What if we're only in the eye of the housing hurricane?

Here's a link to a grim Barron's opinion piece written by a Florida Realtor. His argument is that we're experiencing only a remission in our housing sickness before the full-blown symptoms return.

To summarize his arguments: Banks are ill prepared to handle the foreclosure wave. The result will be a surge in unsold homes at just the wrong time. Also, many of the home buyers returning to the market this spring simply can't get loans. So they represent false hope.

I think he errs a bit on the negative side, as if he woke up in a panic at 3 a.m. and committed his thoughts to the note pad on the nightstand. The Tampa region simply has more economic muscle than this Realtor's home base in Stuart, Fla.

Comments

[Jason W]

I think we are starting to see the signs of normalization, although I don't expect meaningful appreciation to take hold until 2010, at the earliest.

I bought a home on the Pasco-Hernando line about 8 months ago and watched construction in my development effectively come to a hault. My wife and I walked our dogs last night in the previously baren area of our neighborhood and couldn't believe how much construction has picked up in the last couple of months.

I will append my statement to say that the builder clearly has shifted gears to one story, lower cost, entry level type homes where buyers are less likely to be held up by an inability to sell their existing homes. It's more the case that these are decent credit risk, first time home buyers. Either way, I feel a sense of optimism.

Regardless, I want to thank Jim Thorner for this very insightful and unbiased real estate blog.

- Jason

[Tino]

I have to agree with his sentiments. Here is my evidence, as I am starting to house hunt. Savvy real estate professionals may be able to figure out where I am talking about.

Zip Code 337XX
- Approximately 1,100 single family houses in the zip code, average home price is $500,000+
- Currently 105 homes for sale, 50 are priced above $1,000,000
- An additional 19 homes are in the foreclosure process
- Number of home sales in the past year (in the MLS): 5
- Number of home sales above $1M: 2 out of those 5

That's a 21-YEAR supply of homes on the market, or a 25-YEAR supply of million-dollar homes.

Why is this? Sellers and their clueless Realtors (tm) are completely irrational and are refusing to sell, costing sellers millions of dollars a year in carrying costs on their empty homes. For example, I am looking at several properties that were purchased for about $800k just 3 years ago that are being listed in the $2M range. The average days-on-market for the homes I am looking at is over 400. One of them has been on the market for 800 days. That is not a typo.

As I continue my search, I will be posting updates to this board.

[James Thorner]

That's a shocker, Tino. It's almost as if owners don't want them to sell. I've got a couple homes in my nbrhd like that: Have been on market 1 1/2 years, they look abandoned, but price still high. No showings, no traffic, real estate sign tipped over on grass. I almost suspect they're just being used to launder money.

[Tino]

I spent last weekend visiting houses. I actually felt sorry for the poor agents who don't have the spines (or are too desperate) to tell their clients that they are completely insane.

An ethical Realtor would tell their client to price the house realistically or drop them. It's a waste of everyone's time and hearing the agent trying to defend the price was just embarrassing.

[Frances]

Tino - Many of these homes have multiple home equity loans stacked on top of their mortgage and Seller's simply can't sell for what it's worth. They're stuck between a rock and a hard place.

[k]

That's a registered trademark, Tino! (r)
;)

I don't doubt the data. Trying to convince someone to lose money is a tough business. Try it.

[Tino]

No, I researched the liens on each of the properties. Most of the homes have significant equity and none that I looked at are being sold for a loss. Most are of the type mentioned above: buyer pays $800k, immediately puts it on the market for $2M, leaves it on the market for 2+ years.

Good luck with that!

[Fuzzy Bear]

Most of the homes have significant equity and none that I looked at are being sold for a loss.

Tino: I agree with your conclusion. I doubt any commision only sales person would tell their client to cut the price unless as you mentioned they were ethical in their business conduct.

Past bubble history clearly shows that when the bubble pops, people have a tendency to hold on to things hoping that the market will improve and their assets will sell at a higher price.

Case in point, the dot com bubble that popped. The NASDAQ was a little over 5300 in it's high and today at closing, it is still less than half nearly eight years later at 2405. It has never recovered to it's all time peak.

This could very well happen in the housing market and we will know in a few years.

[Fuzzy Bear]

That's a registered trademark, Tino! (r)

K, you got it wrong again! The below example is the registered trademark. Do your research K to get it correct!

