September Housing Market Stats Preview

With September in the bag, let’s have a look at the monthly stats preview. Most of the charts below are based on broad county-wide data that is available through a simple search of King County Records. If you have additional stats you’d like to see in the “preview,” drop a line in the comments and I’ll see what I can do.

Here’s your preview of September’s foreclosure and home sale stats:

First up, total home sales as measured by the number of “Warranty Deeds” filed with the county:

King County Warranty Deeds

County sales as measured by warranty deeds were down just slightly (0.3%) from last year in September, and actually increased month-to-month, up 7% from August. I would not be surprised to see September through November sales make a stronger showing than is usual for this time of year, with the impending expiration of the $8,000 free money giveaway pushing people who are bad at math to make a rush decision on a highly leveraged purchase.

Next, here’s Notices of Trustee sale, which are an indication of the number of homes currently in the foreclosure process:

King County Notices of Trustee Sale

September was the second-lowest month this year, but still came in higher than any month in 2008. I suspect this number will continue to rise back up to around the 1,000 mark.

Here’s another measure of foreclosures, looking at Trustee Deeds, which is the type of document filed with the county when the bank actually repossesses a house through the trustee auction process. Note that there are other ways for the bank to repossess a house that result in different documents being filed, such as when a borrower “turns in the keys” and files a “Deed in Lieu of Foreclosure.”

King County Trustee Deeds

Second-highest month on record, despite the various changes to the foreclosure process legislated earlier this year here in Washington.

Lastly, here’s an approximate guess at where the month-end inventory was, based on our sidebar inventory tracker (powered by Estately):

King County SFH Active Listings

If our tracker is close to the official numbers, inventory may actually increase slightly from August, but will still be down about 12% from last year’s level.

I don’t know about you, but there’s still nothing in these numbers that screams (or even really whispers) “imminent recovery” to me. Stay tuned later this month a for more detailed look at each of these metrics as the “official” data is released from various sources.

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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.

83 comments:

  1. 1
    patient says:

    It could be nice to have a few more references than the last year (2008). Like one bubble year and one pre-bubble year. For example 2005 and 2001 ( though it’s arguable if 2001 was part of the bubble or not, it could be other factors as population growth that makes older data less comparable ).

  2. 2
    Ray Pepper says:

    Who wispered imminent recovery? Did you see the capital markets today ..BloodShed!………High volume selling into close…Ouch!! If my WEN drops below 4.00 I’m jumping in a bunker.

  3. 3
    patient says:

    RE: Ray Pepper @ 2 – Sometimes even the stock market makes sense. I left it at Dow 9900 and will not return this year.

  4. 4
    patient says:

    I must admit that I’m sad and surprised to see that the $8k tax credit seems to be working pretty well. I had more faith in the Seattlites to be able to see through this cheap sales man trick. Not that I think it will make any difference in where prices will endup but it’s sad to see that more people take on the huge risk of being clubbered by this economy and continued falling home prices than what had been the case without this dirty trick from the NAR lobbyists. I’ll guess we will know a lot better in November really how much impact it has when sales normally see a sharp decline.

  5. 5
    Kary L. Krismer says:

    RE: patient @ 4 – Well first, most the population isn’t as pessimistic about economy as people here, and/or they might not care about the next few years.

    Second, the comparison you probably meant was December, because the credit runs through November. December 2008 was pretty sad (volume only 929), and I really doubt that would repeat just because of the repeal of the credit. Something else might happen between now and then, but I just don’t see the credit itself driving that much volume.

  6. 6
    AMS says:

    RE: patient @ 4 – I suspect that, just like CFC, there was some pent-up demand that is being pulled forward. Now that CFC is over, we’re not seeing such good results.

    Keep in mind that there are not that many added sales, and according to CalculatedRisk, using NAR the ~350,000 added sales number, each additional sale cost the taxpayers more than $43,000. The other sales would have happened without the extra incentive.

  7. 7
    PhinneyDawg says:

    I’m well aware of the housing bubble out there right now (bought a historic home in Phinney at near the peak because I was too young and naive to know it was completely overpriced) and even this latest data is eye opening to how much more price declines should be expected in the future.

    There’s a good chance now that my wife and I will be moving to Olympia for a very job for myself and we don’t know what to do with the house. Its in the 705 market, so their isn’t a huge number of homes on the market.

    Question being: Is it worth it to sell the house now and get out from under the huge mortgage (and eat our down payment) or keep it as a rental?

    We plan on waiting to buy or build a home in 2010 or 2011 or 2012 in Olympia after we save money. Also, does the bubble apply if you build your own home as the general contractor?

  8. 8
    patient says:

    RE: Kary L. Krismer @ 5 – With November I meant that if November turns out relative strong this year compared with October this year and November last year it would be a pretty good indication that the tax credit is adding many buyers in this area. December will be another good indicator but November should give a good idea a month in advance.

  9. 9
    patient says:

    RE: PhinneyDawg @ 7 – I’d sell now. The reasons being that I believe in a larger likelyhood of continued price declines followed by a very slow recovery than a quick recovery of prices. By renting and hoping for appreciation within the next couple fo years you are taking a big gamble with pretty bad odds imo. Also being a landlord from distance is often regarded as a big hassle. That’s what I would do but it all depends on your own outlook on where the market is going.

    Land is susceptible to the bubble. If the land is very cheap you would be better insulated imo.

  10. 10
    Scotsman says:

    “with the impending expiration of the $8,000 free money giveaway pushing people who are bad at math to make a rush decision on a highly leveraged purchase.”

    Tim, you crack me up! I’m not sure if it’s because they’re bad at math (do they even try to think it through) so much as it is the idea of getting something for free. How many think they can use the tax credit for the down to help stretch them into the over-priced object of their desire?

  11. 11
    Back to bascic says:

    People only talking about shadow inventory (bank owned, foreclosure, shortsale,..) People forget that there are huge population of potential buyers who moved to Seattle during MSFT hiring, Boeing hiring boom during the last couple of years. I knew a few who have moving box unopened and waiting the price to the the point. These people are mostly live in rental properties. These people will bid against each other once they realize the value of the housing market. Money are still there if the job are still there. 8k free cash helps but for 340K medium just a drop in the bucket. I think 22% price drop helps the most for many people. Fairly priced property sold quickly. Inventory is low (don’t know, maybe banks and homeowner knew that there are people waiting to buy, or the shadow buyer population). The seller and buyer are playing hide&seek game. I am still renting now. But I told my landlord lady that I might give you a notice to move once I find a place to buy. I intend a month by monthly lease. She said add 50USD to my current rent. I said fine and thanks for saving me 22% down pay for 3 years rent. I figured out she lost 22% equity for let me for three years. What a deal. Now its’ time for serious house hunting.

