‘People Lost Track As To What Is Normal’ In Maryland
The Gazette.net reports from Maryland. “It’s a lesson being learned by potential sellers all over Montgomery County. Margaret Carty figured her 5,000-square-foot home would sell quickly and profitably when it went on the market in April. But it took almost five months before Carty agreed to the first offer they received at $100,000 less than the original asking price.”
“‘Be reasonable about it,’ Carty advised would-be home sellers. ‘If you want to sell it fast, sell it low.’”
“The total number of homes listed for sale in July was one-and-a-half times more than in July 2005. For the same period, the number of settlements fell by more than a fifth. ‘A lot of people lost track as to what is normal,’ said Stephen Fuller, at George Mason University.”
“While real estate agents knew the housing market is cyclical and could not continue at the same rate, said said Frank Valentino, of Coldwell Banker Residential Mortgage, predictions of a burst housing bubble became a self-fulfilling prophecy for many potential homeowners.”
“‘The psychology of the purchaser has been somewhat negative,’ he said. ‘The market is a great deal of perception. People are saying, ‘Our decision is to not make a decision.’”
“At the same time consumer confidence was falling, a glut of houses became available. Fuller attributed it to investors panicking over the predicted burst in the housing bubble and getting out of the housing market. Said Fuller: ‘Shoppers are being more careful with what they buy. People are not going to spend more than $1 million for a house when they can spend $750,000 for an adequate replacement.’”
The Daily Times. “The real estate market currently favors buyers, according to local real estate agents. Interest rates have forced property prices down, causing owners to take a more realistic approach to the market.”
“‘The market now is back to a normal market, whereas the last few years it was high,’ said associate broker Claire McLaughlin. ‘It’s a little more in favor of buyers.’”
“To sellers who are really looking to make a large profit, it may seem like a bad time to sell, but this is where agents are saying sellers should change their perception. ‘The home seller is probably realizing the big boom of large increases is momentarily not here, it’s a little bit more realistic at this time,’ said Realtor Rosie Beauclair.”
“Beauclair said for a while the market in the area was getting out of hand. ‘It was getting a little over-inflated,’ she said. ‘Sellers have to realize we can’t sell at yesterday’s prices,’ she said. ‘That’s the way it is, I think once the sellers understand that and they’re not just out there to make a lot of money, they’re ready to be realistic about it.’”
The Globe and Mail. “Real estate agent Andrea Gaus knew the market was out of whack when the price of a typical four-bedroom house near good schools in the leafy Maryland suburbs outside Washington shot past the $1 million mark. ‘It got to the point where appreciation was so high that it priced people out of the market,’ Gaus said.”
“Increasingly nervous home sellers are slashing prices to get rid of properties before their value sinks even further. One buyer recently threatened to walk away from a signed contract on a $1.6 million house unless the seller took $100,000 off the price to reflect the drop in value since the deal was struck. The seller quickly buckled, fearing the house might be worth even less if put back on the market today.”
‘”Look how fast prices were going up. The same thing is happening on the way down,’ observed Gaus, who’s been selling homes in the Washington area for 16 years. ‘It’s a very tough market.’”
‘It was getting a little over-inflated,’ she said. ‘Sellers have to realize we can’t sell at yesterday’s prices,’ she said. ‘That’s the way it is, I think once the sellers understand that and they’re not just out there to make a lot of money, they’re ready to be realistic about it.’”
A little over-inflated? Ready to be realistic? Kind of like the tech stock speculators who were willing to admit that NASDAQ at 5000 was a bit high and 4000 was a more realistic level? Who’s going to buy at $1 million when, shucks, you really don’t need to pay more than 750K? Who’s going to buy Cisco at 250 when, shucks, it probably ain’t worth no more than 200?
- 1 Margaret Carty figured her 5,000-square-foot home would sell quickly and profitably
- 2 But it took almost five months
- 3 agreed to the first offer they received at $100,000 less
Sadly, the buyer will soon realize that the property is worth another 100k less verrrrry sooon.
And the knock-off amount is probably only a portion of the price increase since August 2005, so ….. still paid more than the peak.
Oh, and your neighbors don’t like you because your purchase drove down their “imagined” house value. Double loser. Nice shootin’ Tex.
You are supposed to introduce yourself to the neighbors by giving them a bottle of 2 year old ‘Two-Buck’ Chuck.
That will That will definitely smooth things over.
Hey, for your money, Charles Shaw is quite the value. You’re showing your neighbors how financially savvy you are with your choice.
Hey, don’t you go talking bad about Two Buck Chuck! One of my longtime friends (who is also a neighbor) gave me a bottle as a housewarming present. It was very much appreciated.
Decant it and claim it’s French. There’s more truth in that than in RE prices today.
“Oh, and your neighbors don’t like you because your purchase drove down their “imagined” house value.”
This statement is TRUE. I have witnessed this very thing. lol, These new buyers are in for a world of hurt, imo.
But CNBC’s Krammer said the dot.com’s were held great profit potential and you should hold on just a little bit longer as this trend down is just temporary. Or was that Ken Lay, or was that Robert Toll. The cast of character’s that the dim wits American public listen to for their investment advice is mind boggling.
