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of the market for which this quote is appropriate are the select listings which enter the market, do not sell, are withdrawn or expired and come back on the market at the same or higher price.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- 4/2/16 Listed at $1,350,000 – subsequently withdrawn or expired
- 3/9/17 Listed at $1,300,000 – subsequently withdrawn or expired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- 7/18/17 Price Adjustment to $1,250,000 – subsequently withdrawn or expired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.