December 21, 2005

Question for readers - are you thinking about putting in "low-ball" offers soon?

Doesn't it seem tempting as desperation sets in to go out and put in some low-ball offers to see if they'll get accepted?

But is this like the catch-a-falling-knife strategy during the dot-com implosion?

I'm seeing condos going up like mushrooms here in Arizona, and you just know the developers (or the flippers) are freaking out. So how about a nice 20% below list offer? Or maybe 40%?

One condo development going up here in Scottsdale, in a REALLY bad area, has eight units, priced from $500,000 to $600,000 for like 1200 square feet. Seriously.

Wonder how low that developer will go. $300,000? He'd likely still make money at that price.

Let's hear your take


Anonymous said...

Columbus, OH guy here. I posted last week. We sold our home after being on the market for about a month, for just a few thousand less than asking price. Not bad. Other homes in the neighborhood, not priced reasonably in my opinion, continue to sit and sit and sit, some for over a year already. Bubble here? Not sure.

BUT - I'm glad we're getting out of the house (for various reasons), and will be renting for at least 6 months. Wife, I and kids probably won't stay in Columbus, and instead head for a warmer climate where there's actually things to do besides sit at home and watch football. We'll probably focus in on areas that are *clearly* bubble areas, and I can guaran-damn-tee you we'll be low-balling with offers. Just a matter of finding the right house with a deseparate seller. The worm has turned for sellers, sorry...

veritas_faust said...

We're here in Miami. Living on the beach in a condo (renting). No way I will make an offer until after the denial ends and the hemoraging begins.

We pay $1500 for a 1000Sq ft, why would I look to increase that by at least $500 (presuming my low ball was accepted) and then be looking at association fees, insurance that is going to double (Hurricanes seem to be a problem out here), and the assortment of other hidden costs.

Nope we are going to wait until there are stories of flippers walking away in record numbers...or jumping off their balconies...which ever comes first.

I figure that should be Spring time next year when even the most rabid housing bulls have to concede failure.

Tom DC/VA said...

I don't plan on buying soon. I would strongly recommend that unless the property is absolutely your dream home, you should wait. If you are a firm believer in the existence of a bubble, you know that there is a huge downsize risk lurking out there. Plus it is too early in the popping process for most people to understand that prices are falling. That will take 6-12 months.

Anonymous said...

Yes, it will take at least a year for people to realize that the bubble has burst. This is because people often compare the current month's sales figures with the sales figures of the same month one year ago. Therefore it will take at least 12 months before people realize that houses are selling for less than they did in that same month of the previous year. Also, it will take at least that long for sellers to come to terms with the new reality. What do they say the five stages of grief are? Denial, Anger, Bargaining, Depression, Acceptance. My friends, we are only at stage 1. We must weight patiently for stage 5.

000000000000000000000000000000000000 said...

I will wait a few years. Less jobs, depleated assets, low confidince, bad investment reputation, huge supply with little demand, deffered maintinance, striped apliances, etc.

A good income and cash reserve will be needed to wait this one out.
In the last real estate bubble I spent all my reserve on overhead and had lower income due to the recession. When times suck it is hard to step up to a house at any price.

Nathan said...

So, question, if you are planning on "low-balling", then you must have some expectations as to how much downside there is in the market, correct? I am curious as to what everyone's opinions are regarding the downside risk in markets across the country. And if so, how do you come up with an estimate? Off the top of your head? or actual justification?

keith said...

phoenix went up 55% in the past 12 months - 100% due to speculation.

So to get back to the mean, it will drop 35%.

The beauty of math - 50% up = 33% down. So the declines will look less severe than the inclines to the uneducated. But it all comes out in the wash.

So, for Phoenix, I'd recommend 35% off or more lowball offers, not a penny more.

Anonymous said...

when nasdaq topped at 5000, many bubble heads wanted to buy on the 'pullback' they bought 4000, or 3000 or even 2000, but it went to 1200 before it hit bottom. I want to buy madly a house, but buying in Spring 06 would be like buying nasdaq 4500 on the way to 1200.

Anonymous said...

I will buy when the loan I get (30 year fixed, whatever %) equals my monthly rent $1200. This might take another 2 years due to saving (for more cash that I can put down). As of now, San Diego single family homes in a nice area are nearly $550k. I believe these same homes will be worth $400K in 2 years thereby reverting back to the mean.

skep-tic said...

probably no sooner than 5 yrs from now

Sphenix said...

I think, denial phase will end on summer 2006 with a major shift in sentiment==>"a house is not an investment, it's an obligation". House prices might decline till summer 2008 when it might hit the bottom. Then, the question would be, is this the bottom, or we're set for a Japanese scenario of prolonged period of price deflation.

for now, don't lose your hand catching a falling knife.

Moman said...

Housing will not be thought of as a great investment again in my lifetime. It took 65 years for stocks to be considered a solid investment after the great depression and idiots promptly crashed that market. Housing will be 'japanese style' barely struggling to keep up with inflation for many, many years.

The sheep is slaughtered, the goose is cooked, and there is going to be one hell of a buffet.

jj said...

I know some people that 'cashed out' because of temptation and are renting until the so called 'bubble' bursts so they can nab another house for cheap. I pray they made the right move because even if the prices stabilize, they wont be able to afford the same house they left 6 months before. Good luck.

So much predictions of doom and gloom. We heard it in Dec. 2002,2004,2005 and now 2005. Maybe the market has reached its final run but who cares unless you are a flipper. As long as you got a nice 30 yr fixed with a decent rate and you have a decent career you are fine.

DrChaos said...

"a house is not an investment, it's an obligation".

That's what the young in Japan now believe. They saw their parents and older siblings save like crazy to take out enormous loans on microscopic properties, which now have declined steadily for *15* *years*.

Do any real estate agents today predict 15 years of steady price declines?

I even wouldn't, but 5 years of nominal declines (not to mention real declines) would not surprise me. One big one in 2006 and four small ones.

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