  12. 12
    Ray Pepper says:

    RE: PhinneyDawg @ 7

    Sell now and rent in Olympia. Reassess your financial situation(and your new job) and always look for a GEM! You will know when its time to buy again…..

  13. 13
    patient says:

    RE: Back to bascic @ 11

    “Now its’ time for serious house hunting.”

    I disagree, now is still the time to be patient and see where the economy is going. Housing moves slowly, I have no fear that it will suddenly appreciate with big numbers. I’m fairly sure that the economy will be leading housing this time and not the opposite. Pay attention to the economy and I think you will have ample time to plan your purchase once things have stabilized. We have had well intended but neurotic posters here before that couldn’t stand the wait and the feeling that homes would suddenly appreciate out of their reach. They were wrong and I think you will be as well if you let fear of competition push you into a imo premature purchase.

  14. 14
    Back to bascic says:

    By PhinneyDawg @ 7:

    I’m well aware of the housing bubble out there right now (bought a historic home in Phinney at near the peak because I was too young and naive to know it was completely overpriced) and even this latest data is eye opening to how much more price declines should be expected in the future.

    There’s a good chance now that my wife and I will be moving to Olympia for a very job for myself and we don’t know what to do with the house. Its in the 705 market, so their isn’t a huge number of homes on the market.

    Question being: Is it worth it to sell the house now and get out from under the huge mortgage (and eat our down payment) or keep it as a rental?

    We plan on waiting to buy or build a home in 2010 or 2011 or 2012 in Olympia after we save money. Also, does the bubble apply if you build your own home as the general contractor?

    When you move to a new place, don’t buy in a hurry. Get familiar with the area and know the maket there. Stronly recommend to sell even if you lost down. Consider you can buy in Olympic cheap now. Put your current housing on the market to see how much you can get. Refinance and lock in low interest now. Get out of the loan now so you can apply new loan easily. If you stay in Olympic less than 5 years, forget about buy, renting a water front for cheap now.

  15. 15
    Scotsman says:

    RE: Back to bascic @ 11

    20% off is nothing.

    And very few of those thousands of new Boeing and Microsoft workers can afford Seattle homes even with the recent price drops. And it will be even harder when they find themselves unemployed.

  16. 16
    sead97 says:

    By Scotsman @ 10:

    Tim, you crack me up! I’m not sure if it’s because they’re bad at math (do they even try to think it through) so much as it is the idea of getting something for free. How many think they can use the tax credit for the down to help stretch them into the over-priced object of their desire?

    And I can’t tell you how many times I’ve heard of people using the $8K refund to buy furniture, trips, etc. They just spent it, and now they’ll pay for it over the next 30 years (since simple economics teaches you that home prices must have inflated by at least $8K to eliminate the arbitrage opportunity)

    It’s much the same stupidity that led people to believe they could spend the equity in their homes. Since they still need to live in the house, it’s just another loan they have to pay back (but secured with their house rather than a car or nothing at all).

    The ignorance of your average American – or the lengths they will go to rationalize what they want – are astonishing.

  17. 17
    Back to bascic says:

    By patient @ 13:

    RE: Back to bascic @ 11

    “Now itsâ�� time for serious house hunting.”

    I disagree, now is still the time to be patient and see where the economy is going. Housing moves slowly, I have no fear that it will suddenly appreciate with big numbers. I’m fairly sure that the economy will be leading housing this time and not the opposite. Pay attention to the economy and I think you will have ample time to plan your purchase once things have stabilized. We have had well intended but neurotic posters here before that couldn’t stand the wait and the feeling that homes would suddenly appreciate out of their reach. They were wrong and I think you will be as well if you let fear of competition push you into a imo premature purchase.

    House won’t suddenly appreciate now. Most likely will stay flat for a couple of years. House is a life style not an trading card. Life is short and why not own one and enjoy it. The roof above you and land below are yours. I don’t want to lend my money to banks for 0% interest and wake up find my money is worth less.

  18. 18

    Nothing in these numbers screams or even whispers imminent recovery, but nothing in these numbers screams or even whispers freefall either. Seems to me that the rate of descent has slowed, but we’ll continue to slowly decline for a while, and then wallow on the bottom for a while longer. They don’t call me a wild eyed optimist for nothing.

  19. 19
    The Tim says:

    By Ira Sacharoff @ 18:

    Nothing in these numbers screams or even whispers imminent recovery, but nothing in these numbers screams or even whispers freefall either.

    Hey, that gives me an idea… People have been saying that this site is overdue for a rebranding, with the “bubble” name being passé and whatnot. Maybe I should register SeattleFreefall.com ;^)

  20. 20
    AMS says:

    RE: sead97 @ 16 – “And I can’t tell you how many times I’ve heard of people using the $8K refund to buy furniture, trips, etc. They just spent it, and now they’ll pay for it over the next 30 years (since simple economics teaches you that home prices must have inflated by at least $8K to eliminate the arbitrage opportunity)”

    You assume a 100% qualification rate. It’s lower than that, so the “inflated price” is inflated by less than the full $8k.

    Just like CFC, the car prices did increase toward the full manufacturer’s suggested retail price (MSRP), but that’s not to say that someone without the clunker would have gotten a much better sales price. When the CFC program ended, new cars didn’t magically drop in price by $3,500 to $4,500. In part this is because not everyone qualified under CFC.

  21. 21
    Rojo says:

    By PhinneyDawg @ 7:

    I’m well aware of the housing bubble out there right now (bought a historic home in Phinney at near the peak because I was too young and naive to know it was completely overpriced) and even this latest data is eye opening to how much more price declines should be expected in the future.

    There’s a good chance now that my wife and I will be moving to Olympia for a very job for myself and we don’t know what to do with the house. Its in the 705 market, so their isn’t a huge number of homes on the market.

    Question being: Is it worth it to sell the house now and get out from under the huge mortgage (and eat our down payment) or keep it as a rental?

    We plan on waiting to buy or build a home in 2010 or 2011 or 2012 in Olympia after we save money. Also, does the bubble apply if you build your own home as the general contractor?

    If the location is great, you can cover the mortgage or close to it – Rent it. You have come to a wrong place to get advice about this. Bubbleheads will always tell to sell and take a huge loss by scaring you with a bigger loss down the road.

    Rent it for 5 years! Now if you are totally hosed up, don’t come close to covering your mortgage, maybe bought at the absolute top with little down payment, the wait might be much longer or even unsustainable. Also, you have plan on additional expenses for maintainance and headaches of being a landlord.

    Why take a huge loss just because some doomsday sayers are telling it is going to get a lot worse. We don’t know that – they don’t know that! It is a question of patience and ability to deal with the unknown.

