Market Conditions in 90740>Question Details

Omar, Home Buyer in Seal Beach, CA

Why are home pricing still so high???

Asked by Omar, Seal Beach, CA Sun Mar 2, 2008

My questions is I recently made a great offer on a home that was is still over priced. The home is listed for $899,000 so we started at $775,000 with 50% down no contigences. They countered $ 860,000 what are sellers thinking these days? This is a down market! Sellers are in lala land they think it is still 2006 pricing. We decided not to counter and let it sit for another month or two than come back and get a better price.
Keeping asking prices high may make sellers feel good, but it won't sell their homes. Consider this: On one hand, brokers tell me that prices haven't fallen much, and that they think that's a good sign. On the other hand, they complain that sales volume is way down. Well, friends, the former has a lot to do with the latter. Volume isn't going to pick up until prices fall to accommodate the fact that we're in the midst of a real estate collapse. And buyers aren't going to step up to the plate in large numbers until it's clear that prices fell

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A sucessful sale takes a willing buyer and a willing seller to meet at a willing price. I agree with everything that you said and more. I am making offers for my clients to Bank Owned Properties and having the same difficulty. When I did this ten years ago, during the last downturn, the banks were more willing to see reality. I think everyone is still stuck in the "Good Ole Days." Hold on to your guns and get that home you want for the price you want, if not move on to the next one. Its not like its the only game in town. If you need someone who is willing to fight for you, then give me a call or check out my website.

Joe Homs
949-625-4533
Web Reference: http://www.joehoms.com
1 vote Thank Flag Link Sun Mar 2, 2008
Sandra, your comparison of sales in all of 2006 to all of 2007 is worthless at best to misleading at worst. I certainly hope you provide a better service to your clients then providing this type of information to attempt to show prices are remaining flat or increasing.

The problem with your methodology has nothing to do with the median versus mode differentiation. Your error is that you are taking information for entire twelve month periods and attempting to utilize it to show current price trends. That is you are taking ALL of 2006 and comparing it to ALL of 2007.

But the reality is that the data in the subsets changed during the stated period – prices in the later part of 2007 where different than the earlier part of 2007. Your may have missed it but a dramatic credit event took place in mid-2007 which impacted the market. Your results are further skewed by the reality that sale transaction volume slowed dramatically in the later part of 2007. Therefore, your “data” for 2007 transactions is more heavily weighted towards early 2007 transactions (when prices where higher) to the end of 2007 (when prices where lower). Further compounding your “analysis” is the lag time between a purchase agreement being entered into and a closed sale. Closed sales in February of a year actually more closely reflect the market climate about 6 to 8 weeks earlier.

For these reasons, when analyzing trends, those more statistically trained, would utilize a smaller time period for a comparison. That is, one would compare sales transactions from February ’07 to February ’08 to analyze a year over year changes. This methodology is imperfect, as the sales mixture may have changed from the data sets. However, it is much more useful of show trends. The following entities have reviewed data as to price changes “year over year” for Orange County and all are showing a material price decreases. I also provide their measuring date which are now several months old: Case-Shiller (LA/OC)-13.70% Dec. ’07; DataQuick -16.30% Feb. 22; First American (LA/OC) -15.43% Dec. ’07; Global/National City-10.97%4q/2007; CAR -11.60% Jan. ’08. This is “year over year”, prices are even lower today and from the peak.

Further prices decreases appear almost certain given the number of adults with jobs is declining, the number of home buyers is at historic lows, the number of sellers is more than twice the norm, forecloses and notices of default are at records levels, and credit standards are continue to tighten (pulling even more potential buyers out of the market). Simply stated, the real estate bubble will continue to deflate.

NewportFiji
3 votes Thank Flag Link Thu Mar 20, 2008
You should be waiting at least 2 more years before buying any real estate. We are in the beginning stages of a big bust. Homes will be force sold as more people lose jobs and give up their homes in foreclosure.

Most people are still in denial. Buy when they are in a panic. We're about 2 years from that stage.
3 votes Thank Flag Link Thu Mar 6, 2008
>>>>> "some sellers have no choice but to list the prices high, because their mortgage is also high...."

Omar,


What is owed and what the true value of the property is, has nothing to do with what it will sell for .. -or- what it "should" sell for ... if someone is buried in their home, then it's probably time to be making an offer down the street.

