UR and sdr laid out nicely why I think interests aren’t aligned.
[quote=urbanrealtor]Generally, home prices are 7-10 times per capita income depending on demand.
Mid 2003 the price coefficient was 8.5 or 9 in San Diego (pretty middle of the road).
It was not until a year later that home prices started to become broadly decoupled from income fundamentals.
In short, 2003 was not a crazy year except in hindsight.[/quote]
UR, unless Rich Toscano’s graphs are off, the multiplier was over 10X in mid-2003 and climbing. That was the highest it had been for two generations. I for one had been ranting about absurd house prices for at least a year by then, but I don’t have a blog to point to so you’ll have to take my word for it.
[quote=urbanrealtor]The same house would go for the same nominal price now.
Still about $400k.[/quote]
Factoring in inflation, the time value of money in the down payment (if any, admittedly) and selling costs, that’s at least a $80k loss if not more. Better than the stock market, maybe, but stuffing money in a mattress would have worked better.
[quote=urbanrealtor]The DIY in question sold it in mid-late 2005 for more than 500 btw.[/quote]
If we are to judge the wisdom of an investment by flippers’ standards, then this forum is a funny place to do it. Arguing that a greater fool came along in time to avert disaster is not persuasive. Most people lose their shirts trying to time markets unless they have inside information.
[quote=urbanrealtor]I can only show you the past info and give you my analysis of it and tell you if this deal looks good at a relative level right now.[/quote]
As long as everyone understands what’s going on, I have absolutely no problem with a skilled technician rendering a spot price opinion. But everyone knows that’s not how it generally works. “It’s a good deal!” is about as far as it goes, which is why I think comps aren’t as useful as you seem to think.
If you want to do a real analysis of the RB deal, compute the rent multiple. Otherwise we’re just comparing bulbs in a tulip craze.
[quote=sdrealtor]The agent didnt make the decision to buy a home, the buyer does. The agents job is to help them do what they want and getting them a better deal in the current market is doing a good job for their client. Some of us look out for our clients long term financial well being but by definition that is not our role.[/quote]
In an ideal world with inhumanly well-behaved operators, yes. But the incentive for agents on both sides of the transaction is to close a deal, so corners get cut.
The chant of “it’s a great time to buy” never stopped from the beginning of the boom right through the crash. I heard it everywhere in ’08 and ’09, even from my own agent–whom I consider a fairly bright guy. He didn’t know how to respond when I said “No, it’s not really a great time at all”. Looking at the graphs on the front page of this site, I’d say I was right: 2009 was at best an “acceptable” time to buy, but not “great”.
Houses have well-understood values in relation to other things, namely incomes and prevailing rents. To call a specific house a “good deal” without reference to those two things is simply drinking the speculative Kool-Aid. A competent analysis would take those factors and more into consideration. It’s not hard to do, even for a rube like me.
If you think that kind of analysis is beyond the scope of any real estate professional, how about posting a disclaimer to that effect in your office?
