Zack

Hopefully not. The gov't needs to stop propping up this illiquid market if they want a true correction and then fix. - Thu Jul 2 2009, 10:24

Wow... generally real estate agents on these boards deny deny deny that they will blackball properties based on commission offered. Apparently NYC this is common practice according to Alen and Richard. Again, more of a reason why Real Estate Agent consistently is last or next to last in terms of prestige on the forbes list of careers.

At least this thread has been informative. - Thu Jul 2 2009, 10:19

Hopefully the shift is permanent, not just people being scared in this economy. I'm sick of reading about the coming retirement apocolypse becuase people are too stupid to save anything. - Thu Jun 4 2009, 08:49

I'm curious if different sources have different ideas of upside down also. If you look purely at purchase price in X vs probable sales price today, a lot less people are upside down than if you look at money invested to purchase at time X vs money you'll walk away with if you sell today. That 2nd number will be about 10% lower than the first given the same purchase and sales prices, and really is what matters since that decides whether you need to bring a check to closing or not. For people in my area that I know own their own homes, I am probably very slightly upside down in the 2nd case on my co-op, a friend up the street is upside down as she purchased recently and there hasn't been growth, 2 of our friends are very upside down with no intention of moving soon, another is definitely still up because he got a great price initially. What does all this mean? I'm not sure, although with all the upside down stats, I'd be curious what measure they are using. - Tue May 12 2009, 05:42

Lori, you can turn off emails on ever reply, and you'll get a daily summary although I've found it miss some at times. When you reply to a post, there is a checkbox that says "Email me when answers to this question are posted", uncheck it and you're good. But you have to remember to do it every time. You can also do it through your profile under My Searches and Email Alerts. You can uncheck any notification or do a daily summary. - Mon May 11 2009, 21:06

The term "hoard cash" is just plain wrong. Do you think the banks just want to sit on a pile of money that is being eroded by inflation? No, but with giant unknowns on how much they will lose on bad loan portfolios, money HAS to be set aside if losses increase and they have put up more collateral for short term loans. For many of these companies, the difference between solvency and bankruptcy is really a perception if you can be relied on to be there to cover your debts. When that perception shifts against you, no one will trade/loan with you and perception becomes reality. - Tue May 5 2009, 06:26

Amazing story from Hawaii. Inspiring.

That's the type of thing that gets me so aggravated in discussions with many of my friends over here in the northeast since a large number of them are mindlessly liberal and think the government should be stepping in all over and helping everyone. Sounds great, but what does our government do efficiently? We're pretty good at bombing things, but not great (See Chinese embassy in Serbia), other than that, anything the government does is hugely wasteful, inefficient and rife with special interests. Hawaii estimated it would be 4 million dollars to fix the bridge. I wonder how much the cost of materials and the time of the volunteers actually cost if they were paid at market rates. I'd be surprised if it was 1 million. Actually, I'm sort of a afraid for those people since the last line of the article said, "Pleas says they have only to get the new bridge certified and do minor cleanup." The government has to certify that bridge so they could be looking at a long wade through even more bureaucracy. Still, an inspiring story. Thanks for posting it. - Sat Apr 25 2009, 06:17

Nicholas,
Northern NJ is expensive because you can get to manhattan. That house you posted probably has taxes around 12k. In my neighborhood, an 850k house will have taxes about 22k, so in terms of monthly payments, you're better with the first house. Its sick, but its the NYC area.

On the plus side, the rental market in Westchester county, while not huge, is really starting to come down. 2 BR/2 Bath apts on my street are going for less than 2k now from about 2400 12 months ago, SFH (min 3 BR, 2 Bath) in close areas can be had for < 2700/mo. So it looks like we won't see a 10 year stagnation, but some actual decline. Also a few houses have appeared that the price makes you take a double take as it seems like a steal compared to the last few years. And maybe it is, but I think there is more correction coming to this area with the massive layoffs and bonus reduction from the financial sector.

I second Paul's statement that I like Nicholas' links. I'm definitely too lazy to track them all down so this becomes the stop to pick up what's new in the real estate world.

Zack - Wed Apr 22 2009, 19:59

Socialist Carl,
I'd LOVE to do something. I'd love to remove myself from the workforce and the tax base for these horrendous policies. I'd love to be able to say no, i won't pay for other people's idiocies. My votes didn't help, and my tax dollars are being spent insanely. What I'd really love is to walk down the street, ask Who is John Galt, and have someone respond, "come with me, i'll show you."

Btw, this lady was half right:

http://www.youtube.com/watch?v=P36x8rTb3jI - Thu Feb 19 2009, 05:46

We should make it refundable. I love the term "refundable tax credit". Obama used it a lot. I guess it has a better ring than "welfare". Which is what it is.

I love the stimuluswatch.org link. Its great. My hometown area did not get in on the act though, I'm sorta disappointed. I'm sure Syracuse could use a whole bunch of pork too. If Hillary were still in the senate, they'd get some pork.

I've now apologized to my 2 year old daughter 3 times for this disaster our idiotic administrations have created. When she's graduating college and looking at marginal take rates of 60+%, it will be to service this ludricrous debt. But hey, lets get those banks to start lending to everyone again so we can all get our blindfolds out and pretend that a debt-based economy will work.

Zeus bless the USSA. - Thu Feb 12 2009, 05:27

"im pretty sure if you kept a stock that long that would also be your return on investment"

Well, maybe a stock, if you cherry pick crappy ones. If you were to invest in a fund that tracks the S&P 500 index, or something like that, you'd have made about 5% over inflation. - Tue Dec 23 2008, 21:45

To Nicholas point, as is right now, he's probably right. I decided to actually read my mortgage last night and while boring, its a pretty short document and if my 7/1 ARM were to start floating today, my rate would drop by nearly 1.25%. So depending on the spread and the teaser rate, initially this may not be too bad. But I agree that the money printing we've done has a reckoning coming, although, one thing that does interest me... It seems the gov't is doing its best to get people to start spending like idiots again since the economy is driving on consumer spending. But what if this crunch and recession/depression actually change society and our saving rate goes positive, really positive? What if the excess money people get due to our printing press are used to pay down/off debt and not acquire new things? Could a change in behavior have enough of a reduction in the demand side of the equation to reign in the potential inflation? Being the pessimist I am, I can't see this happening but the idea interests me.

To Tim's point, its a stat about families so I believe college kids would be included with their parents since they'll be dependents on a tax return. That said, people paying for college are almost certainly spending more than they make in that year if they're paying from savings. I think the stat is good and its probably more like 1/3 of families in the country are irresponsible and the other 10% has had large expenditures recently. I'd be curious if things like buying a vacation home are discounted since they're one time purchases. I'd assume so, if not, it will be skewed. - Fri Dec 19 2008, 08:39

Carl,

"So it's the SEC at fault? OK. Madoff just being human then. What about my point about, has greed made us blind to even duty to be responsible and to question beyond, "but it's such a good return." "

I see your point, but then this point should always hold true. Isn't it possible that the fund managers just figured Madoff was smarter than them, and shouldn't question his methods, just accept his money? Isn't this exactly what a huge number of recent homebuyers that are now whining for help did? A strawberry picker buys a 800k house in california, how can he do this? Well his RE agent and mortgage broker made it happen with payments he could "afford". Should he question beyong "but it's such a nice house."? Of course, everyone should, but they didn't. If we're going to blame the victims, blame them all, starting at the bottom up. Personal responsibility has been dead for a while now, sadly. - Thu Dec 18 2008, 13:18

Christine, your post seems to have been cut off. I believe you were trying to say:

"And, IT IS A GREAT TIME TO BUY! IF YOU HATE MONEY!!!" - Thu Dec 18 2008, 10:43

You're not wrong, but how is it different from what Fannie and Freddie did by Congressional direction with regards to funding and supplying loans to people who were not credit worthy. Madoff fleeced many well-to-do people and some larger pension and mutual funds and will end up causing ~30 billion to disappear. This is a tragedy, and certain fund of funds managers had warned people away from Madoff because it did seem too good to be true. Many others thought he was front-running, which is illegal, but without direct knowledge, the investors aren't responsible, so they thought they were cheating, not being cheated, and I don't feel bad for them. Fannie and Freddie's losses have and will continue to dwarf anything Madoff could've possibly done, and instead of affecting mostly the elite, Fannie and Freddie have wreaked horrendous havoc on "main st" through artificial inflation of home prices that is falling apart and wrecking the economy, families' wealth and employment. So if you want to string up Phil Gramm, sure, but Barney Frank better be right along side of him if you're picking congressional villians. - Thu Dec 18 2008, 07:53

Where are house prices historically low? There are a few houses in Detroit you can buy for $1, but other than that, house prices are still WAAAAAAAAAAY above historical norms with regards to rental prices and income. - Tue Dec 16 2008, 13:17

I let my parents' dog loose from its chain and it ran off. While running off it managed to lose its favorite chew toys. I'm not sure why I mention this story, its ridiculous, like most people's grasp of english. - Sun Dec 14 2008, 18:40

Doris,

I'll bet you your 2008 salary that if you buy a property today and sell it in 2 years, anywhere in the country, you will not make a 50% profit on your investment, which isn't what I would consider huge. Also, who are these investors? I don't know any real estate investors, but I know a very large number of people who could afford to buy a house and I don't know any who are actually looking to purchase. A couple of my friends are selling their places now and planning to rent for a few years because of the current mess.

"What other investing can you do that pays for itself while you hold it? " - stocks pay dividends, bonds pay coupons, CDs pay interest. - Thu Nov 13 2008, 11:16

Tony, i agree with everything you say except this: "renting is usually stupid ". No, its not. Renting vs owning is a just a formula, for the past 6+ years this formula has been so out of whack that renting has been massively cheaper. At Equilibrium its more of a personal decision on having stability and building equity vs the flexibility and lower cost of renting, and the gov't meddling, i mean tax breaks, can make buying attractive as long as you can hold for a while because the friction costs in the housing market are ridiculous.

Zack - Fri Oct 31 2008, 09:48

A short sale is obviously a much better option but that wasn't the point. Consistently in this thread and on this site, RE pros consistently comment about how the media is distorting the problem and being alarmist and things really aren't that bad. Which is exactly what that foreclosure list is doing. Foreclosures are obviously terrible for the people involved, so are any other form of repossession, but taking the worst case scenario, putting "may ... " in front of it is more fear mongering than informative.

As for capitalizing god, it can go either way depending on reference, but I don't feel like I need to capitalize the term that large portions of the least educated portion of this country use to describe their imaginary friends. - Thu Oct 30 2008, 18:37

My god Louann, did you really put together that site?!?! Scare tactics anyone?

from http://www.shortsaleisbetter.com/

Foreclosure:
CURRENT EMPLOYMENT
-- MAY BE GROUNDS FOR IMMEDIATE REASSIGNMENT OR TERMINATION
FUTURE EMPLOYMENT
-- IN MOST CASES CHALLENGES EMPLOYMENT - Thu Oct 30 2008, 12:59

While my beliefs fall very closely in line with AJ, i'm just curious how the socialist economies have done historically. How's the economy of the USSR holding up? I seem to remember hearing something a few years back about it having some trouble. Iceland has some of the highest rates of taxes for social programs in the world, I'm sure they're doing just fine. Wasn't there something in the news recently about Britain freezing Icelandic assets and threaten to sue Iceland if they didn't live up to the FDIC-like obligations?

Carl, I'm really curious what deregulation caused this problem and what are the benefits of increasing homeownership? Its easy to speak abstractly about "benefits" and how "deregulation" is to blame, but what are these benefits and what deregulations are to blame. The federal governments most direct foray into the housing market, was one of the most amazing failures we've ever seen. They would mandate that no one in public housing could pay more than 25% for rent in public housing, which effectively stopped the middle or upper classes from living there. This created massive housing projects which are now often the worst parts of any us city. I mean read this list for NYC on the link below. You could take the list and go through rap lyrics about murder and drug trafficking and probably match 90%.

If the government were even remotely competent at fixing anything it attempts to, it wouldn't be nearly so offensive, but since they'll take the money, and waste nearly all of it. It is.

Slash/Rob Banks/Bushwhacked... again you've shown that your critical thinking is on the level of a 3 yr old with a learning disability. Its truly amazing you've managed to learn to turn on a computer and access the internet. I have actually posted my age in this thread in the past so you could find if i was alive when Carter was president, but I find it funny someone who has shown their stupidity, ignorance, and bigotry over and over on this board thinks age is somehow now important. With age does not come understand, with age comes incontinence and erectile dysfunction. Sadly your father didn't get the latter early enough. - Mon Oct 13 2008, 06:56

Ok, i can be convinced, what deregulation happened that caused this problem? - Sat Oct 11 2008, 16:43

Carl,
Your post makes no sense. The governments protracted effort to increase homeownership caused this problem. Add homeownership to the list of things we can do to fight economic depression? Is the post supposed to be sarcastic? I got a good plan, we'll have the government mandate that Fannie Mae and Freddie Mac have to start purchasing more and more loans to less credit worthy people. Since Fannie and Freddie have always purchased just safe and conforming loans, it will imply that these loans are not nearly as unsafe as they really are. We'll also put some tax policies to encourage private banks to lend more to these people. I mean what's the worst that could happen? I mean since housing always goes up, the fact that expanding the pool of people buying homes artificially won't cause unsustainable bubbles, it will just be new levels of appreciation. And if these people can't pay their loans back, that's ok, we'll just have a few more defaults, I'm sure it won't cause any major damage in any financial firms. But if we have a one in a million event (really more like 1 in 2), and we actually have financial problems, we'll just claim the problem is deregulation, not the policies that encouraged expanding homeownership. Its right out of the Barney Frank handbook. - Sat Oct 11 2008, 12:09

Its straight out of the article the_bayou, but I agree, its high. I believe the article assumes a 680 credit score which won't get you the best rates, i'm not sure if its a point higher or not though. I called HSBC to confirm that their rate for a jumbo-conforming was really 6.375 the other day and it was. Qualification was 20% down and great credit, but the loan was there. - Wed Oct 1 2008, 09:15

Eric, if interest rates go up 6% by next year for qualified buyers, i'll buy a house from you. Hell, I'll buy two. - Tue Sep 30 2008, 14:30

" I am glad you are happy in your rental, but in a year from now you will have given away $14,400 with nothing to show for it ..."

