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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I’m glad to see Mr. Holmes suffering. Schaudenfraude or whatever you want to call it. A very large contingent of people are sitting on homes that were supposed to be escalating in value to eternity, and they’re discovering that there’s something called a rational market. Hopefully, all those who bought “high” are forced to sell “low.”
Spread that schadenfreude please, we need some in Cali too. The hubris around here is even more suffocating that Austin or Miami.
IMHO, the main problem is that Mr Holmes treated buying a house as a short term investment rather than a long term place to live. Historically, people purchased houses for the long term as a place to enjoy life and raise a family. If you planned on only living in a location for a few years, you rented. It is only within the last 10 years while the Fed was blowing up this latest bubble, that selling within a few years might be profitable (and maybe 2002-2006 during the first bubble). People have short memories.
As a huge fan of Wolf’s charts, the only guarantee of making a profit with a house is to hold it for 12 years based on Wolf’s excellent charts covering the last 40-50 years. The worst case was buying in 2006 and selling in 2018. I would plan on worst case this time around also. If you plan on staying 12 years, then buy. Otherwise, prepare to be disappointed.
I don’t think he necessarily treated it as an investment. I’m sure he had a job where he was working remote and expected that to continue forever. His employer called him back to the office, and now he has to sell.
His mistake was buying a house at all when his situation was likely temporary, and certainly buying at that ridiculous price.
You are probably correct about being forced to sell due to his job.
I think he had high expectations of short term profit since his initial list price was 635K. His delayed dropping of the price probably now means he still has hope of minimizing his losses like any investment.
You are definitely correct that he paid too much and should have rented with his employment uncertainty.
I wonder if “Anthony Holmes” Tampa subugb home is in a western or eastern suburb. Having a big hurricane heading for Tampa might actually help him if his home is not flooded or destroyed. After a big hurricane or wildfire many homes are usually destroyed and the people that lived in them usually need a place to rent. If the market rent will cover his taxes, insurance, mortgage and a management fee he can rent the place and sell down the road (a cousin owned a home with zero equity in San Antonio TX in 2016 and was able to rent it and Zillow says it is worth ~$400K more today.
The problem is that it will probably be flooded and destroyed. And then he’ll have a much bigger problem, especially if it’s not a member of the maybe 20% who have flood insurance group.
What a nightmare. For those whose homes are destroyed, time to move out of the area, rather than rent.
It’s in Seffner, FL, which is east and not desirable and the price is way higher than the other homes in that area that no one really wants to live in. I’m not surprised it’s not selling. He way overpaid for that thing in 2021. 806 Red Ash Ct, Seffner, FL…
Well, at least he has a reference to what the bottom can look like…then again 2015 wasn’t the trough of the market…hmm…
4/17/2015 Listed for sale
$335,000
$97/sqft
Good detective work in finding the house. Mr Holmes should have noticed in 2021 that he was paying almost double the 2015 price. That would scare me.
I don’t know the area but the house looks nice and it is only a 20 minute drive to Tampa (12 miles). That is a very short commute by CA standards. Hopefully 12 miles from the coast is enough to survive a major hurricane.
That was what caused America’s inflation in general. Had Americans just said “ENOUGH! I will not pay 80% more than what people paid two years ago,” inflation would not have taken off like it did. But our people seem to pay whatever they can afford to, not what they should pay.
Not to mention that his price drops are not real drops. Had he really wanted to sell, he would have realized his $625k asking price was too high, and started dropping $25k at a time. His measly $5-$10k drops over 7 months is not moving the needle for anyone. No one thinks “Oh, I wasn’t going to put in an offer when the price was $615k, but now that it’s $605k, let me offer up!”
This guy is an idiot.
You know what I am going to say…wish I can see this same thing happen in NorCal and SoCal too, unfortunately, the dynamic is different, and likely won’t see anything similar soon or ever…also wonder what the % of institutional listings is like in SoCal, probably minuscule compared to that 5% in Tampa, Orlando..etc
Once again hoping I am dead wrong on my assessment but not holding my breath either.
West coast will be impacted with stock mkt bubble pops.
It’s not a shortage when u have constant population outflow
“If you’re the first one out of thje door, it’s not panicking.”
– Margin Call
LOL… that was a REALLY good movie.
I hope everyone in the path is current on their auto, home, boat, business, and hopefully separate flood insurance policies. Once the storm passes, begin the process of the vast majority unfortunately receiving quick denials from their friendly adjusters.
Re: “ least possible loss”
You need to copyright that or maybe buy a domain name, maybe sell a book or another great post — no a series, syndicated weekly column picked up globally — this could be Bigger than The Big Short!
Unfortunately, very unfortunately, I didn’t coin the phrase. But it would make one hell of book title.
“You can’t lose money in real estate is the biggest propaganda BS line ever”
Propaganda? more like the Ten Commandments to a lot of homeowners, the going up forever narrative is like prosperity gospel to them…this is especially true in Asian countries like China and HK and much like a cult, you’re a true believer until either you wake up or join the shuttle to catch Hale-Bop
Don’t know about Orlando or Jacksonville but for Tampa, maybe there will be quite a bit less active listing after next week?
Loved it! The story format was great. Thanks Wolf.
Mr. Holmes has a ton of options. Maybe his job compensates him enough that he can just eat the loss. Maybe he could look for a new job. Maybe he put 1% down and foreclosure is an option.
I was one of those A-holes holding onto property. In my case, since 2017. I sold it in August at full price. I realize it’s completely anecdotal, but I think the MN market never got as hyped up as Florida.
It didn’t. In Edina, where I have friends, it looks like prices generally went up by about 50% from 2012 to 2022. That’s a lot of course, but in parts of Florida, Austin, Nashville, and others, prices tripled in that time.
“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”
Judging by these price drop emails I see now from Redfin and Zillow, plenty around here didn’t get the memo with these pathetic price drop and even increase..here are some for your amusement. Good times
$1,375,000 drop from $1,390,000
3 Beds · 2 Baths · 2,222 Sq. Ft. Placentia, CA 92870
$1,799,000 drop from $1,819,000
4 Beds · 3 Baths · 2,386 Sq. Ft. Long Beach, CA 90803
$1,399,000 increase to $1,299,000
4 Beds · 2 Baths · 2,302 Sq. Ft. Placentia, CA 92870
Perhaps the hurricane season of 2024 will have the same effect on the FL RE mkts as did the hurricanes of 1926.
We who prefer our working folx to be able to afford decent housing without massive guv mint subsidy hope so.
OTOH, the new house across the street, just finished rough framing, listed recently for $1.3MM is already sold according to the builder who was out in person prepping the site today for Milton, hardly affordable.
(In other news, milty just took a more southerly wobble, and as of the 5pm NHC report appears to be hitting the coast between New Pass and Big Pass in the SRQ area, and looked even more southerly in the 8 pm update.)
Greed and fear, as usual. Greed usually wins at the beginning, fear usually wins in the end. Any way to short local housing markets? It would be fun if there was.
Mother nature bats last. I struggle to understand how anyone can afford to live in the path of repetitive hurricanes…
Florida sounds like one of the worst places in the U.S. to own a home right now in more ways than one. Inventory is piling up and a major hurricane is barreling right towards it. Someone (in their late 50s) was telling me a few years ago that they bought a home and some condos in Florida with the hopes of using the rental income to “fund their retirement”. I wonder how that plan is working out for them now.
They are probably living under a bridge. Buy high and sell low is no way to fund retirement.