Friday, October 07, 2005

That Hissing Sound

by Tom Bozzo

Yesterday's large property transactions list in the State Journal business section included the large former house in our old neighborhood of some playgroup friends who decamped after 15 months to a nearer west side location.

High-priced transactions in Madison still can be accompanied by tales of greenhorn expats from highly bubblicious markets dumping insane amounts of cash on astonished locals (and not a few fix-and-flip sharks), though theirs was no longer quite as rarefied territory as it once was even in my Madison real estate memory. They were able to sell quickly as a near-pure FSBO, saving themselves from a massive chunk of transaction cost. Regardless, the catch was that the crude appreciation was just a hair under 3% for the year-and-a-quarter, representing a 5.5% discount off the listing price. Insofar as it's my understanding that they did a variety of renovations, the true appreciation was probably very approximately zero.

Once again, I'm glad to be able to stay put for the indefinite future.

Amateur Market Strategy Addendum: While this is only one example, and I don't have that much time to plumb the city assessor's database, it's looking like assertively priced houses just aren't selling in Madison, with a lot of listing prices coming down 5-10% or more. There are few houses in the market 'priced to sell' to the extent smart buyers shouldn't at least consider floating lowball offers.
I am not even going to talk about (anymore) the pain of selling, the pain of losing money to real estate agents, the pain of not selling, the pain the pain the pain of maintaining... Someone better clue me in as to where the gain is or I'm likely to never own any property again. Ever.
Nina, while the addendum won't ease the pain, an implication is that your real estate selling trials were not atypical -- even (strange as it may be to say) 'not bad considering.'

Never is a long time, but I think you're at least as well situated now as you'd be in any house or condo.
Since we're likely to either sell or refinance (shortening term) soon, I got the brilliant idea of checking what the current owner of our mortgage would offer.

Perfectly reasonable 15- and 20-year rates (ca. 5.375-5.75%). But the "helpful" system suggested two 30-year alternatives; one was a fixed rate mortgage in the same ballpark.

The other "idea" was a 7/1 30-year ARM-- for which they offered a rate over 6.00%.

If this market really was driven by ARMs, that window has been slammed so shut it's not funny. (And/or someone is severely mispricing the mortgage premium spread for fixed rates.)
Hm, interesting. I took a look at the rates of the institution formerly known as the UW Credit Union, and some of their ARM pricing was similarly curious.

Looking around a bit further, I agree that the ARM deals are getting lousy fast.
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