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Prices and Days On Market


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2008 Jan 13, 11:48pm   27,237 views  305 comments

by Patrick   ➕follow (55)   💰tip   ignore  

dom

Sale prices are always given as an absolute number, without context. The reality is that falling prices can be masked to some extent by a longer number of days on the market.

Getting $500,000 within a week of listing is not at all the same thing as getting $500,000 after having the house on the market for 2 years, yet both are recorded as the same price. Ultimately, you can pretend your house is worth whatever you want by letting days on market go to infinity -- just pulling it off the market. No one will buy it for your dream price, but you don't have to face the reality that it is not worth what you thought either. Assuming you can pay the mortgage.

Realtors know that increasing days on market proves that a house is not worth the asking price. That's why they commonly try to scam users by re-listing a house as if it just came on the market.

Patrick

#housing

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1   anonymous   2008 Jan 14, 1:07am  

Why doesn't anyone want to live in beautiful Phoenix???

Actually in the winter it's nice, in the summer well...... it's a dry heat.....

2   HeadSet   2008 Jan 14, 1:30am  

Re-listing also happens when the seller changes companies. For example, Seller lists with Realty Zer and the 6 month listing agreements expires with no potential buyers even showing up. So, seller lists with a new company, Drainwallet Realty. The listing with Drainwallet will show as new, with no days on market. No real fraud involved.

Same goes for a FSBO who gives up and lists after a few months.

3   anonymous   2008 Jan 14, 1:37am  

Well, again, base it on 3X wages. If you can expect to make $30k a year, which is doing very well, then a house should cost $90k.

4   Malcolm   2008 Jan 14, 1:50am  

Sorry, while I've pointed out that I believe prices have fallen in Phoenix, and especially Gilbert, I disagree with the premise. The price sold is the price sold. Yes it indicates a slowing market if something takes longer but taking longer isn't really masking anything IMO. I think the real mask is itself counting the selling price if you have a huge supply of unsold homes, but even in that case it is just a delay in reporting a downturn in prices. It's just what happened in CA, now the auctions are demonstrating actual market valuations.

5   StuckInBA   2008 Jan 14, 2:13am  

Patrick,

DOM increasing by it self does not mean falling prices. Change in velocity or transaction volume is different than price performance. In a topping market real prices can go up while volume dries up. That's precisely what has been happening in CA in 2005 and 2006.

DOM is used by REIC to create a sense of urgency - which is especially lacking in today's environment.

6   Malcolm   2008 Jan 14, 2:28am  

It can definitely indicate an inflection point as Stuck points out, a lack of 'urgency' is a bubble's worst enemy.

7   Chuck Ponzi   2008 Jan 14, 3:31am  

Well,

Days on market is also meaningless, and can be a misleading indicator for sellers. Many sellers and seller's agents mistakenly believe that if their asking price is too high... all they have to do is wait (or relist). This is a grave mistake, as we can see in much of SoCal right now, the market is pulling away from the housing sitters. If it is priced wrong, it will not sell, it doesn't matter how long it sits. Again, many sellers believe they can get their price just by waiting; which isn't happening. By the time they wake up from that, the market has moved lower than before. This is "chasing the market down".

An "urgency" in the market masks a multitude of sins. Once that urgency is gone, buyers have plenty of time to consider all other homes on market as well as the current market direction. At present, the market is shedding value faster than monthly payments. Without question, waiting makes more sense than buying unless you feel we've hit bottom. If not, you're just setting the next downward comp for someone else to negotiate from.

Chuck Ponzi

8   LowlySmartRenter   2008 Jan 14, 3:32am  

The re-listing practice definitely masks falling asking prices, I believe. I've seen it over and over again in my area, where listings for the same address pop up with a new, lower price, and no one is the wiser (unless they're a geek like me and track prices by street address in their own spreadsheet). The prior listings disappear of course, so once the property indeed sells, it is nearly impossible to discern how much lower the price is from the original asking price. That would be an interesting stat, in my opinion (asking price tracked over the entire DOM period, including all re-listings of same property). All we ever see in published stats is that useless median price. It means nothing of course, but as we all know on this board, the game is geared in favor of the Realtor industry.

9   DinOR   2008 Jan 14, 4:10am  

Very interesting. I'll have to side w/ Patrick on this one. One of Randy H's favorite terms is "Phantom Inventory". If you've had your home listed for 120+ days (when it would've sold in 20 days at peak) that has got to be the very definition.

