Friday, February 23, 2007

Pricing - Time to Get Real

How many times can we say it? The property tax situation would not even be an issue if PRICES weren't so far out of line with income here in the Sunshine state.

Fortunately, the MSM is beginning to report on the problem with pricing. Why? Because the supply of idiot buyers (IBs) has just about dried up, and without the IBs, very few overpriced homes are selling. Ergo, the realtors are not making any money and (voila - we come full circle!) they've come to the same conclusion that we have: prices have to come down if sales are going to go up.
From Dick Hogan at the News-Press, an article relating this issue with it's effect on the commercial real estate business.

'A massive inventory of unsold homes in Lee County could bring bad times to both the residential and commercial real estate markets.

But real estate agents could help soften the blow by telling sellers to ask more realistic prices for their houses.

That’s what two experts told a sold-out audience Tuesday night at The News-Press Market Watch at the Harborside Event Center in downtown Fort Myers.'

With 23,000 houses and condos on the market in the county and the number rising, he said, the residential construction market is likely to slow dramatically this year as builders work through a backlog of homes ordered in better times.'

So, what's the connection between the deteriorating residential market and the commercial version?

'With 65 percent of industrial space occupied by people such as developers, subcontractors and suppliers for the residential market, D’Alessandro said, the commercial market could be hurt.

“The bottom line is fewer tenants,” he said.'

And though we haven't really addressed it much, what is the current situation with "work force housing" in Lee County?

'Also making a presentation Wednesday was residential broker Denny Grimes of Denny Grimes & Co., who like D’Alessandro writes a column on real estate for The News-Press.

Talking about the results of falling land prices, Grimes noted dryly that “the work force housing crisis is over” with houses in Lehigh Acres selling for less than $200,000.'

Well, if you think $200K is tolerable for "Mr. & Mrs. Ham & Egg", well...I would have to disagree. But that's just another symptom of the entire pricing situation.

'But generally, he said, the near future isn’t going to bring boom times for real estate in the county.

“Don’t expect the tide to start rising this year,” he said.

He did hold out hope that if real estate agents muster the collective will to talk tough to their sellers about prices, the supply of existing homes could be reduced more rapidly.

Too often, he said, agents soothe sellers with optimistic talk about additional open houses or other tweaking of sales campaigns.

“We all know what the solution is, don’t we? It’s called a price reduction,” he said.

Meanwhile, he said, things are bad and getting worse.

“In spite of what you want to believe,” Grimes said, “we’ve not hit bottom yet” and won’t until the inventory of existing homes starts to shrink.'

Enough said - it's good to see that our gospel is finally being heard.


jayz said...

As goes Lee County, goes the rest of this state. If realt-whores want to make any money this year, they've gotta stop pandering just to get the listings.

See? This article is proof-positive that even greedy dumb-asses can learn things.

sandi said...

Never underestimate the stubborn-ness of people though. These realtors can talk till they're blue in the face - sellers still want 2005 peak prices. They'll only end up chasing the market down.

Willy Nilly said...

The Supreme Law of Stupidity says:

Sell Flood Insurance, and people will build in flood plains

Sell Hurricane Insurance, and people will build in hurricane zones...


zippo said...

I can't believe the "head in the sand" mentality of this state. After each hurricane, they have to dig their head deeper. Well guess what? Eventually they're gonna hit the aquifer - then they'll have to pull their heads out of the dark recesses where they've been lodged and look at reality.

Bad things are coming.

FlyingMonkeyWarrior said...

It is not the price, the question is have we hit bottom? A buyer does not want to purchase a depreciating
asset, and risk going "up side down" by catching a falling knife.
When real eatate is hated as an investment and is a home once again, then is the time to buy.

Mike Shedlock said...

The U.S. saw a total of $4 trillion in new credit created last year. All that money you see out there has been borrowed.

Normally all that money would go to bid up consumer prices. It is not because of the U.S.' sickness.

All that free money (first fostered by Japan's ridiculously low interest rates, a rate that was just raised yesterday because it is clearly causing malinvestment) combined with globalization has created overcapacity. The latest capacity numbers show it now falling from already below average numbers. The U.S. has too much production in the world so producers can't increase prices. The U.S. has too many houses so the prices are beginning to fall. The U.S. has too much commercial real estate so REIT stocks are showing severe weakness. The U.S. made too many risky loans so the subprime mortgage market is falling apart. The U.S. has too many strip malls so the countryside is getting ugly.

All that borrowed money is now going into speculation because there is nothing left to build. It is going into stock prices, gold, commodities as the last flushes before the market says "we can't take anymore debt." Total U.S. debt is 3.5 times GDP, a level never seen before. The second highest level was 2.9 times in 1929. Total U.S. financial debt (excludes consumer debt) is 2.1 times GDP, the highest ever and up from one time in 1987.

The timing is uncertain, but logic tells us that this must end.

Anonymous said...

Hey Mike!!! How many is, too many houses that we have we got???

Answer!!! Many too many???

Can you count to 2.1 MILLION to many???

Let's see, if we sold one house a minute, how many minutes would it take???

>>> "ALMOST 4 YEARS""<<<<

Anonymous said...

Total debt saturation is now complete. The American consumer cannot absorb another single penny of debt. Helicopter Ben could stuff all the bank vaults in the country to the rafters with currency, providing an endless supply of liquidity, it would make no difference. There is no one left out there who can qualify to borrow it and pay it back.

lissiebeth said...

I can tell you this, that I work in one of the major banks over here on the west coast of Florida, and we are very conservative about who we lend money too..We only lend money to people who will take it, and promise to pay it back someday. In the mean time, we charge interest on that money, and it pays my very hansom $300k year salary . We have a very significant size legal staff, which keeps the borrowers honest. Our moto has been "What's good for "America", is good for us."

Lizziebeth said...


You are still on the wrong path. No banking career here. Keep going:) My, you must be very jealous to be so curious about me.


adrin said...

I agree with the Flyingmonkeywarrior's comment.

Boise real estate

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