Lowball! 3/18 - 3/25
Lowball! takes a look at home sales over the past week from a very different perspective. For those new to Lowball!, a lowball offer is when a buyer offers a significantly lower bid than asking in hopes that the seller accepts the offer. We take a list of home sales over the past week and pick out the sales that have the highest percentage difference between asking price and selling price.
The purpose of Lowball! is to show buyers that the market has changed and buyers now have considerably more leverage than sellers. Just a short time ago, Lowball! offers would have been laughed at and discarded, however, not any more. The fact that so many under-asking offers are being accepted is clear proof that the market is changing.The list does not contain all sales, I hand-pick the most interesting sales from the list. These listings might be the highest dollar drops, biggest percentage reductions, or sales in towns that are thought to still be 'hot'. Please note, even with double digit percentage reductions, these homes are still incredibly overpriced.
On to the list!
MLS# 2082989 - Millburn, NJ
Original List Price $539,000
List Price $485,000
Sales Price $332,700 (31.4% Lowball!, 38.3% off Original List)
MLS# 1700077 - Hopatcong, NJ
Original List Price $299,000
List Price $250,000
Sales Price $190,000 (24% Lowball!, 36.5% off Original List)
MLS# 2109517 - Randolph, NJ
Original List Price $549,000
List Price $495,000
Sales Price $400,000 (19.2% Lowball!, 27.1% off Original List)
MLS# 2218533 - Wayne, NJ
Original List Price $395,000
List Price $379,900
Sales Price $310,000 (18.4% Lowball!, 21.5% off Original List)
MLS# 2206485 - Montclair, NJ
List Price $1,175,000
Sales Price $995,000 (15.3% Lowball!)
MLS# 2070094 - Livingston, NJ
List Price $2,350,000
Sales Price $2,070,000 (11.9% Lowball!)
MLS# 2092323 - Summit, NJ
List Price $549,000
Sales Price $485,000 (11.7% Lowball!)
MLS# 2244685 - West Orange, NJ
List Price $220,000
Sales Price $195,000 (11.4% Lowball!)
MLS# 2091428 - Scotch Plains, NJ
List Price $1,695,000
Sales Price $1,502,800 (11.3% Lowball!)
MLS# 2211219 - Pohatcong, NJ
Original List Price $259,000
List Price $242,000
Sales Price $215,000 (11.2% Lowball!, 17% off Original List)
MLS# 2241813 - Franklin, NJ
List Price $225,000
Sales Price $200,000 (11.1% Lowball!)
MLS# 2228913 - Warren, NJ
List Price $429,900
Sales Price $385,000 (10.4% Lowball!)
MLS# 2109696 - Mendham, NJ
Original List Price $799,000
List Price $789,000
Sales Price $710,000 (10% Lowball!, 11.1% off Original List)
MLS# 2214551 - Nutley, NJ
Original List Price $709,000
List Price $649,000
Sales Price $585,000 (10% Lowball!, 17.5% off Original List)
MLS# 2209010 - Upper Saddle River, NJ
Original List Price $1,299,000
List Price $1,249,000
Sales Price $1,155,000 (7.5% Lowball!, 11.1% off Original List)
MLS# 2207690 - Ridgewood, NJ
Original List Price $674,000
List Price $649,900
Sales Price $603,000 (7.2% Lowball!, 10.5% off Original List)
Caveat Emptor!
Grim
The purpose of Lowball! is to show buyers that the market has changed and buyers now have considerably more leverage than sellers. Just a short time ago, Lowball! offers would have been laughed at and discarded, however, not any more. The fact that so many under-asking offers are being accepted is clear proof that the market is changing.The list does not contain all sales, I hand-pick the most interesting sales from the list. These listings might be the highest dollar drops, biggest percentage reductions, or sales in towns that are thought to still be 'hot'. Please note, even with double digit percentage reductions, these homes are still incredibly overpriced.
On to the list!
MLS# 2082989 - Millburn, NJ
Original List Price $539,000
List Price $485,000
Sales Price $332,700 (31.4% Lowball!, 38.3% off Original List)
MLS# 1700077 - Hopatcong, NJ
Original List Price $299,000
List Price $250,000
Sales Price $190,000 (24% Lowball!, 36.5% off Original List)
MLS# 2109517 - Randolph, NJ
Original List Price $549,000
List Price $495,000
Sales Price $400,000 (19.2% Lowball!, 27.1% off Original List)
MLS# 2218533 - Wayne, NJ
Original List Price $395,000
List Price $379,900
Sales Price $310,000 (18.4% Lowball!, 21.5% off Original List)
MLS# 2206485 - Montclair, NJ
List Price $1,175,000
Sales Price $995,000 (15.3% Lowball!)
