If At First You Do Not Succeed; Relist and Hope for the Best

While I do not necessarily believe the following quote is attributable to Einstein in the context of this blog I find it most appropriate:

 Insanity: doing the same thing over and over again and expecting different results.

I use the above quote to characterize some aspects of the real estate market in Metro Denver that I am witnessing as both a broker and observer. To distill the niche of the market for which this quote is appropriate are the select listings which enter the market, do not sell, are withdrawn or expired and come back on the market at the same or higher price.

Here are just a few select examples:

100 Lafayette Street: A sprawling 2-story post-war suburban style home in the desirable Country Club neighborhood on an expansive lot.

  • 4/2/16          Listed at $1,350,000 – subsequently withdrawn or expired
  • 3/9/17          Listed at $1,300,000 – subsequently withdrawn or expired
  • 5/18/17        Listed at $1,300,000
  • 6/6/17          Price Adjustment to $1,280,000
  • 7/18/17        Price Adjustment to $1,250,000 – subsequently withdrawn or expired
  • 3/18/18        Listed at $1,250,000
  • 4/18/18        Expired
  • 4/19/18        Listed at $1,199,000

This residence will have been on and off the market for 2 calendar years. During that time, while there has been at the most recent resisting a $150,000 price reduction or approx. 9% the residence continues to search for a buyer. Yet the pricing over the past year had remained static. Yes, one may argue inventory for the neighborhood continues to be challenged and just waiting for the correct buyer. I will continue to watch as while the residence has many positives i.e. finished square feet and larger lot; much of the interior could use a cosmetic update and the residence is adjacent to 1stAvenue at a partial motion intersection; while designed correctly i.e. south garage will continue to be a challenge.

600 High Street: A large sprawling large brick potential duplex configuration sitting on a coveted 100’ x 125’ lot. Personally I have had my eye on this one for potential redevelopment HOWEVER I too cannot make the numbers work yet its pricing history continues to baffle me:

  • 8/26/14:      Listed at $1,495,000
  • 8/26/15:      Price Adjustment to $1,445,000
  • 11/20/15:    Price Adjustment to $1,395,000
  • 1/9/16:        Price Adjustment to $1,345,000 – under contract and active again
  • 4/8/16:        Relisted at $1,150,000
  • 10/8/17:      Price Adjustment to $1,250,000 (yes adjusted upward)
  • 10/27/17:    Price Adjustment to $1,150,000  (1.5 years to get back to that price)
    •                         -Goes under contract multiple times and falls through
  • 12/11/17:    Price Adjustment to $999,000 (under contract and falls through)
  • 3/23/18:      Relisted at $999,000
  • 4/15/18:      Goes Under Contract
  • 4/26/18:      Back on market at $999,000

At of April 2018 this residence has been on and off market for 3.5 years. While there had been a substantial price reduction from the original $1,495,000 to a more realistic $999,000 the home has still not sold.  I will not get into the details of Time Value of Money and Inflation. Yet I will suggest the history of this house seems to repeat itself, look at the sales history:

  • 7/13/1995:   Sold for $670,000
  • 2/20/1997:   Sold for $670,000
  • 6/15/2002:   Sold for $625,000

Thus between 1995 and 2002 the home actually lost $45,000 (more if factoring in inflation) and now with 3.5 years on the market continues to look for a buyer. While there may be a buyer willing to pay $999,000, when factoring in inflation and rising interest rates is it worth the wait not even considering maintenance and carrying costs.

140 S Claremont Street: This is a home I have watched as I walk by weekly when looking at options in Hilltop. With its coveted location within 2 blocks of Graland as well as Cranmer Park coupled with great curb appeal I have literally watched this home bounce around concerning pricing as follows:

  • 6/15/16:       Listed at $2,375,000
  • 8/30/17:       Price Adjustment to $2,275,000 – Subsequently withdrawn
  • 1/12/17:       Listed at $2,275,000
  • 4/10/17:       Price Adjustment to $2,175,000
  • 6/14/17:       Price Adjustment to $2,075,000 – Subsequently withdrawn
  • 8/7/17:         Price Adjustment to $1,999,000
  • 10/4/17:       Price Adjustment to $1,900,000 – Subsequently withdrawn
  • 4/1/18:         Relisted at $1,950,000
  • 4/27/18:       Goes Under Contract

During its almost 2 years on the market there were multiple price adjustments coming down to $1,900,000 in October 2017 only to be placed back on the market in April 2018 at $50,000 more. Again, I understand spring selling season yet I guarantee you any good broker representing a buyer will review the history of the listing and share with their client. As of last week, went under contract; I assume the broker representing the buyer has shared the pricing history.

