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January 26, 2007 at 3:36 PM in reply to: Loan Advertised on KFI – Pay $20 per month per $100k borrowed #44262
bigmoneysalsa
ParticipantPeople shouldn’t have to worry about deceptive loans. Getting a home loan should be as easy as ordering a pizza. The nice man on the radio said so!
January 25, 2007 at 10:48 PM in reply to: only the number of housing units sold in 2004/05 will impact the pricing? #44227ParticipantIMHO you are absolutely right that the current NOD/Foreclosure trends are important and will help speed the declines. But I don’t think it’s fair to say that they are “causing” the declines, because the declines would eventually happen (albeit more slowly) even if foreclosures did not trend up higher than normal and sales in 04/05 were not higher than normal.
January 25, 2007 at 10:36 PM in reply to: only the number of housing units sold in 2004/05 will impact the pricing? #44225Participantnestingcouple,
Your statements don’t really make any economic sense at all. What is your argument exactly? Homes go up for sale for all sorts of reasons having nothing to do with foreclosure: new homes, people moving, divorce, death, etc, etc. Yes, there will be a disproportionately large number from 04/05, but they will still be dwarfed by all the older homes on the market for “normal” reasons.
The prices of homes, like those of any other good, are set by marginal demand. The people you know who bought pre-2003 and are comfortable are not in the market and thus will not affect the price.
Over the last few years the marginal buyer has been willing (speculative mania) and able (exotic mortgages) to pay a lot more than made sense, so prices got bid up a lot higher than made sense. As these reasons go away, so too will the unusually high prices. Sure, foreclosures of people who bought during the bubble years will help speed things along by adding inventory, but they are not necessary for the process to happen.
And besides, I think that 04/05/06 were the 3 biggest sales years ever. I am certain 04/05 were disproportionately quite large, at least. So even if what you said made sense then we should expect large declines.
ParticipantPast appreciation rates are not going to be helpful even if you find good data. To answer your question, no, you most definitely CANNOT simply carry thouse appreciation rates forward. Past performance is no guarantee of future results. If you have been reading this blog for months then you know that the wrong idea that past appreciation rates will continue indefinitely was a big source of fuel for the housing bubble.
If you want to stay in SD, why would you leave? IMHO life is too short to live somewhere you like less just to save a few bucks. Decide where you want to live first, then decide whether to rent or buy.
ParticipantSeriously bob007, lendingbubbleco is right. That was a pretty asinine thing to say.
Gold is more expensive than silver. Why? Any number of reasons. It’s rarer, it makes better jewelry, it has more industrial applications, whatever. If both gold and silver are temporarily overvalued by 50%, then they are both going to fall in value by 50% when the market returns to normal. The fact that gold is better than silver has absolutely NO RELEVANCE to the price of gold. All that matters is gold’s intrinsic value.
Participantcashman,
You have to look at the interest that the money you would spend on the house would be earning. Run the numbers. Even after taxes, I think the interest on the amount of money it would take to buy a house that rents for $2700/month is going to earn at least $100K in four years. So, you are not really spending $130K to wait, you are spending about $30K to wait. Trust me, a house that sells for $700K now is goint to sell for a lot less than $670K 4 years from now.ParticipantReal estate prices may not beat inflation over time, but real estate as an overall investment probably does once you figure in rents. Even in today’s grossly overpriced market, few homes are selling at more than 25 times yearly rent, meaning that they have a “rental dividend” of at least 4%. So the long-run average is probably closer to 6-7%. In comparison, I think the average S&P500 stock pays a dividend of around 2%. Plus if the real-estate is owner occupied, that dividend is tax free.
ParticipantAh, OK. I just got your point too. 15% off TODAY’S median price is indeed a total joke for where a starter home should be. Should be more like 60% off in my opinion.
ParticipantI’m confused. If the realtors used 33% instead of 15%, then their affordability index would go up (affordability is higher). Since you think their index is already too high (I agree, btw) then using 33% would make it even higher and more misleading.
15% may not be right on, but I think it was based on some sort of research. If they had just picked a number out of thin air they could have picked a larger number and made their numbers look better. In any case you have given no evidence or argument as to why it is wrong.
ParticipantHonestly I kind of like the California Association of Realtors definition that they use for their (otherwise bogus) affordability index. It assumes that a starter home is 15 percent cheaper than the median-priced house. Sounds about right to me. Also has the nice feature of working in any market with any mixture of housing types. Why argue about neighboorhoods and square feet when we can let the invisible hand work it out.
ParticipantThe phrase “buyers market” actually does have a well-established definition in econ-speak. It basically means that buyers are in control of the transactions that happen. And by that definition, we are definitely in one right now. So technically the REIC is right about that. Of course, a buyers market does not mean it is a good time to buy, by omitting that important detail they are trying to lead people astray.
ParticipantDon’t call it that.
Seriously though, another major thing that Orange County has working against it is the real estate job market. New Century, Option One, Ameriquest, First American, are all headquartered here. I work here in Irvine and as you drive around it seems like two thirds of the offices hold real estate related companies of some sort. A lot of good paying jobs are about to go away. I actually am looking forward to renegotiating my lease later this year.
ParticipantI think that what’s being missed in this discussion is that it’s just not possible to reason our way to a conclusion about the relative worth of different places. You can talk about “glamour city” status, weather, jobs, culture, zoning laws, etc until you are blue in the face; only the invisible hand has the power to track ALL the relevant factors in play. And the best way to see what the invisible hand has to say is by looking at rents. Have rents gone up in So-Cal at a faster rate percentage-wise in recent years than the rest of the US? I don’t know the answer, but I doubt it. In any case I think this is really the only way to answer the question.
ParticipantA lot of people here and on Ben’s blog have been complaining about the phrase “buyer’s market.” I have to respectfully disagree; in economics-speak “buyer’s market” is really a perfect description of what we are seeing.
From AmosWEB, an online economics encyclopedia:
“A disequilibrium condition in a competitive market that has a surplus or excess supply. Because the quantity supplied is greater than the quantity demanded, buyers have the “upper hand” when negotiating. A market surplus also goes by the more common term of buyers’ market. The alternative to a buyers’ market is a sellers’ market, which has a shortage or excess demand. A buyers’ market exists because the quantity supplied by the sellers exceeds the quantity demanded by the buyers… at a given market price. In this situation, sellers are seeking to sell more of the good than buyers are willing to buy, hence buyers can pick and choose the goods purchased from the sellers. Sellers are lucky to find someone willing and able to purchase their good.”
Sure sounds familiar to me…. Note that buyer’s market DOES NOT mean good time to buy, nor seller’s market mean good time to sell.
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