Are SELLERS getting the Message?

Why are sellers holding on to their property despite all the headlines showing slashing prices proving affective???

Because my apartment is special and not subject to market pressures.

I asked a friend this yesterday. He said he was holding onto it because inflation is coming in a couple of years and the dollar will be worthless. He won't rent it out and he doesn't mind paying the maint fees each month.

These are not the REAL sellers!

another problem with the market is that many buyers are simply unrealistic when the make very low offers.

Probably b/c every other day people in the media talk up the economy and b/c the stock market continues to move higher. I'm not saying there's any connection, but I wouldn't be surprised if sellers think this will help move properties - if only based on better psychology/mood or fears of buyers that the RE market will get away from them.

And I think that just like buyers don't want to be the last sucker paying the inflated prices, sellers don't want to sell low just before the next surge up -- granted a surge up is probably fantasy, but try telling someone whose apt. may be his biggest asset and he's looking at a big loss.

Thats where the Real Estate Agent Comes In Handy....!

Because Ben Bernanke said today that we're all going to be rich again starting tomorrow.

Agree Faye. A good RE agent could help, but seems like so many just tell sellers what they want to hear.

CB123

It is unfortunate that some bad apples in the agent business cast an awful shadow on those agent that are ethical and upright, trying to do their job without lying and cheating...!

I agree. I have met really great ones, including the guy who sold my place a few years ago and several I've met recently. And it's also possible that many brokers really do believe prices will move up again soon. They don't have a crystal ball...

so, we need to get rid of all corcoran, elliman and sotherbys agents and start fresh.

ALL....is a stereotype! These companies are made up of INDIVIDUALS....!

i've dealt with many and haven't found one with a balls to tell the seller that they're asking 10-30% over market.

Um, back to the original question...

I find sellers who need to sell are totally realistic. I am finding a shortage of buyers, though, and there's so much inventory that buyers do not seem to be in a big rush.

I am also finding buyers who think they can get the deal of the century, and then are surprised when they can't. But you know what, that's pretty typical in any market. There's an old saying, "buyers are liars" because they don't buy what they say they want at the price they want. But mostly everybody I'm encountering seems to have their feet on the ground.

Probably I just scare away the other kind with all my growlin' and-a yowlin' and-a sniffin' the air! Grrrr! (I'm a bear.)

Oh I do have one seller who is completely nuts. Just remembered her. That apartment is going to sit there till all [the rest of] my hair turns gray.

{Manhattan real estate agent.}

Stock markets are doing well, real estate markets are slower to respond but have turned up for the past 5 months.

Accordinf to todays article in th POST.....sellers that are avoiding reality pricing....cannot keep their head in the sand much longer....!

http://www.nypost.com/seven/08242009/news/regionalnews/city_dealing_to_make_luxe_condos_cheaper_186159.htm

Because 99% of sellers DONT HAVE TO SELL......

because all loser unemployed people are renters. right, petro. sure.

"Because 99% of sellers DONT HAVE TO SELL......"

Do you have a shred of evidence for this?

"Do you have a shred of evidence for this?"

how much of a moron can you be bjw? you are starting to give aboutready a run for his money

Myheartwillgoon, okay let's say only 5% need to sell, given on any given year I don't think more than 5 percent of homes trade. So id think even your 1% in a down market sets the bar lower, no.

'set my heart on fire .......make me women '

go tend to your slums, petro. it's hot, tenants break shit in slums in hot weather.

"how much of a moron can you be bjw? you are starting to give aboutready a run for his money"

Yikes, I merely asked a question. If you have anything to back it up, it's pretty painless to post a link, otherwise you should probably just zip your foul-mouthed lid. And for the record, aboutready is a she, not that you're one to be accurate on such "details."

I don't understand this hostility towards aboutready....I haven't seen any posts by her that warrant this.

this seller is not getting the message:

http://www.streeteasy.com/nyc/sale/383846-condo-610-west-110th-street-manhattan-valley-new-york

09/03/2008
Previous Sale recorded for $1,180,000.
12/04/2008
Previously Listed in StreetEasy by Corcoran at $1,425,000.
02/11/2009
Listed in StreetEasy by Prudential Elliman at $1,350,000.
04/01/2009
Price decreased by 7% to $1,250,000.

over 1000/sq ft and higher than late 2008 pricing all the way up on 110th street.
as far as i can tell building has no amenities besides a doorman.
i don't mind that it is up that high, but there should be a discount for it.

