Reader Letter

Hello,

I just sent a $25 donation via PayPal in appreciation for your efforts. 

You're doing a great job. And, hopefully, your site is going to continue
helping me convince my fiance to postpone purchasing a house in a market that
in free-fall. And save us enough on the house to buy a nice boat. (Used boat
prices are dropping faster than houses.) 

We live on Long Island, New York and we've been looking in areas that are still
fairly strong, though the cracks are finally starting to show up. I was
intrigued by the Zillow finding that the majority of home owners believe their
home values increased last year. It reinforces my belief that prices are still
artificially high because many sellers can't let go of the fanatasy of selling
their homes for the inflated prices their neighbors received back when lenders
were handing out monopoly money. That includes owners who bought their houses
decades ago for a fraction of their current values. As a result, many
homeowners who want to sell are listing their homes and then removing them from
the market after learning that nobody's interested in paying anything close to
what they're asking. Others are postponing listing their homes because they're
convinced the market will miraculously improve in the near future. If and when
these unrealistic homeowners wake up and smell the recession and accept the
reality that it's not going to get better for years, the flood of listings will
depress prices further. Especially if they wait until the market is glutted
with homes from all the poor souls losing their jobs and those who are finding
it impossible to make their mortgage payments after paying for dramatically
increasing home heating, gas, groceries, and local taxes. People who never
noticed the price of groceries are suddenly complaining about how expensive
grocery shopping is getting. 

When we started house hunting (about six months ago) most realtors were
outwardly optimistic and arrogantly dismissive about the possibility that the
north shore of Long Island would be affected by he national housing crisis.
Some agents told us that they (and the homeowners) weren't interested in
receiving what they considered "insulting" offers (i.e. pre 2005 prices). The
facade of optimism is gone and the realtors' new mantra is, "It's a buyer's
market, just make an offer, any offer, and I'll present it." This past weekend
one frustrated realtor told us, "The only homes selling are the the most
desirable homes in diamond condition. Everything else just sits and sits and
sits." A second realtor at an open house for a gorgeous home that's been on
market for a year with a price drop from $1.2 to  $1.1 to $1 million said, "I
work for the seller, so I'm not permitted to make any suggestions, but... if
you're interested, make an offer. The seller is very motivated." 

On a number of occasions, we've been told that homeowners are anxious to get
prices that they turned down as insulting a few months earlier. 

And last, an example of the borderline insanity impacting on the market.  I
know a guy who inherited a mediocre home in a mediocre area and I was blown
away by how out of touch with reality he was. Because a couple of people on the
block hit the jackpot and sold their homes for just over a half million
dollars, this guy refused  to accept anything less than $500K for a home with
no mortgage that cost him nothing. His exact words were, "I refuse to give it
away!" So, instead of accepting an offer in the high $400s, he decided to rent
for about $25K a year. After paying the real estate taxes of almost $10K and
dealing with problems with two sets of tenants, he's netting less than $15K a
year. Meanwhile, the house is decreasing in value by over $50K a year.  

Feel free the reprint all or parts of the above. If you do, please use Charles F. 

Thanks again,

Charles