In Florida, A Battle of Wills Between Buyers and Sellers

Posted by: Peter Coy on May 15, 2007

Good article in the Palm Beach Post about what happens when sellers who don’t want to lower their asking prices collide with buyers who don’t want to raise their offers. The first sentence says it all:

Who’s going to blink first?

Here’s a link.

But you don’t have to read the Palm Beach Post for this information. The clash is going on right here on our own Hot Property blog. Check out the nearly 300 comments going back to the fall of 2005 on Dean Foust’s blog item about whether Florida real estate is a bubble.

Some people are mystified that housing prices haven’t fallen more considering the steep falloff in residential construction. But that puts the logic backwards. When sellers get stubborn, a few of them are able to get reasonably high prices, so the average selling price doesn’t fall much. But the volume of transactions plummets and the inventory of unsold homes shoots up. The people who take it on the chin are builders, who are forced to cut back on construction because they don’t want to add more properties to an oversupplied market. I wrote about this last week in the magazine.

Is it time for sellers to accept reality and slash prices?

Reader Comments

CH

May 15, 2007 11:15 AM

I think that the fact the sellers can wait for a buyer to match their price instead of lowering the price indicates that they are well-armed to weather out the storm. It could indicate that, at least in that market and at least for now, the sellers have some financial backing for holding on.
"The people who take it on the chin are builders, who are forced to cut back on construction because they don't want to add more properties to an oversupplied market." I guess the builders have another option than taking it on the chin: lower their prices towards pre-boom levels. I wonder if "taking it on the chin" is part of their strategy: better to have some inventories now and high prices tommorow rather than no inventories now and possibly small prices tommorow.

Lord

May 15, 2007 3:12 PM

Most sellers are also buyers and are really mostly market neutral to prices, but selling low to buy high doesn't make much sense.

lizziebeth

May 15, 2007 4:00 PM

Sellers do need to get realistic. We now have homes that have been on the market for almost two years! Builders have slashed prices as well as added incentives! Existing homes can't compete with new construction. New construction sales are few and far between as it is. Watching the property transfers in Manatee county each week shows that homes under $400k and a few multi million dollar homes are selling. It seems that for every house that sells another two come on the market! Every street corner is littered with signs for auctions, financing, rentals and homes for sale. Heck, I even saw a guy on I-75 with his car painted House for sale......

Here's another funny seller quirk. Those that have been fortunate enough to sell are complaining how much money they've lost on their home. Fact is most are still making more money than they paid. They're complaining about the money they would have made at the height of the frenzy. There seems to be this entitlement attitude of homeowners here in Florida. Heck, read some of Trish's comments on the Is Florida Housing a Bubble....blog

Lord

May 16, 2007 1:57 PM

It can be a sign sellers have a strong hand, or it can be sign they are between a rock and a hard place and don't have the flexibility to reduce prices. The latter will likely face foreclosure.

Richard

May 18, 2007 7:17 AM

Properties in florida are getting temporary balloon due to high demand in properties but, it will not remain for longer time. Once you see tight home loan and higher interest, things will come to normal

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About

BusinessWeek editors Chris Palmeri, Prashant Gopal and Peter Coy chronicle the highs and lows of the housing and mortgage markets on their Hot Property blog. In print and online, the Hot Property team first wrote about the potential downside of lenders pushing riskier, "option ARM" mortgages and the rise in mortgage fraud back in 2005—well ahead of many other media outlets. In 2008, Hot Property bloggers finished #1 in a ranking of the world's top 100 "most powerful property people" by the British real estate website Global edge. Hot Property was named among the 25 most influential real estate blogs of 2007 by Inman News.

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