[powayseller]

I bet John Lundin had 10 houses sold by this time last year, for every 6 he sells this year. That was my point. I know that thousands of homes are still sold every day in California. Just a lot fewer than last year. I’m certain the same holds true for our friend sdr. He may have had some sales this year, but they are likely 35% fewer than last year, so his income is likely down 35% vs. last year. And unless he corrects us, with data, that’s how I see his situation.

Realtors may get a false sense of security by having more listings, as listings have skyrocketed. But listings don’t mean much. It’s the sales that matter. Finding a buyer/seller combination, where the seller is reasonable, is the key, and those are much harder to get. The sellers digging in their heels is keeping sales so low. So any realtor who thinks they will have a good year because they have a lot of For Sale signs is going to have a bad awakening. Days on market and inventory portend a slowdown. Having a listing just adds more work, and doesn’t guarantee a sale at all. Most listings probably expire, as the seller will not accept today’s market price. It’s a very worrisome time to be a realtor now.

Doesn’t zillow or moveup.com have selling prices? It takes a few weeks after closing for the data to be recorded, and then show up on the online databases. Local data show sales price is 95% of list price. The data doesn’t tell us what types of homes actually sold (was the price more realistic, the home more desirable, away from busy streets?).

[powayseller]

Yeah, sdr has been on the forums this morning, but decided to skip answering the question about his closed sales.

I was only asking him to back up his own statement, that he’s having the best year ever. Now we all know it just ain’t so!

[powayseller]

Here’s a graph, showing So Cal home prices and inflation.

For over 100 years, home prices have risen at the rate of inflation. Any deviance from this trend has been reversed.

[powayseller]

I bet everyone who reads these forums hangs on to your every word. You’re very knowledgeable about investing, and I appreciate what you’ve been teaching. I will contact you by e-mail…

[powayseller]

I already put in my 2 cents about Poway. And let me add: Poway has the lowest crime you’ll find anywhere. My neighbor just told me she checked various other cities to move to, and couldn’t find any other place with a low crime rate like Poway, so they decided to stay.

[powayseller]

Well, enlighten me.

How many closed sales have you had this year?

[powayseller]

Sdrealtor, what is the increase in listings and in pendings you have this year to date over last year? How are you able to pull this off, when the media is full of stories of buyer/seller standoffs?

For your listings: how are you able to get sellers to list at a reasonable price? The newspaper is full of seller/buyer standoffs, and I see listings expire frequently, because sellers won’t take offers.

For your buyers: how are you able to qualify them with rising interest rates, and how are you able to convince them to make the high offers the sellers want?

My friend is a realtor, and she talks until she’s blue in the face, makes Excel presentations, shows comps, and yet she faces the same obstacle to sales each time: sellers won’t negotiate and stay stuck on the price they think they deserve.

You wrote recently about an offer your buyer made, and the seller would not accept the price. So there’s a sale that’s on hold until the buyer/seller standoff is resolved. This is the stalemate I just described, and it is affecting all realtors.

The number of transactions in San Diego is down 35% this year over last year. Let’s assume that 10% of realtors get 99% of sales. If sales are down 35%, then the 10% of realtors who get these sales will get 35% fewer sales. There aren’t other realtors to steal sales from, so the decrease can only come out of the pockets of those who were benefitting.

I guess what I’m saying is I don’t believe you’re having the best year ever, and I’m asking you to prove it.

[powayseller]

I don’t really understand if this is a good idea or not, but I am sure that its implementation would benefit PIMCO’s business!

If our interest rates were reduced to zero, who would buy Treasuries? Who would invest in CDs? Who would bother saving?

They do make a good point about the effect of rising interest rates on the account deficit. The interest rate on 12-month Treasuries increased from 1% to 4% in the last 2 years. We have increased by 30% the interest payments on the national debt, to $270 billion! This year it is estimated to be $370 billion! Does anyone else see this as a problem?

Instead of printing money, the government is increasing the money supply by auctioning off huge amounts of Treasuries, which cost us $370 billion to service. There is a huge cost to inflating the money supply.

