Hey Walstmnky,

Not sure what you didn't like about the article other than it's "Rah! Rah! Real Estate" feel, but if you visit WatchingandWaiting's link, you will get a good feel of the exact opposite (which you will probably enjoy). I don't know how one can read the article I posted though and disagree that the Real Estate market of the United States has historically been one of the strongest markets available - plus the added benefits of owning a home.

One thing to consider while viewing both of these articles is that neither is specific to California, nor Los Angeles County, which is the market I had in mind when I originally posted this question. But I think both are good articles to read through if one is watching the current market.

WatchingandWating, thank you for posting that link! It is very informative and I think many readers will appreciate your posting it -- I do.

Granted, not everyone is in a strong position to buy right now. But, there are many people who are in a much better position to buy now then they will be when this market hits "rock bottom". And as the old addage goes, "if it looks to good to be true - it is". What I mean by that is when the true "deals" are available, many of the current buyers will be underqualified to purchase those "deals" - they will wind up loosing in multiple offers to stronger, more qualified buyers (ie: all cash investors, down-sizing buyers who have cash from a recent purchase, etc.).

Thank you to everyone who has contributed to this conversation thus far and I hope it continues!!

Fri Jan 18 2008, 17:53

Try my link:
http://beacheconomist.com/Newsletter0108.pdf

Fri Jan 18 2008, 16:33

Jordan, the link you provide is not very convincing.

Fri Jan 18 2008, 16:24

Maureen: if by "take advantage" you meant "take advantage of more favorable conditions in a few months", then it's a wise move. If you meant "take advantage of sellers who need to sell" then I must disagree with the phrasing--would you say sellers were "taking advantage" of buyers between 2000 and 2005 when prices were going crazy?

Fri Jan 18 2008, 14:15

Hey Trulia Roger, I appreciate your last comment confirming your admiration for your past Realtor and for defining your earlier comment.

In regards to the comment you made about the unsustainability of the U.S. housing market, please checkout the website referrenced below. And regarding the "media bashing", many media sources are notorious for sensationalizing and magnifying the impact of issues. The media has its hand in our industry's pockets because they over-magnify issues but want us to pay big bucks for advertising in their publications.

Anywho, thanks for your input Trulia Roger and best of everything in the future!!

Thu Jan 17 2008, 17:17

Just as sellers are waiting for the prices to go back up, the buyers are trying to take advantage by waiting to see if the market will go further down. I am having the same problem, in addition to those expired listings that are "waiting".

Thu Jan 17 2008, 16:43

One more thing, to everyone: I have great respect for real estate professionals, and my comment about "whining" was not directed at anyone here. We liked our buyer's agent so much we used her services again when we sold last year, and for the past few years I've met and learned a lot from a bunch of great real estate professionals.

Thu Jan 17 2008, 16:30

Tiffany: You said "unless you actually go to sell your home when your equity is reduced to 15% per were the market is, then you haven't actually lost anything. You only lose money, equity or your down payment if you sell in a time when the prices are down from what your purchased it at." and I completely agree. But when the market was going crazy, that logic was turned on its head and people felt they had made a ton of money on their equity, borrowing against it like mad, even though, as you said it yourself, equity gains or losses are only paper money until you sell. Now they're overextended, they can't sell their homes to cover their neg-am + HELOC liabilities, and everybody is whining over what is essentially an abdication of personal responsibility and foolish financial decisions. The market as a whole needs a kick in the pants, and it's happening now. None too soon.

I think it's refreshing to see buyers hold off on buying now because of the almost certain equity drop--nobody knows for certain they won't need to sell in a year or two.

Another point I see bandied about a lot is media bashing for the price drops and the current state of the market. Nobody was blaming the media when prices were going up 20% yoy and the current crisis was building up. Newspapers and TV news were talking about record prices all the time, on the front page, just as they are talking about the market now, on the front page. It's a little too convenient to blame the media.

A lot of us could see the current mess coming from a mile away, and got out of the market before it imploded. It doesn't take a PhD in economics to know when something's fishy and unsustainable. Getting burned hurts, but I don't really see very many victims here.

(note: these are my opinions, I'm not talking on behalf of Trulia or anyone else).

Thu Jan 17 2008, 16:18

It's hardly a hot market if you look at affordability levels, for example. Prices have to come down by 20-40% to get back to a level that makes financial sense. It's happened before (1956-1958, 1990s, etc) and it's happening again. Not fast enough, if you ask me, but I'm saving up for a good down payment when the time comes, so it's all good. For me anyway :)

Thu Jan 17 2008, 16:04

Jordan and Tiffany you both have good points and there are plenty of professionals in your field that most certainly are not the "car salesman" that was referred to by RecessionTime. This has become quite the discussion.

