July 2010 Resale Housing Data Rodeo

Submitted by Rich Toscano on August 12, 2010 - 12:28pm
In the first month after the [insert preferred double homebuyer tax credit catchphrase here], prices as measured by the median price per square foot were pretty much flat:



Same went for the vanilla median.  Thrilling!



My Case-Shiller proxy, being a three-month average, crept up a bit largely due to the big price jump in May, but this will roll out next month and potentially lead to a decline:



So prices were a bit of an analytical yawnfest.  Much more interesting was the action in sales and inventory.

As one would have expected post-double-tax-credit, sales declined.  This was during what has been a seasonally strong month over the prior two years (sales were down in July 2007, but that probably has more to do with subprime implosion than seasonality).



Schahrzad Berkland, former prolific Econo-Almanac poster, local realtor, and proprietor of the San Diego Housing Forecast website, was kind enough to share with me her historical pending sales data so that I could do this next chart.  Pending sales are a more timely way to measure demand than closed sales, because homes go pending when they go into escrow but don't typically become closed sales (and show up in a chart like the one above) until a month or two later.  Pending sales also dropped in July, indicating declining closed sales ahead:



While demand was waning, supply continued to grow as it has all year:



Month of inventory accordingly rose (the months of inventory chart is updated to use pending sales instead of closings):



So here we are in the post-stimulus lull.  The stimulus worked by pulling forward future demand, but we've now arrived at the point in time from which demand was poached.  The concurrent rise in inventory puts the months-of-inventory figure awfully close to the 6-month line that has often marked the difference between rising and falling prices. If current trends continue, we will soon be at a level of inventory that has historically been associated with price weakness.

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Submitted by CA renter on August 14, 2010 - 12:12am.

Looks an awful lot like 2007. This should be getting interesting.

FWIW, I was surprised that the Fed didn't apply the accelerator as much as they did in the past. Either they have run out of gas, or they are trying to save up what they can for something "unexpected" in the future.

Submitted by jpinpb on August 14, 2010 - 8:08am.

Rich - pending sales don't always close. I was pending for 6 months on a short sale that came back w/a lower appraisal, so I pulled out.

I'm not the only one. I see many that were contingent that I set an alert/favorite and come back active again many months later. Some of the ones that came back active also reduced their price. (of course, the one I wanted didn't - drat!)

Nevertheless, if others see price declines and reduction in price, it's possible future appraisals will come in lower, causing other pendings to go active and/or price reductions. Maybe some people who are in contingent status might see something they like better for a lower price.

To me, contingent/pending is starting to not mean much. I keep an eye on it if I like it, JIC it comes back. Sort of like, "It's not over until the fat lady sings." And frankly, I'm starting to see some that closed in 2008 come BOM for less. (crap - I've been looking that long) Of course, I've also seen some flips recently during the tax credit incentives. But at this rate, maybe we'll see those back for less in a year or two.

The part that's sad is all the money thrown at this and the best they can do is ultimately flatline.

I ask anyone: Wouldn't it be better to have a quick bottom to achieve a quicker real recovery, or drag it out slowly?

As someone who owns and wants to buy, to me, life's to short and I want to get this over with and see a real recovery, but I know to have a real recovery, we have to feel the pain first. I say rip the band aid off quick. Peeling it off slowly is just agonizing.

Submitted by Arraya on August 14, 2010 - 8:44am.

We are leaving "return to normal"We are leaving "return to normal"

Submitted by JC on August 14, 2010 - 8:57am.

As a frustrated buyer, part of me hopes this is true and that you can tell me what month "fear" will hit so I can plan accordingly. :)

If not obvious, I am really making fun of myself as the long term frustrated buyer.

Submitted by sdrealtor on August 14, 2010 - 11:38am.

A couple quick points:

JP-you were not in "pending" status for 6 months you were "contingent". What you see with continegnts coming back at lower prices is likely this. Agents list short sales and take an offer to the bank for approval. According to Sandicor rules it must be marked pending during that phase. The offer can often be lower than asking price. When that offer gets approved the listing agent goes back to the buyer who more often than not has moved on. The property comes back on the market as "active" at a new "previously approved short sale price". All this has aboslutely no bearing on what the market is doing and is simply related to the mechanics of going through a short sale. Thats all it is and nothing more.

