The NAR is a complete joke…

[GoUSC]

No one ever addresses the gap between income and what it costs to own a home. People CANNOT afford houses. Yes maybe at 1-2% but you will never see home loans at that rate long term. Investors just won’t accept that rate of return. Home values have to come down across the board to get things in balance. Pure and simple.

So frustrating sometimes 🙁

[GoUSC]

No one ever addresses the gap between income and what it costs to own a home. People CANNOT afford houses. Yes maybe at 1-2% but you will never see home loans at that rate long term. Investors just won’t accept that rate of return. Home values have to come down across the board to get things in balance. Pure and simple.

So frustrating sometimes 🙁

[SD Realtor]

Thanks JP I had not read that one. I see what he is saying now. I guess I kind of agree with what you are saying.

HLS – NAR may get it, but will never fess up to it. They cannot ever never ever admit it will be a bad time to buy or to sell real estate.

SD Realtor

[SD Realtor]

Thanks JP I had not read that one. I see what he is saying now. I guess I kind of agree with what you are saying.

HLS – NAR may get it, but will never fess up to it. They cannot ever never ever admit it will be a bad time to buy or to sell real estate.

SD Realtor

[HLS]

Affordability gap..
This makes sense to only the logical.
Beach property, San Fran Bay area, New York City, have markets that have sustained gaps that don’t pencil out either.

In the same way that many stocks don’t support the valuations that they are at, it’s a combination of I don’t care what it costs, I want what I want combined with the ignorance factor that will support markets forever.

Personally, I wouldn’t have bought a $300K house that rented for $1500 in 2003, but people who did saw gains of 100% in equity, with a minor increase in rental income.
They didn’t know that the increase was going to take place, but they gambled and won.

Those who bought in 2005-06 gambled and lost, at least for the time being.

I agree with you, but the balance that we want may never happen again.
When the market does finally bottom, we won’t know it until well after, but there is absolutely no reason for a bounce at that level.

So many people will have a bad taste and have ruined credit they won’t be looking to buy back in. After a few years, newbies enter the market with visions and rose colored glasses, and the cycle starts over again with new players.

Many people who got burned in the dot com crash and swore “never again” are have been back in the stock market for the last few years.
They certainly didn’t forget. Is there an explanation ?

It’s just human nature, controlled by fear and greed.

[HLS]

Affordability gap..
This makes sense to only the logical.
Beach property, San Fran Bay area, New York City, have markets that have sustained gaps that don’t pencil out either.

In the same way that many stocks don’t support the valuations that they are at, it’s a combination of I don’t care what it costs, I want what I want combined with the ignorance factor that will support markets forever.

Personally, I wouldn’t have bought a $300K house that rented for $1500 in 2003, but people who did saw gains of 100% in equity, with a minor increase in rental income.
They didn’t know that the increase was going to take place, but they gambled and won.

Those who bought in 2005-06 gambled and lost, at least for the time being.

I agree with you, but the balance that we want may never happen again.
When the market does finally bottom, we won’t know it until well after, but there is absolutely no reason for a bounce at that level.

So many people will have a bad taste and have ruined credit they won’t be looking to buy back in. After a few years, newbies enter the market with visions and rose colored glasses, and the cycle starts over again with new players.

Many people who got burned in the dot com crash and swore “never again” are have been back in the stock market for the last few years.
They certainly didn’t forget. Is there an explanation ?

It’s just human nature, controlled by fear and greed.

[GoUSC]

HLS I agree with you 100%. When I see people here state they will buy when the cost to rent is the same as the cost to buy I just chuckle under my breath knowing that will never happen. However, and it’s a big however, the gap is so bad in places like San Diego. You have what 5% affordability today? I think a more acceptable number is 30-40% percent… I wish there was less discussion on where prices are and have been and more on the underlying fundamental economics. Aka houses cost this much, assuming a 10% down payment would have a mortgage payment of this much, the average household makes this much per month. No one has explained to me why that isn’t the underlying force behind falling prices.

[GoUSC]

HLS I agree with you 100%. When I see people here state they will buy when the cost to rent is the same as the cost to buy I just chuckle under my breath knowing that will never happen. However, and it’s a big however, the gap is so bad in places like San Diego. You have what 5% affordability today? I think a more acceptable number is 30-40% percent… I wish there was less discussion on where prices are and have been and more on the underlying fundamental economics. Aka houses cost this much, assuming a 10% down payment would have a mortgage payment of this much, the average household makes this much per month. No one has explained to me why that isn’t the underlying force behind falling prices.

