Wednesday, April 22, 2009
Here's a very good indication that a bottom in home prices is still far off in the distance. According to this report in Forbes, some sellers are underpricing their homes in order to generate a bidding war and the speculative fervor in real estate is apparently returning, albeit on a small scale - this is not how markets make bottoms.
Two weeks ago, Joyti Goundar, an agent at Redfin, a residential real estate brokerage, entered a bid of $420,000 for a three-bedroom, 1,625-square-foot La Crescenta home outside of L.A., listed at $299,000. When she lost the bid, she wasn't surprised. In July of 2008, Goundar bid $559,000 for a two-bedroom Arcadia house, also outside L.A., listed by Wells Fargo for $459,900. That one received 105 bids, driving the price up to $628,000, according to Los Angeles County records.Author Matt Woolsey correctly opines that this is not an indication that the clock has been turned back to 2005, going on to note that another big leg down in prices is likely.
"Sellers want to generate a bidding war, and it's working," she says.
I, for one, have a hard time believing that people would behave like this after what we've been through in the last couple years. Bidding wars? In 2009? Old habits die hard, apparently. For some it must bring back fond memories of a few years ago, but, a half a million dollars is still way too much money to pay for a two-bedroom house in the L.A. area.