Besides, we all have "open orders" What happens after 90 days? They just cancel the order. I have open orders for GOOG at $400. :(

Just look at the PHX version of Flippers in Trouble and you WILL see McAlb's @ 2 years. Please to notice, in this market, if a home is going to sell... it will typically do so in the first month. After that... join the rest of the fluff. The concept doesn't seem to be lost on the builders!

10   PermaRenter   2008 Jan 14, 4:58am  

Study: $90 wine tastes better than the same wine at $10

This graph shows the activity in the brain's pleasure center; there's more activity with wine subjects think costs $90 a bottle (top line) than the same wine priced at $10. The arrow shows the moment when the subjects started tasting the wine.
(Credit: CalTech, Stanford)

In a study that could make marketing managers and salespeople rub their hands with glee, scientists have used brain-scanning technology to shed new light on the old adage, "You get what you pay for."

Researchers from the California Institute of Technology and Stanford's business school have directly seen that the sensation of pleasantness that people experience when tasting wine is linked directly to its price. And that's true even when, unbeknownst to the test subjects, it's exactly the same Cabernet Sauvignon with a dramatically different price tag.

Specifically, the researchers found that with the higher priced wines, more blood and oxygen is sent to a part of the brain called the medial orbitofrontal cortex, whose activity reflects pleasure. Brain scanning using a method called functional magnetic resonance imaging (FMRI) showed evidence for the researchers' hypothesis that "changes in the price of a product can influence neural computations associated with experienced pleasantness," they said.

===========

QUESTION: Does this theory hold for house prices also? Do people get more satisfaction by over paying for shitboxes?

11   PermaRenter   2008 Jan 14, 4:59am  

http://www.news.com/8301-13580_3-9849949-39.html?tag=newsmap

The research, along with other studies the authors allude to, are putting a serious dent in economists' notions that experienced pleasantness of a product is based on its intrinsic qualities.

"Contrary to the basic assumptions of economics, several studies have provided behavioral evidence that marketing actions can successfully affect experienced pleasantness by manipulating nonintrinsic attributes of goods. For example, knowledge of a beer's ingredients and brand can affect reported taste quality, and the reported enjoyment of a film is influenced by expectations about its quality," the researchers said. "Even more intriguingly, changing the price at which an energy drink is purchased can influence the ability to solve puzzles."

12   StuckInBA   2008 Jan 14, 5:05am  

I have open orders for GOOG at $400. :(

Just wait till it splits ;-)

13   Peter P   2008 Jan 14, 5:13am  

I heard there is a 45% chance that the WSJ will predict a high probability of recession.

I knew that was a 35% chance you would say that.

14   Peter P   2008 Jan 14, 5:14am  

This graph shows the activity in the brain’s pleasure center; there’s more activity with wine subjects think costs $90 a bottle (top line) than the same wine priced at $10. The arrow shows the moment when the subjects started tasting the wine.

What does the brain have anything to do with pleasure?

15   StuckInBA   2008 Jan 14, 5:16am  

I think I can make a bold statement.

Most RE agents have realized that the market has completely changed. I don't think they are playing the DOM games for protecting the price. Because they have far more to gain by not protecting the price. A transaction at a lower price point is better than no transaction. The operating word here is of course most RE agents.

The other players in the game are the real clueless - but to differing degrees. Sellers today are almost completely clueless (in denial) as a group. As much as buyers were few months ago. Buyers are a tad better - they are in most cases paying less than what they would have paid a year ago.

But RE agents are hurting. They know what's going on, although they may not know all the reasons for the bubble burst. Their real problem is not buyers, it's the sellers.

16   HelloKitty   2008 Jan 14, 5:20am  

I would like to thank all todays knife catchers for setting the latest downward comp on the way down. Takin' one for the team, good work.

17   DinOR   2008 Jan 14, 5:48am  

Stuck,

I think you're right. If sellers would (or could) accept substantially lower offers, appraisers, realtors and lenders will be able to move forward. But, at nose-bleed prices everyone on the buy side of the equation balks.

Builders OTOH can (or... don't have to be) part of that equation. They can do an end run by adding NEW inventory that is at a price point everyone on the b/s CAN say yes to! They have whole subdivisions of under water inventory. They've tried to move it. They couldn't. They get it.

18   Randy H   2008 Jan 14, 6:41am  

Builders should behave more "rationally" when setting prices than sticky, mental-accounting, owner occupiers. But builders have been much slower than I had predicted, though they are now coming around.

I suspect the delay was caused by a marketing-versus-finance type of battle. There's something to the "marketing" worries that builders can't just go around cutting prices to maximize for the market or else they could suffer longer-term perception problems. They are selling big, expensive things that are supposed to hold their value. No one will want to buy from them in the future if they think it is the home builders themselves undercutting their value. Instead the HBs had to wait long enough that they could blame it on the market.

