The Second Wave: Desperate Sellers About To Reveal Their Hand

Perhaps its also inaction from buyers. Ie they like the place but don't bother to lowball as the ask is too high.
The more lowball's buyers see, the quicker they grasp reality? As they believe that the "right buyer" just hasn't seen the unit yet

Spinnaker, isn't the spring rush already on, in theory? I mean, it's nearly May. I've never bought, so almost anyone could probably say with more authority than I what the usual season is like. Still, I'm planning my summer vacation, and I can read a calendar as well as the next person. I haven't seen any uptick in the number of my watched properties (currently 70+) going into contract.

Expect to see panic price cuts late May and early June as sellers realize the summer doldrums are approaching.

spinnaker1, hate to dwell on the gruesome, but i agree. i think we may be about to see a perfect storm of problems in the new development sales, unemployment rising, previously high-income earners running out of severance and still unemployed, AND a negative media spin that will exacerbate the effects of distress selling.

after a bit of a dust-up on another thread yesterday, I am back to my usual position of agreeing with aboutready. add her summary of the key issues driving market movement to spinnaker's theory of supply/demand (im)balance and seasonality, and you've got one of the best capsule summaries i've seen of the current state of play. Splitting hairs, I would put more weight on the new development backlog, negative media spin and maybe unemployment generally and less on the severance running out point. Most of those former high earners will have enough assets, even after the value of their stock in their I-bank employers vaporized, to carry monthlies for quite a while if they so choose. But some will capitulate and it only takes a few trades to redefine value, so maybe that's the more important point.

yes, indeed. step right up folks, and grab 'em while they're hot. as others have pointed out, we may have reached the top of the third inning. need to keep remembering that behind all the headlines are more and more real people with real families coming face to face with no jobs. roughly 600K a week are losing their jobs.

evnyc - I would think we're looking at four more weeks (until Memorial Day) of real spring selling season (whatever that even means this year). After that, the ability to get to contract, close and move before school drops off rapidly.

I actually have seen a clear uptick in my watched properties going to contract in the last few weeks. However, most of them were ones that I started watching last fall, that lingered for a while and then went through some serious price cuts this year until getting to contract in March/early April. Once they close and the prices print, these will be a few more data points of significant price reductions for spinnaker1's theory.

CC Isn't that 600K a month job loss?

sidelinesitter, very true. with a market this small (in the summer probably less than 300 sales per month in an average year), a couple of hundred people NEEDING to sell can have a huge impact.

NYCDreamer, probably not recently. Not only have job losses remained at around 650k four week moving average, the addition of new positions has slowed to a trickle and the continuing claims indicate that. The U6 will increasingly become the far more accurate figure as people run out of unemployment benefits and remain unemployed.

aboutready - indeed the other part of story involves the economy and the media. The media is almost a late comer to the game and I doubt we have even begun to understand the impact negative press will have on the fragile psychology of todays market.

no - weekly initial unemployment figures can be seen here

http://fidweek.econoday.com/byshoweventfull.asp?fid=437663&cust=mam&year=2009

number comes out every Thursday at 8:30 am

Wow, 4 weeks sounds very short to me. But like I said, I'm just an observer. I am watching a far more modest market than most on this board, 2brs under 700k (a few higher than that, just in case), and I've been surprised at the steadiness of that range. They take a little while, but most of them keep ticking away into contract after a few months.

maybe it's 4 weeks prime spring selling season and a couple more of late spring selling season, but once we hit mid-june i don't think there's much debate that any notion of peak season is over for this year.

I could see a scenario where this summer's volume holds up better, relative to the spring, than in a typical year as prices continue to fall and some buyers find something that works for them, make bids and sellers start to hit them. I won't be one of those buyers this year because I like getting paid (in the form of lower prices next year) to wait, but not everyone shares that view and some will bite. In absolute terms, there is little doubt that the logjam will continue for a while, with very low spring volumes followed by very low summer volumes vs. recent years, but with prices falling as rapidly as they have maybe there will be a little action over the summer. The measure would be summer 2009 (e.g., June-August) contracts signed as a percentage of spring 2009 (e.g., March-May) contracts signed, compared to the same ratio for, say, 2005-2008.

Weekly new unemployment claims are about 640k. The net job loss is this amount, reduced by the number of people who get a new job in the same week. Weekly unemployment claims were about 300k per week when the total number of employed was rising by 200k per month. Currently the net job loss is about 600k per month.

