DR, Bo:

My brothers, have faith in the economic certainties that you see all around you. Incomes and prices are so in a state of disequilibrium that even Senator Dodd can see it.

We had our 2004. We'll have our repeat of CT RE circa 1987. It's coming, be patient.

A house that we watch in Bethel has gone down over 25% from peak - and that 25% number is assuming they get their new "wishing price." The adjustments are happening right now, especially on the $500K+ properties.

My guess is that we will see some serious price capitulation come fall. You won’t have to wait much longer.

Keep your powder dry.

-John

DR,

Thanks for these thoughts, and especially the link. There is some really useful data there. I looked for this info a few weeks ago when the headlines about Deutsche Bank's prediction that the NYC Metro Area would drop another 40% first hit, but with no success.

I suspect we will stay in this area too for professional reasons, but it is so difficult to accept that buying into a market like this where home prices are so out of step with incomes, means that over the course of our lives we will be essentially throwing away money into excessive interest payments, and limiting our investment options by having to sink so much of our income into housing. It's a great place to live, but a difficult place to live well, or save.

Bo Zho, you raise an interesting question. The Northeast seems to have been the last area to maintain the real estate bubble and prices don't seem to be going down very quickly. There has been an uptick on the low end, due to the 8,000 tax credit and the normal spring buying season. That is why you see houses in the $200-300K range selling right now. What I see also is that not much above $400-500K is selling. These properties have the most value to lose, and nobody with that kind of money wants to catch a falling knife. I'm still going to stay in CT, since my job is here and a lot of people I know are here, but for those that have the choice, there are other markets that are better right now. I don't expect things to really turn around until 2011-2012 at least, and it might take until 2013 or later for the high end to really come down to reasonable prices. I think reasonable prices are where we were in 1999 or 2000. Also, the market always overcorrects on both the upside and the downside, so 1997 prices are more likely than 2000 prices in the

If you want to see how far we have yet to go, I highly recommend this report from Deutsche Bank. It uses the latest numbers from June, 2009, and has some great analysis of all the major market areas, including Bridgeport/Stamford/Norwalk (Fairfield County) and New Haven/Milford:

http://matrix.millersamuel.com/wp-content/6-2009/US%20Home%2…

They note that Fairfield county has currently declined 14% from peak and predict that at the trough, Fairfield county will have declined a total of 31.1% I think their numbers are as close to a good prediction as you can get.

DR,
I too am a prospective buyer in Fairfield Co. (we are looking to buy in Norwalk chiefly because it has what would is the closest to affordable for us) who has been competely flummoxed by the disconnect between this town's median income and housing prices. Also, I am struggling to understand why average asking prices in Norwalk are over $800k when the average sale price for Q1 '09 was around $310k. I appreciate the thought you've put into these responses, and the hard data sources you provided (particularly the Demographia Housing Affordability Study). If the Demographia study is correct, however, the lack of affordable houses in Fairfield Co. has more to do with local policies and land use controls influencing development patterns than forces that can be influenced by market booms and busts. If you or I were to wait on the sidelines until affordability hits a reasonable ratio in Fairfield Co., I think we would be still renting when we are old and gray. Do you think the smart move is to get out of this area?

JR said, “Why would you enjoy seeing a meltdown of the housing market? Many innocent people are going to be hurt in the process, including some of those waiting on the sidelines, maybe even yourself. Many industries may be affected. Did I say something about shadenfreude a few months ago? Looks like it’s back.”

JR, I’m enjoying the housing implosion for one simple reason. The meltdown is the path back to *real* wealth creation and accumulation. The faster we can get to the bottom the better. We can’t build any real wealth until the losers take their losses; then we can move on.

OK – maybe two reasons. It’s fun to see all the naked swimmers as the tide goes out.

The 2000-2006 mania might have resulted in higher real estate prices, but as sellers are now finding, those gains were mostly illusionary. The mania was the result of too many dollars chasing too few assets. The fallout of which was a building frenzy that resulted in an oversupply of housing units in the millions.

Although I appreciate your concern, it’s misplaced. Don’t worry about me. My “business” gets better the worse the economy gets.

