Is It Really A Good Time To Buy A House?
A topic on the new media campaign, “How about a topic on the media blitz to sway public opinion in the new year? Is it really a good time to buy a house? What are the implications of in light of the recent report on subprime defaults?”
“‘The National Association of Realtors is launching a $40 million advertising campaign to encourage Americans to buy houses amid the ongoing housing slump.’ NAR President Pat Vredevoogd Combs said that now is a good time for consumers to buy a home, given low interest rates and high inventories. ‘You can walk into a marketplace and have a choice what you buy,’ Combs said.’”
One note ad revenues. “I wonder if they are buying higher media weight levels in the more troubled markets. They also have that evr present guerilla PR budget called ‘we’ll pull our ad dollars from your outlet if we see any bad stories.’ I’m sure they use the ‘Good Time to Buy’ ad budget as a carrot and a stick for the media. Publishers will be pressuring editors no doubt.”
“By the way, $40 million is not a lot of money as national ad budgets go these days…unless you can use it to get an additional $40 million of friendly editorial reports from the MSM.”
Another saw this problem. “I’m having a hard time understanding how realtors get away with ‘calling’ a major market. My understanding of a RE broker is that they are there to facilitate a (sometimes) complicated transaction and to advise accordingly.”
“But when a RE broker advises buying, selling or taking something off the market there’s a problem; since they are intimately involved in ‘their’ market,) they could easily have a conflict of interest in the advice they provide, no?”
A reply, “Salesmen don’t have a conflict of interest. Their interest is quite clear: MAKE THE SALE. See? No conflict. People who listen to salesmen as if they are independent advisors with a fiduciary obligation will often end up in deep doodoo.”
Another saw a risk in the media push. “At the end of the day, will the NAR’s propaganda campaign blunt or exacerbate the housing crash’s severity? One might argue that the risk of a hard landing can be reduced by ‘managing’ expectations to the positive.”
“But if the expectations management campaign also features disinformation, in the form of either ignoring or fabricating statistics, the whole effort could blow up when credible contradictory evidence comes to light. The potential problem stems from expectations shock, the sudden realization by vast numbers of individuals that they have been collectively suckered and deceived by the NAR could be devastating.”
The Globe and Mail. “I don’t subscribe to the theory that because of a couple of benign recent U.S. housing statistics, there’s going to be the fabled ’soft landing’ and now is a good time to buy a house.”
“Official statistics are so massaged and seasonally adjusted that I often find them hard to believe. It seems like only yesterday (Dec. 12, 2005, actually) that the NAR was predicting that the U.S. national median house price would rise about 6.1 per cent in 2006. After all, gushed NAR, over a full year, the national median price ‘has never declined since good record keeping began in 1968.’”
“After the recent ‘good’ news about the U.S. housing market, the median price was still down about 2 per cent for the first 11 months of 2006. That makes that NAR forecast fairly embarrassing, but the market has discounted the actual small drop as a mere healthy correction, hardly the harbinger of an incipient downward cascade in house prices, or at least, not yet.
From CNN Money. “We hear lots of stories about the pain: An Indiana man writes to say he can’t sell his house even asking less for it than he paid - four years ago. A Duluth, Minnesota, reader writes, ‘The housing market is brutal, has been for months. Prices dropping at least $20,000, some as high as $60,000 just to get them sold. Most aren’t selling even with the drop.’”
“A reader from northeastern Connecticut moved to Maine and can’t find a buyer for his previous house even though all he’s looking for is to sell for what he owes.”
“A Gulf Breeze, Florida, reader reports, ‘The market here went sky high and now went down - houses are selling cheap and people are not buying.’”
“Yet, when the NAR released its third quarter median sales prices, the downturn was very modest, just 1.2 percent compared with 12 months earlier. Why is there such disconnect between the numbers and reports from the front lines?”
“According to Janet Branton, VP of business specialties for NAR, the main factor is that many consumers, and a high percentage of real estate agents, the majority of whom have been in the industry less than five years - got used to operating in a bubble. ‘Most agents and many sellers haven’t seen a normal market,’ Branton says.”
