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Agents Bracing Themselves To Communicate Outrageously Low-Ball Offers To Sellers

A report from the Denver Post in Colorado. “For the first time in seven years, median home prices in metro Denver declined year-over-year, according to a monthly update from the Denver Metro Association of Realtors. ‘Buyers are getting more power and sellers are not loving it. But there is something for both sides to love. Sellers are still doing OK,’ said Jill Schafer, chairwoman of the DMAR market trends committee.”

“It appears the high for this real estate cycle was likely reached in April of last year for single-family homes at $455,000. For condos, the high came a month later at $306,331. Single-family prices are down 5.5 percent from that peak, while condo prices are down about 3 percent.”

“Median prices fell month-over-month in the second half of last year, so the annual drop wasn’t completely unexpected. In January, the annual rate of change turned negative for Boulder, Douglas and Denver counties, according to a separate report from the Colorado Association of Realtors.”

“But price gains in Adams, Arapahoe and other more affordable counties were strong enough to keep the year-over-year number positive. That isn’t the case anymore. Using median prices from REColorado, the last annual decline for single-family homes, 1.9 percent, came in October 2011. For condos, a 2.7 percent annual decline was recorded in February 2012, marking a turn in the market precisely seven years to the month.”

“Buyers, however, seem reticent, despite the drop in mortgage rates in recent months and a 47.3 percent increase in the supply of properties on the market compared to what was available a year ago. It remains to be seen whether lower prices are the missing ingredient needed to bring them out.”

The Wall Street Journal. “In roaring luxury markets from Manhattan to San Francisco over the past few years, buyers were a piteous bunch. Got a million dollars to spend? That’s nice. Want to make an offer? Get in line.”

“Then, in the last quarter of 2018, statistics began to paint a picture of a slowing market: Redfin says there were nearly 4% fewer transactions nationwide for homes costing $2 million and up compared with the previous year. In Manhattan, closed sales declined by 3.3% and median prices fell by 5.8%, while in Los Angeles, transactions dropped 5.2%, according to a report for Douglas Elliman prepared by appraisal company Miller Samuel.”

“Now agents’ tasks include bracing themselves to communicate outrageously low-ball offers to sellers. Here’s how the new normal is playing out in a couple of markets.”

“Jim Kinney – Baird & Warner, Chicago: Since Jan. 1, our market is off 20% in sales volume and number of transactions compared to the year before. In the lower end of the market three years ago, anything under $800,000 would get 20 offers. No more.”

“‘A lot of our sellers are in denial. I had a seller the other day say to me, ‘It’s OK, I can wait for the market to turn around.’ He’s 89.”

“A client had a condo in downtown Chicago that they could have gotten out of at $1.785 million two years ago, because that’s what I sold one across the hall for, to the first person who walked into it. But I had this condo on the market this fall at $1.595 million with no hope in sight. Then we had a buyer come in, relocating from the East Coast. They came in at a crazy low price, $1 million. My seller said, ‘Let’s try to find a deal.'”

” The buyer finally agreed to $1.15 million, but with all the furniture—and he wanted the piano, a baby grand with satinwood inlay. The seller said no. So guess who bought a piano? I paid the seller $4,500 for it and I gave it to the buyer. I just closed on the deal.”

“Robert Dankner – Prime Manhattan Residential, New York: ‘Buyers started pounding their chests a bit as prices started to correct. The expectations are too extreme. This fall, I had a buyer who made absurd offers. For a $10.5 million downtown condo, they offered $8 million. I argued with them and said, ‘This person wants to sell, but is not going to at a price that is just stupid.’ The client said, ‘Do it anyway.’ We didn’t even get a response.”

“I ended up firing the clients. I said, ‘I can’t help, because you’re looking for something that doesn’t exist.’ But they eventually came back to me, and now they’re in contract. They got something for around $12 million, down from the asking in the high $12 millions, that had been price-reduced from $14 million. They ended up getting a very good value.”

The San Francisco Chronicle in California. “A San Francisco mansion with an arresting Tudor Revival facade continues to sit on the market without selling, despite a price reduction, a prime location with drop-dead views, and celebrity cache. Hollywood actor and house collector Nicolas Cage famously owned the home on the corner of Francisco and Hyde streets for a brief spell in the 2000s.”

“Originally listed in 2017 for $12 million — and briefly taken off the market before returning in 2018 —the six-bedroom, six-and-a-half-bathroom home on Russian Hill’s so-called Gold Coast at 898 Francisco St. is now on the market for $10.95 million.”

“Listing agent Mark Levinson of Pacific Union says interest has grown in recent days as real estate activity picks up in March, but he admits the property, which has been largely left untouched since it was built in 1914 (except a slap-dash 1990s kitchen update), will require a special buyer who has both money and time.”

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This Post Has 50 Comments

  1. ‘In January, the annual rate of change turned negative for Boulder, Douglas and Denver counties…price gains in Adams, Arapahoe and other more affordable counties were strong enough to keep the year-over-year number positive. That isn’t the case anymore’

    Eeee-bola, Eeee-bola to you all!

    I guess that YOY game has ended in pretty much all of Colorado.