CAR-2010 is looking nothing like 2007 and exactly like 2009. Lending has loosened up relative to where we were in 2007. I wonder why you post things like this because you know the inventory build up is more related to undesireable properties and/or overpriced properties piling up. These properties are generally overpriced for the current market and if they were priced for the current market most if not all would sell. Price reductions on these do not mean price levels are falling but rather sellers in denial are capitulating to the reality of the marketplace. There are plenty of qualified buyer in all but the highest price ranges for every home on the market as long as its pricing falls within the range of recent closed sales.

We are and have been in a very stable market for at least a year and I expect we will be in a very similar market for the next 2 to 5 years. There is no crash coming anytime soon. People appear to have finally given up on the notion of a foreclosure tsunami which I have been debunking as far fetched for years. We are in for a slow bleed and have been doing so for the last couple years. There will be no "real recovery" in the next decade but rather a slow return to normalcy as the valuations come back in line through modest declines and eventually wage inflation.

Now more than ever the challenge is to find a home you like enough to call home for the next decade that is reasonably priced for the current market rather than someone's fantasy of where they think prices should or will go. It isnt going to happen. The cost of interest, insurance and taxes is not far off rental parity even in desireable NCC neighborhoods at interest rates hovering just above 4%. Throw in the tax benefits for someone with an income above $100K and its right there. Here are the numbers:

$750K home in NCC

Monthly rent easily $3000

Monthly interest on 80% of 750K at 4.125% is $2125 and it goes down over time as you make principal payments.

Insurance is about $100/month

Taxes are about $700/month

Total carrying costs excluding principal payments = $2925.

Throw in a tax benefit on the $2800 portion representing interest and taxes at a marginal tax rate of 28% federal and 9% state gets you down close to $2000 net per month.

We might as well make reservations at Donovan's for tonite. Its over.

Submitted by jpinpb on August 14, 2010 - 11:57am.

sdr - Rich's graph was using historical "pending" sales data.

If you say that Sandicor rules it must be marked "pending" during that phase that I was "contingent," would it not influence the graph, regardless of the term "pending" or "contingent"?

w/regard to your math accounting, those numbers do make sense when one puts 20% down. I don't have stats at my fingertips. Are there a lot of people doing 20% down? Last time I talked to my loan guy, he said he had to brush up on FHA loans, b/c that's pretty much all that people were doing.

Submitted by Arraya on August 14, 2010 - 12:41pm.

sdrealtor wrote:

We are and have been in a very stable market for at least a year and I expect we will be in a very similar market for the next 2 to 5 years. There is no crash coming anytime soon. People appear to have finally given up on the notion of a foreclosure tsunami which I have been debunking as far fetched for years. We are in for a slow bleed and have been doing so for the last couple years. There will be no "real recovery" in the next decade but rather a slow return to normalcy as the valuations come back in line through modest declines and eventually wage inflation.
.

-SDR August 14, 2010

"Financial storm definitely passed." - Bernard Baruch, cablegram to Winston Churchill, November 15, 1929

"I see nothing in the present situation that is either menacing or warrants pessimism... I have every confidence that there will be a revival of activity in the spring, and that during this coming year the country will make steady progress." - Andrew W. Mellon, U.S. Secretary of the Treasury December 31, 1929

"I am convinced that through these measures we have reestablished confidence." - Herbert Hoover, December 1929

While the crash only took place six months ago, I am convinced we have now passed through the worst -- and with continued unity of effort we shall rapidly recover. There has been no significant bank or industrial failure. That danger, too, is safely behind us."
• Herbert Hoover, President of the United States, May 1, 1930

"There is nothing in the situation to be disturbed about." - Secretary of the Treasury Andrew Mellon, Feb 1930

"We are now near the end of the declining phase of the depression." - HES Nov 15, 1930

"Stabilization at [present] levels is clearly possible."
• Harvard Economic Society, Oct 31, 1931

Submitted by jpinpb on August 14, 2010 - 12:51pm.