“Another factor may be problems with the statistics themselves. Some of it is just not very accurate, according to Jonathan Miller, co-founder of Miller Samuels, a leading real estate appraiser based in Manhattan. For example: ‘A significant portion of the OFHEO index,’ he says, ‘is based on refinanced mortgages, not [solely] on actual market transactions.’”
“Miller also believes that bad news travels much faster these days and comes down harder, causing people’s perception to be more extreme. ‘We seem to pile on the cheerleading when the market goes up and we pile on when the market falls,’ he says. ‘And we pass the word on faster through the blogosphere.’”
“Chief economist for the Mortgage Bankers Association, Doug Duncan, is not as sanguine about a swift recovery in the housing markets, by the way. He believes, based on past slowdowns that the slump will take until at least mid-2007 and likely late 2007, to work through. ‘We have to work off the excess inventory before real estate returns to trend lines,’ he says. That will take 24 to 30 months from the peak, which he has pinpointed as July 2005.”
“Recovery might even take a little longer this time. ‘The long run up may mean that the recovery takes a little longer,’ he says.”
Or we can move the measuring sticks from time to time:
‘The chorus is growing in the chant that housing has struck bottom and will slowly rise again. A new report by the National Association of Realtors suggests rising existing home sales through 2007 and 2008 and a turn-around for new home starts by summer 2007, but homes won’t appreciate over inflation rates for the first time in decades. And that’s a little scary.’
‘David Lereah, NAR’s chief economist, says, “We have to keep in mind that we were still in boom conditions during the first quarter of 2006 with a high sales volume and double-digit price appreciation. “We’re starting 2007 from a relatively low point, so even with a gradual improvement in sales it’ll be pretty much of a wash in terms of annual totals. The good news is that the steady improvement in sales will support price appreciation moving forward.’
I am seeing evidence that the chorus and the choir aren’t exactly spontaneous:
‘Three trade association representing builders, lenders and Realtors have launched a $150,000 public relations campaign here to counter what the groups call ‘an onslaught of negative national media coverage of the housing industry.’
‘In unveiling the effort Wednesday, the groups emphasized the Madison area housing market remains strong and has not seen the kind of ‘bubble’ that has occurred in other regions. The campaign will feature television commercials, radio spots and newspaper ads directing consumers to a new Web site. The ads feature red and blue balloons and urges consumers not to ‘blow it’ by missing out on what has become a buyer’s market.’
And they continue to hope that much like Television all the problems can be solved in an hour (or year in real estate time).
the bottom line is affordability. real affordability without using toxic loans is at record low. so no matter who said what, people are spooked by toxic loans and can’t afford mortgage with traditional loans, therefore the slide will continue. of course the reduction in price is no where near the level where the average person can afford the average house.
nick the wizard,
I with you all the way on that line of thinking.
Anyone who pays…$350,000 / $450,000 / $550,000
to “live” (the operative word) in places like Bakersfried / Chula Vista / Hesperia / Perris / El Centro, etc. etc.,… are in a word: STUPID!
Nicely put Nick. I agree completely.
Do you think the NAR and CAR morons are bright enough to figure out that affordability problems just might undermine their “soft landing” happy talk?
It’s the new model.
No “cash flow needed” economy.
You buy it with a real big loan and it grows to the moon.
Look mom! No cash flow needed.
Magic beans. I heard the same bull when the Nasdaq stocks in 2000 started to crash in march.
Nothing changes. I expect the same bull in march or april 2007.
Yes, the bottom line is affordability. The trend I am seeing often lately is people trying to get out of the Option ARM they got in the last two-three years. The loans are adjusting monthly and I am seeing rates of 8.5 to 9%. They often have pre-payment penalties. There is one lender in particular here in California that I am seeing their loans with big margins(which means high rates) and big prepayment penalties. People want to get out of them, but they can’t always do so because values have not increased enough to cover their negative amortization, and the PPP, and they cannot afford other than the artificially low option (neg-am) payment.
I have been a house price bear for a long time. It appears that prices peaked in the 2nd Q 2006 and have been dropping since. With what I am seeing lately in the refinance picture (of people that bought in the last 2-3 years), short sales, long time on market…, I am even more concerned.
Thank you for your insights, Sensible Lender!
What, exactly, are you seeing that is causing you to be even more concerned?
