Thursday, February 5, 2009


Has anybody else seen the commercials running on TV right now, advertising the HUGE LIQUIDATION SALE for the bankrupt companies, Legend Homes and Pacific Lifestyle Homes?

If you missed them, here's the website:

The house shown above is listing at $468,800, down 17.5% from the original listing price of $586,900. That's a significant discount, but not that much greater than the market drop we've already seen. (click on photo to go to listing)

Clint reported on the bankruptcy a few days ago, and the Portland Business Journal featured an article on it as well stating:
Pacific Lifestyle Homes and Legend Homes, two of four local home builders to file for reorganization under Chapter 11 of the U.S. Bankruptcy Code in 2008, have formed a joint marketing venture to sell more than 100 completed homes in the Willamette Valley by the end of March.
At first read I didn't understand why they would be forming a joint venture, but it is really just a joint marketing campaign.

Honestly I'd expect something a little more creative. Like reducing the price on each home by $1k until they sell. Use the power of scarcity to drive buyers to buy now, before they're gone. Wait too long? Sorry, they've all sold.

Honestly I bet they'll get cheaper if you're willing to wait.

Only 7 show as sold to date, out of 110. Seems like they have a ways to go if they want to sell them all by the end of March.

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Greg said...

You kind of expect the homeowner to chase the market on the downside, as that's typical crowd greed/hope behavior, but I am surprised at what rookies developers are in this aspect. Note to sellers: If you want to make a sale you have to sell it at seemingly competitive prices NOT last month's lagged market prices. This lack of aggressive pricing is still prevalent in Portland, and a strong indication that we are NOT close to any bottom. Seriously, has anyone actually seen a true deal in Portland (i.e. a price that is leading not lagging a declining home price-index such as Case-Shiller) ?

PDX Outsider said...

I have seen a few deals (20% below comparable properties) but they are rare.

This isn't much of a liquidation sale in my book.

patient renter said...

Honestly I bet they'll get cheaper if you're willing to wait.

Sounds like you've got the winning bet :)

Anonymous said...

I don't know if these are "deals" Greg but there are tons of houses at discounts to the Case-Shiller 18-20%:

A few examples of Sold's:

12783 SE 157th sold 12/13.06 for $493K and again 1/21/09 for $298,700. a 39.4% decline.

12814 SE Meadehill was originally listed for sale for $469,950 9/13/05 and it sold 1/30/2009 for $320,000. A 31.9% haircut.

14801 SE Natalya was sold on 6/16/06 for $515K and sold again 11/12/2008 for $350K. A loss of 32%

10992 SE Lenore sold for $690K on /17/2006 and again 11/22/08 for $430K, a 37.7% drop.

8560 SE Constance was orig. listed for $1,399,500 on 1/7/2008. It sold 12/18/2008 after a repo for $480,000. A 65% reduction.

Meriwether Condo (south waterfront) unit #1802 sold 6/30/2006 for $1,647,126 and just went pending with an asking price of $979,900. If it closes that would be a 40+% drop in 1.5 years.

This list was a 5 minute look. There are lots and lots of examples to prove Greg's hypothesis incorrect.

Greg said...

Thank you for those examples. However, when looking at percentage declines in any asset (stocks, homes, etc.) we need to measure them relative to a fixed price point in time (i.e average prices in 2004, for example) in order to be accurate. Saying, for example, Microsoft stock is down 10% from its peak doesn't tell us anything regarding the long-term price appreciation of Microsoft. Was it up 200% prior to that peak, 1000%, flat ? Obviously, some prices aren't available for 2004 (Meriwether condo's) and must be thrown out. Otherwise, you are cherry picking the price-entry and price-exit points and the data is meaningless, although not so meaningless to the sucker who paid the previous price. Can you post the price declines of those same examples relative to their valuation prices in say 2004? Although its a small sample, I would imagine that they are still much higher than 2004 prices. Please post your findings if you have the opportunity. The peak-to-current price measurement doesn't give much insight to current price valuations in Portland, other than someone (i.e. the previous buyer) got screwed.

Anonymous said...

My post was in response to your:

"Seriously, has anyone actually seen a true deal in Portland (i.e. a price that is leading not lagging a declining home price-index such as Case-Shiller) ?"

These sales are all leading the Case-Shiller. Now you have some new yardstick. If I show you those you will just find another to try to prove your hypothesis.

so now you need to see prices lower than 2004? Lower than 2004 adjusted for CPI? Lower than 2004 adjusted for "normal" appreciation of 3-5%? Why don't you be very specific and I'll show you some REAL deals. That will be your strong indication that a bottom is near, right?

Anonymous said...

Well, I'm following Clark county, and the banks have started pricing their repo'd properties aggressively (that is, following a straight-line projection from prices in 2004 or earlier).

Example: MLS 9001928. BTW, I love how delusional Zillow is about repos.

The "normal" offerings, though, are still off in bubble-land.

Greg said...

Anonymous (aka panicky sounding real-estate broker):

There is only one yardstick: The price appreciation of the house compared to the price appreciation of a broad house-price index, such as Case-Shiller, over a complete time horizon. As I explained, you can't just pick a random point in time and compare it to some other series and obtain any meaningful information. I suggested 2004, as I assumed that this would be easy to obtain, but to be accurate, one should go back as far as the data is available.

To say something is down x% from a random point in time and therefore it is now at a competitive price is nonsense. If you are saying that because a home price is down 20% this year, it is now considered a deal, then you are incorrectly coming to that conclusion. Would it still be a "deal" if that same home was up 200% the prior year before being down 20%?

Sorry you are so emotional regarding what you are seeing in recent home price deterioration, but perhaps it would serve your career better if you spent some time in an Introductory Statistics course. If all real-estate brokers and speculative home-buyers did so, then maybe everyone could have avoided the morass that you find yourself in with an abundance of home supply, ridiculously inflated prices relative to salaries and rents, and a collapsed mortgage and lending market.

And to answer your inquiry of
what will be my strong indication that a bottom is near? It will be when people are puking their speculative home positions into foreclosures and real-estate brokers are looking for alternative careers... That will be my "strong indication" of a bottom and that will occur after we convincingly breach through early 2004 price levels.

Anonymous said...


Anon here. It sounds to me that your are the nervous one.

I was countering your first post here and with each additional post you abandon the earlier one.

Why is it that when someone challenges a position in an effort to ferrite out the best predictions of this market they are called a Realtor or Mortgage Broker?

I am not either. I do own some real estate but I also am leveraged only 20% or so and have seven figures in muni bonds and other liquid and semi-liquid assets. No panic here, just a keen desire to garner as much info as possible to jump on opportunities.

Greg said...

Only an insecure amateur attempts to talk his book publicly. That fact at least explains a few things about the observed irrationality here. I have officially lost interest in assisting your home price analysis.