Friday, February 20, 2009

Sellers Trapped in Their Homes

More and more sellers are trapped in their homes, unable to move on or up. Read about these sellers in NY, who are unable to sell, stuck and stressed, due to a variety of reasons and decisions.

On the other end of the spectrum are homes that won't sell but are empty. The vacancy rate for houses currently for sale in the Charlottesville / Albemarle area has remained at a consistently high level.

Too much supply, not enough demand. And the supply increases every day.

25 comments:

Anonymous said...

Don't realtors have a code of ethics? I sometimes see homes that have been on the market awhile suddenly appear as "new" listings? They get additional attention on mycaar and elsewhere through this subterfuge. Isn't this unethical and arguably deceptive to consumers?

Jim Duncan said...

Anonymous -

The short answer is "yes" that the Realtors do have a Code of Ethics.

This is a story I wrote last year about this subject -

http://www.realcentralva.com/2008/01/25/realtors-gaming-the-mls/

The argument has been made that the MLS is not for the public (which it's not, as it's owned by Realtors) and that it can be in the seller's best interest to withdraw a property and put it back on the market - (it is, and this does help sometimes).

Also, there are legitimate reasons for sellers temporarily pulling their houses back on the market -

Holidays, sickness, need a break ...

I have strived for a black and white answer to this problem only to be stymied every time.

Another post about Days on Market.

Real C'ville - The Bubble Blog said...

Anon,

This is a persistent concern of buyers. We were hoping Jim would come and provide some links.

Jim gives legitimate reasons why a seller might pull a house from the market and relist. But there are also sellers who do it so that the listing is "new!"

There's a fear that there's a "stigma" on a house that has a large number of days on market. Is there something "wrong" with the house? Will the sellers not budge on "anything"?

A reliable, ethical realtor will provide the buyer with continuous days on the market, and how many times the property has been on the market as well.

While MLS is "private," it is now used by so many buyers that buyers can know all the properties in their price range and be well aware when something shifts--like a "new" listing.

But even if the Multiple Listing Service goes back to the hands of agents only, there will always be internet sources for buyers to keep track of properties. This is Realty 2.0. Shopping for everything happens on the internet. In the case of houses this is especially true because it's unrealistic to visit 500 houses in your search--except onscreen.

Check out another blog for more info on what some call "MLS washing": blog.franklyrealty.com, which is written by a real estate profesional.

Rob said...

A perfect example of manipulating the mls is the JPA condos that sold earlier. It escapes my memory of which blog it appeared on, but basically 6 JPA condos were delisted, relisted with a new prices and sold the same day. Instead of showing a significant difference in sold vs asking price and a long wait on the mls, the sale appeared as though the condos sold in a day for full asking price.

n. downtown said...

another example is 903 rougemont which was listed for months, maybe more than a year. i remember it appeared on this blog a few times. then the owners listed it with equity savers. i don't know if equity savers puts their listings on mls but when the house sold within a few weeks w/a lower price equity savers was posting about it on craigslists as an advertisement of how well that system works.

same idea as relisting. not quite telling the truth.

Real C'ville - The Bubble Blog said...

Rob,

Those condos were mentioned on RealCentralVA. Perhaps Jim will provide the link, as part of his point in mentioning them, if we remember correctly, was exactly what you're describing. The sales price AND the DOM were both skewed because of this.

n. downtown, good memory. 903 Rougemont eventually sold for $167K in 9/08. We'd seen it on craigslist as far back as 1/08.

post: http://realcville.blogspot.com/2008/07/903-rougemont-new-mls-new-price.html

In this 903 Rougemont post another property that was relisted on the MLS is mentioned. 1705 Rugby Circle, which was relisted with no price change. A rather enlightening set of comments appears after this post, a conversation between realtor Jim Duncan, Charlottesville Area Assoc. of Realtors CEO Dave Phillips, RE agent Pavel Dovgalyuk, RE agent Daniel the Real Estate Zebra, and one of our favorite/most astute commenters (currently on hiatus), Montpelier, plus some recent/potential buyers, about:

MLS "gaming," ethics, " internet search terms, meta tagging, sellers' motivations, training v. education, buyers' points of view, the difference between unethical and sneaky, educated buyers, pricing, the state of the market, and the value of a buyer's agent. Etc etc etc. Quite the read.

http://realcville.blogspot.com/2008/07/why-does-1705-rugby-circle-have-new-mls.html

BTW, 1705 Rugby Circle did not sell. We fully expect to see it relisted any day now.