A lot of what you mention was expected by those on this blog (I believe you’ve been here awhile, too). Are you seeing it to a greater extent than what was expected? Greater volume of FBs from higher-income families? Prices down further than expected at this point in time? Total inability to get these FBs into a better situation?
Your perspective is always much appreciated!
I am wondering who is even left to purchase a house at this point. I know not one person who is looking to buy, but 4 who are trying to sell. (A fifth is in escrow). The pool of buyers is incredibly small right now, and even smaller when you take out those who need to sell in order to buy. Does anyone here know more people who are looking to buy than sell? It seems to me that the sellers FAR outnumber buyers which translates into a gigantic imbalance in the supply-demand equation. There is no way to spin this. I look forward to the overloaded mls this spring which is already ramping up in the dead of winter.
BanteringBear’s comment about the small pool of buyers reminded me of the thought I had recently.
There will likely be huge numbers of forclosures in 2007 ( + 2008? ). My thought is that all these forclosures will both increase the inventory of homes for sale AND DECREASE the pool of QUALIFIED buyers. Since a forclosure will ruin the previous Loan-owner’s credit score for a few years, they will not be able to qualify for a new loan to buy another house.
This used to be the way credit and loans worked. Is that still a reasonable assumption for the current situation? Everything that made sense before seems to have been thrown out the window, or reversed like Bizarro World, so maybe my thought is way off base now days.
I’m obviously in the minority, but I actually am looking to buy this summer when my CD matures and my rental agreement expires.
I’ve seen ads by mortgage lenders who will give people a 100% loan just one year out of foreclosure or bankruptcy.
Casey can file for bankruptcy and get back in the game by early 2008.
Bankrupts are getting loans from subprime, which is drying up. Casey and others like him will soon be SOL.
ANSWER: A BIG NO!
Well guess what - the chickens are coming home to roost. By late in 2006, the rate of subprime loan delinquencies of over 60 days was up to nearly 8% according to UBS. The Center for Responsible Lending (CRL) projects that nearly 20% of subprime loans made in the period 2005 to 2006 will fail. The New York Times stated that “about 2.2 million borrowers who took out sub-prime loans from 1998 to 2006 are likely to lose their homes”. One of my favorite commentators, Peter Schiff, believes the the NY Times estimate are too optimistic. He says:
“The secondary effects of the “1 out of 5” sub-prime default rate will be a chain reaction of rising interest rates and falling home prices engendering still more defaults, with the added foreclosures causing the cycle to repeat. In my opinion, when the cycle is fully played out we are more likely to see an 80% default rate rather than 20%”.
I knew that there were some crazy loan products available, but check this out:
“The sub-prime market was designed with a built-in time bomb. In testimony to the Senate Banking Committee in September, Michael Calhoun, the President of the Center for Responsible Lending (CRL), showed an example of the most typical sub-prime loan, known as a 2/28, with an “exploding ARM” (adjustable rate mortgage). Buyers can qualify for this type of loan if the original (”teaser”) monthly payment is not higher than 61% of their after-tax income. At the end of two years, even without a rise in interest rates, the payment will typically rise to 96% of the purchaser’s monthly income. No wonder then, that the study conservatively forecasts that one-third of families who received a sub-prime loan in 2005 and 2006 will ultimately lose their homes!”
What a joke - 96% of your income will go to servicing your mortgage. I hope that Johnny doesn’t need a new pair of shoes. These mortgages were designed to be refinanced assuming that homes continued appreciating. That ain’t happening now.
So, what does this mean to the average homeowner? I will let Mr. Schiff explain, “failures in the sub-prime loan market will put greater downward pressure on housing by increasing inventory and lowering prices.” In other words, the value of your house is going down and its not stopping for awhile.
The offers of getting you a loan after coming out of bankruptcy is a scam but it has all kinds of variations.
It works thus: A company, let’s call them the ABC Lending People, put out ads offering investors 10% or 12% or even more on “real estate investments”. (It’s the old story of, “If it looks too good to be true it probably IS too good to be true.”) Greed knows no bounds as we have seen in the last few years and suckers will invest. However, with these scams momentum (which is all that’s been driving this market) is absent so they have to go looking for suckers.
