Since your "first do this..." example is so juvenile, and you're profession requires no formal education other than some laughable training classes, I'll assume that I'm speaking to someone with a level of education of about 8th grade. So I'll try to say this as simple as possible. Using statistics, you can calculate the correlation between the changes in housing prices month to month. If this number is very close to 1, then the next months change is extremely likely to be the same as the previous months changes, if its close to 0, then the previous months have almost no bearing on the upcoming change.
So if you take the case-shiller composite index since 1987 and calculate the correlation of monthly returns, with the return of the month before, you get a value of .94. If you do the same thing for monthly returns of the S&P 500, the correlation is -3% - not statistically different than 0. There can't be more clear proof that timing the stock market on any kind of long-term scale is impossible, but timing housing on a long scale is in fact much much easier.
Also, in the previous housing slumps, housing prices rose at the level of inflation for years before starting to really trend upward again. Now the trends upward have tended to be relatively insincere, since long term, housing does almost no better than inflation. Here is a graph of the Case-Shiller index vs inflation: http://bp0.blogger.com/_pMscxxELHEg/R-k6W9DCIVI/AAAAAAAABwo/ So basically, if you want to see the bottom, wait until housing is rising at the level of inflation for a few years, then you're there.
You opined we're either at or near the bottom. Do you have data to back that up? By suggesting to buy now, you are providing financial advice in the single largest purchase most people will ever make. Do you feel you are qualified to that?
The correlation of returns was taken from the work AJ did in the following thread, which for anyone interesting in buying a house, I recommend reading at least the first 50-100 posts. Posters to look for are Ryan, Richard, AJ, RealtyExec, Paul Francis and a couple of others. http://www.trulia.com/voices/General_Area/Open_Opinion_Threa
I don't single one post here let alone one from "Every Pro" calling the poster an idiot or saying he should buy.
That simply is not true, please try to refrain from spreading propaganda in this forum, it's not helpful to anyone.
Actually the advice that was given in 2008 Not early 2007 was...
"If you can afford the payments and are looking for a home to live in and with the market being a buyers market, I think you can answer your own question."
In addition to that I said something along the lines that similar to stocks, you buy on the way down not once you've hit bottom and the price starts to come back up again because once the prices start to rise, you've missed the bottom. It is very hard to figure the exact instant we're at the bottom until it's too late being my point.
That was my previous post advice and "now is a good time to buy" if you can afford to. My reasoning, prices are appear to be stabilizing now, at least in my area because we have not seen any significant price reductions lately accepted on offers (sign of pricing bottom).
We have experienced an increase in sales (not sales price, number of unit sales) which is also another good sign, there is a lot of inventory about 11 months worth out there still so it will spill over into 2010 and actually maybe into 2011 when you take into consideration additional properties which are added to the inventory on a daily basis, (You don't need to be a rocket scientist to figure that one out!)
Provided the buyer incentives remain in effect such as the 1st time home buyer incentive programs, like NJ Smart Start and the Federal $8,000 tax credit for buyers not owning a home in the last 3 years and in hopes the feds can keep the interest rates down, but with Obama's spending habits that is doubtful the rates are bound to shoot up sooner or later, hopefully later than sooner.
If and when that happens these times would have proven to be the best time one "could have bought" and by then you would have "missed the boat" my friend.
Ultimately the decision is yours but you should be able to communicate a little better and explain your thought process other then disparaging "the pros" which is not helpful to the person asking the question or others that read the answers.
Take care and have a blessed day!
I've decided to turn over a new leaf. I apologize for being rude in my earlier posts and deleted my obnoxious responses. Seeing as you dish it as well as you take it, I'm sure you don't take too much from my rude comments.
The only point I wanted to make was that housing moves are generally predictable. Picking exact lowest point, of course thats impossible, but in previous housing slumps, the market reached the bottom, and then bounced along at the bottom for years, so seeing the getting in at the bottom wasn't really difficult. Also, given the correlation of housing from month to month, even with lagged data, you can make good estimates of current conditions. There are also futures contracts for the C-S indices traded on the CME where the financial markets predict the future. Houses are heterogeneous products and since a single house is like an auction going to the highest bidder, this data won't predict the exact price a single house will sell for. But the data can give the average Joe a baseline idea of what even local housing is doing to make their decision, and there is a ton of value in that.
So that's it. You said you can't predict the bottom of the market, I argue that for as much as the average buyer cares, you can. No one wants to buy a house that is going to lose nominal value, and using this data and the fact that housing changes tend to be gradual, you should be able to find when the slide has ended.