LOL - Maybe you should add this just for scaredy's sake:

"Nothing to fear, but fear itself,"
FDR - March 4, 1933

or Oingo Boingo, 1988.

Submitted by Rich Toscano on August 14, 2010 - 2:45pm.

jpinpb wrote:

If you say that Sandicor rules it must be marked "pending" during that phase that I was "contingent," would it not influence the graph, regardless of the term "pending" or "contingent"?

I think he meant to say that it's supposed to be marked "contingent" during that phase. This is my understanding, and in this case, it would not impact the graph.

Submitted by sdrealtor on August 14, 2010 - 2:45pm.

jp
There is a "contingent" status on the mls and yours was likely in that category not pending. A short sale becomes pending when the lender accepts your offer and you open escrow. Did you ever deliver a check to an escrow office? If not, the property you referenced was never included in the pending.

As for the 20% down, I was specifically refering to NCC where 20% or more down is far more the rule than the exception. FHA loans on SFR's are virtually non-existent around here. Your loan guy may not be working this area or may be working condo markets. In his world FHA may be all people are doing but his world is not THE world. This market is made up of many very different markets.

Submitted by sdrealtor on August 14, 2010 - 2:51pm.

Arraya
The mechanisms for watching, understanding and manipulating the markets today couldnt have been imagined in 1930. Your a screwball if you think the world of today is anything like the world back then. Things have changed.

Mark the date and etch it in concrete. I'm happy to put my money where my mouth is. I'll be enjoying a very nice dinner at Donovan's courtesy of CAR soon enough. I'd be happy to extend the same offer to you. Let's put our money where our mouths are. Name your wager BearBoy?

sdr (NOT SDR)

Submitted by Arraya on August 14, 2010 - 3:45pm.

lol... A realtor saying RE prices never go down, how cliché of you. This time with new and improved rationale. Is that what realtors are saying today - "Don't worry, the government won't let prices fall" - as a sell point. In place of, "They're not making any more land"

Sorry, that's inline with circa 2005 FB thinking. It's different this time. Why did prices come down at all, they could have "manipulated" the market, right? Or are you saying they wanted prices to collapse in 2007? Or now, they just figured it out? Or they can only manipulate within a given range and you happen to know what that range is?

As for the bet, sorry, but, no thanks. Read into that, how you will...

Submitted by CA renter on August 14, 2010 - 9:15pm.

sdrealtor wrote:

CAR-2010 is looking nothing like 2007 and exactly like 2009. Lending has loosened up relative to where we were in 2007. I wonder why you post things like this because you know the inventory build up is more related to undesireable properties and/or overpriced properties piling up. These properties are generally overpriced for the current market and if they were priced for the current market most if not all would sell. Price reductions on these do not mean price levels are falling but rather sellers in denial are capitulating to the reality of the marketplace. There are plenty of qualified buyer in all but the highest price ranges for every home on the market as long as its pricing falls within the range of recent closed sales.

We are and have been in a very stable market for at least a year and I expect we will be in a very similar market for the next 2 to 5 years. There is no crash coming anytime soon. People appear to have finally given up on the notion of a foreclosure tsunami which I have been debunking as far fetched for years. We are in for a slow bleed and have been doing so for the last couple years. There will be no "real recovery" in the next decade but rather a slow return to normalcy as the valuations come back in line through modest declines and eventually wage inflation.

Now more than ever the challenge is to find a home you like enough to call home for the next decade that is reasonably priced for the current market rather than someone's fantasy of where they think prices should or will go. It isnt going to happen. The cost of interest, insurance and taxes is not far off rental parity even in desireable NCC neighborhoods at interest rates hovering just above 4%. Throw in the tax benefits for someone with an income above $100K and its right there. Here are the numbers:

$750K home in NCC

Monthly rent easily $3000

Monthly interest on 80% of 750K at 4.125% is $2125 and it goes down over time as you make principal payments.

Insurance is about $100/month

Taxes are about $700/month

Total carrying costs excluding principal payments = $2925.

Throw in a tax benefit on the $2800 portion representing interest and taxes at a marginal tax rate of 28% federal and 9% state gets you down close to $2000 net per month.