[sdrealtor]

radelow
Its really quite simple. You cant compare average prices to the the average household. The average household isnt buying the average house around here. Heck they probably arent (or shouldnt be) buying anything.

We have between 50 and 60% of households in homes they own, at least figuratively. Many of these are long time owners with homes purchased a couple bubbles ago. Most of them arent going anywhere short of a pine box. The new homebuyers to the area probably dont start until the 75th percentile.

The most powerful forces at play are supply and demand. Supply of homeowners willing/able/interested in selling is relatively low to what the real demand is for homeownership. Much of that real demand exists only at lower prices. As prices creep down demand inches up.

[sdrealtor]

radelow
Its really quite simple. You cant compare average prices to the the average household. The average household isnt buying the average house around here. Heck they probably arent (or shouldnt be) buying anything.

We have between 50 and 60% of households in homes they own, at least figuratively. Many of these are long time owners with homes purchased a couple bubbles ago. Most of them arent going anywhere short of a pine box. The new homebuyers to the area probably dont start until the 75th percentile.

The most powerful forces at play are supply and demand. Supply of homeowners willing/able/interested in selling is relatively low to what the real demand is for homeownership. Much of that real demand exists only at lower prices. As prices creep down demand inches up.

[Arraya]

I disagree that we will never see prices fall to the point where we can buy for the same price we can rent.

Now I am probably a good bit younger than most on this board and have not wittnessed the past RE cycles. However from what I have seen at the bottom of the past to cycles it breached that point both times. First, around 85-86 and second around 96. So why could it not happen again?

http://www.irvinehousingblog.com/2007/03/06/what-is-past-is-prologue/

Obviously not in the more desirable areas but it the moderate and lower income areas I see it not too far off now.

IMO affordibility is the biggest factor in behind falling prices, not the only one economy, suppy of easy money etc… But I think even with all the other stuff people are saying “This is crazy, I am not paying that, I am not going to be strapped to my mortgage just to be in the homeowners club”

When all is said and done the freemarket will decide where prices should be and where that is, is a guess. I’m banking on them being close to rental range. We will see…

[Arraya]

I disagree that we will never see prices fall to the point where we can buy for the same price we can rent.

Now I am probably a good bit younger than most on this board and have not wittnessed the past RE cycles. However from what I have seen at the bottom of the past to cycles it breached that point both times. First, around 85-86 and second around 96. So why could it not happen again?

http://www.irvinehousingblog.com/2007/03/06/what-is-past-is-prologue/

Obviously not in the more desirable areas but it the moderate and lower income areas I see it not too far off now.

IMO affordibility is the biggest factor in behind falling prices, not the only one economy, suppy of easy money etc… But I think even with all the other stuff people are saying “This is crazy, I am not paying that, I am not going to be strapped to my mortgage just to be in the homeowners club”

When all is said and done the freemarket will decide where prices should be and where that is, is a guess. I’m banking on them being close to rental range. We will see…

[sdrealtor]

FYI, for my house to get back to rental range it would have to get down to the purchase price a decade ago net of installing landscaping, appliances, window treatments etc and rates would have to be around 5.5% and you would need to put down more than 25%.

Good luck on that one.

[sdrealtor]

FYI, for my house to get back to rental range it would have to get down to the purchase price a decade ago net of installing landscaping, appliances, window treatments etc and rates would have to be around 5.5% and you would need to put down more than 25%.

Good luck on that one.

[Bugs]

I believe what you meant to say is that the EFFECTIVE demand creeps up. As the prices come down, a larger percentage of the population can afford to satisfy their desire to buy. I wouldn’t expect this region to ever get to 40% affordability, but there’s no reason it can’t get to 30% or more. Especially when considering that nationwide it’s usually over 60%.

—————

The NAR position that buyer psychology is the problem is hilarious. I never heard them complain about the psychology when they were feverishly stoking it to run the prices up. Buyer psychology IS one of the economic fundamentals. It built this house of cards in the first place and as it reverses it will dismantle that house just as quickly.

A couple of you guys are flirting with making the same mistake I made back in the 1990s. I thought then that enough people had gotten burned badly enough by the last bust that they’d remember their lesson and refrain from doing it again. Now I know better. Individuals may be smart, but PEOPLE are as dumb as a bag of rocks and have a memory span that’s only half as long.

It’ll happen again. The question is when will it happen and how bad will it be next time.

[Author]

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