Yes, and the owner of the townhouse will have given away $19,257.96 nearly all going to interest on their loan and to show for it, following the trends of the past two years, they'll have lost about 50% of their downpayment assuming 20% down. So the choice seems to be paying $14,400 or $46,757.96. Just think, for the low price of $32,357.96, you too can feel the pride of ownership for a year. Oh, and lets not forget about the taxes that have not even been counted. - Tue Sep 30 2008, 12:11

Home sales in California up 13.6% in august year over year, down 3.8% from july. Median home price dropped 35.3% and 46.9% of the sales were foreclosed properties. Amazing. I'm not sure if its good news or bad news, but the magnitude of these numbers is staggering.

http://www.breitbart.com/article.php?id=D939E5SO0&show_article=1


While in my ideology, i'm opposed to the gov't bailouts, and the decisions made in the wake of this crisis, and I, personally, have been VERY affected by recent events, I'm pretty sure that an RTC style bailout would make me a lot more money than it would cost me in taxes. So I'm confused, my "greed" says go RTC, but my ideology says stop bailing out all this bull$h*t. I'll keep you posted on how it comes down, because I know you care. - Fri Sep 19 2008, 06:07

Just to clarify a bit of what Nicholas wrote:

"The spreads are lower since the government took over the GSEs. The thinking is that the GSEs had to tack on some money in order to turn a profit over what they borrowed. Under conservatorship the person making the money is the government and it would look bad if the US gov profited off US mortgages. "

Sorta, the first part is right, the spreads are lower, but its because there is considered no counterparty risk with the explicit US gov't backing. I have not seen anything about Fannie and Freddie reducing or dropping their origination fees. Actually, right now on CNN there is an article that they are still in tact. link below.

Mortgage rates are most commonly tied to the 10 yr treasury yields as the duration of a mortgage is closest to those products. Recently yields on the treasuries have come down, along with the government taking over the entities, so these combos have given us about a 50 bp drop in mortgage immediately.

"I think that move will be followed with the FED increasing the prime rate to combat inflation. " You mean the Fed Funds rate. I used to confuse the two also. The prime rate is the term used to describe the rate banks will give its best customers and is usually a national average. The government has no explicit control of this, but it highly correlated to the fed funds rate which is the rate the banks borrow from the government overnight. Don't mean to nit pick, but they're usually about 2.5-3.0% apart.

"A drop in the interest rate does not mean an increase in liquidity which is the main problem that banks are having. For 20% down, prime borrowers there really wasn't a problem getting a 5.75% mortgage before the bailout and the drop in rates wasn't reflected in the prime class borrowing rate."

The first part is the crux of the CNN article I linked above. There still isn't anybody really lending money other than the federal government now and they're not really trying to spew cash all over like 5 years ago. I have credit scores in the low 800s and up to a 30% downpayment and when I called our mortgage broker to check on rates a few months back I wasn't really getting any better than the published rates. Certainly not half a point, of course I would need a jumbo so that is a big part of the problem but I don't think it was real easy for prime borrowers to do as well before. Since providers no longer have to worry if fannie or freddie will collapse, the rate decrease is from the removal of that fear.

Anyway, I don't meant to nitpick but wanted to clear up a couple of things. Also the spread between the 10 year treasury and mortgage rates is still very high compared to historical levels so rates could still fall even with the fed raising rates.

Zack

links:
http://money.cnn.com/2008/09/08/real_estate/high_credit_scor…
http://en.wikipedia.org/wiki/Prime_rate
http://en.wikipedia.org/wiki/Fed_funds_rate - Wed Sep 10 2008, 12:57

My father's brother's nephew's cousin's former roommate told me that he got asking price for his house, so the market must be turning. As Glenn said, Buy now before you're priced out forever! On the negative side, I lost a bet for lunch today on the stock market debacle. Being an optimist doesn't pay. - Tue Sep 9 2008, 13:44

Carl, I think the problem is you let your kids unionize. Once they did, there was no reason to get to supper on time, pick up the towels or put the toothbrush in back in the holder. Good luck with your layoffs, I hope it doesn't get you in front of an abritrator. - Tue Sep 9 2008, 06:02

John P,
SMACKED DOWN by AJ. Nice.


In response to:
--------------
"John P,

You wrote: "Now Zack, can you explain the statement above, and how Buying a home not a good investment? "

I've probably replied nearly 100x to this thread in the life of it. There are nearly 2000 posts, the first 200 hold much of it and there is a ton of statistics showing a house is a terrible investment for financial gain. If you want a place to put pink siding on and lawn decorations of fat ladies in flower dresses bending over, great, buy a house, but if you buy a house as an investment, you're costing yourself a lot of money.

You still have not answered the question with any qualifying facts!

JohnP"
--------------

On the bottom of this page are a bunch of numbers that take you to previous pages. All the information is there. If you're too lazy to read it, then I'm not going to bother summarizing it for you.

Elvis, I actually burst out laughing at my desk at you post. That was amusing. - Thu Aug 28 2008, 07:58

"JC,

We will soon find out i have sent examples of reprinted articles on here and have sent them to their source. I will see if it is illegal or not."

That's rich. I can tell you what is certainly illegal... making threats to the president of the united states, yet you've done that in the past. I only wish I had saved the posts. I realize Ryan doesn't want to ruin your life just because you're a moronic troll, that's generous of him, I wouldn't do the same. - Wed Aug 27 2008, 20:33

John P,

You wrote: "Now Zack, can you explain the statement above, and how Buying a home not a good investment? "

I've probably replied nearly 100x to this thread in the life of it. There are nearly 2000 posts, the first 200 hold much of it and there is a ton of statistics showing a house is a terrible investment for financial gain. If you want a place to put pink siding on and lawn decorations of fat ladies in flower dresses bending over, great, buy a house, but if you buy a house as an investment, you're costing yourself a lot of money. - Wed Aug 27 2008, 20:20

Bill,
In response to, "Again, what should the realtor say to a potential buyer? If you can't answer that, then moaning about the issue with no solution is pointless."

About 500 posts ago, I had mentioned that all I wanted was for the NAR to stop touting the investment potential of homes. Its false, misleading and has been massively effective. "Its a good time to buy and sell a home" is patently false unless its finished "unless you hate your money". That would be all I ask. I would expect my realtor to tell me about traffic in the morning on my street, or one near me if i ask, approx tax info, when the last reassessment was done, where I can get good info about the schools, neighborhood, etc. If I give them a range of prices I'd like to spend, I'd like that to be followed to a T. I don't mind being asked if I'd be interested in seeing something slightly over because the realtor believes their is wiggle room, etc, but the range is followed. I would like to never hear, "This is a great deal for this house." or "You'll have instant equity" or anything else that implies financial gain. If I ask about an investment, I'd like to be told that I should talk to a financial planner etc. Hearing realtors say you're "throwing away money on rent" which is on these boards all the time is patently false. The NAR plays up the wealth building of owning a home. But they don't mention that it only builds wealth for people too irresponsible to save on their own, otherwise a house is barely a breakeven proposition. As long as the group continues to tout the investment benefits of owning a home, then its members should be able to speak intelligently about it, and if these boards are a sample, that is far from the case. So to get back to the answer, what should the realtor say? They should say that they are not qualified to predict what the market will do in the future, provide inventory numbers and absorption rates and that they should talk to a financial planner if they have any more questions.

Zack - Wed Aug 27 2008, 18:00

Can't lurk anymore...

Chris, I don't have a huge sample size, but I have now worked with 8 different realtors at points in my life. 7 of them have been what you would describe as bad apples. They upsold, showed us things out of our stated range, did not have 1/3 of the expertise Nicholas described below etc. You say there are a few bad apples, I say based on personal experience, and A LOT of time on these boards, that there are a few good realtors, but most are utterly useless and do a disservice to their clients. The barrier to entry for the profession is less than a bus driver in most states and the NAR membership skyrocketed during the bubble and is still very high.

"you're not paying the commission. Stop worrying about everyone else's compensation." Not true, the seller's price includes the 6% they're paying, so the buyer is paying that. And why should anyone stop worrying. When you have useless representation or representation that is actually a disservice, and you're paying 10s of thousands of dollars for that representation, you should be very upset.

"Prices are great, rates are great and there's plenty of inventory to select from. I don't see anything wrong with that." Price are great? Compared to what? How do you qualify that? Rates are great? Qualify that. Justify these statements. The fact you don't see anything wrong with it is a large part of the problem.

"Try not to clump ALL Realtors into your BS accusations. What do you do for a living? Let's switch gears and bash your profession..." You don't have to clump all, just most. Forbes survey on profession by prestige has realtors dead last. These opinions are not realtor bashing, they are what a large segment of the country believes. - Wed Aug 27 2008, 12:03

Carl,
Your grey-haired image and prior posts put you at an age that has experienced a lot of life. I'm glad to see that life has not beaten the dreamer out of you. It gives all of us hope. :-)

Zack - Fri Aug 22 2008, 12:06

Good luck. Did your Realtor claim to be an expert on lucky numbers and fortunes?

Bill, your posts are very polite and well written, but they don't seem to make any sense. The overriding theme I can get is that Realtors are always good, positive and helpful, and if you call them on any BS they spout, you're a know-it-all.

In your question to John the Bruce, you said, "I suppose in your job you are completely straighforward and never have your own financial interests in mind. RIGHT?" I'm sure this has come up, but if you do that, and someone knows better and calls you on it, you look like an a$$hole. That's the way it goes. You can't just dismiss it with a wave of the hand and saying, "Anyone buying a house should do their research and know what they are getting into." Of course they should, that doesn't change the fact that when you enlist the help of a professional, and that professional lies to you, and feigns ignorance, that they should not be taken to task. - Thu Aug 21 2008, 07:16

dammit, my answer was chopped. Stupid boards with non-data cleaning. I should drop the master table.

continued:

80% are less than or equal to 5 years. Basically if you look at it as a scale. If 6 years is the average (sorry I couldn't locate the source, but I remember it being near there), that's the equalibrium point. How many homeowners of less than 6 years are required to average to 6 with a single 50 year homeowner? 10 at a minimum. So it is nearly impossible for their to be more people who have owned their homes longer than 6 years. The only way this would be possible is if you had a large majority of owners in the 6-9 yr range and almost none over 20, which is definitely not the case.

I'm also comfortable with the 50% number because I believe its a conservative estimate.

And to the other point about conventionals, we have the same thing in westchester. When they released the new guidelines we looked at putting 25% down to make it within that range but it ended up not being too much of a benefit, then we decided not to buy so it all became moot. - Tue Aug 19 2008, 13:38

right, and average skew is obvious a problem, but in the wrong direction. Like this:

you have 5 homeowners:
A - 1 yr
B - 1 yr
C - 2 yr
D - 5 yr
E - 27 yr

The median is 2 years and the average 7.2 years. 80% are - Tue Aug 19 2008, 13:32

The difference between conventional and jumbo is ludicrous. Btw, Evanstown is an upscale area right? Does anyone actually get a conventional loan for SFHs there? - Tue Aug 19 2008, 13:25

Elvis,
I poked around on realtor.org and found this: http://www.realtor.org/rmosales_and_marketing/handoutsforcus… which states "The average first-time buyer only stays in a home for four years." I remember seeing another link to realtor.org that stated the average person owns their home for 6 years I believe. Given the huge runup in homeownership in the 2000-2005 time, I don't think 50% purchased in the last 5 years is a ridiculous number, and I think it may even be low. The rest of your post i agree but what do you think would happen in 5% of homeowners mailed in their keys?

According to a 2007 census bureau report: "There were an estimated 127.3 million housing units in the United States in the first quarter 2007. Approximately 109.7 million housing units were occupied: 75.0 million by owners and 34.7 million by renters." All i can find about the number of bank-owned properties is that it passed 750,000 in july. So if 5% of the 75 million owner occupied places were to walk away, that number would go up 5-fold. That's an epic disaster. I don't think its likely, but shrinking the numbers to single digit %s doesn't really fix the problem, 1% would double the bank owned properties, and that ignores that people would be even more likely to just let a cash-negative investment property go.

links:
http://www.census.gov/hhes/www/housing/hvs/qtr107/q107press.pdf
http://www.realtytrac.com/news-trends/index.html - Tue Aug 19 2008, 13:20

Actually JR, I'm not sure how true it is that the vast majority of homeowners are not in over their heads. I've seen a few things that estimate that more the 50% of current owners owe more on their home than it is worth. While I agree that the majority of people can continue to make payments, I'm not sure its such a huge majority. The NAR says the avg person buys a new house every 5 years. A lot of this country is below prices of 5 years ago. The perfect storm of stupidity, especially on the lenders side allowed people to purchase as stupid prices with little or nothing down. I know its been brought up before and you were appalled by the thought of people walking away from a home because its cheaper, but I personally am not. Mortgage contracts are written with words that sound bad like "delinquent" and "default" etc, but at the end of the day, its a document that says you pay $X, if you don't, we'll wreck your credit score and take your house. If a person is will to accept those terms to no longer pay $X, then they can walk. Why would a buyer have a moral obligation to a bank? Those same banks were pushing to get better returns with the same "risk" as US treasuries, paid huge bonuses to executives and traders and basically just had a huge party on funny money. I don't believe we should be saying a buyer has a moral obligation to destroy his quality of life to make sure the hangover to the party isn't so bad.

Zack

** reposted to add some info ** - Tue Aug 19 2008, 11:29

Awesome, at work, and I tried to click on Dionne's sweet liberty link:

The Websense category Militancy and Extremist is Filtered

I couldn't have said it better myself. - Fri Jul 11 2008, 10:11

Dionne's stuff is awesome. Israel has ICBMs now and they're aiming them at the US? Um, ok. The_bayou, I'm with you, I've never seen anything where Israel has confirmed having nuclear weapons. They just don't comment. The entire world agrees they have them, but no confirmation. If they were to confirm it, the outcry from the Arab states would be insane. - Fri Jul 11 2008, 09:25

John, by stating your "fact", you're breaking the mantra of the herd here, that real estate is all local. I have looked at both NYC and westchester county and it is a "fact" that both had slight declines over a 10 year period in the 1987-1997 time frame. This is in nominal value, which with inflation, means you got absolutely killed over this 10 year period.

Inflation hasn't pushed any rates up although it looks likely the prime rate will be raised. Who knows though as Fannie and Freddie appear on the verge of collapse. Also, with both your assumptions of purchase prices coming down and inflation going high, buying now is moronic. You actually get the double whammy of losing nominal value and getting crushed in real purchasing power.

" If the house you're wanting to buy, is selling for less than it was two year years ago, you're getting a good deal." -- Why? If the fundamentals of the market still doesn't make sense, you're not getting a good deal, you're catching a falling knife. - Fri Jul 11 2008, 07:27

A few posts with realtors recommending a person to buy on a short time horizon:

http://www.trulia.com/voices/Home_Buying/We_are_first_time_h…

http://www.trulia.com/voices/Home_Buying/Is_now_a_good_time_…

Trulia mods, something really needs to be done about the poster now named "Rudy's Daddy". I hope Ryan sent his posts threaten the president to the secret service. Its not his place, or ours, to decide who is credible. - Thu Jul 3 2008, 16:04

JR,
The article doesn't state accurately either way whether the man was taken advantage of. Was he promised by the realtor that he could refinance in a couple of years? Or that he'd be able to take out a home equity loan to do something in a couple of years? I'm not saying any of this happened, but we don't know. Either way, its doubtful he was taken advantage of, and much more likely, if anything, he was misled with statements about how its a good time to buy and housing always goes up and you can always refinance, etc etc and was too trusting. This type of reaction is obviously lunacy and if this was normal there would be a lot less CFPs and stock brokers in the world.

