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ParticipantI always get that one wrong too.
ParticipantIt took me a long time to really understand that market psychology is one of the fundamentals in the RE markets. It’s a mistake to focus on the numbers to the exclusion of human emotion. I’ve made that mistake in the past and I’d like to think I’ve learned my lesson from it.
I would argue that the expectation of price increases existed before the easy credit. It migrated from the stock market into the RE market, and now the RE is over it’s migrating over to commodities and stocks again. It’s a demand to get rich quick in search of an asset class to ride and a mechanism to ride it.
In my opinion, the easy credit acted like oxygen to a fire, enabling what would otherwise have been a flare-up to rage out of control. That’s why (I think) the availability of the same credit terms everywhere in the nation has had varying effects.
ParticipantThose are some HEAVY losses considering the time periods involved.
BTW, if the “it’s not a total loss because of rent” line comes up again you might point out that a low interest loan throws off a lower tax writeoff; the market rents are only about 1/2 – if that – of what the mortgage + tax + insurance + HOA fees are. That 50% of the mortgage times 24 months equals an entire year’s worth of payments included in the loss, and that’s if the unit really was rented the entire time. Some of those losses could add up to be 75% more than just the difference between the sale prices.
ParticipantI’ve got a ton of stuff to do today so I’ll make this quick. I don’t know what the future holds. I’m looking at the information at hand and trying to extrapolate it into the future. I fully agree with you that based on what has happened in the past and what’s happening now I THINK we’re headed for a huge decline. But I have been wrong before and I can be wrong again.
My problem with saying things WILL happen in the future is that there are variables that nobody can know. What if oil goes through the roof and the downtown condos do better than everywhere else because of their proximity to employment? What happens if the dollar takes such a beating that inflation corrects the wage/price imbalance? What happens if long term interest rates don’t go up like we think they should? What if there’s some new tax break that comes about to promote RE investment positions?
Granted, the idea that any of these scenarios could be of such effect on the local market as to enable the prices to remain strong or rally is far-fetched, but what rational person could have guessed in 2003 that the interest rates and the markets would have done what they did in fact do? I was wrong about that back then and I need to be honest and not forget that as an example that I can be wrong about this, too.
I’ll give you one more example before I split. When I was realtively new to my current occupation I thought I was so good. I had learned enough to develop a rythym and it was working for me. I could look at a problem and instantly develop my opinion. I saw everything in terms of black-white. But as time wore on and I saw more examples of the exception to the rule, more complicated problems, and ran into situations that had more variables, I came to realize there is no black and there is no white; it’s all shades of gray. I especially learned that people do not always act rationally nor are they often well informed. Now I have a hard time ever being judgemental enough to commit to a single course of action until I’m at the very end of my process. Prior to that it’s all subject to additional information and consideration. Some people would call that weakness and maybe it is, but I like to think of it as keeping an open mind.
ParticipantIt takes a tremendous amount of confidence to actually put into practice an opinion involving the declining value of your own home prior to it actually happening – not many people can get to that point. It takes even more confidence to tell other people to do the same and mean it.
The problem with giving people advice on how to act is that sometimes they take it. Now if the advice turns out to be good that can be a good thing for them and for the relationship. If, for some reason, that advice turns out to be bad the results can be bad for both the advisee and the relationship.
There are enough variables involved in this particular problem that it’s hard justify this level of involvement in someone else’s life. Just the timing alone is enough of a variable that it can make the difference in this case. What if the market experiences a nice rally right as the project is completed and it turns out there is a profit in there for those people who stuck with it?
In your shoes – not that I’m advising you to do this 🙂 – I’d express my opinion about the long term trend, explain why I hold those opinions, and then wish them well on whatever decision they make.
This person is apparently thinking the currently soft trend will rebound and increase during the two years or so that it takes to close escrow on this unit. There are a lot of people who share that view thanks to the NAR PR machine. That’s your competition in this.
ParticipantYou got me there.
ParticipantOne isolated sale shouldn’t have any impact on buyer expectations. Now when buyers start seeing several of them they get to thinking that these might come up often enough to present a reasonable alternative to paying full price. If/when that happens the entire pricing structure for the neighborhood will be in decline and those listings will be leading the race for the bottom.
ParticipantI don’t think you have anything to lose by just hanging out. It’s a distant possibility that the process will take long enough that your lease will end before the bank takes the property back. It’s also possible that the bank would allow you to remain in the house (paying your rent to them) until your lease runs out. Having a tenant who’s paying rent virtually ensures they won’t get the house back in shell condition by the time they foreclose.
A property manager would not normally be privy to a homeowner’s solvency. I wouldn’t assume they were acting in bad faith unless you come across information to the contrary.
ParticipantI probably didn’t communicate my previous post too well. I’m not saying I am buying everything they’re selling but I also won’t dismiss it all out of hand just because I disagree with some of the things they’re saying. I don’t need to agree with everything they say in order to take advantage of a point or two they bring up that makes some sense.
Let me explain it like this: When I start researching data for an assignment I often start developing my opinion of value for the property I’m appraising before I even see it. However, that opinion is subject to change right up until the moment I sign it as I send it out the door. Until that point, I am constantly in search of additional information from any credible source. While much of the additional information is worthless every once in a while something good pops out. I don’t want to get caught missing out on that just because it doesn’t jibe with my initial impressions.
ParticipantI can’t figure out how a 28% decline in sales transactions translates into a doubling (or more) of available listings. Marketing times would have to quadruple in order for it to stack up that much.
ParticipantI disagree. I think the past indicates to the future. Not all areas of the nation have gone up enough to need correction. There will continue to be a baseline relationship between local income levels and the pricing of housing for that locale. The areas that will adjust the most will be the areas that got distorted the most. It’s possible the metro markets have distorted enough to affect the nationwide average enough to show a net loss but I kinda doubt it. Short of the multi-faceted economic Armegeddon some people are forecasting I’m just not seeing a collapse in pricing for the entire nation.
That said, I still think SD County is in for a huge correction, but I also think nobody can know the future.
ParticipantOff-topic: Once again I would suggest that now would be a good time to retreat to our respective corners and not come out unless we have something relevant to the topic of the thread. I don’t care if SDRealtor is a 14-year old computer hacker from the Ukraine – it is the material that’s important, not the individual.
On-Topic: The UCLA Anderson Forecast has a pretty good track record and because I think the past is relevant to the future I would not dismiss their views out of hand even if I do disagree with some of the things they say. I mostly agree with SDRealtor’s comments about emotion being one of the fundamentals in the RESIDENTIAL market, although I don’t think it applies in most of the non-res markets. Residential properties fulfil emotional needs as well as functional needs, so any buy-sell decision will involve a certain amount of emotion. I think market psychology fits into that category, too.
I’ve made the mistake in the past of expecting the residential markets to behave rationally and I’ve had the experience of having to eat crow for that mistake. I hope to learn from my mistakes so I’m trying hard to not make that one again, and I recommend everyone else do the same. Don’t fall into the trap of thinking it’s solely about dollars and cents with most of these buyers because that would be giving them way too much credit. The herd instinct is alive and well in the markets and it would be wise to never lose sight of that.
ParticipantI’m an appraiser. Appraisers are known to be anti-social so I’m not coming.
Just kidding. I’ll make it a point to be there at the appointed hour so long as I’m not teaching a class.
ParticipantOffhand I’d say this would be a good time to go to our respective corners and not come back out until we have something of substance to add.
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