    1. Denver = CRATER.

      As a rich renter who lives in a non-luxury building, it’s an ok place to make alot of money and save alot of money.

      Knowing that I can leave and take all of my money with me when I do makes it tolerable, but other than that the quality of life here is pretty bad.

  2. ‘Buyers started pounding their chests a bit as prices started to correct. The expectations are too extreme’

    Bob, with an attitude like that you’ll be eating pop tarts for supper soon.

  3. ‘Hollywood actor and house collector Nicolas Cage famously owned the home’

    How did that work out?

      1. According to the article Nicholas Cage spent $150,000 on a pet octopus.

        A question submitted to the internet: “What is the going price for a live octopus?”

        The internet responds: “Prices range from $20 to $1,000—with the bulk of pet octopuses priced between $30 and $100 as of January 2013. A 70-gallon tank—which is not an unusual choice for octopus enthusiasts wanting to provide their pet with plenty of room to roam—costs about $300.”

        Nicholas Cage needs to visit me at my bank to learn all about my “No Dollar Escapes” program.

  5. I wonder how Lawrence Yun is rehearsing his next market conditions comments. Low inventory? Oops, better retire that one. Interest rate hikes? Better nix that. Oh yes, fortunately we have that YOY seasonally adjusted thing. Oops, whiskey straight up please.

    A couple more monthly declines and that YOY stat will start to look panic bad and there will be nowhere to hide. Press loves to quote it too, so minds will get shaken on a large scale. Can’t wait.

    1. As YoY gets increasingly ugly we’ll start to see stuff like: “Compared to 2012, prices are still up 25%”

      Homebuilders here appear to be engaging in pricing shenanigans. Way over pricing one or two listings. Maybe to make the others look like bargains, maybe trying to game the Zestimate, maybe trying to make those that bought last year feel better, maybe all of the above. It also may be so they can bump to the top of the “recently changed” lists with fake price cuts during prime selling season.

      1. Homebuilders here appear to be engaging in pricing shenanigans. Way over pricing one or two listings. Maybe to make the others look like bargains.

        Also known as “anchoring bias”.

  6. “Now agents’ tasks include bracing themselves to communicate outrageously low-ball offers to sellers. Here’s how the new normal is playing out in a couple of markets.”

    But gosh, it was ok when agents indicated to buyers just months ago that you better kiss the sellers rear end, bring flowers along with your love letter video and forget about inspections and while you are at it make sure your offer is way, way over suggested retail! And to boot, it wouldn’t hurt if your earnest money deposit was non-refundable!

    It’s remarkable how biased the sell-side is for the REIC. Somehow it’s a lousy and bad market when it’s shifted to a buyers market but it’s a great “white hot” market when people are in FOMO mode.

  8. This comes to mind…

    “‘Tis but a flesh wound” – The Black Knight, ‘Monty Python and the Holy Grail

  9. “‘A lot of our sellers are in denial. I had a seller the other day say to me, ‘It’s OK, I can wait for the market to turn around.’ He’s 89.”

  10. ‘Buyers are getting more power and sellers are not loving it. But there is something for both sides to love. Sellers are still doing OK,’

    Can someone decode this for me? So buyers (aka knife catchers) can still buy at near peak bubble prices! YEAH!!!!

    1. “Can someone decode this for me?”

      Both buyers and sellers feel – FEEL – that they are experiencing a win.

      Buyers feel they are winning because they believe (notice I did not use the word “think” here) they are buying a temporary dip in a real-estate-always-goes-up world, and sellers who just want out feel they are doing okay IF they are able to find a buyer.

    2. I read this as the realtor subliminally telling potential buyers “Please don’t sit on the sidelines anymore”! No more love letters, no more writing offers on the hood of their car. “You’ve got power, the sellers will be fine, and I get my commission”!

  11. “Las Vegas Real Estate in February: Sales Down 7% YoY, Inventory up 105% YoY”

    “Investors” running for the exits in LV….sad

    1. Keep in mind, there is only one EXIT door. Some speculators will get trampled!! Others will lose their shirts and pants in the process!

    2. Wow! I live in Las Vegas. I have been wondering about all of the new developments in Summerlin, Henderson and Lake Las Vegas – luxury homes that are way overpriced. I keep hearing these stories that people are moving here in droves from CA and are willing to pay these prices because they are so much cheaper than CA at least. It seems like people here are still shell shocked from the last bubble and in denial that it is happening again now. Thoughts anyone about the Las Vegas situation?

      1. Vegas:
        A Chinese multi-gazzilionair lays out 350 lots going up a hillside in Henderson (Ascaya) about 12 years ago. All the lots were leveled, roads were added and all the necessary infrastructure was put in.

        The economy crashes and the development gets moth-balled. About 5 years ago “things get better” and the construction of structures begins. A pool and clubhouse (at $30+Mil) gets put in along with a suitable grand entrance with a guardhouse located near a fancy sales office building.

        Some “inspirational homes ” get built. These model houses were designed by invited, well known (and very expensive) architects around the country to give any potential buyers an idea on the possibilities of what kind of house one might own in this development. The architects were paid their normal fees and the developer covered the total cost of construction along with the lot that the house is located on.

