The cover story on residential real estate makes clear that in uncertain markets, a “herd” mentality can get you in plenty of trouble. For instance, hoping to match the recent real estate gains of their friends neighbors, sellers tend to set prices high. Then, as the market softens, they cut prices in increments, a little at a time, doing what is called “following the market down.” In that scenario, the seller might never find a reasonable buyer.
But there’s real estate profit to be had in soft markets if your thinking is in tune with reality. Peter Coy (with Toddi Gutner, Timothy J. Mullaney, and Christopher Palmeri) writes:
Richard X. Bove, a financial services analyst at boutique investment bank Punk, Ziegel & Co., put on his green eyeshade and concluded that Florida real estate was overpriced. So earlier this year he bailed out. Bove sold his 5,600-square-foot St. Petersburg (Fla.) home for $1.2 million, twice what he paid for it a decade ago. The plan was to rent while he waited out a housing decline. But Bove couldn’t find a suitable rental, so he lowballed a four-bedroom house in Tampa and got it for $740,000 — 30% below the asking price.
(Check our Mr. Bove–all smiles poolside.)