Headlines are usually misleading. Your articles cherry pick what they want for the headlines, much like this does: http://www.msnbc.msn.com/id/24664672/ and http://www.bloomberg.com/apps/news?pid=newsarchive&sid=a Same information, MSNBC says surprise good news about housing, Bloomberg says housing is still in the dumps. Yours do the same, sales are up, leaving out that prices are down, other one says median prices are up but ignores sales being down. Also median price is a flawed measure of how a market is doing also which is why no respected index uses it.
If this downturn is anything like all previous downturns, this is absolutely false.
Getting a hotel room is not "throwing money away."
Mort %, HOA fees, repairs, 6% to Realtors, Closing costs, taxes and insurance - those are throwing money away.
if you rent for one year at 1000 per month you have given away 24,000 to a landlord.if you rent for more watch your money disappear down a hole 2 years = 48,000;3=$62000...
you have to live by his rules, have no tax deductions or long term security.(providing you feel you have a stable life and want to settle down for longer than 2 years)
if ,as the last person said you bought a house for 200,000 and lost 10% -$20,000 you would have lost on paper only as you actually live there,get the tax deductions,decorate and live as you like and in the long term will have built up equity. real estate in the long term is usually one of the best investments you will ever make. i agree that if you are an investor the picture is different.
Here is a classic from a so-called Pro: "if you are renting you are throwing the money away anyway - at 1000 pm you would have thrown away $24000"
How is that $24k "thrown away"? What if she bought a $200k house and it went down 10% - how is that not even worse?
while it is true that prices are dropping and may continue there are more considerations. Rates will be going up. work your numbers to see the difference a point makes on a mortgage versus a price drop.
also if you are selling as well you will lose on the selling side and make it up on the buying side.
if you are renting you are throwing the money away anyway - at 1000 pm you would have thrown away $24000. so if it's a home you're looking for and not a flip you will almost certainly be better off buying.
when you are ready to get serious call me.
mara cruwys - weichert realtors - 908-472-8026 email email@example.com web site http://www.homes4unewjersey.com
The MLS is not "open" because it has data, data is valuable would you not agree?
Why would anyone expect the data gathered in it to be distributed freely? Realtors pay to access that data despite being licensed. Like I would have to pay a great deal of money plus meet other requirements in order to have access to the stock markets real time quotes, you must pay and meet requirements to access our industry data. Sounds fair to me!
Zack: "Stocks are the easiest example to use vs housing because there is a ton of readily available data to be analyzed."
Either way I do have access to that "MLS granular data" at the "lower level" so therefore have access to the highly desired mls data which you admit would make your guestimates more accurate. Makes me kinda wonder why my and other realtors opinions mean so little to you if that's the case?
Therefore I DO NOT defend the belief that the C-S index is the best index available for metro areas (BECAUSE I HAVE ACCESS TO THE LOCAL MLS DATA) and the fact that the top economists in the country consistently cite (STOCK) data when describing the housing market supports this fact without using actual and recent housing data.
The C-S index is widely held as the most accurate data for how metro housing markets are going. I agree with you that at a block by block comparison, its too broad, but so is the S&P500 vs an individual stock, or even median prices for a single city vs a single house. But the C-S data is the best and most unbiased for what it covers, single family homes in large metropolitan areas. I understand you don't trust it, which is why I agree we can't agree.
My view is that from an investment perspective, real estate is a poor one. The amount of time I've spent researching this using both C-S and the HPI data has been substantial. I will, at some point, buy a house, but not as an investment, but because its a life choice and one i'm willing to pay a premium to make. I'm not a stocks guy per se, I have no idea what investments would be better for what time frame between stocks, bonds, commodities, etc. If you bought oil 4 years ago, you're probably pretty happy with that purchase now but that doesn't mean we should all be piling into commodities. Stocks are the easiest example to use vs housing because there is a ton of readily available data to be analyzed.
If the MLS was more open, there would probably be more granular data about this but its not open and its not consistent from MLS to MLS so its very difficult to collect the data on a lower level. The recent plea deal with the NAR and the DOJ could open it up more at some point, but I don't think anyone should hold their breath.
The supply and demand is clear, prices are falling because demand is low and supply is high. All indications is that the supply is growing faster than demand, which means prices should depress further. If this is the only principle we want to look at then the only stat is churn rate by price levels.