Yeah a lot of sellers aren't getting the message yet but what they don't understand is that the longer they wait, the less money they'll make.

LuchiasDream

my thoughts exactly!

"Accordinf to todays article in th POST.....sellers that are avoiding reality pricing....cannot keep their head in the sand much longer....!"

Oh yes, a building in Harlem and in Brooklyn are a representation of the entire market. Huh huh...

This is just one example of the "ruthless defaults" that will probably become commonplace as prices come down more and more:
My boss's friend just decided to walk away from his apt on Roosevelt Island. $1.3M purchase price, $1.17M mortgage, and a current value of probably <$1M. I would absolutely do the same thing if I were him, which is why I'm convinced this will become commonplace.

The_President

Last week the Forte went back to its lender, this week a condo in williamsburg went rental after being on the market for some time w/o any sales......and now these two condo buildings turning into affordable...!

Trust me..many more coming!

"My boss's friend just decided to walk away from his apt on Roosevelt Island. $1.3M purchase price, $1.17M mortgage, and a current value of probably <$1M. I would absolutely do the same thing if I were him"

Why?

How does the value of his apartment have anything to do with him being able to pay the mortgage?

""My boss's friend just decided to walk away from his apt on Roosevelt Island. $1.3M purchase price, $1.17M mortgage, and a current value of probably <$1M. I would absolutely do the same thing if I were him"

I'm usually skeptical of third hand information like this. Just like the game of telephone, the info is usually not accurate.

Who would pay over a million dollars to live on Roosevelt Island, anyway?

NYCMatt - "In the lexicon of financial institutions that extend consumer credit, a 'ruthless default' is a decision of a consumer borrower to discontinue servicing his or her debt obligations even though current cash flow (or unused borrowing capacity) would allow that borrower to do so."
http://apachecadillac.blogspot.com/2009/07/ruthless-default.html

I know what it means, East Villager.

I'm asking why people DO it.

As for why, would you want to pay $1.17M for something worth less than a million?

The_President - The ruthless defaulter told me, so it's not third hand info.

In other words, if you walk, you take the credit hit but the bank eats your negative equity, not you.

This is kinda interesting:
http://www.forbes.com/2009/07/13/mortgage-default-obama-business-housing.html

"In a recent survey of 1,000 U.S. households, researchers found that 5% of the homeowners sampled were willing to default "strategically" if their homes were worth 10% to 20% less than their mortgages--i.e. they would turn over the keys even if they still had the means to pay off the loan. Some 17% said they would leave their home to their lender if its value slid to 50% of the mortgage. Furthermore, of the respondents who said they knew homeowners who had defaulted on their mortgages, they appeared to believe that some 26% of those defaults were strategic."

In NYC the stakes are higher so I would expect more people to be willing to default as a result of negative equity.

http://therealdeal.com/newyork/articles/foreclosure-sought-at-alexico-group-east-side-project-the-oliver-at-951-to-961-first-avenue

I luv it :)

NYCmatt, it's a put option.... and cause he knows he f'n fucked up and bought too high and too late and the $400K cap loss is like 10 yrs of his working to save... that's why and it only takes 7yrs to clear your credit and he can rent for 1/3 the carrying cost.. it's pretty fu'king simple and logical to me...

Yeh.. they could've bought a 2bdrm in LIC for $1.3MM... roosevelt is for losers...

"In NYC the stakes are higher so I would expect more people to be willing to default as a result of negative equity. "

i guess it has to be much higher for those that find no problem looking for alternative shelter (like with family members nearby that are happy splitting housing bills with them).

at some point the credit ratings in the us are going to be so destroyed that if things get better lenders won't have anyone to lend to unless they lower their underwriting standards. again.

"that's why and it only takes 7yrs to clear your credit and he can rent for 1/3 the carrying cost"

Rent WHERE? Do you think any landlord is going to welcome a renter who voluntarily defaulted on his mortgage?

Strategic Defaults coming in a Big way ..The economic debacle properties (Lehman) not even close to reaching Foreclosure Vultures..When they do LOOKOUT !! Remember the Alamo? NO Remember FLA,CAL,AZ,NEV !!

New York city is made of 40% immigrants, it reduces the alternative shelter option by quiet a bit.

sledge, many immigrants follow relatives.