Back to the definition of insanity. While I am not suggesting the above examples are insane. I believe it is more a function of the market or the perception of the market i.e. unabated demand, low supply and continued low interest rates. Yet the markets are a changing i.e. interest rates are ticking up, inflation is on the horizon and the equity markets are buoyant yet the charts are showing a slow downward trend from their peak on 1/28/18 of 26,616 (while composing this blog the DJI is trading at 24,288 or 9% off the high of 3 months ago.

I do not fault the brokers or their clients i.e. the sellers…..this has happened to me as a broker! This was back in 2012 when the market has just endured the Great Recession and was just beginning to show signs of a activity. I will not disclose the address as the home has since been sold and closed however the neighborhood was Cory-Merrill.

The house a pop-top first sold after renovation in October 2005 for $810,000. 2005 we were 1.5 years before the peak of the market; the buyers in retrospect over-paid for the residence. In addition to being in the house for $810,000, they added an additional $40K in cosmetic upgrades to the interior, thus their in the house for $850,000.

I am contacted in early 2012 concerning listing the residence. The sellers are retiring and moving and desire to leave Denver. I go over to the residence with a peer broker armed with comparable’s and camera. My co-broker and I confer and suggest an asking of $715,000. And now the saga begins as follows:

Per the seller the house is listed in April 2012 for $819,000! Yes, $819K

  • 4/25/12:       Listed at $819,000
    •   -3 weeks, one showing off an open-house.
  • 5/15/12:       Price Adjustment to $739,000
    • -Seller still believes this is the selling price regardless of our $715,000 suggestion a month earlier.
  • 10/4/12:       Relisted with another broker for $739,000
  • 11/2/12:       Price Adjustment to $725,000
  • 12/14/12:     Sold for $710,000

In addition to the loss between the $810,000 paid in 10/2005 to the $710,000 paid in 12/12 or $100,000 over the 7 years during my 10 months as broker the seller’s paid in excess of $40,000 in mortgage and carrying costs only to sell the residence for what my peer and I suggested 10 months earlier.

While I did not share the following with the seller; based on inflation the $810,000 paid in 2005 equaled $952,250 in 2012; thus their loss was even more severe.

 

The lessons are simple:

For sellers, even in a hot “sellers market” be realistic.

For brokers, while a listing may look attractive, if it does not sell, it is a challenge both financially and psychologically for all parties.

Finally from Wall Street we say “Do not fight the tape”…..the DJI is off 9% from its high, interest rates are going up, inflation is an actual concern and wages while ticking up are still considered stagnant for now.  My humble suggestion, price correctly and sell immediately, the Goldilocks market conditions can change to a Papa Bear in a moment’s notice. Sell like its 2016 not 2005.

 

 

 

 

 

 

 

 

 

 

 

 

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Does the New York City Luxury Market Foretell the Denver Luxury Market and Beyond

Yes I am well aware Denver is not New York City even if we do have Rosenberg’s Bagels and The New York Deli News; literally a slice of the Big Apple on Hampden Avenue. However the old adage goes when New York sneezes the rest of the country catches a cold. The reference is to the stock market; I am more concerned about the real estate market.

As some of my readers know I hold real estate licenses in both Colorado and New York and I work in both markets. Most recently the statistics concerning New York City real estate is concerning:

  • Real estate sales in the first quarter of 2018 posted their largest drop in nearly a decade and reached their lowest level in more than six years.
  • The high end of the market is getting hit the hardest, partly because of asking prices.
  • Many sellers have yet to lower their prices in keeping with tax law changes and a general slowdown since 2014.

The big headline in Manhattan was the 25% reduction is sales in the first quarter of 2018 when compared with the prior year. While the number in itself raised a few eyebrows more shocking was the drop, the largest in a decade meaning since the day when Lehman Brothers and Bear Sterns basically imploded and some argue the catalyst of The Great Recession.

The high end of the market is getting hit the hardest, since it’s the most discretionary segment. Prices for luxury apartments in Manhattan fell 15 percent and sales were down 24 percent in the quarter from 2017.

In Denver the luxury market seems to be on fire with sales including the highest number of over $1M homes selling in 2017 and a few blockbuster listings already in 2018. New York City went through the same cycle a few years back including the record setting $100M condo sale at 157 W 57thStreet.

For now Denver seems immune as the luxury sales have been associated with truly unique and rare properties in Denver’s toniest neighborhoods including Country Club, Cherry Creek North, Polo Club and in the suburbs including Cherry Hills Village. My question is anyone concerned about the number of condos coming online and developed in Cherry Creek North, many asking over $1M. Or the potential glut of luxury rentals on the market and those in the pipeline in Cherry Creek and along the Speer Corridor.

The luxury housing market I have suggested is similar to the stock market; it in general looks forward and sets the trends for the overall market. Well let’s look at the overall Manhattan market…..

