Home prices and sales decline
There was an interesting article in today's Sarasota Herald Tribune about the decline in real estate prices and sales volume across the state of Florida. The report indicates that Charlotte County-North Port's median price was 21 percent below July 2006 while Sarasota-Bradenton's was 12 percent below the comparable month last year. These two figures marked the biggest declines statewide among Florida's 20 largest markets.
I am not sure if this information comes to a surprise to anyone. It is not like the newspaper has been quiet about the real estate slow down. Articles like this are usually in big, bold print on the front page.
Part of me is happy to read this kind of article because it just means that we are that much closer to the bottom in my opinion. Sellers need to realize that market values have dropped and if they truly want to sell they need to drop their asking price accordingly. If they don't drop their price to realistic levels then they are just wasting a lot of people's time.
In addition to wasting time they screwing up inventory levels. If you took our total inventory and removed all of the unmotivated sellers who have not adjusted their pricing to realistic levels it would cut the number of homes for sale dramatically.
I am not tooting my own horn (mainly because the home has not closed yet) but I sold a property I own in about 60 days because of proper marketing, staging and pricing. It can be done but you need to remove your emotions from the equation in most instances.
Lawrence Yun, who is an economist with the National Association of Realtors so his view might be skewed, think that this is a short term problem
"There is an underlying pent-up demand, which I believe will begin to show up in home sales.
"So temporary softness, but toward the end of the year, sales should be beginning to show a rise."
I think there is truth to these statement only from my own personal experience. My phone has been ringing lately with people who are looking to enter the market because they are smelling blood in the streets. And, perhaps more importantly, they would like to own a nice property in a great part of Florida - Sarasota.
I am not sure if this information comes to a surprise to anyone. It is not like the newspaper has been quiet about the real estate slow down. Articles like this are usually in big, bold print on the front page.
Part of me is happy to read this kind of article because it just means that we are that much closer to the bottom in my opinion. Sellers need to realize that market values have dropped and if they truly want to sell they need to drop their asking price accordingly. If they don't drop their price to realistic levels then they are just wasting a lot of people's time.
In addition to wasting time they screwing up inventory levels. If you took our total inventory and removed all of the unmotivated sellers who have not adjusted their pricing to realistic levels it would cut the number of homes for sale dramatically.
I am not tooting my own horn (mainly because the home has not closed yet) but I sold a property I own in about 60 days because of proper marketing, staging and pricing. It can be done but you need to remove your emotions from the equation in most instances.
Lawrence Yun, who is an economist with the National Association of Realtors so his view might be skewed, think that this is a short term problem
"There is an underlying pent-up demand, which I believe will begin to show up in home sales.
"So temporary softness, but toward the end of the year, sales should be beginning to show a rise."
I think there is truth to these statement only from my own personal experience. My phone has been ringing lately with people who are looking to enter the market because they are smelling blood in the streets. And, perhaps more importantly, they would like to own a nice property in a great part of Florida - Sarasota.
posted by Marc Rasmussen at
8:37 PM
9 Comments:
Marc
Chances are that you won't print this post for reasons of your own, but I'll say it to you nonetheless because you need to hear it.
You continue to print fantasy land scenarios regarding the current RE situation in Sarasota.
You have been saying the same thing since the early/middle part of 2006 and you've been WAY, WAY wrong. You always put in a qualifier in those posts = ("I could be wrong"), but the fact remains that you want to appear to be a bull when you should know very well that it's a bear market for RE in our market.
BTW, if you don't know it's a bear market then you're either inept or delusional, like many other people operating in this market. I sense that you indeed are aware of the facts but choose to put a positive spin on what is an extremely situation.
Quit pussyfooting around and just come clean. This is a VERY difficult market. There are deals to be had out there, certainly - but they're extremely selective.
You continue to make it out as if this is a small/moderate decline and that things will bounce back in the next year or two.
Stop selling the local RE association party line. It's pure BS. "Time To Buy" = very premature.
Those in the know see it, and your continued cheerleading diminishes your credibility, IMO. Especially given your move to the high end of the market - those people necessarily know what has occurred and what is happening more than most.
Just one person's opinion, as always.
Thanks for the comment but I disagree.
http://www.thesarasotamls.com/sarasota-real-estate-news/2007/07/june-home-sale-number-good.html
Here is a link to one my posts in which I mention the market has dropped 20-25%. I have stated that several times in numerous posts.
Of course, we are in a bear market. I have never stated otherwise.
"... that things will bounce back in the next year or two."
I don't recall saying that recently. I may have said that the market will become more balanced within the next two years. Which it will.
"Stop selling the local RE association party line. It's pure BS. "Time To Buy" = very premature."
Are you 100% sure of that? No. For some people this is a perfect time to buy because of their personal circumstances. Not everyone is trying to time the market. For that retired doctor who always dreamed of owning a condo on the beach this may be the best time for them to buy. Who are you to tell them otherwise?
Cheerleading? Just because you always look at the negatives in every story and I like to look at the positive aspects does not make me a cheerleader.