The ones from Latin America may be, but most relatives from any Euro immigrants i know prefer to stay where they are. Better living standard, better health care system.

Good for them!

sledgehammer:

Better living standard, better health care system.

I wouldn't move to Europe if you pay me! Better health care systems...my foot!

sledge, i was responding to your 40% of NYC comment. i'd move to many parts of europe in a heartbeat. and my heart would probably beat longer, also.

"i'd move to many parts of europe in a heartbeat. and my heart would probably beat longer, also."

Only because, by and large, their food supply isn't poisoned with chemicals like ours is.

actually, their stress-related deaths, in a number of countries, is far lower than ours.

I hear you AR. As soon as i get over $1Million in cash/assets, i'll go retire in the south of Spain...
Such a wonderful place!!

you may not need so much sledge, they had the mother of all RE bubbles.

the family was watching international house hunters on HGTV the other day. i wasn't, but the husband was literally astonished at what $250-300k could buy in Aruba. I pointed out that of course it would be all cash, and he said who the fuck cares? and then i thought he might be mimi, he started talking about rental income possibilities and retirement options and the like. i thought, who is this man i've been married to for nearly 20 years, and what have you done to my real husband?

"I hear you AR. As soon as i get over $1Million in cash/assets, i'll go retire in the south of Spain...
Such a wonderful place!!"

Sure. If you're a rich Spaniard.

Not necessarily if you're an American. http://www.numbersusa.com/content/news/may-28-2009/spain-revisiting-immigration-policies.html

matt, are you capable of presenting the truth? that article is talking about illegals that are taking employment, not wealthy people who can aid a horribly failing real estate market.

Matt, i'm European, i have the luxury to pick any country in Europe where i want to retire.

and matt is citing "numbers usa - for a lower immigration number."

you ARE a prince.

"i have the luxury to pick any country in Europe where i want to retire."

How about picking one and leaving now?

actually matt, i think you should move to pittsburgh. now. and of course you'd be happy there because you're not an elitist.

perhaps he's already there. they do have cable.

i bet most people have satellite. spendthrifts. only entertainment available, so...

http://www.dsnews.com/articles/optimism-grips-homeowners-four-out-of-five-think-homes-value-will-increase-2009-08-24

"Optimism Grips Homeowners: Four out of Five Think Home's Value Will Increase"

how far can the positive psychology go in the current conditions? And how long?

I guess it depends on where you live http://www.nuwireinvestor.com/articles/25-worst-real-estate-markets-in-the-united-states-53546.aspx

30yrs, yes, but 80% have felt that way for the past two to four years.

AR: It was answering the original "Are SELLERS getting the Message?" question.

I really hope the 4 out of 5 continue believing that their home prices will go up. Unlike the NASDAQ buyers who bought at 3000/4000/5000 despite any sense of valuation, these are not cash or we-will-liquidate-you-if-you-don't-post-margin-today purchases, so when the wisened underwater homedebtor walks away and the bank needs to be bailed out, you and I have to pay out.

SO, in summary, I hope they don't get the message.

P.S., I think NASDAQ will break 5000 again by 2020. You heard it here first!

sellers are not getting the message:

http://www.streeteasy.com/nyc/sale/373876-condo-15-broad-st-financial-district-new-york

even after 225 days on the market
04/12/2007
Previous Sale recorded for $885,000.
01/11/2009
Listed in StreetEasy by Urban Sanctuary at $1,175,000.
08/24/2009
Price decreased by 4% to $1,125,000.

when are people going to understand that if you bought at market prices in 2007/2008, that the value of your crappy apartment has gone DOWN not UP?

I get that a seller who has a lot of their net worth invested in real estate will latch onto ANY and ALL hopeful news indicating a rise in prices and hold on tightly to a dream of higher returns. I watched the psychology play out on an Open House episode with Barbara Corcoran giving Steven pricing advice on his Murray Hill apartment as he thinks about selling and upgrading. It's very interesting (and probably typical) to see his reaction to the lower-than-he'd-hoped-for listing recommendation and Barbara's counter-advice.

http://lxtv.com/openhousenyc/video/10105

plus--if you're looking to upgrade---it's gotta be real tough to hear how low your current equity is worth.

it doesn't matter really what the 4 out of 5 thinks. what matters is what happens when the person who needs to sell tries to do so. buyers aren't in the mood to believe that prices will go up.

maybe sellers got the message that home prices have now increased 2 months in a row, and for the quarter as well. Maybe they got the message that the bulk of the economic stimulous is going to be spent next year and a lot of is targeted at helping out home owners and home values and not market timing renters. maybe Sellers dont have to sell, they like living in their homes, and can wait to sell until they get the price they want.