For Mr & Mrs homeseller, many of them have waited too long now. I'm not talking about the easier computation of eminent foreclosure fodder. I'm talking about the folks who are now too far below their psychological cutoff point. There are a ton of those types around here in Marin. They can stay in their current house -- even many who bought in 2005 -- regardless of how much further their paper-losses rack up. They can just put their lives on hold indefinitely to service their mortgage and keep their albatross alive (ok, around their necks, you get the point). Nothing you will ever tell these folks will convince them they will be better off, richer, happier, or more rational by selling now below their mental-break-even point. Nothing.

These are the hundreds of days on market, relisted 12 times, folks. They'll wait until 2020 if need be, but "you're not going to rip them off, damnit!"*

*actual quote from my next door neighbor, who bought in May 05, and now rents out his MinMcCrapsion for less than half his monthly nut. But wifey poo has family money so they'll "wait until a reasonable buyer comes along, or rent it out forever, but I'm not going to give this house away!"

19   HelloKitty   2008 Jan 14, 6:56am  

I think one issue with the wealthy upside down flop lords is that they cant easily get a short sale approved and if they heloc'd or refi'd then they get nailed with defieciency judgement they cant easily get out of.

When I did loss mit in the mid 90's the 'rich people' were always so angry the short sale was denied when they cleared had enough cash assets to pay the defieciency, a loan is way easier to get approved than a short sale.

The insolvent FB's have much easier decision to make and let it go back to bank and maybe dont even need to go bk or if they do the judge will disolve all debts. So how do we determine where the broke ass people bought in large numbers? Ez- Anywhere you dont want to live. Condo's, oakland, sac, modesto, etc....

20   Malcolm   2008 Jan 14, 7:12am  

That's the beauty of a nonrecourse loan. If the bank doesn't want to do a short sale then just walk away from it. The President has basically encouraged the rich to do that by changing the tax code for them.

21   e   2008 Jan 14, 7:16am  

QUESTION: Does this theory hold for house prices also? Do people get more satisfaction by over paying for shitboxes?

Doubly more so.

My thesis holds that people secretly love to suffer. That spending $800k for a 900sqft tear down brings a certain joy to people - it affords a certain Bay Area bragging right that you otherwise wouldn't have.

It's like people in tech companies who brag about how many hours they work. Sure they bitch and moan about it, but at the end of the day, there's a certain sick happiness that one gets from saying "Hah, you only work 70 hours a week? I work 80."

No wonder SkyNet turns on people!

22   Malcolm   2008 Jan 14, 7:19am  

Given the volume of foreclosures, the foreclosure will just be a blemish on an otherwise good credit report, or it will just be another spot on an already stained credit report.

Another prediction I've jokingly made with people is that there will somehow be legislation that prohibits future creditors from penalizing 'victims' who lose thier houses now. Basically they won't be able to move someone into a lower borrowing tier solely for credit blemishes directly caused from their housing problems.

23   Malcolm   2008 Jan 14, 7:23am  

Eburd that's nuts, but it is also true. My observation: The bigger the loser someone is, the easier it is to get them to buy something. All you have to do is make them feel like somehow they qualify for the right to buy it. It is just like an addiction, for that moment they feel like a winner.

24   StuckInBA   2008 Jan 14, 7:39am  

I am not sure if bragging about long hours has anything to do with being masochist.

People like to prove themselves better than the group they are in - to earn respect. People often equal more work with more accomplishment. Hence they try to prove that they have achieved far more by saying how long they have been working.

Bay Area is one Amazing (Rat)Race. It's all about who did what project, and who made a killing by working for a startup and who made how much on their house. No one brags about their knowledge of movies, music, literature or such mundane stuff. They like to brag about how they don't have time for it.

Once you realize that you win by not participating in it, it becomes a great amusement to watch.

25   PermaRenter   2008 Jan 14, 7:46am  

>> Once you realize that you win by not participating in it, it becomes a great amusement to watch.

One great way of non particpation is not to buy a house in bay area ..... once a realtor tried to pursue me by opening the list of home owner to me. Here is the email text:

======
Sorry to burst your bubble, and there wont be a bubble bursting in the RE market here. I tell you what if we see a 25 -30 percent drop in valuse in SV then I will be more than happy to buy a house for you. That's how confident I am about our market. So you can be like the millions of people who bought and building equity and becoming wealthy or continue to rent and stay with the poor people.

It's a Good Life!!

Patrick Adair

Here is a short list of the Indian clients that are becoming wealthy, maybe you know 1 or 2 of them and can ask about my services, especially my knowledge of Vastu.