REALTOR®

[Frances]

Actually most Realtors want the prices cut as it'd mean they might actually get paid. Why would anyone take a listing, spend time and money on it, when it obviously won't sell?

So either the Realtor is super nice and loves spending his/her time and money for charity, the Realtor is inexperienced/ or an idiot and on the verge of extinction from lack of income, the house is worth the price based off of recent sales comps, (Who cares what they got it for - what is the market baring?), or you're a disgruntled Buyer looking for a steal from a Seller not willing to give it. Ethics has little to do with it.

There's two sides to every story.

[k]

(r) is the same as ® for those wo don't want to take the time to open Character Map or know the shortcut. Thanks for doing that for us, we can just paste it properly now.

®®®®®®®®®®®®®®®®®®®®®®®®®®®®®®®®® :P

Tino, while I don't doubt that is true for a good many examples, the many of the homes bought in the last three years are upside down. Those owners simply won't reduce their price greater than any loss that might occur by holding on. It may take months or years until they GET IT. Realtors® don't set the price, the owners do. They can suggest a lower price all they want but if the owner contracts them to sell at a certain price, then it's up to the Realtor® to take the listing (or continue the listing). There been more than one occasion where a buyer will pay a premium for a "must have" property. In many cases, the owners (and their "clueless" Realtors®) have the money and patience to play that game. Buy low, sell high...or hold until you can. Isn't that a normal "long" investment mentality typical of illiquidity pre-boom? Why should that change?

[Tino]

Frances: Why would anyone take a listing, spend time and money on it, when it obviously won't sell?

This is exactly my point. The example I provided has been on the market for 800 days. **800**. By all comparable value measures, it is priced 100%-125% too high.

I have no idea why the agent gets up every morning to show the property either...but pricing is why only 2 out of more than 50 listed properties in this zip code and price range have sold in the past 12 months.

"failure" can be defined in many ways. In baseball, someone with a .100 batting average or a 10.0 ERA is a failure. In the real estate world, I'd call an agent with an 800-day listing a failure.

[Fuzzy Bear]

r) is the same as ® for those wo don't want to take the time to open Character Map or know the shortcut.

It is also incorrect from a legal standpoint. If you had taken the time and did your research correctly and not cut corners, you would have found it to be very simple to cut and paste the correct data.

No excuse K!

[Fuzzy Bear]

I'd call an agent with an 800-day listing a failure.

Good point Tino!

I have seen numerous flyers in my mail that mention the property listed by the realtor sold in 30 or 60 days. I looked into a couple of these and found that the listings had been manipulated to make it look like it sold in 30 or 60 days. One of those listings was a friend of mine who relocated to Atlanta. His house had been on the market for over a year, but the flyer said sold in 60 days.

[k]

RE: 800-day listing. As mentioned above, the OWNER sets that price, not the Realtor(r). (That's for the resident blog troll who doesn't know squat about text substitutions and PTO law ;)

Tino, you are correct. Any property not sold is a failure fo the owner and the listing agent...but really?

For the owner...

By your expample, you want the owner to come off his price of $2M by $1.2M to...what...what they paid for it? Or even a modest profit of $200K (price would be $1M).
Let's say they have yearly upkeep expenses (taxes, insurance, maint, operating) of $50K. Coming off of thier $2M price, that's 8-10 years worth of waiting (inflation) before they end up with your original price. While extreme in THAT example, I could totally see someone with the patience and cash to hold for a few years (not 8-10), wait for the right buyer and get a bettter profit. It's his/her prerogative not to sell to the likes of you.

As for the agent...
While it may not be the actual intent, the reality is that for every failed open house, showing, phone call or email, it may generate a new buyer client for said agent. "You don't like this $2M listing, well let me show you the $1.2M down the street." I'm sure they rather sell it and get a nice commission, but the outcome isn't always negative.

If you need someone to hold your hand and make an actual OFFER on one of those puppies, I'm sure a local pro would be glad to help.

I wonder where you're getting your comps to base these homes off of, as the public doesn't have access to sold properties and all their accompanying descriptions and pics on the MLS. (Once properties sell they typically retire/expire out of the internet.) It can be a major disadvantage when judging value off of public records and drive-bys alone.

