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Sellers Have Accepted That Buyers’ Assessment Of Value Is Not Equal To Their Total Investment

A report from the Daily Voice. “The bottom line of Houlihan Lawrence’s luxury housing report on sales in Westchester and Fairfield is that it’s all about the effects pricing has been having on the bottom lines of buyers and sellers. ‘Nearly all closed properties in this price range were reduced from their original price – some had up to five reductions – and sold nearly 30% to 50% less than the original list price,’ said Anthony Cutugno, director of private brokerage for Rye Brook-based Houlihan Lawrence.”

“He said that something similar was happening to properties priced at $5 million and up. They were being listed at prices which were unrealistically high and then wound up selling substantially below the original listing price.”

“Gay Prizio, director of luxury marketing for the Houlihan Lawrence private brokerage, told the Business Journal that the softening of high-end real estate prices in New York City has had an effect. ‘New York City is a very important feeder market for both Westchester and lower Fairfield County so, if there are sellers in Manhattan who are unable to sell their condos or co-ops or townhomes, they in turn cannot become buyers north of New York City,’ she said. ‘So, what that’s doing is shrinking the buyer pool.'”

The Darien Times in Connecticut. “In the past quarter, Darien and Rowayton saw their luxury homes’ median prices decline year over year. ‘Sellers have often, in hindsight, over-invested in their homes,’ the report added. ‘If they purchased in the peak years or made costly improvements to their home — coupled with declining values in the recent past — they may take a loss when they sell. They have accepted that buyers’ assessment of value is not equal to their total investment. The financial loss is offset by the intangible gain of being able to move forward with future plans.'”

From Boston Magazine in Massachusetts. “Even in a summer riddled with celebrity homes hitting the market, it was the listing of the season when Bundchen and Brady’s custom-built Brookline home was put up for sale in August, with an asking price of $39.5 million for 12,000-plus square feet. But now, just two short months later, the price of the celebrity residence seems to have…deflated somewhat.”

“Lucky for any superfans trying to score a piece of Patriots-related property, the five-bedroom home has just dropped to $33.9 million. Though the discount would suggest a motivated seller, Brady seems unhurried. Or at least he did back in August, when he told WEEI radio, ‘You shouldn’t read into anything. It takes a long time to sell a house. I don’t know if you guys know, my house is a little bit of an expensive one, so it doesn’t fly off the shelves in a couple of weeks.'”

The Los Angeles Times in California. “No one’s busier than RuPaul. Between filming his new daytime talk show and hosting another season of ‘RuPaul’s Drag Race,’ the famous drag queen found time to shell out $13.7 million for a European-style home in Beverly Hills, public records show. The home hit the market for about $20 million in 2018, but a May price cut brought the tag down to $16.425 million.”

From NBC Los Angeles in California. “A San Diego Navy veteran who’s spent the last two decades living in his Golden Hill home will be evicted on Monday, but an unlikely friend h made during the foreclosure process is helping to make sure he lands on his feet. Robert Steeves, 80, home was foreclosed, and now he faces an unknown future.”

“However, through the foreclosure process, the veteran made an unlikely friend. Realtor Josiah Kern, 28, met the veteran earlier this year to make a short sale to avoid foreclosure. ‘Once it fell through, I told Robert I’m going to help him,’ said Kern. Kern tried getting Steeves a loan with the Patriot Angels but was denied.”

This Post Has 58 Comments
  1. ‘Nearly all closed properties in this price range were reduced from their original price – some had up to five reductions – and sold nearly 30% to 50% less than the original list price’

    But Tony, we were told 50% off is unrealistic?

    1. You know it’s not just houses that regularly fall 50% these days. I occasionally buy some cycling gear. The polyester shirts start at a price of like $250 and end up getting gradually reduced to about 90% off at which point I might actually buy one. These things must cost a couple bucks to make, at most. It seems like the first move of every company these days is to look for an idiot that will pay exorbitant prices, and then just keep lowering until they sell the product. The bubble mindset of preying on the stupid is everywhere — not just in housing.

      1. A Shirt is a great analogy.

        Losing your shirt on a rapidly depreciating asset like a house is gauranteed when you pay a massively inflated price for it.

        How to avoid this nightmare? Don’t pay too much.

        When prices are many multiples over long term historic trend, many multiples over construction costs ($50 per square foot), why would anyone considering buying a house and then doubling down on those losses by financing such a folly?

        I think we all know the answer to this question but highlighting the pitfalls of DebtDonkeyism and DebtDonkeyistic notions and fallacies is worth noting.

      2. +1 and if you can get the products made in America, even better! We see this with the auto industry as well but nothing close to 90% reductions.

  2. ‘met the veteran earlier this year to make a short sale to avoid foreclosure’

    Short sale, foreclosure? But, this is California! All you have to do is scratch the dirt in that driveway and you’ll find gold nuggets all over the place.

    It’s almost like the prices there have…fallen.