We might as well make reservations at Donovan's for tonite. Its over.

When I said it looked like 2007, you have to compare the trends on Rich's graphs. Sales and inventory growth trends are looking like the trajectory seen in 2007.

I think the rise in inventory is more due to the delusional sellers who think they're entitled to 2005/2006 prices. Lots of people took their homes off the market in late 2007 through all of 2008. They thought they would "wait until things got better" in a year or two, so keep listing, delisting, relisting, delisting...you know the drill. They've seen the market strengthen due to the govt/Fed intervention, and decided to make their way to the exit. Too bad they're either a few months too late, and/or they overpriced their listings and will now likely be stuck for many more years, IMHO.

I know a lot of people who did a final draw-down on their HELOCs and/or did a cash-out refi in 2007/2008. They were doing this to capture their "equity" before it went away -- there were quite a few folks who saw the writing on the wall and tried to hunker down. Problem is, they thought (and still think) that 2006 prices are "normal" and that the deflation was some sort of anomaly that came out of the blue. Too many people can't seem to tie together the existence of rising prices and the subsequent falling prices.

Anyway, I think a lot of budgets are getting thin, and people are starting to understand that wages and prices don't "always go up," even in the mid-long run. Many of the listings today are actually better than what we saw a year ago, and are better priced, relatively speaking.

You can't ignore all those high-end places that are clogging up the MLS. Some of those people actually want to sell, and when that top-heavy inventory starts crumbling, look out below.

There is no doubt in my mind that we'll see lower prices from here on out. There are valid arguments to be made by the inflationistas, but I'm still leaning toward deflation -- which seems to be the most powerful force out there, at least for now. I'll change my mind just as soon as we hear about sigificant and sustainable wage increases.

Submitted by sdrealtor on August 14, 2010 - 9:25pm.

Arraya it is embaressing watching you hopelessly flail away. You lost and cant admit it. Nowhere did I say RE prices never go down in fact here is my quote from above.

"There will be no "real recovery" in the next decade but rather a slow return to normalcy as the valuations come back in line through modest declines and eventually wage inflation."

Can you read? It says modest D-E-C-L-I-N-E-S! That means prices coming down. I was right in 2005, right in 2006, right in 2007, right in 2008, right in 2009 and right again in 2010 thus far. My track record over the last 4 years can easily be found in the archives of this site. Its been spot on. Meanwhile you whistle down the road calling for tsunamis, 50% declines and other nonsense. You've been right about very little that i can see.

As for the bet, I'd bet a bottle of water just to enjoy drinking it down at your expense. I dont have read anything into the no thanks on the bet it obvious for all to see . You are full of hot air.

Submitted by sdrealtor on August 14, 2010 - 9:45pm.

Sorry CAR but I dont buy it. 2010 looks like 2009 not 2007. Compare the months inventory numbers which combine sales and inventory and tell me 2010 looks like 2007. It is not even close. In 2007 inventory built up because sales volume fell off the map when financing shut down. Do you beleive we will see financing shut down in the next 30 to 90 days like it did in 2007? Of course not.

We are heading into our typical seasonal duldrums and we should get some declines over the next couple months in some places. Nothing major but defintely some small declines to be found by opportunistic buyers.

I watch the market around here like a hawk and there is no credence to the list, de-list, relist, de-list drill. I dont see it happening to any degree. Find me 10 houses that have come on and off the market around here over the last 5 years. Find me 5 or even 3.

I do agree delusional sellers exist and sit overpriced. Yes some people drew down HELOCs but other people are coming in to this market and others are suceeding. The world is not ending. People are suceeding all around you.

As for the high end markets struggling - that market is not large enough to take down the much larger entry level and mid priced tiers. I just saw an REO today that was formally worth about $1.5 to $1.7M on the market for $1M. You had to take a ticket to get in the house. Traffic was more backed up then the deli counter at Stater Brothers.

Yes we will see some lower prices but we will also see some higher prices. That is the nature of the RE markets. Have you considered that we could see neither inflation or deflation? Thats what I see, relatively stable prices for the next 2 to 5 years. Eventually all the stimulus and money that has been put into circulation will make its way into paychecks a little at a time. May not in the already bloated public sector but defintely in the private sector.