    If things do get a lot worse, buy one in Olympia for a lot less and then giveup on this one. Who needs the credit – right? (tongue in cheek)

  22. 22
    Back to bascic says:

    By Scotsman @ 15:

    RE: Back to bascic @ 11

    20% off is nothing.

    And very few of those thousands of new Boeing and Microsoft workers can afford Seattle homes even with the recent price drops. And it will be even harder when they find themselves unemployed.

    Boeing and MSFT are well paid companies. Much better than medium Seattle income. That’s why the bubble are from. That’s why people are fighting to keep these jobs here. So yes job may loss to someone who is capable to do and paying less somewhere else. As long as there are good paying job here, the housing bubble will be here. 20% is really something for bubble area. Housing price are local. I bet you never live in HongKong, Tokoyo. People there are complaining housing price for decades and still can afford to rent a tiny place. You have to pay premium for the place people like to live.

  23. 23
    Hello says:

    ” . . . pushing people who are bad at math to make a rush decision . . .” hahaha. That is funny.

  24. 24
    PhinneyDawg says:

    By Rojo @ 21:

    By PhinneyDawg @ 7:

    I’m well aware of the housing bubble out there right now (bought a historic home in Phinney at near the peak because I was too young and naive to know it was completely overpriced) and even this latest data is eye opening to how much more price declines should be expected in the future.

    There’s a good chance now that my wife and I will be moving to Olympia for a very job for myself and we don’t know what to do with the house. Its in the 705 market, so their isn’t a huge number of homes on the market.

    Question being: Is it worth it to sell the house now and get out from under the huge mortgage (and eat our down payment) or keep it as a rental?

    We plan on waiting to buy or build a home in 2010 or 2011 or 2012 in Olympia after we save money. Also, does the bubble apply if you build your own home as the general contractor?

    If the location is great, you can cover the mortgage or close to it – Rent it. You have come to a wrong place to get advice about this. Bubbleheads will always tell to sell and take a huge loss by scaring you with a bigger loss down the road.

    Rent it for 5 years! Now if you are totally hosed up, don’t come close to covering your mortgage, maybe bought at the absolute top with little down payment, the wait might be much longer or even unsustainable. Also, you have plan on additional expenses for maintainance and headaches of being a landlord.

    Why take a huge loss just because some doomsday sayers are telling it is going to get a lot worse. We don’t know that – they don’t know that! It is a question of patience and ability to deal with the unknown.

    If things do get a lot worse, buy one in Olympia for a lot less and then giveup on this one. Who needs the credit – right? (tongue in cheek)

    Hard to say which direction I’m in on the sell vs rent argument. My house is probably down 20% from where I bought it (conservatively) and I put down 25%. Take into account I’ll be paying 5% or more for closing costs selling it and I come out even right now.

    The hassles, cost, and risk of renting this home is tough to swallow though. You all make convincing arguments. I don’t think I’d cover the mortgage (even w/ a 30 year loan at 5%) by renting it, but close. Also, potentially holding 2 mortgages (if I buy or build a home in Olympia) in a very unpredictable economic future seems very risky right now.

  25. 25
    patient says:

    RE: Rojo @ 21
    “You have come to a wrong place to get advice about this”

    Actually I think you have come to the right place. Here you will get a counter weight to the natural reluctance to make a decision that involves an immediate loss. You already have the arguments on making the choice that involves a chance to reduce or eliminate the loss by instinct. It all comes down to how long you honestly think it will take for your home to come back to a price where you with all costs combined are better off than if you sell today. Being a landlord is not free of costs and the risk of having the home stand empty and or take a significant beating is not insignificant. Do deligent research and do not take the advice of only one source. I would also really think of the psychological relief of being free of the worries on top of the financial risks/benefits.

  26. 26
    Snigliastic says:

    RE: sead97 @ 16 – Looks like someone needs a primer on Arbitrage.

  27. 27
    Scotsman says:

    RE: Rojo @ 21

    “Why take a huge loss just because some doomsday sayers are telling it is going to get a lot worse.”

    Um, because a huge loss is better than a worse-than-huge loss? This isn’t rocket science. And besides, it looks like he can get out at about break even in terms of future commitment verses financing a an even bigger loss going forward. It’s basic risk analysis. There’s a very small chance of any gain or recovery in the foreseeable future, he has the opportunity to zero out at this point (the down payment is already gone), and there is still a significant risk of further reductions.

  28. 28
    AMS says:

    RE: Snigliastic @ 26 – The $8,000 has a 3-year residency requirement, if I remember right. Clearly one cannot take and try to gain by arbitrage with this sort of requirement.

    But terminology aside, the potential inflation in price isn’t the full $8k, unless you have a property that is only sought by qualified buyers.

  29. 29
    AMS says:

    RE: Scotsman @ 27 – Simply put, minimize losses.

  30. 30
    Rojo says:

    By patient @ 25:

    RE: Rojo @ 21
    “You have come to a wrong place to get advice about this”

    Actually I think you have come to the right place. Here you will get a counter weight to the natural reluctance to make a decision that involves an immediate loss. You already have the arguments on making the choice that involves a chance to reduce or eliminate the loss by instinct. It all comes down to how long you honestly think it will take for your home to come back to a price where you with all costs combined are better off than if you sell today. Being a landlord is not free of costs and the risk of having the home stand empty and or take a significant beating is not insignificant. Do deligent research and do not take the advice of only one source. I would also really think of the psychological relief of being free of the worries on top of the financial risks/benefits.

    Yes, being psychologically free of having two mortgages has a lot of value. I have to give you that much.

    With that said, renting vs. selling decision is a very personal one depending on each individual’s situations. Being a landlord is not for everyone.

    There are other things to consider also – what kind of property are we talking about here.

    For someone who paid too much for a >3000sf house in the boonies for >800K during peak might not make sense to rent. In that case, I am pretty sure, the rent will not even come close to covering the mortgage. Now for someone who paid 300-400K for a decent house in-city in one of the desirable areas (queen anne, capitol hill, green lake, ballard, etc), the rent will probably cover most of the mortgage if not all. For a nice 3 br house in the city, you can get anywhere from 1500-2500. See what you can get.

    Renting vs. selling decision should be looked at very carefully, and pros and cons weighed. Another thing to consider is that just because he thinks the house has lost 20-25% of the values doesn’t mean that he can sell it for 20-25% off original price. The market is very fickle right now. Things he value in this home when he bought it might not be valued by other buyers in this market. Historic could mean old and needing a lot of work – something people might shy away from. There is no way of telling what it will sell for. It might sit on the market for months and might get an offer for 40% off original price. What should he do then?

