The Wall Street Journal recently ran the following article about high end foreclosures.
While subprime mortgages sparked the first round of housing problems two years ago, now “troubles are lurking further up the food chain,” says Joshua Shapiro, chief U.S. economist at MFR Inc. White-collar job losses have accelerated while more adjustable-rate loans to prime borrowers are resetting to higher payments. “You put all that together, it leads me to believe that the next leg down on home prices is going to come from the top,” he says.
To be sure, the affluent housing market is substantially smaller than the mass market. Sales of existing homes priced over $750,000 accounted for 2.3% of all sales in the first quarter of this year, compared to 4.4% of the housing market in 2007, according to the National Association of Realtors.
Still, the distress in high-end market has implications for consumer spending: the top 10% of U.S. households in terms of income accounted for 23% of consumer spending in 2007, according to government statistics. As those households watch their home equity evaporate, they are more reluctant to spend on housing upgrades or other items.
Inventory of expensive homes is rising. Overall, the inventory of unsold homes in June was enough to last 9.4 months at the current selling pace, down from 11 months a year ago, according to the NAR. But the supply of unsold homes priced above $750,000 swelled to around 17 months in June, up from a 14.5-month backlog one year ago. A recent forecast by analysts at J.P. Morgan Chase & Co. said it would take until at least 2012 for the expensive-home market to recover and that peak-to-trough declines could surpass 60%, compared to 40% for the rest of the market. WSJ.com.
It is important to note the importance of price when it comes to moving a home. While the high end market is experiencing a decline or a softening everything will sell at the right price! Many times people feel forced to list a house at the price necessary to cover all expenses and Realtor commissions etc. However, this is a catch 22, because this means inflexibility on the most crucial component of getting that house sold….price.
If you have a high end home that you are trying to sell, the key is to get an offer, and in order to get an offer, the house must be priced right. Remember the old adage, “It is easier to ask for forgiveness than permission”? That applies to Short Sales. You are going to ask the bank to forgive your debt, or at least a portion of it. However, in order to do this you need to present them a viable offer so they can consider it. In order to do that, the house must be priced to garner that offer, in other words…Drop the Price!, and keep dropping it until you get an offer. Or, call someone who buys property who will give you an offer to at least get the ball rolling (e.g. an investor). If you have a home that you are looking to sell, that may be a candidate for a short sale, or would like further information about your options, feel free to contact us at sandgrealestate@gmail.com