What's the purpose of the article? I'm not sure. Maybe that if you tell gun-toting NRA members in the middle of this country its a good time to buy, you better be right? - Wed Jul 2 2008, 08:03

Greg,
The article is rather lousy but I sorta expected that. It says: "Experts say timing the market correctly is almost impossible and that for a traditional homeowner -- who should be taking a long-term outlook approach -- timing is irrelevant."

Who are these experts?
--says Bonnie Abbott, a professional real estate consultant from Seattle.
--Stuart McAfee, a Realtor with Oakhurst Properties in the San Francisco Bay
--Lawrence Yun, chief economist for the NAR
--Patrick Killelea, a programmer from Menlo Park, Calif.

Of these 4 "experts", who would guess who gives real calculations and decides its not a GTTB? One hint, its not the new incarnation of the Iraqi Information Minister.

The title is inflammatory, but that's the news for you. Like just yesterday when MSNBC ran the headline "We caused this!" or something like that with a picture of a house underwater to the roof. Then the actual article talked about how the majority of experts believe the global warming has factored into some of our meteorological events. This one isn't so far off. In their examples, they completely ignore the difference in downpayment, which for a 250k house, isn't a huge amount, but for 900k houses like they have in NY area, or Chicago, 18k savings up front goes a long way. Plus they don't even consider the fact that the spread between the 10 year treasury and mortgage rates is STILL at a historical high, so there is plenty of room for rates to fall even in the fed raises rates, nor do they consider that you can refinance rates. Finally, they don't even consider the odds of each event. Does anyone want to bet me which we'll see first nationally, a 1% rise in rates or a 5% drop in home prices?

Finally, AJ's work earlier in the thread showed that timing the market for housing is very possible. You won't pick the exact bottom, but close enough that it doesn't matter, especially considering the you won't be catching the falling knife.

Ok, i'm going back into hibernation. - Tue Jul 1 2008, 16:04

And yet another account soon to be deleted for CAR's charter member. - Tue Jun 24 2008, 15:56

Reposted for Christine who doesn't have a "contact me" in her profile or I'd just send it to her:

If you're getting emails on every reply, which I also had to stop, do this to stop them:

go to: http://www.trulia.com/account/searches/
click on the tab "My Trulia Voices Alerts"
find this question in the list, and uncheck the "email alerts" checkbox.

That should stop you from getting alerted every time. Be aware, that if you do return and are answering again, by default Trulia puts a checkbox under the "Web References" area that says "Email me when answers to this question are posted", if you don't uncheck that, it will go back to alerting you on every message and you'll have to go uncheck it again in your profile. I haven't found a way to stop the checkbox from appearing on every answer.

Zack - Tue Jun 24 2008, 13:25

If it makes everyone feel better, its not just housing that is taking a beating. Corporate profits expected to be off by 10%: http://biz.yahoo.com/rb/080624/usa_earnings.html

The good places to have your money right now are few and far between. Bachelier tells me under my mattress and its looking better and better. - Tue Jun 24 2008, 12:24

**Reposted because I can't type coherently

Nancy and Charles,

If you're getting emails on every reply, which I also had to stop, do this to stop them:

go to: http://www.trulia.com/account/searches/
click on the tab "My Trulia Voices Alerts"
find this question in the list, and uncheck the "email alerts" checkbox.

That should stop you from getting alerted every time. Be aware, that if you do return and are answering again, by default Trulia puts a checkbox under the "Web References" area that says "Email me when answers to this question are posted", if you don't uncheck that, it will go back to alerting you on every message and you'll have to go uncheck it again in your profile. I haven't found a way to stop the checkbox from appearing on every answer.

Zack

I will also send this to both of you through your profiles also in case you're just mass ignoring the thread. - Sun Jun 22 2008, 18:49

Carl,
Your response got me thinking about the american dream thing, so i started a new question about it. I was going to avoid doing it because I've found that the quality of responses on this thread is much much higher than the usual question gets but I'm curious about the emotional aspects and many of the common posters on this thread tend to remove emotion from purchasing, which I believe is rare.

Anyway, I'd welcome all thoughts on it, link below.

Zack - Sun Jun 22 2008, 13:13

Carl, I have nothing against homeonwnership at all. I really don't. You know my feeling on it as an investment, but with gov't tax breaks, its not a terrible deal and you get all the intangibles Linda listed below. Its never been a dream of mine. I don't know of a single person that I'm friends with that dreams of owning a home. They feel is something you're supposed to do when you reach a certain age. I feel/felt the same way. I started asking people about buying and some had very good reasons and others had no reason other than they felt it was something they were supposed to do, like register with selective services or something.

My parents did not have a lot of money when I was young, by the time I reached teen years my dad had been promoted a number of times and my mother was back to work as all 3 of us were in school and relatively able to take care of ourselves. They did pretty well. They still have their same home but spend 8+ weeks each winter in Hawaii and 12 weeks in Puerto Rico and/or Costa Rica. So no, i've never seen a foreclosure process server.

"Now you compare local home prices over 10 years to the S&P average nationally to prove that a home is less profitable as an investment therefore don't buy one?" - I've done comparisons like this about 20x in this thread, and have stated a number of times that a house is a bad investment. Buy one when life decides you need space, or you want to join a neighborhood/school district permanently, or many other personal reasons, but just don't think of it as an investment. During normal times, I believe the intangibles you get are worth the premium you pay for them, but in the current declining/flat market, where it looks like we're going to be flat for a long time, those intangibles are very expensive, too expensive in my opinion.

"You are afraid democrats will tax you while they further ruin the values of real estate." - I'm nearly certain of this, its not a fear, it being practical to assume that my taxes will go up, the only question is how much. If the democrats get over 60% of the house also, they'll have free reign to pass whatever they want which will likely result in a large gov't homeownership bailout. If this is structured to really encourage first time buyers, I may benefit from it, but more likely it will be large amounts of taxpayer funds to prop up bubble prices all over the country. The only result of this is that they'll set a bottom and we'll have flat real estate prices for many years as inflation does its work. Either that or they'll inadvertantly price everyday people out of being able to afford homes all. Our gov't has shown time and time again that when they intercede to "fix" things on our behalf, generally all they do is cost a ton and turn out to fail. They could call their bailout No Homeowner Left Behind, it would be fitting.

I'm not trying to bait people, I really do not understand the concept of calling homeownership the american dream. I've spoken with many people my age about it, including friend that own SFHs. They cite the intangibles and settling down and knowing you can stay there for as long as you want, etc. I agree all of these things are positives to homeownership. When I bought my co-op I felt like more of an adult, but it didn't feel like a sense of accomplishment. Maybe for others it does and that's really what people mean. Carl, you deal with people making this purchase, please explain it to me. Do many of your clients feel a sense of accomplishment when they've closed? I'm not being sarcastic, I'm actually curious. I remember feeling relieved but mostly because it was over and I could close the book on the massively annoying steps of going through contract, inspections etc, and its exciting to move to a new location. Anyway, again, I'm not trying to bait people. I do think Victor is crazy, and I really don't understand why buying a home is considered the american dream. I'd be happy to hear from people why they believe it is and how they felt after purchasing.

Zack - Sun Jun 22 2008, 11:08

Victor, you've refuted nothing and proven nothing to anyone other than yourself, but I do give you credit, you've really seemed to convince yourself that you've proven someone wrong.

This is seriously funny:
"Reporting my posts which oppose yours resulting in a temporarily suspended account until I contacted trulia and they saw there was no reason for the suspension."

I've been on a few threads you've been on and have never reported any of your posts. The only person's posts I've reported is Slash/Go Cubs and his next 15 iterations and obvious spam like the financing offer on the california boards today. You probably don't believe me either way, but it doesn't matter. I find it hilarious that you're crazy ranting actually got you temporarily banned. I don't think even Richard from Philly has been temporarily banned. Nice work. - Fri Jun 20 2008, 12:57

Go Cubs latest account,
You'd think after having like 15 deleted accounts, you'd end the embarassment of continuously looking like a fool. Although since you've done it under 15 different names, maybe you're different personalities don't mind. You should less more time trying to time "botooms" and read earlier posts by AJ that show that timing the approximate bottom of the housing market, if very likely to be possible. Considering your usual posts contain either nonsense or hatemongering, I doubt you'll be able to understand it, but give it a try, maybe you'll surprise us all. - Wed Jun 18 2008, 18:53

"and seller's response was, let's wait, it is too soon. "

That's awesome. Honestly, I don't know how you guys deal with people most of the time. This actually intrigues me a little bit though. I know older, or stale listings tend to attract less attention, etc, and there is an old adage that the first offer is usually the best, although I'm not one ot believe much conventional wisdom, but I wonder if there is data compiled on SP/OP based on days on the market? Many days on the market also adds to the cost of carry for the house as the person who is trying to sell is paying for it while trying to sell, but in our area, compared to the prices houses go for, that's usually a minor amount. There seems like there is an optimal solution to the days on the market to reach peak price though, although it has so many other factors that it may not be useful. Interesting idea though, at least to me. - Wed Jun 11 2008, 17:00

JR, way to be useful. I replied again defining what was meant by meaningful data, a comma separated list, or something that can be analyzed. I don't want lockbox info, seller's name, etc, not important, rooms, bathrooms, sq ft, original price, etc, that's useful.

You said: "Oh my let's everyone rent because we might have to move suddenly." Brilliant. Since the original poster was claiming its ALWAYS better to buy vs rent, when I point out a case its not, I'm advocating always renting. Way to go, you're channelling your inner-Victor today. You tend to vary between being snide yet useful, and a troll, and if you checked the mirror today, your nose would be green and pointy. - Wed Jun 11 2008, 15:08

Paul,

I don't believe its a big conspiracy, and I've actually considered getting my license just to get MLS access. Its more that I'd like to be able to get the data in a nice .csv format, or something else that can easily be loaded into excel or a stats package to be analyzed. I've asked a few realtors we're using here for information, and I get sizeable reports via email, but its difficult to analyze since the data all has to be entered following that. Plus the columns in the report tend to vary which makes me believe they can be chosen by the realtor, which is a nice feature, and I would be more specific if I was willing to do the data entry.

I read the settlement thing and saw that it was more around everyone being listed, but I wasn't sure what doors that would open for someone like redfin etc to start producing the ability to run csv reports on specific queries. I realize its not covered specifically but I'm not sure if the NAR would object to someone trying to do this, and if they did, i believe this ruling could have have an effect. Of course its very possible i'm just imagining all this too. :) Either way, it wasn't may intention to make it sound like a conspiracy of hidden data.

Christine, I'm all for the power of positive thinking, but positive thinking doesn't make purchasing always a good idea. Actually, it doesn't do much other than sell self-help books.

Zack - Wed Jun 11 2008, 14:39

Thanks Nancy.

I'd love to be able to access our local MLS data in a meaningful way but currently its difficult and you need a license to even get access. The reports it spits out aren't real useful if you're looking at them as data to be entered and analyzed but I think the idx feed would probably help quite a bit. Not sure. With the recent settlement with the NAR and the DOJ I wonder if we'll see more opening of the MLS data and some companies coming in to provide more analysis on it.

Zack - Wed Jun 11 2008, 13:25

Nancy, is it possible to get List Price/Original Price out of the MLS? I'm curious about reductions being seen and days on the market. Also, is it possible to breakdown by # of bedrooms? The stats do look like the market is going up but if March was a month with almost all 3 BRs and May was all 4 BRs, etc. With ~140 items in the sample set, it doesn't take a lot of differences to cause decent fluctuations. I'm not claiming your stats don't support what you're saying, just asking for more details. Thanks for the info, we like stats.

Zack - Wed Jun 11 2008, 13:00

Christine,
Here is someone who might disagree with your premise that it is always better to buy than rent...

http://www.trulia.com/voices/Home_Selling/How_do_you_sell_a_… - Wed Jun 11 2008, 12:44

Just to help clarify, Nicholas mentioned Maryland is losing 2.5% per month, not Chicago. Chicago lost 4% last year. The funny thing is you'll now get a bunch of replies about how real estate is local, and stuff about The Loop in Chicago and other desirable areas. There will always be local areas where things are doing fine, this may be due to desire to live there never waning, but more likely its due to small sample sizes.

Christine, this statement is totally insane:

"IT will always be better to own than rent, even if it s a small condo - IT'S YOURS!".
and
"However, Zack, you get write offs ROI, tax deductions for the expenses & interest. How can you say that a person is better off renting?"

How can you claim globally its not? If a market is going to decline for a period of time, you are MUCH MUCH MUCH better off renting during that period of time than you are buying. There are a number of posts in this thread that point out the math, which shows that housing, as an investment is a poor one. It historically appreciates basically at the level of inflation which means all your doing is being forced to save money at the rate of inflation. Owning you do get writeoffs, maybe, depending on if your mortgage interest is enough to itemize. If you didn't itemize before, then you only get a partial writeoff. And the writeoff is on mortgage interest, so it sounds like its more advantageous for a buyer to have higher interest rates and a a lower purchase price, assuming the don't just take the standard deduction.

"Our market has improved and is not stagnant and I am hearing this from many in different LOCAL markets." -- almost everyone is claiming the same thing, yet the country as a whole keeps declining at a rapid rate. Something doesn't fit, either many different LOCAL markets are declining, or the government data the politicians are building a platform on is wrong.

There is a reason realtors used to do buy vs rent calculations. Because there is a ratio that determines when i makes sense to buy. If you bought in most of California, or Phoenix it definitely wasn't a better time to own than rent. I'm talking local markets too. The inland empire of california, put 40 local markets from there on a dartboard and throw a dart, odds are probably 100% that you've found one where it wasn't a better time to buy or rent.

From a purely financial standpoint, the buy vs rent decision is an equation, and that equation gives you an answer about which is better financially. To claim that it is always better to buy is obviously wrong.

Zack - Wed Jun 11 2008, 11:11

I've been lurking but think i've finally collected enough comments to join the fray again.

Thomas Hall, excellent post. I think many people confuse this point and I was/am one of them. Its a mistake to look at a realtor as a financial planner although I understand why many people are confused as they look at the realtor as their one-stop-shop for all info housing.