DR-

Realtor.com is not a global MLS.
Rather, Realtor.com accepts feeds from most (not all) MLS's around the country.
Realtor.com is strictly an advertising medium. Not all listing information is found in Realtor.com.
As an agent, if your MLS provides a feed to Realtor.com, but you wish to add more info to your listings (such as additional photos or description), you must pay for that.

Many Realtors are not fond of Realtor.com. In fact, Realtor.com is not even run by NAR but rather by a separate, for-profit company. A Realtor can spend a fortune advertising on Realtor.com.

Each MLS (there are now 5 in Connecticut alone - there used to be more) is separate. Some are run as a conglomerate by the local brokers, whereas others are run by a non-profit organization. (I don't believe any are run by for-profit organizations, but I'm not positive about that). There are some standards from MLS to MLS, but each one does also get to make its own rules.

The MLS is set up to allow cooperation between brokers, so brokers have access to other brokers listings.
The MLS is not technically considered an advertising medium, but rather as an offer of cooperation between brokers.
In recent years, with the advent of the internet, MLS listings have been fed to various sites, including Realtor.com. These sites ARE advertising vehicles. They are NOT MLS's.

Access to the MLS is reserved for real estate professionals only, and we pay (separately from our dues to NAR) to belong and access the information.
Buyers and sellers are today able to obtain more information than ever about properties for sale. However, any buyer or seller is able to obtain any and all information they require through their agent, provided their agent is a member of the MLS.

(Not all agents are members of an MLS, and agents who are not members do not have access. I've heard from many, many "agents" over the years who use Realtor.com to find listings for their clients and then call the listing agent for information. In my opinion, these are not true "agents" and are not providing proper representation to their clients. Access to the proper MLS is vital in order to represent a client properly. Not being willing or able to pay the ongoing MLS membership/access fees, in my opinion, not a good enough reason to not provide a buyer or seller with the representation they deserve.)

Much of the 'public access' part that is kept out of the public contains information such as the buyer's agent involved with the sale, clients telephone numbers and specific showing times, whether the house is vacant or occupied, pet in house, children in house, etc., information that does not need to be thrown out there to the public. All this NAR bashing and people don't really understand that they don't have a lot to do with the things you are bashing them about. It's wonderful to hear different opinions on the market from all the different posters but the incorrect 'knowledge' of contract specifics, ownership and daily running of the mls systems and other areas is as annoying to us as 'Top Gun' is to pilots, 'War Games' to scope dopes, etc., I'm sure that many of you that post pretty interesting things on the site are also in professions that we could not walk right in and correctly explain but we probably have enough knowledge of either by past experience or quick google copy and pasting to make ourselves just dangerous enough.

No problem.

Realtor.com gets it's feeds from all the local MLS. Gawd, what I wouldn't give for a national MLS... that would rock. And oddly enough, I think it would actually be a cheaper membership... while there would be more work... it would be only 1 site, and so many more members to share the cost.

they have a national MLS in Canada, and they pay (on average) less per month, than we do.

Alan, thanks for the explanation. I didn't know the MLS was operated by different companies in different regions. I assumed the MLS was run by the NAR, based on the fact that realtor.com has a global MLS of the entire US.

Well, I'm really not asking for your advice Bryan. Atlanta is a very different market than Fairfield County Connecticut. I just wanted to better understand how your brain can rationalize having two different realities at the same time.

Markets are cyclical. Either the market is in decline and it's not a good time to buy, or the market is in growth and it is a good time to buy. Another good time to buy might be in the trough before market growth.

To take my example from earlier of the condo I was about to purchase. How many years of normal market appreciation would it take me to wipe out 19% negative equity in just 9 months? I could probably live there for 20 years and not be able to sell it without losing money.

Or I could wait 2-3 years and buy it at $200,000 then enjoy normal market appreciation and not have to worry about a negative equity situation.

I grow tired of talking with you. I'd rather discuss the economics with someone intelligent like Don.

well, the MLS is an advertising media... so no surprise that it's not designed to allow the buyer to get the lowest price.

and I guess I have a higher opinion of the public, than you do, as I don't think this fools them at all.

also... again, it's NOT the NAR practicing deceptive trade practices. NAR does not own all the 700+ MLS around the country. Each MLS makes up it's own rules, as should be evident by the fact that Don's does not support cumulative days on market yeet.

Bryan Furse, did you create a sockpuppet account to speak in this thread so it won't show up on your comment history? That seems like an immature thing to do.