Reading the comments by the realtors, one would get the impression that the market is just a little bit off. No big deal. Well, they are in for the surprise of their lives. Of course, most of them will be in the soup lines this time next year.
Naw — most of them will find something else to do to earn a buck.
Somehow, it strikes me that all these fly-by-night realtors are the same people who were demanding $100k salaries for technical writing during the dotcom boom. And without another bubble to ride, they’ll go back to their $35k admin assistant careers.
For all the stupid drivel the Realtors spout, I will go out of my way to reduce and avoid RE that I buy to be paying commission.
No sign of anyone hurting for money around here yet. Store and restaurants are packed. Reductions 5-8% off asking prices that are 15% higher than last year’s sales prices.
High end stores and restaurants are packed, “family priced” restaurants are down here in Annapolis. A local realtor sent a mass mailing letter. He listed all the homes that had been listed, their list price, days on the market, and final sales price. I sent him an email back, because one of the houses on his page was on my street. It went through 3 price reductions, to a total of 20% price reduction before it sold. The realtor put down as the listing price the final asking price, and then said the home sold for within 3% of its asking price. I wrote the realtor and told him that what he sent out was dishonest. I also asked him to include a list of all the homes that have been sitting, unsold, the next time he sends me a “market report.” I never heard back from him.
A Realtor® lying? I bet if you asked him if there have been multiple bids on the houses I know what the answer will be.
I hate to break this to you, but if the final reduction was done under a relist under a different MLS number, then it technically was sold for 3% under list. I’ve seen that several times–a property goes inactive, pops up the next day under a new MLS # with a cheaper list price, and then goes inactive again under the lower price. A dirty trick, but not uncommon…
dirty trick, lie, what’s the difference? Lying is a legal move in poker, it doesn’t mean it’s not lying.
I totally agree…the whole MLS relist option is one of the main problems, IMO. Once that home is on the market, it should stay there. If they want to “freshen” the listing, then leave it off the market for 6 months, as rules in MD require, to reset DOM. Otherwise, price it right to begin with and you won’t watch it sit.
Realistically: Never believe DOM or price history.
This also forces the realtors to the defensive, because the correct negotiating position for the buyers is that they now ASSUME the price has been dropped a few times and that the DOM is large.
If the seller acts otherwise, then the best negotiators will walk away and tell the realtor to call back once the listing ripens. If the call-back comes, you know it’s time for a lowball.
gov workers never get fired !
never do anything useful either
“gov workers never get fired !
never do anything useful either”
Sure they do! Animal Control will be out next week to pick you up. Pigs just can’t go running loose you know.
Government workers do get fired, and usually work for less than market wages.
I’ve noticed a distinct drop-off in consumer activity pretty much everywhere I shop. Not off the cliff, mind you, but more aggressive markdowns and parking lots that aren’t as full as they were this time last year. Haven’t had a problem getting a restaurant table right away in many months now, even on weekends.
And I track prices on a few items on eBay very closely, and I’ve noticed a sharp downturn in prices just within the last four months or so. I believe we’ve already entered the early stages of a recession. Which means that the media won’t recognize it until at least the time that 3Q earnings reports come out. Could get interesting.
I don’t think the gov or MSM will ‘let’ a recession happen (won’t publish anything meaningful, only happy talk) until 2007. Gotta keep those consumers consuming through Xmas. If there is widespread recession talk before Xmas, it will be a poor Xmas. If it’s a poor Xmas, it will reinforce the ‘gut feeling’ that something is wrong wiht the economy, resulting in further cutbacks by Joe Soccer Mom.
You’re assuming that the gubbimint has the power to do this. Sure, they can spin all they want, but I predict those 3Q earnings numbers are going to be mighty ugly. Good luck spinning that. I will agree that the recession probably won’t be in full swing until next year, though. The Xmas season WILL be bad this year, and that will prompt layoffs etc. next year.
Spin is like a bubble: it can go on a lot longer than one would imagine. I think they can spin the numbers for a long time.
I agree thet Q3 numbers are going to be ugly, but they will also be mixed. The spin meisters will highlight to good ones and bury the bad ones.
The MSM only gets into the act when it’s really bad.
Christmas?….. Small stuff. It’s mid-term elections, and the spin will keep us whirling till time to shop for your turkey. Christmas will merely help drain the existing room on the battered credit cards..
More from Maryland.
I’m not sure how “supply” is typically calculated, but one bit in that article was this “At the rate condos have sold this year, it would take more than a year and a half to sell the existing inventory.”.
I’ve always thought that they calculate the housing supply based on historical trends, instead of recent trends. That is, a realtor might tell you that Ocean City has a 2 month supply, when in fact given the current rates of sales, it might be more like 2 years.
“I’m just a little discouraged with the lack of interest,” said Siciliano, owner of Baltimore-based Capital Floor Preparations, who bought the four-bedroom condo to use on weekends but has since traded up to an oceanfront home.
No, he hasn’t TRADED anything. He just bought a more expensive home and is stuck with his condo.