    Right now is the time for only the very desperate to sell their houses. If a person is not desperate, I don’t see why somebody should try to sell in today’s market. Even if prices go down a little further, natural market will resume sometime in the future where buying selling decisions will be based on choices to find home for your family rather than mass fear! I would wait till then.

  31. 31
    Rojo says:

    By AMS @ 29:

    RE: Scotsman @ 27 – Simply put, minimize losses.

    Who here has actually sold a house at a loss when they could come close to covering the mortgage with rent?

    It is easy to give advice when you have not lived through it yourself.

  32. 32
    AMS says:

    RE: Rojo @ 30 – “Right now is the time for only the very desperate to sell their houses. If a person is not desperate, I don’t see why somebody should try to sell in today’s market.”

    We need to discuss discount rates. I spoke with an elderly couple who wanted to move closer to their children. They didn’t owe anything on their home. It was part of their retirement plan.

    Were they “very desperate” to sell?

    Financially, no, but they had other goals. Certainly their discount rate was not excessively high, but they did want to sell while their grandchildren were young. I guess they could have waited 10 years, but that’s a lot of lost time.

    Are they desperate? I don’t consider them desperate.

    Next, given enough time, everyone becomes desperate, I suppose. I’ve heard it from single mothers, “I thought the child support would come in sooner rather than never.” Of course “never” might represent a delay of a few months, or it could be literally never.

  33. 33
    DrShort says:

    There were a LOT of closings in the last couple of days of the month’s end, for whatever that’s worth. Buyers with not much cash for prepaid interest, maybe?

    Aren’t any of the MLS insiders gonna give us a sneak peak at the median sales price??

  34. 34
    Scotsman says:

    RE: Back to bascic @ 22

    Sorry, but you are wrong on so many levels. Boeing and Microsoft salaries did little to cause the housing bubble here or anywhere else. And even today, the average salaries paid by these companies do not support current housing prices, let alone current housing prices when markets return to more normal interest rates. Inflated housing prices are the result of lax lending standards and loan structures that didn’t even require the payment of sustainable interest rates, let alone full amortization. Can you explain a negative amortization loan with a “teaser” rate to me? Now that even FHA is looking at increased down payments and tighter front and back ratios, far fewer folks can qualify for any kind of loan. Fewer qualified buyers means lower prices- it has always worked that way.

    After years of rapidly rising prices even plateaued values and the financial breather they offer would look like an opportunity. Twenty percent off would look like a great deal. But we’re just getting started on this contraction. And I would be surprised if we saw market prices (nominal) matching the highs of 2006/2007 for literally decades. Adjusted for inflation, we may never see them again. What has begun is a global realignment that will keep the damper on U.S. productivity and wages for a long, long time. The great advantages we had, a political and tax system that rewarded risk taking and innovation, are slowly fading away in the face of ever increasing foreign competition and competence.

    People used to 30 second sound bites have a hard time believing something is immanent in historical terms if it doesn’t happen by the end of the week, or next month at the latest. It’s frustrating when we can do the math, see the inevitable outcome, but not see progress toward that end over a time frame we can relate to. But that doesn’t change the end result. The math doesn’t lie- there is no way out of the box the U.S. has put itself in without clearing away decades of debt, false growth, and unsustainable commitments. And while lots of people are happy to claim the worst is over, in reality we haven’t even started talking seriously about the needed solutions. When you hear politicians talk about reducing spending and not just deficits, but the debt, you’ll know some level of sustainable economic reality is on the horizon. But to my knowledge the conversation hasn’t even started.

  35. 35
    AMS says:

    By DrShort @ 33:

    There were a LOT of closings in the last couple of days of the month’s end, for whatever that’s worth. Buyers with not much cash for prepaid interest, maybe?

    Aren’t any of the MLS insiders gonna give us a sneak peak at the median sales price??

    I don’t think “prepaid interest” is legal. Time must pass before interest is earned.

    Generally with renting you pay forward.

    With mortgages you pay after the time has passed. Your October 1 payment covers the interest that was earned during September.

  36. 36
    Rojo says:

    By AMS @ 32:

    RE: Rojo @ 30 – “Right now is the time for only the very desperate to sell their houses. If a person is not desperate, I donâ��t see why somebody should try to sell in todayâ��s market.”

    We need to discuss discount rates. I spoke with an elderly couple who wanted to move closer to their children. They didn’t owe anything on their home. It was part of their retirement plan.

    Were they “very desperate” to sell?

    Financially, no, but they had other goals. Certainly their discount rate was not excessively high, but they did want to sell while their grandchildren were young. I guess they could have waited 10 years, but that’s a lot of lost time.

    Are they desperate? I don’t consider them desperate.

    Next, given enough time, everyone becomes desperate, I suppose. I’ve heard it from single mothers, “I thought the child support would come in sooner rather than never.”

    No, I would not call them desperate. They are just living their lives. The needed to sell, could stomach the loss from a gain they never realized. Different situation. Life will continue to happen and market will become normal from that perspective. Right now it is not. Most people are putting a hold on their lives. Kudos to these elderly couple of continuing on.

    Desperation comes when you are putting money into a hole. Take this example: Mr. X lists the house 20% off his purchase price because that’s what he thinks he should based on how much the overall market has declined. 1 month passes by, no offers and he decides to reduce by 5%. Another month passes by, no offers, he drops it another 5%. A few months pass by, he has dropped it 10-15% but still no offers and he also lost 10K in mortgage. Yes, he would get pretty desperate. The problem right now is, the buyer pool is very small and very scared. They are rejecting houses for the color of the door. Finding a buyer is not easy unless you are willing to make it into a screaming deal. I am not sure too many people would want to do that unless they are desperate.

    Again, it is a personal decision and many things need to be weighed in. Giving an advice to run and cut your losses without knowing details not just silly but also careless.

  37. 37
    AMS says:

    RE: Rojo @ 36 – “The needed to sell, could stomach the loss from a gain they never realized”

    We are talking losses here, right? They are selling below purchase price, not above, no matter what the final sales price. Just because they paid cash does not automatically mean that the home will sell for more than was paid.

    You described their situation PERFECTLY (almost).

    “Mr. X lists the house 20% off his purchase price because that’s what he thinks he should based on how much the overall market has declined. 1 month passes by, no offers and he decides to reduce by 5%. Another month passes by, no offers, he drops it another 5%. A few months pass by, he has dropped it 10-15% but still no offers”

    It took them over a year to sell. I’d have to go back and get all the data, but the price drops are almost exactly what you speak of. There is one big difference, however. Early on they got a “low ball” offer, at least according to their expectations. They ended up selling for less than that “low ball” offer, and it was over a year later too.

