Sunday, February 12, 2006

Reality Sets In For Sellers...The Violins Please.

Has the bell rung on the seller's market in South Florida? If this news story is an indication, link , then hang on to your hat. It is going to be a wild ride folks. Reality is a hard pill to swallow when the perception has been of 20-30% annual gains as far as the eye can see.

"Four months after putting their Wellington home on the market and cutting the price $40,000, John and Mary Porter are still waiting for an offer."

"Real estate agents and home sellers throughout the county describe a dramatic shift from what only six months ago was a strong seller's market. There's no crash yet — sale prices have flattened rather than plummeted — but there's plenty of evidence the five-year boom has peaked."

"The chill came quickly. Just last year, torrid price spikes made Palm Beach County the nation's third-hottest housing market, according to the National Association of Realtors. Prices here jumped 35.9 percent from early 2004 to early 2005. The typical home's value rose at a rate of nearly $1,900 a week"

"The Porters initially asked $409,000 for their house at 627 Carnation Court, but they've cut the price to $369,000, said their real estate agent, Randy Bianchi of Paradise Properties in West Palm Beach. The Porters paid $279,000 for the house in 2004."

"Indeed, it seems as though everyone decided to sell at once. The number of homes for sale in Palm Beach County nearly tripled in the past two years, from about 7,800 two years ago to more than 20,000 today"

"Some economists warn that Palm Beach County's rapid run-up in prices makes the market ripe for a fall."

"For instance, National City Corp. of Cleveland says Palm Beach County homes are overpriced by 57 percent, while Treasure Coast houses are inflated by 72 percent. To calculate those figures, the financial services firm compared home prices with incomes."

"Others say the slowdown will lead to a soft landing rather than a crash. The National Association of Realtors last week predicted that the number of sales nationwide will dip slightly in 2006 from last year's record, while price appreciation will slow to 5 percent from last year's 12.7 percent."

Send in the violins, please. When people complain that they might only make $90,000 0r 32% on a home they purchased two years ago, I know that the top of the market is in the rear view mirror. A sense of 'entitlement" and 'investment' has turned home ownership into a quasi-casino. Houses are viewed as an appreciating asset, not a home. It is going to take a major shock to the system( in the form of substantial price reductions) to change the mindset of people back to the merits of home "ownership" again.


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