Jim Duncan said...

Here's the post on JPA condos.

The 1705 Rugby post did yield a great discussion.

For now we're likely stuck at an impasse as far as definitions and interpretations of DOM.

Here's a question - there's a house I'm looking at for a buyer that was on the market last year for 300 days. It came of the market for about four months and recently came back on the market - same agent, similar price ... what should the days on market be?

If you want to know the true days on market, it'll take a little bit of research.

Anonymous said...

It's all a game with the rules made up as we go. If the MLS is a private tool, the Realtor is speaking out of both sides of his mouth. When it suits his purpose, the Realtor points a prospect to the MLS to do a preliminary search so the 'busy' Realtor doesn't have to do it. Then when the buyer wants more information, he can get it only through discussion with the Realtor. A teaser if you will. Unsold homes are passed from agent to agent by nervous sellers and they become "new" with no mention of having previously been listed on the market. The database built for the original MLS never envisioned a computer savy public that has search and statistical needs that are advantageous to a Buyer vs. the Seller's agent. Ethics may be questionable, but I prefer to see the positive side which is that the online MLS beats the original paper book published weekly and available only to the Realtor. It is also free to everyone.

Cville Buyer said...

I haven't read all the comments yet on the 1705 Rugby post, fwiw, but I intend to. So forgive me if I repeat something that's already appeared over here. But I'm going to address Jim's question before I pop out to some of today's open houses.

For a "new" listing, I want to know how many times it has been on the market lately and when it was pulled. And why. So I want to know the days on market for both (or three or four) times it has been listed.

It is also important to me that this is the same agent. And what the "similar" price is. Is it a $20K price drop for a $400K house? That type of "drop", about 5%, is unrealistic for something that has been for sale for at least a year.

That the price is similar tells me that the seller and the agent still believe that Charlottesville is "protected" from the rest of the US if not the rest of the world. It tells me that they believe therefore that this area is not subject to the Recession that is apparently going to drag on for the next 3-5 years. It tells me that they seem to believe that buyers are flocking in from the sidelines. Even though there's evidence to the contrary with weekly reports of area layoffs, furloughs, and closings, not to mention the fact that Cville is actually losing population.

I will conclude that these sellers need to make a certain price on the home. Or that they have have too much pride in the home to lower the price. Or that they will not negotiate to a "fair" price so I will not be immediately underwater in my mortgage should I purchase the home.

And if I have all this information up front I'm going to save myself and my agent a trip over to see the house, one or two hours that we could both use more productively.

Additionally, I am going to be suspicious of this particular seller's agent in the future, as s/he hasn't done his/her "homework" on the local and national economy.

Anonymous, great point about the rules being made up as we go.

But that's true for buying a home right now in general. From everything I read not just on this blog but the national bubble blogs and the national newspapers, the stock and housing bubbles have changed the financial landscape forever. We are truly in uncharted territory.

Anonymous said...

A seller recently told me that he was waiting for the spring, because several agents here told him there would be a flood of buyers entering the market then. Until then, he was not willing to drop his list price more than a token amount. He also took comfort from the recent assessments which showed very little decline in the county. I'm amazed by the persistence in this kind of thinking.

Joe Blow said...

Realtors seem to have a similar want it both ways vibe going with the economy and housing markets at least in this area. I was shocked to read the banner ad running across The Hooks website for some new townhouses near the Corner. Venable Fields. It actually says It's a Great Time to Buy.

Um, no it's really not. And that's the thing with realtor blogs in this area too. The economy is bad and even with stimulus plan it's going to continue to get worse for some time. When it does get better the housing market is not going to 'come back' according to Nouriel Roubini, Paul Krugman, Robert Shiller and so on. Meaning that there is never going to be such a time that houses will accrue 'value' the way they have in the past seven years. Because BTW? Houses DID NOT accrue the value. Tthat's the whole point of the collapse of the US and global economies. It was fake.

But there's really never a mention of that on any realtor'ss blog I'm reading, at least in this area. Sure I realize that the small number of realtors still making a full time living do need to keep eating. But this should be accomplished by selling people their house, not selling a half-truth or suggesting that if a buyer doesn't buy right now they're going to miss low interest rates and the lowest prices. There's no evidence for this.

In fact there's so much evidence in the other direction obviously that the very controversial mortgage rescue was just announced.

Anonymous, I know a seller who's doing the same thing. All I can say is good luck. I'm wondering why sellers don't know that assessments are based on sales prices from 2007. Assessments don't have anything to do with what the house is worth in this market. Why don't seller's agents tell them this?

