He who panics first, panics best. Mr. Holmes, with no offers in 9 months, missed that train and is chasing prices lower.
By Wolf Richter for WOLF STREET.
So let’s use the example of “Anthony Holmes,” cited by the WSJ, who’d bought a house in a suburb of Tampa, Florida, for $550,000 in 2021 after home prices had exploded. He put another $50,000 into it and now has $600,000 in it. And then he had to move to Virginia for his job. He put his home on the market in February 2024, expecting an easy sale, maybe a bidding war or whatever, and some easy profit. But nothing. Then he dropped his original asking price five times to $583,900.
“I can’t unload the thing,” Holmes told the WSJ. “In eight months, I’ve had zero offers. No one even showed up to the open houses. Nobody.”
We know why he “can’t unload the thing”: price is too high.
The problem when no one shows up is the listing price, in comparison to similar homes in similar areas. You can sell just about anything if the price is low enough. People are buying homes in Florida, it’s not like no one is buying, but sales have plunged, and the price can no longer be whatever. If no one is interested, the price is too high, it’s as simple as that. And likely by a lot. If it’s just a little too high, you’d get some nibbles. This is the situation Mr. Holmes is looking at, and time is not on his side (data via Realtor.com):
The median listing price in September dropped to $437,251, the lowest since February 2022, according to data from Realtor.com. On the way down, it blew right through the normal seasonal high in June 2024 without stopping, and the slide has accelerated since then.
Listing prices are prices that sellers, such as Mr. Holmes, want or that they imagine might work. It’s not the price that buyers have agreed to pay.
Mr. Holmes spent the past nine month chasing after the faster-dropping listing prices of his competition.
Compared to the seasonal peak in June 2022, the median listing price is down by 11%, and we have the impression that this has just gotten started.
Transaction prices (closed sales) for single-family houses Florida have fallen for three months in a row as of August, reducing their year-over-year gain to 1.5%, according to Zillow data. Condo prices have fallen for the eighth month in a row as of August and are down 2.5% year-over-year, and back where they’d first been two years ago.
Price reductions to deal with a too-high listing price.
In September, there were 52,554 listings with price reductions in Florida, the second highest for any September in the data going back to 2016, behind 2018. They have surged by 76% from September last year.
Mr. Holmes’ five price reductions came off his inflated asking price and have been way too timid and too slow, attested to by the fact that no one came to any open houses.
It doesn’t matter to buyers how much money Mr. Holmes put into the house; it’s irrelevant to them. He said he’d like to break even, but that’s irrelevant to buyers. The buyers are going after deals instead of paying whatever.
Listing prices need to be reasonable in the first place, and when they don’t catch, price reductions need to be bold and stand out in this field of competition, because there is a lot of competition now (data via Realtor.com).
Big institutional investors have turned into net sellers.
The big single-family rental landlords have years ago switched to building their own build-for-rent subdivisions, with leasing and maintenance offices and common amenities – the hottest trend in homebuilding. These communities are more efficient to operate than individual houses scattered all over the place.
In their earnings calls, some of them started spelling out last year that they were selling some of their scattered rental properties that they’d bought out of foreclosure during the mortgage crisis, and especially in 2012-2014 when Blackstone and others piled into this market, with encouragement from the Fed. Now, after these massive price gains, they’re making huge profits on the sales even if they price the house aggressively. They’re the pros, they know what they’re doing (Who are the Biggest Landlords of Single-Family Rental Houses and Multifamily Apartments? Who Owns the US Rental Housing Stock?)
In Tampa, Orlando, and Jacksonville, institutionally owned single-family houses account for nearly 5% of the listings over the past 60 days, according to an analysis by Parcl Labs, cited by the WSJ. Institutional investors own between 2% and 4% of the single-family houses in these three markets and have been net sellers – they’re reducing their portfolios – in those markets over the past 90 days.
That’s the competition Mr. Holmes has to deal with.
These companies don’t have $600,000 in their houses. They bought them during the Housing Bust for a fraction of that, and they’re making huge percentage gains if they can sell them for $400,000.
Every month that Mr. Holmes doesn’t sell his vacant home is an expensive month. The carrying costs are substantial, even at the lower mortgage rates of 2021, and the insurance premiums, oh-la-la. A vacant house is a money-suck, and prices are heading lower.
You can’t lose money in real estate is the biggest propaganda BS line ever, as even the smartest institutional investors and lenders in commercial real estate have been re-learning over the past two years.
But he who panics first, panics best has been forgotten. Mr. Holmes missed that train already. And now there’s another hurricane that he wouldn’t have had to deal with, if he had priced the house aggressively in February, underbidding everyone else, and selling it quickly for the least possible loss.
And inventory – the competition to Mr. Holmes – is piling up, put on the market by similarly nervous home sellers.
Active listings pile up.
Active listings (total inventory minus listings with a pending sale) surged 35% year-over-year in Florida, to 185,696 listings, the highest for any September in the data going back to 2016, as demand has wilted and as inventory gets stale because prices are way too high (data via Realtor.com).
Median Days on the Market drag out.
The median number of days a property sat on the market for sale before it sold or before it was pulled off the market rose to 74 days in September, matching September 2019, and both are the highest since 2017.
This metric is a mix of:
How aggressively sellers pulled listings off the market if they didn’t sell;And how fast properties sold that did sell.
When sellers get more desperate, they leave the property on the market, rather than pulling it off quickly, and they might try reducing the price until it sells. In that dynamic, the days on the market lengthens.
So we wish Mr. Holmes best of luck.
But he doesn’t need our wishes or luck; he needs to cut the price boldly and pronto, understanding that buying the house during the craziest housing bubble ever was just a high-risk bet that didn’t work out, and that happens, and he might be out some money. But he would have been out a lot less money, including nine months of carrying costs, had he priced the house in February to underbid everyone else and to sell it quickly and to wash his hands off it with the least possible loss (if any).
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