"Especially given your move to the high end of the market - those people necessarily know what has occurred and what is happening more than most."
And many of them are actively on the hunt for real estate. What does that tell you?
Why do you find it necessary to visit numerous real estate blogs spewing negativity and doom and gloom? Your posts could be more objective. Why don't you fess up to who you are and how you are involved with the real estate industry instead of comfortably hiding behind your anonymity?
Marc said:
"Why do you find it necessary to visit numerous real estate blogs spewing negativity and doom and gloom? Your posts could be more objective."
If I come off as currently negative on the local RE market it's because of what I see unfolding right before us. As I've stated before I'm not a realtor. I'm an average person of very modest means.
There are absolutely some very competent, professional, hard-working RE agents who make a legitimate living. There are also many RE sales agents who have not done their homework or kept up with the current business cycle, and who are not deserving of any compensation whatsoever. I've talked to them personally.
I have a problem with someone posing as a "professional sales agent", someone who purports to know what they're talking about when in fact they don't have a clue.
I'll give you a real life example of what I'm talking about, but I'll save the folks trying to sell their house some embarrassment and won't mention the address of the home.
Back in the spring of 2006, there was an open house for a house listed at $289,900. One Sunday my wife and I decided to take a look. The agent informed me that the house had been reduced by $10,000 and that it was "priced to sell."
I could see right away that the house was overpriced by $40K-50K for what the market was commanding back at that time.
Since there was no one at the house except the realtor I asked him a few questions about what he thought of the market in general. He was utterly clueless. I told him about how rates were on the rise and how that would impact house prices, how there was a glut of new homes built in recent years, etc...
He asked me where I got my information and so I told him that I read a lot. His reply to me was "who has time to read?"
Fast forward to May of 2006 and there was another open house at the same house. This time I took a friend along. The realtor told my friend that the house had been reduced to $279,900 and that the owners "were really ready to sell."
I told the realtor that if they were really serious about selling they should drop the price by $30,000 immediately and be prepared to take $235,000. He laughed out loud at me. His response, "this house will never sell for below $250,000."
The house WOULD have sold for $235,000 back in the summer of 2006 because money was still readily available for the lower end buyers.
I've watched that house closely since then. They have dropped the price consistently but have still chased the market down. That is, they're always priced $30K-40K above the current market.
They now have it listed for $159,900 and they still haven't sold it! That realtor has already cost the seller minimally $75,000-$80,000; not including interest and other carrying costs by being smug and unaware of what was happening.
As I said before, there are indeed some very good RE agents. But it's bozos like this guy I talked to several times in 2006 masquerading as a realtor that make it bad for the industry.
The RE industry needs to do a MUCH better job of training sales agents, appraisers, mortgage brokers, etc before they're permitted to deal with property transactions.
When I read realtors and RE organizations putting forth information that is absolutely incorrect, I feel compelled to engage the conversation.
You are certainly more in tune with what is happening than most of your counterparts, but you still like to put a positive spin on things when it's unjustified, IMO.
From what I've read, Thomas Heimann also appears to have a better grasp of what is occurring and what will happen going forward. I do not know the man, but he appears to be more realistic than most in the industry.
It is not my intent to be a doom and gloomer - what's the point of that ? But the reports coming from the NAR and the local chapter have been filled with misleading information and bad advice for the last few years.
It's only in that vein that I continue to offer my opinions.
Thanks to you for providing the forum with which to do so.
Todd said:
"There are also many RE sales agents who have not done their homework or kept up with the current business cycle"
I totally agree with you there.
There are numerous similar examples like the one you described in your post. There are plenty of Realtors out there who are a bit clueless about the market. I would imagine many of them will get washed out with this market downturn. Take note: I said market downturn.
I don't know the Realtor you are talking about or the house but perhaps the agents hands were tied by the seller. Perhaps he was representing his client the best way he knew how. He could have been aware of the market conditions but had to do his best in representing his client. That is his/her job.
Todd said:
"The RE industry needs to do a MUCH better job of training sales agents, appraisers, mortgage brokers, etc before they're permitted to deal with property transactions."
Possibly.
The real estate market is not totally efficient. For example, I can make a compelling case why a particular home should sell for around $500,000 (fictitious home & price). I can provide extensive market and neighborhood data that supports my valuation. Then comes a buyer who has the funds, listens and trusts his Realtor, does no homework on his own and ultimately buys the home for $600,000. She decides to buy it because it has a "good energy". The sales price makes no rhyme or reason. This happens. I have seen a few of them lately.
This example of market inefficiencies allows Realtors and sellers to have unrealistic asking prices.
Perhaps in your example the Realtor was looking for that one buyer who would overpay for the home because it had a "good energy".
Tood said:
"You are certainly more in tune with what is happening than most of your counterparts, but you still like to put a positive spin on things when it's unjustified, IMO."
I don't believe it is unjustified. We can just agree to disagree.
I have read your posts on other area real estate blogs and forums. I think it is great that you post and offer your opinion and insights.
