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Are short-term home sellers screwed?

tenence.com

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Re: Are short-term home sellers screwed?

#31

Post by toomuchtodo »

jstanley wrote: post #20
toomuchtodo wrote: post #19

Earlier quoted context omitted.

If you haven’t sold in 90 days, your price is to high. There is always a buyer at the right price. As a real estate investor, I specially target homes going unsold after long durations on the market due to unrealistic expectations.

> If you haven’t sold in 90 days, your price is to high Right. So it's selection bias. The people who can get a price 15% more than they paid manage to sell within 90 days, the people who can't dont.

That’s not selection bias, that’s a functioning marketplace. Something is worth what someone will pay for it. If demand is increasing, prices increase.

Re: Are short-term home sellers screwed?

#32

Post by vinceguidry »

The relevant factor in short term asset holds is transaction costs. Whether you're buying stocks or houses. If you can account for them and make a profit anyway, you're making money. Generally you need a market edge to lean on.

But at the end of the day it's hustling in a zero-sum market. Holding on to your edge requires work. And doing the deals requires work. Not something you want to make a career out of if you value your sanity or free time.

Re: Are short-term home sellers screwed?

#34

Post by sulam »

Wait, we are supposed to ignore transaction costs? I kept waiting for them to be factored in, but it never happened. I have a simple reason for the 15% number — you need to make ~ that much to be breaking even!

Humans have strong loss aversion and it’s common to come across properties where the offer price is clearly set at a point where the sellers will only be making their money back. You can make fair offers in this situation but we had them declined every time. This was most evident during the 2008-2010 housing bust when we had to look for 18 months for a house that was fairly priced — and after we bought, we got two calls from people we’d made offers to — offers which they declined — asking if we were still interested in buying at our offered price! In the case of one house I tracked, they ended up selling at over 10% below what we’d offered them!

Combine that with the lack of any kind of data on houses that didn’t sell, and I would take this analysis with a hefty nugget of salt.

Re: Are short-term home sellers screwed?

#35

Post by dpwm »

toomuchtodo wrote: post #31
jstanley wrote: post #20

Earlier quoted context omitted.

> If you haven’t sold in 90 days, your price is to high Right. So it's selection bias. The people who can get a price 15% more than they paid manage to sell within 90 days, the people who can't dont.

That’s not selection bias, that’s a functioning marketplace. Something is worth what someone will pay for it. If demand is increasing, prices increase.

There is clearly selection bias in the quoted figure of houses sold within 90 days, because people try to maximise what they'll get.

People only tend to drop the price after it's been sat around for a while. By definition, such sales are not very likely to happen within the 90 day window and therefore do not contribute to this average.

Re: Are short-term home sellers screwed?

#36

Post by toomuchtodo »

dpwm wrote: post #35
toomuchtodo wrote: post #31

Earlier quoted context omitted.

That’s not selection bias, that’s a functioning marketplace. Something is worth what someone will pay for it. If demand is increasing, prices increase.

There is clearly selection bias in the quoted figure of houses sold within 90 days, because people try to maximise what they'll get. People only tend to drop the price after it's been sat around for a while. By definition, such sales are not very likely to happen within the 90 day window and therefore do not contribute to this average.

What window of time would provide better data if not 90 days? 3 months? 6 months? A year? Anything more than 90 days and it’s stale market data.

Re: Are short-term home sellers screwed?

#37

Post by pwagland »

toomuchtodo wrote: post #31
jstanley wrote: post #20

Earlier quoted context omitted.

> If you haven’t sold in 90 days, your price is to high Right. So it's selection bias. The people who can get a price 15% more than they paid manage to sell within 90 days, the people who can't dont.

That’s not selection bias, that’s a functioning marketplace. Something is worth what someone will pay for it. If demand is increasing, prices increase.

The point that the op is making is that this is only looking at the "successful" trades. It is not looking at the set of "attempted" trades. So it is only looking a selection of the possible trades, and so there is a selection bias involved in the data set. This is very much a form of survivor bias.

It is likely that it also "only" includes those that managed to buy a house at under market rates, and sold at, or above, market rates within 90 days. Anyone who is buying to live in is likely paying as much or more as the "sale" price.

This is further stated in the market, since the annualised rate of return is 650%, but house prices are _not_ going up that quickly.

Which, in turn, means that distressed buyers are not necessarily going to see a 15% increase in the price of their house in 90 days, nor are they going to see a ~30% in 180 days, since their property may not be "undervalued".

Re: Are short-term home sellers screwed?

#38

Post by jrochkind1 »

>on average, if you sell your home within 90 days, you’ll do it at 15% higher than what you bought it for.

Uh, well, what I think this probably means is that people who _aren't_ going to make money _don't_ sell a property within 90 days. Even if they were buying it as an investment/flip, if they aren't going to be able to sell it for a ~15% profit... they hold on to it longer. Until they can.

Realizing this confusion of correlation with causation makes the rest of the "advice" in the article somewhat suspect too.

It's interesting findings, that there are significant numbers of owners managing to flip a house quickly for profit. But I'm not sure it can be extrapolated into a "what you should do".

Re: Are short-term home sellers screwed?

#39

Post by jrochkind1 »

toomuchtodo wrote: post #19
jstanley wrote: post #13

> Data tells the story: on average, if you sell your home within 90 days, you’ll do it at 15% higher than what you bought it for. There's some selection bias here. Those who got lucky (e.g. they bought the house cheaply) found it easy to sell for a good price quickly. Those who got unlucky and couldn't find a buyer quickly are excluded from the "90 days" window so don't contribute to the statistic. It might be true t…

If you haven’t sold in 90 days, your price is to high. There is always a buyer at the right price. As a real estate investor, I specially target homes going unsold after long durations on the market due to unrealistic expectations.

Sure. But the right (market) price 30 days later might be the same price you bought it at (or less), meaning you'll be selling it at a loss after various transaction fees.

Re: Are short-term home sellers screwed?

#40

Post by toomuchtodo »

pwagland wrote: post #37
toomuchtodo wrote: post #31

Earlier quoted context omitted.

That’s not selection bias, that’s a functioning marketplace. Something is worth what someone will pay for it. If demand is increasing, prices increase.

The point that the op is making is that this is only looking at the "successful" trades. It is not looking at the set of "attempted" trades. So it is only looking a selection of the possible trades, and so there is a selection bias involved in the data set. This is very much a form of survivor bias. It is likely that it also "only" includes those that managed to buy a house at under market rates, and sold at, or abov…

Attempted transactions do not make a market. Completed transactions do.
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