Thursday, January 29, 2009

Real Estate Agents Say Home-price Tide Has Turned

CHICAGO TRIBUNE -- Chicago-area real estate agents, who have been pleading for months with stubborn sellers to lower their prices, say the tide has finally turned and sellers are capitulating. Price reductions totaling $25,000 or more are becoming commonplace, and homes that have been relisted after several months off the market are being offered for significantly less.

"We're essentially at fair market value," said Jack Ablin, chief investment officer of Harris Private Bank. While he said he believes the worst is behind the market, he added: "Given the credit conditions and the environment, it wouldn't be a surprise to me if we shot below fair market value."

Related: December new home sales report from First Trust.


At 1/29/2009 2:04 PM, Blogger Bruce Hall said...

Fair Market Value... a rather sloppy concept. It's like trying to define the shape of an ocean wave or the density of a sandstorm.

It might be more useful to evaluate homes in terms of the replacement costs less some reasonable depreciation. Still hard to do.

Real estate agents are simply trying to express "what the market will bear" at any given time... reasonable or not. What will buyers offer given the available choices and what will sellers settle for. I guess that's fair... if not reasonable.

At 1/29/2009 2:41 PM, Anonymous Anonymous said...

All arm's-length transactions are at fair market value, by definition.

And if Mr Relitter thinks we are anywhere near the bottom, then tell him to go out and buy a dozen.

What a bunch of shills.

At 1/29/2009 3:18 PM, Blogger juandos said...

"And if Mr Relitter thinks we are anywhere near the bottom, then tell him to go out and buy a dozen"...

Have you seen the housing prices in places like Detroit, Mi or E. St. Louis, Il?

I mean its still all about location right?

"What a bunch of shills"...

Who's shilling whom?

At 1/29/2009 4:35 PM, Anonymous Anonymous said...

It's always a good time to buy, right?

Yeah, right.

At 1/29/2009 4:38 PM, Anonymous Anonymous said...

Anonymous said:

"All arm's-length transactions are at fair market value, by definition."

So if undistressed House #1 sells for $300K and distressed identical House #2 next door sells for $200K the same day, are their fair market values $100K apart?

At 1/29/2009 7:23 PM, Blogger Plamen said...

Poor boomer: yes.

FMV is a good example for the confusion that attaching emotionally loaded modifiers to terms causes. "Fair" in "fair market value" implies only that the parties were willing and not under compulsion, not that they are fully informed. "Value" is not a constant either.

In your example, most likely one buyer underpaid and/or the other overpaid, or there were other factors, e.g. pre-commitment (deposit).

Bruce Hall is right that FMV is not the same as intrinsic value, it is value at a point in time, and thus it VERY quickly becomes obsolete when applied to dynamic and illiquid assets.

At 1/30/2009 7:34 AM, Blogger Free2Choose said...

"I mean its still all about location right?"

I'm with 1 on this one. I haven't checked the numbers lately, but I know that several months ago when housing data was released, Chicago and Charlotte were the only cities in the nation which were included in the report which showed growth rather than decline in new construction. To be fair, I don't know if this aggregated residential and commercial data. From a purely anecdotal standpoint, I was downtown quite a bit between April and June and it looked as though there was a great deal of new construction going in the Windy City. Resi or Commercial, I couldn't say for sure. What I can tell you is that I certainly haven't seen that kind of construction activity in downtown Detroit.

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