The average sales price in Manhattan dropped 8 percent when compared to one-year prior. 8% may not sound like much however let’s assume you purchased a home in Metro Denver in 2017 for the average price of $480,140. How would you feel if suddenly $38,000 of your value suddenly disappeared and your home was now worth $442,140?

The money you invested in the conventional down-payment has basically disappeared yet your mortgage is the same, your PITI will probably increase due to property taxes and thinking about refinancing, interest rates are trending up not down.

While many believe the Federal Tax Law changes concerning deductibility of real estate taxes being capped at $10,000 mostly affects the Northeast and California, guess again….many of the luxury homes selling in the Denver metro area have tax bills in excess of $10,000 annually. The next assessment coupled with the gains over the past few years will increase valuations even further.

Let’s assume tax law changes are inconsequential; let’s consider other factors, which are challenging the Manhattan market:

Glut of Luxury Properties: In Manhattan due to land and construction costs luxury is what has to be constructed to justify investment costs. The same is being said in Cherry Creek North and in areas of gentrification i.e. LoHi and RiNo. Yet the luxury market is not infinite i.e. the higher the price point the less demand, as the potential pool of buyers is smaller and honestly more fickle.

Out-migration: While I continually hear about the continued in-migration leading to challenges concerning livability the reality is according to the state demographer, we are experiencing increased out-migration.

Cost Of Living: Denver is and has been for a few years the most expensive city not located on a coastline. While we believe we can rest on our laurels concerning the Colorado Lifestyle and the hipness of Denver, Salt Lake City is nipping at our spurs. We also forget such cities as Minneapolis, Dallas and others are actively courting tech businesses and capturing new residents due to their reasonable cost of living.

Do I see the market changing radically in the next few months? Not necessarily however the headwinds are there i.e. interest rate hikes, a bull market that seems to be losing steam, housing costs that are increasing faster than average wages and over-priced listings sitting on the market the light of rationality.

While we may wish to emulate Seattle, Portland and San Francisco we should be careful what we wish for.

 

 

If at First You do not Succeed Re-list

While I do not necessarily believe the following quote is attributable to Einstein in the context of this blog I find it most appropriate:

Insanity: doing the same thing over and over again and expecting different results.

I use the above quote concerning the some aspects of the real estate market in Metro Denver that I am witnessing. To distill the niche of the market for which this quote is appropriate are the select listings which come on the market, do not sell, are withdrawn or expired and come back on the market at the same or higher price.

Here are just a few select examples:

100 Lafayette Street: A sprawling 2-story post-war suburban style home in the desirable Country Club neighborhood on an expansive lot.

  • 4/2/16           Listed at $1,350,000 – subsequently withdrawn or expired
  • 3/9/17           Listed at $1,300,000 – subsequently withdrawn or expired
  • 5/18/17        Listed at $1,300,000
  • 6/6/17           Price Adjustment to $1,280,000
  • 7/18/17        Price Adjustment to $1,250,000 – subsequently withdrawn or expired
  • 3/18./18        Listed at $1,250,000

As of today this residence will have been on and off the market for two calendar years. During that time, while there has been a $100,000 price reduction or approx. 8% the residence continues to search for a buyer. Yet the pricing over the past year has remained static. Yes, one may argue inventory for the neighborhood continues to be challenged and just waiting for the correct purchaser i.e. one who desires a larger home at a below comparable PSF pricing. I will continue to watch as while the residence has many positives i.e. finished square feet and larger lot. However being adjacent to 1st Avenue, even with a sound/privacy wall will be a challenge for many prospective buyers (I know the challenges;  I have transacted residences along the 200 Block of Colorado Boulevard).

600 High Street: A sprawling large brick potential duplex configuration situated on a coveted 100’ x 125’ lot. Personally I have had my eye on this one for potential redevelopment HOWEVER I too cannot make the numbers work (due to pricing, location adjacent to 6th Avenue and Historic District inclusion) yet its pricing history continues to baffle me:

  • 8/26/14:       Listed at $1,495,000
  • 8/26/15:       Price Adjustment to $1,445,000
  • 11/20/15:     Price Adjustment to $1,395,000
  • 1/9/16:          Price Adjustment to $1,345,000 – under contract and active again
  • 4/8/16:          Relisted at $1,150,000
  • 10/8/17:       Price Adjustment to $1,250,000 (yes adjusted upward)
  • 10/27/17:     Price Adjustment to $1,150,000 (1.5 years to get back to that price)
  •                       -Status to under contract multiple times and falls through
  • 12/11/17:     Price Adjustment to $999,000 (under contract and falls through)
  • 3/23/18:       Relisted at $999,000

At present this residence has been on and off market for 3.5 years. While there had been a substantial price reduction from the original $1,495,000 to a more realistic $999,000 the home has still not sold. I will not get into the details of Time Value of Money and Inflation. Yet I will suggest the history of this house seems to repeat itself, look at the sales history:

  • 7/13/1995:   Sold for $670,000
  • 2/20/1997:   Sold for $670,000
  • 6/15/2002:   Sold for $625,000

Thus between 1995 and 2002 the home actually lost $45,000 (more if factoring in inflation) and now with 3.5 years on the market continues to look for a buyer. While there may be a buyer willing to pay $999,000, when considering in inflation and rising interest rates is it worth the wait coupled with maintenance and carrying costs including real estate taxes.

