Procrastinator's Market

The Post Gazette is reporting A different kind of fall in New England.

Kim Bronson's West Windsor, Vt., home has everything a buyer might expect in a pastoral North Country property: a five-bedroom, Federal-era main house, several fenced horse paddocks and four guest cottages. It's located just 12 miles south of Woodstock, a vacation spot known for its quaint New England charm. It even has a celebrity pedigree. Ms. Bronson shared the home with her late husband, actor Charles Bronson.

The only thing the property doesn't have is a buyer. Ms. Bronson put her home on the market more than a year ago at $4.9 million, then shaved the price by $1 million in April. "I'm really surprised it hasn't sold," she says. "I don't think Vermont and New England is going with the same real-estate flow as the rest of the universe."

Melanie Eleftherio's renovated five-bedroom home in Newport, R.I., has been on the market for almost a year at $1.3 million. Though the 1860s Victorian includes new bathrooms and a renovated kitchen, the property -- sandwiched between the ocean and the Bellevue Avenue mansions -- has failed to fetch a single serious offer. But the 46-year-old former advertising executive isn't ready to cut the asking price. "The home is priced right for the market," Ms. Eleftherio says. "Serious buyers will recognize that."

Andrew Heiblien has been trying to sell his four-bedroom home in Mystic, Conn., since January. As in many of the small towns that dot the Connecticut shore, the number of for-sale signs in tiny Mystic (pop. 4,001) has doubled since then, area brokers say. Mr. Heiblien, a 46-year-old private ferry operator, says he anticipated a slowing market when he listed the property for $515,000. But, he says, he "never dreamed" he'd need to cut the home's asking price four times before finding a buyer. The property went under contract last week for $405,000. "I really thought the market was stronger when I put the home up for sale," says Mr. Heiblien. "I had to adjust."

I don't think Ms. Bronson has any idea of what is really happening in "the rest of the universe". Obviously Bronson was asking at least $1 million too much for her property. Who knows? She might still be asking $1 million too much for her property.

Andrew Heiblien walked the market down 5 times before getting a sale. But at least he finally got out. It seems Melanie Eleftherio still believes in the "different universe theory" when she made this statement: "The home is priced right for the market. Serious buyers will recognize that."

Tough All Over

LOCATION: Las Vegas
MAY 2006: Condominium and town-house sales volume fell 19 percent compared with the same 2005 period. Single-family home sales declined 17 percent.
COMMENTS: The number of overall home listings reached 20,000 in June, an all-time high, up 32 percent from the same month a year ago.

LOCATION: Los Angeles County
MAY 2006: Home-sales volume down 11.6 percent compared with the 2005 period.
COMMENTS: Though sales volume is slipping, the median price of a home in the county rose 13.5 percent from the previous month to $568,550, second-biggest gain in state.

LOCATION: Miami
MAY 2006: Home sales down 26 percent compared with the 2005 period.
COMMENTS: Median prices for single-family homes were up 1 percent from both the previous month and the year before, to $379,700.

LOCATION: New York
MAY 2006: Condominiums and co-operative apartment sales rose 35 percent compared with the same 2005 period.
COMMENTS: Virtually all of the increase was attributed to closings at recently completed condominiums.

LOCATION: San Francisco
MAY 2006: Home sales down 18 percent compared with the same period a year earlier.
COMMENTS: May marked the third consecutive month that the year-over-year price increases were in the single-digit range.

It seems we have proof that New England is not in a different universe.

Buyer's Market

I have been thinking about the terms "buyer's market" and "seller's market".
What exactly do they mean anyway?

I found the following definitions of "Buyer's Market" on Answers.Com

1. A market condition characterized by low prices and a supply of commodities exceeding demand.
2. A market condition characterized by an abundance of goods available for sale.
3. A market in which supply exceeds demand. As a result, suppliers usually have to lower their prices, thus favoring the buyer.
4. a market in which more people want to sell than want to buy

What is interesting is that real estate cheerleaders are suggesting that now is a great time to buy because "It's a buyer's market". Of course when it was a seller's market the mantra was "better get in now before prices rise further". Thus we have the situation where "It's always a good time to buy".

Just because "It's a buyers market" does not mean "It's smart to buy". To suggest that "now is a good time to buy" because prices are 4-10% lower after a maniac period where prices doubled in five years is disingenuous at best. Now is not a good time to buy and the smartest Realtors know it. Some will do what they have to do to stay in business, lie.

Drama Pricing

Boston.Com is reporting To fight the glut, home sellers push their prices down.

Today, what's important is what is not selling. Drama pricing focuses on what buyers see on the market, forcing sellers to look at the prices of active listings.

Coldwell Banker Residential Brokerage, Massachusetts' largest real estate firm with more than 3,500 agents, is coaching agents on how to persuade clients to list their homes at an asking price that undercuts those of comparable ones on the market.

The hope is low prices will attract more prospective buyers, leading to faster sales. Other real estate agents in the Boston area report success with similar strategies in a housing market with an unprecedented glut of properties for sale.

Called "drama pricing" or "energy pricing," it is a drastic measure for difficult times. And it seems to run counter to the conventional strategy of selling your home for the highest price possible.

"It's another indication that it's clearly a buyers' market," said Timothy Warren Jr., chief executive of The Warren Group, a Boston real estate research and publishing firm that tracks the market. "There's a lot of stuff on the market, and it's going to have downward pressure on prices."

The median price of a single-family house in Massachusetts has declined 4 percent over the past year, to $331,000 in May, and sales volume has fallen five consecutive months.

The traditional strategy of incremental reductions in asking prices can frustrate sellers because properties grow stale and buyers lose interest.

Prudential Maxfield & Co. in Boston also is tinkering with asking prices with the same goal to attract more bidders. Instead of a single asking price, owner John Maxfield places a range on a listing, say, $469,000 to $529,000. Sellers were hesitant to try this when the firm introduced the idea in 1999, but the slowdown has made them more open to the tactic.

Kathleen Horigan is selling a tidy four-bedroom house in North Attleborough she purchased eight years ago for her sister and family. A few weeks after they moved out in February, Horigan listed the house for $319,900. There were no offers.

Her agent suggested drama pricing, and Horigan dropped the price to $279,900.

Nine more people have looked at the house -- ``unheard of in this market," she said. While she was optimistic last week she'd receive an offer over the weekend, none came. During the selling process, she has gained new insight into Massachusetts' housing market.

"It's not a buyer's market," she said. "It's a procrastinator's market."

Drama pricing [is] forcing sellers to look at the prices of active listings.
Yeah right. No one can force people who do not need a house into looking at listings. There are so many houses on the market because investors bought two and three houses and now do not know what to do with them. 40% of the houses sold in 2004 and 2005 were as second homes or investments. The market is now flooded with inventory from those who now want to cash out.

Prices have only one way to go and that is down. Why buy today when home prices will be cheaper tomorrow? He who procrastinates, wins. That's what makes it "A Procrastinator's Market".

Mike Shedlock / Mish
http://globaleconomicanalysis.blogspot.com/