Anonymous said...

Here's an excellent article that supports your points re the current real estate market: http://www.businessinsider.com/the-housing-chart-thats-worth-1000-words-2009-2 The market here will have to adjust at some point, our inventory is already reaching a ridiculous level. Realtors are going to continue to have a hard time earning a living so long as they perpetuate the current gridlock. I've thought of going through the current listings to see which realtors are the most egregious offenders -- those pricing houses at the most ridiculous prices. Hopefully, the market will take care of them on its own and we'll be left with realtors with intelligence, perspective, and strong ethics.

downtownenvy said...

I've been watching this market for nearly 5 years and "renting it out" in the hopes that people would get real. It's still not happening. On a bright note though, the quality and availability of rental housing is increasing as more people are carrying two mortgages.

I'm just telling myself that it gives me more time to save a bigger down payment. On the other hand, when I do finally find the right house at a sane price, I am not going to be in the haggling mood, and I suspect many other buyers feel the same way. A lot of us have been running into this current seller mentality, and frankly, patience and good manners only go so far. At some point some buyers are going to be giving reality checks to some of the more stubborn sellers and agents.

Thankfully, not every realtor and seller here are like this, but there are still an overabundance who are not in touch with current economic facts. I guess it's just going to have to get to the point of desperation for some. Otherwise they are going to be holding on to their houses for years.

Soren Burkhart said...

I see the issue with the higher prices are due to two reasons:

1. Sellers paid too much for their property, but can afford to drag a listing on at a higher price point; and

2. Realtors are so desperate for business that they are supporting these sellers. But by doing so they are doing a disservice to themselves and their client, because it doesn't really create a realistic or liquid market.

Whenever I see listings that fly on and off the market due to various excuses "Spring Break","Needs a rest","More buyers later" I know that either the seller and/or the seller's agent is not serious about selling the house.

If a house is priced right for the current market conditions it doesn't matter how many games they play with coming on and off the market it will sell.

Simplest analogy I make to sellers is that if they bought shares of a company 3 years ago at $150 a share and it rose up to $300 a share 1 year ago, but now is selling at $100 a share. They won't be able to sell it at $300 a share now. They either wait it out and hope it gets better, or sell now and take their loss and move on.

The only people that like a sales process to take longer is the banks that currently hold the note. Because they still get paid while the house is being sold. And if it goes on for too long and the seller can't afford to pay the note, the bank will step in and sell the house at foreclosure.

Real C'ville - The Bubble Blog said...

These comments are compelling, to say the least. We have a little more to add (of course), but in the meanwhile, welcome to Soren. Good analogy.

Jim Duncan has linked to this post over at Realcentralva:
http://tinyurl.com/cn6gmd

We've seen some of you periodically comment over there; you may feel like doing so in regard to the excerpts he's highlighted (or add new material!).

downtownenvy said...

It's going to get especially interesting to watch the MLS closer to spring. I know of a couple who were told by a local agent that there are going to be a "lot" of buyers out this spring. Also, the market here is going to be "picking up" and the assessments are supposedly reflective of the fact that Cville just hasn't been that affected by the current downturn. Can I have some of what he's having please?

He's right on a few counts I think. There are going to be buyers out there. The only problem is I don't think that most of them are coming pre-approved with a jumbo mortgage and the willingness to pay prices that were considered overvalued here two years ago.

Real C'ville - The Bubble Blog said...

Joe Blow, we saw that ad for the Fields at Venable and were actually embarrassed for those realtors.

Despite the Recession, the stock market plummeting, bailouts right and left, stock analysts keep saying Buy! Buy! Buy! Ditto with some realtors. See this recent NYT story about analysts who just can't stop themselves:

http://tinyurl.com/b4tb5x

Soren, your stock analogy, as we mentioned earlier, is excellent. More sellers should be encouraged to look at their homes this way, as an asset. Not as a place connected to identity or ego or, worse, loving memories.

Buyers certainly look at a home as the kind of asset it is nowadays: "fixed" or "non-performing." It's not going to gain in value for years to come. In fact, it is quite likely to decline for the next few. But a person's got to have a place to live, so there will still be buyers. But buyers are smarter than ever.

But sellers in these parts are still convinced the market will hold and improve.

IOHO, it's not accurate to say that every home in this area can be correctly priced to find a buyer. There simply are not that many buyers. 23% of the City lives in poverty; the largest employers in the MSA are having layoffs, furloughs, hiring and wage freezes. Prices have increased 70% since 2002; that's the average. In particular instances, home prices have increased up to 300%.