140 S Claremont Street: This is a home I have watched as I walk by weekly when looking at opportunities in Hilltop. With its coveted location within 2 blocks of Graland as well as Cranmer Park coupled with great curb appeal I have literally watched this home bounce around concerning pricing as follows:

  • 6/15/16:       Listed at $2,375,000
  • 8/30/17:       Price Adjustment to $2,275,000 – Subsequently withdrawn
  • 1/12/17:       Listed at $2,275,000
  • 4/10/17:       Price Adjustment to $2,175,000
  • 6/14/17:       Price Adjustment to $2,075,000 – Subsequently withdrawn
  • 8/7/17:          Price Adjustment to $1,999,000
  • 10/4/17:       Price Adjustment to $1,900,000 – Subsequently withdrawn
  • 4/1/18:          Relisted at $1,950,000

During its almost two years on the market there were multiple price adjustments coming down to $1,900,000 in October 2017 only to be placed back on the market in April 2018 at $50,000 more. Again, I understand spring selling season yet I guarantee you any good broker representing a buyer will review the history of the listing and share with their client before making an offer.

Back to the definition of insanity. While I am not suggesting the above examples are insane. I believe it is more a function of the market or the PERCEPTION of the market i.e. unabated demand, low supply and continued low interest rates. Yet the markets are a changing i.e. interest rates are ticking up, inflation is on the horizon and the equity markets are buoyant yet the charts are showing a downward trend from their peak i.e. 10% off the high of 3 months ago.

I do not fault the brokers or their clients i.e. the sellers…..this has happened to yours truly!

My awakening began in 2012; the market has just experienced the Great Recession and was beginning to show signs of activity. I will not disclose the address of the residence as it has since been sold and closed, however the neighborhood is the NW quadrant of Cory-Merrill.

The house a pop-top (first and to this day the largest on the block) sold after renovation in October 2005 for $810,000. While 1-2 years before the peak of the market the buyers in retrospect over-paid for the residence based on the opinion of myself and other brokers. In addition to purchasing the house for $810,000 the buyers added an additional $40K in interior cosmetic upgrades while neglecting the rear-yard (usually a strong selling feature for most buyers), thus in their house for $850,000 in 2005 Dollars.

I was contacted in early 2012 about listing the residence. The sellers planned on retiring and relocating beyond Denver. I visit the residence with a peer broker armed with comparable sales data. My co-broker and I confer and suggested based on empirical data i.e. sales comps an asking of $715,000. Now the saga begins; per the seller’s request the house is listed in April 2012 for $819,000! Yes, $819K or $100K+ over what we suggested.

  • 4/25/12:       Listed at $819,000
  •                      -3 weeks, one showing off an open-house.
  • 5/15/12:       Price Adjustment to $739,000
    • -Seller still believes this is the eventual selling price dismissing our $715 suggestion based on verifiable comparable’s one month earlier.
  • 9/30/12:      A mutual termination concerning the listing and I am thankful as endured  50+ showings and not one single offer.
  • 10/4/12:       Relisted with another broker for $739,000
  • 11/2/12:       Price Adjustment to $725,000
  • 12/14/12:     Sold for $710,000

In addition to the $100K loss i.e. $810,000 paid in 10/2005 to the $710 paid in December 2012 over the 7 years, during my 10 months as broker the seller’s paid in excess of $40,000 in mortgage and carrying costs only to sell the residence for what my peer and I suggested 10 months earlier.

On a more technical basis, here are the inflation adjusted #’s: The $710,000 in 2005 was actually $834,673 in 2012 Dollars, thus their real dollar loss was closer to $225,000.

The lessons are simple:

  • For sellers, even in a hot sellers market be realistic.
  • For brokers, while a listing may look attractive, if it does not sell, it is a challenge both financially and psychologically for all parties.
  • For buyers, trees do not grow in the sky, they need soil and moisture.

Finally from Wall Street: “Do not fight the tape”…..the DJI is off 10% from its high of 26,616, trading at 24,037 as of this posting, interest rates are going up per the Federal Reserve Minutes, inflation is an actual concern on the horizon and wages while ticking up are still considered stagnant.

My humble suggestion, price correctly and sell immediately, the market conditions known as Goldilocks can change to Papa Bear in a moment’s notice.

Sell like its 2016 not 2005.