    1. “A San Diego Navy veteran who’s spent the last two decades living in his Golden Hill home …”

      … and relentlessly and systematically paying down the mortgage …

      “… will be evicted on Monday.”

      Oooops, guess not.

      1. Did Steeves take-out a HELOC on this property? This story is most likely incomplete and being used as yellow journalism.

        1. This makes me think it wasn’t a reverse mortgage:

          ‘Kern tried getting Steeves a loan with the Patriot Angels but was denied’

          No soup for you!

          1. Love the view of the high tension towers from the back yard. I associate that with a low value home, and not a 7 figure house with a $14K property tax bill.

          2. ‘Kern tried getting Steeves a loan with the Patriot Angels but was denied’

            I can turn the gray sky blue
            I can make it rain whenever I want it to
            Oh, I can build a castle from a single grain of sand
            I can make a ship sail, huh, on dry land

            [Chorus]
            But my life is incomplete and I’m so blue
            ‘Cause I can’t get loans for you

            The Temptations – I Can’t Get Next To You 1969

            https://www.youtube.com/watch?v=YQ5pRNsqgqU

          3. Hopefully they don’t have cracks in the driveway, rocks for a backyard, and termites in the attic like our landlords have. Such defects can lead to large asking price reductions when there are a large number of houses up for sale relative to the size of the buyer pool.

          4. But San Diego Home’s sell themselves! 2 decades he had lived there, did he stop paying his mortgage a decade ago? Seems appropriate they leave out those “small” details…

          5. The termites live in the attic because the landlords didn’t address clogged gutters that caused water to leak into the attic, even though we brought the problem to their attention years ago. Back when we owned, I would have taken care of the problem myself, but there’s no way I would risk falling of the roof and breaking my neck to protect the value of their investment, even if they paid me to do it. We notified them of the issue, after which it became their problem to address.

  3. ‘Sellers have often, in hindsight, over-invested in their homes,’ the report added. ‘If they purchased in the peak years or made costly improvements to their home — coupled with declining values in the recent past — they may take a loss when they sell’

    Long gone are the days when Richie Rich would leave the AC on with the doors and windows open while jetting around Europe..

  4. ‘But now, just two short months later, the price of the celebrity residence seems to have…deflated somewhat…back in August, he told WEEI radio, ‘You shouldn’t read into anything. It takes a long time to sell a house. I don’t know if you guys know, my house is a little bit of an expensive one, so it doesn’t fly off the shelves in a couple of weeks’

    You hold the line Tom. Don’t take a cent less than $20M. Maybe 15.

    1. “Any fools who rush in to sign on Mr. Banker’s dotted line are going to end up being forever inoculated against trusting globalist media mouthpieces.”

      Wrong. These fools never learn.

  5. Ben – hope you don’t mind a somewhat off topic question for your regular readers.

    My wife will be taking a new job which will require a move from Charlotte to Greensboro, NC. I paid off my house many years ago and based on what I’m reading on your blog, it sounds like I should hold off buying again and rent for a few years.

    Any feedback would be appreciated.

    1. There are just too many undefined variables to provide an informed opinion. But you know your own budget and you know where you are going and how long you expect to live there. You can easily find out what it will cost to rent vs buy and you can make an informed decision about the potential downside of buying based on easily accessible historical data on home prices vs income. Broadly speaking, real estate seems to have peaked. Seems the best advice you could be given with the information you provided is to proceed with caution.

      1. You could just rent for a year or two (or five) to see how far down the market settles out before buying. We aren’t talking about buying the dip on a one-day stock market correction. Real estate busts play out over years or decades (think Japan). Jumping in to buy at the first sign of price softening could prove to be the financial mistake of a lifetime.

    2. An almost impossible question to answer for a particular place and time period.

      How long you going to be Greensboro, NC?
      Downpayment? Job secure? Taxes? Savings?

      Does the average house in the area sell for about 2.5-3.0 x average household income?

      Does the average house sell for about 100-120 x average monthly rent?

      After taxes, what percent of your income are you paying for the P/I Should be no more than 30%.

      1. I don’t have anything to add because 2banana and John G said everything perfectly. It’s too bad that everyone can’t get such sage advice.

        1. What they said was quite opposite.

          And I reiterate my advice to not assume buying is the only option. In fact, buying at current prices could easily result in losing $100,000s if prices revert to historic levels relative to incomes and rents.

    1. Speaking of which, it sounds like that old veteran is being “helped” by that 28yo realtor. I think we better get a welfare check, stat.