For example, you may be interested in a 5 bed, 2 bath waterfront home that's beautifully done and may be comparing it to a "similar" property recently sold for a much cheaper price in the property records that has the same attributes on paper... 5 bed, 2 bath, blah, blah, blah... but in reality hasn't been touched for 25 to 30 years in the interior and needs a lot of time and $ to bring it up to speed.

I do agree that there are many overzealous sellers, but there are many realistic and even desperate ones too. As K pointed out - the only way you find out is by actually submitting an offer.

[Fuzzy Bear]

1. RE: 800-day listing. As mentioned above, the OWNER sets that price, not the Realtor(r).

The REALTOR® associations are advertising to the public that their members assist the sellers with pricing, but now you mention that the agent/broker does not help the owner set the price with comps. So who is telling the truth K or are you making things up as you post on this blog site?

(That's for the resident blog troll who doesn't know squat about text substitutions and PTO law ;)

Your showing your unethical traits with the name calling and lack of credibility K, simply because you don't understand the proper way to display a legal registered trademark.

[k]

"but now you mention that the agent/broker does not help the owner set the price with comps..."

There you go misstating facts again, fuzzy-logic. That IS your modus operandi, isn't it? The burned flipper becomes realtor hater because he didn't practice what he preaches?

You know they have a whole website dedicated to explaining types like you, right?
http://www.logicalfallacies.info/

To be absolutely clear....

The owner SETS the price. Realtors can *suggest* pricing all day long. Many times the owners will actually take the suggestion. And, many folks don't want to be told what their property is worth because they think they know better - even though you go though a gamut of facts to the contrary.

Empty offensive, fuzz.

BTW, "Realtor" doesn't need the registered trademark since it is also a name mark. The symbolic "R" logo is typically displayed with the "®" symbol. You'd know this if you actually knew PTO law. ;)

NEXT!

©k - All Lefts Reserved

[Joe]

dissssss!

So are all these pricing issues true across local areas or are some areas going to hold onto value better than others? I would guess that places like Riverview would descend sharply, but what about older established neighborhoods with less residential turnover?

[Frances]

K - You have a good command of language, finances and are quite humorous - if this Realtor thing doesn't pan out, you should look into freelancing.

[James Thorner]

As a general rule, whereever you had the speculator element dominating the scene, you'll see the sharpest declines. That means places like Riverview and Apollo Beach in Hillsborough, much of central Pasco and the less expensive Clearwater condos. I've been to some nice older neighborhoods in Carrollwood that have held up better. They aren't interchangable cookie cutter homes. Lots of the speculator 'hoods suffer from builder price cuts: models that sold for $350,000 in 2005 going for $270,000 now. Whoever bought at 350K is stuck if they want to sell.

[Fuzzy Bear]

^ United States Patent and Trademark Office, reg. no. 519,789, "REALTOR"
^ United States Patent and Trademark Office, reg. no. 515,200, "REALTORS

Realtor is a frequently-used word in many countries to describe any person or company involved in the real estate trade, regardless of their NAR status or American residence. However, in the United States the National Association of Realtors in 1949 obtained preregistrations for the words REALTOR[3] and REALTORS[4] (which the NAR prefers rendered in all caps) as collective trade marks. As long as the trademarks are maintained, the words cannot be used in commerce by other parties in a way that is likely to cause confusion as to the origin, sponsorship, or approval of goods, services, or commercial activities in the domain of real estate. The NAR only authorizes usage by National Association of Realtors members or licensees.

The word "realtor" was added to the Webster's Dictionary after a request by New Jersey Realtor Rachel Storchheim Silverman in the 1960s.[citation needed]

In 2003, Jacob Joseph Zimmerman, a real estate agent who was not a member of NAR, petitioned the U.S. Patent and Trademark Office to cancel the trademarks, on the ground that "realtor" and "realtors" were generic terms rather than a trademark. On March 31, 2004, the USPTO's Trademark Trial and Appeal Board denied the petition, holding that the words continued to function as collective service marks and have not become generic terms.[5]

[Fuzzy Bear]

As a general rule, whereever you had the speculator element dominating the scene, you'll see the sharpest declines.

James:

Many of the lower cost areas in Carrolwood, such as Plantation were infested with speculators and are now experiencing rising foreclosures. For instance, some properties that sold for $85K in 1996 were selling for $249K in 2006. The houses are 1,500 sqft. and sold at $166 a sqft.