The borrower(s), of course, will either be f*b waaaay behind and trying to avoid foreclosure OR a f*b who was foreclosed upon and went bankrupt and figures (Casey Serin come to mind) that he can still make money in real estate if he can get back in. Remember, it’s a private loan so there are no banks to answer to.
The ABC Lending People will send out a list of properties where borrowers are looking for finance to would be prospects who have replied to their ads OR they use a salesman to visit or phone the “investors” who have expressed interest in making 10%, 12% or more. The ABC Lending People get a fee up front of thousands of dollars, similar to “points” but heavy duty. The salesman, if used, gets a fat commission.
I knew somebody who did this in the last property boom and bust in the 80’s (Oh, no! I thought property only went up!) to the tune of $400,000. Actually it was a commercial property but these scams cover commercial and private real estate. I was quite surprised because this person was no dummie but, I suppose, if people fall for those Nigerian, “My husband Dr. Mumboogoo Nifuwana of the Nigerian Oil corporation has died and left $66 million in a bank account and I need your help….” they will fall for anything. And according to FBI statistics plenty do. Just greed again.
The question is, did my friend get his 12% interest. Yes, he did. For 4 payments, then a missed payment, then another missed payment, then the borrower walked away and was never seen again.
Actually, in this case (yet another variation) the amount was over $1 million but the loan was shared between several (suckers) investors. The ABC Lending People wrote all kinds of letters, similar to the O.J Simpson, “Looking for the real killer,” thing. In their case, it was “We are searching for the whereabouts of the borrower.” Of course, the borrower was usually already underwater so the value of the property will not cover the loans.
Needless to say my friend lost the $400,000. Fortunately, he’s wealthy but this stuff is out there. On the other hand, I know someone who went bankrupt over medical bills (we will see a LOT of that in the next few years) and within a month, was getting credit card applications in his mail.
Thanks for creating this mess, Mr. Magoo Greenspan. Be interesting to see what the Washington Hack who took his place does to try and stop it becoming a full blown disaster.
O% interest rates like in Japan ?
Over at Patrick’s we were talking about ZIRP a year ago. It could happen….
Nice sounding name ZIRP! Like in a cartoon or “Star wars”.
“The adventures of ZIRP.”
“ZIRP the super zhero!”
“ZIRP battles Zorro”.
I have two words for you naysayers: Rosarito, MX condos. Sure, on the way there you have to drive through Tijuana (which has disarmed the local police so that the Feds can shake you down and cut out the middleman and is experiencing a homicide rate through the roof) and risk being kidnapped and held for ransom (OOPS! They killed my client’s uncle even though he paid the $40k ransom). Trump opened sales for his latest tower down there recently so it must be the next up and coming thing! No wait. . . not Rosarito, Nicaragua, no, no Panama, Equador, Belize,. . . in other words, anyplace other than the U.S. The airwaves are filled with RE “experts” predicting that these out-of-country properties are the next best thing. Yeah, good luck with that one. . .
My specuvestor parents were just in Arizona looking for investor property….I think they are afraid to tell me they bought. But hey, it’s a buyer’s market!
“Three trade association representing builders, lenders and Realtors have launched a …”
Popularly known as the “REIC”.
If I may be so bold, the term REIC was coined/popularized right here on Ben’s blog by the many posters that contribute.
David Lerearh says “The good news is that the steady improvement in sales will support price appreciation moving forward.’
How does he know that? steady improvment? price appreciation? in 2007? I have a feeling we will be able to pin this quote up in 2008 as being quite wrong.
Steady improvement in sales will only put a dent in this excess inventory and you would need discounts ,(not appreciation), to get sales in a high supply market .
Why doesn’t the REIC ever comment on the current fall of the sub-prime lenders or the impact of upcoming foreclosures in their analysis ? The REIC acts like these market facts will have no bearing on the market .
The REIC knows that the affordabiliy tables are at a long time low at the current inflated prices ,so just where are the buyers that will make this appreciation in prices come about ?
Median salaries are in the 40,000 range - so let’s see that means people can afford a 100,000 house and there aren’t any of those on the market anymore because they became 200,000 houses or higher. So until housing gets back in line with wages - it is dead to most people unless they borrow against their current house that is if they have a house. Without a house, you can not afford another house. Those with a house were getting 200,000 for their 100,000 house and buying something more expensive.