Here's a simple question for you that you failed to answer: How can you be telling people in Atlanta to smash the big button that says DEAL, which I take as saying "buy now while the market is hot", and at the same time say you're not telling your clients to buy now?

You just spent about 3 pages of text trying to explain why you don't want to answer John's simple question.

To briefly explain, when you said earlier that you wanted to give free advice to those in Atlanta, to buy now. The only assumption that was made was that if you're recommending buying now, you must think the prices will go up.

John asked a simple question: When in history have prices ever gone up when the market is in such decline as it is now? The answer, which you fail to give, is simply that it hasn't.

There are some good professional replies in this thread, but using sockpuppet accounts and spending 3 pages of text explaining why you don't want to answer his question doesn't add anything to the conversation.

I guess where you and I differ, is that I see the constantly delisting and relisting in order to push the property to the top of the list and hide the price reductions as a deceptive practice, designed to fool an uneducated buyer into thinking there is no downward movement in price on the property.

I believe it is a deceptive trade practice, and you can see it play out in thousands of listings nationwide. It is also designed to allow the seller to extract the maximum amount of money from a property, not to allow the buyer to get the lowest possible price. After all, commissions are higher if the sales price is higher.

How long will we as consumers allow the NAR to get away with these deceptive trade practices? I think everyone should call the FTC and start reporting these deceptive trade practices. Sadly, congress gets too much money from the NAR for any action to ever be taken... If the FTC ever started real investigations into the deceptive trade practices of the real estate industry, congress would step in and tell them to leave the realtors alone.

I guess, the missing link, here, disgruntled, is that the property history that Don pulled (Don the knowledgeable and honest agent) is available to each and every member of that MLS... and they would happily and willingly pull up that information on any house that you were interested in.

So if you showed some interest in that property, the first thing your buyer's agent would do is to pull the property history (let's see what they've paid, how long they've been on the market, and any price reductions they've taken). Then we'd pull any local comparables.

So I don't see any deception here. Their relisting in 09 as new, after being off market since 3/08 is legitimate (although their price is probably still high)... the relisting as new in January of 07 was merely a marketing ploy,... probably an attempt to get the property back on the "hotsheet" of the MLS. Not an attempt to deceive (as you can see, any agent can check the history)... but an attempt to put it in front of the agent's eyeballs again.

btw... our NAR dues does not pay for the MLS. There are over 700 MLS across the country and each and every one is run by a local board. We pay separate dues to those boards for MLS access.

Don, excellent analysis on that property. You impress me as an agent that is very knowledgeable and honest. I admit I haven't checked the price fluctuations as closely, I've just seen the for sale sign on the property for the last 3 years.

It would be great if the public had access to that information, but I guess that is the hidden part of the MLS that RE agents pay their annual dues to the NAR to get access to.

I believe the database should be public and transparent, and not hidden. I also look forward to adding features like cumulative days on the market.

Just to clarify some things about our local MLS and also MLS # 98416242

Unfortunately, our local MLS does not yet include a cumulative days on market. But, they are supposedly working on adding that in.

For this particular listing, it is not re-listed at $599,000 each time.

Here is the complete history of this particular property:
The home was purchased in June, 2005, for $285,000 and then torn down and rebuilt.

4/21/2006 - listed for $799,000.
4/21/2006 - reduced to $769,900.
6/29/2006 - reduced to $749,900
8/13/2006 - reduced to $729,900
10/18/2006 - reduced to $699,000
1/18/2007 - listing was cancelled.

1/22/2007 - listed as new for $689,000
2/16/07 - withdrawn from the market.

3/15/2007 - listed as new for $664,000
8/2/2007 - reduced to $644,000
9/7/2007 - reduced to $619,000.
10/30/2007 - reduced to $599,000
3/16/2008 - listing expired unsold.

4/3/2009 - listed as new for $599,000
Currently active.


They did cancel this listing once to then enter it as a "new" listing. That is not a practice I would condone. Once our MLS utilizes cumulative days on market, this marketing trick will become obsolete. Another time the listing agreement actually expired.
But, all agents with access to the MLS can click on the History of the property and see all the details I outlined above.

Is the access to all this detailed history a joke? I don't think so. All this information is available to all agents. Any agent representing a buyer should access this information and share and discuss it with their clients, should their clients be interested in the home.

