Bloomberg columnist's message to homedebtors looking to sell: Enough with the balloons, open houses and incentives - just cut the damn price

The whole world is going HousingPANIC now, wouldn't you say?

What took so long?

HP adds one piece of advice to this: Cut the price BIG TIME. Shock yourself at how far and how fast your home's value plummeted. If you want out from under your debt-trap, you're gonna have to shock your neighbors with the new comp on the street.

Or you could hang on, watch your home rot on the MLS for another few months or years, and watch it sell for even less down the road than you could have gotten for it today.

Housing party over. Get out. Now.

Housing Market's Stench Means Cut Price to Sell

ov. 19 (Bloomberg) -- Raffles, festive balloons, open houses, car giveaways. Will any of these incentives sell houses? Not at the moment.

You don't have to be particularly creative in a market glutted with homes for sale. The painful reality is that homes are commodities. There are more than 4 million of them sitting out there unsold and more coming on the market every day due to foreclosures. If you really need to sell a house, price is the one lever that will move a property.

Almost everywhere your competition is abundant while buyers are waiting for prices to fall even more. U.S. existing-home prices are expected to drop almost 2 percent this year nationally, according to the National Association of Realtors, and are likely to fall further in areas oversaturated with homes for sale.

``Buyers just want price,'' says Mike Morgan, a Stuart, Florida-based lawyer, real-estate broker and consultant who researches property markets for hedge funds and financial institutions. ``Buyers have become educated and they can easily cut through the fluffy incentives.''

HousingPANIC Stupid Question of the Day

Why do you care so much about home prices and the housing market?

Lets Play "Mark to Market"!!! What % overvalued are America's housing bubble cities?

HP'ers, the game today is "Mark to Market" the HP US top 10 bubble city list.

From the city's fraud-and-speculation home price peak to today's mortgage-meltdown-reality, what % off do you think a home should be marked down in order to move? And what other cities should be up for consideration?

1) Phoenix
2) Tucson

3) Vegas

4) San Diego

5) Sacramento

6) Miami

7) Tampa

8) Naples

9) Boston

10) DC

Let's play!

My answers

1) 36%

2) 38%

3) 42%

4) 36%

5) 47%

6) 55%

7) 35%

8) 45%

9) 20%

10) 22%

Now that stated income, liar's loan, no-doc, no-down, teaser rate, negative am (etc) mortgages are no more, how far have home prices just crashed?

Homedebtors might not realize it yet, but with the disappearance of all these "creative" loan products, and the lenders who used to make them, home values across the United States have just crashed.

Mark to Market.

Mark to Market.

Mark to Market.

You add it up, these types of loans made up 40%+ of the multi-trillion dollar mortgage market these past few years, and now they're gone. Poof. Overnight.

That's a lot of folks who can no longer buy a home (at these stupid fake prices). That's a lot of people who can no longer refinance, who will now lose their homes when their ARM resets. That's a lot of housing ATM loot that is not only gone, but won't be able to be repaid.

The collapse of the financial system is at hand. The Grand Housing Ponzi Scheme is over.

So - answer this question. If American homedebtors had to "Mark to Market" and sell their home today, how far have home values legitimately just dropped?

Ready? Here's my number:

30%. And many markets will be more than that.

It's called regression to the mean. It's called supply and demand. And it's called a bitch.

What happens when incomes are too low and interest rates and home prices are too high for new buyers to come into the Great Housing Ponzi Scheme?

Another HousingPANIC quote of the year candidate:

"Everybody now recognizes that the elimination of creative finance in housing leaves us with a problem for new homebuyers"

- Robert Barbera, the chief economist of ITG

When does it really get messy? When existing homedebtors realize they have to Mark to Market, the new prices set by the homebuilders

We all know in places like Phoenix, Las Vegas, San Diego, Miami, Tampa, Washington D.C., Boston, Sacramento and more, that new homebuilders have taken prices down big-time - either posted price or through the use of massive incentives.

Yet in those markets, stubborn existing homedebtors, less in tune with the market or Econ 101, and still under the illusion that 2005 prices are real, haven't adjusted their prices to the new market reality - or Marked to Market (yes, there's those three words again).

So what's happening in those markets and more? New homes are selling moderately well at the new prices as homebuilders take the haircut, slash the prices, and move the inventory, yet existing homes continue to not sell, and pile up like tumbleweed on a windy western day.

Eventually, some existing homedebtors will have to sell - or have the house sold for them via foreclosure. This starts the rush for the exits, the first ones out the door will be best off, then the real mess starts.

Note to existing homedebtors - 2005 prices are a joke. 2006 prices are a joke. 2007 prices are a joke. If you want to sell, just look at what true new home prices are at in your neighborhood (posted price less incentives), and price accordingly.

Here's a quick tidbit on this from CNBC's Diana Olick yesterday. Not only are prices going to come down, but when they do, watch for even more blood in the streets with the lenders.

I spoke to Nishu Sood, an analyst over at Deutsche Bank today, and he makes an interesting point. The big home builders have lowered their prices in the hot markets, like Las Vegas, down 25%, but the existing home owners have not dropped as far.

He expects to see existing home owners start to drop prices more dramatically in the second half of this year. If prices really start to hit the skids in these big markets--which are where all those speculator investors lived and breathed--then you can expect all those adjustable rate mortgages they used to really kick into high gear default.

Associated Press lead: "Housing market may be worse than stats reveal". HP: "No duh. Glad we could help"

Here's the AP version of HP's thread the other day "FLASH: Lennar tells us what new homes are REALLY selling for, and it's ugly. Really ugly"

NEW YORK (AP) - Here's a scary thought about the housing market: Things may be far worse than what's already being revealed by the troubling government and industry statistics.