Nothing has increased in NYC.

and maybe the government has created a temporary bubble. great idea, give people the money for the down payment, they can close with zero savings on a subprime loan carried by the taxpayers. fab.

http://www.calculatedriskblog.com/2009/08/comment-on-first-time-homebuyer-tax.html
"Anecdote: I've spoken with two younger guys (30 ish) who told me they had no down payment, but edit: were looking to buy a house NOW. They are using the tax credit and FHA to buy. I think that conversation is happening in many places.

This suggests existing home sales will decline - perhaps significantly - after the frenzy subsides."

so what is the difference between this bubble and the next or the last? either way market timers have missed the beginning of the next bubble. According to your theories you guys have now lost money because you didnt buy at the bottom. Now you are stuck waiting for this bubble to pop and for the next bottom to be reached. I figure you got about 10-15 years of renting before you can try to time your next RE bubble bottom. Thats about $700K in rent for you to try and save $50K on sales price. Brilliant!

Bronxboy says "Nothing has increased in NYC."

yeah - NYC RE always is the last to try and raise prices......you can be sure and sit back while counting on NY owners to not jump on a trend happening nationwide afterall NYer's are known for their passive laid back non monetary gains attitude.

petro, i owned for years. and i still own, just not my primary home. and i most likely won't buy in the future, so the timing is irrelevant. i like the freedom of renting, the mobility.

how is this bubble different? over 9% unemployment, and a consumer that has little access to credit in the event of hardship.

"maybe sellers got the message that home prices have now increased 2 months in a row, and for the quarter as well."

Are you saying this is true in New York? I've seen zero evidence of that. Still waiting on your evidence that 99% of sellers don't need to sell.

We all seem to agree that the government is propping up prices (agreement between AR & petrfitz -- woah!).

AR: are you suggesting that the government do differently or that as a result of their actions we're just going to see continued fizzling down?

Petrftiz: have you been making use of the opportunities in the market over the last year to buy additional properties?

aboutready, where's your second home? What's your take on the secondary home market right now anyway?

inonada, we'll see the same results, it will just take longer. there's nothing in the economy to support a v-shaped recovery, which would be the only thing that would help long-term home prices. they'd be better off determining where they should spend their money on R&D. and something IS wrong when i'm agreeing with petro.

bjw, my house is in Nassau, upstate. total folly, money pit, etc. but i bought in 2004, at 25% off initial ask, in an area that hadn't yet seen real appreciation,from a seller who had already closed on the next house and was carrying two mortgages. was also marketed horribly. still, it's most likely worth less today. but it cost less than a studio, and is 4000 sf of respite (when i'm not cleaning), was built in about 1800 and i love the historical aspect of it.

i view the second home as a discretionary expense. i bought it with no intention of selling, and i don't care what it's worth. if i had to choose between a second home and being able to travel often, i'd choose the travel. i think prices in the second home markets have tanked, but i don't doubt that they will tank more.

isnt it the actual job of the government to prop up homes prices? the US currency? insure domestic tranquility, provide for the common defense, promote the general welfare, and secure the blessings of liberty to ourselves and our posterity

or is it the job of the government to protect the market timing renters who dont invest in their communities? Just look at who the govt took care of in Katrina and who ended up on cots in filth strewn stadiums

no petro. the government should not be in the business of manipulating asset prices.

and stop with the katrina nastiness. you're foul.

fitzie, those are pretty gross distortions - the government should ensure that the economy doesn't collapse, but it should certainly not "prop up homes prices."

i realize this is for the metro area, and why business week should be accurate at this point is in no way obvious, but this is still fun (unless you own and need to sell, of course).

http://realestate.msn.com/slideshow.aspx?cp-documentid=21177689#4

AR, I am in general agreement with your statement that the government should not be in the business of manipulating asset prices, but perhaps not as a blanket statement. Clearly, there is a public interest in promoting homeownership (the line between that and promoting a bubble was crossed long ago IMO). Markets are inherently prone to bubbles, so perhaps it's good for the government to act as a tempering force and consider the effects of their monetary policy on asset prices (see what China is doing right now). Regardless of how we got here, though, if the government does not prop up prices, we all suffer. Best to let people slowly earn/burn their way through their losses rather then go belly-up, which transfers the loss to the banks which subsequently go belly-up, which transfers the loss to the taxpayer because we don't want Great Depression 2.0.

