Ryan

Fair point, Julia--I think the article mentioned that a significant portion of the "shadow supply" consists of baby boomers. I suspect some of this group will buy a smaller home, but most will opt for retirement communities or similar non-buying alternatives.

Of course, most sellers right now are probably also buyers, but that hasn't changed the fact that oversupply is plaguing housing. - Yesterday, 11:37

Invesco's investment strategist says housing inventory backup is actually understated (that is, worse than the numbers indicate) because it doesn't include the "shadow supply" of homes owned by individuals who want to sell but have prolonged the decision due to poor market conditions.

http://finance.yahoo.com/tech-ticker/article/42434/Garnick-M… - Yesterday, 09:39

Foreclosures accelerating:

--Q2 foreclosures up 14% from Q1
--quarterly foreclosures up 121% year-over-year
--RealtyTrac forced to upwardly adjust its foreclosures forecast: "We've been saying foreclosures will total 1.9 million to 2 million this year," [the RealtyTrac spokesman] said. "But midway through the year, we're already at 1.4 million so we're going to be raising our projections." - Yesterday, 08:59

Agreed--I am thankful to the many contributors who, like you, have made this an informative (if sometimes contentious!) forum. - Thu Jul 24 2008, 20:07

No, the point I was trying to make is just the opposite--that Buyer A has *not suffered* at all from his town's median price declines. He paid $100k for a house that was worth $100k. He merely got into his home earlier than later buyers, who all eventually bought the same quality house for the same price--$100k.

Sorry if I'm still not clear. - Thu Jul 24 2008, 18:41

Hilarious! Rob Banks/Slash/etc. just created a new account (Roy Davis), posted under that account, and then criticized the post HE JUST MADE under yet another of his alter ego accounts (Mike Rafone..."microphone").

To top it off, he then signs back on under "Roy Davis" immediately thereafter (less than five minutes passed between the posts from "Mike" and "Roy"), apologizes for his repetitiveness, and uses that as a reason to call for this thread to be terminated.

You can't make this stuff up, folks!

AJ, Zach, Richard, and everyone else (including real estate agents!), I'm still looking forward to hearing your thoughts on my post (and Paul's response) from last night.

--Ryan
"Sniffing out Chicago's biggest idiots since Spring 2008" - Thu Jul 24 2008, 15:05

Great comment, Paul--thanks. Others, please chime in on my and Paul's posts below.

More news:

--existing home sales down 2.6% in June to their "lowest level in a decade;" sales down 16% year-over-year

--foreclosures now account for at least 1/3 home sales, according to NAR chief economist Lawrence Yun (!) - Thu Jul 24 2008, 07:54

*Reposted with minor changes*

A thought has been on my mind lately, and I wanted to bounce it off of anyone still keeping up with this thread. It concerns the relationship between whole market data and individual home sales.

By now, everyone in this country (and certainly everyone trying to sell their home) knows that, generally speaking, home prices have fallen and it's a bad time to sell. Suppose I find a seller who realizes this and sells her $700k-listed home to me for $600k, 14% below asking price. The seller is disappointed but realizes that the market has changed in the past few years, and $600k may be a fair assessment of what her home is worth today. Other sellers with similar offers decline them, holding out hope that their home is worth more.

Now suppose that for the next six months, as these "holdout" sellers perceive reality and slowly begin to sell their homes at the disappointingly low numbers, the Case-Schiller index continues to report that median home prices are falling.

Does this *necessarily* mean that the value of my home has also fallen for the past six months? Or could it be that *my home's value* hasn't changed, but the C-S Index is merely reflecting the fact that sellers are slow to realize price losses?

Instead of looking at month-to-month trends to infer the value of a single home, doesn't it make sense to look at homes as single units, some of which have realized their price losses and some of which have not?

I fear I'm not articulating this thought well, so consider this hypothetical:

[ Town A consists of five homes, all for sale and listed at $200k. Due to less demand, sellers are not willing to buy these homes for more than $100k.

Buyer A offers Seller A $100k for his home. Seller A accepts. Buyers B-E offer Sellers B-E $100k for their homes; Sellers B-E decline.

For each of the next four months, one of the Sellers wakes up and realizes home prices have fallen, so they sell their Homes to Buyers at $100k each. ]

If I'm not mistaken, a C-S-type index would indicate that median prices have fallen for Town A during each one of the five months in the hypothetical:

*Month 0 median price for Town A, before "pent-up" price loss has been realized by any homes: $200k
*end of Month 1 median price (after sale of Home A): $180k
*end of Month 2 median price (after sale of Home B): $160
*end of Month 3 median price: $140k (after Home C sold for $100k)
*end of Month 4 median price: $120k (Home D sells)
*end of Month 5 median price: $100k (Home E sells; Town A's price decline realized by all homes).

But for Buyer A--who bought at the beginning of the hypothetical for $100k--surely it would not be accurate to say that the value of *his house* fell just because Town A's median prices continued to fall, would it? On the contrary, it seems to me that House A merely *realized* its pent-up price loss before the other homes did--NOT that the value of House A continued to fall with the Town's price index.

Similarly, I continue to see significant price reductions in Chicago's market. Obviously some sellers (and their agents, no doubt) are beginning to realize that their home isn't worth what it was worth two years ago. If I buy one of these homes at what I perceive to be its true (and decreased) market value, and then Chicago home prices continue to fall, I see no reason why this means that my home's value has correspondingly decreased.

As final food for thought, consider this tidbit from Jim Cramer's "Mad Money" show today:

http://www.cnbc.com/id/25818021

(Relevant excerpt occurs about 2:15 into the clip and contains this quote: “I was the first guy that said torch your house for the insurance money. I am now telling you that between now and the next six months you have to buy a house.”) Whatever you may think about Cramer (I agree he has become the financial sector's "Dr. Phil"--more entertainment than substance--but this is probably the most unequivocal and objective endorsement of housing I've seen in more than a year).

What do you think? - Thu Jul 24 2008, 05:50

It now sounds as if a major housing bill (described by Sen. Chris Dodd as "the most important piece of housing legislation in a generation") will pass by the end of the week.

Please share your thoughts on this and post any topical editorials you come across.

Who wins? Who loses? What impact, if any, should this legislation have on the decision to buy now or wait? - Wed Jul 23 2008, 17:59

More on the politics of foreclosure bailouts--decent analysis of problem, pretty weak on analysis of the solution.

NY Times Editorial
As Foreclosures Escalate
Published: July 1, 2008

By the time the Senate returns next Monday from its July 4 recess, some 55,000 more homes will have entered foreclosure. And that’s hardly the full picture of the growing calamity. More than three million homeowners are currently at risk of default and millions more are expected to join them in the coming year as home prices drop, the economy falters and delinquencies rise. Yet the Senate went ahead with its vacation last Friday without passing a foreclosure prevention measure.

The bill was expected to pass, but the vote was derailed by petty politics. Senator John Ensign, Republican of Nevada, for example, demanded that the Senate add a multibillion dollar package of tax breaks for renewable energy. Democrats balked — not out of opposition to the tax breaks, which rightly enjoy bipartisan support, but because Mr. Ensign wanted to tack them on to the foreclosure bill without paying for them. That would threaten passage of the bill in the House, which is more committed than the Senate to pay-as-you-go governing.

This sort of delay achieves political ends, like denying Democrats the chance to campaign on the accomplishment during the recess, but it’s exceedingly poor policy. Foreclosures are feeding the nation’s severe economic problems. Turmoil in the financial markets is rooted in the collapse of the housing bubble and will not abate until house prices stabilize and sales pick up. Even Americans fortunate enough to have a down payment and a willing lender are hesitating, understandably fearful of further price drops. Rising foreclosures add daily to the glut of unsold homes, pushing prices down and foreclosures up in a vicious cycle.

That same financial turmoil, coupled with huge losses in home equity, has deprived many Americans of the means or the confidence to buy a new house or other big-ticket items, like cars. In a recent Gallup poll, a majority of Americans said they were now worse off financially than they were a year ago. That’s the first time in the 32-year history of the question that more than half the population has reported losing ground.

Unfortunately, the pessimism is justified. The Bush-era expansion was based largely on a boom in bad lending and house-price inflation — not on robust employment, wage increases or sustainable gains in household wealth. As a result, many Americans have spent the last several years taking on debt, rather than building their earning power or adding to savings. They are ill prepared to cope with a weakening economy and rising gas prices, and they know it.

This spring’s tax refunds and stimulus checks have been a boost, but it won’t last. Soon, defaults on credit cards and auto loans are likely to pick up, and lenders will respond by keeping credit tight.

The foreclosure prevention bill is not a cure-all, by any means, but is a way to try to break the cycle. It would allow many troubled borrowers to exchange their unaffordable loans for new mortgages guaranteed by the federal government — as long as the lender agreed to reduce the existing loan balance to 85 percent of the home’s current value. It is questionable whether lenders would be willing to take the loss, and there’s nothing in the law to prod them to do so.

