March 20, 2007

Are selling a home and ticket scalping similar? (hey there - who needs two?!)


BusinessWeek's Hot Property had this one the other day. For someone who buys tickets to events after they start from desperate scalpers looking to take any price, I thought the analogy was "spot-on" as they say here...

The panic that could occur in the housing market is akin to what I experience in buying tickets from scalpers at a rock concert.

A few minutes before the show starts, even professional scalpers lose their cool – vigorously competing against others, they drop their prices in an attempt to monetize the rapidly declining value of their tickets.

This results in drastic price drops.

What does rock concert ticket scalping have to do with the housing market you may be wondering…one concern is that much like ticket scalpers, sellers will aggressively discount their homes (to lock in profits or minimize losses) before they further decline in value.

This will lead to even more supply and lower prices.

15 comments:

Anonymous said...
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Anonymous said...

Cash will be king. Well cash measured in gold/silver. The difference between how many ounces it takes to buy a home in whatever area you are in now, compared to when the FB's and FF's(flippers) are in full on panic mode, will be amazing. I'm guessing the 30 oz I have right now will outright buy a nice 3br/2ba!

Uncle Al said...

Most home sellers are not as rational as scalpers. They'll follow the price down. Some will behave according to your description, however. Keep in mind a lot of willing sellers trying to avoid foreclosure or rate resets cannot lower the price.

showmenouns said...

I find myself going over the incredible words of Greenspan's recent comment, to paraphrase, There wouldn't be a problem with subprime if housing prices rose 10%.

Inferring, everything would be solid if housing prices rose, or, The only problem is housing is too cheap, to affordable. Wow.

Nelson D said...

The recent 400-point plunge is no reason to panic. But it's a good excuse to tweak your portfolio, says Fortune's Nelson D.

W.C. Varones said...

That would be nice to see, but I agree with Uncle Al.

There are a lot of psychological factors that will make homeowners hold out for unrealistic prices for a long, long time.

Anonymous said...

Nice.

House Scalpers is my new term.

Anonymous said...

Well, since we are making silly comparisons - what about the value of beer in the 1st inning vs the 9th inning of a baseball game. No one is going to want it after the game ends - so the value of beer should plummet - but it doesn’t...but then that is like a monopoly or total government control...which is what most socialists on this board want anyways...

Marky Mark

Anonymous said...

That was the dumbest analogy ever Marky Mark. The beer at a baseball game can always be sold at the next game the next day.

Damon said...

The best economic lessons I ever learned was when I was in the Scalpers pit before game 7 of the 2001 World Series. Dbacks vs. Yankees. It also turned out to be the best game I've ever seen and I sold my freakin tickets! Darn!

Now I use my scalper skills in so many other ways. It was a Very worthwhile lesson I must say.

brokersleaveyoubroke said...

It's kind of a poor analogy. The scalper is in a panic because the ticket is just a wortless piece of paper after the event, a house may drop in value but it will always be worth something and if you don't need to sell it you can live in it.

Anonymous said...

But you can't sell it tomorrow if the bank takes it today.

Anonymous said...

is this proper analysis,.. leveraged borrowers were with the feds help, planing to use 90% other peoples money, to raise prices, on other people, by borrowing from the fed, who either pays nothing for its money, or gives at that time of those expectations 2% to its lenders, so its lenders can not afford to buy products, it lends money to others to buy, or if gov doesent get lenders, it prints money, that causes price inflations, causing the same results?

Anonymous said...

love that concept, grow other peoples money, and pay them nothing,or/and they get inflation in prices, where does the concept of government helping come in?

AnonyRuss said...

"Uncle Al said...
Most home sellers are not as rational as scalpers. They'll follow the price down"

Exactly, I really am fascinated by this ridiculous belief that someone is magically going to show up and overpay for your house, regardless of the craziness that happened in 2004, 2005, etc. When I put my Phoenix area house for sale in September 2005, I knew that the insane upward price momentum had slowed. Actually, I later saw that appreciation had stopped on a dime that very month, although actual closings in October and November showed gains because house sales obviously take some time to close.

The normal practice in my house's price range in Summer '05 was: take the highest comp in the subdivision and add $15K. I opted for adding $10K. With no offer in two weeks and several showings of my clean, well-furnished, uncluttered house, I re-assessed and dropped to a couple thousand above the last comp. I was fully prepared to drop further because I knew that this bubblicious price level was eroding, but a solid contract and closing came soon after.

But I see houses priced so far from current reality, it is almost funny. To purchase them would be like paying double the face value to a scalper when the same seating section is still for sale at the box office fifty feet away.