Saturday, April 2, 2011

Maine Association of Realtors Holds "Clearance Sale," Cuts Prices At Least $10k

Realty Check reports that more than 900 sellers have signed up for the event held by the Maine Association of Realtors. The median price of a single family home in Maine is $159,900, so a $10k drop is significant.  "It's a price more than a beauty contest," Mike La Plage, president of the MAR said.

Locally, many sellers are responding to the lack of buyers and doing their own price reductions.  Through mid-March, there were 17% fewer sales in this area compared to 2010.  Check out Trulia's Price Reduced section. 

The housing market is double dipping,  and many Virginia buyers are more price-sensitive than ever.


Anonymous said...

We put together a list of 8 properties that we were interested in based on online listings. $300k give or take. When we checked property records for last sale price HALF were listed below what owners paid in 04, 05, 06 by about 3%. As if that's going to do it when tax assessments are tens of thousands lower.

No clearance sale possible! I'm getting the idea this is true in so many cases. Sellers just hoping someone loves the house and or believes it wont go any lower.

Starting to think renting for another year may be the way to go.

AliG said...

Back in March of 2009, there was intense debate on a blog called "Worth More or Less" (dedicated to discussions of Charlottesville region home pricing)

about the true value of a house in Beau Mont Farm listed for 875K. Well, 2+ years later, it has finally gone to contract. Obviously, we will not know the sale price until it closes (if in fact it does.)

Scott Pershing (or any one else), if you are still out there, wanna hazard a guess on the sale price? The most recent listing was for 829k, and the basement was finished after the initial listing.

craigger said...

3080 is a nice house in a great neighborhood. To build that today from scratch would easily cost 750k, just for the construction. A good deal on a lot in that neighborhood would be 100-150k, so 830 is a good price. Even 875k isn't crazy. I would bet they spent 30-50k on the basement.

Anonymous said...

do you believe that market value has fallen below the cost of construction and what would be the implications of this?

Anonymous said...

I'm looking to buy a house in Charlottesville -- for real. From a buyer's perspective, here's the problem: Just about every seller is setting an asking price that's 20% or 30% or more above what the closing prices have been on (the very few) comparable sales from the last year. I'd like to know: "What's up with that, Cville sellers and agents?" If everyone lists a price from Fantasyland, it does not help the market to clear. As it is now, I am coming to ignore list prices entirely because they convey no realistic information. Some prices might be equivalent to a Zillow "Make Me Move" price -- a price the sellers don't expect anyone to pay, but they sure will take it if someone's fool enough to offer it! Other prices are probably merely offers to negotiate--e.g., asking $1.2M, but feel free to offer $800K and we'll start negotiating. The problem is I don't know which is which, so the asking prices are useless. Here are two modest proposals for sellers and seller's agents: First, set a price based on comparable sold properties, not mere listings. And second, if you're thinking about putting your house on the market with your "dream price" -- the price that would make you give up the house that you pretty much like -- don't bother! It's the wrong market right now for wishful thinking.

craigger said...

To Anon 2:24,

For some properties (mostly at the high end), prices have certainly fallen below replacement value. But as I've said in previous posts, those prices are usually a result of people who HAVE to sell, which are few and far between in this area, although they do exist. The only implication to this is that it will be a relatively short lived phenom, as prices ultimately converge towards new construction costs. And new construction costs are doing nothing but increasing as the Govt continues to print money, and is likely to print even more money in the coming years.

Over a full cycle, prices for homes will trade around the replacement cost new construction plus 10-25% for land value in an suburban land market. This is the basis for public home builder's business model when they purchase land options from land bankers.

The more constrained a land market is, the more land will represent for the purchase price of a home. That's one reason why condo's in Manhattan cost $1000 a sq ft. It costs $500 a sq ft to build them and the land is scarce enough that people will pay another 500 bucks (or more).

For short periods of time in a growing market, RE will sometimes trade for below replacement value due to credit bubbles, or economic down cycles, but over time prices converge to replacement value which will escalate with inflation. In many markets around the country, you can buy houses for less than replacement cost, but those are VASTLY oversupplied markets with incredible amounts of vacancy on a relative level to Cville.

Sadly (for me because I'm looking for a house). Cville, despite having lots of land around, is surprisingly land constrained. This is because of the onerous entitlement process in both the city and the county that is relatively hostile towards new and dense development. The city is actually not too bad, but for albemarle county, you need a 21 acre parcel!!! to get one division right for newly entitled parcels (if you're not in a designated growth area). This is a clear constraint on supply in the county. In the city, I think you will continue to see condo and especially apartment development around the old MJH area after those parcels are sold. Rents here are getting high enough were new construction of apartments will start to make sense again.

All of this will keep Cville prices relatively inflated compared to the national average. Although as I've said before, all properties have their own prices, but I think we have another 10-15% aggregate price decrease to go before bottom here.

John Doe said...

Anon April 24, Add 6% agent fees then 1.5% closing costs to your calculations and you see why these underwater mortgage holders are listing as they do. They NEED the money and hope somebody loves the house.

AliG, Jim Duncan could supply the answer if he'd like to divulge. Going to guess $790k.

Anon 11:34 April 7, A house is currently worth WHAT A BUYER WILL PAY FOR IT.

A lot of houses have "dream prices" because the "owner" is in debt in other ways besides mortgage. (Patricia Kluge listing Albemarle House at $100M is most extreme example on the planet! Today, bank-owned, it's listed for $16M.)

But as for listings, the "anchor price" is important psychologically. If you implant it in buyers' minds, perhaps they'll only go so low in negotiations.

Also, there are people who still believe that this is a "protected market" and are trying to blow right past the downturn toward better times. The economy is picking up, but housing isn't. And this area is still oversupplied.

You're right, in many cases these listings are doing nothing to "clear" the market.

Craigger, thanks for the concise explanation.