HarborView's developer is hitting the reset button on the Pier Homes.
Eleven of the luxury waterfront townhouses in Baltimore will be auctioned off June 28 with minimum bids 55 percent to 75 percent below the most recent asking prices. Accelerated Marketing Partners, which is handling the auction, says the minimum bids are the reserve prices -- meaning the developer will accept them if no one bids any higher.
The unit with the highest recent asking price -- nearly $2 million -- is tagged with a minimum bid of $665,000. The lowest minimum bid is $329,000 for a unit with an asking price of $1.2 million.
Of the 88 townhomes, 44 have sold and two are under contract. That leaves a lot still to sell. The goal of the auction is to drum up interest and get buyers to break up the logjam -- one that exists across the high-end market.
"In declining markets or markets that are reasonably uncertain, there tends to be a disconnect," said Jon Gollinger, co-founder of the Boston-based Accelerated Marketing Partners. "The only one who can cause traction on prices is the consumer."
Read more in today's story, including the impact this has on other sellers and homeowners.
In Gollinger's mind, the decision to slash prices and let buyers bid them up from there (if the builder is lucky) is no more complicated than Economics 101. "Let the market determine value," he says. "These 11 units are going to set a value."
There's no buyer's premium added on to the price, for the auction-savvy among you who were wondering. Gollinger says some of the units are fully completed inside, and the rest are close to complete with some finishes for buyers to choose, included in the purchase price.
The units themselves range from about 3,000 to 3,700 square feet, most with water views.
At an auction Gollinger's firm handled in Boston, buyers picked up 14 units during the event "and the market responded by knocking off a quick 20 more after the auction," he says.
Kenneth Wenhold, director of the Mid-Atlantic region for Metrostudy, a real estate market-research firm, says the Baltimore price cut sounds big enough to get buyers' attention. "It'll make it very difficult to sell against them," he added, a problem for other builders.
The rough state the high-end housing market is in nationwide can't only be attributed to the lousy luck of projects conceived when everything was zooming and delivered when sales dried up, he says. Developers started luxury projects during the housing boom with little thought "to where these buyers were going to come from."
What he's saying is that asking prices were too high even for the bubble. "These things really were doomed from the get-go," Wenhold says. As prices come down significantly, though, the potential buyer pool widens.
Gollinger says the new minimum prices for the Pier Homes are below the cost of replacement. The developer and investment team decided against hanging on in hopes of getting more at some later date.
"With the kind of ... disconnect between the buyers and sellers that's occurring in Baltimore right now, to wait it out doesn't make sense," he says. "These guys are making a decision to capitulate now. In general, I think it's always the better way to go."