    In any event, their purchase price was about $125,000 more than selling price, before sales commissions and expenses.

  38. 38
    Scotsman says:

    RE: Rojo @ 31

    What makes you think that rents will not continue to fall? How much rent do unemployed folks feel they can pay?

    Another poster here, Magnolia44, ridiculed us for thinking housing prices would ever fall. Then when they did indeed fall, he talked about how much he loved his house, and how it was more than an investment. As things continued to deteriorate he talked about how his equity was disappearing, but he wouldn’t walk until he was under water by a certain amount. With transaction costs, I believe he’s now upside down. In one of his last posts he talked about losing his job……

    I’m not in the mood to say “we told you so”. But I do wish things had turned out differently for him. How many more are in the same spot?

    One rule of investing or money management that too many overlook or fail to take to heart is that if you suffer a 50% loss, it takes a 100% return on what’s left to build your capital back up to where you started, to get back to “zero.” And 100% gains are hard to come by. It’s better to minimize the losses, given the difficulty of finding big gains, or the long periods of time required at more easily attained rates of return. Sell now- and wait. The chances for success are much higher.

  39. 39
    DrShort says:

    By AMS @ 35:

    By DrShort @ 33:

    There were a LOT of closings in the last couple of days of the month’s end, for whatever that’s worth. Buyers with not much cash for prepaid interest, maybe?

    Aren’t any of the MLS insiders gonna give us a sneak peak at the median sales price??

    I don’t think “prepaid interest” is legal. Time must pass before interest is earned.

    Generally with renting you pay forward.

    With mortgages you pay after the time has passed. Your October 1 payment covers the interest that was earned during September.

    Generally, you pay interest on the remaining days of the month at closing. Then you don’t make your first mortgage payment until the first day of the month following the next.

    For instance, if you closed on September 25th you’d pay interest for the 5 remaining days in September at closing. You wouldn’t have a payment due Oct 1st. Your first payment would for due Nov 1st.

    So for a lot of cash strapped home buyers, closing at the end of the month is a cash preserving strategy. Should you close in the beginning or middle of the month, you have to bring more cash to close.

  40. 40
    AMS says:

    RE: DrShort @ 39 – So if they close on the first day of the month they owe the whole mortgage payment in advance, less the dollar or two in principal?

  41. 41
    DrShort says:

    By AMS @ 40:

    RE: DrShort @ 39 – So if they close on the first day of the month they owe the whole mortgage payment in advance, less the dollar or two in principal?

    Yup.

  42. 42
    AMS says:

    RE: DrShort @ 41 – Even if I had plenty of cash, I’d close a day earlier.

  43. 43

    RE: The Tim @ 19
    I can just see it. One of the websites with someone talking, a sleazy looking real estate agent stating ” now is a great time to…”
    and cut to the song ” Free Falling” by Tom Petty.

  44. 44
    AMS says:

    RE: DrShort @ 41

    If I close on the first and pay the full month in advance, I don’t have to make a payment for 60 days, two months.

    I guess it really does not matter much in the end; unless, like you suggest, buyers don’t have the extra capital.

  45. 45
    DrShort says:

    By AMS @ 44:

    RE: DrShort @ 41

    If I close on the first and pay the full month in advance, I don’t have to make a payment for 60 days, two months.

    I guess it really does not matter much in the end.

    For those who can barely scrape together the 3.5% down payment, it matters A LOT. They need a paycheck or two to build up some cash.

  46. 46
    AMS says:

    RE: DrShort @ 45 – Over 60 days it would make no difference, excluding one very big issue: Once the mortgage is done, they can play all kinds of rob Peter to pay Paul games. This cannot be done before hand, as the cash is needed at closing.

    So, yes, I see what the concern is… I don’t have any idea how many buyers fall into the category, but yes, it could be a significant impact for someone who has very little capital.

    I am going to guess that these buyers have the “forced savings” mentality too.

  47. 47
    AMS says:

    RE: Ira Sacharoff @ 43 – I thinking we should make a video and upload it to YouTube, Jim the Realtor style.

  48. 48
    Matsayswhat says:

    RE: PhinneyDawg @ 24

    I suppose the question to ask yourself is how bad renting out the house will be. I’m renting out my old house right now, and while I’ve been lucky in that I have good renters, it hasn’t been problem free. Do you have enough liquid cash available that you’ll be able to deal with the water heater having issues? Or a pipe bursting in winter? You’ll be paying to maintain the home, but not reaping the benefits of living in it.

    The best thing you can do is sit down and do the math. Estimate how much you’ll get in rent and thus cover of your mortgage and realistically what maintenance costs will be. Now estimate that 25% you’ll pay if you sell and compare the two numbers. How long will it take you, renting, the house out, to lose as much as you’d lose in its sale? Two years? Three? Four? Five? If it’s take five, I’d probably rent it. Two… maybe not.

  49. 49
    David Losh says:

    RE: PhinneyDawg @ 7

    A historic home is hard to rent without consequence. Historic may mean deferred maintenance or that some of the charm is valuable, like glass door knobs.

    If the house has been completely redone that may influence me, but if there is stuff left to do renting it out may be a hassle.

    You have a small buyer pool that I would advertise for on craigslist. I would also list the property with some one cheap, like redfin. I know it’s a sacrilege but you need market exposure without commitment. You do have 5%.

    I have had this conversation with friends and family and in my opinion this would be the best year to sell. You should try at least.

    Pick the lowest number you can and list, then advertise through all search sites, like zillow, trulia, google, yahoo, and craigslist.

    Get rid of it.

  50. 50
    Ray Pepper says:

    RE: PhinneyDawg @ 7

    Here is my advice (which is usually the best in my opinion)…………

    You list it with someone who charges you no more then 500 or 600. Yes, I know I’m plugging our services but not really. Red Fin wants the Buyers like we do. Thats their focus. They are NOT cheap to LIST! I suggest MLS 4 Owners on their 99.00 plan or 500 Realty type plan for 100.00. You are here at the Bubble so I assume you are somewhat astute and can use this type of service. Furthermore you throw 2.5% out for the BUYERS AGENT. I personally can care less about scoring your 100.00 but find someone who has this service and use them.

    Secondly and simultaneously you run ads on CraigsList for Rent, Rent to Own, and Lease Option. Not sure what your payment is but if you find a tenant that is SOLID and can cover the payment your GOLDEN. If you find someone with 10% down and is willing to PAY for a LEASE OPTION your GOLDEN!

    Hit it hard all at once but focus on selling it. However, if you find a GEM of a tenant WITH CASH your set. Price the home aggressively and pass the savings on to the BUYER that your saving in listing it.

