I know of two separate sellers, each of whom is marketing a tract of more than 5,000 acres. Each is priced at about $1,500/A. I think fair value for each is in the $700/A range. That’s not a low-ball number. It’s how I pencil out the assets. And maybe I’m being generous.
The stock market is down 40 percent over the year. It continues to decline. The Dow is down about 2,250 points in seven days. The economy is stronger than this paniced market, but is being tugged down by weakening sales, tight credit and a dozen other factors.
The stock market appears to have decided that the $700 billion in federal money will not put a floor under the fall if it’s used as Secretary Paulson testified he plans to use it. Op-Ed articles in the WSJ and other papers have presented alternatives that deal directly with stopping foreclosures, refinancing mortgages, capitalizing banks, etc. I’ve yet to see a proposal for ending credit-default swaps and unfathomable derivatives, which together, as much as anything else, set us up for this mess.
My own uneducated sense of this is that we will work our way into a recovery, one property at a time, with one buyer and one seller finding a price. If sellers don’t budge from inflated valuations, all the liquidity in the world won’t get buyers to buy.
Everyone is waiting for the pain to stop. I don’t think we reverse this trend without pain being spread widely and deeply. A price set six months ago won’t work today. Each seller has to fight this fight with himself and his lender. It will be ugly and hurt a lot. A property that is overpriced by 100 percent needs to come down 50 percent.
Brokers are encouraging their clients to drop 10 or 15 percent. Recent WSJ ads are coming down by 25 to 30 percent or more. I’m interested in what brokers on both the seller and buyer sides think about this predicament, which has ensnared us all.
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