Yes, Karen, I will keep my fingers crossed for you! It will be good for all. My in-laws are in L.A , Encino and Pasadena, specifically. My sister in law is looking but has been for the last yera or so. Maybe they will finally buy.

Sylvia

Thu Feb 7 2008, 22:20

Sylvia,

We haven't seen the buyers yet! I hope your buzz spreads to Southern California.

Karen Miller

Thu Feb 7 2008, 22:04

In the Marin, CA area, our buyers are out again! My office is quite buoyed by what we are seeing.

This is especially true after the nice buzz about the town, the fed interest rate cut, and yes, the foreclosures and reo that are driving prices down - I have seen parents coming out and shop for their out of town kids, a great time to get those young folks who could not affords homes here a chance to own - a few houses are actually so low that they are getting multiple offers (o.k. everything is relative)..

Yes, I think we are pretty successful in explaining that to buyers, but guess what, places like Trulia and local paper help also - words travel fast that this is a great time to buy.

Sylvia

Thu Feb 7 2008, 21:37

Hey Walstmnky,

Yes, I believe Buyers are still dragging their feet - out here in LA - but I am starting to see more and more come out of the woodworks, so to speak. I am guessing that the increased activity from home buyers is due to the recent rate cuts, the nearly executed Stimulus Program, and the nearly agreed to WGA (Writer's Guild of America) contract.

That is my short answer and I am still looking forward to answering this question in further detail, and with statistics, in the near future!

To all, have a great weekend!!
~ jordan elias

Thu Feb 7 2008, 20:16

JR, I am bi-coastal--I live in LA and New York, so I ask you the same question. A rule of thumb I have been taught about real estate is: a home purchase should cost 100 to 120 the rent of a comparable property. Do you disagree with this?

If so:
1) Are there properties with that multiple right now in LA & New York City?

I have no idea if there are properties with that multiple in NYC because I am on the East End of LI, but I can assume there are properties within someon's multiple because NYC is not having problems selling and retaining the prices asked. Where I am, I ask homeowners "who do you think can afford to live in your house?" in an effort to get them to lower their "wanting price", and invariably some second home buyer comes from the city and actually pays some of these inflated prices. So while I get what you're asking, I don't see that it is having an effect.
~~~~~~~~~~~~~~~~
2) Please provide examples.
JR: Like I said, I'mnot in NYC so I can't.
~~~~~~~~~~~~~~~~~~
3) If they are not, and historical facts show that home prices have always been in line with rents until the past four years, then why go against history? Why not wait to see how home prices react, as they are currently being dragged down?
JR: We have no idea how much they're being dragged down, since as you said, sellers have a seige mentality and are digging in.

Mon Feb 4 2008, 09:05

For you the decision is different. If we were to make an accurate analogy between a buyer in this market facing a decision to buy or wait, then the appropriate actions for you would be to upgrade your current house vs. wait. And you have voted with your feet and waited (maybe you don't need a bigger house, but still). Heck, you even considered selling out. See, how diametrically opposed your position is with that of a buyer? Read between the lines of what you said, words like cashing out, wait for bargains, etc. That means you would cash out if the numbers were right for you, and you would wait until the real bargains show up. By not going after the "bargains" now you have voted with your actions that there are no bargais per se, as far as your threshold for return on investment is concerned.
~~~~~~~~~~~~~~~~
No, I wouln't sell if the price was right. I'm not going to sell when the real bargains come, either. I am going to buy the bargains and rent them out. You say my position is diametrically oppsed to that of a buyer, I am looking at it like a buyer AND a seller. And P.S., I have investors that I am trying to talk OUT of buying now because I think prices will fall a lot more.


!!!!!!!!!!!!!!!!!!!!!
Someone who is renting now justifies CONTINUING to rent the same was as you justify continuing what you are doing.
~~~~~~~~~~~~~~~~
I couldn't imagine renting so I can't identify. I doesn't make sense to me.

!!!!!!!!!!!!!!

BTW, if you were interested in cashing out the equity in your house and did not want to sell your house, there are ways to do that (no, I am not talking about REFI, I am talking about actually giving up some of the equity in your house in exchange for cash today). Just search the web, it's not secret.
~~~~~~~~~~~~~~~~
You're kidding, right? I'm happier being debt free. I don't need to tap into my equity, if I want to add I'll do it the right way.

Mon Feb 4 2008, 08:59

I'd like to take a little break from the heated discussion whether buying or waiting is the right decision, and ask the real estate agents a question.

It has been about 15 days since Jordan asked the original question.

Do you think that buyers are still dragging their feet, or has that changed?~
~~~~~~~~~~~~~~~
In the past 15 days? No, nothing has changed and as long as seller's refuse to lower their prices (for whatever reason. I know some "cant't", as if their ability to lower the price affects whatthe house is worth), we will continue to have record inventory. Houses priced right sell. and quickly.

Mon Feb 4 2008, 08:53

All: interesting discussion, and kudos for keeping it civil.