Chris Freeman, I'm glad you didn't get your wish about the thread dying. Very good post about the thoughts of realtors etc. I gave it a thumbs up. Early in my trulia posting days, there was a post by a realtor in florida calling for a moratorium on home building to ease the crisis. It was obviously a panic thought without much realism but he made a comment about how the home builders could just go and fix all the bridges that need to be fixed (after the minnesota collapse) etc, which implied it was simple for a home builder to just go do something else. Your comments are spot on with that, they build homes, they know how to build homes. The market the credit bubble and housing bubble created is one where they probably shouldn't be building many homes, but they can't just go home and twiddle their thumbs, so they still need to build homes. Same with realtors, they have to sell homes. And I agree, that most actually believe its a good time to buy because a bad time for everyone in the housing market just doesn't compute. Good post.

RealtyExec, AJ posted some data earlier about the explosion of Option ARMS coming. Here is a link I found from his posts: http://calculatedrisk.blogspot.com/2007/10/imf-mortgage-rese… The actual data was compiled by Credit-Suisse. I've seen it broken down by state also somwhere, I think, but didn't see a link for it. I believe there were other links posted around the same time but I just glanced through AJ's posts to find this one. Its back there though.

Christine Moscinski, whether we've hit the bottom or not matters some, but not a lot right now because this bottom looks like its going to be long and flat if we're there. You said, "Why not you become your own Landlord and pay yourself! It's all a state of mind..." Well, this is sorta true. In very large areas of the country, the rent/buy calculations are WAAAAY off. So you can buy, and become your own landlord, but the landlord in you then charges the tenant in you nearly twice as much as it would cost to rent, and you, the landlord, have to pay taxes now, and you, the landlord, have to pay maintenance, etc. If cost of renting = cost of buying, no one would rent, when the ratio is nearly 1:1, people rent or buy depending on where life takes them or if they can afford to buy. When its much more expensive to buy than it is to rent, paying yourself doesn't work because you charge yourself WAAAAAY over market value.

Zack - Wed Jun 11 2008, 07:30

The Bayou, its a bit weird, but basically the point is that the april numbers were their estimate, as was march, feb, jan etc, and later when the numbers came in, the last 6 months had all been overestimated so they were revised down. So the author is saying the increase is over revised down numbers and are likely to be revised down themselves. The point they really should make is that the 6.9% they rose were with a confidence interval of +/- 14%, so they're not even a good estimate.

Zack - Fri Jun 6 2008, 17:42

New news brings new posts. Carl continues to post on occasion and when he does, he has added value to the thread. I find his anecdotes interesting and they seem to jive with what other people on the site are posting on trulia voices.

Joep, if you would go back to read the early part of the thread, Ryan was very close to buying early on before the deal fell through and even through a number of posts, was still undecided. I was on the fence before this thread also and had made a 3 offers on houses, since going through the work to post accurately to some of the debates on this thread, we have stopped actively searching. People were here looking for intelligent discussion and in some of the thread, we got it, if you wade through about 800 drone posts.

Welcome back Slash/Go Cubs/Nomorehaterz. Still smarting for the NAR settlement that set you off on a tirade and another deleted account?

Zack - Thu Jun 5 2008, 15:16

Dave,
I completely agree the buyer sets the market. I'd even be willing to believe that if you could provide someone with the entire set of data for an individual house, including how that neighborhood will do for the next 2 years, how motivated the seller will be at any point, and where rates will go and how many buyers will enter the market in the next 2 years, you still couldn't predict the lowest possible value of that house. As Carl mentioned, too much emotion built into it. But what this data can do is give you a baseline range for what an average house in XYZ neighborhood with X bedrooms and Y bathrooms and ~Z sq ft will cost. There may not be an actual house on the market that fits the description, but if you have that baseline range, you can adjust for what other features are worth in the market, and to you as an individual. This is really all I'd like to be able to take away if there was better data available. I'd love for more granualar data, but its hard to come by. I'd be fine with median prices even if you could completely eliminate or only take new construction depending on what you're looking for. Comparing new construction to 10+ yr old existing homes really isn't fair.

I also agree that people can and do make a fortune investing in real estate from single family homes to commercial properties. Real estate can be a great investment, if you know what you're doing. The same is true of stocks, bonds, commodities or even writing useless self-help books (see Kiyosaki). The problem is average people have been led to believe that making tons of money and becoming rich in real estate is easy, just buy a house and you're done. Most people believe that you are throwing away money when you rent. These statements are just not true, and renting is a lot cheaper in most of the country right now and that's the point I've tried to make in this thread. There has been a lot of back and forth here so there have been a lot of tangents and flame wars, bu the main point of the thread is the data and expert opinions about where housing is going.

I responded to Victor in another thread that I've become convinced that a house is and always has been a rather poor investment, just a savings account that pays you inflation, but I will buy a house in the future because it will be a life decision I'm willing to pay a premium on. I have no problem paying that premium, especially when its at a much more reasonable rent to purchase level or income to price level, but right now, the premium is very high even in the most desireable areas around me.

Zack - Tue Jun 3 2008, 18:00

Victor, i gave you a contradiction earlier when you were leaving the first time that took me one post to find. Also, I post and comment on articles I find interesting regardless of point of view. I posted the article because I found it interesting, not because of who's side it was on.

"Every topic you've opposed me on, I've debunked your data and associated theories which always seem to be from an investors point of view. Despite the fact most people who purchase homes are not investors."
-- So people should just accept that they'll overspend by a substantial margin and then overpay for shelter for many years because they're not investors? The point of view doesn't matter, the facts are that for a large portion of the country, buying a home now is still very likely a large losing proposition.

I also gave up on arguing with you as its pointless and will go back to standing by that. I believe that anyone with a solid sense of reason will be not be confused. Reading your posts are at least semi-entertaining in an ADD-of-their-ritalin sort of way although they get old quickly. So I bid adeiu to you again.

Zack - Tue Jun 3 2008, 17:40

John appears to be Go Cubs/Slash's latest name. He can't stay away, its like crack.

Dave, if you want to know how much something has increased, isn't the most logical way to determine that is to take what it was bought at, what is sold at, and figure out the increase? Also you seem to imply that the C-S index and HPI index aren't set by what consumers are paying for real estate which is obviously false. Finally, I'm not sure who you're referring to as "armchair QBs" . Some of the most adamant anti-housing members on this thread have been me, AJ and Richard. I own right now, AJ has stated a few times that he owns right now and Richard has posted that he owns his current home and had bought and sold a home in SoCal in the past couple of years. Since you seem to be implying that someone has to be in the game to accurately discussing housing data, we've been in the game, and have found that it seems about time to call timeout.

Zack - Tue Jun 3 2008, 15:19

C-S index on chicago metro area John? I'll take that bet, you tell me the escrow account we'll each deposit into and winner get it. - Tue Jun 3 2008, 13:29

"but the yardstick for any market area is the median price" - this is only true for the media and the NAR. Anyone trying to make informed and real decisions such as, say, the FHA uses the HPI index. Anyone trying to really judge what is going on for large scale investment, such as wall street, uses C-S. There is a reason for this, they are the least biased of any indicator. Median home price is generally sh*t. I mean look earlier in this thread when someone posted the median stats for NYC for the past quarter with and without CPW15 and the Plaza conversions. Those two buildings skewed the median by something like 20%. - Tue Jun 3 2008, 12:57

A MarketWatch article about price to income levels coming back into line which bodes well for housing. - Tue Jun 3 2008, 06:33

"Use your best judgment when taking advice from others online with a good dose of common sense a little research on the advice giver and a grain of salt... "

-- Very true. I'd take it even further. Be very wary of accepting advice from someone who's livelihood depends on people taking that advice.

"I would advise reading any bloggers profile and comments they've made in other posts to get a reality check of where they're coming from."

What I've learned from reading the posts of Victor Kaminsky is that he contradicts himself depending on who he's answering, he seems to believe there is a conspiracy going on here if people don't believe the NAR company line, and that if someone disagrees with him and provides WIDELY ACCEPTED data that is published by independent and government agencies, its faulty. The government makes policy decisions and recommendations based on this data he considers "incomplete old data", but its faulty because it doesn't agree with his view. Finally, the most glaring point I've learned from reading all posts by Victor Kaminsky is that he consistently makes ridiculous arguments in obnoxious and flaming tones and pass them off as if they are so obviously true. This is what people do when they have nothing of substance to support their arguments. - Tue Jun 3 2008, 06:09

RealtyExec,
Thanks for the answer. Its likely the sample is skewed on a site like this because people wouldn't post questions here if they're not having any problems. Although the answers from many of the realtors answer that this is standard procedure for short sales and bank-owned properties. I do agree is probably due to problems like the system being overwhelmed and the banks being unprepared to sell properties. Like JR likes to say, the homes aren't really for sale, just listed as such since no one will pay or agree to the terms. I'm not actually involved in any short sale transactions, or looking for them as the NYC area hasn't had the same level of price drops so they're not as common. I'm only speaking from what I read on the trulia voices area. Thanks for clarifying and I agree that having good and accurate representation in a transaction like a short sell probably saves everyone lots of headaches.

Zack - Mon Jun 2 2008, 17:55

**Reposted changing "are motivated" to "aren't motivated" **

A few random comments....

Wow, someone citing Robert Kiyosaki. Next we'll get some expert non-fiction from James Frey. http://www.johntreed.com/Kiyosaki.html

Greg, you got a thumbs down from me too for reasons AJ stated. But basically, if you're post reads like a commercial by the NAR, you're getting a thumbs down from me.

The inventory analysis is a good thought. Is there a good way to get breakdowns of that? The newspapers have it frequently so its gotta be out there soon.

Realtyexec, one question for you. You mention the banks being very motivated sellers earlier, but whenever a surf around on these boards, there are probably 10 new posts a day about people trying to buy a foreclosure or a short sell and the banks don't respond for weeks to months, and if you have any questions, or try to get them to fix something, you're looking at even more weeks. While I believe the banks don't want to be holding this inventory, the large number of questions and responses to those questions on this site have shown that banks may not want to be holding houses, but they certainly aren't motivated to move them.

Zack - Mon Jun 2 2008, 13:33

Jed, please post your stats. RealtyExec is posting articles to support his feeling from seekingalpha which is generally a pretty good economic site. They seem a lot higher on housing than me, but at least there is substance and data there.

The only "stats" posted to support the opposite side we've seen have been some socialist papers from realtor.org and some median home price stats from very small areas, or where new construction has skewed the numbers. Please bring any and all stats you have to this discussion, the core of respondents want to see them.

"Many many people don't make decisions based on analysis, they make them on emotion and motivations from perception." - very true and a big part of why we had this bubble and a tactic many of our "pro" company liners have tried to inject into this thread. If we could remove this fact, the world would be a much better place.

"My point is that the people that have property will be better off than those that rent. If you want studies that prove that they can be found but I don't think you want them because they will not support your decision."

--Why? I want studies and I haven't made a decision in my area. Liz Hoffman provided some studies from realtor.org earlier in the thread that tried to support one of the newer NAR tag lines that a house is a builder of long-term wealth. The paper was an interesting read, but it was seriously biased in terms of what data they were using and what conclusions they were drawing. A house is a forced savings account that grows historically basically at the rate of inflation. Although you can now remove any of that forced equity with Home Equity loans etc so I believe it is very likely that the data currently being used to show people's net worth being heavily tied up in their home will begin eroding quickly as the irresponsible people are no longer forced to save with mortgage payments.

Zack

On a truly sad note, we just missed a sale in San Diego:
http://www.michaelcrews.com/IMAGES/flyers/BOGOF_flyer.pdf - Mon Jun 2 2008, 12:47

RealtyExec,
I liked the article and feel a lot like the person in the article, although i'm not moving. Having read that article, I can't understand why anyone without a very specfiic need to buy, would want to buy now. The quotes I could most relate to:

"I’m still not sure how good our timing was. Based on the backlog of houses on the market, I fully expect that our new house will be worth less in six months than it is today. I’m also not sure that we would have been willing to buy in Boston, New York or much of California, where the rent ratios remain above 20, according to data from Moody’s Economy.com. "

"In fact, if you’re now renting — almost anywhere — and do not need to move, I’d probably recommend that you wait to buy. The market is still coming your way. "

and finally...

"Most of the time, the decision whether to rent or buy should be based above all on life circumstances."

I completely agree that life circumstances drive the decision more than anything else, and if you buy smart, you'll probably do ok, but I consider myself a smart person and willing to do a lot of research, and I still have no idea what a smart real estate buy is, other than not over-leveraging myself.

I do read the articles you post so i'm glad for the information and I don't think you should take articles to the contrary as chest thumping. Its very easy to be here and predict housing declines, everyone outside the NAR economists are looking for continuous downturns although the fact we're still setting records in many markets for inventory should be discouraging.

Paul, very good insight. I had a conversation with a friend earlier about that exact column and were thinking considering the correction and inflation that that national number will probably settle around 140-145. I'll be watching with interest as I still think NY area is gonna slump a decent amount, especially when the recession takes hold.

Zack - Tue May 27 2008, 19:42

To clarify on this statement i made: "I'll miss the mortgage deduction, as its truly a 100% deduction for me, which is common in the NYC area but rare for the country as a whole..."

What I meant is that I will never take the standard deduction. My state income taxes are more than the standard deduction so I will always be itemizing and the mortgage deduction I get is fully realized. If you live in the midwest and make a decent living there and have a wife and kid, its very possible you will not be itemizing, or if you do, its only due to mortgage interest, which if you do, you either get no tax break, or only a break on the difference between your deductions and the standard deduction. In states that do not have income tax, the benefit is much smaller.

Zack - Fri May 23 2008, 09:33

Reposted because trulia cut off my answer...odd

Carl,
As a potential buyer of a new home and a seller of a co-op, I've started actively looking for townhouse and SFH rentals in our area. Westchester may be holding its value, sort of, but the taxes and closing costs in NY are so obscene it makes a flat market even more painful as it takes so much more growth to overcome the initial costs. Its likely we'll sell our co-op in 6-12 months and move into a rental at that time. I can rent entire houses with a commute within 5 mins of my current time for LESS than I pay now for a < 1000 sq ft co-op. I'll miss the mortgage deduction, as its truly a 100% deduction for me, which is common in the NYC area but rare for the country as a whole, but adding 20-30 mins to my commute while tripling my housing costs to purchase just doesn't make sense. Also since the rental will be short term, 1-3 years, I don't have to worry about school districts which helps more wtih the costs.

I'm worried about the economy as a whole. I'm also worried that democrats will take the 60% of congress and the presidency which will allow them free reign to pass any laws they want which will probably mean my taxes will go up a lot and the economy as a whole will suffer. On the plus side, I'm sure they'll do something massively ignorant like prop up the bubble prices and then wonder why homeownership keeps falling beneath long term percentages.

Zack - Fri May 23 2008, 09:16

Thanks for the articles RealtyExec. Stupid question, but what is a REO? Real estate offering?

I like seekingalpha and i'm a bit surprised they didn't mention that the housing starts data was not statistically significant meaning that the the number fell within the error range.