My understanding is that supply is calculated by dividing the number of listings listed as active on any given day (say, september 7) by the sales (either contracts or closings) during the most recent month (say, August 2006), to determine the supply in terms of months. Calculating it that way, the rate of sales is always close to current. If you tried to average a sales rate over the course of the previous 12 months, you’d probably get a rate of absorption that was misleadingly high.
It should be listings AND foreclosures vs # of sales.
Yeah, it looks like OC is gonna be hit hard. Last year my husband and I got a deal to Barbados for a week, including air and daily breakfast at a beachfront resort for $1350 total for both. To rent a condo in OC for a week on the beach was $1800, and a hotel room for the week was about $1200. OC is way overpriced, IMO, for the hassle of getting there and the crowded beaches and roads.
Let me think…. Barbados, or… Ocean City, Maryland…
Still thinking hard for my next vacation…
Oh my, which to choose? So hard to decide…
For all the stupid drivel the Realtors spout, I will go out of my way to reduce and avoid RE that I buy to be paying commission.
Yeah, I’m thinking the same thing. Question for those who deal with realtors on a more frequent basis. How far do you think I can reasonably push things? My wife and I plan to put our house up for sale this spring with the idea that if we can sell it we’ll upgrade to a place in the same area that better suits our lifestyle. Whichever realtor we chose to sell our place will more than double their commission because if they get our place sold they’re guaranteed to earn more commission on whatever new place we buy if we use the same agent for both transactions.
Unfortunately because we live in a gated community that prevents drive-bys and will be traveling for much of the spring we don’t really have the ability to do a FSBO. And the budget internet agencies haven’t reached this far into Central Texas.
So the question is, how far do you think I can reasonably drive down the listing commission given the coming market conditions and the fact that if they sell my place they’re guaranteed to earn another commission on whatever new place we buy.
This market is headed in the opposite direction for a seller getting a break on a commission. With so much inventory, a *good* agent who can sell property could ask for 7-10% commission and be worth it. If you’ve been paying attention builders and condo devolpers are offering much more than 6% commission. The coming crash is going to purge the idiot agents with no connections and no salesmanship. It will not purge the real salesman, I expect their commissions to go up not down.
Just offer what the buyer to believe is far value minus the cost of RE commission.
How about offering your agent a sliding scale?
Above list - 7%
At list - 5%
below list - 2%
10% below list - they pay you
Nah….then you’d never see any offers below asking, and that means no offers at all.
I think this bubble is going to be the end of the fixed 5% - 6% comission structure for RE. Not immediatly, buy over the next decade.
Central Texas? Are you sure you want to buy another home there? A house we sold in Dallas in 1985 was listed on realtor.com in 2004 and the asking price was LESS than what we sold it for 19 years earlier.
My advice: Don’t mess with Texas real estate. Become a renter.
selling yourself is easy as pie
just 3rd party the escrow and everyone stays civil
Look for a top producer who survived the bloodbath in your area of the mid-80s. That should be your top priority. If you can also shave a few percent, great. But you may see less foot traffic if you push too far.
I recently sold a condo in downtown Boston. I found an agent who had been through the 1990-1992 downturn here. He called himself “an old warhorse.” His price recommendation was based on actual sales of comparables in the past 3 months and was lower than asking prices of many of my neighbors. He was very realistic and honest. My condo was on the market for 8 days before I got two offers within 3% of asking price. Many of my neighbors are still living in FSBO/online dreamland. I’m glad I found an old warhorse, and would have gladly paid a higher commission for the results I got. This is not the kind of market to be pennywise and pound foolish.
I agree with you if you have some equity to pay a “old warhorse ” to do the job .If a person is upside down and paying a commission would throw them into short sale status or foreclosure because they can’t bring money to the table ,finding any discounts you can get might make the difference between getting out by the skin of the teeth verses being stuck .
Some people do not have a problem selling for sale by owner while others do .Sometimes if you on a short time span and its getting risky if you don’t get a sale soon you might need to pay more for marketing costs . It just all depends on the situation .
Wiz — you just made me think of something — wonder if things will get so bad that agents will take promissory notes for part of their commission? Meant as humor, but in fact I think this actually occurs in large commercial transactions.
The question not yet answered: If I am a buyer, and if inventory is through the roof, why do I want to spend any time looking at FSBO properties? Right off the bat, I suspect that it’s 50-50 they are asking too much and agents wouldn’t take the listing. There is nothing close to a disinterested third party to clue me in about the neighborhood, the murder next door, the fake stucco that soaks up water like a sponge, etc. etc.
I accept the argument that saying the seller absorbs the commission doesn’t float, because it is a part of the price, but in areas where inventory is huge, these agents can save me a lot of time and zero in on what I’m after. I can at least try to lowball my way through part of that commission.
I think a rough analogy is Barrett-Jackson. Notice that the buyer pays a buyer’s commission of I think 8%. That probably means the seller does, too. 16%. Works the same with art — I sold something through Sotheby’s many years ago and the total commission was right around 15% as I recall. At any rate, and I may well be in the minority here, I’ve used agents to buy four of five homes and to sell all five of them, and didn’t feel screwed in any of the transactions.
But with house prices going up 100% to 300% ,the realtors are the only ones that got a pay raise in the last 5 years with the home appreciation . 4 years ago a 100k house= 6k commission at 6% ..Same house at 400k,4 years later =24K commission at 6% .