One issue I see happening in the small market I track for my own purposes is that prices can't really go down unless something drastic happens, like new tax rules for short sales or new bankruptcy laws. This is because so many sellers bought at the top of the market between late 2004 and 2007, and they're already upside down by 5 or 6 digits. These are typically folks who really couldn't afford to buy in the first place, so they can't weather a $60,000 loss. Renting out their home doesn't begin to cover the mortgage,
so they cling to the price they need so they don't lose their shirt.

Right now, the only homes I see moving are priced well below what they would have fetched in 2005. Those are usually owned by sellers who bought in the 1990s or earlier.

I wonder if we're going to have a frozen market with record high inventories that simply will not move.

Sun Feb 3 2008, 12:13

From my vantage point, I think buyers are slow to react for one simple reason. The supply is at an all-time high right now and so most feel they will wait it out until that 'just right' (albeit fantasy) steal comes along. They may want to buy, but are not in a desperate position so they do not feel as though they have to buy. They do not fear the home they have their eye on will be gone if they don't immediately react, and truth be told, if they do wait too long, there is still a huge inventory out there just waiting for an offer. On the flip side, buyers do want that bottom basement bargain purchase and sellers are still digging in their heels refusing to recognize the resale housing glut. They are still comparing their own homes to homes that sold years ago for exhorbitant prices and they still feel this is what they should walk away from the table with. Buyers are just as stubborn and are demanding giveaways, knowing the current supply outweighs the demand. I think the only way to tackle this problem is for listing agents to get hard on their sellers and start pushing those prices down to more realistic levels. Push them down to the point where buyers will become more attracted and start giving them a sense that they are getting the bargan basement price they hoped for. And start refusing to list homes that sellers will not work with you on. The less homes on the market, the more competition there will be between buyers and the less apt they will be to hesitate.

Sun Feb 3 2008, 09:41

I'd like to take a little break from the heated discussion whether buying or waiting is the right decision, and ask the real estate agents a question.

It has been about 15 days since Jordan asked the original question.

Do you think that buyers are still dragging their feet, or has that changed?

Sun Feb 3 2008, 09:35

[[I'm sure anyone can find NAR statistics on the web, they don't keep them secret.]]

Well, is it going to be much different than Case / Shiller index as far as the historical values are concerned? I doubt (if it is, then one of those sources must be junk).

As far as forward-looking predictions and speculations are concerned, NAR info is pretty much propaganda. Their chief economist probably knows deep down in his heart that he is forced to sell bullish predictions. Just read the wording of some of those carefully, you will see.

[[As far as the Shiller report goes: I am not a jump up and down now is the best time to buy a house is a great investment type realtor, but Shiller is at one end of the spectrum. He touches on some good points but he is basically a doom and gloomer. It isn't glass if full vs glass is empty thing, the glass is filled to the middle and the level fluctuates.]]

I agree - that's why I said pick the middle point between NAR and Shiller predictions. The result is still a bearish view of the real estate for the next, oh, 5 years.

[[I actually spoke to my husband last night about selling and cashing out and renting until we can purchase some bargains, but there are too many benefits to owning that we can't enjoy renting and it is actually cheaper for us, now that our mortage is paid off.]]

For you the decision is different. If we were to make an accurate analogy between a buyer in this market facing a decision to buy or wait, then the appropriate actions for you would be to upgrade your current house vs. wait. And you have voted with your feet and waited (maybe you don't need a bigger house, but still). Heck, you even considered selling out. See, how diametrically opposed your position is with that of a buyer? Read between the lines of what you said, words like cashing out, wait for bargains, etc. That means you would cash out if the numbers were right for you, and you would wait until the real bargains show up. By not going after the "bargains" now you have voted with your actions that there are no bargais per se, as far as your threshold for return on investment is concerned.

Someone who is renting now justifies CONTINUING to rent the same was as you justify continuing what you are doing.

BTW, if you were interested in cashing out the equity in your house and did not want to sell your house, there are ways to do that (no, I am not talking about REFI, I am talking about actually giving up some of the equity in your house in exchange for cash today). Just search the web, it's not secret.

Sun Feb 3 2008, 09:17

As a buyer, I will tell you why I'm "dragging my feet"!

In my area, prices are plummeting, and houses are coming on the market faster than popcorn pops.

Some are good enough deals, but many are put up by desperate sellers who have not yet come to grips with the reality of the new conditions. The house that they counted on to provide half their retirement isn't going to provide a third now, and they're digging in like it's a siege.

You can't blame them, either. This change came on so quickly it's a shock, but the reality of home valuation is a fact they cannot deny. "If only I'd sold 8 months ago", is a common plaint.

Seeing an asking price drop $30 or $40,000 in a month is commonplace. REO's and HUD offerings are going wild. It's rather like waiting for a 'sale' at a retail store. I can wait for the savings. Maybe I'll buy next month... or the month after.

After all, how much corporate owned property can any given institution hold before discounting it deeply, cutting their losses and moving on? And the bitter attitude of banks and so on isn't helping. They're annoyed and sometimes downright hostile!