The speculators and landlords bought up everything 100,000 and under. So there are no starter homes either.
They can cry media, and other things but the facts are people are not making the money to afford these homes. At least the majority of people are not.
Except for military related or government related jobs - most people are struggling.
Hate to quibble, but I disagree…many people are struggling, not most.
Remove the easy credit and everything will fall apart for much more people. Most people are struggling. It’s just that they don’t know yet. It’s the artificially low interest rates of things like the ARMS that gave the illusion that they were not. “Qui vivra verra.”
BTW, Readhead,
I’d wait until October to buy (you mentioned this summer).
If you watch the RE market over a number of years, you’ll see the prices are lower in the fall/winter months.
One of the many things I’ve learned while eagle-eyeing the market is to sell in Feb/Mar/Apr and buy in late Sept through late December, in order to get the best deal. At least, that’s what I’ve witnessed.
My rental agreement expires in August, so I’m planning to buy late summer, unless I can get an extension. I’m in the Colorado market, which seems to be leading the wave in foreclosures. I have the cash to buy outright, but I’m weighing my options. Over the long haul, it might be better to finance with a 20% downpayment and leave the bulk of the money invested. We’ll see. Anyway, thanks for the tip.
Now I know why our local real estate blogger is so anxious to announce that “the buyers have been coming out of the woodwork” and she’s been too busy to blog in the Reno/Sparks, Nevada area:
http://dianecohn.blogs.com/reno/
I almost died when I read this yesterday on Realty Times. Basically it is OK to defraud the mortgage company – just don’t get caught!
http://realtytimes.com/rtcpages/20070112_cashback.htm
Cash Back At Settlement Is Legal, But Be Careful
by M. Anthony Carr
As many real estate markets have transitioned to a buyers market, the practice of seller subsidies has returned with a vengeance. Each time this topic comes up, I receive emails questioning the practice of the seller helping the buyer with closing costs or cash back as being a violation of the Real Estate Settlement Procedures Act, which was passed into law in 1975…
So what’s the legal method of passing money from the seller to the buyer in a real estate transaction? …Borrow some of the cash proceeds that the seller has received — but outside of the purchase closing…The seller loan should not be part of the purchase contract or agreement in any way. It is a totally separate transaction…The seller loan does not have to be included in the RESPA (and thus set off red flags with the lender), because it is not part of the purchase transaction,
The key is as long as the appraisal is independent and supports the contract price. Any collusion will represent fraud.
BS ….On a purchase money transaction all aspects of the transaction must be disclosed to the lender pursuant the sales contract and escrow instructions . Any side agreements that are hidden from the lender is fraud because it’s hidding a condition of sale or material fact that might have bearing on the loan or the appraisal risk . Realtors that say that it’s legal to have side agreements outside of escrow or escrow officers that are hiding them are commiting fraud and the people in the business know this .
excuse me + hiding not hidding
You are probably right. What I was trying to emphasize (poorly written) that the key to these things blowing up will be the appraisals. Lenders are going to know they got stiffed at some point and they will be looking for the appraiser’s nuts. Flaky appraisers will not get any more work at the minimum
Well if Haliburton gets away with stealing the US government and Irak government in Irak, why shouldn’t they ? That’s the truth.
BTW, a poster pointed out yesterday that the writer of the Globe piece may have misused the negative feedback definition.
$40 million?? I wonder how that compares to their typical advertising budget. Seems like a waste of money. If I was a REALTOR, I think I would be pissed that they are spending my dues that way.
Actually, I have heard realtors say it’s a waste of money.
But I also question the $40 million number. Ever since the first NAR PR campaign last fall (remember that?), the local bi-weekly paper has had a big ad from the NAR in every issue! Up in Flagstaff, Coldwell Banker is running the same message on their banner on the classifed section just about every week.
The NAR is the largest trade group in the US with member commissions in the tens of billions. If they were running a $400 million push, would they publicize such a large number?
