Zack

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.

Th