There may be some new condo/townhouse buyers for Match Day and/or for grad programs. It will be interesting to see. But the days of buying a house, condo, town house during schooling, by degree candidate or parents, just ain't what they used to be. Homes are no longer "investments."

The most desirable well-priced houses will certainly find buyers. But the backlog of inventory in these parts isn't going to work itself back down to CAAR's "normal" of about 2000 properties in 2009.

The issue with what realtors say to clinets, whether buyers or sellers, is that it is NOT regulated by the SEC. Much of what stock and money market advisors say isn't either. Which is why for the PAST YEAR analysts keep saying "Buy!" (See above link). And some Realtors still say "It's a Great Time!" with a straight face. Heck, they probably truly believe it is. But home buyers aren't disconnected from the wider world.

Anonymous who linked to Robert Shiller's History of Home Price charts: thanks for the link. We have the chart in a forthcoming post. It's also available at NYT large-scale.

Downtownenvy, you're a valuable marketwatcher for the bubble blog and for RealcentralVA, IOHO, because you've been around for a while, you know what you want, and you're witnessing others' experiences. Thanks for your insights.

And Cville Buyer, "Uncharted territory" is the least frightening term to use to describe what's going on in the wider world right now.

Keith said...

Its pretty cool to read 17 comments, and by the end be so engrossed in the conversation that you forget the original post.

I agree that Soren has the right analogy, and I want to point out two additions to his spot-on example. As I have pointed out in a post I did on "Stealing a Home" the problem right now is that no one seems to agree as to whether that $300 stock is now down to $200 or $150. And therein lies the problem. The problem isn't that buyers aren't out there shopping, it's that they don't see eye to eye with the sellers. Buyers say $150 and sellers say $200. No one wants to budge, and thus we have a market that is virtually frozen.
The other issue is one that I have heard over and over in the past 6 months from clients. "I don't want to pay $X if the house is going to drop 10% more before it levels off. Therefore, I'm going to offer $X-10% to protect myself." To go to Soren's example, imagine that you go to buy an index fund of the Dow (which today traded at 7270) and told your broker that you thought it would hit 6500 (very reasonable and possible) and therefore you were willing to buy the stock not at 7270, but rather for 6500. Your broker would tell you to wait until the price drops and you would think nothing of it. But because our market is not liquid, we can't "know that current price point." We are stagnant. So, yes, sellers have to be realistic about what people are willing to pay. But more importantly, there has to be something that takes place to bring buyers and sellers together. Right now, fear is keeping that away.

This market is going to take some time to thaw, and movement has to occur, but unlike the stock market, we don't know precisely where we stand even at this very moment.

Anonymous said...

Serious Buyer says-- It is time for homeowners to realize that housing is a "cost center" and historically was considered a depreciating asset. Once upon a time, the owner was expected to clean the residence--routinely pay for repairs, keep up the yard, replace aging mechanical systems and exterior components, etc. Perhaps stay in the home for a lifetime.

Instead as one Realtor noted, people in C'ville have just "used up a property" and upgraded to a new one. In some cases there has been a cosmetic fix of the property (kitchen and bath fixtures) to justify an asking price that gets this seller into a new home. My favorite indicator of this truth is granite countertops and stainless appliances heralded in the midst of inferior new construction or disrepair or not-so-historic landmark or a poor neighborhood or meager square footage.

The Realtor is so ingrained in the sales spin that he is rarely equipped to answer any specific questions regarding the property (plat, mechanicals, homeowners association, covenants, floor plans, dimensions, etc.). But, he is able to add the commission atop the asking price so the 'seller' can pass it through to the 'buyer'. With the government and ultimately the taxpayer backstopping the industry, the expenses of property transfer (i.e., fees charged by the Realtor, Banker, Lawyer, Insurer, Appraiser) should be placed under close scrutiny and perhaps even made subject to regulation. High compensation for such non-value add administration seems out of order to me.

Over the past 50 years government subsidies, income tax credits, inflation, turnover and most recently, excessive leverage made even the worst property appear to appreciate in excess of the real-rate-of-return (1-3%). The US is overbuilt and it will take years for the inventory to be absorbed. Not only do bankers realize this and not want to lend, buyers refuse to be left holding the proverbial "bag" knowing full well what lies ahead for each individual taxpayer.

Anonymous said...

