So they're a young couple, had been together for years and after graduating from university they had both been working for a couple years, getting established in their professional careers. So in the summer of '06 they decided it was a good time to buy a starter home.
The real estate market had been hot for a couple years, but things had just started to get ridiculous price wise. Resale inventories were very low at the time, and bidding wars were all to common, so they decided to buy a spec townhouse in one of the new developments in Edmonton's latest "it" neighbourhood, Terwillegar. They moved in that fall.
They ended up paying about $200,000 for the unit, which they figured that was alright since prices were seemingly going up about 10% a month and they got in rather early. They figured they'd spend a couple years there, then climb the property ladder a notch or two with some nice equity in their back pockets. A few of their neighbours did just that too... by the peak identical units were being flipped for 350-400K during the summer of '07.
Flash forward to fall of '08, she gets a new job in Calgary (and he has no trouble relocating with the same company), so the move is on. They list their place right away, in their words "aggressively priced" at ~$285,000, figure it will sell in no time. Three months on the market later, and three token price drops, they still haven't gotten as much as a wiff of an offer, and it's now listed about $270,000.
When they first listed it I tried to subtly tell them that they may be a bit over priced, and if they got an offer within 40K of their price they'd be wise to take it. They brushed me off, dollar signs in their eyes. They don't seem any less confident that they'll get their price today, and I know there isn't any point trying to tell them otherwise. I'm afraid that if they don't slash that price and quickly they're quickly losing the chance they have of clearing some money after paying the realtor and other fees... in a few months the market could have so far passed them by they won't even be able to break even, which considering they had one of those lovely zero down mortgages will leave them in a bit of a sticky situation.
They don't seem to realize the gravity of the economic downturn, and frankly their townhouse isn't all that desirable. It's in one of those developments where everyone is practically on top of each other, poorly and cheaply built, no view of anything other then the next buildings on either side, and a "yard" that is smaller then my Volkswagen. It's the kind of yuppie ghetto that will pockmark the city and eventually become de facto low income housing, a sad reminder of the housing boom and bust.
That said, their situation as far as that goes isn't that bad. They both make decent money and even if they have to take a bit of a loss it wouldn't ruin them. Their real big mistake is they also rushed out and put down an offer on a house in Calgary when they first listed... then upped their offer when apparently another offer came (on a house that had been on that market for 120+ days with no action I might add). If it were me I would have lowered by offer by 20 grand and added a condition they had to include their lawnmower and first born in the sale.
Fortunately they have a condition requiring financing approval and the sale of their old place. Which is their potential saving grace, and my hope for them. Their place isn't going to sell for what they priced it at, so they won't be able to buy the new one... and when they finally smarten up and lower their price the won't be able to afford to finance the new one. So despite their best efforts to screw themselves, I think they may be alright after all.
Not as well off if they dumped the townhouse now and rented for a couple years, then bought again, but who am I to tell someone how to lose money?!
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