If you live in Florida or the Midwest then the "Gold Mine" may already be a distant memory. But here in the Northeast (New York Metro area to Boston) the housing market meltdown is only an incipient pain.
Over the last six months of my intensive house search I have met countless distraught sellers, many of whom have been trying to sell their homes for over a year. They are always a step behind - belatedly dropping their price in $10,000 or $20,000 increments as if those slight discounts are going to titillate buyers. Most of these clowns need to drop their price by 50k today (just to start out with).
Real estate price erosion is of course a slow motion train wreck. It first manifests itself in the weakest sectors: the Midwest, the subprime borrowers, speculative markets (FL and Las Vegas), etc.
In that same vein, I've noticed that almost every single languishing house on my local market has something fundamentally "wrong" with it. It is either on a very busy street, has no backyard, needs too much work, has a bad master bedroom or inferior kitchen, etc.
The latest apple of my eye is on a busy street AND abuts a commuter railroad line. How's that for a non-ideal location? It's been for sale for two years now.
As I already mentioned, these delusional sellers haven't been dropping their prices fast enough. For many, it may be too late.
A seller not only has to have their house spic-and-span, uncluttered, lawn mown, and beautified for its first open house, it has to be priced-to-move from inception as well. That's because they might only get one chance at otherwise would-be buyers who may quickly move on to other properties or just not even looked because of the high sticker price. It is for this reason that the real professional house stagers (just watch HGTV) INSIST that you're better off not even listing the house than putting it out at an unrealistic price. (Of course a cheap price gets real estate facilitators paid more rapidly as well!)
On a side note - If you are going to be house hunting these days, there are two extremely annoying expressions you'll have to bear from the know-nothing agents.
1) - "The market has flattened out, it is stabilizing". Of course they have been saying this since the market's apex two years ago and they will continue to bleat it for years to come.
2) - "The homes priced correctly are selling". This borders on the tautological. By definition, assets that aren't trading are overpriced.
Here's the latest Moronic house selling stratagem - "I can't get what I want for the house now, so I'll rent it out."
Then they proceed to pick such an astronomic rent price that they are now overpriced and not moving in both halves of the real estate market. I looked at one such property. Even though the house wouldn't move for 545k, the delusional owner listed it for rent at $2,850 per month.
The national rental costs are roughly, at best, 70% of ownership costs. If you can't get 545k for you house, it's probably only worth 500k (at best). So based on current mortgage rates, this house's rental value is only around $2,200 per month.
The above bold-faced sentence tells you, make that it SCREAMS, that almost under no circumstances does it make sense to turn your mispriced, languishing house into a rental property. Even if housing flatlined at today's prices it'd be a losing proposition because continuous 4% annual appreciation is needed JUST TO COVER THE CAPITAL COSTS OF HOMEOWNERSHIP.
Now I am usually no fount of compassion when it comes to excusing people's elective financial missteps, but I really do feel horribly for almost everyone that's struggling to sell their home. A couple weeks ago I met a beautiful family. They had seven kids and were homeschooling them - a rarity up here in Beantown. They paid $650,000 for their house just two years ago; they can't sell it (down to 580k now); and if indeed the market is already back to 2004 prices, they may only be able to get $500,000 for the place now. That would represent a loss of 150k plus sales commissions, moving costs, title insurance, etc. all in two year's time. Let's not forget or underestimate the mental anguish either.
The poor woman asked me why I wasn't interested in her house, i.e. what she could do in the way of enhancements. I broke the disheartening news to her that there was nothing she could do except drop the price drastically. Though solicited, I apologized for the gratuity of my response. She actually thanked me for "telling her what she needed to hear" and besought further advice. She lamented that she and her husband were not "business savvy".
Therein lies the tragedy.
This next year will be a painful one for stubborn home sellers. And as the knife twists in Boston and Manhattan, expect the media coverage to get extremely negative.
Remember, Big Media is nothing but a sad collection of like-minded projectionists. There's no real housing meltdown, until their condos depreciate.
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