You said, "I'm not saying we reached bottom, but a bottom does not have to be a deeper drop. It could be a flat stagnant line that takes awhile to rise again." I completely agree with this and looking more and more at sales in high income areas, I'm becoming more convinced that this is actually what we'll have with inflation and rising wages and rents closing their unsustainable gaps with housing with time.

Zack - Wed May 21 2008, 06:44

Forgot the actual graph..

Here is a graph of resets on option arms AJ posted earlier:

http://www.bubbleinfo.com/statistics-2007/2007/3/15/arm-rese… - Tue May 20 2008, 10:25

Dave,
I agree completely that sellers will nearly never adjust price to what the buyer can afford, for a specific buyer. But when the choice comes to being adjusting the price, or not selling the house, they don't really have a choice.

You're point about price vs rates for qualifying buyers is a good one and one I hadn't considered. I've always just thought of putting 20% down and qualification should be fine, but considering a large number of buyers put down substantially less, this is a good point. I wonder if there is good data on what downpayment people put down in specific areas. As obviously this can have a big effect. I've seen speculation in a number of articles including the one i posted earlier that Manhattan is holding its value because of the number of co-ops and their stringent financing requirements so you have so little distressed properties, but I wonder if there is hard data behind it. I know manhattan is mostly co-ops and I know they have stringent financial requirements, so the idea seems very reasonable to me, I'm just curious if its more quantifiable. That is a good point though and one I hadn't really considered before.

I said in my previous post: "interest is tax deductible, purchase price is not, so low rates is an advantage if house prices don't jump up to make up the difference, currently they have, so its not such an advantage."

I should've been cleared because this relationship is not going to be 1:1. A 1% rise in rates will not immediately cause a 10% decline in prices, although if you went purely on monthly payments, it should. There will be an affect, but it will obviously be gradual and it won't be a 1:1 change. I'm curious in existing models, what time they assume for the affect to be complete and how much decline they plan in real terms.

Anyway, welcome to the thread. I re-read my first reply like 5x to try to avoid having an aggressive tone and think i succeeded with the repost, if not, don't take it as such.

Zack - Tue May 20 2008, 10:19

Reposted and edited for tone:

To add to what Bayou said,

Also, interest is tax deductible, purchase price is not, so low rates is an advantage if house prices don't jump up to make up the difference, currently they have, so its not such an advantage. Plus, you can refinance rates, not a purchase price. That is offset by the fact that a higher purchase price, growing at inflation is a better numerical return, but this is also a risk if the market continues down.

You said, "Do any of you really believe that in 3 years you'll be able to purchase real estate for a lower price and at a more advantageous interest rate than you can today? ... If your answer is yes to either question, you are sadly mistaken."

This is a bold statement. First, we have to define advantageous interest rate? If house prices decline as rates rise, and advantageous interest rate would be a higher rate as your monthly payment would be the same but be more deductible. You could quantify this in a number of areas by setting up something similar to the equity insurance Richard talked about below. Take something X years ago, find the purchase price, downpayment, closing costs, etc. Find the opportunity cost of that money, and the difference in home equity now, and the difference in payments between now and then. Then the policy will pay off if the equity is less than now then you'd have if you'd have rented for 3 years.
1) The difference between the downpayment made initially and the one made today (gain/lost home equity, very possibly 0 )
2) The opportunity cost lost on the downpayment and cost of closing. We could use the prevailing CDs rates for a 36 month CD at the time of purchase.
3) the difference in monthly payments for the life of the loan. (also very possibly 0)

I believe a produt like this would actually have and provide a lot of value. I'd rather see the FHA do something like this than take on a large set of horrific loans and figuring out the proper rates would create a number of models that would be very good for figuring out future housing prices.

You also said, "Do any of you really believe that one magic day in the future, someone will declare "we've hit bottom - buy now"?"

I do believe that this is possible. Home moves are very gradual and very correlated to the previous months moves. It is impossible to pick the exact lowest point of the market, but with housing moves being gradual and rather predictable, I believe it is possible to get within 1-2% of the bottom of the market, which is plenty good for any buyer. I'd even argue that for a single property, getting the lowest possible price is as much a product of emotion as it is of the comparables. Did the seller fight with his wife today and now would just say "f-it" over a 2k difference because they're p*ssed off and don't want to think about it. Or maybe the opposite, they're mad and want to stick to that offer. I don't believe any of this is quantifiable, which is why talking about an absolute bottom is a myth, but within a few pctg pts of the bottom appears to be attainable.

I'm curious as to what you're basing your belief that this thought is "sadly mistaken". The first reckoning is here now and a 2nd is coming. Here is a graph of resets on option arms AJ posted earlier: Subprime has mostly passed but 100% LTV is coming to home to roost very soon and in places where prices have been decimated, there is a large risk for more people being forced out without being able to refinance and others just walking away.

So to answer your simple question, I think Yes, and would like to know why you believe me to be mistaken?

Zack - Tue May 20 2008, 10:19

General WSJ article about some urban areas many of the posters on this thread are from. Chicago, SF, NY all covered.

http://online.wsj.com/article/SB121122333682304367.html?mod=… - Tue May 20 2008, 06:50

Caren,
I find no fault with you. We agree. AJ was doing that as a counter example to Sandra about her parents house. So his reply was sarcastic proof. I didn't realize you hadn't noticed that initially. So we agree and our back and forth with pointless examples proves it I think.

Zack - Mon May 19 2008, 07:38

Caren,
I'm a bit confused why you're asking for a warm welcome when you're posts seem to be advocating that picking by using a single example, you can make a judgement on an entire asset class. You're first post in the thread was to debunk AJ's example, repeated by Chandler, of using a single stock as an example. I read this as you supporting Sandra's position for doing the same with houses. Being a "Real Estate Pro" doesn't guarantee you a cold shoulder on this thread just as "Just looking" doesn't mean you'll be welcomed with open arms.

You said, "Ok, if you had bought practically ANY house in 1986 (that is when you gave us the stat for MS) and sold it in 2005, or today you would have done very well. Next brain teaser? "

No need to be obnoxious about this, if you had bought any broad based indices in the stock market in 1986 and sold it in 2005, you'd also have done very well. This isn't a brain teaser, its a point that saying "I made X on my house" or "My parents made X on their house" is a very weak argument. Within the first 10 replies to this thread, this same back and forth happened. Jerry from Phoenix comment that since someone in Los Gatos CA had a good return on their house, housing was good. I replied that my parents built their house in 1986 for ~150k and would sell it today, 20 years later, for less than that. So its not a brain teaser, the point is making an argument with a valid sample.

In your original post, you asked what the return on Enron would be. I can tell you it'd be a lot better than someone who closed on their house on 8/22/2005 in New Orleans. At least Enron didn't come with the added potential of death.

Can't we all agree that using a single example as "proof" isn't proof and move on?

Zack - Mon May 19 2008, 06:51

Victor,

I give up. You believe that the case-shiller index data is made up and the fact that housing moves gradually is a far fetched conclusion. Ok.

As they say, "Never argue with stupid people. They just drag you down to their level and beat you with experience."

Good luck to you, and in my opinion, its a good thing you're not here to drum up business.

Zack - Sun May 18 2008, 14:38

Reposted with link from FT about ottomans and their debt and a commentary on the US. I actually understated the numbers. link:
http://search.ft.com/ftArticle?queryText=An+Ottoman+warning+…

Bill,

I didn't take your post as an attack, although it did seem to have a bit of a testy tone, but I tend to post in testy tones unintentionally a lot, so I take no offense.

Do I believe anonymous interent postings, not at all which is why I ask people for the data when they say something I find interesting or unbelievable, so I can draw my own conclusions.

You said, "By inference, you think you know more than the average person, which is the reason you are trying to help them. Is there any self-interest there? Or am I way off? "

Again I find this view very pessimistic and i'm a huge pessimist, but sure, it could be self interest. I think I know more than the average person. Honestly, I'd wager my entire net worth on it if it were measurable. But posting here trying to prove it doesn't provide me with any satisfaction. Sometimes its stress relief when i'm really obnoxious, most times its like p*ssing into the wind. Honestly, I believe that the real estate bubble has made homeownership, aka someone else's "American Dream" less affordable for the average person and costs people much much more than they can afford. The rule of thumb when my parents were house shopping was 2.5x your salary, now for enormous sections the country, you couldn't get mobile home for 2.5x the average salary. In my area, you couldn't get the land on which to park a car for 2.5x the average salary. I believe this and our consumerist society are rapidly putting this country into so much debt that we'll turn into the ottomans who near the end of their empire, over 25% of their annual budget was spent debt servicing, or paying interest on debt. If I'm selfish, its because I have a young daughter and I'm afraid of the way this country is going and what type of a world she'll graduate college into. If posting here and trying to spread knowledge helps in anyway, and thinking it might is a hopelessly optimistic thought, then its worth it. Besides, there isn't any baseball on right now so what else am I gonna do.

Zack - Sat May 17 2008, 22:20

Bill,

Could you provide some data for point 1) in your latest response. The vast majority of stocks and sectors climb/drop over weeks and months, not just a handful of days. Even with the highly increased volatility we've seen recently, this is still true.

You said, "this has a small correlation in real estate, because while real estate prices change much more slowly, you will still know when you hit bottom after the market begins to recover (so you will miss the bottom, by definition)"

which I 100% agree with. But doesn't this also mean that because real estate moves so much more slowly that even if you miss the bottom, you'll barely miss and and get in within 1-2% of the bottom, which is fine. If I could do that with the stock market, I'd have more money than Warren Buffett already.

You also said, "Remember hindsight is always 20/20, and a person who assumes extremes in either direction is not making sense. I remember wall street bears saying the stock market would go to dow 1k after it fell from 12k to 7500. Why didn't it happen?"

Which I completely agree with also. One extreme is saying houses will fall 75-80% back to 1998 levels, the other is saying we've hit the bottom and now we'll grow at the normal historical rate of inflation right now. Somewhere in the middle is almost certainly right and the middle of that is a very bearish look at housing.

Finally, the vast majority of the realtors that have responded in this thread have providing nothing more than the NAR company line that now is a good time to buy. I named a few in a previous post that added a lot of value to this thread, some others have been downright deceitful in the posts. I don't believe it is unjustified to be hard on them without getting a license. I don't think anyone in this thread is a permanent housing bear. The tax incentives the gov't gives you and the dividend homeownership plus the intangibles like security and becoming part of a community for a family are all very good benefits. But you have to weigh those intangibles vs the financial cost, which in normal markets, with housing increasing with inflation, they're very worthwhile, but in a rapidly declining market like a huge portion of this country has right now, those intangibles are extremely expensive.

Zack - Sat May 17 2008, 21:57

Victor,

One last thing. if you think this site is rough on realtors now, you'll be really amazed when Richard returns. Ask RealtyExec. He made an embellishment in a post claiming that someone with bad credit could get the same rate through the FHA as someone with we great credit, which is only possibly true in a very small circumstance (having too few credit entries) and he was pounced on and mercilessly ripped for it.

Since your previous answers in other threads say this:

"This site is ridiculously full of spam in the blogs, trust me! I'm a realtor and can tell you honestly these blogs are just full of plugs from realtors instead of giving you the best possible answers to your questions. They seem to be followed up with, you can get that info your looking for here... at my website ;-) "

link: http://www.trulia.com/voices/Foreclosure/We_are_first_time_h…

and now you're claiming this:

"I can understand why realtors frequent these blogs: They offer help and assistance to the public in hopes of being recognized embracing new forms of media and public contact as a knowledgeable helpful professionals whom others can count on for assistance when they are READY to purchase or sell a home at a time they feel is right for them."

in this thread. You may want to get your ducks in a row before continuing to post personal attacks at the pro-data crowd in this thread.

Zack - Sat May 17 2008, 21:45

Victor,

I'm still turning over my non-rude leaf, but you're antagonizing people in this thread without making any facts. In your response to Chandler, you question his motives, but if you read his past posts, his motives seems to be nothing more than knowledge. He does not benefit from keeping sales up. You're also confusing a stock trader mentality with a rational investor mentality. People should act in their own financial interests and for a huge part of the country right now, buying a house is not in their financial interest. You argued in another post that you absolutely can't time the market and asked for my crystal ball. Now you're saying this:

-- Start quote --
"Someone mentioned that real estate has been a bad investment for the last 120 years because it has been trading at .04% above the inflation rate!!! That sounds like a good investment to me historically speaking if it can hold that position for 120 years!!! How long do you think you will live? Do I even need to go further with these answers?"
-- end quote --

Yes, you must go further. You've said you can't time the market, and we won't live 120 years, when should we buy and sell to get a good return? In a period longer than any of us will live, the average return is .04% over inflation, so the only way to make real money is to properly time the market.

You comment that you have "proven several you guys wrong many times of the last few days alone". Could you show some of us where you've proven some of us wrong. I assume you mean me since you're referring to it in every way in the thread about New Brunswick, NJ. I explained why I've used that data in the C-S index and briefly about why using random cherry picked articles that use median home prices is not proof, its not even valid data. You also linked to this thread: http://www.trulia.com/voices/Market_Conditions/Do_people_rea… as proof of "us" being proved wrong, when from what I can see, the original poster was very accurately refuted and refusing to believe that the C-S index is valid when the government and the world's financial industry believes it to be the most accurate indicator we have is either amazing arrogance or ignorance.

You comment why you understand why realtors frequent these blogs, but from the massive sample size in this thread alone, you thoughts that they are helping the public appear incorrect. They're hear to repeat the NAR company line and drum up business.

Finally, you said "home ownership in general trying to prove to the public the stock market is a better investment if you can imagine that roller coaster being a predictable good investment. lol.... NOW THAT IS FUNNY!!!" I'm curious why this is funny? Historical data shows that the stock market has beat inflation by about 7% since 1950, housing has beaten it by < 1%. Are you disputing that this data is accurate or that historical data has not bearing on what we should anticipate in the future?

I'm not sure why you're now taking to personally attacking people who disagree with you and if you have an real facts to provide, they are more than welcome in this thread. This thread has frequently degenerated into arguments but the core purpose of it is to collect data from both sides. The pro-housing data so far has been a bit scarce but there has been some by some very helpful realtor posters like Paul Francis, RealtyExec and Carl has come on strong after a rough start. If you'd like to provide data to add to the quality of this thread, please do.

Cheng usually posts total nonsense but one thing he did say that was true in response to you attacking him, is that many people read this site and acting unprofessionally and posting personal attacks under your real name if probably not the best way to make an impression.

Thanks,
Zack - Sat May 17 2008, 21:11

Bill,

I don't really understand your 3 points. The first 2 are just guesses that can never be proven and the 3rd is a very pessimistic way to look at the world. Is attempting to educate people an ulterior motive? You must not believe that the open source community or even wikipedia works. There are people who spent extraordinary amounts of time editing and debating on those sites with nothing to be gained but a better free encyclopedia or better shared source code.