Values are based on current market conditions, not payoffs .....

;^)
3 votes Thank Flag Link Mon Mar 3, 2008
Hi Omar,

The market value of a home is a price a buyer is willing to pay AND the price the seller is willing to let it go for. Just because the headlines say that the streets are bleeding and homes are down whatever % doesn't mean a seller has to take any offer. It has to do with their motivation. They may not need to sell. They may be willing to see if a buyer will love the location, condition, etc... enough to buy it at the price they are willing to let it go for.

Prices in Garden Grove came down about 8% last year. Your offer was about 14% below asking. The average SOLD price compared to average list price shows a difference between -0.60% and -4.41%. Unless the price of this home is waaaaay off of the comps, your offer was waaaaay off of what is really happening in Garden Grove. There are a lot of areas where a 14% lower offer would be a great offer and one that a seller should take. Garden Grove isn't one of them when you look at the real numbers.

The sellers came down about 4%, which is perfectly in line with reality. And yes, sales volume is still down from the peak, it had nowhere else to go, but homes are still selling. 53 homes sold in Garden Grove last month and it will pick up as we move into the normal seasonal upswing. A lot of buyers are getting off the fence because of the new conforming loan limit changes. As soon as the median prices are posted by HUD, we will still a nice increase in the number of sales because affordability will increase, especially in the area you are looking. (More competition for you, will that motivate sellers to continue dropping their price??? Probably not.)

At the price range you are talking about, I assume it is one of the most desirable areas such as Garden Park where other buyers will head first in their search just like you did. You need to decide what this property is worth to you. If you don't feel it's worth anything other than $775,000, than move on and find a seller whose motivation matches yours.
Web Reference: http://www.ocbeachblog.com
3 votes Thank Flag Link Mon Mar 3, 2008
Omar, it takes give and take on both sides. If you really want this house then counter back . You didn't begin the offer with your top dollar did you?
Web Reference: http://www.DotChance.com
1 vote Thank Flag Link Mon Mar 3, 2008
Prices being high or low is subjective. For example,take the house you want to buy that is listed at 899,000, for which you offered 775,000. What if it was listed at 775,000? Then someone comes by and says "wow, why are the prices so high? I offered them 650,000 and they didn't jump on it" See my point?

Remember, a house is worth nothing except what someone is willing to pay for it. Even the recent sales of similar houses (which is what realtors use to come up with the price) don't actually indicate "the true" price of a house, just how much someone has paid for a similar house in recent months.

So, why did you offer 775,000? Was it because similar houses have sold for 760-800k in the last ~3 months? Or was it because you figured since it's buyers market and such why not save some 124,000?
1 vote Thank Flag Link Mon Mar 3, 2008
Omar, Gee, never heard that one before! This is a common lament and an age old question. Find another home to write on. In our market I see some killer deals and those which are still "hoping" they can get what they "need" which is NEVER a pricing criteria. Here's a strategy you may wish to employ. Find three properties which you would like to purchase. Have your Realtor/Licensee write THREE CONTRACTS and then have Him or Her present your offer IN PERSON to the SELLER!! Write this into the offer! "Subject to offer being presented to Seller by Buyer's Agent". Then when your Realtor/licensee presents this offer SHOW the other two offers to the Seller. Keep this as your "ace-in-the-hole". The dialogue is, "My Buyer's first choice is your home. However, he is keenly aware of pricing in this market. He feels that the downturn and his price offering will protect his down payment. He is willing to move forward immediately. However, he has instructed me to show you these other two offers on properties in this price point. He needs an answer on this property tonight. If not he has instructed me to present the next offer." I have used this for "shock value" as it tells the Seller they are NOT THE ONLY property on the market and adds immediacy to the deal. Give it a shot and be prepared to move on! I had one friend of mine who did the same thing but he took it to a new level of arrogance--he literally ripped up the contract in FRONT of the Seller to drive home the point! Hardly "win-win" but it gets them back to the table!! (Course he has a copy in his briefcase!!). Go get 'em!
1 vote Thank Flag Link Mon Mar 3, 2008
Omar,
I don`t mean to be the bad guy here, however maybe it is in the delivery of your offer, or the presentation.
The seller gave up 39K and you balked. Is the home only worth 775K is that your final price.

When it was a sellers market, they would take all the offers and tell the buyers "were are going to wait a few day`s for more offers to come in" The Sellers played the buyers against each other.