Still, the bill’s passage, which should be the Senate’s priority next week, would be an overdue acknowledgment that the foreclosure mess requires government intervention. Lawmakers could build on the effort as needed, but it is unconscionable not to take the first step. - Tue Jul 1 2008, 14:35

Link to interview with Charles Schwab's Chief Investment Strategist predicts another 10-15% drop in housing prices before market stabilizes:

http://finance.yahoo.com/tech-ticker/article/31337/Bottomles…

She also discusses the need to "flush foreclosures out" instead of temporarily staving them off via legislation. Decent interview, though the interviewer either sucks or is on cocaine. - Mon Jun 30 2008, 13:41

Kallen, your advertised homes are not "BELOW MARKET VALUE" if NO ONE IN THE MARKET IS BUYING THEM.

Here's an article from the Washington Post nicely summing up our current economic problems (warning, this guy is as bearish as I've read in awhile):

http://www.washingtonpost.com/wp-dyn/content/article/2008/06… - Mon Jun 30 2008, 13:18

Sales of existing home show slight gain in May

Thursday June 26, 3:04 pm ET
By Martin Crutsinger, AP Economics Writer
Slight rise in sales of existing homes in May; only second gain in past 10 months

WASHINGTON (AP) -- Sales of existing homes rose slightly in May, only the second increase in the past 10 months. Prices, however, kept plunging and analysts said the large number of unsold homes indicated the prolonged slump in housing was far from over.

The National Association of Realtors reported Thursday that sales of existing single-family homes and condominiums edged up by 2 percent to a seasonally adjusted annual rate of 4.99 million units in May. Even with the small gain, it was still 15.9 percent below the depressed levels of a year ago.

The median price of an existing home sold in May dropped to $208,600, 6.3 percent lower than a year ago. That is the point where half sell for more and half sell for less. It was the fifth biggest year-over-year price decline in records that go back to 1999.

Existing homes sales account for the bulk of the housing market. The report followed news Wednesday that sales of new single-family homes fell by 2.5 percent in May. That was the sixth drop in the past seven months and pushed the annual sales pace down to 512,000 units.

The two-year slump in housing has dragged down the economy and rising levels of foreclosures are dumping even more unsold homes on the market.

Given the weak economy, many analysts said they were not looking for a turnaround in housing for many more months. "Plunging prices and massive inventory are huge disincentives to home buying," said Ian Shepherdson, chief U.S. economist at High Frequency Economics.

Economists said that falling consumer confidence, rising job layoffs and higher mortgage rates were standing in the way of a housing rebound. Freddie Mac, the mortgage company, reported on Thursday that mortgage rates rose across the board in the past week. The 30-year mortgage climbed to 6.45 percent, the highest since last September.

"We do not expect residential real estate markets to turn around soon," said Stuart Hoffman, chief economist at PNC Financial Services. "In a sea of weak data, home sales will remain an anchor, not a life boat."

The existing homes report found a 5.5 percent increase in the Midwest, followed by gains of 4.6 percent in the Northeast and 2 percent in the West. Sales in the South dropped of 0.5 percent.

Economists with the Realtors noted that for the past few months sales have rebounded in areas hit hardest by the housing bust. Examples included Sacramento, the San Fernando Valley and Monterey in California; Sarasota, Fla.; and Battle Creek, Mich.

"Stabilization in home prices can only occur with buyers returning to the market, so we are encouraged by rising home sales, particularly in distressed markets," said Lawrence Yun, the Realtors' chief economist.

Yun said foreclosures and short sales, when a home is sold for less than the value of the mortgage, are a larger portion of the current housing market, particularly in California, and are depressing home prices.

The inventory of unsold homes dropped by 1.4 percent to 4.49 million units in May. That is a 10.8-months supply at the May sales pace, down from 11.2-months in April. That still exceeds the seven-month inventory that is typical. - Thu Jun 26 2008, 13:37

Playing Devil's Advocate:

I just looked over the C-S numbers and saw that Chicago's price index rose (oh so modestly--0.11%--but still a rise) in April 2008, the most recent numbers we have. Isn't this what we'd expect a bottom to look like? Before today, C-S showed 19 straight months of Chicago price declines.

We could say "this is just April, which is always a good month for sales," but the C-S numbers don't seem to show much of a seasonal "April bump" in prices. In fact, last year's (2007) March-April price drop (-1.17%) was worse than that year's Feb.-March price drop (-0.45%), suggesting April was a particularly disappointing month (all other things being equal, which I understand they are not).

Again, I'm just playing devil's advocate. At best, the market is still too uncertain for me to jump in, and I have nothing to lose by sitting it out a year (prices aren't going up anytime soon). But for me, these numbers are reason for some optimism.

A final point/question--someone below mentioned the effect of inflation of C-S data. Doesn't C-S control for inflation? I think this factored into the debate between AJ/Bayou re how much prices should fall to align with 2000 numbers. - Tue Jun 24 2008, 14:47

Nancy, I think there is some way to do that under the "My Trulia" tab, "My Questions and Answers." If not, just ask someone on Trulia's staff--Trulia Roger was keeping up with this thread for awhile and can probably help you out.

Hyuflg, glad you decided to take down your post. Of course you can never really "take back" anything you have published on the internet--it can all be traced--but it was probably a step in the right direction. Just so you know, I have kept all of your most heinous posts under the various names--from your "KILL LAWYERS" posts to the comments about my family members dying painful deaths to your most recent comments on what should be done to our nation's President. You've really done your profession proud (from your other posts I've read from different question threads, it's clear you actually are a REALTOR). I have collected and kept these posts in case I ever believe they should be reported to authorities outside of this web site.

I repeat, do not ever post on this thread again. - Sun Jun 22 2008, 18:23

Hyuflg, you are dumber than a tic tac. First, everyone here knows you're the same old Slash/Rob Banks freak. If it isn't clear enough by your poor grammar and general stupidity, it's easy to check your other posts, which I did, and see your same old run-of-the-mill whining about Trulia being anti-Realtor:

(from another thread): "[Trulia] is primarily a place for people to come and tell Realtors how little we know and other bashing, have your broker look through some very active posts on here before jumping blindly in." [P.S.--what ever happened to your "thousands of Realtor friends" who were going to "take this thread down"? I suppose by "thousands" you meant "dozens" and by "friends" you meant you and your cat.

if you're going to continue creating names, posting worthless crap, and giving my thread a thumbs-down, fine. The amount of time you commit to degrading our discussion is a sad commentary on your life, but that's your call. But at least stop pretending to be different people (remember when you invented "Go Cubs!", a woman??)--the whole charade really adds to your creepiness. Every time I see you've created another name I expect your comment to be something like "it puts the lotion in the basket!"

(see http://www.youtube.com/watch?v=HrwDFgEeFCE )

Besides this, you're also a moron. I appreciate the fact that you've backed off of me ever since posting that you wanted to come find me under your "KILL LAWYERS" alias--very civil of you. Now you say "we needed" Lee Harvey Oswald (an assassin) to take care of our President. I hope you get a visit from the Secret Service--partly because it would teach you a lesson, and partly because I'm starting to believe it may actually be necessary.

If you think I'm joking, I'm not. Title 18 of the US Code, section 871 criminalizes threats on our President, and the definition of "threat" is extremely broad--as you might expect, our Secret Service doesn't take comments like yours lightly. In 1996 the Secret Service detained a Reverend under this law who merely said "God will hold you to account, Mr. President" after Bill Clinton vetoed the partial-birth abortion bill. In my opinion, your comment that we "need" Lee Harvey Oswald is much more serious of a threat.

http://usgovinfo.about.com/library/weekly/aa040398.htm

Leave this thread and do not come back. - Sun Jun 22 2008, 17:28

The article Realtyexec just posted is one of the best I've read on this subject in a long time. Here are a few excerpts:

--"There are 129 million housing units in the United States, comprising owner-occupied, rented, and vacant units. Of these, 18.5 million are empty. This vacancy rate is 2.5 percentage points higher than it has been at any point in the half century the data have been tracked, translating into at least 3 million too many empty housing units in the country. This number, moreover, is rising. This is the most intractable part of the real estate bubble, for we cannot find a true bottom to home prices until this inventory of empty units starts to clear, and we cannot find a bottom to the mortgage finance market until home prices bottom out."

--"The worst type of inventory is an empty house, which people in the industry like to say has about the same half-life as a head of cabbage. As the former chairman of the Neighborhood Investment Corporation, I've seen the damage done to neighborhoods by vacant homes. They are never maintained adequately, depress surrounding property values, and can quickly become temporary retail space for drug lords and a playground for juvenile delinquents. They are also the homes whose owner has the least incentive, and usually the least ability, to service the mortgage or pay the property taxes. So whittling down the inventory of empty houses should be the first economic, social, financial, and political objective."

