In my January post Love Thy Neighbor, I featured one overpriced condo clinging to a ridiculous wishing price and his heartless, disgusting, comp-killing, bank-owned neighbor who priced $40,000 lower.
Well, that ruthless, scumbag bank (in the eyes of the wishing price neighbor) just made the weekly open houses a hell of a lot more uncomfortable. That's because the bank who owns #8 recently dropped the price another $30,000 to $369,000 (If it sold today at that price, the bank would eat $65,000 including commissions).
Now compare that new price to #13's $439,000 fantasy pricing and tell me what kind of day he's having.
While I respect Unlucky #13's pricing strategy (offend all buyers with a ridiculous price and STICK TO IT), if #8 miraculously sold for $369,000, #13 would IMMEDIATELY have to knock $60,000 off the price of his nearly identical property to meet the new comp and have any chance at a sale.
The worst part is that Unit #8's dramatic price reduction has been in effect for almost a month and it's still collecting MLS cobwebs. This does not bode well for either seller, but at least #13 still has some equity left.
However, if he doesn't get serious about selling soon, any hopes of getting out with a profit will disappear. My advice to him is to price 10% below the bank-owned property and keep cutting if he has any intention of avoiding a significant financial loss. The longer he waits, the worse it gets.
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At some point ( I think it will be after September - after the net null effect those rebate checks will have on the economy) all these underwater condo and duplex owners in the LBC are going to wake up, suddenly and realize it either now or never. Unfortunately by then it will be too late.
ReplyDeleteFear & panic Oct. 08.
Enjoyable blog, BTW
problemwithcaring,
ReplyDeleteThanks for commenting and thanks for reading.
I agree with you that Fall '08 will be do-or-die for many living (and selling) in denial. By then, as you say, the rebate checks will have fallen flat and all the other bailout schemes--er...mortgage assistance programs will have failed to stop the tsunami of foreclosures.
The fact is, real estate has a stink on it now. With so much turmoil, there would have to be an awfully compelling reason for me to get off the sidelines.
I doubt the "Spring Bounce" that so many housing bulls are counting on will amount to much. However (and this will sound strange coming from me in the face of so much bad economic news), I think summer will get a decent bounce.
No, really.
House prices are still inflated despite big price drops (a 10% drop JUST IN THE LAST QUARTER OF '07!!), but if the price cuts highlighted on this blog continue into July and August and interest rates stay reasonable, we might just see a significant pick up in sales during summer.
With that said, you're absolutely right that by the time the delusional finally wake up to the harsh, cold reality, it will be too late for anything close to financial salvation. Anyone still trying to unload a property in the fall (moving into the slower winter months) will only have financial ruination in store.