More comments on Greenwood King’s April market report, which focuses on real estate activity in Houston’s higher-end neighborhoods. A second reader focuses on prices, determined to find storm clouds in the report’s silver lining:
While some avg. sales prices are higher, this is most likely due to builders no longer buying lots to build on for b/t 400 and 500k.
Last week you had a poster ask to see the evidence of price declines and an eroding market. Here is further evidence of a declining market. Moreover, the poster requested to see comps that show declines. I think I have proof. Can we get a Realtor to confirm that a prime West U. property–3128 Lafayette–sold for 700,000 over two years ago and now has been recently reduced to 699,000. Welcome back to 2007–[how] much further do we have to go?
One problem with finding these declining comp examples (and I think there are more, and more on the way), is that the Realtors control all of the data and are reluctant to admit that the prime inner loop area that has been so good to them is begining to substantially turn negative.
- April Houston Market Report (PDF) [Greenwood King Properties]
- Greenwood King April Report: Getting a Little Crowded at the Top of the Market [Swamplot]
- Comment of the Day: Show Me the Deals!
Photo of 3128 Lafayette St. in West University: HAR
I call it Zsa Zsa Syndrome. About 15 years ago, realizing the market in Bel-Air was about to take off like the proverbial rocket, Zsa Zsa decided to put her little villa on the market for $22 million. The market of course never caught up to the list price. The Realtors of course loved it and used it as a comp and showed it occasionally. Mainly to keep it on the market. Of course Zsa Zsa never got an offer. Not for $22 million anyway.
And Realtors wonder why they are sometimes compared to used car salesmen.
A listing price as you have noted on the West U. lot, is not and I repeat not a “Comp”. Yes land prices are basically stagnant or down somewhat from the irrational exuberance of 2006 or 2007, but most good builders knew 2-3 years ago that it was near time for the market to stall. Luckily for everyone who owns a home in Houston, the economic malaise which has struck this country, and which is primarily related to Real Estate and Energy speculation, has not hit Houston nearly as hard as many other parts of the country, and lets hope that remains the case. As a homeowner, I am content to know that the value of my middle class home has fallen very little in the last two years, and further I am willing to accept it will go up only slightly in the next five years. That will still leave me better off than many Calif. & Flor. Homeowners
It may not be a comp but it was originally listed at 774,900 and was reduced to 724,900 on April 8th, and then 699,000 on May 9th–according to the better search engine referenced earlier on Swamplot. This shows at least one example (but I am sure there are more) of the market not supporting even a 2007 price.
Just because this house was reduced from an obviously overpriced level of $774K to what may have been a modestly overbought price of $700K in 2007 is hardly evidence of a declining real estate market in Houston. Frankly, if this house is able to sell in the upper 600’s – which it probably will – it is a testament to how strong Houston Inner Loop real estate remains.
Cue the “Houston is fine, real estate never goes down here, we’re immune from the broader market” comments in 3…2…1…
Run Dmc, run…
Anyone who claims “immunity” or claims our market “never goes down” couldn’t master a PC keyboard to log in.
The fact remains that inner-loop Houston has been hammered by the international recession less than 95% +/- of comparable metro areas in the U.S. (arguably, the world).
I feel darn good about that.
Also, as the recession eases (1 yr., max.)
investors worldwide will evaluate relative “safe-havens” for their U.S. RE portfolios. There is a tremendous amount of $ on the sidelines.
I feel darn good about how Houston’s spreadsheet entry will look versus previously “hot” areas like S. Fla.,
Phoenix, Lost Vagrants, Cali’s Inland Empire, L.A., and the midwest – not to mention Manhattan.
Despite the microanalysis, the sky is NOT falling inside the loop, dips will be short-lived and anyway, would you prefer that your home equity have been in the stock market the last year or so?
If you’re shopping inside the loop, your window of opportunity is there – and will vanish if you don’t get a deal done within the next (very) few quarters.
The fact remains that inner-loop Houston has been hammered by the international recession less than 95% +/- of comparable metro areas in the U.S. (arguably, the world).
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So far. And every time the government says the recession may be ending/ended/possibly ending/not lasting as long as originally predicted/not turning into a depression there is another major disaster somewhere.
Obviously the Inner Loop, and our “Platinum Triangle,” are not reflective of other cities and so any devaluation is going to look almost good comparatively. But there is devaluation. There may be more. There may not be more.