Manish & Kavita Agarwal
Madhu & Laxmi Alur
Saurabh & Vishakha Atre
Muni & Sailaja Bandlamoori
Sunil Kumar and Sadhna Chaudhary
Rajesh & Jeanne Desai
Praveen and Ami Dua
Ganesh Subramaniam & Ayishwarya Ganesan
Gopal Sundaram & Lakshmi Gopal
Selva and Bharathi Govindarajan
Prakash & Suda Iyer
Vinay & Anjli Jagtap
Mr. & Mrs. Vipin & Charu Jain
Veeraiyan & Radhamani Kandasamy
Harish and Jhaanaki Krishnamurthy
Prabhu & Chitra Krishnamurthy
Lakshminarasimhan Venkatavardan and Vasanthi Lakshminarashim
Ravi Shankar & Priya Mahurkar
Anil Madan & Shalini Malhotra
Mani and Tina Manicham
Ravi & Preeti Mayuram
Rajeev Ranjan and Renu Mehra
Mr. & Mrs. Milind & Snehal Mohile
Satish Maruvada and Surekha Nidamarty
Logo & Bharani Palanisamy
Abhay & Rashmi Pendse
Poulo Kuriakose & Smitha Poulo
Srini & Preetha Rengasamy
Mani and Kalpana Revanuru
Nitin Khanna & Urna Roy
Khalid Beg and Nikhat Saleha
Sandeep Sakawalker and Sampanna Shambbhag
Kapil Sheth
Mr. & Mrs. Rohit & Poornima Sood
Sridhar Rao & Sasireka Sridhar
Prasad Purushothaman & Sripriya Srinivasan
Srini Raman & Shobha Srinivasan
Srini Satyavarpu & Sri Sriramdas
Gopal and Lakshmi Sundaram
Murthy Atmakuri & Vasantha Tammana
Gopal and Rupa Tendolkar
Ramesh & Brinda Thyagarajan
Rahul & Bhagyashree Vadodkar
======

26   HelloKitty   2008 Jan 14, 7:57am  

I forgot about the 'dont 1099 me bro' law.

Randy H should remind his flop lord w/family money neighbor of this law (If were him I would write the text of the law on a huge sign on my car and drive around Marin all day honking horn and pointing at people accusingly at red lights.....hehe...gotta help GW by getting tha message out)

27   skibum   2008 Jan 14, 8:15am  

Builders should behave more “rationally” when setting prices than sticky, mental-accounting, owner occupiers. But builders have been much slower than I had predicted, though they are now coming around.

@RandyH,

In addition to the "marketing vs. finance" internal struggle with homebuilders, I think another factor in their price stickiness is from legal. Namely, they are probably scared current owners will cry foul when they see prices for homes in their neighborhood getting slashed, especially those who bought more recently. There have already been a trickle of stories on this. I can't imagine how those arguments would have any merit at all, but my guess is that it's a serious concern for the HBs.

28   SP   2008 Jan 14, 10:45am  

RandyH's RE-Tycoon-neighbore:
“not going to give this house away!"

Hey, looks like he is willing to just give his money away instead.

Isn't that what he is doing now?

29   SP   2008 Jan 14, 10:54am  

eburbed: It’s like people in tech companies who brag about how many hours they work.

That seems to have changed already. My sample may be skewed but I am seeing more and more people bragging about cutting back on hours or quitting altogether to stay home and take care of the brats. If I had a nickel for every woman who says she will look for "something in a non-profit" after the toddler starts school... well, I would have a few nickels.

In fact, 70-80 hours at a startup is seen as a dead-end of sorts, unless you are one of the piggies with his snout close to the trough.

30   StuckInBA   2008 Jan 14, 11:25am  

In fact, 70-80 hours at a startup is seen as a dead-end of sorts, unless you are one of the piggies with his snout close to the trough.

Maybe Silly Con valley's population is aging and the supply of fresh grads is not enough to replenish the need for code monkeys ? The older one gets, the priorities change. And the ability, and the drive. How many failed startups does it take for an engineer to realize that may be it ain't worth it ?

If the aging of the population is a significant factor, then it doesn't bode well for BA housing - which is a pyramid scheme - in the long run. Older population is more susceptible to reach salary limits and extended periods of employment.

31   StuckInBA   2008 Jan 14, 11:26am  

Arrghh.

... and extended periods of employment.