MLS# 2070094 - Livingston, NJ
List Price $2,350,000
Sales Price $2,070,000 (11.9% Lowball!)
MLS# 2092323 - Summit, NJ
List Price $549,000
Sales Price $485,000 (11.7% Lowball!)
MLS# 2244685 - West Orange, NJ
List Price $220,000
Sales Price $195,000 (11.4% Lowball!)
MLS# 2091428 - Scotch Plains, NJ
List Price $1,695,000
Sales Price $1,502,800 (11.3% Lowball!)
MLS# 2211219 - Pohatcong, NJ
Original List Price $259,000
List Price $242,000
Sales Price $215,000 (11.2% Lowball!, 17% off Original List)
MLS# 2241813 - Franklin, NJ
List Price $225,000
Sales Price $200,000 (11.1% Lowball!)
MLS# 2228913 - Warren, NJ
List Price $429,900
Sales Price $385,000 (10.4% Lowball!)
MLS# 2109696 - Mendham, NJ
Original List Price $799,000
List Price $789,000
Sales Price $710,000 (10% Lowball!, 11.1% off Original List)
MLS# 2214551 - Nutley, NJ
Original List Price $709,000
List Price $649,000
Sales Price $585,000 (10% Lowball!, 17.5% off Original List)
MLS# 2209010 - Upper Saddle River, NJ
Original List Price $1,299,000
List Price $1,249,000
Sales Price $1,155,000 (7.5% Lowball!, 11.1% off Original List)
MLS# 2207690 - Ridgewood, NJ
Original List Price $674,000
List Price $649,900
Sales Price $603,000 (7.2% Lowball!, 10.5% off Original List)
Caveat Emptor!
Grim
11 Comments:
I am most surprised about the Milburn, The Nutley property and the Hopatcong property had no business being listed for the original price, and still for that matter sold for much more than they should have
KL
I am going to play devil's advocate even though I have been a long-time real estate bear. I have been monitoring the NJ market for years, and have been shocked by the ever increasing prices and the crazy expectations that permeats the market.
Here are my arguments why won't take a dive any time soon:
1. While most of us here believe there is a bubble, the vast majority of the people do not believe it. Ask around work... almost everyone still have the mindset that prices only go up. They do not read all these articles about increasing inventories, decreasing prices, and a bubble.
2. Price reductions do not necessarily mean a desperate seller. My parents put up their house for 1.2M. If they don't get their price or if the listing expires, they will just hold on to the house because they have no urgency to move.
3. This impending crash theory has existed for years. I first caught on to this theory in 2003 and bought into it. However, I purchased a home at the end of 2003 and the value has gone up from 660k to 900k.
Don't get me wrong, I am on your side. It makes me puke that neighbors in my development buy a house for 650k, paid a few grand to paint the interior and add some light fixtures, and then successfully sell a year later for 800k. And that slimball real estate agents (who add no real value other than a leetch on a home sale) are now made up of Harvard MBA grads instead of retirees. The decline has just started... it'll take at least a few years (when inventory floods the market, when all exotic loans start affecting payments, when the fixed rate goes up at least another point, etc.) But I'm not sure I will root for that because it will lead to a recession and a complete crash.
Disagree that many do not think there is a bubble. More and more people are saying prices are to high. Even a realtor admitted things were slowing prices have come down a little and that larger price declines were possible.
Incomes do not support these prices. Easy risky loans are but this is a short term speculation to buy with one of these.
2 things have to happen House prices go down or Wages go up fast.
With newly minted mba's phd's and other high skilled workers being incubated in China and India I suspect wages at higher levels will be stagnant.
Prices are coming down now, but much slower than anyone that wants to buy.
"1. While most of us here believe there is a bubble, the vast majority of the people do not believe it. Ask around work... almost everyone still have the mindset that prices only go up. They do not read all these articles about increasing inventories, decreasing prices, and a bubble."
That may have been true in the past, but awareness is increasing as more articles appear in mass media that report negative housing news. It is slowly building to critical mass when all of sudden market psychology will turn.
"2. Price reductions do not necessarily mean a desperate seller. My parents put up their house for 1.2M. If they don't get their price or if the listing expires, they will just hold on to the house because they have no urgency to move."