But my point is wouldn’t it be easier for a for sale by owner to reduce his price if he isn’t paying the 6% commission making it possible to sell in a down market .
People who have owned a property for a long time have more equity therefore they have more options as far as marketing costs .
Back in prior real estate cycles there wasn’t massive amounts of people needing to sell so soon after they have bought unless they loss their job ,etc. People usually bought property for longer term use ,( so there was usually enough for marketing costs ).
I guess it boils down to how much one thinks its worth to market a house in this day and age .
I’ve sold a couple houses FSBO…..As part of the process, I commissioned an appraisal from an appraiser recommended by my bank, held my own open houses…. Found it to be a simple process….using a title company for closing, of course.. For pricing, I “split” the hypothetical 6% commission by reducing the appraisal by that amount.
Is anyone keeping track of all of the comments made by realtors recently in which they all claim to have realized the market was out of whack in 2004 and 2005? You wouldn’t know about their alleged market genius from all of the “buy now before you’re priced out” nonsense that came out of their mouths.
I agree. Realtors made a strange face when I mentioned ‘cycles’ to them last year. Now that’s what they say to me, ‘we’re just going through the cycle.’
just mentioning the whole ‘cycle’ thing to realtors is like taunting a vamprie with garlic and and a cross. it really freaks ‘em. they know full well about the classic 18 year r.e. cycle: 9 years up … inexorably followed by 9 years down!
Juxtaposed to the harsh reality of today’s housing market a lot of what realtors and mortgage brokers say reads like eye-crossing gibberish.
More importantly relevant than befuddled realtors, however, is the growing consensus of an impending recession as articulated by Peter Morici and Stephen Roach in the last article .
Roach argues the housing bubble’s pop could resonate throughout the US economy and echo across the globe. Recognizing other countries across the globe are at differing phases of similar housing bubbles, I ponder the implications of a world that echoes back.
Does anybody out there think we are not heading into a recession as a result of today’s housing bubble?
Yes. I’ve been blogging about it for at leat 6 months now.
David
http://bubblemeter.blogspot.com
And so the back-peddling begins in earnest. A year ago you couldn’t find one realtor who didn’t think prices would increase rapidly for the next ten years. Now, the realtors are back-peddling by saying stuff like “we all knew this couldn’t last” or “we all knew the prices had gotten out of hand.”
Well, if realtors supposedly “knew” this all along why didn’t they speak up and tell their buyers last year? Maybe because they care more about their commissions than the best interests of their clients, despite their ethical obligations.
This back-peddling makes me sick. I agree with the poster above. I’ll go out of my way to reduce or avoid realtor commissions for the rest of my life.
The realtors didn’t speak up because they were making 30,40.60 thousand per house for being a order taker in a mania market .
I doubt the real estate companies spent that much on marketing when houses sold in 1 to 2 days . Now the average cost to market a house is a whole lot more .
I use to be a realtor many many years ago and I have sold in up market and slow markets . I have sold real estate owned by banks and I have been on new home tracts . I also was in the lending business for more years than real estate sales .I’m retired now ,so I can’t relate to this new way of lending .
The only reason that I can come up with that the real estate industry was saying what they did was because they were on a money making gravy-train that they didn’t want to stop for another 10 years . There was no basis for the assertions that “real estate always goes up “, or that” we were running out of land” ,or “you better buy or you will be priced out forever “.
Investors use to be more sane in prior markets. If a investor didn’t come close to positive cash flow on a investment property they wouldn’t buy . Of course investors bought to hold long term also as a general rule prior to 1999.
When I think about how this greedy gold fever housing boom might of put us all at risk I’m just speechless .
I bet alot of the people who suffered because of the 1929 crash ,who never even bought stock were just shocked .
Hopefully it won’t be as bad as the Great Depression and I’m hoping for just a mild recession ,but we will see .
“‘The psychology of the purchaser has been somewhat negative,’ he said. ‘The market is a great deal of perception. People are saying, ‘Our decision is to not make a decision.’”
During the mania the Realtors (TM) whipped the masses into a frenzy with lines like “buy now or get priced out forever.” But now that buyers have discovered they have the option to wait until prices revert to lower levels, they are deciding to rent, which is quite different than to “not make a decision.” Further, I would say the idea of waiting until prices become more affordable again is an optimistic, not a negative, approach.
How about waiting to purchase after seeing 1-2 years of steady appreciation again? Like purchasing in 2002. Clearly not as good as buying in 2000, but at least you know where the trough was (ok, the real one was back in 1996). This would accelerate the panic if sellers thought buyers weren’t even looking until they thought purchasing was a good INVESTMENT again. You know, an investment …… the same reason THEY purchased.
“how purchasing after 2 years of appreciation?”
2018.
Bubble blogger - “Dont buy now or you will get priced in at bubble levels !”
“Sell now or be priced in forever”
Buyers are very optimistic right now. That’s why they are waiting for prices to become more affordable.
rosie the moron says the big price increases are “momentarily” not there. i don’t think the word “momentarily” means what she thinks it means.