I know that I am essentially beating a dead horse here, but the fact remains that prices here are still too high. Just yesterday on the MLS I watched as several condos were listed for over a millions dollars. I have also seen more this week in the downtown area that are still listing at over $200 per square foot. Huh?

Is anyone in this town reading the Wall Street Journal, the Financial Times or following a single piece of economic news? Unemployment is up and more jobs, even locally, are said to be in danger. There is a hiring freeze at UVA, and Fanuc just furloughed employees. Home starts are at their lowest in recorded history. Charlottesville is sitting on 18 + months of inventory. Come on guys. Buyers aren't just scared here, some of them are petrified and I can't blame them. Basically you have a large group of sellers here who are saying, "Look, I know that I am asking $859,000 for a 3000 square foot home, but you need to understand that it sits in a neighborhood that has commanded these kinds of prices for the last 5 years. Homes here were appreciating at a rate of 112% or more per year and now their owners think that they should be listed at that peak. Climb down off of the mountain people. It is over. Price your home for 1998 because that is the ONLY way most of them are going to sell.

I am sorry that a lot of people are not going to get the price that they really, really want. If they wanted to take advantage of the time when even my cat could qualify for a jumbo mortgage and pay way over what a house was worth then they should have listed 3 years ago. No one in their right mind is going to buy a home at these prices when they can literally here the value meter turning backwards as they sign the papers at closing. That is financial suicide in ANY economy, but especially in this one.

downtownenvy said...

Oops. Please pardon the numerous spelling errors in my post just above. I am afraid that I meant hear the value meter running backwards.:)More coffee please.

Joe Blow said...

There are now nearly four years of inventory in the City of Charlottesville and Albemarle County. Do the math on sales v. numbers. Those condos over on Ivy Road aren't built yet. The ones that came on the MLS yesterday for over $1.4Million at 3000 sq ft "close to UVa." WTH? This isn't Greenwich CT. There's lots of room here. Nobody is commuting to their job in the City and the space isn't at a premium. Is this place supposed to catch the Farmington overflow? Newsflash: everybody's portfolio at Farmington just got dinged in a major way. The head-in-the-sand mentality here would be laudable if it weren't so laughable. Builders are going under left and right.

Keith? It's not "fear" that's keeping people away.

It's practicality. It's realism. It's a look at the bottom line.

It makes no sense to pay too much for a home in order to put yourself into the same position as millions of other Americans "underwater" in their mortgages. That's what happens if you pay a bubble price for a house. Many of the houses in this area are still in the bubble.

To suggest that it's "fear" keeping people out of the market is to suggest that a buyer should ignore almost all the economic facts and information available to him and JUST GO with the desire to buy a house and live the American dream.

Isn't it?

But that's how the US got the entire world into this mess in the first place.

Anonymous said...

Serious buyer says . . .
Keith, please search Bloomberg's economic podcasts and listen hard. There is so much more to the BIG PICTURE.

For example, "Logan Sees Transition to Higher Savings Rate, Lower Spending"
Feb. 23 (Bloomberg) -- Kevin Logan, senior market economist at Dresdner Kleinwort, talks with Bloomberg's Tom Keene about the U.S. economy, expectations for the President Barack Obama's $787 billion stimulus package, the housing market and the possible government nationalization of banks.

Housing is no longer an easy sale driven by emotion and no money down. With the tightening of lending standards, credit, lack of jobs, and savings, there is a smaller population of qualified buyers and a glut of housing (rental and for sale).

Let's all pray this debacle will be over sooner than later.

Anonymous said...

Keith says "the problem right now is that no one seems to agree as to whether that $300 stock is now down to $200 or $150.....Buyers say $150 and sellers say $200."

This is not the situation as I see it. Many sellers are not conceding to any loss and in fact are saying that $300 stock is now worth $400. That's the problem right now!

vram said...

Great blog. After doing much research and being perilously close to closing over a new townhome (which isn't that overpriced compared to resales) and then realizing that the correction in cville has just started, I decided to rent for a year more. And the fact that sales in the area of my interest is like 15% of what it used to be in a normal year.

I doubt sellers are reading this blog. But if you are rational, you should cut the asking price steeply enough to find 1 buyer (thats all you need) and get out now before it becomes worse. Those who exit early, even with losses, will win by curtailing their losses. Your potential buyer is also taking a risk by seeing the
value depreciate further over the next 2-3 years at least. So why not spread the risk? Maybe a way out is to calculate the 2006-07 peak value and knock off 25% off that. That still leaves quite a bit of room for downward movement and yet would be far more realistic than the currently listed prices.