--"Congressmen don't want to appear to be helping speculators, liars, or cheats. The trouble is, a good part of the problem was caused by people who might be considered speculators, liars, and cheats. Speculators by definition bought vacant properties in the hope of "flipping" them for a higher price. A vacant home is therefore a good sign of speculative activity. "

--"Markets correct huge inventory overhangs and declines in demand due to the scarcity of credit by lowering prices. Home prices are correcting, though more slowly than the credit market shrank. Prices are down over 14 percent in aggregate since their peak in 2006--having adjusted in a year and a half as much as liquid markets might in a month. The pace of decline, about a 30 percent annual rate in recent months, is still accelerating. The California Association of Realtors reports that the median price fell that much in just the last year. Futures markets are predicting that home prices will fall over 30 percent in aggregate on a national basis, with 70 percent of the drop happening by year's end. I personally think the decline will be less, but just as 2007 was the year that mortgage credit dried up, 2008 will be the year that home prices plummet....Just a 20 percent decline in home prices would place a quarter of mortgages under water."

--"The housing market crash is far from over, and its ramifications will be with us for some time. The combination of excessively easy credit, a rapid run up in prices, and overbuilding set the stage for the current mess. Prices must fall to correct oversupply, and that, in turn, will further adversely affect both consumer confidence and financial solvency. The unique nature of the problem makes a precise ending hard to predict. But it seems likely that some combination of speculative buying, inflation, and purchases by both foreigners and government entities will correct the situation. Now is not the time for ideology, of either the left-wing variety (soak the rich, punish speculators, and conduct a witch hunt through the financial community) or the right-wing variety (stave off government involvement of any form). Pragmatism is a conservative virtue. It is time for everyone to start practicing it." - Mon Jun 9 2008, 14:31

If by "tossing in some red meat" and "fanning the flames" you mean "posting an article I found on the AP wire," then yes, I am a full-fledged rabble-rousing demagogue. Funny how Joep posts a reply, "Nomorehaterz" appears from thin-air, and the post gets four thumbs-downs in ten minutes.

And yes, I have made up my mind--which I made pretty clear about 600 replies ago. And yes, I hope the market continues to tank, deflating the bubble, and returning prices to historically-sane levels, at which time I will eagerly jump in--not because homes are a great investment (they aren't), but because I am anxious to own a home as soon as I can do so without blowing my savings. - Thu Jun 5 2008, 15:08

The first sentence in Manny's article sums it up nicely: "More than one million homes are now in foreclosure, the highest rate ever recorded, according to a trade group which warned Thursday that number will continue to climb."

The impact of price declines on individuals' net worth:

http://money.cnn.com/2008/06/05/news/economy/fundflows/index.htm

"Americans saw their net worth decline by $1.7 trillion in the first quarter - the biggest drop since 2002 - as declines in home values and the stock market ravaged their holdings.

Meanwhile, the amount of equity people have in their homes fell to 46.2%, the lowest level on record..." - Thu Jun 5 2008, 13:16

Home foreclosures set (another new) record in first quarter

WASHINGTON (AP) -- Home foreclosures and late payments set records over the first three months of the year and are expected to keep rising, stark signs of the housing crisis' mounting damage to homeowners and the economy.

The latest snapshot of the mortgage market, released Thursday, showed that the proportion of mortgages that fell into foreclosure soared to 0.99 percent in the January-through-March period. That surpassed the previous high of 0.83 percent over the last three months in 2007.

The report by the Mortgage Bankers Association also found that more homeowners slipped behind on their monthly payments.

The delinquency rate jumped to 6.35 percent in the first quarter, compared with 5.82 percent for the three months earlier. Payments are considered delinquent if they are 30 or more days past due.

Both the rate of new foreclosures and late payments were the highest on record going back to 1979.

Jay Brinkmann, the association's vice president of research and economics, told The Associated Press that the slump in house prices was the biggest factor for rising foreclosures and late payments.

With prices expected to keep dropping, foreclosures and late payments "are going to continue to go up" in the months ahead, he said.

Homeowners with tarnished credit who have subprime adjustable-rate loans took the hardest hits. Foreclosures and late payments for these borrowers also swelled to all-time highs in the first quarter.

The percentage of subprime adjustable-rate mortgages that started the foreclosure process climbed to 6.35 percent. The rate was 5.29 percent in fourth quarter, the previous high. Late payments rose to 22.07 percent from 20.02 percent, the previous high.

The association's survey covers just over 45 million home loans.

More problems also cropped up with loans to more creditworthy borrowers.

The percentage of such loans falling into foreclosure was 0.54 percent, compared with 0.41 percent at the end of last year. Late payment rose to 3.71 percent, compared with 3.24 percent.

The numbers were higher for prime borrowers with adjustable rate mortgages. The proportion of those loans falling into foreclosures jumped to 1.55 percent from 1.06 percent. The delinquency rate rose to 6.78 percent, compared with 5.51 percent.

"The number one problem is the drop in home prices," Brinkmann said. Declining prices, especially in newer built areas, "are hurting people's ability to recover when they run into trouble -- a divorce or loss of job," he said. "In other days, you could sell the home. But because home prices have fallen so much, in many of those cases, the homes are going into foreclosure."

California, Florida, Nevada and Arizona accounted for 89 percent of the total increase in new home foreclosures, he said. Those are places where prices have fallen sharply and there was a lot of home building, creating too much supply, Brinkmann said.

After a five-year boom, the housing market fell into a deep slump two years ago. That dragged down sales, and prices with it. As the value of homes plummeted, many newer homeowners found themselves owing more on their mortgages than their homes were worth.

Homeowners with adjustable-rate mortgages were clobbered when their initially low rates reset to much higher ones. That made it difficult, if not impossible, to keep up with monthly mortgage payments.

As foreclosures and late payments climbed, financial companies took multibillion losses when their investments in mortgage-backed securities soured. A credit crisis erupted and spread, crimping other types of financing. The fallout plunged Wall Street in turmoil, disrupting the normal functioning of markets.

All those troubles have pushed the economy to the brink of a recession, if the country isn't already in one. Consumers and business have tightened their spending. Employers have cut more than a quarter-million jobs in the first four months of this year.

To bolster the economy, the Federal Reserve made aggressive interest rate cuts. That has helped homeowners facing rate resets on their adjustable-rate mortgages. But with inflation on the rise, Fed Chairman Ben Bernanke this week sent his strongest signal yet that the central bank's rate-cutting campaign started that started in September is coming to an end.

The Bush administration has taken steps to help distressed homeowners. It has urged lenders to freeze rates for some homeowners and encouraged lenders to rework mortgage terms so troubled borrowers can stay in their homes.

A congressional plan that includes a foreclosure prevention program has stalled as lawmakers figure out how to pay for it.

The government would back as much as $300 billion in new loans to help certain borrowers refinance into cheaper, fixed-rate loans. Mortgage holders would have to agree - Thu Jun 5 2008, 12:32

Dave, I'm not sure I understand. Suppose a small town consists of four homes, average price $100k. Then a neighbor moves in and builds a significantly nicer and larger home, valued at $600,000. Suddenly, the town's average price has risen from $100,000 to $200,000--a doubling of the average price! But surely no one would argue that the town's housing prices have doubled; rather, someone simply built a house nicer than the rest.

This example obviously oversimplifies things, but it captures the basic point. In any city, new construction is generally more valuable than "old" construction, so when new buildings go up, the area's average for-sale prices may be higher--but surely this doesn't mean that the value of those homes is rising.

Despite the town's now-higher price, the owners of the $100,000 homes still own $100,000 homes (not $200,000), whatever the new neighbor may have built. - Tue Jun 3 2008, 14:15

Here is a Washington Post writer's blog re the DOJ/NAR settlement NonRealtor just referenced. I suggested in a different thread that Realtors may be violating state and federal antitrust laws if they refuse to deal with a buyer who chooses not to go with a fellow Realtor, and I was sharply criticized by Realtors and received about 10 thumbs-downs! This is only a slightly different issue, as both deal with the NAR's attempt to limit its own competition, which is anti-competitive and illegal.

Text:
Jason Kincaid
TechCrunch.com
Tuesday, May 27, 2008; 8:09 PM

The National Association of Realtors has settled its antitrust case with the Department of Justice, and has given online realtors full access to the industry-standard Multiple Listing Service (MLS) Databases. The MLS is a comprehensive listing of homes that are are available on the housing market, and until this point the NAR has restricted access to online brokers.

These online brokers have been offering fees that are significantly lower than traditional realtor rates, and rather than adapt as an industry, the NAR choose a more childish route and withheld the essential data. The Department of Justice took issue with this stance, and filed suit in September 2005.

The deal is especially important for disruptive online-only companies like Redfin, which rely on being able to access current home listings. If the case had gone the other way, Redfin CEO Glenn Kelman says that the company would have died a "slow, grisly death" ( SeattlePI). Redfin aims to make the home-buying process more efficient, while saving consumers money in the process (it has been able to save the average home buyer $10,000, which doesn't sit well with most traditional realtors).
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Unfortunately, the settlement isn't a complete victory for online sites, which will be subject to restrictions on the comments users can leave on each home. If a home-seller asks that a comment be taken down, websites are obligated to comply (consequently, you probably won't be seeing many negative reviews). Instant customer feedback is one of the most valuable assets of online retailers - to deny consumers access to such information is both annoying and foolhardy on the NAR's part. The NAR should be supporting traditional brokers by emphasizing personal interaction and service, not by handicapping the competition. - Tue Jun 3 2008, 13:55

The flyer link Zach posted is just incredible. If I am lucky, I expect to find my shoes or shirts on sale "buy one, get one free." I never thought I'd see California homes selling the same way! I really feel for the California families affected by that situation.