Perhaps she meant “monetarily” or “monumentally”? But then again, she’s a realtor and thus probably like most realtors she may be ‘challenged’ in a few areas.
“‘The market now is back to a normal market, whereas the last few years it was high,’ said associate broker Claire McLaughlin. ‘It’s a little more in favor of buyers.’”
Get used to the new Realtors (TM) mantra (”the market is now back to normal”), which will be used repeatedly over the next 4+ years to try to attract buyers while the market gradually slides back to normal and then slides further.
That was also the second time in the last week I’ve seen a quote that the market is safe for long-term buyers.
It’s like they’re AM Radio talk show hosts with the Karl Rove of real estate feeding them their talking points.
Actually, I agree with that statement, but let me explain myself.
Its safe, if you can afford to put 20% down, fixed rate morgage, and plan on living there for AT LEAST the next 10-15 years. Then, yes, it’s a relatively safe investment.
However, safe does NOT equal smart.
Why on earth would anyone want to sink all that equity into a depreciating asset, when in all likelyhood, you will be able to purchase that same asset in 3 years for 60% of what you pay today? Also, when you compound that additional cost of owning vs. renting, especially in the bubble markets, why on earth would you want to do this to yourself?
Again, safe investments are NOT always good/wise investments. You can bury cash in your backyard; it’s almost 100% safe, but it’s going to depreciate at 3-5% per year. Why would you want to get into that game??
Not that we’re really too far apart here, but as far as I’m concerned, overpaying 100,000 for a house is 100,000 that I don’t have in retirement, regardless of whether I gain it back in 20 years or not.
I don’t consider that safe.
Why not just keep renting for three more years and enjoy lots of nice vacations, then buy
At the midpoint in the flight of a pop fly ball, the ball stops and has zero vertical velocity. The ball is back to “normal” and so is this market
ahhhhh … normal is a momentary thing!
I wounder how this normal market is working out for those mentally challenged real estate agents?
OK, so how much have prices in the DC suburbs (MD and VA) increased in the last few years? We sold a house in Vienna, VA for right around $400k in 1992. Recent listings on realtor.com show prices in that neighborhood around a million dollars now, which is 14 years later. That’s only 7% per year if increases were linear. So was there much of a bubble increase in the last few years?
Well , you could look at it this way I guess - how many people in the area have seen their incomes multiply by 2 1/2 times over that same period?
7% per year is substantially higher than the rate of inflation during that period, and wages haven’t even kept up with inflation, as Huck Finn says. I remember a $400k house back in ‘92 as being something more than your usual 4br/2ba suburban tract house, although I’ll grant you that Vienna is decidedly more upper middle-class than many other parts of Fairfax Co.
Moreover, housing was still coming down a bit from the previous bubble back in ‘92, IIRC, so that might not be the proper baseline figure to use since the house probably was either stagnant or lost value during the mid-’90s.
To add to my comment:
Assume a straight-line 6% increase per year, your house would now be worth about $894,000, and with a 5% increase, it would be $787,000. Again, that’s assuming that your $400k price was right on the long-term trend line, which it might not have been.
I bought my place in mid 2002 for $245k (original owner bought in 2000 for $185k). An identical unit sold for $460k in Nov 2005, and another for $430k in March 2006.
Given that housing prices still hadn’t recovered in 2000, and had supposedly recovered in 2002, and extrapolating from that, I’d guess that NoVA is (was at the peak) 50% overvalued. That is, the townhouse bought for $450k was really worth $300k.
Even as a bubblehead extraordinaire, I’ll say that you can’t make such blanket statements about an entire region like No.Va. My personal opinion/guess is that that lower-end townhouse stuff and new exurban areas are more overvalued on a percentage basis than established high-end areas.
The townhouse market, I believe, is more susceptible to economic fluctuations, since it’s going to attract more marginal buyers to begin with, as well as a higher percentage of first-time buyers who aren’t rolling over the gains on one overpriced house into a downpayment on another.
Apart from condos, which are going to be a disaster all over the area, I think the next biggest loser will be all of those new exurban McMansion and crapbox neighborhoods in Loudoun, Prince William, Stafford, and Spotsylvania Cos. in Va. and Howard, Anne Arundel, Frederick, Carroll, Charles, and St. Mary’s Cos. in Maryland. New, poorly built crap with two-hour commutes is going to die on the vine all over this area.
To play devil’s advocate with myself, let me say that if the recession that I believe started recently turns ugly (which I believe is a distinct possibility given the frightening level of indebtedness in our country), then all predictions for the next 10 years or so are out the window.
Increases weren’t liner: they were flat for 10 years. Although this web site doesn’t have the long-term trend plotted, houses were overvalued in 1990, undervalued in the late-90s, and matched the long-term trend around 2002: http://tinyurl.com/qa9rj
Also, the long-term trend is a little under 5%.
What a deal! Buy a house less than last year’s inflated assessment and have instant equity!
With such powerhouse schools located nearby, you’d think the people of Massachusetts wouldn’t be as dumb as they are.
http://www.boston.com/realestate/news/articles/2006/09/07/priced_below_assessment/?p1=MEWell_Pos1
“Right after we bought this, the prices began to shoot up, and we said, `Aren’t we lucky,’ ” said Diane Schmalensee, a business consultant; her husband, Richard Schmalensee is dean of the Sloan School at Massachusetts Institute of Technology. With the market in decline, she realized perhaps “we waited a little too long” to sell.”
