A Tale of Two Cities: UPDATE

Do you remember this lil' green goblin from February's A Tale of Two Cities post?

http://www.redfin.com/stingray/do/printable-listing?listing-id=1456738

Well, it turns out somebody cracked open a newspaper. The wishing price for "the best house in the area" has been dropped from a staggering $310,000 to a less staggering but still hilarious $265,000.

Hey, they at least get an "A" for effort for finally waking up to the cold, hard reality that this dump, in this condition, in this terrible neighborhood ain't going anywhere until the price starts flirting with the 2000 value of $130,000.

That's a Tear Down price for what is clearly a Tear Down property.



And the thing I don't get is why they're selling the first place. Is it that tough to keep up with a $917 a month mortgage? Really?

They did, to their credit, buy years before the housing bubble inflated to the catastrophic proportions we witnessed in '06, so I can't blame them for taking their chances in this market hoping to squeak out a profit for living in such squalor for eight years. But if they think they're going to get rid of this place for a $120,000 profit after commissions then they're only cracking open that newspaper to read Family Circus.

At $160,000 it might make sense as an investment property. It would have to be torn down (or maybe the Historical Society would come down on you for trying to level this 95 year-old dumpster) and rebuilt, so you have to factor in those costs as well.

Oh, who knows. According to the commission-hungry zombies at the National Association of Realtors, existing home sales nudged up a whopping 2.9% in February, signifying to them that all is well in the real estate world and double-digit appreciation will return momentarily.

Look, an increase in sales is a good thing for stabilization of the market. But an increase in sales with a 13.6 regional decrease in prices and a 30% decrease in sales year-on-year makes this news MEANINGLESS. You are going to hear an awful lot from the NAR in the coming months about us hitting "a bottom" and they will try to pressure you by telling you if you "don't act now, you'll be priced out forever."

But it's just scare tactics, plain and simple. And many people believe the sales statistics actually include homes that were foreclosed on and "sold" back to the bank at foreclosure auction. That's right, folks. There is a distinct possibility these sales numbers include the record number of foreclosed homes.

Real estate has a long way to go and if you make a move in the next few months due to "record low interest rates!" or "great incentives from builders!" or "a huge discount from the '07 price!" then you're catching a falling knife, you'll be underwater instantly, and you'll be no better off than most of the fools I feature on this site.

Here's all you need to know about whether or not prices will still come down: This booger barn featured above was $45,000 more expensive five days ago. Not $4,500...forty five THOUSAND bones.

As long as big chunks of "equity" are being torn off indiscriminately and the house still sits, it means nobody knows what the hell anything is worth anymore. The only reliable indicators to steer this lost ship back to shore are incomes, rents, and availability of credit. Until all of those factors creep closer to alignment with house prices, the bottom is nowhere in sight.