    I have not read this entire thread but I want to tell you being a Landlord can be a pain but with only 1 you will be fine. FIND SOMEONE WITH CASH.

    You already know the answer of what you SHOULD do and you don’t need all of us to hold your hand. The answer is obvious and you knew it before you asked it. Now get it done!

  51. 51

    RE: PhinneyDawg @ 7
    I see it as something of a tradeoff. Phinney is a desirable neighborhood, and there usually aren’t a lot of nice historic homes for sale. I think the rate of decline for something like a historic home on Phinney has declined less than the Seattle area as a whole and it’s not likely to freefall ( my word of the day). But…you couldn’t nearly get enough in rent to cover the mortgage, and the odds that you’d be able to sell it in a couple of years for more than you can sell it for now aren’t real high.
    I’d try to sell it now. If you price it right it should sell fairly quickly.

  52. 52
    David Losh says:

    RE: Ray Pepper @ 50

    You know that I was going to recommend you.

    I am curious about the different price structures though. My reasoning with redfin is that they are a buyers site and probably the most open search site to the public.

    It never occurred to me until this past week that consumers don’t have search sites available that are not filtered, framed with agent links, or extremely difficult to maneuver.

    I would offer 3% commission to the buyer’s agent. A half a point for a solid sale is cheap.

    I don’t like lease to own, especially for a historic home. Some leasers like to fix stuff. It can get messy. Then if the market changes, like goes down, they want out and you are left with the fixings.

  53. 53
    Ray Pepper says:

    David, please understand this. We were made for Buyers. All we want are the Buyers. The same as Red Fin. MLS4OWNERS just wants the sellers. We offer the 100 plan and 500 plan as a courtesy to sellers. We profit 0.

    However, each and every sign that goes up educates the public and therefore turns into more Buyers eventually. Statistics dictate that 72% of sellers become Buyers. We give out free listings all the time if the property lies on busy streets!

    Red Fin will always be the top dog due to their Capital they had infused. 60 Minutes GOOD LORD! That was a great day. With their high 5500 office minimum we get tremendous over flow due to their inability to give anything to the masses in Tacoma, Puyallup, Graham, Bremerton, etc.

    Never feel you need to “plug” us. Its just a slow grind at educating the public and if there was no Red Fin it would be even HARDER on us. Findwell needs to enjoy their position just dangling on their coat tails and never attempt to criticize or challenge just offer a more enticing deal to the consumer! Same for Shop Prop and Handspring!

    I believe the Phoenix market will be very difficult for us to educate next year because of the lack of companies that do the same. I only wish Red Fin would hit that market hard and assist us!

  54. 54
  55. 55
    Rojo says:

    Top post-recession mecca for young people – Seattle & DC

    http://www.wtop.com/?nid=600&sid=1774722

  56. 56
    PhinneyDawg says:

    Wow, I didn’t expect this kind of response! Thanks for all the advice. You’re all great.

    I’m still torn. I’m leaning towards selling the home because it is a very well maintained 1906 craftsman that may still sell okay in this market (Phinney seems to sell their homes very quickly too). Updated electrical/plumbing, all drywall, updated bathrooms and kitchens with heated floors, big deck, new roof, and new paint job. Hardwood floors and original trimwork and doors throughout. 3 bd, 2 ba. Only drawback is the size (1100 sq ft). The neighborhood is great though.

    I’d love to rent it but I don’t have a lot of cash reserves (I’m only 28) to maintain the home or carry two mortgages simultaneously if say I had trouble finding renters.

  57. 57
    David Losh says:

    RE: PhinneyDawg @ 56

    For this past selling season my contemporaries have made fun of me for sitting it out. My wife and I have carried the two or three mortgages at a time and it is a killer, even in the best of times.

    One investor who has been making deals consistently admitted on hard questioning by me that yes she did have to carry this last property for 9 months before it got an offer. It’s a good house, good location, fair price, but buyers can afford to be picky.

    My award winning company A Spring Cleaning has prepared thousands of properties for rent and sale. We have worked with most of the top real estate agents in the Seattle area. We bid for free up to thirty minutes of consultation.

    You can click through to my Real Estate site on this comment.

  58. 58
    b says:

    RE: PhinneyDawg @ 56 – It sounds like the decision is made for you if you don’t have the cash reserves to carry it. You should never plan such things on the best case scenario only.

  59. 59
    Kary L. Krismer says:

    By Scotsman @ 27:

    RE: Rojo @ 21

    “Why take a huge loss just because some doomsday sayers are telling it is going to get a lot worse.”

    Um, because a huge loss is better than a worse-than-huge loss? This isn’t rocket science. And besides, it looks like he can get out at about break even in terms of future commitment verses financing a an even bigger loss going forward. It’s basic risk analysis. There’s a very small chance of any gain or recovery in the foreseeable future, he has the opportunity to zero out at this point (the down payment is already gone), and there is still a significant risk of further reductions.

    This is entirely inconsistent with the bulk of other advice given here–the walk away argument.

    Assuming there’s only one loan, and not a first and a second, then this person has almost zero risk, because of the likelihood of a non-judicial foreclosure. They can just walk away, which most people here claim is a good option. But if the market rises again–profit!

    That said, I’m not advocating that approach (riding it out). Being a landlord can be a PITA, and it’s not for everyone. Also, foreclosure isn’t a good thing to have on your record. I would have sold our house 2 years ago even if we didn’t have significant equity to recover, rather than owning two houses.

  60. 60
    Kary L. Krismer says:

    By DrShort @ 33:

    Aren’t any of the MLS insiders gonna give us a sneak peak at the median sales price??

    I reported earlier the median appeared to be up, but still within the range of the summer. The volume is looking better than when I last looked, but I suspect it will be slightly down. That’s hard to judge.

  61. 61
    Kary L. Krismer says:

    RE: Scotsman @ 34 – I’d sort of agree with you when you say Microsoft salaries did little to cause the bubble. It’s the total wealth picture of the population. Prices are not determined by peoples’ salaries, except in the low end.

  62. 62
    Kary L. Krismer says:

    By AMS @ 35:

    By DrShort @ 33:

    There were a LOT of closings in the last couple of days of the month’s end, for whatever that’s worth. Buyers with not much cash for prepaid interest, maybe?

    Aren’t any of the MLS insiders gonna give us a sneak peak at the median sales price??

    I don’t think “prepaid interest” is legal. Time must pass before interest is earned.

    Generally with renting you pay forward.

    With mortgages you pay after the time has passed. Your October 1 payment covers the interest that was earned during September.

    You don’t typically have a payment on the first day of the first month after closing. The pre-paid interest covers the interest that accrues during those days. So if you close on the 25th you’d have 5 or 6 days of prepaid interest.