        One must go thru a credit check before even being allowed on the property. However, I was able to ride the coattails of a friend and take a brief tour of the area. I was told, last year, that the model homes would be sold as the development began to build out.

        But if you check out the development website it now appears that all the inspirational homes are for sale. I only observed a couple of homes that had been built outside of the models that actually appeared to have people living in them.

        I asked my friend and one of the sales reps what happens if things get ugly, economically, and no more than a few dozen homes get bought and occupied. Who would pay all those expected fees from 350 home owners necessary to keep something this big and expensive running?

        They just laughed.

        https://ascaya.com

  12. “A client had a condo in downtown Chicago that they could have gotten out of at $1.785 million two years ago, because that’s what I sold one across the hall for, to the first person who walked into it. But I had this condo on the market this fall at $1.595 million with no hope in sight. Then we had a buyer come in, relocating from the East Coast. They came in at a crazy low price, $1 million. My seller said, ‘Let’s try to find a deal.’”

    ” The buyer finally agreed to $1.15 million, but with all the furniture—and he wanted the piano, a baby grand with satinwood inlay. The seller said no. So guess who bought a piano? I paid the seller $4,500 for it and I gave it to the buyer. I just closed on the deal.”

    Where is Chris “No Bubble” Thornberg!!! Come home for dinner!!!! Crows again

  14. What is so often missing from these little morality play scenarios about bids is that what the seller paid is not an unknown right?! Comps mean jack, if a realtor won’t consider what was paid as a point of data in deciding what counts as a “ridiculously “ low offer, then why would a client continue with him?!

    1. Comps simply amplify the stupidity of recent suckers. What difference is it to you whether they got scalded with 2nd or 3rd degree burns?

      $50/sq ft for the structure less depreciation
      $500/acre for the dirt

  15. Washington (AFP) – The US economy should slow “considerably” in 2019 as the boost from last year’s economic stimulus fades, the president of the New York Federal Reserve Bank said Wednesday.

    Amid economic uncertainty, the Federal Reserve could “wait” before raising interest rates again, John Williams said in remarks to the Economic Club of New York.

    Williams holds the number two position on the central bank’s rate-setting monetary policy committee.

    Global markets have fallen in recent weeks as investors grow fearful the world economy will slow.

      1. That’s it?! The boost from Trumps tax cuts are over now?! Lol

        Yeah, gawd forbid we actually repatriated all that overseas cash to invest in our own manufacturing infrastructure, let’s instead spend it all on short-term stock buybacks that benefit only the select few!

        This kind of crap should be illegal, but I’m done hoping for real change, seeing as how the inmates are running the asylum. I’m just here to see how it all ends.

        1. Wouldn’t that be cool?! Requiring some limits to stock buybacks ? Even if it’s somehow merely disincentivizing it via tax code ?! Socialism would be the cry from the people who own and run everything and the dutiful consumers of their propaganda would nod and regurgitate as needed.

          1. Stock buybacks were de facto illegal from 1934-1982 (they were classified as a form of market manipulation).

          2. “Stock buybacks were de facto illegal from 1934-1982 (they were classified as a form of market manipulation).”
            Like I said, “socialist” and thusly ended by the blessed purveyor of trickle-down dogma making America great again in 1980…

          3. Like I said, “socialist”

            Not Socialist. Corrupt, yes.

            Around the same time they allowed Corporate officers to pillage pension funds.

      1. Oh my…well, now Trump won’t have to cajole Powell into ceasing all tightening at least right? That itself ought to help keep the indices inflated yeah? Cruddy projected GDP will be a boon to the Dow!! So much winning!

    1. That was my prediction. And here’s the other shocker…I bet he’s not really dead. Although what are the odds of finding out?

  18. From the Denver Post articile
    “After years of robust gains, falling prices add another twist into the dynamics between buyers and sellers. Will sellers, realizing waiting won’t bring a better price, list more homes? And will buyers jump at the extra inventory hitting the market, or will they wait for a better bargain down the road?”

    HMMMMM with sales down 10.9% YOY I guess which one?

    “Historical median sales prices from DMAR weren’t available before deadline. But using median prices from REColorado, the last annual decline for single-family homes, 1.9 percent, came in October 2011. For condos, a 2.7 percent annual decline was recorded in February 2012, marking a turn in the market precisely seven years to the month.
    Median prices were much lower back then: $227,000 for a single-family home, and $119,000 for condos.”

    We got a long way to go…

  19. “the high for this real estate cycle was likely reached in April of last year”

    Just like in Australia last year, thousands of Denver readers spit out their morning coffee as their local newspaper casually informs them there was a bubble after all; a bubble peak occurred; oh and by the way, the peak happened months ago.

  20. Wow, I had completely forgot about those love letters! Those were prevalent for a while last summer. Can you really imagine kissing sellers butts like that! But its true, they really were doing just that to appeal to sellers hearts.

    Wow have things changed.

  22. “It remains to be seen whether lower prices are the missing ingredient needed to bring them out.”

    Like I always tell people who think the market is not overpriced: “There is nothing wrong with a house that price can’t fix”

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