Submitted by CA renter on August 14, 2010 - 10:33pm.

sdrealtor wrote:
Sorry CAR but I dont buy it. 2010 looks like 2009 not 2007. Compare the months inventory numbers which combine sales and inventory and tell me 2010 looks like 2007. It is not even close. In 2007 inventory built up because sales volume fell off the map when financing shut down. Do you beleive we will see financing shut down in the next 30 to 90 days like it did in 2007? Of course not.

We are heading into our typical seasonal duldrums and we should get some declines over the next couple months in some places. Nothing major but defintely some small declines to be found by opportunistic buyers.

I watch the market around here like a hawk and there is no credence to the list, de-list, relist, de-list drill. I dont see it happening to any degree. Find me 10 houses that have come on and off the market around here over the last 5 years. Find me 5 or even 3.

I do agree delusional sellers exist and sit overpriced. Yes some people drew down HELOCs but other people are coming in to this market and others are suceeding. The world is not ending. People are suceeding all around you.

As for the high end markets struggling - that market is not large enough to take down the much larger entry level and mid priced tiers. I just saw an REO today that was formally worth about $1.5 to $1.7M on the market for $1M. You had to take a ticket to get in the house. Traffic was more backed up then the deli counter at Stater Brothers.

Yes we will see some lower prices but we will also see some higher prices. That is the nature of the RE markets. Have you considered that we could see neither inflation or deflation? Thats what I see, relatively stable prices for the next 2 to 5 years. Eventually all the stimulus and money that has been put into circulation will make its way into paychecks a little at a time. May not in the already bloated public sector but defintely in the private sector.

The only place I see that money going into is the horrifically bloated FIRE sector. We'll see if it ever makes its way into either the public or *productive* private sector (as opposed to the parasitic financial sector).

Back in 2007, it was the credit market seizing up that caused the big chunk down. This year, I believe it will be the end of many stimulative programs that will lead the next chunk down (so far -- we'll see what else they pull out of their hats). I really think they're pushing on a string, and it's getting worse with every new program they announce. It has to be progressively bigger and badder than the last program just to keep things level, and I don't see that as sustainable.

I'll get you your ten houses next. Will have to do some legwork.

Submitted by sobmaz on August 16, 2010 - 8:00pm.

I get a kick out of those trying to say it is time to buy because the payment is equal to rent, then they do their best to show the numbers.

They say, "all you need to do is put 20%" down and your payment will be this or that.

That 20% has value and should be considered . It is much like saying, "if you put down 90%" your payment will be ........" It doesn't make sense!

When coming up with the calculation you must calculate as if 100% is financed.

In addition, in the last 12 months my landlord has had a termite treatment (about 1k), replaced the heating/cooling system (3to 5K) and replaced the fridge (400.00). Not to mention the long term things like paint jobs and re roofing.

Where are these numbers in your examples of rent versus buying?

And, I don't know how old you are but up til 1990 buying was ALWAYS cheaper than renting, even when considering the above.

Submitted by AN on August 16, 2010 - 10:34pm.

sobmaz, would it be a time to buy if the interest + tax + insurance - tax deduction on 100% financing is $600/month cheaper than comparable rent?

Submitted by DWCAP on August 16, 2010 - 11:05pm.

AN wrote:
sobmaz, would it be a time to buy if the interest + tax + insurance - tax deduction on 100% financing is $600/month cheaper than comparable rent?

I dont know, but three questions:

1) Why no principal payment? Sure, you are able to say that is savings, but paying off debt on an underwater house isnt going to return dollar for dollar. Just curious to your train of thought.

2) What is the rent? $600 off $1200/m is alot differnet than $600 off $5000/m.

3) Whos income? Cause child tax credits, interest deductions, standard deductions, home buiz writeoffs; no two income are the same. How do you handle a tax return where the interest deduction doesnt pay off due to AMT? again, just curious.

Also, if your gonna do the math the way I think you are, you really need to add in a 1month per 2 year vacancy period. And some repair/maintaince costs.

Submitted by AN on August 16, 2010 - 11:38pm.

