HOUSING SALES: My earlier post on rising home sales and price cuts produced this email from reader James Meigs:
About those rising home sales:
Like many in the media, the author of the Bloomberg story you linked to seemed a bit mystified about what’s going on here. (“Sales of existing homes in the U.S. unexpectedly rose in February for the first time in seven months, easing concern credit restrictions and falling prices would hurt demand.” )
Prices have been falling for months, yet some people have strangely decided to start buying houses? Who in the world could possibly explain this bizarre phenomenon?
Heh. Indeed. Meanwhile, reader Robert Talbert emails:
Regarding your article on the housing market and the need to price houses appropriately: Here in Indianapolis, often ranked as the most affordable housing market in the country, I’ve been seeing the same thing you mentioned happening — houses that stay on the market for months or even years, because they are priced ridiculously high, which suddenly sell once the owners acquire a modicum of common sense. For example: We built our house new for $220K two years ago in a suburban subdivision. A newer home up the street from us, with less square footage than ours and with fewer upgrades, was put up for sale a few months ago for $245K. As far as we know, there were no major upgrades to the house that would justify the jacked-up price. Unsurprisingly, it didn’t sell, not because it was competing with cheaper pre-existing homes in the same neighborhood, but mainly because the subdivision is still being built out, and you can build a nicer home with more square footage and more upgrades for $30K less, within 50 yards of that house. (So long as you’re willing to wait 6 months for it to be built.)
I seriously believe the glut of real estate-oriented shows on HGTV and TLC is partially to blame. Those networks run endless programs about young couples who build or buy houses, do a few basic upgrades, and then turn around and sell them for unbelievable profits in just a year or two. I think people watch these shows and truly project themselves into them, believing that anybody can make money off any house, at any time and in any housing market. There have been many times where I’ve seen a house priced way above market value and thought, “That person’s seen one too many episodes of ‘My House is Worth WHAT?’.”
I hate to dis HGTV, which is a Knoxville operation, but yeah. And reader Justin Lipner thinks things are picking up:
After buying a new condo in St Louis in August, I eagerly awaited the sale of the rest of the new units, because until that happened, I couldn’t hope to sell my unit. In the last month following 4 months of nearly no sales, they sold 3 units quickly. Their asking price has not dropped for the remaining units, and it looks like they will have sold the rest of the units in the next couple months.
Anecdotally, I see the American home buyer adjusting to the new reality of prices being constant at least, and moving from one place to another, not expecting a value rise that they should wait for. It’s good news for everyone who doesn’t sell bad news.
We’ll see.