Either way, i'll agree, you can't convince me, I can't convince you and I'm fine with that. But I will continue to believe and defend the belief that the C-S index is the best index available for metro areas and the fact that the top economists in the country consistently cite this data when describing the housing market supports this fact.
Quote: "Getting the data is hard"
That is true Zack, which is why data miners are rich and why I don't trust Case Shiller Index, I've explained why before in this same post and won't beat a dead horse any longer.
Let's get past this, I've learned these forums are full of people wanting to argue and fell into the trap myself, Stock market & News people have one view and the real estate experts another, like it or not, real estate is local and the only way to get that local info is from the people who create the data used in those statistics daily, the real estate agents.
FYI once again, not all people buy real estate strictly as an investment, some purchase homes to live in and grow families and memories. You must decide which is most important to you and cannot assume everyone shares that same sentimate. Even if you dont, the question at hand posed by Nidhi was...
"are the prices stable in New Providence,NJ or should we wait to buy as prices are falling.?"
Just like with stocks, for all the investors here...
You don't buy stock when the price is going up, you buy on the way down because if you purchase when its near its lowest, you'll tend to make more money when it turns around. real estate is resiliant, especially in the tri-state metropolitan area where real estate is like a comodity, there is only so much of it available and a growing number of people growing, moving, reproducing and living here.
It's the basic principal of supply and demand!
That was strictly from an investor point of view, Nidhi are you an investor or do you plan on actually "Living" in the home and for how long? Temporarily or for at least 2-3 years?
Note, mortgage rates are still near all time lows, prices are falling but ever so slowly here, (Except for Short Sales) I would say the only homes I've seen prices fall on where for the people that are desperate to sell now and in a hurry!!! Basically short sales and foreclosures.
If you can afford the payments and are looking for a home to live in and with the market being a buyers market, I think you can answer your own question.
Good Luck and if you should decide to purchase, I'd be glad to assist, if you decide to rent... I would still be glad to assist.
Owner / Broker Manager
Marivic GMAC Real Estate
2056A Lincoln Hwy. (Rt.27)
Edison, NJ 08817-3330
Office: 732-650-9911 Ext.302
Toll Free: 1-866-745-GMAC(4622) Ext.302
Also, you did ask me for my prediction of when it will turn. When you see the data from the NY metro index increasing monthly at about 20 basis points which given the lag in data should show you when housing is again growing at the rate of inflation, so you're at the bottom.
The data I'm using is the Case Shiller index which is widely held to be the best index for metro areas because it takes into account changes in single family house prices. Median sales and averages are horribly skewed by new construction, especially new construction of Multi-dwelling units and townhouse complexes which flood a market with very similarly priced homes which skew the data.
I'm not sure why you think I'm plagiarizing other people when the final paragraph of my post told you where to find the excerpt I posted. If you'd like me to send you a spreadsheet with the correlation of monthly returns calculated, I can. If you'd like to put together a list of resales and their price increases of a local area and send them to me, I can do the same for that. In Excel, you only have to calculate the returns by taking the difference in purchase and sales price divided by the purchase price and when you have these broken down monthly, excel has a "correl" function which will give you the correlation. Calculating the correlation is easy, its getting the data that is hard.
Finally, quoting realtor association presidents as proof is an odd choice considering some of the quotes coming out of the NAR in the past 2-3 years. Here is a highlight of them: http://www.moneybluebook.com/the-national-association-of-rea
Again, I apologize for being rude initially, but I disagree with your retort.
By the way according to â€œyourâ€ theory you can predict local real estate market changes based on broad historical wide regional and national data? Something donâ€™t smell right just by reading that now does it? Especially since real estate cannot be measured so broadly accurately.
"It has been said before but it's worth saying again, all real estate is local,"
As stated by 2008 NJARÂ® President Drew Fishman, CRS.
â€œYou analysis can only be as good as the data and its freshness which you are using!â€
Quote by Victor M. Kaminski, self proclaimed real estate expert and comedian ;-D
Lastly Zack, Iâ€™m not providing financial advice to anyone they need to consult with their CPA for that. Duh!
Funny you should mention:
â€œYou opined we're either at or near the bottom. Do you have data to back that up? By suggesting to buy now, you are providing financial advice in the single largest purchase most people will ever make. Do you feel you are qualified to that?â€
The â€œOPINIONâ€ I made in my post on the 5/14/2008 was backed up by recent data, not just statistics which was release by NJAR and also heard by many on 101.5 radio. I found out about this press release by reading my email from my media contacts email dated 5/15/2008 followed by hearing it on NJ101.5 radio.
