Same Story, Different Place

© Copyright, View from Florida, 2009. All rights reserved.



Greetings from our new digs in Florida! We hope you enjoy the insight and common sense we tried to apply in Silicon Valley, now emanating from ~2,800 miles east.

This is a trial effort. I’m not sure how frequently we will post, but here goes.
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The numbers change, but the story is the same here. We’re not surprised, but we thought you might enjoy the deconstruction of a front-page “woe is me” article from our new local paper(*). The general topic was the (largely self-inflicted) difficulty suffered by local golf courses but the chutzpah of some homeowners, left unchallenged by the local reporter, cried out for extra attention.

The money quote was:
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In Oldsmar's East Lake Woodlands, Jon Nelson and his wife want to move to a smaller home because their children have grown up and moved away. But their Arthur Rutenberg home — $599,000, down from $625,000 — won't budge.

"It's just a terrible time to be selling any house," Nelson said. While he enjoys the golf course, he said, "It's a selling point if somebody wants to belong to a country club and play golf."
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Oh, puh-leeze!

A quick search of public records finds they are the original owners and bought this house allegedly “worth” $625K for only $390K of real money in 1996. There is nothing(!) to stop them from lowering their price to attract a buyer. This is a classic example of greedy owners trying to cash out. (For reference, this house is five beds, four baths, 3,490 square feet, pool, built in 1993.)

As an aside, we might cut the owners a little break by observing Zillow shows the peak “value” was $776K (in ~mid-2006). We then take the little break back by noting today’s Zestimate is only $550K with a “value” range of $470K to $608K.

Zillow also shows this house on the market at $599K for 151 days. Did anybody get a clue during the last five months to lower the price?

Attacking from a different direction, if we mirror California and assume the annual “value” increases 2% per year, today’s “value” projects out to ~$504.5K.

In short, crying about not selling at $625K is equivalent to demanding a greater fool step up in the middle of this severe recession and fund your retirement. (Editor’s note: Such a strategy actually seems to work for local public employee unions, but that’s a rant for another day.)

Based on living on the same county and shopping for a house in 1997, I have to say even "only"
$390K seems a bit stiff for that part of town in those days. I could be convinced they over-paid by $40 -$50K in 1996 from which you then project a “value” at ~$450K in 2009 –or whatever year they eventually “get real” on the price. Fortunately for these owners, the intervening housing bubble may help them overcome the rule, “You make money when you buy real estate, not when you sell it.” However, they may "only" gain $50 or so instead of the $200K implied by their 151-day-old asking price.

As an aside, implying folks who refuse to lower their asking price when they could are in anywhere near the same boat as the tens (hundreds?) of thousands who are underwater and/or unable to make payments does a terrible disservice to the public debate. (However, do not for a minute imagine we agree anyone “deserves” to be bailed out at the behest of the government. That’s also a rant for another day.)

Conclusion:
For crying out loud, just lower the price and sell the dang house already! Regardless of politicians trying to support house prices and bail out all the losers, house prices are not coming back. The longer you wait before lowering your price, the farther you have need to lower it to catch up with the market and close a sale.

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*"At Tampa Bay country clubs, golf hits a rough patch"
http://www.tampabay.com/news/business/realestate/article1017542.ece