The property hasn't actually sold yet...it's under contract with a contingency but has not closed. While my colleague is correct about the fact that the property is overpriced at 480,000, and the market is booming when it comes to unit sales; however, unit sales is not indicative of price or recovery for that matter. It's important to break a market down into macro-markets and this is because while some areas may be doing well, others are suffering badly so it does not make sense to compare everything together. It's inaccurate... For instance in the 23455 zip code there are approximately 6 or 7 macro markets within that zip code. It gets more complicated if you break down the types of communities and how people search for homes. For example some people want to live in a beach community so they will look in Chick's Beach, Ocean Park, Shore Dr/Great Neck, North End, and the Oceanfront; however, maybe someone else wants a beach community but only wants to be in the Cox School District. That eliminates part of Chick's Beach and the Oceanfront (Beach Borough). Chick's Beach and Ocean Park are the only 2 communities in 23455.
To help you understand what is happening on a broad scale I will give you a brief explanation on what has happened in Hampton Roads in the last few years: in 2005 we sold the most amount of units at 28,999 units, but the highest priced sales happened in 2007, but our number of sales was down to 22,897 for that same year. That is 6,100 less unit sales but for higher prices...that's where the problems arise. In 2009 we sold 18,533 units and in 2010 we sold 17,002 units, but unit sales in the 23455 INCREASED from 2009 to 2010...but prices still dropped. Not terribly but enough to hurt. Because we have half the number of agents doing business then we did during the boom, Real Estate Agents think we are doing better or in a recovery when in fact our inventory is increasing dramatically, unit sales are slowly declining, and prices are still dropping overall. (My business has quadrupled since 2007, but it's not due to recovery or because of a plateau.) It's basic supply and demand. Another indicator is that as of January 18 there were over 5700 people in the Seven Cities that were at least 60 days behind on their mortgage. The cure rate for 60 days behind is less then 5%. Of those 5700 delinquent only 1500 were either listed as short sales or under contract. That's still leaves 4200 seriously delinquent homes that either need to become short sales or will foreclose in the near future because they don't just disappear. This will put enormous strain on inventory and prices. Some areas will bear much better then others, but the regardless of the area 2 things are for certain.
1. Buyers are getting much more house for their money (This is what I call "Hidden Depreciation")
2. Inventory is increasing and unit sales are slowly declining (This means that prices must come down)
There are a lot of other factors involved that affect market analysis but that would take a long time to explain. Hope this helps! There is also a study by Clear Capital that breaks down what will happen this year in Hampton Roads. They are expecting 10-13% depreciation overall. I am expecting it something similar, but that doesn't mean everywhere...just overall.
Thanks for the lengthy answer. I follow the real estate market and generally agree with your observations. Thanks again.
While this house was overpriced at $674K, it is still a valuable property being a true lakefront property (not a faux waterfront property) with an excellent lot and location. $399K is a great price for the right buyer (1955 style house). With this type of house going at a low cost, it's setting a comps standard that is certainly going to drag down surounding property values. 2011 is not going to be a year of stabilization or recovery for the local housing market in my opinion.