At issue is what goes into sales price data and what does not. When those numbers are crunched, many of the incentives that sellers are using to lure buyers - including cash rebates - aren't being included.

That suggests prices may be falling faster in many markets than is now being reported. The same goes for how the mortgage-application indexes don't account for the implosion of lenders. That could have the effect of masking a slowdown in demand, which is why the housing market could be in for rough sailing much longer than most anyone anticipates.

There certainly has been plenty of bad news, but it might not even be giving a full picture of how difficult things really are.

For instance, the Commerce Department reported last week that the median sales price of new homes fell 0.9 percent in May from a year ago, after tumbling 10.9 percent in April.

But those numbers don't include the thousands of dollars in lavish incentives like plasma televisions, pool installation and closing costs that sellers are increasingly using to woo buyers. That means a home selling for $600,000 gets reported for that price even though all those extras technically are reducing the net sale price.

Sales incentives at Lennar Corp., one of the nation's biggest builders, averaged $43,700 a home in its fiscal second quarter, up from $24,700 in the same quarter last year. And it isn't just builders piling on the incentives - it's spilling over to the existing-home and foreclosure market, too.

"In effect, they are reducing the new sales price but that is not showing up anywhere in the actual sales data," said Peter Schiff, who runs the investment firm Euro Pacific Capital Inc. in Darien, Conn.

A message from HousingPANIC to out of control homebuilders and Desperate Homedebtors

Homebuilders: Keep building. Keep adding inventory to the fire. Keep pumping out houses nobody wants, nobody can afford and nobody can get financing for anymore.

Desperate Homedebtors: Keep asking for prices that no sane person would pay. Keep holding out for that price you "deserve". Keep hoping against hope. Keep reading realtor blogs.

Why, you ask, would HP ask such a thing?

Because unsold and unwanted housing inventory will continue to build and build and build and build and build and build and build and build and build and build some more...

And then home prices will crash back to the level where the fundamentals will make sense again.

Toxic buildup in slumping housing market - Home builders are fighting the shrinking demand ... by adding more supply

CENTRAL VALLEY, Calif. - How do you deal with excessive supply? Add more supply!

Sounds like a head scratcher, but that’s exactly what home builders are doing.

The housing market hasn’t seen any light at the end of the tunnel: Home builders have built too many homes and they've had too many cancellations. There are too many existing homes on the market competing with them, and now here come the foreclosures adding to supply.

Though homes don’t sell, home builders are building fast in some places.

You might wonder why home builders would dig larger holes for themselves.

Standard Pacific won't comment for the story, saying the company is in the quiet period before posting earnings. But Ara Hovnanian, CEO of home builder Hovnanian Enterprise said recently that building Spec homes is about the only way to liquidate land these days.

"It's easier to sell land by popping a house on it than it is to just sell land because there are just not many buyers out there," he said.

Why do desperate homedebtors think they get to set the price?

"I'm not gonna sell for a penny below what I owe"

"There's no way I'm gonna take a loss"

"I deserve what my neighbor got last year"

"I'm gonna find a realtor who can get me what my place should go for"

Uh, no, you're not. The market sets the price, not the homedebtor, and trust us, that market price is WAY below what it was last year or the year before.

It's time for the Great Housing Blue Light Special.

Cleanup on aisle three.

A HousingPANIC Message for the REALTORS (ramen-eating real estate clerks) of America

I'm baaaaccckkk... Now where do I even begin? Here's one for starters, a thought for our real estate clerk friends.

Dear REALTORS of America,

It has come to our attention that unsold home inventory is at record levels, with more and more homes are being put on the market every week, and we're just getting started. This is called "exploding supply".

It also appears that home sales velocity has plummeted, as people have come to realize that you and the NAR were lying, and that real estate values can fall. People aren't buying anymore (even if they could - thank you subprime implosion), since the smart people know the same house will be cheaper next month or next year. This is called "plummeting demand".

Now, when supply is rocketing, and demand is cratering, there's this third variable called "price" that gets impacted. For homes to sell, the prices will need to come down. Drastically. And this is your job now, to help Desperate Homedebtors understand that nobody wants their home anymore, especially at last year's price.

So, it's time to do the unimaginable. It's time for you, REALTORS of America, to embrace HousingPANIC. Make HP your friend, not your enemy.

Send your sellers the link to HP. Help them understand that the game is up, homes are insanely overvalued, the fundamentals do matter, and if they want out from under their debt trap, they're gonna have to cut the price, cut it bigtime, and cut it now. And if they don't it'll get even worse tomorrow. Trust us.

Then send your prospective buyers the link to HP. Help them understand that now is a great time to buy - at 50% off. Teach them all about foreclosures, lowballing, and Desperate Homedebtors. Then get out there and lowball!

Finally, listen to the HP community when it comes to The Corrupt David Lereah, the NAR, and the usual REALTOR spin. At your next REALTOR gathering, be the one who calls for TCDL's resignation. Next time the media interviews you, or you blog, write about what a joke the NAR, your fellow REALTORS, and TCDL have become. And try telling the truth for a change - it can only help at this point. Yes, telling the truth is against your normal business model, but times have changed.

I know the idea of embracing HP is like eating glass to many of you. But at least you'd be eating something! Good luck out there. Now get those prices down - they're gonna crash anyway, so wouldn't you rather it be sooner rather than later?

Weeeeeeeeeeeee!!