So petrfitz, I think do think the government is protecting renters by propping up the housing market so that the loss is taken by the hopeful homeowner over the next decade rather than John Q Public today. So, have you been buying???

oh so the middle class homeowners have no effect on the stability of the currency? or letting the RE of the citizens would not make the economy collapse? please explain

inonada - i am in the process of selling and reinvesting gains by buying. I have placed offers over the past year and have not closed on anything for a number of reasons. I will buy within the next 6-12 months. I am always looking at buying or selling - always in every market because i believe there are always deals out there where you can make money. With that said I only do a certain type of deal on certain types of properties

inonada, i agree with much of what you wrote. but prices are still too high based on income, and income is likely declining. what is good for some is bad for others. it's good for people who need to sell to keep prices higher, although many of them are already underwater and need a short sale or will be foreclosed upon so it doesn't help them. it helps the banks, which is the main impetus for keeping prices higher, but i think that is short-term, because we don't have the income levels necessary to keep prices where they are at without a new source of credit to prop up the bubble.

and it hurts people who would like to buy, but can't because prices are still not in line with rents and incomes. while we don't want GD2, i'm not certain that allowing price correction will cause that.

very, very slippery slope. we wouldn't have gotten here if government hadn't kept interest rates low for too long. who decides what gets propped up, how, and for how long? and how convenient for the small group let in on the secret to massively profit from this information.

petro, most of the people who need to sell are already screwed. this just allows the banks to take a smaller loss.

Petrfitz, that seems like a fine philosophy. It seems to me that there are good REO opportunities out there, especially outside of NYC, where you can set up a cash-flow positive situation. If prices go up, great; if not, you just sit & collect cash until things turn up. Is that your feeling as well, or are you looking at deals that are more dependent on capital gains for a positive outcome?

AR & CC, I hear you, but what do you want done now? Suppose that compared to incomes & rents, you think prices should go down 30% from here. Would you rather see the drop tomorrow, inducing a lot more homeowners to walk away, or have prices flat and let inflation deal with the issue with the homeowner pay for the loss in the form of a larger-than-rent monthly nut? Personally, I'd rather have the latter.

I empathize with the poor would-be buyers who are priced / logic'ed out of buying, but honestly, I care about my own pocket more than some random person's attachment to pride in homeownership. If prices fall, they can buy. If not, keep renting & chillax, especially in NYC where you can rent the equivalent of pretty much anything you can buy....

i look at opportunities more from a gains outcome than a cashflow (at this point in my career) but I do look at properties from a cash flow perspective. If you play in certain markets the risk is high and so is the gain so the cash flow is marginal

> i look at opportunities more from a gains outcome than a cashflow (at this point in my career)

finally!

now you know how stupid your RE investment decisions were.

nada, i'm thinking japan here.

personally, i'm much better off, certainly short term, with a propped up economy. but i'm not sure my daughter will be at the end of the day.

nyc10022, I don't think that's really right. When you buy stocks, your cashflow (dividends) are quite low compared to your gains, even as a value investor. The point is to buy when the cashflow is high rather than low, and the gains will follow. Otherwise, losses will follow. The price is a reflection of all future cashflows, so the expectations on the gain on that (if you believe it's mis-priced) should be much higher than the actual cashflows unless you think the mis-pricing is going to take a very long time to correct (on the timeframe of the future cashflow).

Petrfitz, I understand that you are looking more from a gains outcome than cashflow, but that could mean one of two things. (A) You are in a positive cashflow situation, and you think this is indicative of a capital gain in the future. (B) You are in a negative cashflow situation, but you think there will be capital gains nevertheless because of future rent improvements or simply the fact that people will be willing to pay more later.

AR, if you want to tablulate the ways your daughter will be worse off, I think propping things to avoid GD2 should be the least of your worries. I.e., my guess is that she is a net beneficiary of GD2 avoidance, but there have been / are / will be plenty of things where she is a net loser.