  6. Ah…the joys of Bay Area living!

    10.02.19
    world changing ideas
    Why I hate living in my tiny house
    Small backyard houses get a lot of attention as a solution to the housing crisis, but it’s a different idea in theory than it is when you try to put it into practice.
    By Adele Peters
    6 minute Read

    When I moved from Brooklyn back to the Bay Area a few years ago, I thought, at first, that the apartment I found was charming. It’s also very small: At the end of a long driveway, inside a former garage, it’s 240 square feet, or roughly the size of one and a half parking spaces.

    every time I trip over a pile of books in my “living room,” I wonder about the larger picture. In the 1960s, the average homebuyer in the Bay Area paid around twice their annual income for a house. Today, it takes around nine times the median household income (in the area, that income is around $100,000). I’ve watched countless friends move away, from nonprofit managers to preschool teachers, because of the cost of housing. Even in less expensive parts of the country, the cost of housing is still unaffordable for many people. One report found earlier this year that renting a two-bedroom apartment is unaffordable for minimum wage workers in every state. We need more solutions, including different housing tech that can lower construction costs and salaries that are in line with the cost of living, and tiny houses, while cute, can’t fix those issues alone. Being able to pay for an adequate amount of housing—not huge, but larger than a tiny house or apartment—shouldn’t be so far out of reach.

  7. “‘Sellers have often, in hindsight, over-invested in their homes,’ the report added. ‘If they purchased in the peak years or made costly improvements to their home — coupled with declining values in the recent past — they may take a loss when they sell. They have accepted that buyers’ assessment of value is not equal to their total investment. The financial loss is offset by the intangible gain of being able to move forward with future plans.’”

    Why not just sell as is at a price the market will bear?

    Given the confiscatory taxes that will have to be paid on the labor and materials purchased for home renovations, not to mention the taxes on one’s own income used to pay for them, plus the possibility that a new buyer’s tastes won’t match the homeowner’s choice of renovations, I remain wholly unconvinced that the increase in market value of a home matches renovation costs in a majority of the cases. This is especially obvious when market values are flat or falling.

  8. “…the famous drag queen found time to shell out $13.7 million for a European-style home in Beverly Hills, public records show. The home hit the market for about $20 million in 2018, but a May price cut brought the tag down to $16.425 million.”

    You can ask whatever you want when you try to sell your home, but good luck selling if you price high when market values are heading south.

      1. So India is now our foreign PPT for real estate…. Chinese vanish and India swoops in. We really need some foreign RE taxation

        1. Perhaps it is not so foreign. During the great recession Federal reserve money was propping up banks all over the world. Some of that money returned to the US either by design or just due to normal investment patterns. Are US banks having liquidity problems because they are propping up Indian banks, thus the federal reserve is indirectly propping up Indian banks? I do not know. However, I firmly believe that the globalists have lost faith that Biden can beat Trump, they have also realized that they cannot cause a recession in this country without collapsing the entire world’s economy. Thus, the attempt to gin up an impeachment. They know that the attempt finishes up Biden and it exposes the bipartisan nature of the fraud with Romney’s friend sitting on the crooked NG firm’s board. However, they are desperate, Warren has taken positions too far left on issues such as immigration and there is no one else on the horizon to beat Trump in a fair election.

          1. I have a hard time imagining the male half of the electorate backing Warren. What self-respecting man would vote for her?

          2. ‘America’s First Feminist blamed women. If they didn’t vote for her, it was because they were too weak and stupid to think for themselves. Women had been pressured by “fathers and husbands and boyfriends and male employers not to vote for ‘the girl,’ ” she breezily told CBS News in the aftermath of the election.’

            I can’t say how representative my sisters and mom are of the female half of the electorate, but they all vote, and they all started out in favor of Hillary but ultimately voted for another candidate in Election Day. All of them are college educated and think for themselves. So far as I am aware, no male member of our family or any other male had a say in their decisions.

        2. We’ve seen some Indian home shoppers in our neighborhood recently. The Chinese investor horde has vanished without a trace.

          1. I would assume this has been happening prior to this India bank account freeze. US housing must be a universal piggy bank for foreign capital flight. Just a matter of time until there gov puts restrictions on the outflow.

          2. Indian home shoppers in our neighborhood recently

            Carmel Valley and 4S Ranch supplies must be low and/or prices too high.

        3. What self-respecting man would vote for her?

          I supported Bernie last go-around, but I’m solidly in the camp for Warren. Interestingly enough, my wife likes Warren, but really gravitates more to mayor Pete or Yang.

          1. If Warren were the anti-dishonest-banker that she claims to be AND would credibly promise to leave guns alone I would probably vote for her. But that’s a big AND. I’m keeping my eye on Gabbard. The fact that the system doesn’t seem to like her is an encouraging sign. They used to not like Warren, which is a less encouraging sign.

          2. I’m keeping my eye on Gabbard

            Tulsi is a truth-teller. She would make a great president, but more likely a solid VP.

    1. “Media has lots of stories quoting officials on how the banking system is sound which means the collapse is near:”

      Agreed.

      And your point about the Indian banksters’ porcine beauticians’ media lies reminds me of my new favorite quote.

      There’s one way to find out if a man is honest – ask him. If he says, ‘Yes,’ you know he is a crook.

      — Groucho Marx

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