Here is an article summarizing some recent data which shed light on the widespread nature of price losses (as opposed to Case-Schiller, which focuses only on large metro areas). The data show 262/330 American housing markets--including 84% of American homes and 89% of home wealth--are experiencing price declines right now. Or, put a more positive way, 16% of homes have not fallen in value during the current downturn. The comprehensive nature of this data makes it valuable in considering the "real estate is local" mantra, which of course is mostly true but says nothing of the widespread nature of our current housing problems.

[WALTHAM, Mass., June 2 /PRNewswire/ -- Global Insight, the world’s leading company for economic and financial analysis and forecasting, today released the first quarter 2008 update of the U.S. housing valuation analysis, House Prices in America, showing that single-family home prices fell for the third straight period, dropping at a steep 6.7 % annualized rate. Nationwide, 262 housing markets out of 330 in the study -- the overwhelming majority of the nation’s housing markets -- experienced declines, accounting for 84% of all housing units and 89% of real estate value.

California, Florida and Michigan accounted for the steepest losses and contained 45 of the 50 worst performing metropolitan areas for this period. California and Florida had been among the most overvalued states for the past several years and Michigan is reeling from the impact of a slumping economy. Other housing markets in the bottom 50 include Las Vegas and Reno, Nevada and Bend, Oregon, areas cited in earlier House Price studies as being precariously overvalued and likely to be the next "shoe to drop."

House prices are being pushed down across the nation by fewer high-priced home sales and an abundance of foreclosed properties being sold at discount. Contributing to the downward pressure are significantly tighter credit standards which are reducing the amount of borrowing available for home purchases.

In the first quarter 2008, only eight housing markets -- down from a peak of 53 in 2006 -- were determined to be overvalued, representing only 1% of the U.S. single family housing stock and 2% of total real estate value, down from 32% and 16%, respectively, from 2006. Areas of the Pacific Northwest, including Bend, Oregon and Longview, Washington, continued to be among the most overvalued. However, other areas once extremely overvalued -- the Northeast and coastal California and Florida -- are now rated as fairly valued.

Additionally, a number of widely dispersed and mostly smaller markets throughout the country that had seen less price fluctuation during the boom years experienced price resilience. The top nine housing markets registering price increases this period all had populations less than 300,000 and were as varied as Ithaca, New York; Billings, Montana; Houma, Louisiana; and Odessa, Texas.

James Diffley, group managing director of Global Insight’s Regional Services Group, said, "The large price adjustments we have seen are precisely what was required before we could begin to talk of recovery."

Jeannine Cataldi, senior economist and manager of Global Insight’s Regional Real Estate Service, added that, "The housing market will take some time to recover as consumers are constrained not only by tighter credit standards, but rising costs in other areas of the economy. There is also excess supply that needs to be absorbed, plus the rate of foreclosures entering the market needs to slow before housing can begin to pull out of its current downward trend."

The House Prices in America study, a joint effort by Global Insight and National City Corporation, examines the top 330 U.S. real estate markets, representing 78% of all existing housing units and 93% of all related real estate value, to determine what home prices should be, accounting for differences in population density, relative income levels, interest rates, and historically observed market premiums or discounts. Markets with valuation premiums above 35% were deemed at risk for price corrections based on the typical degree of overvaluation that preceded the 79 known local market price declines observed since 1985.

House Prices in America combines a statistical model originally developed at National City Corporation (www.nationalcity.com/housevaluation) with data largely developed at Global Insight. More information on Global Insight’s housing valuation analysis is available at http:// www.globalinsight.com/housingvaluation.] - Mon Jun 2 2008, 13:55

Greg, FYI: I accidentally picked one of J R's responses as the "Best Answer." I have no idea how it happened and can't figure out if / how I can undo it. Just didn't want you to go searching through 21 pages of responses in order to find it. : )

I wouldn't take the thumbs-down too personally. A handful of people have followed this thread from the beginning, and it can be frustrating when someone chimes in for the first time (after 1000+ responses) to say "interest rates are at an all-time low" and "real estate is always a good long term investment" or something along these lines--statements which are not only false but, as one may imagine, have been pretty well covered by the first 1,045 posts. It's particularly frustrating when such statements are made baldly without any reasoning or factual support.

As an example, Jed, who sells real estate in California, just said:

"While Ryan and his tribe are renting and paying taxes and hopefully enjoying their lives here in 21st century America there are thousands of others that have bought houses, are paying their reduced taxes and hopefully enjoying their lives in 21st century America. In 5, 10, 15, years I hope they are all happy with their decisions. I have a feeling, no I believe strongly, that the people that bought will be better off. "

Jed cites no data in this assessment, instead relying on his "feeling" or the fact that he "believe[s] strongly" in his conclusion. The fact is that the median California home price has fallen more than 30% in the past year *according to the California Association of Realtors*. In Sacramento, the *average* home owner has lost more than $100,000 of equity in ONE YEAR, and prices are still falling. When these home owners compare notes to their renter counterparts in 5, 10, and 15 years, I have a "feeling" you'll find the renters won't be regretting their decisions.

http://www.bizjournals.com/sacramento/stories/2008/05/19/dai… - Sun Jun 1 2008, 17:21

Consumer Confidence (Way) Down. Question: does this news independently shape the economy in some way, or is it merely reflective of other news? A twist on the "chicken or the egg" question.

May 30 (Bloomberg) -- Confidence among U.S. consumers fell in May to the lowest level in 28 years, pointing to slower spending as gasoline prices reach record levels and job losses mount.

The Reuters/University of Michigan final index of consumer sentiment decreased to 59.8, the weakest reading since June 1980, from 62.6 in April. The measure averaged 85.6 in 2007.

Consumer spending that makes up two-thirds of the economy is cooling as record fuel costs and a weakening job market undermine household buying power. Declining home prices and tighter credit are weighing further on growth, pushing the economy to the brink of a recession.

``The consumer is under siege,'' Russell Price, senior economist at H&R Block Financial Advisors in Detroit, said before the report. ``Home values are dropping, the job market is shaky, food prices are higher and soaring gasoline prices are a constant reminder of their financial burdens.''

The confidence index was forecast to fall to 59.5, according to the median of 57 economists surveyed by Bloomberg News. Estimates ranged from 50 to 63. The preliminary survey, released May 16, came in at 59.5.

Earlier today, the Commerce Department in Washington reported that consumer spending rose 0.2 percent in April after a 0.4 percent increase in March. Incomes grew 0.2 percent, bolstered in part by the government's tax rebates, and the Federal Reserve's preferred measure of inflation moderated, the report showed. - Fri May 30 2008, 07:56

Latest Case-Schiller data paints bleak picture. Anyone who can look at the graph on page 1 and say "it's a great time to buy" should check themselves into an insane asylum--or is lying to you.

Report highlights (besides the graph, which pretty much tells you all you need to know):
--home prices in the first quarter of 2008 fell at the steepest rate in the index's 20-year history. (Some have stated that "real estate is cyclical" and have compared this decline to the 1990-91 housing recession. In fact, over those years the largest annualized decline in prices was -2.8%, compared to -14.1% for the first quarter of 2008.)

--"The steep downturn in residential real estate continues. There are very few silver linings that one can see in the data."

--"Looking closely at these returns, you can see that 15 of the metro areas are also recording record lows, and eleven are in double-digit decline, with Chicago being the latest metro area to join these ranks." - Tue May 27 2008, 06:38

Pretty thorough market update, incorporating some new projections and recent data:

http://biz.yahoo.com/ap/080526/housing_prospects.html - Mon May 26 2008, 21:55

It's been a very tame week for this thread, yet we've still had 11 thumbs-down in the past week. I think our old friend(s) Rob Banks/Go Cubs/etc. have shown restraint in their posts, but tried to slowly reappear with the thumbs-down. If any moderator can check to make sure this virus isn't manipulating the system again, it would be much-appreciated. - Sun May 25 2008, 18:35

Great question, Carl. For those who have the time and interest, here is a fascinating article I recently read in March's issue of Atlantic Monthly:

http://www.theatlantic.com/doc/200803/subprime

The article is entitled "The Next Slum?" and argues that with rising energy prices and an overbuilt suburbia, there will soon be a mass "reverse exodus" from the suburbs to the cities--for those who can afford it. "The Next Slum" won't be a blighted urban area, but the suburbia once known for its picket fences.

Favorite excerpts:
"The subprime crisis is just the tip of the iceberg. Fundamental changes in American life may turn today’s McMansions into tomorrow’s tenements."

"At Windy Ridge, a recently built starter-home development seven miles northwest of Charlotte, North Carolina, 81 of the community’s 132 small, vinyl-sided houses were in foreclosure as of late last year. Vandals have kicked in doors and stripped the copper wire from vacant houses; drug users and homeless people have furtively moved in. In December, after a stray bullet blasted through her son’s bedroom and into her own, Laurie Talbot, who’d moved to Windy Ridge from New York in 2005, told The Charlotte Observer, “I thought I’d bought a home in Pleasantville. I never imagined in my wildest dreams that stuff like this would happen.”

