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The Masked Tulip

A One In 30 Years Buying Opportunity... In Everything

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http://www.gainspainscapital.com/

Oops, that's a painful fall in your house price!

Back in 2006, I almost stopped going to this place because I was so sick of hearing the clientele blathering about “the Dow going to 20,000†or “geniuses†flipping McMansions like hotcakes. It’s not that I don’t enjoy good times. It’s just that I knew those good times were illusory, fueled by a credit bubble that was primed to burst. So I hope you’ll forgive me when I say that hearing my local realtor explaining how “you can’t lose buying real estate†to his clients over a cappuccino in August 2006 always left a bad taste in my mouth.

However, in the last year or so, the conversational tones have changed dramatically. I never see realtors in the place anymore. And the topics of discussion all center on ravaged 401(k)s, questioning whether it’s time to finally buy gold, or whether one should simply pull one’s money out of the market entirely (in spite of a 37% market rally since March).

However, even these horror stories pale beside what I heard last night. A man (50ish) and his wife were sitting at the table next to mine talking with their niece about their home (one of several, I gathered) in Port St Lucie in Florida.

According to the man, his neighborhood is one of the best in the area with prices ranging from $700K to $8 million (judging from his watch and wife’s jewelry, they were in the upper range of homes there).

Apparently, one of their neighbors has single-handedly destroyed the neighborhood’s property value by recently accepting a low-ball offer for his home. Two years ago, he’d turned down an offer for $400K, thinking it too low. However, he’s since lost his job and is unable to make his mortgage payments. With Florida’s real estate market at a virtual standstill, he took the only offer he received, a mere $180K.

That one sale has pulled the entire neighborhood’s property values down like a stone. You’d have to go back nearly 20 years to find a comparable sales price for the neighborhood. No one else even wants to consider listing their home unless they absolutely have to.

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http://www.gainspainscapital.com/

Oops, that's a painful fall in your house price!

Yeah but to be honest I'm really not convinced by the mechanics this guy and others assert is at work. Thought I conceded the general principle is sound.

Vendor A loses job and has to sell in order to live will accept low offers.

Vendor B has job and no need to sell will not accept low offers.

Undoubtedly a buyer will wish to purchase at the price Vendor A accepted. However if supply is limited then Vendor B still enjoys some power when transacting.

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Oops, that's a painful fall in your house price!

Not surprised. I know that area very well-we have a rented place (a house used as an office) in Mineola (near Disney). Basically LL went bust ONE YEAR ago. Bank have still not sold the property and we have paid nothing (apart from utilities) in that time. We have had no contact from the bank (Washington Mutual). They call periodically to see if we have trashed the place but a girl told me (off the record ssshhh) that they have so much inventory to work through that they are happy to have the place utilised and the gardens maintained. Rent was $1200 a month so $15K to the good. Lovely jubbly. BTW The LL bought for $280K and the bank have had no offers at $150K. Go figure as the Yanks say.

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Not surprised. I know that area very well-we have a rented place (a house used as an office) in Mineola (near Disney). Basically LL went bust ONE YEAR ago. Bank have still not sold the property and we have paid nothing (apart from utilities) in that time. We have had no contact from the bank (Washington Mutual). They call periodically to see if we have trashed the place but a girl told me (off the record ssshhh) that they have so much inventory to work through that they are happy to have the place utilised and the gardens maintained. Rent was $1200 a month so $15K to the good. Lovely jubbly. BTW The LL bought for $280K and the bank have had no offers at $150K. Go figure as the Yanks say.

Watch out for the IRS - that's taxable as income, I guess.

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