Is this home overpriced? Possibly. I have not performed an analysis of the home to determine its actual value in today's market. Was it overpriced in the past? Obviously, as it did not sell at any of the previous prices If they overbuilt for the area, then yes, the home's value will be drawn down by the neighboring property values.

disgrunt.

your description of how the MLS is a joke, describes a seller and his Realtor listing and delisting a home. Supposedly, this is somehow "fooling" the public into thinking this is a new listing.

Yet, the property hasn't sold... clearly the public hasn't been "fooled". In most MLS, the house has to be offmarket for some reasonable period of time, to stop the "market time" clock. (in some cases 90 days, and in some 180 days).

Additionally, most MLS across the country have a feature called "cumulative days on market" or someway to view the history of the home based on the PIN number. So even though the listing may say "new", or only a few days, it doesn't hide the fact that the house has been relisted.

Yes, it's a marketing ploy, but nowhere near as sinister as you make it sound, as the MLS is marketing toward other Realtors, who know how to pull down cumulative days, and look up history.

John: JR – when we discuss the median price of homes versus the median income, we’re talking about historical affordability rates. Just because that number is out of whack doesn’t mean that we’re saying it’s “unfair.” To illustrate it shows the manic nature of this market and it’s not meant to be a social commentary.

JR: I'm not sure who "we" is, John. Do you have a mouse in your pocket? :) I do see other posters with many of the same sentiments you have, say prices are “unfair”.

John: When I talk about these numbers, I’m just saying that both the denominator and the numerator of that affordability calculation are correcting; and they will continue to correct in spectacular fashion. Enjoy the show. I know I am.

JR: Why would you enjoy seeing a meltdown of the housing market? Many innocent people are going to be hurt in the process, including some of those waiting on the sidelines, maybe even yourself. Many industries may be affected. Did I say something about shadenfreude a few months ago? Looks like it’s back.

Bryan Furse - I asked you a very pointed and simple question that you failed to address.

If you would have your clients truly fear that they'll miss the boat once this market recovers, could you please tell us the last time a real estate downturn was followed by a fast moving price recovery on the up-side? It's really simple. Please answer.

---

JR – when we discuss the median price of homes versus the median income, we’re talking about historical affordability rates. Just because that number is out of whack doesn’t mean that we’re saying it’s “unfair.” To illustrate it shows the manic nature of this market and it’s not meant to be a social commentary.

When I talk about these numbers, I’m just saying that both the denominator and the numerator of that affordability calculation are correcting; and they will continue to correct in spectacular fashion. Enjoy the show. I know I am.

For those of you defending the MLS, here is how I know it is a joke. Check out MLS # 98416242. You would think this house has just been listed on April 3rd, 2009 for $599,000. It's new construction only 3 years old.

What you don't know about it is that the property was bought by a flipper in 2005 for $285,000. Then, they promptly bulldozed the house and built a 3,000 sq. foot McMansion on a teeny tiny .15 acre property. Mind you, this is in a neighborhood filled with 900 sq. foot ranches and capes with an average price of $250,000.

Every year the seller delists the property, then relists it for $599,000, hoping to strike it rich. It looks to a buyer as if it's a brand new property on the market, fresh and ready for them to move in to. What they don't realize is that the seller is desperate, has been trying to sell it for twice what they bought it for for the past 3 years with no success! Who in their right mind is willing to buy a $600K property in a $250K neighborhood?

How do I know all this? I live in the neighborhood and watch every year as they delist it and relist it, trying to mess with the MLS to make the listing more and more appealing. Sorry, but the property is not selling. It's a nice house I'll grant you that, but not worth $600K. More like 300-400K, and even that's a stretch considering the small lot and the neighborhood property values.

This is one small example of bubble stupidity that I see play out over and over again. Those of us that are smart and think a little bit just choose to laugh to ourselves and realize we will have our chance to buy a house for a fair price eventually.

Leading economists such as George Soros say that markets always overshoot prices on the upside, as well as the downside. Smart money is waiting for the overshoot on the downside, which has yet to happen.