"For 60 years, Americans have pushed steadily into the suburbs, transforming the landscape and (until recently) leaving cities behind. But today the pendulum is swinging back toward urban living, and there are many reasons to believe this swing will continue. As it does, many low-density suburbs and McMansion subdivisions, including some that are lovely and affluent today, may become what inner cities became in the 1960s and ’70s—slums characterized by poverty, crime, and decay." - Thu May 22 2008, 21:07

1000!

Steep drop in mortgage applications:

http://money.cnn.com/2008/05/21/real_estate/bc.apfn.mortgage…

Article highlights:
--mortgage applications fell 7.8% from previous week

--"Mortgage application volume falls to one-third of where it was during the height of the housing boom in May, 2003." - Thu May 22 2008, 09:54

House prices post (another) record decline according to OFHEO data:

http://money.cnn.com/2008/05/22/real_estate/ofheo_report/?po…

Article highlights:
--"Home prices fell 3.1% from the first quarter of 2007, the largest decline in the purchase-only index, which excludes refinancings, since the agency began keeping records 17 years ago."

--"It's not going to be the largest decline on record for long," said Peter Schiff, president and chief global strategist at Euro Pacific Capital."Prices are going to keep falling until we get to the equilibrium, which is much, much lower. This is only the beginning."

--"The nominal price declines aren't as spectacular as they would be if we didn't have so much inflation," Schiff said. "Houses are becoming a less valuable asset relative to the cost of living."

Even worse, these statistics may seriously understate the decline, because "The government index focuses on less expensive properties and includes fewer houses bought with risky home loans that have gone sour over the past year." (source: AP) - Thu May 22 2008, 09:49

NYU's Economics Chair predicts a further 10-15% national home price decrease in the next 6-12 months:

http://finance.yahoo.com/tech-ticker/article/17662/No-Bottom…

[The current downturn is "much more serious" than past housing declines, Smith says, predicting another 10%-15% downside, on average, for national home prices over the next 6-to-12 months before any recovery begins.

In other words, the housing market isn't anywhere close to a bottom yet.] - Wed May 21 2008, 11:19

Not a lot of talk on this thread yet specifically about the plight of condo owners. Even accepting NAR estimates, sales of existing condo units were down 26% year-over-year in March (compared to 18% sales decline for single-family homes). The real issue is what happens when, say, 1/6 units in your building is in foreclosure, and now the rest of the owners have to take on an additional share of assessment fees that are no longer being shared by the whole building. Interesting New York Times article on this topic:

"Collateral Foreclosure Damage for Condo Owners" 5/15/08
http://www.nytimes.com/2008/05/15/business/15condo.html?page… - Thu May 15 2008, 09:49

New foreclosure data shows April foreclosures up 65% from same month last year; problem is probably worse, because many foreclosures have not yet been processed because public agencies cannot process the filings quickly enough.

http://biz.yahoo.com/cnbc/080514/24615625.html

CNBC
Home Foreclosures: Crisis Is Only Getting Deeper
Wednesday May 14, 12:15 pm ET

It’s another record in the real estate market, and it’s not a good one. RealtyTrac, the online foreclosure sale site, which has also been tracking foreclosure activity since the beginning of 2005, reports the single largest one-month volume of foreclosure activity it’s ever seen.

Again, they’ve only been doing this for three years, but you get the idea.

Foreclosure activity in April--that’s default notices, auction sale notices and bank repossessions (so yes there can be more than one hit on the property, but we look at the total percentage increases)--was reported on 243,353 properties. That’s a 65% increase from April of 2007.

Alright, so what about all the reports that borrowers are being helped, and all those programs to find and refi borrowers, and what about the word from some other sources that foreclosure numbers are actually dipping?

Well here’s a disconcerting answer: Apparently the system, that is whatever court or clerk or local bureaucratic office is stuck with recording all this stuff, is stressed. In Ohio, for example, I’m being told that it can take two to six months to get your filings in the system.

"In states like Michigan, we’re hearing from some of the trustees who actually do the foreclosures that the lenders have asked them to slow down because they don’t want to process any more into a market that won’t absorb the properties back through sales," says Rick Sharga of RealtyTrac.

In Florida, a St. Lucie County court actually added a night shift to handle the massive backlog of foreclosure filings. The clerk of the courts was quoted as saying the caseload has become, “just horrendous.” The court used to handle about forty filings per month.

In January they were tracking 715 foreclosure filings. Some are reporting lower numbers because the numbers simply can’t get into the system.

The folks at RealtyTrac, and granted these folks list foreclosed properties for a fee, say they don’t believe we’ll see the numbers start to slow until the second quarter of 2009. May and June of this year, according to banking estimates, are supposed to be the peak of adjustable rate mortgage resets from subprime loans initiated in 2006.

Lower interest rates on Libor (one of the most common of benchmark interest rate indexes used to make adjustments to adjustable rate mortgages) and other indices that correlate to ARM loans could help, as could continued efforts from FHA and lenders. But the sheer volume, it appears will remain high for now.

All those foreclosed homes on the market will continue to push inventories up and push prices down in neighborhoods across the country. - Wed May 14 2008, 11:51

Very good (and short) article from the American Enterprise Institute for Public Policy Research discussing how several negative economic factors are currently creating an "adverse-feedback loop" and slowing the economy. The article states that 1/3 of all U.S. home owners will have negative equity in their home by the end of the year. - Wed May 14 2008, 09:19

I'm not sure if we have any NPR fans reading this thread, but if so, last week's episode of "This American Life" is excellent and on point. The show discusses what caused the credit crisis by interviewing individuals from various phases of the credit industry and can be downloaded onto your MP3 player.

http://www.thislife.org/ (the show title is "The Giant Pool of Money") - Tue May 13 2008, 17:29

I do agree with some of the others below who have complained that this thread has degenerated into a lot of bickering. Some of it is inevitable due to the "Slash"-type who come here for no purpose other than to muddy up an otherwise-impressive ongoing discussion. But to the extent possible, let's keep this discussion issue-focused (instead of personality-focused). Most of the personal issues can be worked out (or fought out) via email, but if this forum is to remain productive and educational, we really need to scale back the personal elements. I imagine I have been guilty of this as well, so I'm not trying to call out any person in particular. Maintaining an issue-focused thread also reduces the burden on moderators, which I'm sure they would appreciate. Since we're all adults, I don't think this should be too difficult.

Moderators: thank you for correcting the thumbs-down issue. - Tue May 13 2008, 15:43

Hey wsj, I checked alexa.com, and your claim is bogus. There is maybe a three-day dip, but certainly not a two-week dip--also compare trulia.com to zillow.com and you'll see they mirror each other in the slight decline over this period. More interestingly, try Realtor.com and you'll see the same dip, but even more pronounced.

Maybe all real estate sites are getting fewer hits because fewer people are interested in buying.

I also find your repeated claims (under various member names, of course) that you have the power to "have every realtor in the country" act in a particular way hilarious.

Everyone monitoring this thread knows that you are one person with close to twenty different names, and everyone knows you're manipulating the thumbs-down system by creating names for no other purpose than to add a thumbs-down and throw in your newest useless tidbit (after getting called out under your "Go Cubs" alias this weekend this question received 17 TDs in a one-hour period--after receiving a total of seven in the previous month). So round up all of your friends--Slash, What?, Wsj, Go Cubs, Ryan's Mom, Zach's Mom, and the other fifteen people we've long forgotten, and enjoy watching Fried Green Tomatoes again tonight with your Mom and Dad in their Lakeview condo. - Tue May 13 2008, 15:24

A contract is NOT a moral obligation. JR, you continue to embarrass yourself by comparing mortgage default to murder and marital infidelity. A contract is a legal document expressing the duties of the parties, and the penalty to be assessed if a party to the contract fails to heed those duties. In the housing context, the mortgage is nothing other than an agreement--legal, not moral--, on the part of the buyer, to make monthly payments to the lender; and if he does not make those payments, the lender is entitled to recapture the home from the defaulting buyer.

If morality were involved, lenders would probably want to meet with the buyer's friends and family, perhaps even clergymen and former school teachers, to find out as much as possible about the buyer's moral character. But they don't. They look into his finances, (sometimes) legal status and judgments outstanding, and credit history--all financial and legal, but certainly not moral, indicators. Furthermore, when someone defaults on her mortgage, she doesn't face criminal penalty (as when truly moral issues are involved, such as taking another's life) -- she loses whatever she agreed to lose in the contract.

Legal scholars have been trying to emphasize this point to the JR-type for more than a century:

"Nowhere is the confusion between legal and moral ideas more manifest than in the law of contract. Among other things, here again the so-called primary rights and duties are invested with a mystic significance beyond what can be assigned and explained. The duty to keep a contract at common law means a prediction that you must pay damages if you do not keep it — and nothing else... But such a mode of looking at the matter stinks in the nostrils of those who think it advantageous to get as much ethics into the law as they can."

