- This topic has 18 replies, 9 voices, and was last updated 17 years, 3 months ago by Anonymous.
August 25, 2006 at 8:34 AM #7304August 25, 2006 at 9:01 AM #33184
I think that we’re all enjoying being vindicated after being the evil party poopers (who were irresponsible doomsayers wishing ill to everyone) for so long.August 25, 2006 at 10:48 AM #33222ChrispyParticipant
A $10K incentive works out to be .6% of the asking price. Barely more than half of a percent!
Chasing the market while trying to get attention with bogus incentives … ludicrous. I wonder if they already own that timeshare and would just transfer title to the buyer? That would get rid of two lemons in one transaction!August 25, 2006 at 11:00 AM #33227DanielParticipant
I’m glad they printed this, because I think it’s a real issue nowadays. This is my #1 concern regarding the reliability of supposedly accurate price metrics, such as the CME Case-Schiller index. Anecdotal evidence in SD shows incentives in the 2%-5% range, perhaps even higher for new construction. I’m sure these are not captured in NAR’s data (they don’t even bother to make that claim), but I am afraid they’re not captured in the CME futures, either.August 25, 2006 at 12:43 PM #33249
Good point, Daniel. The Case-Shiller index was our long-awaited metric, but since it relies on the sales price, it is off by up to 5%. There doesn’t seem to be a reliable way to track home prices, because the only organizations tracking this data don’t care about reliable data. Realtors and country assessors have databases already; they could add one field: incentives, and a second field: price after incentives.August 25, 2006 at 1:30 PM #33257sdrealtorParticipant
HMMM…..Sounds like you are finally coming about and starting to understand how bad the data really is. I mentioned all this months ago but you werent ready to hear it then. Even Rich fell back on the “well it’s the best we’ve got” excuse. The method in which the data is reported and collected is extremely poor and a constantly moving target. As you peel the layers back further, you begin to understand what I was trying to convey unsuccessfully back in Spring.
The only way to really understand what is going on is to watch it on a daily basis from the ground level. As most people don’t have time for this, thats where the quality Realtors come in. I hear so many people around here saying next time I am going to go with Zip Realty. I know several Zip Realty agents and they tend to be stay at home mom’s looking to pick up some extra bucks w/o risk or working too hard. I wouldn’t hire most of them run a school bake sale. When you are ready to buy, make sure you find yourself a quality Realtor. There are plenty out there.
BTW, I still have this idea rattling around my head thats dieing to get out. I just dont have the time to get it all on paper right now. It came to me as a result of reading Docteur’s Farewell post which I believe is a must read for everyone here. It has some incredible learning. The key is to distance oneself from both the participants (Powayseller and Docteur) and the disagreement (Real Estate). More when I have time…….August 25, 2006 at 1:47 PM #33261
sdrealtor, I’m not sure where you stand. You said that you predict 30% drop, yet at the same time you’re optimistic about real estate and say that the market dropped enough already that buying opportunities are on the near horizon.
So, in your view, will real estate prices flatten, or will there be a 30% drop? If you think 30% drop, then there’s no need to even consider buying now.
I still think 50% drop.
BTW, if you know exactly the home that you want to buy, then ziprealty is a great product. Why use a Realtor who’ll want to suggest a whole bunch of other properties you don’t want? That’s why I hate Nordstrom. I don’t need a salesperson to help me select my clothes or give me suggestions on what goes with what. I know what I want when I see it.August 25, 2006 at 2:03 PM #33264sdrealtorParticipant
I never said to buy, perhaps that was your interpretation but it wasn’t what I said. I merely said that break even opportunities were close. I have found properties that are down close to 30% already and which I dont think will fall much further. Many on this board said they would buy when it made sense when comparing ownership cost with rental costs. When I posted that was almost possible already, I didn’t hear anyone saying “Wow, that is what I’ve been waiting to hear”. I didn’t expect anyone to say great, lets go out and buy something. The post rattling around in my head has alot to do with this psychology. I hope to get to it soon because I think its worth hearing as well as spending the time to put my thoughts together for my own benefit.
BTW, your post about buying a home shows you dont really understand what a good Realtor is supposed to do for you. Anyone can find a house. They are the big rectangular boxes covered with stucco and red tile that you find on most streets around here. The value of a quality Realtor is finding the right one, at the right price, under the right terms while being adequately protected financially and legally. Furthermore, the one you want is probably the same one we all want. When you are ready to buy it, you might miss it or be faced with lots of competition for it. If you want to trust that to a Desperate Housewife, I’m not here to stop you.