[Fuzzy Bear]

The symbolic "R" logo is typically displayed with the "®" symbol. You'd know this if you actually knew PTO law. ;)

Gee, I wonder how you finally understood all of this K, could it be from my post of the following example?

REALTOR®

There no doubt in my mind that you think a few weeks of a realtors course makes you an expert in everything K.

If the realtor thing does not pan out for you, based on your comments, your education from the realtors course should make you qualified as an expert in business management, enterprise system troubleshooting, accounting/finance or even as a rocket scientist!

[k]

Fuzz - You posted a *word* mark, not a logo. An example of the "R" logo (graphical representation) can be seen here: http://www.garealtor.com/Portals/0/REALTORPin1.jpg

"....and remove all doubt". Is how I think the quote ends. You can research the beginning.

Frances - thanks for overlooking my typos! :>

[Tino]

k, nice analysis, but I am afraid you are doing "Realtor math", which ignores the opportunity cost of money.

In your example, not only does the seller save $50k a year by selling, but also can take that money and invest it elsewhere for a return. The full carrying cost of an empty home is 10-12% of the market price per year. If you think that real estate price escalation will greatly exceed this rate, you should hold on to the property. If not, you should sell.

Sellers will continue to lose 10-12% per year on their empty properties, *even in a flat market*. The failure of speculators to appreciate this is one reason why so many are losing their shirts.

In the 800-day example I quoted, there are very similar properties that I visited priced at HALF of that, and those aren't selling either.

Yes, I have access to comparable sales data and yes, I will be making some market-based offers. We shall see who wants my money!

[Fuzzy Bear]

The burned flipper becomes realtor hater because he didn't practice what he preaches?

Show the readers the evidence that supports your above statement K or are you afraid of being exposed by your false statements and lies?

Your lack of ethics by the above statement clearly demonstrates to the public your inability to provide them the truth! Your comment is a perfect example of why the public is losing respect for realtors and it only hurts the hard working honest realtors K!

The burned flipper becomes realtor hater because he didn't practice what he preaches?

As I have posted and replied over and over, the readers must formulate their own opinion and do their own research to determine if the information is correct. However, I am very confident that what I have posted has been correct and I remain totally independent and have no conflicting interests in the real estate industry.
Those who take the time to verify my information will certainly know find the answer and can come to their own conclusion.

Bottom line J.K., I am not in the real estate business like you or offering financial advice as you mentioned. My posts are my opinions based upon my research which is not available or will be posted on this site as it is not intended to be published or linked to the public. This blog site is for opinions, not research.

If you don't like my comments, don't read them or reply, it is that simple!

Tino,

I disagree with you on the convoluted math, but in any case, Good Luck to you on your purchasing. You never know, right?

F - Enough with the "lack of ethics" blather. Get some new material or brains, one or the other. If you're not in the real estate business you sure do sound like a real-estate-business-wannabe. Why obsess over a profession in which you are not tied?? Lonely?

[Fuzzy Bear]

F - Enough with the "lack of ethics" blather.

There you go again showing the readers your lack of business ethics by attacking those with blatant false information because they oppose your views.

You want to come across to the readers as a representative of the realtors, but you end up doing more damage to the image of the realtor by posting your lies and false information in your personal attacks. You end up hurting the honest and ethical realtors in the business by your derogatory comments and your attempts to intimidate those who oppose you.

There is a simple rule in sales, never talk bad about your competitor or bad mouth prospective buyers or consumers. I am a prospective customer K, but only to those who display and deliver proper business ethics!

Fuzzy,

You neglected to mention the second part of your "simple rules". Don't heed advice from an emotional-ridden blogito whose "facts" come readily undocumented and are disproven.

-Another potential customer

[k]

Fuzz, FWIW, those two posts above weren't from from me. Nice bit or per-normal assumption! I also like the fact that you actually read the fallacies link and are now trying to employ the "straw man". In a nutshell, this is your strategy: http://www.logicalfallacies.info/strawmanarguments.html

Unfortunately, in a written blog, it's pretty easy for the other readers to detect. The results are the posts above.

You actually post SOME decent information from time to time. Why ruin it with all this Realtor hate and parade of misinformation? It serves no one.

Recent evidence of worsening conditions: I know one person that has filed for bankruptcy and two local professionals that have lost high paying jobs. One will be leaving the area. It is easy to see how these events can contribute to the snowball affect.