--Oliver Wendell Holmes (the most cited Justice, to date, in United States Supreme Court history), "The Path of the Law," 1897 - Tue May 13 2008, 09:56

Realtyexec, that is a fair point--I hadn't properly considered credit score. But it doesn't change the fact that the loan market of yesterday allowed people to play with house money; financially, they only stood to gain. The credit score hit is a serious consideration to take into account, but when one's home is worth $80,000 less than one's loan (which is very common in your neck of the woods--California), credit score concerns become secondary. In any case, the credit hit is an after-the-fact consideration and factors little into the initial decision whether to purchase a home beyond one's means--in my opinion, most people don't buy a house thinking about what will happen to their credit when they foreclose. It only factors in later, when the speculation-induced damage has been done. - Mon May 12 2008, 20:19

JR, sometimes I feel like you are living in a different universe. I don't know how anyone can disagree with Richard's most recent post, which you described as "disgusting." He simply stated the obvious--that it's natural for individuals to act in their own financial interest. Offer: "no down payment for this gigantic house--if it appreciates (which it has done for years!), you reap ALL OF THE REWARDS (minus a 6% commission); if the housing bubble bursts, you bear none of the risk!" What's "disgusting" about accepting this offer??

Suppose I ask you to call heads or tails. If it's heads, you win $50,000. If it's tails, I shake your hand and you walk away with an "aw, shucks." What's "disgusting" about accepting my offer to play in this game? You'd be a moron not to play. Many people who "played" in the housing boom of the past decade stood to gain (and did gain) much more than $50,000. I doubt they think there was anything "disgusting" about their decision. And many people have faced foreclosure in the past few years as housing busted. Oh, well! Now they're in a new home or are renting, and the move/foreclosure was a pain, but with no money down, it's no skin off of their backs. For these people, the coin came up "tails," but there's nothing "disgusting" about it. - Mon May 12 2008, 20:00

See my updates below: last night I called out "new contributor" "Go Cubs" as being another Slash alter-ego, and this thread's thumbs-downs quadrupled from 7 to 28 within a one-hour period.

Moderators, thank you for your continued efforts to keep this thread clean, and I'm sorry that it has become more time-consuming than most. I don't mind that there are some thumbs-downs (which can be expected for a relatively controversial question), but I do want to uphold the integrity of the "thumbs-up/thumbs down" procedure by not allowing one individual to give 20+ TDs in the course of an hour (obviously artificial considering the question received only seven authentic TDs--assuming the others were authentic--over the previous four-week span).

Next I expect Slash to give this thread TDs more subtly--say, four here, five there, etc., so as not to be so obvious. It would be great if we could eliminate this (and him) by banishing him completely in some way. - Mon May 12 2008, 13:52

Twenty thumbs-downs on this question in 16 minutes now (after seven in the previous four weeks)--keep 'em coming! This is like watching the ball drop in Times Square. You know it's coming, but it's still so exciting! - Sun May 11 2008, 19:26

Now you're answering like a real person--glad you took my advice. You've sure contributed a lot in the past fifteen minutes for someone who casually observed for the first 740 posts.

See you under your next name, sweety!

Ryan - Sun May 11 2008, 18:55

Whatever you say, Slash!

I noted in my post what wikipedia said--that the two-word is often used, but "Lakeview" is "increasingly used," hence its use by the community's Chamber of Commerce.

Also, great job sidestepping Exhibits A, B, and D. You get creepier by the second.

An authentic poster would either ignore my post or put me in my place for even questioning her--they wouldn't try so hard to prove themselves, as you just did. Finally, nice touch on the use of "honey" and "sweety" (three times! ...yes!). Way to prove you're a real live woman!

Also, you used the "spin this one" lingo(quoted directly from your last post) to prove your point to Aj under the "Realtor B" alias three days ago. Sorry to out you like this--and on Mother's Day!

Go Cards! - Sun May 11 2008, 18:43

Go Cubs is just Realtor B's newest alter ego.

Exhibit A: Yesterday Realtor B asked us "retards" to comment on how prices in Lakeview could be rising if Chicago prices were falling. Today "Go Cubs"--who claims to have been casually watching all along (she summarizes her view of all 700+ posts!), but has never contributed--arrives on the scene to "chime in" for the sole purpose of informing us that Lakeview prices are strong and that he/she/it knows "several investors" with "tens of millions of dollars" who are just waiting to jump into this market--like most crap Realtor B spews, completely unverifiable and almost certainly false information.

Exhibit B: like every other one of Realtor B's split personalities, this "new contributor" created her account TODAY--the same day she posted.

Exhibit C: both Realtor B and "Go Cubs" described the neighborhood as "Lake View," which is odd because the Chicago neighborhood "Lakeview" is one word. See wikipedia: http://en.wikipedia.org/wiki/Lakeview%2C_Chicago

See also "Lakeview Chamber of Commerce": http://www.lakeviewchamber.com/

See also Trulia's listing of Chicago neighborhoods, which includes "Lakeview."

The two-word spelling is seen in some instances, but it is by far less common, and it is certainly odd that both Realtor B and Go Cubs would "randomly" use this spelling.

Exhibit D: two days ago, Roger fixed up the artificial thumbs-down problem, bringing this thread's thumbs-down total to seven. Yesterday, "Realtor B" was created, and there was immediately an eighth thumbs-down. Today, "Go Cubs" was created, and the thread (predictably) received its ninth thumbs-down, even though "Go Cubs" expressed that he/she/it was amused by the thread, and no other new contributor appeared.

It's clear Slash/Rob Banks/Buster Hymen/Ryan's Mom/Realtor B/etc. is up to his old tricks. This time he apparently sought to at least start under the guise of being a serious contributor ("Go Cubs"!!) undoubtedly to try and bolster his beloved "Lake View" neighborhood before getting dismissed again. Making his "new contributor" an apparent female was a nice (though not clever) touch.

Moderators, again, if there is any reasonable way to prevent this individual from further burdening our discussion, please try. As I sift through the thread's history and check my memory, I believe this is the eleventh alter ego he has created, which demonstrates tremendous time and effort expended for the sole purpose of destroying discussion and education (also recall that his numerous alter egos have repeatedly called for this thread's termination--apparently sabotage is Plan B). - Sun May 11 2008, 18:05

JR: "Surely you jest. I haven't seen ANY pro use the profany I have seen coming from certain other posters."

JR, have you been reading anything coming from Realtor B, a Naperville "Real Estate Pro"? Search the entire 729-post thread and I don't think you'll see any "profany"--or any profanity, for that matter--from those contributors who are down on real estate. A few posters have bashed the value of Realtors generally, but I can say pretty confidently that none on this side of the fence has wished cancer or AIDS on others' family members.

I really don't know what thread you're reading. - Sun May 11 2008, 13:54

Another coincidence: creation of Realtor B's account ----> another thumbs-down for the question.

Roger or whoever--thanks for taking care of the artificial thumbs-down problem. I know it doesn't really matter, but it was annoying seeing this thread's thumbs-downs accumulate with each new alias account. - Sat May 10 2008, 08:48

Nice scare tactics, Realtor B (yet another "contributor" who created his account YESTERDAY). If you haven't noticed, most contributors to this thread have high respect for real estate agents who can make an argument based on facts and acknowledge strengths and weaknesses in their arguments.

Most threads are filled with Realtors patting each other on their backs. This one is generally more critical. Is it really your belief that the presence of one bearish thread with a few Realtor-critical (or skeptical) comments warrants a full-out boycott of this website? How whiny. I'll bet you were the kid in kindergarten whose report card said "Doesn't play well with others." - Sat May 10 2008, 08:41

JR: I think you meant "ROTFL," meaning "Rolling on the floor laughing." Otherwise you're just "rolling on the floor," which makes you seem surprisingly insane (or a fire victim, in which case you should focusing on escape instead of this thread!).

Helping people with internet jargon since 1992,

Ryan - Sat May 10 2008, 07:45

Another great article regarding those who keep chanting "the worst is over":

http://www.abc.net.au/news/stories/2008/05/09/2240270.htm - Fri May 9 2008, 18:59

Another housing article from the latest issue of The Economist (discussing housing bailout efforts):

Home truths

May 8th 2008
From The Economist print edition
Congress can't stop people losing their homes, but it can do a little to help

AMERICA'S policymakers have fought the credit crunch with gusto. The Federal Reserve has slashed interest rates, pumped liquidity into markets and spun a new safety net for investment banks. Politicians have applied a fiscal stimulus and, to keep housing finance flowing, relaxed prudential controls on government-sponsored mortgage lenders. As The Economist went to press, the House of Representatives was set to vote on the latest plan: to stem foreclosures and stabilise house prices by allowing the government to reinsure up to $300 billion of problem loans through the Federal Housing Administration (FHA).

It is not hard to see why politicians are so keen to help. For all the hope that the worst may be over in financial markets, the housing mess is getting nastier. Nationally, house prices have fallen between 3% and 13% depending on which index you look at. And they have further to sink. The stock of unsold homes is huge and the ratio of prices to rents suggests that property is still expensive (see article). Some 1.5m households went into foreclosure in 2007, up 50% from the year before. And with 9m people owing more than their house is worth, that figure is likely to soar.

