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of the market for which this quote is appropriate are the select listings which come on the market, do not sell, are withdrawn or expired and come back on the market at the same or higher price.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- 4/2/16 Listed at $1,350,000 – subsequently withdrawn or expired
- 3/9/17 Listed at $1,300,000 – subsequently withdrawn or expired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- 7/18/17 Price Adjustment to $1,250,000 – subsequently withdrawn or expired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