Their influence is permeating…even my Libra astrological forecast has twice in the last 2 months said ” It’s a great time to buy or sell a house”!They’ve bought off the MSM Astrologers!!! The sheeple seem to be believing the campaign. Everyone I speak to who hasn’t researched housing(the uninformed masses) seems to think it’s hit bottom and going to rise. Price don’t fall in our “special” area.
One RE mouthpiece, a couple weeks ago, said the “stars were about to align” for a housing rebound.
It’s simple, really. All Realtors moonlight as astrologers and dog groomers .
Doesn’t it seem logical that astrologers and dog groomers become RE agents? After all, it’s just stroke, stroke, stroke -
Other professions qualify accordingly.
“Everyone I speak to who hasn’t researched housing(the uninformed masses) seems to think it’s hit bottom and going to rise. Price don’t fall in our “special” area.”
Obviously you must not be talking to those trying to sell in any of the numerous bubble markets. Houses are just languishing on the market and deep price cuts are the only things moving them. There is no way the NAR can spin this away. Funny thing, they never mention affordability. The subprimes are drying up, and this means less funny money, and, in turn, less overpriced POS’s selling. In addition, there is no way demand would come close to approaching levels of years past. All of this leads to a buildup of inventory and the continued erosion of prices. The speculators can not and will not filter back into the areas in which they are still getting burned right now. And their numbers were what created the false pricing to begin with. For all of the areas which experienced huge run-ups in pricing, it’s curtains.
According to NAR’s website at http://www.realtor.org the organization has 1,357,732 members with annual dues of $64. A “Special Assessment” for Public Awareness Compaign of $20 for 2006 and and $30 for 2007 was made per member. This is at the national level. There could be other dues/assessments at the state and local level.
But what happens to their budget when all of the amateur Realtors decide to find real jobs?
$40 million is a drop in the bucket for a national ad campaign these days. As a point of refernce to get a feel for the impact $40 million will have, look at the following 2005 observed ad spending as reported in Advertising Age at: http://tinyurl.com/ttejp
The figures below are in millions.
My guess is they use this to try and motivate agents, but more so, to motivate the media to play along with them in terms of keeping the editorial coverage favorable.
$4,609 Procter & Gamble Co.
$4,353 General Motors Corp.
$3,494 Time Warner
$2,484 Verizon Communications
$2,471 AT&T
$2,398 Ford Motor Co.
$2,279 Walt Disney Co.
$2,209 Johnson & Johnson
$2,194 GlaxoSmithKline
$2,179 DaimlerChrysler
$2,153 Pfizer
$1,917 General Electric Co.
$1,785 Toyota Motor Corp.
$1,778 Sony Corp.
$1,713 Sears Holdings Corp.
$1,663 Sprint Nextel Corp.
$1,662 McDonaldfs Corp.
$1,522 Unilever
$1,497 Viacom
$1,486 Altria Group
$1,467 PepsiCo
$1,456 LfOreal
$1,453 Federated Department Stores
$1,441 Nissan Motor Co.
$1,325 Honda Motor Co.
$1,219 Nestle
$1,218 U.S. Government
$1,163 Novartis
$1,160 News Corp.
$1,114 Home Depot
$1,093 Estee Lauder Cos.
$1,072 J.C. Penney Co.
$1,067 American Express Co.
$1,020 Target Corp.
$1,004 Citigroup
$973 Wal-Mart Stores
$945 Microsoft Corp.
$939 Dell
$922 General Mills
$919 Anheuser-Busch Cos.
$919 Wyeth
$909 Berkshire Hathaway
$869 Cendant Corp.
$863 Yum Brands
$853 Schering-Plough Corp.
$833 Hewlett-Packard Co.
$812 Best Buy Co.
$796 AstraZeneca
$769 Merck & Co.
$721 Deutsche Telekom
$715 Kellogg Co.
$703 Coca-Cola Co.
$695 Lowefs Cos.
$687 Sanofi-Aventis
$629 Mars Inc.
$609 Nike
$608 Hyundai Motor Co.
$606 IBM Corp.
$599 Diageo
$595 Kohlfs Corp.
$590 Volkswagen
$582 Bristol-Myers Squibb Co.
$572 Bayer
$571 Clorox Co.
