[an]

To a certain extent, I agree. But please tell, have you ever seen a market that does not over shoot or undershoot? Also, tell me how much more than rent do you think is enough? Of course i’m not saying it should be exactly the same. I would personally pay about 100-200/month more. But 20% drop would still mean at lease $1000/month more. In that case, no thanks, I’ll put that $1000/month to my retirement and retire early rather than buying my house.

[an]

That’s a little contradicting, don’t you think? Even if rates doesn’t go up, in order for the price to reverse back to where things made a bit more sense, it would have to drop by at least 30-40%. I use rent cost and income to be consider where payment make sense.I can rent a 550k house for $1800. So, even if rent go up to $2k, and rates stay the say, in order for mortgage payment to be anywhere near $2.5k, price would hav to drop under $400k. That’s more than 40% to my calculation.

[an]

Of course less new homes will help resale homes. Unless the builder expect demand to drop 25% in 2007, when these houses will come online. Then there would be 0 effect to the resale market. If the demand drop more than 25% and the new homes undercut resale homes in price, which they can very easily, then it would still hurt resale homes. But we don’t know what will happen until 2007 when it happens. But I’m sure those builder have a much better insight in the market than you or I.

[an]

You give all realtors too much credit. Most of the homes for sale right now are represented by a realtor. I see houses represented by realtors who “rot on the shelves” for over 6 months. If you mean realistic seller with the help of a good realtor, then I agree. But realistic seller and bad realtor or unrealistic seller and any realtor won’t resort to a fast sell. In this environment, it would “rot on the shelves”.

Why would there be no Realtor? You have people who need to sell and people who need to buy, realtor connect those two people and take care all of the paper works and putting data into the MLS. But the MLS is very lacking the way it is and should be free to the public with much more data open to the public, which the Realtor already have. I’m surprise Google or Yahoo hasn’t created something much better and free.

[an]

I don’t think being young have anything to do with it. I’m 25, but I find myself explaining why there is a bubble to people much older than me. I see people who completely forgot about the last down turn. I think it has alot more to do with mindset than age.

One way for people to see there is a bubble, if they want to see it, is to just simply compare mortgage payment to rent. That alone will tell you price is not right. Why buy a 600k house when you can rent it for 2k/month while mortgage payment for an interest only loan is much higher than that. But the problem is, most people don’t want to see it. I talked some people buying recently but there are also other people that, even after I gave them reasons there is a bubble, they still buy anyways.

[an]

That make sense. However, if you take a look at these house on this street, you’ll noticed they’re probably the exactly same sq-ft lot +/- couple of sq-ft. Also, since all 3 have an odd # for the address, all three have the same view. So, both of those factors shouldn’t affect the price in this case. You can use Zillow to see what I’m talking about. I just checked all the house on the street, and basically, the house i posted about and the house that was sold last year is right next to each other.

[an]

How about this one, which is even bigger:
1xxx3 Manassas St, San Diego, CA 92127
Bedrooms: 3
Baths: 3
Sq ft: 2,043
current asking: $599,900 – $629,000
listing date: 04/12/05

[an]

That’s a possibility but I don’t think that’s what happening. I’ve been tracking houses around this price range (400k-600k) for over a year now. Listing price this year is at least 5-10% less than last years. Also, the sp/lp ratio is much lower this year than last year as well. That’s why I couldn’t figure out why the median/average price is moving up although my data is saying otherwise. After I read his analysis, it makes perfect sense.

[an]

I agree. I wait for his post every month. It’s very insightful. It helps explain why median price keep on going up even though you see price reduction everyday.

[an]

No sophisticated investor would want to lose any money if he/she can help it. So, either you’re extremely wealthy and don’t mind losing several hundred grand. In that case, why are you looking at these relatively “cheap” places instead of getting a custome built home in Rancho Santa Fe? Something just doesn’t add up. Last I check, wealthy people don’t waste their time posting on web forums.

[an]

Even if rates doesn’t go down, buying at a low price high rate is a better choice, because, you can deduct more of your monthly payment since a larger of your monthly payment is interest. Also, any additional payment you make will make a larger dent in the total loan with a high rate/low price case.

[an]

I agree that there are risks. You have to know what you’re doing when buying foreclosures, or else, you’ll be caught holding the bag. But you can find deals out there, such as preforeclosure and such. Also, not everyone can buy foreclosure, you need the cash on hand to buy those. So the demand is limited. Especially, in a down market, there would be even less people bidding. The pro who bid will probably take the market condition into consideration and bid accordingly. So foreclosure auction might not be a good deal in a up market, in a down market, you might be able to to find better deals.

[an]

I think there’s still money to be made even on a falling market if the deal was right. Imagine, if you can buy a foreclosed house for 30-40% under market, then turn back and sell it at 5-15% less than market, you house will probably get sold pretty quickly.

[an]

This is very true, median price is what people are paying for the homes. People tend to have a tight price range of how much they want to spend on a home, especially move up buyers. With this in mind, even if price fall people will still buy that 500k house if they set out to buy a 500k house, except now, they can probably get more house for 500k than a year ago. Which is why the median price is still ticking upward ever so slightly.

[an]

I agree with you completely. I’ve been reading his commentary too. It’s very insightful. I will definitely use him when the time comes. It’s quite annoying when real estate agents try to use the standard rosey arguements to buy now.

[Author]

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