Should be and extended periods of unemployment./i>

32   azrob00   2008 Jan 14, 12:07pm  

Re-listing a home in phoenix does not reset the cummulative days, it sets a different field, agent days to zero. Interestingly enough, the local MLS has decided to remove the cummulative days on market (DOM) from all the normal sheets, though it is still available if a realtor clicks the history button. Resetting cummulative days would require screwing up the address so that the computer didn't recognize it. When I see that, I typically use the "report violation" feature, and send both MLS numbers to the MLS system monitors for review. The listings seem to disappear after I do that, then come back with the correct DOM number. My understanding is that the fine for gaming the system is a few hundred dollars...

By the way, the graph above shows it isn't happening all that much, after all the DOM average seems to be climbing almost 1 for 1.

33   anonymous   2008 Jan 14, 3:10pm  

Yes, that's been the big thing in my life, and I was a toddler in the 60s, to realize that it's not the friggin' 60s.

There's no tech race, we've conceded defeat. There's no space race, there's no company willing to hire an enthusiastic tech and make 'em an engineer.

In the BA you're lucky to make $10 an hour and in flyover country you can find plenty of work for that or more - with 1/3 the cost of living and no hours in the car daily.

34   anonymous   2008 Jan 14, 3:21pm  

OK - so I went into town today, to swap the guitar I'm not playing for an air rifle I'll definately shoot and get a lot of grins out of..... it's amazing how much my life it turning into some kind of weird retro-teenagerhood. I have the motorcycle, the pellet gun, practice my trumpet every day, and am even proud of the snappy come-back I made to this chick at the coffee shop, it went like this:

She: "Oh, I don't like motorcycles."
Me: Why don't you like motorcyles?
She: Because they're "murdercycles" people get hurt
Me: Oh come on, I've crashed tons of times and not gotten hurt - much.

Maybe I should get a job selling GRIT, is that newspaper still around?

But I should get to the real subject, which is how things change when the economy's tanking, even over a couple of months. The hock shop where I traded my bitchin' guitar for an even more bitchin' air rifle has become quite popular with RealtWhores, selling off their bling, or trying to. The pawnshops are kind of inundated with stuff lately, so they've gotten rather selective, this guy is really only taking coins, gold, the really good stuff. The "antique" stores around here all have silver coins prominently displayed now, and there are a few more empty store fronts. A street banjo player told me he calls for jobs but it's very hard to actually land one, meanwhile, I guess his pickin' pays OK even if he sings the Beverly Hillbillies theme song with the emPHASis on the wrong sylLABles.

Foreign buyers are buying sell, so the "antique" shops with a lot of interesting old "western" type knick-knacks are doing well. The Germans and Euros in general just eat this stuff up. In general though things are really slowing down, with Murphy's advertising $2 appetizers and $2 drinks during weekday happy hours, which is saying something since they're about the highest class joint in town.

Hearing about the RealtWhores discovering that hard-times establishment, the pawn shop, made my day!

35   anonymous   2008 Jan 14, 3:22pm  

I meant, "buying well".

36   GallopingCheetah   2008 Jan 14, 3:46pm  

But still, the Bay Area is the preeminent place for high tech people. The good time and old spirit will come back, I'm pretty sure, although I've never been affected by the BA culture, despite having spent a summer working -- I mean dozing off in my cubicle -- at SGI.

The world is full of losers (dreamers) and suckers (risk takers) and they need the bay area, the sunshine, the waves, the million-dollar bungalows to fight for, and the average-looking, aging chicks to compete for. Bangalore just doesn't cut it.

These losers won't be happy elsewhere. Trust me. They either get beaten up or depressed. That's why they chose to come to the meca in the first place.

37   Elamite   2008 Jan 14, 3:54pm  

My first wife was a commercial real estate broker but she sold high end residential as well( Beverly Hills, malibu, etc.) She said that if a piece of property was on the market for more than 30 days with no offers then the asking price was simply too high.

38   empty houses   2008 Jan 14, 4:03pm  

Ex sunny, where you at man? I've been thinking of leaving. You sound like you are living my dream bro. How is it? Any suggestions for someone thinking of quitting the program.

39   DennisN   2008 Jan 14, 4:30pm  

Amazingly enough, Grit is still around.

http://www.grit.com/grit-history.html

'One thing that continuously surprises and delights all who work here is the number of people who hear where we work and say, “Grit? I used to sell Grit when I was a kid!” '

40   DennisN   2008 Jan 14, 4:37pm  

IIRC when my parents sold houses in the south bay in the 1960s and 1970s, houses typically were about 60 days on the market.

In April 2006 when I listed my Cambrian Park home, the listing went up on a Monday and the winning offer was in hand that same Friday.

A friend's mother died last spring, and they put her three Fremont properties on the market in June. They have already gone through 2 ninety day listings with two agents, and have decided to rent them out and wait.

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