Masses believe market will rebound, sales flat

[no_such_reality]

sdrealtor has it right, the median is really useless lately. The OCregistor is hubbubing the flat appreciation in median, but has been too stupid to look at the fact that the only reason the number is and hasn’t been negative was because new home sales price tags continued to increase even when others stalled and started to pull back.

As for waiting in the wings, I’ll enter when it’s cheaper than renting. I won’t wait for bottom, the deals are long before bottom. Before the house can be worn, before “bottom” which is an inflation adjusted measure takes a few years of flat nominal into the bottom of the bowl.

I don’t want a median house, the median house is POS. It’s a vapor number that drops in somewhere between a nice condo and a crappy SFR.

[PerryChase]

What wrong with renting a house even for 10 years or more? My friend in renting a beautiful condo Downtown with sweeping 180 degrees views. His rent is 1/2 the carrying cost of the same condo. What’s so terrible with saving money?

To me, renting a house is the same as leasing a car. Choose the best deal for you.

[Steve Beebo]

Renting for 10 years and saving lots of money sounds like a great idea, but I would guess that most people that rent aren’t putting money away, they’re renting because they aren’t able to buy. If someone is renting and saving the difference, though, more power to them.

When I’m 60 or 65 years old, I would rather live in my house that’s paid off than to be paying rent, or being in year #5 of my 30 year suicide loan.

[FormerOwner]

You’ll get priced out of the market if you keep renting, fool. Ha ha ha ha! Over the years, I’ve bought and sold a few houses and rented as well. I’ve always thought that once people start ranting about being “priced out of the market” it’s best to stay out of the market. There’s nothing wrong with renting, people. And there’s nothing wrong with buying, either, as long as the economics of the buy pencil out (which they probably didn’t for most people that bought in the last few years).

[PerryChase]

Steve Beebo, I still don’t get your logic.

You can rent beautiful condo downtown for $3000/mo or buy it for $6000/mo (interest only loan + taxes + HOA, net of tax savings).

Even if you don’t save the difference, if you rent, you have $3000/mo to indulge yourself, go on vacation, buy a nice car, have a nice life.

I think that in this case, the renter is clearly ahead of the buyer.

[Steve Beebo]

Perry – in the short term, I would agree with you. Maybe in the long term for some people that really do save and invest the difference. But the savings rate is so low for the country as a whole, that I don’t think that most people in that situation really would save it all and invest it wisely.

[mixxalot]

I rent a 1 bedroom placed for 1100/month and a similar condo would cost me close to 3k per month. I take the difference and invest in various funds until market comes down to reality. Maybe in a few years I might buy a place but for now its best to wait for the market correction to finish.

[SD Realtor]

Steve –

I can point you to several condo sales (or lack thereof) that are in the 20% depreciation from the peak. The depreciation is regional.

[sdrealtor]

In the last couple years I’ve been on the listing side far more often than not. My clients that are buying understand the risks and I clearly state what I belive will happen. The client that I have who are buying fall into two categories. They are very high end clients looking at very special properties/locations for whom time and enjoyment are more valuable than money. The second category is clients that will move up when and if they sell their current home. I cant see many other situations where I’d work with a buyer this year.

[Steve Beebo]

sdr –

If, as I think you believe, that the major price decreases for typical homes are still to occur, I really don’t see how in good conscience you can let any of your non “very high end clients” trade up at all. I can see you having them trade down to a lesser-priced home, or having them sell their properties and renting for a few years. But if they trade up, then in your mind aren’t you dooming them to lose more money?

If they own a $500,000 property that declines 20% they lose $100,000, but in an $800,000 home they could lose $160,000. Where are the morals and ethics, and what about the fiduciary duty to your clients?

[no_such_reality]

Where are the morals and ethics, and what about the fiduciary duty to your clients?

Time is money.

Family situations don’t wait for a bottom. Nor do interest rates.

Hypothetically, let’s say I bought a home a few years ago for $400,000, and today, after some discounting, can get it sold for $600,000. I want a $800,000 house that the family has been eyeing and can make it happen. I have the 20% down and can still afford the $4500/month PITI.

Instead I wait for the bottom or at least, the 20% drop you mention, if interest rates go up 1% from 6% to 7%, I pay more per month for the same house.

[PerryChase]

Let’s not carried away with fiduciary duty. Realtor’s job is to find what the buyers want to buy at a fair prices AT THE TIME OF PURCHASE. It’s not Realtor’s responsibility to predict the future. The future is uncertain, predicting it is pure speculation.

[an]

NSR, how do you come up with paying more if it drop 20% and interest increase 1%. Here’s the # I came up with:
$800k @ 6% w/20% down = $3837.12/month (PI)
$640k @ 7% w/20% down = $3406.35/month (PI)
$640k @ 8% w/20% down = $3756.87/month (PI)
$640k @ 8.23% w/ 20% down = $3839.29/month (PI)

So rates would have to go up 2.23% from 6%, which is a 37% jump in order for your payment to be higher when waiting compare to not waiting. Then there’s the $32k difference in down payment that either you can invest and make more $ or put that into the down payment. If you put that into the down payment:

$640k @ 9% w/$160k down = $3862.19/month (PI)
Which means rates would have to jump 50% from 6% in order for it to be more economical to buy now.

[no_such_reality]

AN, simple, if you don’t sell the place today and move into a rental, your $160K down which is profit from the sale today, vaporizes. If you wait to sell after the slide, and you only have enough after commission for less than 10% down. So by waiting to sell, you have to finance $590K of the buy. That means 80% first, and a second for about $76K.

So $600K – comission(36K) – purchase price (400K) = $164K investable.

Waiting: $600K – 20% slide ($120K) – commission ($29K) – purchase price ($400K) = $51K investable.

Buying the $800K after the 20% slide at $640K with $51K down = $589K in loans. = 80% first (512K) and a second of ($77K).

$512k @ 7% = $3406.35/month (PI)
$77k second @ 7% = $512.28/month (PI)
Total = $3918 plus PMI on second. That’s probably low since a second will run more. If you finance 90% LTV straight up, with probably run a point above prevailing rate making it 8% which would push the PI to $4300/month.

Versus $800k @ 6% w/20% down = $3837.12/month (PI) today.

No moving, no hassles, just the need to be able to make the payments.

[SD Realtor]

So nsr the optimal way to handle it is to sell today and wait to buy. It would not be fair to doc the seller the cost of renting the home he would live in for a few years as long as his rent was not appreciably larger then his current mortgage.

I also service mainly sellers but also a few buyers as well. I always tell them my opinion with how I feel the market will perform in both the short term and the long run. I work for them and they benefit from my experience and expertise. If they still want a home to live in or rent out after I give them my opinions then it is my duty to find them a home. As much as I try to make sure they can afford the home, that they have a good mortgage that will not drown them in the future, it is ultimately thier own choice.

I had some clients just this spring/summer who wanted to buy in Eastlake. We looked at places for months and months and I tried to tone down thier tastes to a more affordable level then what they wanted. I knew thier income and I knew what they could afford… We lowballed people on 4 different offers over 8 weeks. I went to thier credit union with them, recommended a host of different mortgage brokers… on and on and on… So I don’t hear from them for a week after talking with them almost daily for like 2 months…. Turns out they scorched me and went to an open house and worked directly with the listing agent….They bought a home at full price after it was on the market for only a few days!!! Hey getting scorched is part of my job right? The point is that I was looking out for thier best interest even to the point of possibly being to much of a financial nag to them… So they call me last week saying they need to sell cuz they are to stressed out on thier payments…

What can you do…

[Author]

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