Sorry to rant a little but I’m trying to get my mojo back for this site.August 25, 2006 at 2:23 PM #33272bob007Participant
i would like a 50% drop. but i will take a 30% drop.August 26, 2006 at 8:10 AM #33367
sdrealtor, I don’t recall what you are talking about. The median is a lagging indicator, but it is the best we’ve got to show the pricing direction, albeit 1-2 years after the fact. I do believe in inventory, sales, and thus months inventory as a reliable indicator of the market. DOM is useless too, as it has the potential for abuse.
BTW, you were going to check with some oldtimers about pricing on coastal properties on the last downturn. Did you get any answers yet?
I don’t see that today is a good time to buy. As long as prices are falling, it’s a bad time to buy.August 26, 2006 at 8:32 AM #33370BugsParticipant
As I was saying just a month ago, the passing of July 1 marked the end of the use of yr2005 sales data in appraisal reports. That’s why we are starting to see some really significant discounts in the sales; generally speaking not even a poorly developed appraisal can “justify” a price at the peak any more.
The downhill momentum is picking up and there are no signs that it will slow up or reverse any time soon. There will be plenty of warning when it turns around for those people who are looking for it. Time and patience are on the side of the buyers and are against the sellers.
NARs mantra right now SHOULD be “Now is a great time to sell real estate!!”August 26, 2006 at 9:55 AM #33378
sdrealtor, it’s interesting that you found properties that are close to 30% down already (in this supposedly still stable market). Why would sellers discount their properties so much? Are they investors in trouble?
Also, would that mean that when the stats show 10% down, those properties will down further to 40-50%?
My take from following certain neighborhoods is that we’re already down 10-15%; but since those listed properties have not sold yet, they don’t reflect in the stats.
Are you thinking that the markets is down so much already that it can only turn around and go up, hence the buying opportunities you’re talking about? If one purchased those properties one would be stuck with albatrosses if the market kept on going down, down.
My feeling that one buys now only if one thinks that the market is almost done correcting. That’s the psychology and sentiment that PD and others have talked about.August 26, 2006 at 11:59 AM #33391
What could be 30% down, other than the most undesireable condos?
I am waiting for 30-50% down on SFHs. Even then, I would only buy if the bottom was hit, not if prices were still trending down. The biggest price drops ought to come in 2007 and 2008, as exotic loans reset and lenders tighten their lending guidelines, making it much harder to satisfy any existing demand.
Assume our sales go down to 20,000/year, which is half of 2005 sales (I think). At today’s rates and lending guidelines, any bozo can get a loan for a $1 mil house, so those 20,000 buyers will get their homes.
Now assume lenders want a 700+ FICO score, proof of income, max 28% of income to PITI, and 10% down. Subprime lenders are out of business and MBS investors got burned on bad loans, so that’s the reason for the higher standards. Now: how will those 20,000 potential buyers qualify for these homes? They won’t, so only 10,000 buyers can qualify, futher depressing demand and prices.
The change in lending standards, which has NOT even started yet, is going to drive prices down with a vengeance, IMO. We haven’t even seen the effect of ARM resets and tighter lending yet, nor the effect of buyer fear.
Anybody who thinks this is a good time to buy because we are back at 2005 or 2004 prices, hasn’t thought through all the factors that are going to bring this a lot lower.
Schahrzad BerklandAugust 26, 2006 at 12:07 PM #33393AnonymousGuest
Makes sense, PS. Question is, when do you buy?
1. When prices reach a reasonable price-to-capitalized rent value?
2. At proper time in momentum cycle, i.e., the Robert Campbell, “Timing the Real Estate Market” approach?
Warren Buffett says buy at a 20% discount to capitalized value. Is the ideal approach to keep track of market momentum, and pull the trigger based on momentum if the price is spitting distance to capitalized value?August 26, 2006 at 1:53 PM #33417ChrispyParticipant
PS, you brought up an excellent point. Not only are sellers going to get whacked by decreasing prices for their homes, but what a sinking feeling to have finally found a buyer and then to find out they don’t qualify for a loan!
Or – they do qualify, but they have to pay excessive fees for having “subprime credit” (what was good credit back when is going to look like bad credit soon). I see the potential for a lot of deals falling through for reasons above and beyond price.
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