THIS FB IS THE DEAN OF THE MIT SLOAN SCHOOL OF MGMT!!!!
“While real estate agents knew the housing market is cyclical and could not continue at the same rate, said said Frank Valentino, of Coldwell Banker Residential Mortgage, predictions of a burst housing bubble became a self-fulfilling prophecy for many potential homeowners”
Oh my God, where the f**k do they grow these people? The *predictions* became a self-fulfilling prophecy? Um, how about all the option-ARMs resetting becoming a self-fulfilling prophecy?
Living in West Palm Beach, you have no idea how many times I heard “priced out forever” come out of a RE agents mouth.
I swear, the next agent that says those words to me.. I know I have said this before, but the whole mantra of “priced out forever” is totally insane. How on earth could that possibly work? Only people who own homes can afford to buy more = no more buyers. As those people die off = more sales, no more buyers. Yes, they could hand them down; but most people don’t want to live in their parent’s homes. If you sell it and split it between family members. Well, guess what, your still priced out forever.
Next person who says that to me with a straight face….. They are going to get an earful; that’s for sure.
One more point. Everyone who says “The market it back to normal” should have the chart from Irrational Exuberance stapled to their foreheads! The market is not even close to normal. And dispite what all these RE agents want people to believe, its a VERY normal market. Appreciation has been almost linear for the last 100+ years, with the exception of the period of time after the world wars.. I keep asking this question on another blog (much more frequented by RE agents), “what happened 5-7 years ago to make the chart spike up like this? Where did all the wealth come from? Just tell with a rational argument, why prices should have started appreciating at 30-40% per year a few years ago”. Of course, they always sidestep the issue.
Palm Beach is different.
Boomers with buckets of cash are buying everything in site.
Florida get 10 billion new people a day, they all need homes.
blah, blah, blah.
“‘‘If you’re purchasing long term, it’s a great time to buy real estate,” Valentino said.
The Cartys learned this lesson, too: While they waited to sell their home in Maryland, the value of their property in Park City, Utah, where they are moving to be closer to their grandchildren, has increased $90,000 in value, Margaret Carty said.”
Uh, sure thing there, Margie. Just wait until you try to SELL IT.
UT has tiurned and out of town sht like park city gets the gas whack on top
How can the realtors say this is now a normal market? What you have is a situation of a massive amount of re-sale inventory ,flippers trying to unload ,adjustables adjusting beyond affordability ,and a massive amount of overpriced new home inventory . The entry level buyers still has problems with affordability . Nobody wants to buy second homes right now .
This is not a normal market …..I repeat ….This is not a normal market .
Stephen Fuller and the other motley fools at GMU are the last people I need advice from. The internet will forever capture your broken ‘analysis’ used by Realtors when things were good:
In the fall of 2002, the Center for Regional Analysis at George Mason University conducted an analysis of future housing supply and demand in the greater Washington area. Conclusions of that research were that the collective land use and development policies of local governments in the region have resulted in an existing deficit of 43,200 units and that the deficit would grow to 218,100 housing units by 2025.
http://www.nvar.com/newsdetail.lasso?articleno=nvarn100455
why don’t they fire that fck ?
oh, acedemics never get fired either
almost forgot
That is priceless!
Arlington - go look at GMU’s website. The “Center for Regional Analysis” has a “client list” that includes Pulte, Richmond American, etc.
So, they are at least forthcoming with the fact that they are in the pay of residential real estate developers.
What they forgot to mention was that most of those units were going to be in Retirement Homes or Assisted Living Facilities.
I love this genius Director of Economic Policy at GMU
http://policy.gmu.edu/people/Fuller.html
Where can I get a job with a title of Director and my job is to state the obvious?
I don’t want to be mean spirited, but these ‘experts’ that got the joe sixpack tied to huge mortgages have no love from me.
That is not even mean-spirited.
Mean spirited is: when this jerk is on the street begging for pennies, I will spit on him.
“‘The psychology of the purchaser has been somewhat negative,’ he said. ‘The market is a great deal of perception. People are saying, ‘Our decision is to not make a decision.’”
I just don’t know why these negative people won’t buy. You don’t think it could be the sky high prices and lack of affordability do you?
Come on folks 800K Interest only loans for every one - Step right up and get your loan… Can’t afford the payments? Don’t be negative, something will work out, maybe you’ll win the lottery
Yeah, no one ever mentions that elephant in the room. But they did today on cnbc when discussing the housing stocks — they only way out of rising inventories, negative sentiment, slow sales is for prices to fall. That’s progress. Expect to see that in the mainstream soon enough. (although cnbc is mainsteam, it’s not Joe 6 pack, mainstream). Imagine a world where all those professionally employed to report on economics find it the greatest struggle of all to come to terms with the simplest law of supply and demand.
We know the real cause of all these “predictions” is the kool aid was drunk well and often by those charged with reporting unbiased observations.
If the oil companies gave every journalist and professor $100K in long-term option grants and oil futures contracts, we wouldn’t find any complaints about high gas prices anymore in the media.