Sales have definitely picked up (as usual this time of year). But inventory has continued to outstrip the gains in sales. Latest figure: 11,084.

Then, of course, there is the huge, and growing, shadow inventory.

I think until we see SOLID indications of an economic recovery, the sideliners will rule the day and the market will have little support at any level. Some dribs and drabs maybe, along the lines of what sidelinesitter is saying.

There is a lot of hot air out there trying to convince us the recovery is nigh. To most of the prognosticators talking recovery (politicos, business leaders, speculators, et al) this is a self fulfilling prophecy. There is a new army of skeptics out there that need a whole lot more convincing than talk of "green shoots".

Be patient, the greatly anticipated destruction of all things real estate is further off than you think. Yes, every twist and turn brings a slightly greater shade of reality to the pricing market but, the bottom of which you seek is still far off. Pricing does not act like a super ball. It does not hit bottom and bounce back to the stratusphere. It's more like a fish out of water. It bounces a little and then lays there...motionless. This is what, as buyers, we are waiting for. Relax, sit back and watch, there will be no fire sale. We will settle into a new low low normal. The key would be to time the super low interest rates to your buy before they begin to change. It's the rates that will run away fast that will make you miss the boat.

"It's the rates that will run away fast that will make you miss the boat."

Indeed a possibility. But if RE pricing is based on affordability...those rising rates should, in theory, continue to force declines in prices. Since I have no clue what drives Manhattan RE prices (other than paranoia, ego, and desperation), I cannot even guess what might happen.

falcogold1 - I agree the bottom is far off. I'm looking for the catalyst that will give things a little push. My gut tells me that increasing numbers of desperate sellers may be it. I don't believe buyers are waiting for lower rates or considering the possibility of the potential of higher rates down the road. Not to say this may not be the next big thing though.

April's jobs report will be an interesting one. If it comes out and is lower than the last couple of months it could be a sign that the worst is finally behind us (say, under 500,000 lost). If it stays in the 600's or (god forbid) goes up that would certainly be a bad thing.

I have a real problem with the rates rising issue, even though as someone looking to pay alot of cash, they would probably work to my benefit.

The only reason MBS hasn't crawled into a crater and died is lower interest rates. The US Gov't is trying to sweep as many ARMs and Option-ARMs into cheap convention re-fis as possible. But many of the owners at greatest risk do not qualify, as they have negative equity, or are unemployed, or more importantly to our market, their loans are not conforming. Even after this unprecedented refi activity, there will be a huge amount of at-risk ARM and option-ARMs out there. With unemployment expected to remain high for a couple of years, I see no room for the government to significantly raise interest rates without causing a secondary catastrophe in home prices.

i think we all agree that there is a major stand-off between the sellers and buyers. based on my own views, everything i read on these boards and in other places...the buyers WILL NOT blink first. they have no reason to. although no one wants to pay higher interest rates on their mortgage i don't see that being the determining factor in the stand-off. sellers have to blink first to get things moving.

Waverly, not so fast. This is about the initial claims report, and its predictive power as a sign of the recession ending (widely being cited as a possible green shoot), but I suspect it applies equally to unemployment as well.

http://www.econbrowser.com/archives/2009/04/initial_claims.html

Sorry guys, this is really wonkish, but the conclusion is highly interesting and the author, James Hamilton, is very respected.

IMHO, the lower end has held up because with the lower interest rates and modest price declines many people feel like they can finally get into something. I expect further compression between the higher end and lower end with the low end falling at a slower pace through the year. If/when rates go higher, I expect the low end to deteriorate at a faster rate.

Still, if a property comes up at a price that makes sense _for me_ I'm willing to buy.

Ehhh...I'm not so sure about that. At least for now, I'll compare apples to apples. I do think the initial claims is good data, though, and should be tracked. And aboutready, there is nothing wrong with being wonkish.;)

Well, given that his analysis is whether or not a reduction would be a false bottom, i think it'll reach. But, I'll keep an eye out for something exactly on point (my husband's legal writing professor used to refer to it as "the purple cow case." could you get me a case involving purple cows, and by the way, from the second circuit, and it would be great if the tort occurred in the dead of night absent a moon. hop to that research."

I must confess to being a bit wonkish. I love Ezra Klein's motto, Momma Said Wonk You Out.

At some point, the job loss number might be irrelevant. Say it gets cut in half. Is that progress because we're losing less, or only a factor of we already lost to many, there aren't any left to lose?