the loss with the 8K credit. Then subtract the difference between what the place can be rented for compared to the monthly payments. You can probably make out on the deal if you stop making payments and stay in the house for as long as possible. But consider what’s going to happen to your credit score. If you can take the stress, it might be worth it. I’m thinking for most people, the aging effects of the additional stress will result in an overall loss. I certainly would not want to go that route. For people on food stamps and can get the loan, it’s probably a good deal though.

    FWIW, everybody I know who has lost their home in this mess, even with zero down, has aged 10 years in the last 2 and is sickened by what’s happened to them. If you could go into this with a strategy to come out ahead, you could probably skip the stress and make it worth it. It seems like a lot of work for not much of a return though.

    But I agree with you, impulsive people are not getting spanked as hard as they should.

  46. 46
    Kary L. Krismer says:

    RE: Jonness @ 45 – The issue isn’t money into it, the issue is ability to fund the payments. The inability to make a mortgage payment is what causes stress.

    The bigger problem is people not living within their means. The 12% of homeowners in default–think about that in terms of the number of people refinancing for higher and higher amounts every year or two. I’d guess that most of the defaults are not because people are underwater, or even unable to make their mortgage payments by themselves, most of the defaults not caused by unemployment or medical conditions are probably due to the total debt structure.of the owners–debt they ran up after buying their homes. And you back out the house as a source of funding for spending, and it’s no wonder that we’re in a recession.

  47. 47
    Racket says:

    RE: Kary L. Krismer @ 46

    I agree with you 100%, there is a ton of REO inventory that was originally purchased BB (before bubble)

  48. 48
    Racket says:

    RE: Jonness @ 45

    Everyone keeps saying cost to rent vs ownership. There typically a huge difference in the quality of house you get VS the quality of one you will buy. The difference in quality of house can be as much as 10-20% of the purchase price if everything had to be brought up to the level of a house you would sell.

  49. 49
    Racket says:

    Oh btw you still didn’t address the original question what does it matter 3.5% vs 20%?

    4.75% is a really cheap loan.

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