Full Press Release: New Jersey Defies National Housing Trends http://www.njar.com/pressroom/releases/2008/051308.html
Compare the first quarter median sales price of existing single-family homes in 2007 and 2008 within New Jersey metropolitan statistical areas (MSA): http://njar.com/
Not my data or made up formulas with no backup, by the way ZACK how could you miss this with your predictions and formulas
â€œNew Jersey Defies National Housing Trends: Home Sales Up 4 Percentâ€
Never said I was qualified ZACK but I am more qualified than you ZACK because I am a FULL TIME PROFESSIONAL whoâ€™s livelihood depends on staying on top of these thing, ZACK.
Is it still okay to post personal opinions in blogs ZACK?
Oh, maybe this may make you feel better about my advice ZACK, or maybe you â€œTHINKâ€ you still know better?
Maybe some of these SOURCES backing ME up take ZACKâ€™s head out of the sand
WoW you got me good on that one, what was I thinking I must be a really stupid guy out of my league talking to you ZACK, wow being a successful Brokerage Owner one would figure I would have got a better edumacation
â€œyou're profession requires no formal education other than some laughable training classesâ€
Have you taken the real estate salesperson â€œtraining classesâ€ Zack? or are you once again talking out your @ss lolâ€¦ If you had you would know there are no realtor training classes, only pre-licensure courses which teach basics and how not to break laws. To survive a career agent must be very knowledgeable and strongly believes in continuing education classes and takes them regularly.
Truth is you sound bright with all the techno babble jargon you're using but I do my research and donâ€™t back down to math and big words. Lolâ€¦
Clearly you've been cutting and pasting data without knowing what youâ€™re talking about, Check your sources mister.
BTW I see people are proving you wrong all over the place ZACK http://www.trulia.com/voices/Market_Conditions/Do_people_rea
The S&P/Case-Shiller Home Price Indices are calculated monthly and published with a two month lag. http://www2.standardandpoors.com/portal/site/sp/en/us/page.t
More info about Case Shiller which is not used to predict the future of real estate but rather measure market historical changes:
More Case Shiller facts http://www2.standardandpoors.com/spf/pdf/index/SP_Case_Shill
You are using old data and historic events to predict at which exactly point in time in the future the market will change? Wow, you are good, lol...
So at what point will that happen Zack? Can you give me a date, month or year that change will happen? Go ahead, use your statistics and prove it to me, I have an open mind "Professor"!
This was a quote from you right?
"There can't be more clear proof that timing the stock market on any kind of long-term scale is impossible, but timing housing on a long scale is in fact much much easier."
I noticed you conveniently left out parts of the article which I have pasted below with credits:
"There can't be more clear proof that timing the stock market on any kind of long-term scale is impossible, but timing housing on a long scale is in fact much much easier. There is obviously a long lag in getting housing data, etc, but this kind of data can't be ignored, and its clearly possible to make smart purchase timings and now is clearly not a smart time to buy in terms of home price appreciation. - Mon Apr 28 2008, 11:31"
It looks to me like you stole this exact Quote, actually your reply from another trulia blogger called AJ, See: http://www.trulia.com/voices/profile/Just_Looking-10016-179645/
Continued in next post...
I'd love to hear your explanation?
First do this... Get paper and pencil... Draw a line to resemble a timeline... Now swoop up to resemble how the market prices have gone up in the past...Now swoop that line down to resemble how prices have come down...(Slightly only about 20%)... Now as your drawing that line doing down...Tell me at what point to swing back up? If you cannot, then you'll just have to wait until it does so on its own and then my statement proves correct wise guy!
If you still feel you are correct, I'd like to know where you got your crystal ball because I want one...
Tell me when the market will hit bottom mister smarty pants... or should I say Guru? lol...
If you like the house, are comfortable with the payments, rates, etc. BUY it...
We are either at or near bottom in my opinion that matters to anyone. Sure there are foreclosures and short sales that sell for less but they wont make that big of an impact on the house your looking to purchase unless the seller absoutely MUST SELL NOW!!!!! i.e. they are in a short sale position themselves.
How much more do you think the price will drop on the house?
If you feel it is still too much, offer a little less and see if they turn you down.
It is impossible to time the market or see where a" bottom" is. NP is on the midtown direct train line and people are buying for housing, not speculation.Unless the house is exceptional, I wouldn't pay a premium over the asking price if it is fair. NP is a destination for transferees- good resale and you have quick access access to Highway 78 off Mountain Avenue to NY