In general, governments should not try to prop up prices in inflated markets. However, as Ben Bernanke, the Fed chairman, argued this week, there is a case for government intervention to avoid unnecessary foreclosures. Evicting a homeowner and selling his property takes months, during which vandalism and legal fees can destroy a large part of the home's value—and drag down the price of the neighbours' homes as well. Borrowers and lenders would often be better off renegotiating and writing down loans than going through foreclosure. Yet securitisation has made it harder to reschedule loans and nobody knows how far house prices will fall. Too few home loans have been renegotiated.

So is the FHA plan the answer? Supporters, from Wall Street financiers to all three presidential candidates, claim it will do great things: save 1.5m people from losing their homes and, as a result, help to stabilise house prices. Opponents, including the veto-wielding Bush White House, lambast it as a misguided taxpayer rescue for the imprudent. Neither is true.

Criticism notwithstanding, the plan is hardly a bail-out. Lenders would have to write down their loans to 85% of the current value of a house. Borrowers would pay a fee for the insurance and give up a share of any later price rise to the government. By reinsuring more mortgages, the government would take on more risk, but the bean-counters at the Congressional Budget Office (CBO) put the explicit subsidy at about $1.7 billion over five years—a fiscal rounding error rather than a reckless handout. Yet because the plan involves little government cash and is voluntary, its effects will be modest, helping half a million households at most avoid foreclosure, according to the CBO. For all the hoopla, the FHA plan will be a useful addition to the anti-foreclosure tool-kit. But it will do less than its supporters hope—or its detractors fear.
The virtues of modesty

That is no bad thing. The role for government is to prevent more foreclosures than necessary, not to prevent them altogether. Given the scale of likely house-price declines and the laxity of lending standards during the bubble, many Americans are in homes that they cannot afford. In these cases, the right answer is to make foreclosure faster and less damaging to everyone else, so that homes can swiftly be bought by people who can pay for them. A useful counterpart to the FHA plan would be a federal effort to streamline the states' convoluted foreclosure laws. You will not be surprised to hear that no politician has supported that. - Fri May 9 2008, 17:32

"The courage to end it"? Isn't that a bit dramatic? Besides Chris, the only person who has called for an end to this thread is Rob Banks/Buster Hymen/Heywood Jablowme/ whateverelseproperlydemonstrateshisselfdisdainandinsecurity.

Chris, again, STOP READING. It's easy. The proper cancer treatment is to remove the cancer, not kill the patient. And this thread's biggest cancer (BY FAR) is your partner-in-crime who keeps calling for the thread-killing and hurling juvenile insults at contributors under whichever name hasn't been deleted yet.

I created this thread, and at least ten individuals continue to actively contribute. Just in the last day we received updates on this thread regarding new housing price numbers, California Assn. of Realtors updates, and Warren Buffett's recent comments regarding the housing market. All very valuable information that I would not have otherwise found.

I understand your frustration with the personal stuff going on, and I repeat my request to Mike and others to keep this thread civil and, in turn, productive. But there's no need to shut it down.

As a side note, this thread now has 17 thumbs-downs. At least ten are attributable to Heywood Jablowme and his schizophrenic friends. - Fri May 9 2008, 15:44

The weather analogy (that real estate, like weather, is "local," so it cannot be inferred from national numbers) has strong rhetorical appeal but is logically weak. You can only compare houses to weather if houses and weather are analytically similar in some way. They aren't. Simply put, housing prices have nothing to do with temperature and barometrics. The only *alleged* similarity is that both are "local," which presumes precisely what you are attempting to prove by creating the analogy, making it circular and logically irrelevant.

To the extent we accept the weather analogy, how about this: while we may not know the precise figures, we do know that the "nationwide" (as opposed to "local") temperature will drop significantly from July to December. Minnesota's temperature will drop. So will Orlando's. The drop may be uneven, but the temperature WILL DROP EVERYWHERE. This is because United States temperatures are driven by constants--the Earth's rotation/tilt, distance from the sun, etc.

Similarly, we may not be able to accurately predict how bad it will be (see: California Association of Realtors, which recently adjusted its 2008 forecasted price declines from 9%--March's estimate--to nearly 25%--May's estimate). But we can say it will be bad--(almost) everywhere. This is because home prices are based on predictable underlying characteristics which all point toward exactly what we have been seeing for several months in a row--rapidly accelerating price declines. It's not as if what is "randomly" causing prices in California to drop is also randomly affecting Las Vegas, Florida, the East Coast, Chicago, etc. in the exact same "random" way. No, markets across the country are falling because the same NATIONWIDE issues (lack of buyers, foreclosures causing price declines which cause foreclosures which cause further price declines ad infinitum, etc.) are affecting every region.

Bring your umbrella--wherever you may be. - Thu May 8 2008, 22:00

I hope Trulia never shuts down this thread.

Whatever anyone else wants to believe, I am a real person who was absolutely planning to buy a house until about a month ago. My wife and I were in a contract to buy property at 4547 N. Ashland (Chicago), and we got out of the contract due to some problems revealed during our home inspection. My wife and I were checking websites such as craigslist, buysiderealty.com, and others on a daily basis looking for new listings.

Then I found this website and was drawn to a comment and report cited by Trulia member John the Bruce. The report persuasively argued that home prices would continue to fall in the short- and medium-term future. I had heard home prices were falling, and my intuition was that this made it a particularly *good* time to buy, because I would get more for my money. I never considered the fact that prices could *keep falling*, perhaps dramatically. After all, real estate prices have been increasing every year since I was about ten years old, and Realtors I talked with always (yes, in my experience, ALWAYS) told me that it was a good time to buy. I just assumed that any price drop must be temporary.

After I read John's link, I did some research on my own, and I created this question thread. It is hard to overstate how grateful I am today for this website and the contributions made to this thread by several Trulia members. As a once-objective and unbiased mind, I am now absolutely convinced that prices will continue to drop for at least another year, and I firmly believe that the information gleaned from this thread has protected my wife and I from losing a great deal of our savings in an ill-advised real estate purchase. The Center for Economic and Policy Research (an organization with neither a "horse in the race" nor a tarnished reputation, see: NAR) recently estimated that, based on the most recent Case-Schiller data, more than $6 trillion worth of home equity will "disappear" in 2008 alone due to home price deflation. This equates to an average of $85.000 of lost equity PER PERSON.

http://latimesblogs.latimes.com/laland/2008/04/disappearing-…

I am gladly not a part of this statistic. If anyone stumbles onto this website, and onto this thread, and makes a wise decision based on objective data instead of NAR spin, then the thread continues to serve a valuable purpose. To anyone reading this right now, I would recommend reading the first 100 or so comments, which are substantively the strongest, or you can click the link above entitled "Highest Rated" for the answers other Trulia members have chosen as the best.

I am not aware of any other resource on the internet right now with more comprehensive analysis or better data links than the posts contained in this thread. Those who call for the termination of this thread are obviously bothered by the prospect of regular people having easy access to valuable information--there is no other explanation, because anyone who is simply annoyed by this thread could easily choose not to read it.

Finally, I would note that with 600+ posts, it is more important than ever to properly flag posts worthy of "thumbs up" so future readers can actually find the best information. - Thu May 8 2008, 17:36

Deborah, I don't want to speak for Ben, but I don't think he meant the "Joe Sixpack" comment the way you took it. I usually interpret "Joe ____" to mean your everyday person. Perhaps the "Sixpack" surname refers to working class buyers (which describes most people), but I don't think there's anything inherently offensive about that. The point Ben was making (at least how I took it) is that your everyday worker--"Joe Sixpack"--used to be able to buy a multi-hundred-thousand dollar house with no little or no money down, regardless of his credit rating. Today, the "regular buyer" needs to put up about $45,000 in cash to buy his "average priced" ($225,000 or so) home--AND he needs a very strong credit score. In some parts of the country, even this will not be enough, as banks are increasingly skeptical of approving loans for declining assets. "Joe Sixpack"--meaning, as I take it, persons of average wealth, average credit, etc.--can't buy a house today, at least not the way he could a few years ago.

There is nothing local about the underlying problem facing the real estate market. Tens of millions of buyers--everyday people--have received rubber-stamp approvals for their home loans. This is no more. Banks are requiring large down payments and high credit scores, and this means substantially fewer buyers can buy, which means substantially less demand, which means substantially reduced prices. I don't have to hypothesize--this is happening. - Thu May 8 2008, 08:18

Slash and Chris Freeman, this thread remains the top rated on Trulia, and by tonight's end there will likely be more than 100 responses (by twenty-five different people) TODAY. You don't need to constantly chant "kill the thread" (and accuse Trulia of evil-doing) every time Mike posts a response that makes you feel insecure. Your attempts to quash the opinions of others is not welcomed in most countries not-named-China.