Now it`s a buyers market.
If 775K is your final offer, than tell them 775K is my final offer and by the way I have placed an offer on this and that house also.
Play the sellers against each other.

And another thing, you are taking this to personal.
"what are sellers thinking these days? This is a down market! Sellers are in lala land they think it is still 2006 pricing. We decided not to counter and let it sit for another month or two than come back and get a better price."

Wrong, you should at least counter 5k. Keep it alive. Don`t expect to come in 125K off and for them to say sold.
1 vote Thank Flag Link Mon Mar 3, 2008
Mr.P, Other/Just Looking in Arizona
MVP'08
Omar,

This depends on a few things ...

How much homework the seller has done .. and how much homework the buyer has done.

We all know California prices have been psychotic for a long time, so you as a buyer should know what the homes were doing 16 months ago, 6 months ago and what the homes are doing now in that particular neighborhood .... you should also know the balance owed on the property.

Check the comps .. but you better be "walking" through the comps and actually seeing and feeling and not taking the word of the paperwork or the agent, Brazilian hardwood floors might be worth a little more than orange formica (maybe)....

See how many days the property has been on the market (dom) - that means "real time" .... not it's been on the market since last June and it's on it's 3rd realtor and it only "shows" 33 days on their MLS ....

I'm not saying this property is worth the money (because I have no idea) but new sellers get bad information thrown at them all the time ... if nothing else, an agent might list them just to have another listing ... but, this one might be 3 weeks on the market and overpriced by $100,000 ... or, this one might be overpriced because the owner is on his 2nd HELOC and his 4th wife.

You as a buyer, should have 6 or 7 houses in your briefcase when you go on the real estate market, and those you've been researching for the last 4/5 months and know all the background that goes with them .. when this one didn't workout, you should have been bidding in the next home ...

I never saw I home I couldn't live without....

Good luck and happy hunting.!


-
1 vote Thank Flag Link Mon Mar 3, 2008
where is your proof that the home is overpriced? do you have comps to support your statement?
0 votes Thank Flag Link Wed Dec 14, 2011
Hey Omar - My thoughts on the situation are this, since I don’t know the exact specifics of the property you are making the offer on. Maybe the home you made the offer on had strong comparable sales data to back up the list price of $899,000? Or maybe the home was overpriced but the owners just put it on the market to see if they could get that much for it? Maybe the amount owed on the property is more than you where offering, in which case there would not be enough proceeds from the sale in order to pay off the liens on the property at closing. I totally understand that the majority of people see today’s market as a "buyers" market but that does not mean that every home out there will be negotiable. There are always going to be home on the market, no matter what the market condition, that are not going to work for all buyers. I would advise you to ask yourself "why am I in the market"? Am i looking to swoop in and a get a great deal on a home, possibly under market value? or Am I looking to purchase a home that I will live in and raise a family. Something secure that meets my needs and wants? If you are looking to purchase homes under market value then Seal Beach may not be the market you should be shopping in as this is what many would consider a "highly desirable and competitive market" , more often than not homes in Seal Beach, even in a down market, are going to have multiple offers and you may have been countered back at $860,000 because another buyer came in with a strong offer at, lets say $850,000.

If you are shopping to get a home at a drastically discounted price such as approx 15% like your offer off $775k on the $899k property then you can still achieve your goal. Those deals are out there. But be prepared for 2 things. 1) there are always other buyers that can beat you out on price 2) seal beach is very competitive and you may want to consider less competitive markets for your buying strategy
0 votes Thank Flag Link Tue Dec 13, 2011
The offer you made might be great to you but to the sellers it wa not.
My first question to you would be are you working with a realtor?

If you are he or she should be able to help you determine what fair market is.
If you are not working with a Realtor , that should be step one.

If you really want the home, sitting on the sidelines may lose you a home you love. A offer could come in any time. I would suggest getting a good Realtor and Have he or she negotiate your offer.
0 votes Thank Flag Link Mon Sep 12, 2011
We're in the same situation with this home buying process. Prices are still unrealistic to incomes.
Until prices come down to normal levels will we be able to buy. And we have 100k to put down. It is just
crazy - Sellers are still trying to get 2006 prices in many areas.
0 votes Thank Flag Link Fri Nov 5, 2010
Did you end up buying a home early last year? The home for $1,098,000, was that in Rossmoor or in Seal Beach? Rossmoor has actually held up pretty well considering. Example, I sold a beater of a home to a man a year ago for $700K, he's since torn it down & is in the process of building a new beautiful home, the neighbors couldn't be happier, the old house was nasty with bee swarms & what not. Still, current comps for the same type of home is about $650-675K.

