One of my dad's cows and a big fan of the blog listening to my observations on the real estate market and contemplating the timing of her next purchase now that she can no longer get a stated income mortgage.
Question: If the bottom happens and no one is around to notice, did a bottom really happen? Calling the bottom in this real estate cycle has been an embarrassing game for those who have ventured a call so far. The National Association of Realtors perhaps has the most egg on it's face with it's call in November 2006 that the housing market was "on the road to recovery", but, they have plenty of red-faced company. For buyers and sellers of real estate, it would be prudent to take any call of bottom, regardless of the source, with a grain of salt.
As I've mentioned in the past, no one is going to ring a bell when the bottom is reached. To further complicate timing is the fact that it will not occur at the same time for all properties. We have already seen sales that may represent the bottom for specific unit types in some condos. For instance, it appears that my call a year ago of the bottom in 3 bedroom non-riverfront Harbor Isles units at $220,000 was accurate. The lowest price for currently-listed 3 bedroom units there is $265,000 and the lowest selling price since the $220,000 sale was $265,000. Buyers who passed on that unit expecting further price deterioration were wrong. What does this mean for buyers who are afraid of catching a falling knife? Research, research, research. Without market knowledge, one can't hope to recognize a price that is ahead of the declining curve.
As the broad market continues to decline, I am seeing deals like that Harbor Isles sale a year ago, sales at prices that likely will represent the bottom in those particular unit types and buildings. Remember that every seller's situation is different. Some have no pressure to sell and are content to wait out the downturn while others are motivated to sell at whatever price the market will yield. These motivated sellers will reach their capitulation point at different times. If you're buying, be ready to move and have the market knowledge to recognize a deal when it it presents itself, or have access to someone like myself who can identify the candidates as they appear. As I said a year ago, "If you'd like a nice existing condo, be looking now and be ready to pounce when that isolated, motivated seller drops his price to the can't-refuse level."
Exhibit A for this week; 2 year old, 2293 sq.ft., 3 bedroom 3 bath, direct river condo on the mile-wide part of the Banana River in south Cocoa Beach across the street from the ocean. Sold new in December 2005 for $699,000. Offered for $445,000 as a short sale and under contract as of yesterday.
I'll leave you with a recent windswept day south of the condos in Cocoa Beach.
“I don’t want to be too sophisticated here, but 2007 is going to suck, all 12 months of the calendar year.'’ Don Tomnitz, CEO of D.R. Horton Homebuilders, March 2007
