High-End Foreclosures?

[traceimage_IHB]

I thought today's blog post was really interesting and informative. It made me wonder (and this might be a stupid question), but is the lack of foreclosures hitting the market part of what is stopping the high end from dropping? If I'm understanding correctly, this is what's happening in the lower end too...there's not a lot on the market to buy, but there are a lot of properties in foreclosure or pre-foreclosure. So once those foreclosed properties are finally for sale, inventory will swell, there won't be a lot of buyers, and prices will drop, right?

 

[bkshopr_IHB]

[quote author="traceimage" date=1246321167]I thought today's blog post was really interesting and informative. It made me wonder (and this might be a stupid question), but is the lack of foreclosures hitting the market part of what is stopping the high end from dropping? If I'm understanding correctly, this is what's happening in the lower end too...there's not a lot on the market to buy, but there are a lot of properties in foreclosure or pre-foreclosure. So once those foreclosed properties are finally for sale, inventory will swell, there won't be a lot of buyers, and prices will drop, right?</blockquote>


Price will drop when there are limited qualified buyers <strong>and</strong> limited desirability. In the current situation the price drop equation is only 50% fulfilled. The desirability is what is keeping stubborn prices high. It is now the housing poker game to see which side is willing to fold.



Benchmark pricing will give the home sellers more ammunition unless this summers new home release yields no sale. Then the home sellers would re-evaluate their asking prices. Everyone is waiting for the new homes but Lyon's Triplex may be a limited gauge to assess exiting detached home market non the less the 110% detached theoretical minus 10-15% for the "used" factor would apply even new detached homes are not available now for comparison until 2010-2011.



(I did not see the "highend" until now but this equation would apply to average homes as well as bigger homes.

 

[cletus_IHB]

Agree with you to some degree bkshopr... higher end people typically can wait things out a bit more (Granted, ya, some are just more leveraged... but in general they got a bit more cash flow and can hold on a bit more)



On the preowned homes prices though, one thing that is amazing to me is how many homes are priced ABOVE 2006/2007 sales... I know the Coto area fairly well, and you see alot of homes priced at some of the asking prices in 2007 (asking prices, not prices where a home sold). I'm not certain why these people are on the market... are they just still trying to cash out their lottery ticket, or are they people who need to sell, and eventually market forces take place.



Case in point would be most of the Weatherly homes on the market today. $3-$4mil for these guys... insane. Especially when you see there are similar models selling in the $2.5mil range in 2008, and to my knowledge only a single home sold above $4mil, and it sat on a 2 acre flat lot... and sold at the height of the bubble. Don't even get me going on some of the homes in San Marino.



Toss in that it is damned near impossible for the average person to get a jumbo loan today, the number of people who could actually close a sale at those prices is very small.



So where is the "equilibrium"... is it the sale prices of 2006/2007, is it 20-30% below that (like many of the Oak Knoll/Oak view homes have come down)... don't know. My personal take is the buyers are gone for a while. The question is, how desperate does each individual seller need to sell?



Delroy