Anyway, I was just curious to see if you had found a great deal since last winter.

emilyknell1@yahoo.com
0 votes Thank Flag Link Thu Jul 2, 2009
Let it sit. Submit an offer for 750K. If they don't get the picture, then they're in over their heads on the mortgage.
0 votes Thank Flag Link Sun Aug 10, 2008
If you house sits on the market long enough to get forclosed on......Your price was too high. That may very well have meant you bought above your means. It might mean you are just walking away. It surely does mean you wanted more $$$ than the market would bear though.
~~~~~~~~~~~~~~~~~
You should have stopped after "your price was too high."
0 votes Thank Flag Link Wed Apr 16, 2008
JR
If you house sits on the market long enough to get forclosed on......Your price was too high. That may very well have meant you bought above your means. It might mean you are just walking away. It surely does mean you wanted more $$$ than the market would bear though.
0 votes Thank Flag Link Wed Apr 16, 2008
Fair market value assumes that you don't get forclosed on while your house sits on the market.
~~~~~~~~~~~~~~~~~~~
So homes being foreclosed on have nothing to do with people buying above their means? There are plenty of folks who are not in foreclosure, yes, even those who bought in the last 3 years.
0 votes Thank Flag Link Wed Apr 16, 2008
They are still so high because people are looking at comps and trying to get a selling price in line with them. Well, I think the guy who paid XXX for that house was an Idiot, as evidenced by the fact it got forclosed on, so don't compare me to him. Fair market value assumes that you don't get forclosed on while your house sits on the market. Some sellers are finding some buyers, but the overlap in the bell curves on what each thinks a property is worth is pretty thin. (Thus the low volume/high inventory) When the govm't stops trying to save people from themselves and some loan standards get ironed out the prices will come down, but it's gonna take time.
I'd say your seller is either hoping to win the lottery by having that one perfect buyer, or they can't sell for lower because the bank actually owns the home. Either way, It'll be fun to see what the house is worth in a few years.
0 votes Thank Flag Link Wed Apr 16, 2008
There is a three unit in the Ocean side of PCH asking 750K. A real dump, but they won't take any offer below 750K. My agent tried to fax the offer, but they told him not to bother. They said they had plenty of offers already and one being a pure cash offer. It's been 30 days since and the listing is still active. Been active for 85 days. They might be upside down on the loan, but they would rather lose more each month than to just let it go at a "market price". Market price being the best offer...
0 votes Thank Flag Link Tue Apr 15, 2008
Don't forget that alot of seller's are upside down with their loans. The equity is not there so they might not have alot of flexibility with the price. cameron.fedderman@era.com
0 votes Thank Flag Link Thu Mar 20, 2008
I wanted to defend Westminster a bit. Prices in Westminster based on price per square foot averages of SOLD homes were down approximately 6% from 2006 - 2007. In 2006 the average price per square foot was $391 and in 2007 it was $366.

San Bernadino County was the only county in Southern California to decline into double digit territory from 2006-2007 with an average price per square foot drop of 12%. Orange County actually showed a 1.5% increase in price per square foot because 5 communities posted gains in price per square foot. (Dana Point, Laguna Beach, Newport Beach, Newport Coast and Villa Park)

Check out the web reference below to see a city by city comparison of price per square foot from 2006 - 2007 in Orange County.

The data was obtained from all single family home & condo sales reported to the MLS for those years.
0 votes Thank Flag Link Mon Mar 3, 2008
Home prices have corrected significantly since November 2007. As a matter of fact, the listings in nearby Westminster in November 2007 averaging around $560,000 are now listed for $440,000. That's nearly 20% downward adjustment of list prices. In my opinion, $440,000 is still too high for Westminster.

Also, keep in mind that some sellers have no choice but to list the prices high, because their mortgage is also high. What if your seller refinanced in 2006 and needs to sell at $850,000+ to repay all their mortgages and closing costs?
Web Reference: http://www.condostorela.com
0 votes Thank Flag Link Mon Mar 3, 2008
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