I believe part of that attitude comes from the always upbeat "its a great time to buy" attitude. Everyone knows that homes have run up to levels that are out of line with historic trends. So while the pricing has dropped, it doesn't mean that it is in line with the normal trend line. Lets not forget Lawrence Yun and the continuous revisions related to sales and what seems to be his expectations that "this month" is the month it all turns around in. He hasn't done any great service to the public perception as it relates to Realtors. He's been singing that tune since August 2006.

The only item that I would take exception with was when Tiffany stated "People will always need to sell, and always need to buy no matter what the market looks like, and no matter where the majority of people sit in terms of their opinions on the market."

The first part is correct that people will always need to sell; people will not always need to buy. When rent in many areas is far less than what a mortgage would cost, it would be better for many people to rent instead of buying. Inflation adjusted, housing traditionally has less than a 1% return on it. I doubt that many people that get comission off of real estate espose renting over buying.

What many people would save by renting instead of purchasing a home that is currently overvalued could easily be invested in a low risk fund and still outperform the historical return rate that you get on a home. A years interest on a 417k mortgage is ~$24,880. Take away your standard deduction of $9,500 and you have ~$15,380 that can be written off. Depending upon your specific situation that could be beneficial. Of course, if your retirement still needs funding, that 15k could be a really nice 401k/IRA contribution that you would get tax benefits also.

Every persons situation is going to be different. In many ways renting will always make more sense; except it doesn't fulfill that "American Dream" that many, myself included, have. We want a space to call our own. From a strictly financial standpoint, I know that I should probably keep renting until homes come down quite a bit and take that extra money to fund my retirement more. I would say the sweet spot would be when a 30-year mortgage + tax + insurance + maintenance is less than 30% of your gross pay and the loss from interest, tax, insurance, and maintenance is less than rent on an equivalent place and you plan on staying put for 10 years or more.

Thu Jan 17 2008, 15:43

To defend myself, lets refer to a few comments I have already said and that is "At the end of the day, you can't and shouldn't have to "convince" buyers that right now is the right time, all you can do is educate them to the best of your capability and give them the tools in order for them to make an intelligent decision for their family. If you are honest and up front with them, then they will use you when they are ready."

I am by far, not a "car salesman", thank you. I take offense to anyone who would look at what I do as trying to trick people into buying a home because I just want to sell something, or that I just twist peoples arms to get a deal! I have a B.A. in business administration and in addition to that have taken a variety of educational courses on real estate in order to know what is best for my clients. My goal in real estate is to help my clients achieve their desire and dreams of being a home owner, and hopefully in that process make clients for life. Not all real estate agents are out to get you into anything and everything just to get a paycheck - there are a lot of them - but I at least know I am not one of them. So for future references, lets not stereotype..it's just no nice. ;)

People will always need to sell, and always need to buy no matter what the market looks like, and no matter where the majority of people sit in terms of their opinions on the market.

My point is, each person, good market or bad has a time when they feel it is the right time for them to buy and/or sell. No one is saying to buy or sell when you don't want to, we are just saying to make sure you educate yourself fully by using a variety of sources. Why wouldn't you want to hear the advice of someone who deals with this day in, and day out?! This is what I live and breath, not what I dabble in and check in on from time to time.

Lastly, for the record I never said it was the medias "fault" that people were not buying, I simply said that as agent's we need to make sure we do our due diligence in telling prospective buyers and sellers intelligent information on the market other than just the panic that the media is trying to display. Of course this is not a "terrific" market, but whether or not it is the right time to buy or sell depends on your situation! Each persons circumstance is different when buying and selling real estate. Lets face it, you have got to be super naive if you haven't figured out yet the media's capability to blow stuff massively out of proportion - not just real estate...and when the majority of us think media, we think the news...not trulia.com

Thu Jan 17 2008, 14:26

Quick response to your Recessiontime's comment: It is unfortunate that Realtors are placed in the same category as the stereotypical smarmy "car salesman". I can't say that I blame one for viewing Realtors as such because there are unprofessional "professionals" in our industry. This is very evident in the current mortgage market - because of a small minority of greedy mortgage brokers who did not have their clients' interest at the forefront and were offering loans to their clients that they knew they would soon not be able to afford, consumers have lost a lot of trust in mortgage brokers.

The way I look at my business, as I think the great majority of Realtors do also, is that the real estate industry is greatly a referral based business. If I treat my clients well, they will referr their friends & family to me - hence, more money. If I pressure my clients into buying or selling when, based on my experience, I know they will be making a mistake, I can guarantee that client will not be back around for their next transaction, nor will they referr me business.