In your parents case, they obviously do not really need to sell. Many sellers do need to sell, and increasing inventories create competition that will lower asking prices.
"3. This impending crash theory has existed for years. I first caught on to this theory in 2003 and bought into it. However, I purchased a home at the end of 2003 and the value has gone up from 660k to 900k."
The impending crash theory was also put forward years before the stock market crash. When it didn't happen right away, a lot of people figured it was never going to. Look what happened to them. It's really very simple. History shows that assets always return to fundamental values (and sometimes over-correct), once the emotional mania subsides and people return to their senses.
While most of us here believe there is a bubble, the vast majority of the people do not believe it. Ask around work... almost everyone still have the mindset that prices only go up.
Perfect example of herd mentality. The same thoughts were going through everyones head at the top of the stock market bubble. I routinely had discussions about stock picks with cashiers, clothing salespeople, landscapers, cooks, and the like. This situation should be viewed as a contrary indicator.
2. Price reductions do not necessarily mean a desperate seller
No, but they mark changes in psychology. Bubbles are driven by psychology and emotion, not fundamentals and smart investing. This is also an indicator that the pool of greater fools is beginning to run thin.
3. This impending crash theory has existed for years.
I don't understand what you are saying. I can only interpret that to mean "Since it didn't happen already, it never will."
A number of factors prolonged this bubble long past the point of bursting. Low rates and lax lending. When buyers couldn't afford to buy using traditional 30y fixed products, out came the Negative Amortizing Teaser IO's and Stated Income (Liar Loans)..
However, I purchased a home at the end of 2003 and the value has gone up from 660k to 900k.
Just another example of the irrational behavior or the market
But I'm not sure I will root for that because it will lead to a recession and a complete crash.
The big question going through economists minds right now is not if the bubble will bust, but what the outcome will be..
grim
What exactly constitutes a real estate crash?
Should housing prices decline 5% a year for the next 5 years, what would the compounded loss be?
1 Yr Price decline= -5%.
Percent of purchase left after 1 year = 95% (1- 0.05) * 100
100 * (0.95)^5 = 77.3% remaining after 5 years
loss over 5 years =
77.3%- 100% = 22.7%
Pretty steep, if you ask me.
Suppose prices decline at 8% for the next 5 years.
Price decline= -8%. after 1 year
Percent of purchase left after 1 year = 92%
100 * (0.92)^5 = 65.9% remaining after 5 years
loss over 5 years =
65.9%- 100% = 34.1%
Getting ugly.
How about a drop of 10% a year for 5 years?
Price decline= -10%. after 1 year
Percent of purchase left after 1 year = 90%
100 * (0.90)^5 = 59% remaining after 5 years
loss over 5 years =
59%- 100% = 41%.
Would any of those scenarios constitute a real estate crash in my book--YES! Once you get cumulative declines over 20%, it is very tough to make up losses like that.
Keep in mind, real estate is levered. A mere 5% decline in price is a 25% loss if someone actually put 20% down.
Purchase price: 100,000
Sale price at 5% loss 95,000
Mortgage: 80,000
Remaining after sale 15,000
Downpayment 20,000
Actual loss: (5,000)
(-25%)
But perhaps a 5% compounded decline in real estate is just a return to "normal" market conditions.
And what happens to those who have negative amortization mortgages, and face even minimal price declines?
Catastrophe!
I just don't understand how anyone can put faith in a real estate
"soft landing."
There was a positive feedback loop on the way up, and I don't see how there can be anything other than a positive feedback loop on the way down.
It sure hasn't slowed down yet. My mother is a realtor in NJ, had an open house today, 27 people who came to see the place.
(That, mind you, is pretty insane). She hasn't seen prices rise any further, but the buyers are still there, and these are not the investors/flippers, these are people looking for a home.
The reality remains that the factor most likely to drive prices down will be rising interest rates. However, if you are taking a mortgage and now paying a higher rate, on a lower priced house, your monthly outgoing may end up being the same anyhow.
rob reley,
There is one more factor that needs to be taken under consideration: inflation. And that’s additional 3-4% a year on the top of 5% decline.
IMHO it will get ugly.
About that first house in Millburn...
According to the MLS report, the house has not been sold yet, it's still pending.
How do you know what the sales price will be?
I have been following a site now for almost 2 years and I have found it to be both reliable and profitable. They post daily and their stock trades have been beating
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