Similarly, all the journalists and professors have unvested options on the future value of their houses, and as such, high house prices are “good” even though it’s really bad for the common man as high gas prices are.
so true! just as the so-called ‘analysts’ were invested in the dot.com paper they pushed to the public, now EVERY journalist — every one a potential FB — sells blue skies on the r.e. horizon to the rest of us soup-slurpers.
Has anyone here begun to consider submitting lowball offers on RE with some additional documentation like cap rates or gross rent multipliers to justify the purchase.
That would maybe open some eyes of the stubborn sellers.
“Has anyone here begun to consider submitting lowball offers on RE with some additional documentation like cap rates or gross rent multipliers to justify the purchase.”
I put in one lowball offer a couple of months ago, but without the cap rate/rent stuff. I figured the sellers are either clueless about that type of math/reasoning, in which case they’d be suspicious, or they are shell-shocked that the house hasn’t sold (this one fell through a couple of times) and cannot comprehend the real reason. Oddly enough, now that the market is tanking at a faster rate, I wouldn’t even pay that lowball amount any longer — soon enough, I’ll be able to get a far better house in the same neighborhood for very little more.
I think it’s not too early to lowball, and that sellers who dismiss them out of hand could be totally screwed.
Central Texas? Are you sure you want to buy another home there? A house we sold in Dallas in 1985 was listed on realtor.com in 2004 and the asking price was LESS than what we sold it for 19 years earlier. My advice: Don’t mess with Texas real estate. Become a renter.
Yeah well. We’re looking for a home to live in at least until we retire if not beyond. The girls are desperate to get horses and I’m sick and tired of constantly driving them to riding lessons. So we’re looking at a subdivision nearby that has 5-20 acre lots on rolling wooded terrain with lots of riding trails and accommodations for horses. We’re not looking for real estate as an investment. Our real investments are in diversifed domestic and foreign index funds and that sort of thing. Rather, we’re looking for a place to put down permanent roots and raise our kids. Even if the types of homes we’re looking at were available for rent (which they are not) it would still not give us the permanence that we’re looking for. If I was single or we were childless I’d probably rent for certain. But at this point in our lives, owning just suits our lifestyle much better.
I don’t have any illusions about Texas real estate. And we won’t be making any moves unless our current house sells and I find a nicer place to steal from some desperate seller who’s going under. We can stay put as long as we want in our current house. But my wife and kids are desperate for a pool and I don’t want to pay the bucks to put in a pool until I’m certain we’re in the house where we plan to spend the next 20 years or so.
Sounds like you “desperately” need to prioritize your wants and needs.
whoa horsie! If you think you’re tired of driving them to riding lessons, how are you going to feel when they’re too busy with their next new interest to groom and feed the horses, clean the stable and paint the fences???
Happened to a relative of mine. Made me thing that even a boat or plane is a better idea than owning a horse, unless Mom & Dad love riding them and carrying out the oats every morning. I’d use the SunsetBeachGuy rule — can you lease horses?
Again my advice is buy a lot in a good location and have your own house built when the contractors are desperate for work and building supplies are cheaper (next year?). Why overpay for someone else’s idea of the perfect house? I expect land to get real cheap this winter as builder try to unload their inventories. It’ll take you a few months to find an architect and decide on what you want in a house, so you can do that now while keeping an eye out for land.
“‘The market now is back to a normal market, whereas the last few years it was high,’ said associate broker Claire McLaughlin. ‘It’s a little more in favor of buyers.’”
What a load of ……!
The market in no way is “back to a normal market”! Actually, it has a long way to go, sweets :/
Lots of For Sale signs in Silver Spring/Takoma Park. Capes and Sears catalog houses on 0.12 acre going for $400K or so. Older larger sutff going for more. One lovely house (1700 sq ft) on a small corner lot, not much yard, was priced at $614. These are very nice older neighborhoods.
Downtown there’s a condo glut, and more homeless.
There is a world of difference between what the Sellers & the Real Estate Industry want & expect and what a sensible informed Buyer wants and expects dispite the finger in the dam RE spin machine.
I am grateful for Ben and others with the Blogs for their time, courage and convictions to expose these Con Artists and their tricks when many others with a responsibility to do so, would NOT !
Encourage your kids, friends & family be well informed & to look long & hard before they leap into ANY Real Estate purchases in the next year or so as many of the uniformed & greedy are about to spend a lifetime as Crispsy Critters in a Debtor’s HELL on Earth.
Thanks again Ben
I wouldn’t call it a buyer’s market yet. Even at discounted prices, “bubble” homes are still WAY overpriced. Anyone buying at discount today is still putting on a set of leg-irons.
One point i fail to see get mentioned on this blog is the psychology of the home buyer once they realize how much of a slave they are to their mortgage payment. What is in today is out tomorrow. For the last couple years everyone had to have the “wow” factor in their home so they could show off to their family and friends. Now aside from the other reasons that are pointed out on this thread. What if in the future, travel and seeing the world become the new “it” thing to do? These people have left themselves with 0 disposable income. Who the hell wants to spend their whole life cooped up in their home? Most of the time i am at home i am sleeping, eating, bathing or watching tv. So, i use three rooms.