DWCAP wrote:
AN wrote:
sobmaz, would it be a time to buy if the interest + tax + insurance - tax deduction on 100% financing is $600/month cheaper than comparable rent?

I dont know, but three questions:

1) Why no principal payment? Sure, you are able to say that is savings, but paying off debt on an underwater house isnt going to return dollar for dollar. Just curious to your train of thought.

2) What is the rent? $600 off $1200/m is alot differnet than $600 off $5000/m.

3) Whos income? Cause child tax credits, interest deductions, standard deductions, home buiz writeoffs; no two income are the same. How do you handle a tax return where the interest deduction doesnt pay off due to AMT? again, just curious.

Also, if your gonna do the math the way I think you are, you really need to add in a 1month per 2 year vacancy period. And some repair/maintaince costs.


1) Assuming you bought a house you can afford, your mortgage is less than comparable rent, and it's your primary resident and not an investment property, why would you want to sell at a loss? That's why I don't count principal. At some point in the future, you'll break even. Why wouldn't it return dollar for dollar? Just curious to your train of thought?

2) Does rent matter? Is $600 discount somehow not $600 discount when it's 10% off vs 50% off?

3) Does income really matter? Same questions as #2.

4) Why would you count in vacancy? Are you not going to need a roof over your head 24/7/365? Is $600/month saving not enough to at least cover repair and maintenance?

Submitted by outtamojo on August 16, 2010 - 11:42pm.

sobmaz wrote:
I get a kick out of those trying to say it is time to buy because the payment is equal to rent, then they do their best to show the numbers.

They say, "all you need to do is put 20%" down and your payment will be this or that.

That 20% has value and should be considered . It is much like saying, "if you put down 90%" your payment will be ........" It doesn't make sense!

When coming up with the calculation you must calculate as if 100% is financed.

In addition, in the last 12 months my landlord has had a termite treatment (about 1k), replaced the heating/cooling system (3to 5K) and replaced the fridge (400.00). Not to mention the long term things like paint jobs and re roofing.

Where are these numbers in your examples of rent versus buying?

And, I don't know how old you are but up til 1990 buying was ALWAYS cheaper than renting, even when considering the above.

Speaking of 1990, how much was it to rent a 3/2 1500 sq foot home vs now? Anyone here own a home bot in the 1990 that can tell us whether they regret owning that home and would rather rent it from a landlord? You know, just as all ownership experirces are not smooth, not all rental experiences are pleasant either, especially if you happen to rent from someone here whose name I won't mention : )

Submitted by sdrealtor on August 16, 2010 - 11:59pm.

Cmon AN the vacancy factor is important to count for the time you live in your parents basement when you get laid off your job at Hollywood Video.

Submitted by sdrealtor on August 17, 2010 - 12:03am.

NO prinicpal payment because it is paying down the debt and over the long run it comes back to you in most cases-impoprtant I said LONG run.

Over time rent increases with inflation but mortgage payments stay the same. Also interest actually goes down as you pay down the principal.

NO vacancy because it is for your shelter not for an investment property. You do need a roof over your head.

Submitted by CA renter on August 17, 2010 - 3:00am.

AN wrote:
DWCAP wrote:
AN wrote:
sobmaz, would it be a time to buy if the interest + tax + insurance - tax deduction on 100% financing is $600/month cheaper than comparable rent?

I dont know, but three questions:

1) Why no principal payment? Sure, you are able to say that is savings, but paying off debt on an underwater house isnt going to return dollar for dollar. Just curious to your train of thought.

2) What is the rent? $600 off $1200/m is alot differnet than $600 off $5000/m.

3) Whos income? Cause child tax credits, interest deductions, standard deductions, home buiz writeoffs; no two income are the same. How do you handle a tax return where the interest deduction doesnt pay off due to AMT? again, just curious.

Also, if your gonna do the math the way I think you are, you really need to add in a 1month per 2 year vacancy period. And some repair/maintaince costs.


1) Assuming you bought a house you can afford, your mortgage is less than comparable rent, and it's your primary resident and not an investment property, why would you want to sell at a loss? That's why I don't count principal. At some point in the future, you'll break even. Why wouldn't it return dollar for dollar? Just curious to your train of thought?

