Why Auctions Matter
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NORWALK -- Later I’ll tell you more about today’s foreclosed home auction on the courthouse steps in Norwalk (plot spoiler: more than 90% of the houses did not sell). But first, a word or two about why these auctions matter and what they tell us.
As David Leonhardt wrote in the New York Times a while back, statistics attempting to measure or track the real estate market can be misleading -- not every house put up for sale is sold; not every seller is motivated to accept an offer. The market can’t always answer the simple question: what is my house worth if I have to sell it today?
Leonhardt, a better writer than yours truly (But I am FASTER), explains, ‘The truth is that the official numbers on house prices — the last refuge of soothing information about the real estate market on the coasts — are deeply misleading. Depending on which set you look at, you’ll see that prices have either continued to rise, albeit modestly, or have fallen slightly over the last year. But the statistics have a number of flaws, perhaps the biggest being that they are based only on homes that have actually sold. The numbers overlook all those homes that have been languishing on the market for months, getting only offers that their owners have not been willing to accept.’
Auctions give you a better glimpse at reality. That’s why today’s sale of a Long Beach home was meaningful; the house was listed for $555,000 and sold at auction for $417,000. True, it was a foreclosed house in need of fixing up, and the listing was a bit Alice in Wonderland. Still the auction answers a tough question: what is that house really worth in today’s market? Answer: $138,000 less than the listed price.
That said, as soon as I have my first cup of coffee of the afternoon (for my money that’s the second best cup of the day), I’ll tell you more about today’s auction.
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