I am a loan officer and no, i have never done a neg am loan or interest only loan for anyone. I dont do purchases either. Mostly refi and bill consolidation seconds. I am astounded at what position i see people put themselves in on a daily basis when they call me to try to help bail them out. I too was looking to upsize from my townhome starting back in 01. Everytime i looked i was shocked at the prices and wondered how on earth enough people made enough money to afford all of these homes? I almost rationalized to myself that i better buy because everytime i looked i was getting less and less for the price. I am so glad i never did. i live in a 280k thm that i owe 100 on that i bought in 98. Looking back now, ireally am comforted by the fact that i will not get pigeon holed by the economy. if the world falls apart i can pay off the mortgage and live on the cheap.
I just wish msm would get on board here and really start explaining to the american public the way these toxic loans work. I have a feeling this is going to go down as one of the greatest con games ever played in the history of time. Where the banks, appraisers, loan officers and realtors conspired for one magnificent hoax on the american/world consumer.
Last add, i take loan applications from all over the country and i am so sick of every huckleberry homeowner calling and using the phrase ” the way things keep going up around here”. They all say it with such smugness, like their financial savy led them to make such a shrewed real estate decision. I dont think i have ever taken a loan applicaiton in 10 years where someone said the house is workth what they paid for it or less. Even people that just bought their home will tell me a value that is 5-25% greater just two months after purchase. So, by putting your name on the house it automatically increases in value? Cant wait til this ends
Not all of us in the economics business are as bad as GMU’s Fuller. It is always important to note who the person is beholden to when you look at their analysis. I have clients in autos, restaurants, insurance, and also home goods - I wont name which. The auto clients are very interested in hearing the reality about risks to the housing market, and Ive been telling them for two and half years. The home goods people, however, didnt want to hear any of it - why? Because if it was true, they’d have heart attacks, and they prefer denial, then the blame it on someone else game. Only now are they ratcheting their internal forecasts down to what had expected for them. We dont forecast a housing bubble deflation in our baseline, still, even though I know there is one. It’s just not something you can do in this field. What you do, is put together another scenario, for a burst, and show them the impact. Then you can talk about the reasons the risks are rising and why that scenario is becoming more probably. If the company has good management at the top, they will read between the lines and adjust to the reality. Most often, they dont.
my argument in 2004- it’s ok now, but the more this thing goes up, and the more creative the financing - the worse the pain later. They are now inundating me with requests for impact analysis. In my initial research brief I laid it out for them clearly. There is NOTHING in the fundamentals that justifies this price increase, outside of lower interest rates. NOTHING. Population growth is slower than it used to be, household formation rates the same, income growth lower than usual. I told them that I was worried that speculation was playing a bigger and bigger role and that that investment demand could go as fast as it came if returns slow, since rental rates dont support the financing. And on and on it went….
The worst part about this is that it’s going to end badly for me. Not because Im a homeowner (Im not) but because all my clients are going to get screwed when they realize how much of consumer spending was linked to housing. And when my clients are screwed, their budgets are cut, and it comes back to bite me in the a**
whoa horsie! If you think you’re tired of driving them to riding lessons, how are you going to feel when they’re too busy with their next new interest to groom and feed the horses, clean the stable and paint the fences???
Happened to a relative of mine. Made me thing that even a boat or plane is a better idea than owning a horse, unless Mom & Dad love riding them and carrying out the oats every morning. I’d use the SunsetBeachGuy rule — can you lease horses?
Actually yes you can lease horses. It’s quite common in fact. Personally I really enjoy getting out and doing the rural grunt work of clearing land, putting in fences, that sort of thing. Helps me clear my head from sitting in front of a computer all day.
Far as I’m concerned, the girls have a couple more years to prove they are still interested in horses and ready to take care of them. If they are, then fine. I’ll support it. It gets them away from the TV and outside where they get exercise, fresh air, and have responsibilities. And if they want to compete seriously, that’s fine too. If they lose interest and don’t want to deal with the responsiblity then they horses get packed up and hauled away.
One of the reasons we decided to stay in Texas was because we can afford to do some of these kinds of things whereas moving back to Seattle would make them unaffordable or unpractical.
Again my advice is buy a lot in a good location and have your own house built when the contractors are desperate for work and building supplies are cheaper (next year?). Why overpay for someone else’s idea of the perfect house? I expect land to get real cheap this winter as builder try to unload their inventories. It’ll take you a few months to find an architect and decide on what you want in a house, so you can do that now while keeping an eye out for land.
Actually that’s a very appealing idea that we are seriously considering. My interest would be in building a very green and energy-efficient house with extensive use of solar and wind power and whatever other technologies are available. There are endless amounts of land around here. That is not the problem. But because of the distorted mind of the Average Texan, it’s never going to be cheaper to build new. Because once you reach the upper 10-20% everyone wants to build their own dream home and no one wants to buy a “used” house. I figure there are going to be plenty of fabulous houses going for way below cost in a year or two as the desperation and fear begins to grow among sellers who want to move on. I wouldn’t be surprised to see some very nice houses going for $100,000 or more below their replacement cost.