Bryan said:
~~~~~~~~~~~~~~~~
Free advice: Anyone looking to buy in Atlanta, I would NOT wait. There are many reasons for this. If buying a house were compared to "Deal or No Deal," NOW is when you should be smashing that button and yelling "DEAL!"
~~~~~~~~~~~~~~~~
Then a few hours later, Bryan said:
~~~~~~~~~~~~~~~~
What I can't seem to get through to you is that I DON'T HAVE A BUY NOW attitude!
~~~~~~~~~~~~~~~~

What exactly are you trying to say Bryan? Are you saying smash the button and buy now, or not?

Don't look for a bottom! You will never find it! Use common sense! The cycle will not bottom until approximately 2013! Ask me how I know! Better yet, mark it on your calendar! There are always good buys because there are always motivated sellers!

This is the problem with RE agents, and I realize I'm making a generalization here. I have worked with very professional ones, who know their markets well and do good comps, but not a single one of them will tell a buyer the honest truth: That they should wait and see where the market goes because it's only going to get worse (lower home prices).
~~~~~~~~~~~~
You’re opinion of the public seems even lower than that of real estate agents. They don’t follow the same news we all follow? They aren’t aware of where prices seem to be heading? Sometimes people HAVE to buy or sell. Sometimes they WANT to own the place they live in. I would never rent. I have dogs, cats, I like to change my house whenever I want without asking persmission. I want a new kitchen. I want new appliances. My landlord is going to buy them for me? I don’t think so. YOu may not care where or how you live, but others do.

J R, the MLS database is a complete joke. Listings are constantly manipulated by RE agents to create the false impression that a property is "in demand." Listings are pulled and relisted, to avoid showing too many days on the market. Listings are altered without notifying the public. The entire database is setup in a way that allows RE agents to manipulate it as a sales tool.

Craigslist would make a far better database and it's free. Please tell me why we need the MLS at all? Please tell me why we need the NAR at all?

~~~~~~~~~~~
How exactly are listings “manipulated” to look like they are “in demand”? Maybe I can learn something here. Many MLS have rules about relisting. But buyers seem to be aware of homes that are taken off the market for a while and then relisted, so I don’t think it’s getting past anyone. What alterations are being made with “notifying” the public, and why do they need to be notified? My buyers notice when an listing is changed, and ask me what has changed. They know when something is updated. I sometimes change a description, or add something a homeowner thinks should be added, or rewrite the description. Is this a deception? How so? As far as Craigslist goes, you have to be kidding. There is noregulation, no rhyme or reason in how listings are categorized. I think the MLS is a great tool for the pubilc to use.

As for the NAR, personally, I can do without them myself. I’d rather see my dues go to educate the public about what my job entails rather than saying what a great time it is to buy a house.

Let me add a personal story. Last August, 2008, I was about to purchase a 1600 sq. foot condo in Norwalk CT for $408,000. The condo was valued according to Zillow at $429,000, and I thought I was getting a deal. In the end, the sellers backed out and decided to take it off the market for personal reasons. I think they were getting a divorce and decided not to sell because they had only purchased in 2007 and didn't want to lose money.

That same condo today is valued at $331,000. In the last 9 months it has lost $77,000 worth of value. I would have wiped out my entire 20% downpayment and ended up with negative equity after only 9 months.

You know what the real estate agent, who was very professional and knew the market very well (20 years of experience) told me? You can't predict when the bottom will end, and that prices had already corrected themselves.

Looks like he was wrong. I am very glad the seller backed out, or I would be upside down on my mortgage already, after only 9 months.

J R, the MLS database is a complete joke. Listings are constantly manipulated by RE agents to create the false impression that a property is "in demand." Listings are pulled and relisted, to avoid showing too many days on the market. Listings are altered without notifying the public. The entire database is setup in a way that allows RE agents to manipulate it as a sales tool.

Craigslist would make a far better database and it's free. Please tell me why we need the MLS at all? Please tell me why we need the NAR at all?

Lori, I can come down to Yorktown and overpay there as well, what a deal!

Bryan, I appreciate the sentiment you have, that you are trying to help buyers make a good decision, but your attitude of "buy now" does them no service.

This is the problem with RE agents, and I realize I'm making a generalization here. I have worked with very professional ones, who know their markets well and do good comps, but not a single one of them will tell a buyer the honest truth: That they should wait and see where the market goes because it's only going to get worse (lower home prices).