The try living in a stock argument I don't understand. You don't have to own where you live. John's post below mentions that according to the US Census we are at an all time high in home vacancies, finding a rental should be trivial. I have no idea what successful investors own their homes and which do not. Does it matter? For a successful investor, a home purchase is generally a very small purchase in terms of their net worth. The people who really need to be informed are the average joes who could lose their entire savings in a 5-10% decline in their house. And overpaying now will mean that over their lifetime their extra cost on their payments will slowly suck away their wealth all for making a single mistake right now.

As for not liking realtors, I think realtors add value, just the commissions they're paid are extremely high and a reason why housing is a bad investment. The friction in the market is just obscene. The ones that come here an post its a good time to buy and nothing else are the problem. They're not adding value and are actually encouraging people that live in 80-90% of the country to make an egregious financial mistake. I work as a software developer on wall street and you could argue that my job is pointless and adds no value. I have no problem with that belief, but at the end of the day I'm not encouraging the average person to commit financial suicide.

Zack - Sat May 17 2008, 21:05

Carl,
You posted some stuff about absorption rates in your area before which had me thinking. Is the absorption rate increasing and decreasing and is this due to fewer purchases happening, fewer houses being listed, a combo etc? It seems in well-to-do areas, listings seem to be down quite a bit also as people who don't have to sell in these areas are not.

Also, I think we've been getting repetitive for quite a long time in this thread, but the new articles are helpful and when the first page gets spammed with company liners, they have to be refuted or at least implored to read the earlier posts.

Zack - Sat May 17 2008, 19:05

Reposted to be less rude (for Bella Vista):

Sandra, your example of picking a single house with single dates to prove housing is a good investment is weak. There is plenty of data earlier in the thread showing long term housing trends vs inflation, etc. Please go back and read the beginning of the thread. Also, if your parents would've really lost 20% in one year if they had sold in '88 instead, they were really lucky.

I'm an american, my parents are american and owning a home wasn't a dream to either of us. I'm pretty sure its not a dream of many of generation Y. Not spending twice as much on shelter while holding a depreciating asset that makes you no money in real terms, that's my american dream, because it will let me retire early.

Zack - Sat May 17 2008, 06:08

Bella Vista, you're probably right.

But as someone who has been here since the beginning of this thread, its frustrating and insulting when someone comes in, responds with their examples without bothering to read at least the beginning of the thread. There are probably 700 responses of the 900 here that are nothing more than repeating the NAR mantra that "Now is a good time to buy". - Sat May 17 2008, 05:57

Reposted with fixed link

Some Chicago centric news...

http://www.chicagotribune.com/classified/realestate/chi-wed-…

Scary about that is 6000 are hitting the market and 201 were sold in Q1. I know Q1 is a slow season but call it 1k per year with 200 in Q1/4 and 300 in Q2/3, that means 6 years of condos are hitting the market now.

Bill, what does this mean: "it is a great opportunity to actually buy your equity up front.."? If you "buy equity" now, which I assume you mean your downpayment, and your house declines 10%, you're getting killed. There are a number of examples early in this thread on how extreme it is to overpay by 10% over the lifetime of a purchase. - Fri May 16 2008, 10:24

Elvis' point is correct also. It is unfair to individual realtors, especially good ones that work hard to make sure their clients are well informed about the decision they are making. Pointing at the mortgage broker IMO is incorrect because their job is to secure you a loan with the best terms, nothing more. Joe sixpack doesn't ask his mortgage broker if its a good time to buy, and if a house is a bargain, etc. They ask their realtors. In an ideal world, every realtor would respond that they are not financial planners and couldn't tell you about how housing prices will go in the near or far future, etc, but the NAR ad campaign has taken the position strongly that they give sound financial advice and people should listen. "Now is a good time to buy and sell a home." By doing this, its members will be asked to answer for this from thinking people like Chandler who want to know why "Now is a good time to buy and sell a home."

Zack - Wed May 14 2008, 06:39

J R said, "Oh, now THERE"S a twist for you."

There is no twist at all. On that other planet that others have said you live on, apparently it equates working for someone and working for yourself. Chandler is claiming correctly that many many realtors on this thread have given financial advice and offered their services and expertise. Services for which they are paid a commission. A realtor is paid a commission by their client either directly or through the seller, to look out for their client's best interests. By putting on blinders and just repeating the NAR company line, "Real estate is local." or "Its a good time to buy." the realtor is claiming to act in their client's best interest, but is only acting in their own.

In the below examples of constantly flipping houses until you can't make money, and then walking away, the buyer is risking his/her own capital, credit score, reputation, etc for personal gain. They are not being paid by someone else and then shirking that responsibility because they don't want to. The banks and lenders that write the mortgages are acting selfishly trying to get returns on their dollars, or upfront fees for their writings. An individual who believes they are writing stupid contracts and takes advantage of that is no more immoral than anyone who files bankruptcy instead of opting for debtor's prison. - Wed May 14 2008, 06:29

And 2 hours later, he returns with more useful articles. You've been here for weeks with about 10 different personas and have yet to provide anything useful to this thread other than fodder for others to poke fun at. Isn't it time for you to create 10 new accounts to give thumbs downs? Oh wait, you wouldn't have time to do that with all the sales you've been racking up in our white hot market. - Tue May 13 2008, 12:22

Elvis, you said, "Is there any room in your arguments for "personal responsibility", or is everything the fault of Realtors and NAR?"

Personal reponsibility! Whoever heard of such a concept! Although our nanny state making it harder to believe in and its getting worse every democrat elected. Not that the republicans are better with their warmongering and bible thumping. I'm not really sure how we ended up in a 2 party system with 2 horrible choices but we have.

If we could find a way to truly bring back personal responsibility, I think the entire country would be so much better off. What can you really do? Vote Ron Paul I guess and hope for a massive enlightening.

As for my take, its hard to point at an individual realtor and say "You're evil", because they're generally not. I'm on realtor #5 in personal dealings and 4 of the 5 were quick to try to get us to see houses well out of our stated range because they "just knew we'd love them". For me, buying a home is much more financial than emotional so it doesn't work, but I know I'm in the minority of that so while its a minor evil, my tiny sample is showing 4 of out 5 will try to upsell you. One was borderline fraudulent in arguments which was really awful, and she's won awards in my area for sales for years running. But I think most of it is just personal gain of people who don't know better. I've said before, the barrier for entry for realtors is so low that anyone can jump in and the bubble would bring in the worst with no concern or ability to understand what could happen when they pressured people to move up in prices. So I don't really hold individual realtors to have too much responsibility. A car salesman wants you to buy the most car you will, its what sales people do, and if you consider as much when going in, you get what you expect. That said, I do think the NAR is and continues to be culpable. Their forecasts, claims and "facts" that are still being touted claim a house is a good investment, which it almost never is, and their continually rosy projects are taken about as seriously as the Iraqi Information Minister's updates on the Iraq War by people who really follow. The problem is, they spend money advertising all over TLC, Discovery, HGTV and on the national network touting their facts, and there is no single group with a vested interest in disputing them so the masses get one side and are too dumb/lazy to check the facts. So while personal responsibility would be ideal, with the society we have currently, the NAR deserves as much blame as anyone.

Zack - Mon May 12 2008, 15:48

J R, I bought a co-op in 2004 which while not being an epic disaster worthy of my humor, it certainly hasn't been a "key to building wealth". Quite the opposite in fact. Its been a drain on my wealth. I don't feel bad for anyone in this mess, and I believe the culpability lies with many of the players, the government, the banks writing these loans, and institutional investors clamoring for new products with higher yields and "low" risk. Ooops. But for the individual trying to decide to whether to buy a house or keep renting, no single entity is more cupable than the NAR and its completely misleading ad campaigns.

Random article that would be a disaster if this occured...
http://realestate.msn.com/Buying/Article_slate.aspx?cp-docum…

Zack - Mon May 12 2008, 11:04

JR said: "The diffference between former slumps and this one is the internet. It just gives people who feel left out from homeownership and don't believe they'll ever be able to get a job that enables them to own their own home, an opportunity to broadcast their shadenfreud all over the world! :)"

This is true, although I wouldn't say "be able to get a job that enables them", because in many bubbled and high cost places, 80-90% of the jobs won't get you a home. I'm pretty laissez-faire personally, but I do think people have a legitimate complaint and have no problem with them laughing at others misery if they've been priced out of the market by bubbles fueled by NAR marketing and destructive gov't loan programs. - Mon May 12 2008, 07:04

Realtyexec,
That bill has almost no chance of passing the senate, and if it does, Bush has already promised to veto it, and there isn't near the level of support to override the veto. This is also a horrible idea. The fundamental problem right now is that everyday people cannot afford to buy homes in a sizeable portion of the country. Propping up the bubbled prices with tax payer dollars and bull$h1t bonds only causes this problem to be postponed to reward the people who were trying to make a jump into the housing rush and didn't find any gold.

Zack - Thu May 8 2008, 20:28

Slash/Rob Banks,
You were close, my middle name is actually A.C. Slater. You're just jealous that I got the girls in Saved by the Bell and you were home schooled.

I'm curious, how many real estate offices are their in Chicago? I went to yp.yahoo.com, put in location Chicago, IL and chose the category Real Estate then subcategory, Real Estate Agents. On this list, just in the yellowpages, there are 2805 entries. So you're saying that your data from your 1 office of what appears to be a couple of thousands is representative of Chicago as a whole? I'd try to explain why this is not the case but you've proven in your Rob Banks posts you're not capable of understanding, so I'll save us both the time.

Yahoo YP link:
http://yp.yahoo.com/py/ypResults.py?&city=Chicago&state=IL&u… - Thu May 8 2008, 12:35

JR: "I've got another great way for you to spend your time since you're so concerned about other people in 5/10/15 years: fight the tobacco companies."

Depending on what you want to accomplish, we may want to encourage them. If you're interested in saving the country money on healthcare, we should encourage everyone to smoke. Cancer kills people quickly. Alzheimer's, parkinson's and other diseases that require years and years of long term care are massively more expensive for our healthcare budget. here is a link talking about it: http://www.breitbart.com/article.php?id=D8UJRCV80&show_article=1

Chris: "Rest assured, I find your posts worthless too!"

If you're being serious, this statement says a lot more about you to the thinking members on this thread. My posts on this thread alone have provided data, links to government studies, graphs of real appreciation of housing, futures prices of C-S indices, graphs of the spread between the 10 yr treasury yield and current mortgage rates, and a correction to false information still be disseminated about 10% drop in prices is 1/2 pt rise in rates. If all this is worthless, either you know everything there is to know, or too little to know you don't.

Zack - Thu May 8 2008, 12:20

Louis, read the begining of the thread and you'll know what I want. Also read the entire thread, and you'll see why every one of your points has been accurately refuted by others with historical data. Your tone is obnoxious and even worse, you're wrong on every point you make except one. The case is closed, the jury finds you stupid.

Zack - Thu May 8 2008, 11:19

Realtyexec,

Is this really true?

"This is not the case a client can still qualify right now on a 500K loan amount with a 580-600 credit score 1 year out of a bankruptcy and not even have to be a citizen with only 3% down and that 3% can be a gift. Also there 30 year fixed rate would be the same rate a person with a 800 fico would receive through FHA. So your statement is not entirely true. In your case the minimum they would have to put down would be around 8K and have a 580 FICO."

I mean, if it is, someone gifted money that is a huge credit risk would get the same as someone who is virtually no credit risk with 20% down. This is LUDICROUS! How can any reasonable person not be horribly offended by this? You know how they can afford the exorbitant default rate? With our tax dollars. The government's push increasing homeownership was declared by George W. Bush to be a victory of his administration in 2004, and like all his other "victories", it was pyrrhic at best.

Why would you bother trying to save, and try to be responsible? Pay your bills on time? why bother? The FHA's got your back. ugh. - Thu May 8 2008, 10:19

"This is not the case a client can still qualify right now on a 500K loan amount with a 580-600 credit score 1 year out of a bankruptcy and not even have to be a citizen with only 3% down and that 3% can be a gift. Also there 30 year fixed rate would be the same rate a person with a 800 fico would receive through FHA. So your statement is not entirely true. In your case the minimum they would have to put down would be around 8K and have a 580 FICO."

Short Fannie Mae. Lots of it. - Thu May 8 2008, 10:14

80% of the answers in this thread are either full blown inappropriate or border on it. That other 20% make this worthwhile. The last two days have seen about 150 new posts now and probably 5 have real value, another 15-20 are rebuttals of obviously flawed statements that are being rehashed again, and the rest of either flame wars or company line BS. The real value posts are why it makes sense, for me, to keep coming back and reading through the flame wars and "Real estate is local ... buy now" drone posts and will continue to do so.

By far the most worthless posts in this thread have been from Slash/Rob Banks/etc and Chris Freeman. If you don't want to read the thread, don't, posting that it should be killed is moronic. The uninformed redirect/conspiracy theory bit is getting old also. You still have answered me Slash/Rob Banks... how firm is your belief in Intelligent Design? I'm guessing you donate to the creation museum. I'm a bit surprised by Chris since he tends to provide useful responses when I read through other random posts. - Thu May 8 2008, 08:13

"That explains alot Ryan is moving here to become a liar oooops lawyer, same difference. "

Now that's rich. Pot, meet kettle, kettle, this is pot.

I'd be very surprised if Slash isn't Rob Banks or whatever acronyms he's gone by. - Wed May 7 2008, 19:04

Dann,
Could you post the link? I went looking for it on WSJ but couldn't find it. I'd be surprised if the april data was available to take that position, but i'm up for a wsj read. - Wed May 7 2008, 19:02

Thanks Charles, do you have a link to the report? - Wed May 7 2008, 10:33

Charles, you wrote, " believe that we will see improvement (maybe not mind-blowing) in both sales volume and pricing over the next several months, and 2009 will see significant improvement. Just my opinion, but there is data to support that viewpoint."

Could you provide the data? That's what this thread is really about, collecting the information to make informed decisions. - Wed May 7 2008, 10:15

The realtytimes article below is utter crap. All it does is take pot shots at the flawed, yet best index we have and then mentions that the NAR has different results. The Iraqi Information Minister would proud. The wsj article on the other hand is a good read and I'm glad to have read it.

An interesting link from the NAR I found while searching for that time article in my previous answer: http://www.realtor.org/rmotoolkits.nsf/pages/buyer12?OpenDocument

"5. They don’t think about resale before they buy. The average first-time buyer only stays in a home for four years."

If the average homeowner stays in a home for four years, it is irresponsible to the point of near criminality to suggest to buy in the majority of metro markets now. Yet every day I see more ads about how now is a great time to buy.