So, yes. I agree that there are Realtors who do not act on their fiduciary duties to their clients - but these Realtors do not seem to hang around in this industry very long.

Thu Jan 17 2008, 14:04

Happy to see this question has intrigued many and struck great conversation!

One point I will make in regards to the current market (and I'm willing to risk the responsive attacks) is that the list price of any property is a "virtual number". By virtual number I mean that it is a temporary place holder until an actual number is agreed upon by Buyer and Seller. I think Tiffany asks her Buyers very relevant questions ("how will you know when the market has hit rock bottom? Furthermore when you (the buyer) know that the market has hit rock bottom, do you think the sellers will know that as well, and if so do you think they (the sellers) are going to be willing to negotiate as much at that point?"), and I would hate to see a Buyer miss the bus by over-waiting the "rock-bottom" market. And again Tiffany is right on, I believe, when she states that Realtors should not be "convincing" Buyers to make a move - that decision is theirs and theirs alone, but it is our job as Realtors, I believe, to make sure that our clients are well educated and updated about what is currently happening in the market.

Lastly, I do believe the current market is a hot Buyer's market for the right Buyers and the right properties. Often times the right Buyer might not know it's the right property until they explore the Seller's bottom line through an offer and negotiations. There are deals currently available, many are just hiding beneath a high, unrealistic list price. Thoughts?

Thu Jan 17 2008, 13:52

I totally agree with BamBam. Not to be rude, but I look at realtors like car salesman. They always say they are after you best interest, but when it comes down to it, they need to make a sale or they dont get paid. So of course they want people to buy no matter what the market is doing. And for everyone saying its the medias fault for people not buying , remember that you are using a media outlet to voice your opinions. Sounds contradictory to me.

Thu Jan 17 2008, 13:39

A.) Prices will continue to come down.
B.) There will be more inventory.
C.) There's a writer's strike and it's affecting a lot of people in the So. Cal. area
D.) The economy is getting sludgy.
and
E.) I don't listen to realtors any more than I listen to the media.

Realtors were pushing buying when the market was insane, and they are pushing it now. I'm keeping an eye on the areas I'm interested in, and I feel it is best to wait a few more months.

I do take take Tiffany's point that if the market is going down and you aren't selling you shouldn't care because real estate is cyclical and it will come back. Very true. But why would you be pushing your buyers to buy right now? It's pretty obvious that the subprime effect hasn't rippled through the area completely yet. There are still realtors and sellers pricing too high for this market.

Some prices seem competetive based on what they were 18 mos. ago - but that's not what they should be compared to. Look at 2004 numbers and see how it compares to that. The adjustment is not done yet.

Thu Jan 17 2008, 13:05

I totally agree, I am not trying to be argumentative either. I think what I am trying to do is make sure that there is intelligent information being placed out there other than the panic the media is trying to display. In my defense, my opinion(s) is based on the experience I have had in the business, as well as my mother's experience in the business, for a combined total of 19 years. As a realtor, I am not saying you are wrong in not buying, I am just saying here are some reasons why I have found that purchasing is always a good thing if you are looking at it long term.

As I said in one of my past statements, at the end of the day, myself nor anyone else can or should have to "convince" buyers that right now is the right time to purchase, all myself and other agents can do is educate people to the best of your capability and give them the tools in order for them to make an intelligent decision for their family.

I wish you the best of luck in your search!

Thu Jan 17 2008, 10:54

Let me start by saying that I'm not trying to be argumentative, but trying to explain the psychology that keeps me on the side lines.

Its not just the loss in equity. A 5% drop on the median 470k LA home represents $23,500. For me that is 3.5 months of money that I am putting aside for home purchase. Thats represents a lot of work.

Carrying a 30 year with that added $23,500 adds $27,221.98 of interest payments. With interest rates at historical lows, the odds are that you will not refinance to a lower rate in the future. Buying before my theoretical 5% drop also represents higher taxes on the property and insurance.

A concern is that if it does drop another 5% and I miss the "bottom", if I catch a raise from that bottom within a few percent I am still saving on a lower overall mortgage payment, tax, and interest. The big unknown, of course is the interest rate. With the economy how it is, it is almost guaranteed that the Federal Reserve lowers 50bps on Jan 30th with another 25bps on March 18th.

I know from my perspective that I want to buy, but my wife and I have very particular things that we like and dislike in homes. We've seen so many homes that we are past the "wow" and "falling in love" with a house. Every month we wait represents a larger down payment and has (so far) represented further falling in home pricing.

Thu Jan 17 2008, 10:17