So, let's take your market of Atlanta, GA. I have a colleague that lives there and loves it. I see according to Trulia that there are 12,990 homes for sale and only 6,678 sold in the last year. It looks like you have 2 years of inventory in your market applying downward price pressure there as well. Can you point to one time in history when an excess of inventory has created upward price pressure? These are the basic laws of supply and demand and you do your clients a huge disservice by telling them to buy now, when it's clear that now is not a good time to buy.

But, I see commercials on the TV and hear them on the radio, paid for by your NAR dues, telling me every day that it is a good time to buy. I don't believe them for one second. If it was really a good time to buy, you wouldn't need to blanket the airwaves with advertising. You would have buyers lined up making offers on every property the day it was listed. The fact that you have 2 years of inventory sitting there leads me to believe that the fantasy is far from reality.

Look at another indicator: Average listing price in Atlanta is $480,065. Average sales price is $96,000, down a whopping 40% year over year. I would hazard a guess that median family income in Atlanta is far less than $160,021 a year. That is the median family income needed to support a $480,000 home.

So, please elaborate Bryan, on why now is a good time to buy.

Where I sit, patiently waiting for the bubble cheerleaders to stop cheering, it's a fantasy land where we all live in million dollar McMansions purchased on interest only option-ARMs that will only reset in the year 3000...

JR,

You know I have nothing but affection for you, but I fail to see how you make a connection between real estate bears and socialists. I think the root is that you might not know what a socialist is because we (bears) are generally the furthest thing from it.

~~~~~~~~~~~~~~

I love you, too J the B, but when I hear about how out of proportion prices are from middle class income and fairness, I think socialism.

Bryan, you crack me up. REALTOR just means you paid the NAR their extortion fee so you could add a word to your business card.
~~~~~~~~~~~~

You like having access to the MLS don’t you? Without us paying our fees there would be none.

Dis, come on down to Yorktown with your $$ and you can afford to buy the house you are looking for...as a matter of fact, you can buy one for you and JTB.

Bryan, you crack me up. REALTOR just means you paid the NAR their extortion fee so you could add a word to your business card. Good for you, would you like a cookie?

When you said:
~~~~~~~~
Free advice: Anyone looking to buy in Atlanta, I would NOT wait. There are many reasons for this.
~~~~~~~~

What are the many reasons? All I've heard you say are sales tactics designed to provoke an emotional response or urge to buy. While, I'm sure your sales skills are spectacular, what I am looking for as a buyer are HARD FACTS.

To be fair, JR, when I say "middle class", my girlfriend and I both make 6 digit incomes. In lower Fairfield county, bringing in a quarter of million per year is pretty much "middle class". Even making that much income, I'm still not going to pay $500K for a tiny, 80 year old cape with a kitchen from the 70s.

On 250K a year, I _should_ be able to afford a 2,500 - 3,000 sq. foot home that was built sometime in the last 2 decades, in a decent neighborhood with good schools.

The fact that the market is so far out of whack that people are paying half a million for a rotting wooden box that hasn't seen a new piece of carpet or window treatment for the last quarter century should be a huge indicator that prices are inflated.

And, please, what does socialism have to do with this? I'm tired of having my tax dollars subsidize flippers. That sounds more like socialism than letting the market correct itself.

JR,

You know I have nothing but affection for you, but I fail to see how you make a connection between real estate bears and socialists. I think the root is that you might not know what a socialist is because we (bears) are generally the furthest thing from it.

We’re all free market boosters who see housing for what it is; a consumption good, not an investment and not something to “flip.” The smart money that stayed on the sidelines during the mania, the money that’s now watching this slow-motion train wreck, isn’t going to start another bubble. That money will stabilize home values when it flows into the market, but we have a long way down to go before we reach that point…

All the best,
-John

JR, I continue to be amazed at your belief that the bears are advocating for the redistribution of gains or for government intervention in the free markets.
~~~~~~~~~~~~

I don't think you're for the distribution of gains or losses, but what you call "bears" seem to be is socialist. I'm tired of reading about how people can't afford homes or they shouldn't have 50 year mortgages etc. I'm all for letting the bubble burst, I've said it many times. I've also said that's when you folks will rush in, buy houses, and flip them, creating another bubble.

Let the bubble pop already so that we can afford homes on our middle-class incomes.
~~~~~~~~~~~
Homes were expensive before the bubble, too, relative to income. I paid $55,000 for my first home. I made $250 a week. I sell homes between 800,000 and a million to people who seem to have no problem affording them on their salaries. Who is to say what "should" be. Where did all these socialists come from? Life isn't fair. It wasn't fair when I bought my first home--BUT I DID IT!-- and it isn't fair now.