Finally, out of curiousity Carl, what link was infected and how was it infected? The nytimes blog? I also clicked on this without problems but I find is highly unlikely that the website of the nytimes is spreading spyware or malware. - Wed May 7 2008, 06:46

Ryan,
I received the same article, its from a time article a while back. I also saw the same thing being touted by Barbara Corcoran of the Corcoran Group on the Today show. The best part about this, is its FALSE!

"Consider a typical home that sells for $218,900. You put down 20% and get a 30-year fixed-rate mortgage at today's rate of 5.5%. monthly principal and interest come to $944.31. Let's say that in 12 months from now the same house goes for 10% less, or $197,010. But by then the recession is history and the Fed is jacking up rates to stem inflation. If mortgage costs rise just half a point, to 6%, your monthly payment would be $944.94 and you'd have saved NOTHING. Meaning while, home prices might steady and sellers might become less willing to negotiate. And you have spent a year living someplace you'd rather not be. "

The original article has been corrected on the time website, but the false information continues to spread. The math is just plain wrong, rates would have to go up a FULL point, to 6.5% to make the payments equal, which is a huge jump. Plus, as has been rehashed over and over, you can refinance rates, you can't refinance a purchase price. Plus a higher purchase price means higher closing costs/commissions, likely higher appraisals on taxes and a likely higher maintenance costs.

Here is msnbc still disseminating false information. At least the still image of Barbara looks like she's drunk, that could explain it. http://www.msnbc.msn.com/id/23726652/

and here is the original article: http://www.time.com/time/magazine/article/0,9171,1713483,00.html see the footnote at the bottom. - Wed May 7 2008, 06:37

Random article I liked linked below. Its pretty rare I read or like anything in The New Republic but I think this was spot on with the irresponsibility of the government with its push into homeownership. As with much of what our government tries to do, they're generally either totally inept or fail to realize any side effects of their myopic policies. Any government bailout to help prop up the bubble prices only make true homeownership, and its social benefits further from the reach of the average joe. - Fri May 2 2008, 06:34

Paul, if i ever move to vegas, you've got an absolute lock on my business. Great article. This was my favorite quote:

"The effective borrowing costs for a lot of people are rising, not falling, despite the Fed cuts. The rising spreads are more than offsetting it."

This is basically what I've been trying to say in response to people claiming that rates are gonna spike. Even if the fed did decide to start raising the prime rate again, which IMO is unlikely until the credit crunch disappears, we have huge speads to work through. Last time I checked on Bankrate, spreads between the 10 year treasury yield and the 30 year fixed rate were 100 basis pts higher than they'd been in the last 10 years.

Zack - Thu May 1 2008, 14:18

Dick,
I believe a number of realtors hang out on activerain which may be more what you're looking for. As for being "bashed by nothings with an agenda", having been involved with this thread from the very beginning, I can tell most of quality posts are from people without an agenda, but just want some facts. There are about 200 posts saying "BUY NOW! RATES ARE LOW! blah blah" or one other of the NAR company lines by people who's livelihood depends on sales volume. So who would you consider having the agenda?

I'm actually curious, what agenda would someone who came to this thread, provided documents from gov't studies, real index data, and other links to data supporting their position have? The majority of meat in this post is from well thought out posts that are not just looking to realtor bash, and a vast majority of the realtor bashing in this thread has been in direct response to a "Real Estate Pro" posting something meaningless and mindless without reading any of the messages early in the thread.

Anyway, if you're looking for realtor discussion, check out http://www.activerain.com. I believe its moderated to remove much of the "call me!" posts that are on here.

Zack - Wed Apr 30 2008, 15:36

"caralyn, You said those with not great credit and no secondary market wont be able to buy a hiouse. Isnt that what fha is trying to fix?"

The better question would be, why are we even trying to fix this? If you have bad credit, why would we want somethign to loan you hundreds of thousands of dollars when you've proven with past behavior that you're unreliable in paying it back? - Wed Apr 30 2008, 08:40

Dann, what stat are you looking at saying chicago is up on trulia stats for the 4/23? I see that Listing prices are up 4.7%, median sales price was up 1.3% and price/sq ft was down 4.4%. Looking at the heat map, did a new building open up on in the Loop area? In 60604 zip code, median price is up 126%. This is obvious an outlier, likely due to a new building opening or other new construction. If these sales are removed, I'd be shocked if the median sales price for the city was still positive.

People like me and wall st, and the fed, and basically everyone that wants an objective view like the case schiller index because it takes a lot of steps to remove the anomolies like new buildings opening, etc that greatly skew Median and avg sales prices, especially at a neighborhood level. It is limited due to the size it covers, and it would be ideal to be able to get a lower breakdown even if they wouldn't be statistically significant since most everything you're citing here also has a statistically insignificant number of transactions. Limited or not, there is no other better way of checking housing trends in a metro area. - Tue Apr 29 2008, 09:54

Dann,
I don't understand why you'd want to remove foreclosures from the data? They don't taint the data, they are real sales that have a real effect on comparables and drag down all the other properties in their area. You seem to believe this problem is temporary when in the next 2 years, hundreds of billions of dollars in ARMs will reset again. We may be at the peak of foreclosures, but we may not, and until this inventory or foreclosures and short-sells is cleared, not only is it prudent to count them, its absolutely necessary. Your example makes it sound as if all foreclosures and just dumped immediately for huge losses by the bank. They want to recover what they can, but they are sold at what the market will pay for a highly motivated seller, which is very important data. If a highly motivated seller has to sell his supposedly $100k house for 20k to get rid of it in a month, then its not worth $100k.

Speaking for me personally, its not that I don't want to believe positive data, our local realtor has recently provided me with some that is making me rethink a couple of places, but that no one here is really providing much of it. And there are probably 150 responses that just keep repeating the mantra of the NAR, that now is a great time to buy. For the vast majority of the country, now is definitely not a good time to buy. I think there are 5 of these posts that start the same way: "Why buy now? is the question. How about, why not buy now?". All 150 of these provide no value at all and are generally irritating.

The facts are that foreclosures and short-sells are way up in most parts of the country, and every one of these transactions has a negative effect on their region. Until we see their numbers dropping from available inventory, their effect has to be counted. It would be ideal if case-schiller went down to a much smaller area of neighborhood, but i'm not sure how much data would be available in that case, especially monthly and then you just make the argument on a smaller scale over what is a neighborhood and what isn't. etc.

Zack - Sun Apr 27 2008, 07:38

JR,
Land is rare in westchester also, although not as rare as LI I'd suppose, so we haven't had a bunch of new construction. I agree completely with your comment about some homes not really being for sale. In our range, its not quite as bad but over a million plus we've had friends just be baffled by seller's unwillingness to budge on anything.

The candid part IMO was the the Look Ahead section including quotes:
"There are no expectations for rates to increase in the coming months."
"While Westchester and Putnam may be fortunate to have avoided the worst effects of the national real estate market recession up to now, there are serious threats ahead."

I also agree with the doc's hope that the recession will treat the area with kid gloves. All in all, I think this is the type of information people like me are looking for and was glad to read it.

Zack - Fri Apr 25 2008, 05:54

In my neck of the woods, the MLS posted their 1Q report and its not rosy. This is amazingly candid for a real estate document.

http://www.wcbr.net/Library/stats/stats08/SR1st08_Report_Fin… - Thu Apr 24 2008, 17:47

Patrick,
At no point did I claim to be an expert on Chicago. I'm citing earlier posts.

You are saying "its soft", "prices have been flat to down 10%" and I agree with you. We're both saying chicago is in decline. You're guessing its at a bottom, I'm guessing its not based on data provided in this thread. That's fine, but either way we agree. I completely agree with the last sentence in your 2nd to last paragraph and the last paragraph. A long period of stagnation hurts quite a bit also since inflation is actually high now.

As for the drone mentality, I don't see you posting "Buy Now! Rates are low! Its buyer's market!" so I'm not sure why you believed I was talking about your posts. I'm not an expert on any market, especially Chicago, but I am analytical and if the majority of the posters on these boards were taken at their word, the number of foreclosures year over year would be astounding.

Thomas, I agree with your points, although I think you needed the latest reply to connect the article to the main point of the thread. I've been keeping up on this thread but I forget who says what so I may have missed that you had stated earlier your thoughts and this was just data to back it up. I also agree with this "If you are looking to make a long term commitment to an area with the intent to stay, there is no reason not to be looking for opportunities." although I think you want to be VERY diligent in your research because as examples earlier in this thread show, overpaying by 5-10% is VERY expensive over the long term. If i didn't agree with that sentiment, I wouldn't be house shopping now.

Zack - Wed Apr 23 2008, 12:05

Wow has this thread really degenerated.

Can we add a counter to total the BS NAR company line responses? I'd guess there are probably nearly 80 by now. "BUY NOW! RATES ARE LOW! ITS A BUYERS MARKET!"

Thomas, awesome, Chicago has a diverse economy. That hasn't stopped it from being 2nd only to LV in foreclosures last month (reference in one of Ryan's replies earlier). Chicago was part of hte bubble, it may not have been the highest point, but it was on it, and now its coming back to earth.

The last 3 responses by Bob, Jennifer and Nancy increase the company line count by 3. I realize this is a long thread to read, but if you read the first 10 replies, the company-liners would realize they came to an intellectual discussion without any intellect and may stop dragging this thread to their drone level. - Wed Apr 23 2008, 11:33

Ryan,
A quick explanation of the futures link. They are illiquid securities so most days there are not trades which is why Session high and low are blank. LAST is the last price that the future traded at. PT CHGE is the percent change, but without trades in a day, this will be blank too. the SETT part is the price at which the futures are settled. Futures are cash settled daily so basically if you own MAY08 at 153.80 and today it sells for 150.00, you'll have to pay 3.80 when it is settled and the SETT column would be 150.00.

Zack - Wed Apr 23 2008, 06:18

JR, yes, upstate is depressed, and jobs leave, and its a sad area. Los Gatos is in the San Jose/SF area of California which has always been desireable and was on the top of the recent bubble. If he can cherry pick the best locations in the country, I can pick a depressed one. If I had picked Detroit, it would've been worse.

Ryan,
I HATE the "below market value" thing also. I actually think it should be considered unethical but whatever. I started a thread about it actually: http://www.trulia.com/voices/Market_Conditions/Odd_possibly_… In an amusing twist, when I posted this, it was "BELOW MARKET VALUE!" at $999,000, so since its now at $949,000, it must be super double BELOW MARKET VALUE.

Zack - Mon Apr 21 2008, 10:14

Paul,
You've added a lot of value to this thread IMO and if we had more realtors with your insight, I think we'd all be better off. I agree with this: "And...what somebody paid for a product means absolutely nothing in a current market evaluation." in principle because its true, but that's still a very important thing to know, especially if the purchase was recent. There are tons of studies about how people will hold on just trying to avoid a loss. There is a mental barrier at work and people cannot take a loss. Heck, you should know this better than all of us, just head down to the Strip, and look for anyone very bleary-eyed and ask them if they're just trying to get even. If they don't tell you f-off, I'd say 9 out of 10 will say yes. So for valuation, what someone paid is not important, but if you're serious about a place, knowing this information can be crucial. We made an offer a few months ago on a place we really liked, but is definitely overpriced, and we offered more than we believed it was worth because the seller paid x in May 2005, put in a bunch of unnecessary upgrades, and is now just trying to get totally even. We were willing to give him his purchase price plus the realtor fee so he'd walk out flat, but not pay for the upgrades. They declined to counter and the house is still on the market. I believe they're suffering from trying not to take a loss on the place because they don't want to admit that buying in 2005 and spending 60k+ to upgrade a kitchen that was already updated was stupid, even if it was.

Anyway, for valuation, you're definitely right but its very hard to separate seller's emotionally from their home, which for a theoretical discussion, has little meaning, but if you're really looking to buy, and since homes are heterogeneous, its an important factor.

Zack - Mon Apr 21 2008, 05:09

Trulia Roger,
I'm sure you know, but your post doesn't state that your 10% assumes a very short time horizon to ammortize the costs. The transaction costs associated with buying and selling real estate are obscene, especially in my area, but the effect of closing costs is spread over the life of the purchase so 8% is actually the worst case scenario of selling after 1 year. Of course, even more fun, is the fact that the nominal gains increase your selling fees also although marginally. Once you get past the ~10% in fees it will cost to buy and sell a home, your growth is very largely your own. - Sat Apr 19 2008, 04:40

Ryan's last point could not be better stated.

There are a number of studies about job loyalty being at all time lows. Employers and employees no longer expect to grab a person out of high school or college, and employ them for 40+ years, funding their pension etc, and people out of college don't expect to find a job and a company that will take care of them for life. Companies lay people off in huge numbers, Merril Lynch anounced an additional 3,000 layoffs this week to go with 1,000 already planned, Citigroup announced 9,000 jobs will be cut soon. People jump around to jobs every couple of years as the only way to get a real salary bump is often to switch jobs. People also have no loyalty to an area and often move to metro areas while young only to return to an area like they grew up in later in life. The mobility of the new generation makes this even more valid. I don't see myself ever owning a house for 30 years and I won't be paying down principal as long as there are any tax breaks still around to claim so medium term appreciation is important.

Very well put Ryan. Trulia Roger's insight into the point has also been very good and Realtyexec has also really added value to the recent thread. - Sat Apr 19 2008, 04:02

**reposted after deleting to fix typos.

"Say you buy - for whatever reason - say prices drop another 5% - you stay 6 years in your place - and it appreciates back above that point anyhow"

So say you buy a 600k house, in Ryan's range, and you overpay by 5%, over those 6 years, you $180/mo additional in mortgage payments. This is $13,000 or basically a vacation a year for 6 years. So not only will you have lost the 30k in equity, you've also overpaid by 13k in mortgage compounding the loss.

"I never believed in the "wealth is created in real estate mantra" until I bough a rental property and watched people write me checks every month for more than my mortgage payment on the place . Nothing more comforting than that - someone building equity for you. So go ahead and rent - you will make some landlord very happy - as rents in my area have probably gone up 10%+ over the past 24 months."

This type of comment is seen a lot on these boards and is little more than a scare tactic. First, in my area, taxes have probably gone up by 10%+ in the past 24 months, in some times (i'm looking at you Armonk) its been 37%. Inflation has been over 3% in the past 24 months also. So that 10% gain could be a loss in real spending power. That doesn't even count the maintenance you're now paying on a investment property. Or the work that needs to be done when someone moves out and you have to prepare it for rental again, or the risk of needing to evict someone, and having to spend the time and money in court while not getting paid. I realize the risk of an eviction or a sizeable repair is small, but it only takes one to wipe out years if not a decade in "profits". Its highly likely that if you had taken your downpayment and the money spent on closing costs, put it into an index fund, like SPY, you'd have more money and wouldn't be looking at at least 6% fees at closing. Renting may be paying someone else's mortgage, or it could be paying a income stream to a REIT, which could be helping the California teachers retire. The only reason to claim that "you're paying someone's else's mortgage" is to imply you're being taken advantage of when its much more likely the renter is the one in the driver's seat and the landlord fell asleep in economics class.