Here is one of your recent posts:
"There has been more RE broker reciprocal love recently on this site than ever before.
Signs of a further panic forthcoming in the months ahead ?"
I find it amazing that since a couple of Realtors posted positive comments about my blog and website translates into a further decline in the real estate market in your eyes.
That post really shows how biased your are.
Todd said:
"Thanks to you for providing the forum with which to do so. "
You are welcome.
Marc said:
"I find it amazing that since a couple of Realtors posted positive comments about my blog and website translates into a further decline in the real estate market in your eyes."
A poor attempt on my part to inject some humor. Ah well ... There are limitations to communicating on the internet where you can't read body language.
"A poor attempt on my part to inject some humor. Ah well ... There are limitations to communicating on the internet where you can't read body language."
Ahh...gotcha. Understand now. Yea, it is sometimes hard to make a joke over the internet. I guess you have to follow it up with a :) or a "lol".
Thanks, for the posts.
Marc said:
"I don't know the Realtor you are talking about or the house but perhaps the agents hands were tied by the seller. Perhaps he was representing his client the best way he knew how. He could have been aware of the market conditions but had to do his best in representing his client. That is his/her job."
No, this realtor was and is clueless. In my conversations with him it was clear that he has no concept of the business cycle or the importance of interest rate levels/trends.
Without getting into a lengthy explanation of how/why I know this, suffice it to say that the owner's cost basis (including refinancings) is substantially lower than even the current price.
Marc said:
"Take note: I said market downturn."
Market downturn = bear market, they're the same thing.
Too my recollection I have never mentioned the term 'housing depression' like some economists have. There's a distinction in my mind between a bear market and a depression.
And Marc, I think it's very important for everyone involved in this discussion to acknowledge that this "market downturn", as you term it, COULD indeed turn into a "housing depression" if things aren't fixed before all the ARMs reset.
IMO, the federal govt. is just now starting to get their heads out of wherever they've had them and acknowledge the seriousness of the problem. They've got a lot of work to do.
Marc said:
"Why don't you fess up to who you are and how you are involved with the real estate industry instead of comfortably hiding behind your anonymity?"
I think you need to know that when you see my comments at other websites like the forums at the Herald Tribune or the blogs by Michael Saunders and Thomas Heimann, etc., that I always sign my first name.
I am not one of those many persons who puts the blame of this bad RE market solely at the feet of the realtors, builders, appraisers, flippers, etc. I'm not critical of any one entity (other than the govt which always finds a way to screw things up) for this problem.
In fact, I firmly believe in free markets. IMO, the current turmoil was caused by a combination of MANY factors. This debacle was precipitated by the gov't. lowering interest rates to artificially low levels, something I've mentioned previously. You can't turn the money spigot on full throttle like the Fed did after 9/11 and then just cut it off and not expect to have serious problems down the road.
Please make a distinction between my personal opinions and assessments of the current market, and that of laying blame on your profession. That's not my style.
Well folks here is the down and dirty on Florida Real Estate. Doesn't matter if it's Sarasota, or Boca, or Naples. I lived in Florida from 1964-2005. I'm a institutional investment banker and Florida has the perfect storm with regards to real estate. 1. Homeowners and Flood insurance is very very expensive IF you can get it. 2. Property Taxes have sky rocketed. 3. The state is overbuilt and extreme speculation caused tremendous supply overhang. 4. Because of increased information technology more people throughout the country know about it. After the last Florida real estate bust in the late sixties and early seventies it took 15 yrs to recover from that. This could be as severe. If Florida can dodge a hurricane for the next few years, then there could be a light at the end of the tunnel.
Good points Chris. Thanks for the post.
Chris wrote:
1. Homeowners and Flood insurance is very very expensive IF you can get it.
We are more expensive than other states but it is not as much as most people think. I have not had one client this year have trouble getting insurance.
Chris wrote:
2. Property Taxes have sky rocketed.
Property taxes have gone up with the market prices. They will most likely come down as the market goes down. There is a year lag. Property taxes generally end up between 1.0% - 1.5% of purchase price. Compared to many areas of the northeast that is not bad. I have had clients from Pittsburgh, New York and New Jersey tell me that their taxes were much higher. I guess it all depends on what you are used to.
Chris wrote:
3. The state is overbuilt and extreme speculation caused tremendous supply overhang.
We currently have an oversupply but building starts have declined. As the state becomes more affordable again the retiring baby boomer population will help drive demand.
Chris wrote:
4. Because of increased information technology more people throughout the country know about it. After the last Florida real estate bust in the late sixties and early seventies it took 15 yrs to recover from that. This could be as severe.
More people do know about the declining real estate prices. But it is not only happening in Florida. It is occuring everywhere.
As quickly as people find out about a declining market they will also know find out about a more balanced market.
In my personal opinion it won't be 15 years for a recovery. Many retiring baby boomers still desire a home in Florida. The trouble is that we blew past affordability for many of them. As we get back to those levels the demand will come back.
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