Bryan... LOL... No concrete data, and your advice is to pretend like you're on a game show and mash a big button that says "DEAL!"

Here's free advice: Send $1000 to my Paypal account right now! I guarantee you'll lose a lot less money than if you follow Bryan's advice.

Bryan,

Since you're a student of history, why don't you tell us about the last real estate downturn that resulted in a fast moving recovery to the up-side?

Thanks,
-John

My math is bad below... In a scenario where the home is appreciating by 3% a year but inflation is also 3%, inflation wipes out any gains you might make and property tax and repairs/upkeep puts you in the red.

I'm with John the Bruce on this one. We DO NOT WANT market intervention by the government. Bailing out failed banks is killing the market. Banks are keeping shadow inventory of foreclosures off the market to avoid causing prices to drop. Banks are also playing games by putting foreclosures on the market at too good to be true prices, getting multiple bids, and refusing all of the bids because it doesn't come close to what they really want for the property.

In a true fair market, banks would be unable to play these dirty tricks because they would need to sell their bad assets (foreclosures) to balance their books, or go into receivership/bankruptcy.

In our crony version of capitalism, the banks don't care if they sell any foreclosures because they'll keep getting cash injections from the taxpayers indefinitely. Obama already said that based on the "stress tests", they will prop up any banks that don't have enough money.

If I was a banker, why would I sell any foreclosures at a loss at all right now? I'll just sit on the bad assets and show them on my books at "bubble prices", thanks to the newly relaxed mark-to-market rules. It looks better to my shareholders to have a $1 million foreclosure asset on my books than to sell it for $500,000 and show a loss.

Until this insanity stops, the market can't return to normal. As tax paying Americans, we DEMAND that our government quit propping up failed banks and let the market decide what houses are worth.

This is why I'm a "Disgruntled Renter." My tax dollars subsidized the flippers, shady mortgage companies who inflated the bubble, and now they're subsidizing the banks who are trying desperately to keep re-inflating it.

Let the bubble pop already so that we can afford homes on our middle-class incomes.

The solution is to let things run their course with the minimum amount of intervention and let the "losers" take their losses. That’s it.

JR, I continue to be amazed at your belief that the bears are advocating for the redistribution of gains or for government intervention in the free markets.

Far from it, we're all advocating for things to be left alone such that the re-pricing of these overvalued assets can continue in earnest.

That's bad news John. What is your solution? should they all walk away from their debts, even if they're still keeping up with the payments? Maybe we should just give them all money to make up for the equity they lost. We could get it by taking it away from all the lucky people who got out at the top where we will never see their former home's prices again. Darn those lucky people.

Gotta love the CT.

From yesterdays Courant:

"In Connecticut, 14 percent of all houses and condominiums with mortgages on them were "underwater" as of the end of 2008 — meaning the amount owed on the mortgage was more than the value of the home — according to a report by The Warren Group. That was 95,640 residential properties in all, a number that's probably still rising along with short sales."

Let the good times roll.

DR, that is an excellent (non-personal attack) explanation of why many people are standing on the sidelines. Thank you.

Ok, I'll try this again without personal attacks, since Nicole has inspired me to write something today.

As John so eloquently wrote, you can't argue with historical data for over 100 years and the Case/Shiller index is widely viewed as valuable data, even by the NAR. The great thing about bubbles is that someone is always willing to declare that the fundamentals of economics have changed, and that it is perfectly logical that house prices will increase exponentially for decades to come. Just as we saw happen during the tech stock bubble of the 90s, they are always wrong.

Why is Real Estate such a great investment for the average person to make? One word: L-E-V-E-R-A-G-E. There are very few other investments that average people can make that allow you to leverage yourself 5 to 1 (with 20% down), or even 10 to 1 or greater (with an FHA loan). This means that in ordinary times, your average 3% annual increase gets multiplied by 5 and you might get a 15% annual return. Subtract 3% for inflation and you're still up 12% year over year.