For the most part through the years our market has been “sane” for lack of a better word – Houston in some ways in terms of sheer size is not that much different from Los Angeles. And yet those who attempted to break the price barrier, which appears to be $10 million, have been very disappointed. There are homes, a couple on Lazy Lane and several in Memorial, primarily in Sherwood Forest, that probably are worth that and more. Until they are put on the market. They make wonderful comps. But don’t sell.
Inner Loop is comparatively “stable” despite devaluation.
Just the same, if I were a homebuyer, I would watch the market over the summer.
And if I were a homeowner, I would definitely be protesting my valuation.
I call it Zsa Zsa Syndrome. About 15 years ago, realizing the market in Bel-Air was about to take off like the proverbial rocket, Zsa Zsa decided to put her little villa on the market for $22 million. The market of course never caught up to the list price. The Realtors of course loved it and used it as a comp and showed it occasionally. Mainly to keep it on the market. Of course Zsa Zsa never got an offer. Not for $22 million anyway.
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Glad to see some more tripe posted by Matt.
On what planet do agents or buyers use active listings as comps? I’m starting to doubt whether or not you actually have a license as you don’t seem to grasp the most basic concepts of real estate.
“On what planet do agents or buyers use active listings as comps? I’m starting to doubt whether or not you actually have a license as you don’t seem to grasp the most basic concepts of real estate.”
Can you explain to me why using an active listing that is having a hard time selling at a price below what it was bought two years ago is not an important indicator of the health of the market? The fact that this house has had huge price reductions and still cannot sell is very telling, even though it is not a “comp.” Of course, it’s only one datapoint. It would be helpful if someone who has access to the data would look for more–but than again, Realtors might have to give up their fantasy about the health of the market.
Matt: If you are a real estate agent, I have a hunch about another property: 6132 Fordham looks like it was bought at the top of the market in 2007. It has seen some pretty big and rapid price reductions. It also looks like its owned by a realtor (makes you wonder if having to sell because of a substantial loss of income). Matt: post details on what this house sold for in 2007–and let’s watch this one for another data point.
“Can you explain to me why using an active listing that is having a hard time selling at a price below what it was bought two years ago”
$1,000 less is hardly selling for below what it was bought for…which shows the absurdity of comments like “how much further down do we need to go”
Is anyone surprised that this house did not appreciate by $74,000 in less than 2 years…
$1,000 less is hardly selling for below what it was bought for…which shows the absurdity of comments like “how much further down do we need to goâ€
By further, it means in terms of prices–are we talking about 2009 prices with this house (no) but rather at least 2007 prices. This would suggest two years of no price appreciation, which is not the usual tune Realtors sing when talking about West U. And that’s only the asking price. Or are you agreeing with me that prices have not appreciated in two years.
I agree that there has been very limited appreciation in the last 2 years given the explosive appreciation in the 5 years before that. However, prices have not come down much if any yet, and I don’t expect houses like the one featured here to experience much more than 5% devaluation, if that. Houses at the very top of the market, especially new builds, will probably face substantial pressure, and houses under $500K are probably relatively safe, IMO.
On what planet do agents or buyers use active listings as comps? I’m starting to doubt whether or not you actually have a license as you don’t seem to grasp the most basic concepts of real estate.
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Every agent uses comps of active listings particularly in “upper end” markets. If you use sold comps that are a year old, you may not be using comps for the current year which reflect the current market conditions. There may not have been any sales for two years. And suddenly there are four homes on the market. One may have set the market value. The other three were listed using that as the comp.
Sometimes sold comps aren’t really reflective of the market value for a particular house. Two comps for 5,000 square foot speculative “tract houses” aren’t going to necessarily reflect the market value of a third 5,000 square foot custom home. You might have standard builder wood and tile flooring in one. Brazilian wood and granite flooring in another.
The first two homes may be 3 bedrooms/2.5 baths with a connecting bath between two of the bedrooms.
The custom home may be 3 bedrooms/5 baths with “en suite” baths and “his and hers” baths in the master. And 2 half-baths.
More to comps than just a sales price. Obviously in a booming market, a previous sales price for a similar home in a subdivision is going to influence the sales price of a home but really the only comp that matters are the comps provided by the other active listings in a subdivision. Market conditions affect everything. We have horrible market conditions and devaluation. What goes up comes down. As more and more sellers are discovering.