  63. 63
    AMS says:

    RE: Kary L. Krismer @ 62 – “So if you close on the 25th you’d have 5 or 6 days of prepaid interest. ”

    An insignificant amount, relatively to the size of the loan.

    If a person closes on the first, then they make the full payment, less the dollar or two in principal, and then don’t make another payment for 60 days, plus or minus.

    Given a 60 time frame, there is little difference in any of this, but the cash must be brought to closing.

  64. 64
    Plastic Bags says:

    A lot of people want to close on the last day of the month because if you’re renting a lot of time you have to pay for the whole month, even if you’re only there one day. If you close on the 1st you pay for a whole month of rent you didn’t use. I don’t know why anyone in that situation (which I assume is most renters) wouldn’t want to close on the last day of the month and I don’t know if it reflects at all on their financial situation. I think amount of down payment and cash reserves is a far better indicator than closing date.

  65. 65
    David Losh says:

    RE: Kary L. Krismer @ 59

    This selling season was all about people getting out of properties. If this guy has a chance he should take it.

    Just like cash for clunkers the free ride for Real Estate agents and mortgage brokers is coming to an end. If by chance banks, lenders, and insurance companies are given more free tax dollars there will be a back lash.

    Anyway you look at the larger economic picture banks are pretty much backed into a corner. This year was a free money give away, next year will be tougher.

  66. 66
    Scotsman says:

    RE: Kary L. Krismer @ 59

    ??? I’m not advocating he walk away because it sounds like he can sell it with no out of pocket expense. Why walk and take the credit hit if there’s still enough equity to get you out? I’m not sure where you’re coming from on this one.

  67. 67
    Kary L. Krismer says:

    RE: Plastic Bags @ 64 – Closing on the last day of the month can be a bit problematic just because there are so many other closings. Also, assuming a rental situation, closing x days earlier gives you x days to move, which is worth a lot in my book.

  68. 68
    Kary L. Krismer says:

    By Scotsman @ 66:

    RE: Kary L. Krismer @ 59

    ??? I’m not advocating he walk away because it sounds like he can sell it with no out of pocket expense. Why walk and take the credit hit if there’s still enough equity to get you out? I’m not sure where you’re coming from on this one.

    I was comparing it not to what you said in that post (or in the past that I remember), but instead the general advice here. The general advice here is to walk away if you’re underwater. Well if that’s the case, then this person would basically be playing with the house’s money if he/she is even right now. If prices go up, they pocket it. If prices go down, they can walk away, because foreclosure has no significance or consequences (per the standard advice given here).

  69. 69
    Ray Pepper says:

    RE: Scotsman @ 66

    Agree Scotsman..It is my impression Phinney will lose his money he placed down and the home will sell rather quickly due to its unique location and style.

    Kary the walk away option should be held for the likes of Steve Tytlers friend. Even then his pal should live in the home until the bitter end and save save save. If his Mtg is 3000 per month then at the very least the Phoenix Broker should have 30k saved up while his boxes are being packed up.

    Just common sense……Kary, your a smart guy………..Just realize you are NOW living in a different world. Adaptation is essential.

  70. 70
    Plastic Bags says:

    RE: Kary L. Krismer @ 67
    That is definitely true and I guess I didn’t word my thoughts correctly. I was more arguing the point of why someone would want to close as close to the end of the month as possible. Even if you intended to close on the last day, it might not be a weekday or you might not be able to get the day off from work. Many probably pick the last Friday of the month so they have a whole weekend to move. Either way, my point was there are enough reasons to pick for why someone can’t afford their house (low down payment/ gifted down payment/ not enough in savings/ etc)- I just don’t think choice of closing date is really one of them.

  71. 71
    sead97 says:

    By AMS @ 20:

    RE:
    You assume a 100% qualification rate. It’s lower than that, so the “inflated price” is inflated by less than the full $8k.

    Doesn’t take 100% qualification rate. I acknowledge the highest bidder doesn’t always win, but usally. So as long as you have enough qualified folks in the market, the price will get bid up. Folks who don’t qualify will just pay more…or won’t win the houses.

  72. 72
    sead97 says:

    By Snigliastic @ 26:

    RE: sead97 @ 16 – Looks like someone needs a primer on Arbitrage.

    Ok, here you go:

    Let’s assume:
    1) House’s real value is $100
    2) People in group A don’t qualify
    3) People in group B do qualify

    Group B person can pay 101 for the house, then resell to group A person for 100. B Pockets 7. Until the price goes to 108, Someone from group B can lock in a risk free gain (assume they pre-negotiate the deal).

    Now, you are probably mentally factoring in transaction costs (realty fees, sales tax). But there are juridictions that don’t charge sales tax, and there are ways around realty fees (FSBO). Arbitrage opportunities are always subject to the transaction costs required to execute – which can lead some opportunities to persist. And real estate – being less fungible than finanical assets and having higher carrying costs – makes it harder to realize the opportunity. Harder, but not impossible.

    So now you’ll say the law prevents by requiring 3 years occupancy. Maybe – I don’t qualify and haven’t looked into the fine print. However, I have infinite confidence in the ability of smart people to game the system.

  73. 73
    sead97 says:

    As a final thought on $8K, let’s do some really rough math:

    1) Stimulus bill passed in late February
    2) ~60 days to close, so impact starts being see after April
    3) Case Shiller 20 city at 139.25 for April
    4) Latest Case Shiller at 144.23 (about 4% higher)
    5) Median US home price is about $202K (probably higher in 20 city index)
    5) $202 * 4% = $8K

    I’m sure it’s just a coincidence…

  74. 74
    AMS says:

    By sead97 @ 71:

    By AMS @ 20:

    RE:
    You assume a 100% qualification rate. It’s lower than that, so the “inflated price” is inflated by less than the full $8k.

    Doesn’t take 100% qualification rate. I acknowledge the highest bidder doesn’t always win, but usally. So as long as you have enough qualified folks in the market, the price will get bid up. Folks who don’t qualify will just pay more…or won’t win the houses.

    Specifically let’s consider, “Folks who don’t qualify will just pay more…or won’t win the houses”

    After the $8k expires, those folks will still “just pay more.”

    Asking price $250,000

    Qualified first time home buyer net price: $242,000
    Everyone else must pay $250,000

    If there is a first-time home buyer that places a value of $245,000, and is willing and able, then they will pay the $250,000 to net out to $242,000. The buyer will net out $3,000 in alpha, or buy a product for $3,000 less than the value that they place on it, while the seller realized the full $250,000.

    If I am willing to pay $249,000, I will not purchase the home until after the expiration of the $8k credit. The home will now sell for $249,000, not $242,000. As an unqualified buyer my value does not suddenly change.