The bad thing about leverage is that it works just as bad for you in reverse. In a declining market like we're seeing right now, your losses get multipled by 5 and you can easily wipe out your entire down payment and all equity, and end up in the red.

So, let's imagine for a second the average homebuyer that decided "it's a great time to buy! (TM)" back in 2008. They put $50,000 down on a $500,000 house in Stamford, leveraging themselves 10 to 1 on this property. Now let's say the property went down the average 23.7% in the last 12 months, and is currently valued at $381,500.

The poor homebuyer that only bought 12 months ago leveraging themselves 10 to 1, has leveraged their losses into a 237% loss on their original investment. Their $50,000 investment has turned into a $118,500 loss!

Now you can see why nobody smart enough to do the numbers is buying right now. The phrase "catching falling knives" is very appropriate in this context. Far better to wait until the knife is stuck in the floor and pull it out safely, than to try and catch it on the way down.

all I can say is WOW. :) John, I am not saying you have don't a point but things are getting a little testy, don't ya think! lol I know cash flow. my clients have it. I can only speak for myself.

Oh Nicole Borsey,

Yes, I'm filled with generalizations. I just intersperse my erudite market observations and wit with the horror of the data.

Shedding light on the data might be viewed as “putting fear into people,” but I’m putting forward hard data instead of anecdotes and f-e-e-l-i-n-g-s. Just because you feel that things are all lollipops-and-sunshine because you are not personally underwater doesn’t make it the same for everyone else.

Then again, data doesn’t make for good sales talk. But anecdotes sure do.

Nicole says, “you have no clue what prices I am selling these investments at”

You’re right. I don’t. But I do have an idea since Stamford median prices are DOWN 23.7 percent y-o-y. That’s not an anecdote. It’s data. Also, sales in Stamford are down 50 percent y-o-y. Good deals abound, I’m sure. Let me go and find my checkbook.

So, even if “the numbers work” right now, do you want to buy a rapidly depreciating asset in a market marketed by declining employment, negative wage growth and negative equity return? Of course you don’t. Because as educated people, we all know what’s coming given those indicators. If you don’t, well, maybe you should be selling cars instead of real estate.

-John

"Anyone who bought after 2002 in Connecticut overpaid."

wow are these two guys are filled with generalizations. you have no clue what prices I am selling these investments at... I love how you quote Yale Economists, yet, make ridiculous comments like:

"Investors that “eat it up” now are going to be eating a pistol in the coming 2 years. Take it to the bank."

you are quite the intelligent one! I am not saying we've already hit bottom, but if the numbers work, then what exactly is the problem?

it's the doom and gloom people like you who are putting the fear in people. why don't you just worry about your own investments :)

Nicole,

You seem to be trying support your argument with anecdotes instead of data. There is a difference.

Noted Yale Economist Robert Shiller performed a study wherein he analyzed housing price data all the way back to 1890. His conclusion? The annual long term gains in U.S. housing run about 3% - per year.

Factor in inflation and your real rate of return is…well…pretty low. Maybe 1%.

The supply picture in Fairfield County is an absolute and utter horror show. Inventories could be reduced by 50% tomorrow and it would still look abysmal.

Anyone who bought after 2002 in Connecticut overpaid. Investors that “eat it up” now are going to be eating a pistol in the coming 2 years. Take it to the bank.

Good luck,
-John

I didn't read the entire thread, just too much going on...but one thing caught my eye...you stated:

"Actually, renting is a better financial decision in most cases, especially right now. " where are you getting your info!!?? that UK article...from what i saw of the first chart, it shows a 30 year return on homes as 1%!! are you kidding me?

there are actually so many good deals out there where the rental value is WAY higher than what the PITI payments would be. I am finding deals with HUGE cash flow and my investors are eating them up!

As for the 2004 "boom" and the people who are underwater... it's not true across the board. Most of those people underwater bought on emotion and overpaid... and on top of it, put nothing down, then had adjustable rates. I have plenty of clients who purchased in 2004 (myself included) who is not upside down, AND have equity. sorry but I disagree.

DR,

If you keep it civil, opposing viewpoints are welcomed and encouraged. Just keep any personal attacks out of the equation and you're good to go.

-John

My answer seems to have been censored by the Trulia community. As I see now this is not a forum that values truth and freedom of speech, I'll kindly take my internet eyeballs to another forum. Good day.