Just because a house sold in the previous year for $500,000 doesn’t mean it’s worth $500,000 the following year. Could be worth $600,000. Could be worth $450,000. Most agents are going to want to try to get the $600,000. For the obvious reason. And the only way you can get the $600,000 is with comps of active listings.
In most areas of Houston, not too many homes are going to be worth $600,000. And many are not even going to be worth $450,000. Not a good time for sellers. Not necessarily a good time for buyers.
The real tripe is what HAR keeps putting out. Prices are up but sales are down?
What does that mean, really? Most would take it to mean some are still buying overpriced homes in some areas.
Matt: post details on what this house sold for in 2007–and let’s watch this one for another data point.
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Not going to happen.
Can you explain to me why using an active listing that is having a hard time selling at a price below what it was bought two years ago is not an important indicator of the health of the market? The fact that this house has had huge price reductions and still cannot sell is very telling, even though it is not a “comp.â€
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I didn’t mean to imply that that wasn’t a valid concern for that particular listing. I don’t know what the history of that home is or if the current buyer paid too much back in ’07. I would certainly be troubled if I were that seller.
What I was referring to is Matt’s conspiracy theory that people were showing Zsa Zsa’s 22 million dollar house so that it could stay on the market and be used as a comp.
Despite what he thinks he might know about real estate, no agent in their right mind would use an active listing to justify a sales price. You can get a decent idea of what the market pricing is with active sales, but they have little to nothing to do with what a home should sell for.
And why on earth do you think an agent would want to list a home for significantly more than it’s worth? If the home is overpriced, it’s not going to sell in this market…it’s that simple. It doesn’t matter how high their commission “could be” at the higher sales price if the home never sells. The people putting upward pressure on the asking price are the home owner’s…not the agent. A competitively priced home that’s in good shape in a good area will still sell fairly quickly in this market…an overpriced listing will not.
You can get a decent idea of what the market pricing is with active sales
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Sorry, this should read “active listings”, not “active sales”. I wish we had and edit function :)
You can get a decent idea of what the market pricing is with active sales.
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I certainly am not saying you can’t. If you are working with a buyer’s agent and the buyer’s agent gives you a list of comps instead of a market analysis. A seller’s agent, however, isn’t necessarily going to to give a flip about how much the house next door sold for the month before. They’ve looked at the comps and the market analysis. And set the price per the seller. Not always the market.
Hence, the Zsa Zsa Syndrome.
Her house really wasn’t that much off where the market analyses indicated it should be. Within a year similar homes in upper Bel-Air began to see significant increases in both list price and sold price. Homes in lower Bel-Air began to go through the roof. $10 million homes quickly became $25 million homes. Land and view are what matters in Bel-Air. Her two previous homes sold close to what she wanted. Also listed way above “sold comp” value. Two out of three isn’t bad.
Different market but the principle is the same. Land and location seem to be the big two here in Houston. And in reality it only takes one overpriced house to start a trend upward. And anyone who thinks a Realtor isn’t going to take advantage of it is delusional. Realtors are not social workers vounteering their time to the community. All are looking for one thing. Commission. And you make a lot more commission on a $1 million house than you do a $500,000 house. Especially if you can sell one which makes it more likely the other houses will go up. The first overpriced one may not sell. The others may. And sellers are going to try to get the $1 million as well. Few would list their home at $500,000 if the house next door was listed at $1,000,000.
Keep in mind this happens when the market is relatively stable. When there are only 10 houses on the market instead of 100.
There is one reality everyone has discovered. Even in real estate, what goes up will come down. Sometimes just as fast and as significantly as it went up.
When there are 1
When there are 100 homes on the market, those $1,000,000 homes may not be worth $1,000,000.
Hence, again, the Zsa Zsa Syndrome. Most sellers are going to convince themselves their home is still worth $1,000,000.
Until they HAVE to sell. Zsa Zsa of course didn’t have to.
Homes in Lake Pointe in Sugar Land have been foreclosed on.
15311 Oyster Creek Ln
15310 Vista Creek Ct
1003 Vista Creek Dr
The owner was PLANNED COMMUNITY DEVELOPERS. This is a story!!!!!
The big developers were foreclosed on!!!
The big developers were foreclosed on!!!
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It wasn’t the developer but a relatively small custom builder names Marsters.
Not good for them obviously.