With that being said, Mike, you are going a bit (OK, a lot) overboard. I don't mind your passionate stance, but keep in mind two things: first, you have good points to make, and you do a nice job of supporting your opinions with articles and data, but when you get emotional with your posts and generally berate Realtors, you lose credibility and it takes away from your overall effectiveness. Second, I think it's important to not generalize so much. I think you're right that Realtors are not as critical to making a home purchase today as they were ten years ago (due mostly to websites like this). But I think it is equally true that Realtors continue to provide a great service to those buyers and sellers not able or willing to do it on their own. I just turned 25, but in three months I'll become a lawyer and charge people $300/hour for my services. A fair argument can be made that I'm not worth that, but the bottom line is that some people (and companies, of course) will gladly pay it. As long as people continue to gladly hire Realtors, I don't see the point of being so fussy about it. Similarly, I agree with you that MANY Realtors (and the NAR, in my opinion) greatly contributed to many wrecked lives in this country through the "Great Time to Buy (and Sell)" propaganda, and the well-being of buyers was shoved to the side in the name of more sales and more commission, but I also think it's true that many Realtors have been and continue to be realistic about this situation, and a few have really contributed to this thread. I don't think it's fair to say they are all worthless and will be making $10/hour in another industry next year.

Just my thoughts--obviously this thread has taken on a life of its own, so no need to listen to me anymore. - Wed May 7 2008, 17:47

In other news from this week...

*Moody's, in a report for forbes.com, reportedly predicts that home prices (at least in some markets) will continue to decline between 10-25% in 2009.

*Fannie Mae president stated we are only now "in the belly of the cycle" (that is, at our worst point, but not close to over), and the company has upped its 2008 forecasted price declines from 5-7% to 7-9%.
http://biz.yahoo.com/ap/080506/economy.html

*Quote of the week: "Where in the world does it stop?" --National Association of Homebuilders chief economist David Seiders, on the worsening rate of foreclosures and resulting falling prices.
http://seekingalpha.com/article/75863-moody-s-sees-prices-10… - Tue May 6 2008, 21:35

[Some, not all] REALTORs say the darndest things!
My wife recently received this email from "Agent Erwin" of Nexus Chicago Realty Group, LLC. I'm not sure how he got her email address...maybe from a sign-in sheet from last year, when we were actually considering buying a home. I wanted to see if anyone had thoughts on it. The message strikes me as plainly irresponsible. Don't REALTORs owe a fiduciary duty to their clients? If so, aren't they breaching that duty by soliciting clients in a way that misrepresents the true nature of the housing environment? Most people don't know how to do their own home research, and instead they rely on real estate "professionals." If an email like this induced me to buy a home that fell in value 15% after I bought it, I'd be pretty upset. I particularly dislike the line that says "We know that home prices are leveling off in Chicago!" --assuming, as I believe, that he means price DECLINES are leveling off.

Anyhow, the soon-to-be lawyer in me can't help but wonder whether we can expect a class action lawsuit against REALTORs in the near future, or individuals suits against certain agents. I believe agents have a duty to inform their home-buying clients that the market is volatile and uncertain, that prices may continue to drop, etc. If people trust in and rely on their REALTOR's judgment, and that REALTOR misleads the facts, I think they should pay for it.

[[[
*Do you want to be a homeowner?

*Do you have a credit score of 620+?

*Do you plan on living in your home for 5+years?


What are you waiting for???


Finance costs will rise as the economy recovers, so trying to time real estate might not pay off
[visual aid, described in following paragraph of email]

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.

In today's housing market, the real risk is in waiting to buy a home! We know that interest rates are low TODAY! We know that home prices are leveling off in Chicago! We know that there are plenty of homes on the market to choose from! We know that sellers are willing to bargain. And we know that builders are willing to offer attractive incentives to get your business!
Any or all of these favorable variables could change for the WORSE twelve months from today! - Tue May 6 2008, 21:29

That's a great article Paul, thank you. Paul Krugman is one of the most respected living economists. A couple other points in that article which I found very interesting:
--prediction that 1/4 of all American homeowners will have negative equity before the housing correction is over
--the possibility of "overshooting." Many people assume that prices will drop until they are in line with what the "should be"--whatever that means, and then they will stabilize. I thought it was interesting that Krugman believes prices could "overshoot" in the negative direction and fall farther than necessary due to the negative snowball effect (price drop causes foreclosures which cause price drop, etc.). This makes sense--if home prices rose unjustifiably for a decade based on superficial investment optimism, who is to say prices can't dramatically fall below baseline levels based on (perhaps unfairly hyped) negative trends? - Thu May 1 2008, 12:25

I don't have much to add to this discussion right now, but I do want to address a stream of annoying comments: (1) I never sought to solicit advice to advise me whether to rent or buy. Read the question: I specifically say I'm leaning toward renting (in the interest of disclosure), and I just wanted a forum to discuss the issue and exchange data/opinions. (2) I'm tired of the "this thread is still going?!?" comments. If you aren't getting anything out of it anymore, then stop reading. What would you have me do, delete the thread? I'm not sure why these people are so committed to stifling others' discussions. Considering this thread has more "thumbs ups" than any in the history of this website, I'd prefer to keep the discussion active as long as others are getting something out of it. It's rather ironic that people keep contributing these worthless comments in order to point out that the discussion isn't productive.

I don't have time to search the internet all day looking for new housing articles/data, but I do have time to check this site and read the 2-3 new solid links each day, so the thread is valuable to me if only for this reason.

In the meantime, Mike, you really piqued my interest--can you tell us more about your old position? I am definitely interested in hearing what a former real estate VP thinks about this market. - Wed Apr 30 2008, 17:06

Aj, I'm not sure if you had said it before, but I thought your last post's analysis made a lot of sense. It would be nice to know exactly what is going on in a particular neighborhood, but there just aren't enough home sales (especially in this market) to get a large enough sample to confidently reflect what's going on. For me, Dann, the C-S data is just the best (most objective, most reliable, etc.), so that is why I value it over almost anything else I could read, and I just cannot believe that Chicago (city) prices can be steady while Chicago (metro) prices are falling quickly. I understand there is some conflicting data and appreciate your reasonable disagreement.

Here is a Chicago local market report by Chris Ford, Realtor (found on Realty Times website):

There has been a noticeable slow down in sales of both the single family and condo market. Properties that show very well and are priced correctly are moving. But if you don't get an offer in the first 30-45 days, properties are sitting and market times are going up as well as inventory. The avg days on the market for Condos has gone up to 200 days Buyers are being very particular in what they want and if they are not finding exactly what they want they are moving on to the next property. Developers are being forced to offer big incentives to attract buyers and resale properties are being forced to lower their prices and expectations if their property has not sold quickly. A strong marketing plan is needed by sellers to attract as many buyers to their property as quickly as possible. As we move into the traditionally active Spring/Summer selling season with lots of left over inventory and new listings coming on the market I believe this trend will put even more pressure on sellers who have been on the market for some time to further lower prices. Making for advantageous deals for Buyers. - Tue Apr 29 2008, 11:59

Couple of thoughts re recent posts:

Chandler: I think you raise a good point about buyers' alarming tendency to make their lives' biggest investment without really researching. Sadly, I was one of them. Last summer I heard that home prices were starting to fall, but I believed what I heard on radio commercials put on by Chicago-area Realtor Associations: that the problem was confined to the coasts. My wife and I found a house we liked listed at $700k, and we thought we got a "steal" when we got it for $620k. This was a great price according to comps I was seeing (reinforcing your theory that, at least to a limited extent, stupid buyers create more stupid buyers). This spring, we did our home inspection, which revealed that the home's wrap-around front porch was defective and needed to be replaced. We couldn't work this out with the seller, so we walked away.

Today, I am so thankful that our inspection revealed that defect. Best $395 I ever spent.

JR: in response to Chandler's message about buyers overpaying, you wrote "Now where do we place the blame for inflated prices? Hmmmmmmm.....?" Not sure what you're getting at here. The vast majority of buyers rely on their trusted Realtors when deciding whether and how much to bid. Overpaying is also surely based, at least in part, on highly successful Realtor ad campaigns which gave Americans the impression that prices were inevitably (and dramatically) rising, so (1) no home investment could be a bad investment; and (2) pay now--whatever it takes--because you may not be able to find a home later.

Dann: it's clear we have different opinions as to what is happening in Chicago, but I appreciate your insistence! I imagine that for every example or friend you can call, someone else has a counter example showing things aren't so hot in Chicago. For instance, a few months ago my wife and I saw a home we liked in the north part of the city. It was listed at $829,000 (out of our range), but we wanted to keep an eye on it. The home is now listed at $699k and is still on the market (and I can verify it is a beautiful home). It is also true that home sales *in the city* remain at a 17-year low, and Chicago was second nationally in foreclosures in February. I just think it is silly to believe that the problem is confined to the outer suburbs but not the city--after all, the city (not the suburbs) saw the most significant price appreciation in the previous ten years. My feeling is that we have a long way to go. Meanwhile, Case-Shiller shows Chicago prices are now down 8.5% year-over-year, meaning the average person who bought a $500k home LAST YEAR has now lost $42,500 in equity. And--once again--the price decline was steeper this month than the previous, showing the price free fall is intensifying, not slowing.

(Reposted after correcting typos) - Tue Apr 29 2008, 07:14

Extra! Extra! Case-Shiller's February data was published this morning (li