    In this example,

    With $8k credit the home will sell for $250,000, a net of $242,000 for the qualified first-time home buyer.
    Without the credit the home will sell for $249,000.

  75. 75
    AMS says:

    RE: sead97 @ 72 – This statement is 100% false: “Group B person can pay 101 for the house, then resell to group A person for 100.”

    There is a 3 year residency requirement. Technically arbitrage requires an immediate sale, as it is simultaneously buying and selling between two different markets.

  76. 76
    AMS says:

    By sead97 @ 73:

    As a final thought on $8K, let’s do some really rough math:

    1) Stimulus bill passed in late February
    2) ~60 days to close, so impact starts being see after April
    3) Case Shiller 20 city at 139.25 for April
    4) Latest Case Shiller at 144.23 (about 4% higher)
    5) Median US home price is about $202K (probably higher in 20 city index)
    5) $202 * 4% = $8K

    I’m sure it’s just a coincidence…

    This is a really difficult claim to support, as not all home buyers qualify for the $8,000, and furthermore, assigning all the gains or losses to a single factor in a complex market is going to be very difficult to support.

  77. 77
    sead97 says:

    By AMS @ 76:

    This is a really difficult claim to support, as not all home buyers qualify for the $8,000, and furthermore, assigning all the gains or losses to a single factor in a complex market is going to be very difficult to support.

    I’m posting on seattlebubble, not trying to get published in the American Econonic Journal. Correlation does not equal causation, but when theory and observation are in line, it’s suggestive at a minimum. We’ll just have to see what happens when the subsidy is removed.

  78. 78
    AMS says:

    RE: sead97 @ 77 – CFC immediately comes to mind…

  79. 79
    sead97 says:

    RE: AMS @ 78

    Aug SAAR – 14.2M vehicles
    Sept SAAR – 9.2M vehicles

    In the case of CFC, car makers set prices (and chose not to raise with CFC, which would have been politically unacceptable) and therefore see impact in volumes.

    With housing, prices are market set and supply relatively fixed in short-term (does $8K make someone move when wasn’t considering before, are builders going to break ground in this market for potential $8K), therefore we’re more likely to see impact in prices.

  80. 80
    AMS says:

    By sead97 @ 79:

    RE: AMS @ 78

    Aug SAAR – 14.2M vehicles
    Sept SAAR – 9.2M vehicles

    In the case of CFC, car makers set prices (and chose not to raise with CFC, which would have been politically unacceptable) and therefore volume adjustments balance supply/demand.

    With housing, prices are market set and supply relatively fixed in short-term, therefore we’re more likely to see impact in prices.

    “car makers set prices”

    The manufacturer sets the “MSRP,” Manufacturer’s Suggested Retail Price. Suggested is a key word. The dealership may generally sell above or below that price. In the case of the new Camaro, dealers were initially asking about $5,000 above MSRP. Generally MSRP is the starting negotiation point where the consumer seeks a lower price.

    “(and chose not to raise with CFC, which would have been politically unacceptable)”

    CFC prohibited not passing the CFC money to the consumer. I am not an attorney, but charging above MSRP seems to be price gouging under the CFC program. However selling at MSRP seems perfectly acceptable, or at least how would one argue that selling at the suggested retail price that was established long before CFC was enacted is price gouging.

    “With housing, prices are market set and supply relatively fixed in short-term, therefore we’re more likely to see impact in prices.”

    With the CFC, prices did not come down, so volume did. If dealerships drop the price of new cars by $4,500, then I’d expect higher new car sales numbers (quantity sold).

    What you are suggesting is that in housing the quantity sold will remain a constant number (or near constant), so the price will need to be adjusted to maintain the same quantity of sales. This may be true, but it may not take a full $8k, as not all buyers qualified for the credit, as illustrated above.

  81. 81
    D. in Ballard says:

    Phinneydawg,

    There doesn’t seem to be a glut of nice homes for sale in Phinney. I like the neighborhood and would love to live there, but all I see is overpriced bungalows with extensively renovated basements. You may be sitting on a really nice home that could stand out from all the rest. And you could just luck out. A house we rented in Greenwood sold for 524K in May. It was a nice house, don’t get me wrong, but was it 524K? Not to me at least.

    The owners had originally listed it right when prices started to fall in 2007, so from their original asking price at close to peak it was down just 9%. I’m just saying you never know who will bite and why.

  82. 82
    sead97 says:

    By AMS @ 80

    “car makers set prices”

    The manufacturer sets the “MSRP,” Manufacturer’s Suggested Retail Price. Suggested is a key word. The dealership may generally sell above or below that price. In the case of the new Camaro, dealers were initially asking about $5,000 above MSRP. Generally MSRP is the starting negotiation point where the consumer seeks a lower price.”

    Car makers set what they sell the car to dealers for. Yes, dealers can charge whatever they want. But let’s say Ford charges the dealers $20K for a car. Dealer A can ask $22K, but if Dealer B is willing to live with $1K margin they can ask $21K and steal share. And so on and so on… This is economics 101.

    I’m not sure why you keep harping on this “not all buyers qualified”. It doesn’t matter. Are there properties that don’t attract a single qualified buyer. Sure. But with first time buying making up ~40% of buyers on average, there’s plenty to go around. Actually, what’s probably happening is on the low end it’s bidding up properties well more than $8K (since I can get $8K today for a few extra dollars per month – that appeals to many Americans) and on the high end no impact

  83. 83
    AMS says:

    RE: sead97 @ 82 – “Actually, what’s probably happening is on the low end it’s bidding up properties well more than $8K (since I can get $8K today for a few extra dollars per month – that appeals to many Americans) and on the high end no impact ”

    The bottom end is where the first-time home buyers are concentrated. These low-end homes will likely take the full 10% hit, bounded by $8k. Some of these homes are priced below $80,000, so they are bounded by the 10%.

    On the top end, as we have discussed, the $8k has essentially no impact. A $1M home selling to a first-time home buyer for $8k less than $1M isn’t going to make or break the transaction, or at least it shouldn’t. Somewhere between the bottom end, which is nearly 100% first-time home buyers, and the top end, which is nearly 0% first-time home buyers, the impact shifts from the full 10% (bound by $8k) to no impact.

    Summary:
    $80k and under homes will take a 10% hit, as these have nearly 100% first-time buyers.
    $80k – (some reasonable amount based on local market conditions) will take a near $8k hit.
    High end homes will see little, if any, direct impact.

    That’s all independent of the whole “move-up” theory. The “move-up” theory might support a much greater collapse than the $8k on the top end if there are no bottom end buyers.

    It could also be that home sales are already put back on firm foundation, but I doubt it.

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