Zack - Fri Apr 18 2008, 12:48

Patrick,
The article was informative, but the first was "Special to SearchChicago-Homes" which implies with written for realtors if not by them, the 2nd's main source is a home builders and Realtors. The 2nd article is actually poor, and sounds like most of hte arguments on this post, which is not surprising. Also, the 2nd one contains some math with implications that sound good but are not.

"Basic gave this example: “In 1991 the average price of a home was $120,000. Now it’s around $246,000. That’s more than double. You can never lose in housing. That’s where all the nation’s wealth is sitting.”

First, he cherry picked the dates with the low from the previous housing slump, which is fine, everyone does that, but everyone also deserves to be called on it. Second, considering 3% inflation, which is about right, your real return on investment was 1.38% which is paltry, but much higher than housing usually shows, which is due to cherry picking the dates.

“Interest rates are pretty close to being at the bottom," he said. "In my opinion the Fed (Federal Reserve) won’t make many more negative adjustments in the rate (that drives key financial factors). There is a glut of inventory, and that tends to keep prices down. And the bigger builders have cut back (new housing) production. That means there’s a very good opportunity in the next several months.”

This has been refuted a few times below and true experts believe this to be false.

“But as soon as that inventory gets down, say about half of where it is now, you’re going to see prices start to go the other way,” he said.

I agree with this, but every data point we've seen has shown that inventory is increasing. With arms set to reset, this is likely to get worse before it gets better. - Fri Apr 18 2008, 12:35

Liz,
We have a realtor for southern Westchester County and were forced to fire one in Norhern as we were using all the data she provided to show why a house was overpriced and she kept citing one off examples as to why we should offer more for the house. Our southern realtor has been helpful although i prefer when she just sends me everything in a range/area and I do the work myself since I'm very into taking raw data and drawing my own conclusions. But I agree, it is helpful to get a realtor to provide and organize the data.

Part of it is that i'm just generally curious about areas that I'm not serious about buying and don't want to use anyone's time when there is no chance of them being compensated for it. Also, some areas I have a passing interest and would be willing to do my own research but don't want to basically employ someone else to provide information just for my own information. - Thu Apr 17 2008, 18:45

In response to my earlier post, I found the answer. The NAR study with charts on corporate equities only includes corporate equities held directly by households. It does not count the equities that are held by households in mutual funds, or equities held in retirement accounts (401k etc).

The study is very honest in the differences between housing and stocks including the very high transaction costs associated with housing and the lack of diversification and the fact that it depreciates without maintenance. My concern is that, to me, it reads more like an advertisement for socialism and better distribution of wealth than supporting housing an a builder of wealth. Also the study points out the volatility of housing being high in metro areas also which I found interesting. Also working against the study is the timing. It was written in 2004 and talks about the great advantage of lowering rates to keeping the economy going. While this was true, it was also the spark that the fed let get out of control and has burnt the economy and the market horribly in the past year+.

I do appreciate having data points from the other side and having more places to gather data from in continuing my housing education.

Thanks,
Zack - Thu Apr 17 2008, 17:19

Liz,
I commend you for putting your money in the game you believe in. I wish you luck. Real estate is such a heterogenous product that its deals can be found if you know how and where to look. The problem and why people such as myself and Ryan look for baselines is that humans by nature look at things they aren't familiar with relative to each other. Since the only price we can see is asking price, and this is not a standard, its hard to get an initial reference. Which is why people like me get annoyed with answers like "it depends". I know it depends, what I want to know is what range the sales price is likely to be for an average house in an average neighborhood in XYZ location with X bedrooms and Y baths. That question should have an answer. There may not be a house on the market at that price because maybe all are top of the line or "needs a little TLC" but having that range as a reference point allows us to make much more educated decisions about pricing.

I agree with Ryan's comment about the NAR's and NCRER's both having too much "horse in the race" but I'm always interested in data so I went and read the report. Sadly, the concern about bias is founded. Chart 5, net wealth of renters vs owners is a perfect example. Since wealthy people rarely choose to rent, this chart is meaninglyess, yet appears with the title "The Net Wealth of Owner Dwarfs the Net Wealth of Renters". Chart 6 is just as bad. In bottom income housing wealth towers over stock wealth. Well of course it does, you have to pay your mortgage or be thrown out, investing in the stock market is done with discretionary income, and only by wise people at that. People in the bottom income are rarely wise about saving so the bias in this chart is huge. The chart you reference isn't what you think though. Its actually a chart of total wealth of in terms of real estate vs the stock market. So historically, the amount of money in real estate is more than in stocks. This doesn't tell you anything about returns, just the amount invested. I'd like to find more information on this chart though as I'm curious if it includes people's 401k and Pension plans. If it does include 401ks, I'd expect this to start swinging back as more and more companies go to them for retirement.

Liz, thank you for the response and the fact its linking studies. I personally find the study flawed, but its food for thought which is what this thread is really all about. I've printed it to read on the train on the way home also since I was forced to skip over some of it at work.

Zack - Thu Apr 17 2008, 15:22

I may be wrong about the conforming. The answers are conflicting in this thread:
http://www.trulia.com/voices/Financing/Jumbo_Mortgage_Rates_…

I'd really like to hear from people with experience with this. - Thu Apr 17 2008, 09:36

Ryan,
Not all banks are creating mortgages that fall within the new ranges. I had seen a post from a mortgage broker which quoted a Countrywide Temporary Conforming Loan, the rate was 6.625 I believe with Jumbo at 7.0 and regular conforming at 5.75 or something near that. Others brokers have posted that they are able to beat the temporary conforming rates by blending a few loans together. I also read somewhere that the FHA is charging extra fees for the oversized conforming loans which is obviously passed onto the consumer. So these loans don't appear to be the panacea many of us were hoping for.

It would be good to get a couple of mortgage brokers or experienced realtors to talk about the products they've seen and their experience with them. I know I'm interested. - Thu Apr 17 2008, 09:21

Liz,
Nice response. You make good points about selling and buying at the same time and Richard does a good job of addressing those below. I consider myself a first time buyer since I'll be selling a co-op to buy a house and will be greatly increasing my leverage much like Ryan so I look at my data with that in mind. I am familiar with the Consumer Confidence Index and the Consumer Sentiment Index but what is not decided is whether the index leads or lags the economy. It is debated by many experts over which is more cause and which is more effect between the two.

Karsten, I thank you for the compliment about spouting facts, they're rare on these boards. I implore you to post once more and provide the original poster and myself and other interest parties with economists and papers of the opposite opinion. I'd be very interested in reading them. Also, what is the basis of "most actually are" in reference to most areas doing well? I've looked at all the individual areas in the Case-Shiller index and in the OFHEO HPI index and according to those, very few markets are doing well.

Now's the time when that fact spouting comes back and bites you in the a$$. Rates having NOTHING to do with futures. I can't even fathom what you mean by this. Futures on what? This statement is like saying the weather has to do with how many times i flip a coin tomorrow. Its not just that the correlation is low, its nonsense. Mortgage rates are tied to the 10 yr treasury since their duration tends to be 10-12 years. Here's a CNNMoney link explaining it: http://money.cnn.com/2003/10/15/pf/expert/ask_expert/ The fed funds rate has a very high correlation with the 10 year treasury, so will have an effect on mortgage rates. To take the other side, if the fed funds rate doesn't have any effect on mortgage rates, the fact that it was 1% in 2003 had nothing to do with the fact mortgage rates were the lowest ever?

Houses are not a good investment because they require you to save, they are a good saving mechanism with a poor return because there are very real consequences to not saving. This is not an investment, its forced savings at the rate of inflation. Since people will not save unless forced to, this is an advantage to homeownership but it does not make them a good investment.

"How many people do you know with equity in their homes? Or with stuff they got using an equity line from their homes? How many people you know with savings accounts equal to that equity? I bet the numbers for the latter aren't even close."

I'm 31, live north of NYC, and I'm having trouble thinking of more than a couple of people I know that have more equity in their house than money in savings. I'd guess my parents friends probably do, my parents do not, but I don't know that. - Wed Apr 16 2008, 20:32

Jerry,

I realize facts and data are the enemy of the realtor, but don't shoot the messenger. I have provided no answers about the housing market. I have provided data. CS index vs inflation, CEPR paper, CS chicago index futures. I have stated what historical trends have shown. I have provided a mathematical example of what happens if you overpay and how much it costs you. I have stated my beliefs on what interest rates will do, so if you want to try to poke holes, that's where you should aim. Everything else is just facts and numbers provided by government studies or by widely accepted indices.

You said, "Try telling that to my friend's parents in Los Gatos, CA who bought their home in 1960 for $32,000 which is now worth about $1 mil. Inflation or not, that's a good return on your investment."

This is high comedy. You claim I analyze things the way the media does, then you cite a single home as an example of how housing is a great investment. So by your methods, I'll use my parents. My parents house cost them $150k 21 years ago in upstate NY, today they could sell it for about $130k. Over 21 years, losing 20k on your house must mean housing is a horrible investment.

I don't claim to have all the answers, just provide data, by contrast you make snide remarks about a post that is high on facts and low on opinion, and provide NO data other than your beliefs. You state, "However, I believe the real reason..." no proof, no data, just your feeling, great. You state, "Investors are again looking for a safe haven ... So, viola!" Do you have any data to support that many investors are returning to housing in the Phoeniz area? I'd be interested in seeing it as the JP Morgan earnings call this morning talked about more writedowns and how investors were not interested in housing products. Also, you mention that people are buying up all the bank-owned and short-sale properties, as if this is a benefit. The phoenix market must be rolling with all these bank-owned properties and short-sells. Bank-owned properties and short-sells were all the rage in 03-04 when the market was skyrocketing.

Finally, I'm confused by your claim about seeing a Yale economist claiming that home values haven't appreciated in 100 years. Was it meant to contradict the rest of your post? Or do you believe yourself smarter than this Yale economist and believe that he cannot be right without reading his study?

Jerry, the poster encouraged you to state your opinions and was asking for why you believe that. From what I can gather from your post, your why is that investors are returning to housing, to which you provide nothing to support and that phoenix has had an uptick in bank-owned properties and short-sells. Other than that, you just took shots at my post without providing any counter argument other than your friend's parents house. - Wed Apr 16 2008, 18:29

To refute a couple of points here...

Karstan says: "Rates aren't going to stay this low for long. Inflation problems will become apparent soon, and rates will rise."

The gov't has cut the prime rate from 5.25 to 2.25, during these cuts, mortgage rates have actually gone up! The gov't will have to deal with inflation, and should soon, but rates have to come down before the govt will act since they're fighting the credit crunch right now.

Also, the media reporting the numbers declining in housing are not to blame for housing declining. If I say its raining out, it doesn't mean I made it rain. They are reporting the facts and the ridiculous sob stories they publish are only meant for a buyout. Also, economic planning by the gov't takes years to have real effects on the economy, so if you and Ida believe the economy will bounce back after the election, then you are trusting the current administration to fix it. If you believe the next president will fix it, then we're looking at probably a 5 year stagnation or recession while it recovers.

Zack - Wed Apr 16 2008, 17:51

Ryan, since you're obviously willing and able to do serious research into this, you should check previous housing slumps (which have never come after a bubble this huge) and how the market recovered. The market bounces around at the bottom for years. You'll hear realtors say its a great time to buy, buy now before prices spike. Prices don't spike, they hover around the bottom, climbing at the rate of inflation only for years, so missing out on the bottom is actually difficult if you're paying attention.

Another claim that comes a lot is buy now before rates go up. Rates have not declined with the last 300 bps in the prime rate. This is unheard of and due to people being afraid to loan money. The rates won't be raised until people are no longer afraid to loan money. And we'll see this when people start loaning money driving rates down. The government seems unconcerned with the tremendously weak dollar and continues to try to spur lending, this will bring down rates. Plus rates are not at historic lows. 2003/4 was historic lows, now is better than it was 10-15 years ago, but its no longer historic, and its high for the last 8 years.

Also, you reference the case-schiller index for your data, but there are also futures markets for the index. Here is the link to delayed prices: http://www.cme.com/trading/dta/del/delayed_quote.html?Produc… .

Finally, you make a good point about a house being an investment, and it is. The NAR ads like to tout that a home is a very large part of most people's net worth, but this is misleading. Its not becuase its a good investment, its because you have to pay into every month and therefore build equity. Here is a graph of the Case-Schiller index vs Inflation: http://bp0.blogger.com/_pMscxxELHEg/R-k6W9DCIVI/AAAAAAAABwo/… Prior to the insane bubble we just had, a house appreciated basically at the rate of inflation for the previous 14 years. Basically a home is a vehicle that forces people to save, although with home equity loans, you can even avoid that. You also will hear that if you plan to hold for a long time, it doesn't matter, but this is also ludicrous. Using some quick shorthand, assuming $6/$1000 borrowed per month, if you buy a house today that in a year, you could get for $50k less (in a city like chicago or NYC, that's an extremely reasonable price drop), and you sold the house in 20 years, not only would that 1 year of living cost you $50k in equity that you overpaid initially, your monthly payments will be $300/month more which means you will pay $72,000 extra in payments over that 20 years. That means in just pure money paid, you're out $122,000 without factoring the opportunity cost lost with that money. You'll also hear about rates, but when rates change, you can refinance, no one will refinance your purchase price for you.

There are good reasons to buy a home, the tax breaks are nice although constantly overstated by anyone with a vested interest in keeping sales churning (realtors, mortgage brokers, etc). It is nice to become part of a community and school district for children, and to have neighbors and a neighborhood that is familiar. We are currently house shopping also but rather passively due to the market.

From another post, John The Bruce posted this study from the Center for Economic Policy and Research that paints an extremely dismal view of the upcoming real estate market. CEPR has no agenda related to housing so this study is not likely to be biased by politics.

http://www.cepr.net/documents/publications/ownrent_2008_04.pdf

Zack - Wed Apr 16 2008, 17:43

Ok, i'm now officially curious, what exactly defines not being "free-standing" for a refridgerator? I've seen stoves with the burners built into the countertops, so I'd assume that is not free standing, but does this apply to all refridgerators that are not built into cabinets? I probably looked at 50 house and only once saw a fridge built into cabinets, and it was ugly.

Btw, I consider myself pretty well educated in the ways of real estate due to these boards, i'm no pro, but have learned quite a bit here. And it would never occur to me that someone would unhook the gas hose, unplug the fridge and walk off with them. Bizarre. - Thu Jun 4 2009, 07:08

If you want good invesment, then don't buy a house. Returns on housing historically is basically the rate of inflation, and you rarely get back all that you put in for upgrades, so that will be more of a loss. Plus it costs about 10% to buy and sell a house in transaction costs. - Wed Jun 3 2009, 11:55