2) Does rent matter? Is $600 discount somehow not $600 discount when it's 10% off vs 50% off?

3) Does income really matter? Same questions as #2.

4) Why would you count in vacancy? Are you not going to need a roof over your head 24/7/365? Is $600/month saving not enough to at least cover repair and maintenance?

It's not a matter of *wanting* to sell or not, it's a matter of *having* to. This can be for financial reasons, health reasons, family dynamics, or just wanting to move!

The vast majority of people don't sell their houses because they increased in value. They sell because they want to (or have to) move for a variety of reasons, and they can't -- or don't want -- to become landlords. It's that simple.

I would ALWAYS calculate principal payments in my rent/own calculations. After all, it is borrowed money that has to be paid back. You might get that back "in the long run," but you might not. I think too many people are counting on inflation to bail them out of their bad decisions. That's not necessarily how things are going to play out from here on out. There are many economic and demographic changes which point to housing deflation for a long, long time to come.

Submitted by AN on August 17, 2010 - 6:52am.

CA renter wrote:

It's not a matter of *wanting* to sell or not, it's a matter of *having* to. This can be for financial reasons, health reasons, family dynamics, or just wanting to move!

Understandable. Those are the cases you can't plan for.

CA renter wrote:
The vast majority of people don't sell their houses because they increased in value. They sell because they want to (or have to) move for a variety of reasons, and they can't -- or don't want -- to become landlords. It's that simple.

Again, why would you want to if the current value is below what you bought it for and selling it and renting a similar place would mean you have to pay more every month?

CA renter wrote:
I would ALWAYS calculate principal payments in my rent/own calculations. After all, it is borrowed money that has to be paid back. You might get that back "in the long run," but you might not. I think too many people are counting on inflation to bail them out of their bad decisions. That's not necessarily how things are going to play out from here on out. .

What do you mean you might not? After 30 years, you're done. You have no more mortgage payment and the house is yours.

CA renter wrote:
There are many economic and demographic changes which point to housing deflation for a long, long time to come.

Oh really? So you think 10-20 years from now, people will be able to buy a house for less than what you can today?

Submitted by sdrealtor on August 17, 2010 - 8:16am.

Not counting principal payments assumes neither inflation nor deflation. Either could happen but we dont know which and when. In the LONG run inflation is most more likely.

Interest costs go down as principal is reduced and rent goes up over time. There are also moving costs. I would estimate that each time you move it costs about 1 months rent. None of these costs were factored in which all benefit buying over renting.

Quibling over this is not the point though because the current carrying costs for a typical home in NCC are pretty darn close if not neutral on rent vs buy right now as the numbers above show. Whether the numbers I used are a couple hundred too low or too high doesnt much matter. A significant change in prices (i.e. 20% or more) is very unlikely to occur anytime soon from current levels. I dont know where or when a bottom will occur but all signs tell me we are close enough that buying makes sense for alot of people if they are fortunate to find a home they love and could live in long term around here.

Submitted by peterb on August 17, 2010 - 8:41am.

Rich- If you're still in touch with Ramsey Su, it would be very interesting to hear his take on the RE market at this time.

His analytical work has been very impressive.

Thanks

Submitted by Rich Toscano on August 17, 2010 - 11:22am.

peterb wrote:
Rich- If you're still in touch with Ramsey Su, it would be very interesting to hear his take on the RE market at this time.

His analytical work has been very impressive.

Thanks

He's very bearish based on all the delinquencies and the fact that there is no private mortgage market.

Submitted by sdrealtor on August 17, 2010 - 11:57am.

Guess he didnt see my observation today on a $1M REO that attracted 16 offers and counting. Plenty of demand when they are priced right or slightly below market as that one is.

Submitted by FormerSanDiegan on August 17, 2010 - 1:16pm.

DWCAP wrote:

3) Whos income? Cause child tax credits, interest deductions, standard deductions, home buiz writeoffs; no two income are the same. How do you handle a tax return where the interest deduction doesnt pay off due to AMT? again, just curious.

Fact check: Mortgage interest IS deductible under AMT.

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