Q: Eighteen months ago I and several other cousins inherited my aunt's home when she died. The cousin she named as executor has had the house listed with three real estate agents, and all of them have told him the house isn't selling because his price is too high. What do you say?I would not at all be surprised if the house in question is this one in Mill Valley. It is still for sale. Originally listed at $1.1 million (goofus), reduced to $999,000 (ludicrous) in July, 2006, now listed at $729,000 (absurd) -- a 34% price reduction from the original wishing price and still no buyers.
A: I say if I had the cure for stupidity, I'd be a zillionaire. A home is worth whatever someone will pay for it. Prices have softened in the months that your aunt's house has sat on the market. If your cousin had dropped his price by, say, 10 percent in 2005, he wouldn't be looking at dropping it by 20 percent to sell in 2007. Moreover, all of the cousins have lost 18 months of opportunity to invest the proceeds they would have received if the house had already sold.
Sunday, April 22, 2007
Stupid Is as Stupid Does
A little vignette into how greed and the housing bubble in Marin can tear apart a family:
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13 comments:
There was a place in the east oakland ghetto about this size that sold for $600k at the peak...600 sq ft is SMALL,i have lived in a cottage that size...it was aahhh,cozy.this place is about $150k of cozy,tops,in my book.what would it rent for?
Yikes, I too once lived in a 600 sq ft cottage.
It was O.K. for a single guy on a serious budget.
For this POS, I'd pay $65k and feel ripped off.
Bring on the Spring Dead Cat Bouncing Sliders.
Dear LAY, you ain't seen nothin' yet.
"A home is worth whatever someone will pay for it."
"this place is about $150k of cozy,tops,in my book"
"For this POS, I'd pay $65k and feel ripped off."
I second that comment waiting for sanity. How long until this is the prevalent sentiment nationwide?
Will tomorrow be "subprime Tuesday?" http://infohype.blogspot.com
Corey,
I don't know what the numbers will look like tomorrow, but I don’t think it really matters at this point, as the RE machine will spin and twist whatever numbers come out like there is no tomorrow.
I honestly believe the rug has been uncovered and the decaying elephant in the room is self-evident for all to see. Even if we were to see some improvements, the word is out on housing. Ta ta and good riddance.. This slide will continue to unfold in the months and years ahead.
Matt
This story reminds me of a house that has been sitting for sale on my block for about a year or maybe slightly more. As far as I know, a woman's mother passed away and left her the house. The house in question was incredibly dilapidated and literally falling apart. It isn't even that interesting architecturally.
Anyhow, the house went up for sale IMMEDIATELY. The asking price: $784,000. I took a look at this place and honestly, he house needed to be gutted inside and out. There were also some serious structural issues. Basically, the back wall of the foundation was buckling inward. So there it sat. All year long without a bite.
This year, it seems like day laborers were hired to do a quicky fixy job on the place. Cheap appliances and cabinets were wheeled in the door. The back wall was fixed,and of course paint was slapped over the exterior. Now it is up for sale... again but now for even MORE money. Now it has an asking price of $820,000.
If this were a home someone had owned and was trying to sell, I guess I'd at least understand why they are trying to get so much money for it. But The fact that any money made by this woman is now almost pure profit just makes me see how greedy some people can be. If it were mine and it hadn't sold, I would've dropped 100+k off the price and be done with it. hell-I'd take 500k. It's be all profit wouldn't it?
I guess these days I'm just a bit confused because a house 2 blocks down was in even worse condition and sold 4 months ago for the princely sum of $750,000. So somehow or another, I bet someone will buy this one too. People are simply not that smart these days and despite screaming headlines are STILL plunging into these overpriced houses. Why?
He or she who buys that dump will regret it sooner or later, much like anyone who has bought in the last 12 months or so.
The denial is undeniable however, because there is soooooo, sooooo much more tied to the price of one's home than the simple cost of the land and structure. This is true in Marin county more than anywhere probably.
BUT... taxes, mortgages, interest, dues, insurance, maintenance and other costs have no such emotions and self-worth tied to them. They are what they are, and will all need to be paid in the end.
35-40% haicut in Marin is well underway.. bank on it..
Matt
Hey Matt,
I fear you have it right.
All of those costs will be devastating to the buyers who are cutting it so close.
Their investment is predicated on the upward spiral.
This spiral has obviously stopped.
The folks with enough dough will slide through.
The folks on a shoestring will default.
Marin will be a whole new enchilada.
Not cheap, but more realistic.
Time will tell.
I agree..
I have thought for a while that it would be interesting on one of these blogs to try and work out the mathematical formulas for house pricing, before and after this bubble burst. The reason this has been on my mind lately is to show that the largest factors that drove home prices through the roof were factors that no longer exist in the market (or are very minor in their impact).
Here are my thoughts anyhow (all factors must add up to 1.0):
First the factors or drivers:
B = Bankruptcy… the fear of losing one’s shirt (or worse)..
E = Easy money due to loose (or no) lending policies and practices
F = Fear of “being priced out forever”
G = Greed & instant wealth
H = House and land intrinsic value.. the asset(s) themselves.
I = Interest rates.. namely low rates
L = Location, as in “location, location, location”
X = The “X” factor, which includes RE machine fraud, collusion etc etc.
A Normal (non-bubble) Market… (kept in alphabetical order.. )
Home Prices =
.1G + .3H +.1I + .5L
The “Pre-crash” Bubbly Market (1998-2005/6) at it’s peak ugliness:
Home Prices =
.2E + .2F + .2G + .1H + .2L +.1X
The “Post-crash” Market (especially now here in 2007)...
Home Prices =
.2B + .1E + .2H + .4L +.1X
(yes, you will note I still believe the RE machine’s “X” factor is still at work …. )
Have at it folks, and Marinite, feel free to throw this up for discussion any time..
Matt..
While there has been a lot of talk here about what caused the market to rise, I'll step in and throw out some hypothetical opinions about what might bring the prices down. Some are more obvious than others.
A: Universal adoption of tighter lending practices
B: Subsequent multi-year loan resetting cycles on previous exotic loans causes prices to stagnate or fall
C: Other states continue to become more competitive economically, eating into the BA's bread and butter and forcing wages downward in order to remain competitive.
D: Further out-migration of young professionals, middle class families, and retirees erodes the financial base needed by those selling in order to keep the cycle of price high. A continued cycle like this could actually force prices lower.
E: The avg age in the BA community is older. Once the boomers retire en mass, this causes several things: The economy loses a massive percentage of the workforce. many retirees will want to sell and move out of state or into smaller homes, hence flooding the already bloated market.
These are all guesses, but hey- could happen.
Hmmm, I wonder if the executor has been living there rent-free while the house is on the market.
One of the more difficult things is buying a house owned by multiple heirs. It takes only one moron to price the house so high it will never sell. Can be stupidity or just a golden opportunity to mess with your relatives.
I miss the POS blog --- any chance of restarting it?
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