I also want to note that the Fed doesn’t seem to understand the difference between monetary and price inflation. Adding to the money supply by auctioning off Treasuries causes monetary inflation. Increasing commodity prices cause price inflation. The Fed sees the cost of higher oil working through to prices and raises the interest rates to control inflation. But, higher prices already act to temper spending. Now the consumer is hit with a double whammy: he already cut back on spending because gas is higher, and goods made with copper/gold/oil are more expensive, and then the Fed comes along and raises interest rates to slow capital spending and increase the cost of servicing consumer debt, so he gets a double whammy. Raising interest rates to lessen the effect of rising gas prices is the wrong thing to do. Why doesn’t the Fed distinuish between these 2 types of inflation?

Next, I wonder how the Fed could possibly stop raising rates, when any anticipation of a stop in further hikes is decreasing the value of the dollar already.

[powayseller]

Does anyone have a question I should ask these guys during the Q&A? If I get it answered, I’ll post back.

[powayseller]

So the steeper the fall in the market, the greater the number of payments they can tack onto the purchase price…Interesting.

[powayseller]

Although that seems highly unlikely for any realtor to have their best year in the worst year for real estate in general, I’ll take you at your word.

[powayseller]

His showings, as well as his income, are down 35% from last year, statistically speaking, so he has a lot more free time now. I’m sure some of that free time is spent on marketing and working on a Plan B.

Many of us will need a Plan B as the economy unwinds, and all of us will be affected. It’s just that realtors are at the front end of this. We can’t get smug at someone’s loss of income, and second, we will all be affected by the bear market.

I used to love reading SoCalMtgGuys’ writings. He left the mortgage business a month ago, to do sales in a different industry. Smart move!

[powayseller]

Mike, the realtor in the story, said he would take listings only if the seller agreed to his suggested price. He didn’t want to waste time with an overpriced listing.

It’s only a matter of a few months before this happens in San Diego. The bust is further along in Florida.

I wonder how our friend sdrealtor is adapting to the 30% pay cut? I hope his other businesses are picking up the slack, because realty income is permanently down, for at least 10 years. We all need to adjust, and the sooner we do, the better off we are. In our household, income is dependent on how much the government spends on a certain sector. Within 1-2 years, this will trickle down and affect us adversely. At least we don’t have a mortgage, and cash in the bank. And I can go back to work if I need to.

But these little stories give us insight into larger trends. We need to heed them.

[powayseller]

Well, don’t tell that to my dad. He lived in Germany and Switzerland, and left a job as an executive manager at Sandoz AG in Basel to return to Omaha. He travels all over the world at least a dozen times a year to lecture on his field of expertise, has condos in Aspen and Portugal, and says he will never leave Omaha. My dad has been to every country in the world, even Russia and China during the 80’s, Africa, Italy, etc. He turns down lecturing offers if he doesn’t like the city. For example, regardless of the offer, he won’t go to Washington DC. He only goes to San Diego to see me, because he says this is nothing compared to Portugal’s beaches. He finds La Jolla’s beaches dreadful. Yet he loves Omaha. He loves the small town feel and change of seasons. My husband and I have family who choose to stay in Omaha, so I don’t think we should belittle their tastes. Certainly there are people who choose to live where they do, despite other options.

Anyway, I personally couldn’t wait to leave Omaha. Too cold in the winter, too humid in summer.

That is precisly why I bring Omaha in the mix. A simple Midwestern town, with normal appreciation, no bubble at all. Yet, we see rising foreclosures. Rising inventory. If this can happen in Omaha, it can happen in Ames, Iowa, in Davenport, Iowa, in Timbuktu, Wisconsin. Exotic lending is far reaching, to the most unlikely places. Every town in America is subject to home price drops.

A common rule of etiquette, sdrealtor, is that someone can critique their own race, city of origin, choice of clothing, but doing that to another is considered bad sportsmanship. We need to focus on exchange of ideas and information, and refrain from poking fun, intimidating, insulting. This skill of holding your tongue will work wonders in your personal relationships too. Just some advice from an old married lady..

[powayseller]

Could they really defer the interest on the books, just as they do with the neg-am mortgage? The interest accrues in the first year, and is paid starting in Year 2. This would cause a big jump in payment. Fascinating – the creativity of lenders keeps me laughing. By this summer, they’ll figure out how to sell a $650K home to someone with a $40K income.

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