Inclusions in ads like (quote) "Buyers Must Be Pre-approved By Countrywide Home. Corporate Addendum Supersedes Local Contract", do not particularly dispose me to deal. Before you start making rules, mister bigshot, you might want to make sure there's a game.

Also, has the market bottomed? If I commit now, will I watch the value of my new home drop another 10%? 20%? That doesn't sit well.

Finally, the character of entire neighborhoods is changing. There are a lot of foreclosures, and some angry losers are taking out their frustrations on their ex-properties. Smashed windows, destroyed kitchens, landscaping, air conditioners and even garage doors torn out by the roots and sold and suddenly a peaceful, idyllic street is looking more like Baghdad...on a bad day.

Will they recover their former glory or become low-end ghettos populated with Bumpuses and meth labs?

Technically, it is a buyers market. Realistically, there are pitfalls enough to scare the willies out of us poor folk who are just trying to find some decent shelter with a potential upside, while not losing our backsides!

Sun Feb 3 2008, 08:57

Tom made a sarcastic response about a "crystal ball"

When someone says real estate is in for a hard fall on this site, I've seen many realtors use a crystal ball analogy. When a hedge fund makes a bet on buying or shorting the stock of a company, are they looking into a crystal ball as well? Or are they doing a fundamental financial analysis and making an educated bet based on the numbers. When Walst or Yev or I put up numbers and statistics and say, "Housing will take a major fall," it isn't somebody predicting an exact future, but making an educated prediction based on numbers. Why would anyone say anything about a "crystal ball?" That would basically render moot all the financial work that investment banks, financiers, etc. do. Sure, it's possible to be wrong--but based on two numbers--income vs home prices and rent vs home prices, housing must fall significantly.

Look--the question I have is very simple. Jordan--I appreciate your positivity and I would love to discuss this with you in your area (more on point for me would be 90069) and JR, I am bi-coastal--I live in LA and New York, so I ask you the same question. A rule of thumb I have been taught about real estate is: a home purchase should cost 100 to 120 the rent of a comparable property. Do you disagree with this?

If so:
1) Are there properties with that multiple right now in LA & New York City?
2) Please provide examples.
3) If they are not, and historical facts show that home prices have always been in line with rents until the past four years, then why go against history? Why not wait to see how home prices react, as they are currently being dragged down?

Sun Feb 3 2008, 07:43

I'm sure anyone can find NAR statistics on the web, they don't keep them secret. As far as the Shiller report goes: I am not a jump up and down now is the best time to buy a house is a great investment type realtor, but Shiller is at one end of the spectrum. He touches on some good points but he is basically a doom and gloomer. It isn't glass if full vs glass is empty thing, the glass is filled to the middle and the level fluctuates. Yev by the way I see you enjoyed the last issue of Business Week. I think if you want to rent that is a great decision for you. I actually spoke to my husband last night about selling and cashing out and renting until we can purchase some bargains, but there are too many benefits to owning that we can't enjoy renting and it is actually cheaper for us, now that our mortage is paid off. There is no way we could rent house the size of the one we own, with out multiple animals, in a neighborhood as nice as ours. Just before Christmas we decided we needed a bigger kitchen and knocked down a wall. Couldn't do that in a rental. We're also going to put in a fireplace and get some big evergreens to screen the back of a neighbor's house that we see from our hot tub. Couldn't do that in a rental. I guess if you don't care how you live and you don't care about your immediate environs (and you can't afford to buy, most importantly) renting is the way to go, but it isn't in my case.

Sun Feb 3 2008, 06:47

Tom: I certainly respect your opinion to disagree, and there is nothing to be sorry about.

My opinions could end up being wrong, but I am betting on them by waiting.

For the areas that I am interested in buying, the local association of the realtors publishes very good data: monthly market statistics per town, weekly summaries metro-wide, and monthly metro-wide outlook. So I keep my eye on the data regularly.

I just noticed the snippet about your sister's story in your earlier post. Very informative to give data and statistics some personal perspective. I am glad she had a decent return on her house. But her story is more of a house-as-a shelter story. And if her story is any moral, it is: "don't buy high and sell low", which is kind of what she did. I would hate to be 50% down two years into the mortage (25% in the red against the loan amount)!

Sat Feb 2 2008, 22:08

Tom, please don't compare Warren Buffet investing into quality companies to real-estate. These quality companies grow their profits consistently, real-estate does not grow squat, except sucking in more cash for maintenance, taxes year after year. Based on your explanation real-estate will just grow and grow exponentially.

As far as "THE SKY IS FALLING", let's talk buy low sell high, I would rather rent then buy. I will buy when "I FEEL" the price is right, NOT because it will come back sometime in the future and because you say it will come back. Instead of plunking a 20% down on a property today, I can rent for a fraction of the cost, and buy in a year or two, when I KNOW that prices will be lower. If you want to buy now, then do so and sit it out, I will gladly use this opportunity to generate income off of my down payment instead of once again "HOPING" it will come back.

Basic money management.

Sat Feb 2 2008, 21:47