Hide and Seek: UPDATE 2

I promised I would keep tabs on our MLS-manipulating friend over at 1055 Orizaba. If you recall, my first post on the property concluded that at the $310,000 asking price...

These are going from “Ridiculously overpriced” to just “Overpriced.” However, after crunching the numbers it becomes clear these units will play MLS-peek-a-boo with no sale for a while. As the seller is now painfully aware, significant price reductions are in order to sell less desirable properties in this market, and almost $400 per square foot is fantasy pricing.

Well, friends, I hate to say I told you so. The price for Unit #5 has been reduced from $310,000 to $299,000--a nice little $11,000 haircut.


This is significant not only because it is the first attempt at a price reduction this year, but because it represents capitulation to the economic realities at play, and demonstrates a bitter understanding that the party is officially over and the only people selling are the ones slashing prices.

Now, put yourselves in the shoes of the suckers--er, homeowners who paid full price for these apartments. How do you think they feel knowing that their condo, if they tried to sell today, would list at 10, 20, 30 or even $60,000 less than what they paid just a matter of months ago (Remember, units like these were priced around $350,000 last summer)?

They would feel devastated. In fact I bet it feels so lousy that if they put very little down, or have an interest rate reset around the bend, or if they suddenly realize they bit off more than they could chew (or a combination of those factors), they would have very little incentive to keep making payments on their overpriced condo in a 30% unoccupied building.

What happens when incentive to honor a financial commitment vanishes?

Homeowners: Can't pay? Just walk away
More and more borrowers are watching their house values sink while the cost of their loans skyrockets. What to do? Skip out on the mortgage all together.

NEW YORK (CNNMoney.com) -- Mortgage payments are set to jump. Home prices have plunged. "I'm outta here."

Homeowners are abandoning their homes and, more importantly, their mortgages, rather than trying to keep up with rising payments on deteriorating assets. So many people are handing their keys back to lenders that a new term has been coined for it: jingle mail.

"I stopped paying my mortgage in October, after shelling out about $70,000 in interest [over 15 months]," said one borrower, David, who doesn't want his last name used. "Now, I'm just waiting for the default notice."

…

Current lending practices have created an environment where a measure as extreme as abandoning a home actually makes sense to some people.

Many buyers put little or no money down, so they don't have much invested in them. That leaves them with little incentive to keep making payments when a home's market value dips below the balance of the mortgage.

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If this trend catches on, and recent media coverage indicates it is, a year from now you'll be able to swoop up two of these condos in a Buy-One-Get-One-Free for the current asking price.