$546 SC Johnson
$528 Safeway
$515 Visa International
$500 Gap Inc.
$489 Kroger Co.
$489 Capital One Financial Corp.
$487 Doctorfs Associates
$475 Eli Lilly & Co.
$469 Campbell Soup Co.
$466 MasterCard International
$464 Burger King Corp.
$462 Wendyfs International
$460 Mattel
$459 Sara Lee Corp.
$456 ConAgra Foods
$453 SABMiller
$449 State Farm Mutual Auto Insurance Co.
$448 JP Morgan Chase & Co.
$425 Comcast Corp.
$417 Cadbury Schweppes
$415 Abbott Laboratories
$414 Vonage Holdings Corp.
$406 Circuit City Stores
$401 Molson Coors Brewing Co.
$397 United Parcel Service
$394 Allstate Corp.
$393 Limited Brands
$369 Kimberly-Clark Corp.
$363 Adidas
$361 Supervalu
$357 Kia Motors Corp.
$356 Bank of America Corp.
$337 Philips Electronics
$329 Reckitt Benckiser
$327 Joh. A. Benckiser
$322 TD Ameritrade Holding Corp.
So true . The NAR thinks that they will only have to spend 40 Million and than the main stream media will pick up on it and run with it for free .I have already seen CNN state the NAR ad campaign as fact ,however they didn’t state the reason why .
In fact I tuned into HGTV this morning and on one of their shows they were touting the ad campaign of the NAR on a regular program .Course the advertiser for HGTV are all REIC related .
We think of an ad campaign as network TV advertising, but I think it can be more subtle, and local, at a lower budget.
The budget goes to creating and dispersing a unified message to all members. THen to the local organs.
For example, the local city paper in its real estate section regularly republishes as news the entire copy of a press release issued by a house builder. The problem is the copy has not changed in 12 months, yet every couple months it appears again in the re section as though it were news.
All we need is a few warmed over mush stories sent endlessly to friends in the local paper who are glad to take ads, and, by the way, when you get a chance, could you also run this ’story?’ Or on the local tv house-for-sale-watch, just run the same 30-second spot about a good time to buy.
I wouldn’t sell the NAR short on its know-how in targeting its money.
“A Gulf Breeze, Florida, reader reports, ‘The market here went sky high and now went down - houses are selling cheap and people are not buying.’”
This is what happens when the RE market became disconnected from fundamentals. People saw home ownership as the road to riches, no risk, no way to lose. Now that’s off the table, most folks have no interest in tying up 50%+ of their take home pay in a flat or declining asset. Prices will have to come down before folks jump in again, and I think the expectation will be very different going forward.
I can confirm that the market in Gulf Breeze went sky high and people are not buying however it is BS that houses are selling “cheap” today. The Gulf Breeze and the Pensacola market needs a good 50% free fall from present levels to get back to reality in my opinion. I have noticed prices on a few good properties dropping a bit but we are far, far, far away from applying the word “cheap” to anything in Gulf Breeze by local standards.
I say no earlier than Dec 2007. We all know real estate busts average about 2 and a half years, and even if you mark the end of 2005 as the beginning of this one, we still have plenty of time left.
Mozo Maz
When property prices align with incomes (affordability)and mortgage payments are just slightly above the cost of renting a similar property taking into consideration taxes, etc, we are at the bottom. Until then - we have NOT hit the bottom. The NAR can spend a billion dollars and it doesn’t mean s*it. Rolls Royce can spend a billion dollars advertising their new $255,000 car and plenty of people would like one. Problem is, only a few can afford them and keep up with the payments.
Mike,
We’ll be closer to the bottom, but we won’t be there. Mass psychology dictates that prices will overshoot to the downside. Even when owning is cheaper than renting, people still won’t buy if they fear further declines.
Plenty of time left. PLENTY ! 2 and haft years? You are generous.
You have to factor in the worldwide mega real estate bubble in the rest of the world. Yesterday I read thta in Dubai, a crazy developer, wanta to erect a high rise hotel.
The hotel will have a particular form of a bedouin, a 100 floor hotel in the form of a man and dress with traditional arabic clothes. I am not kidding!
If that’s not a sign of a mega bubble…. what is ?
Do we know that? The only bubble bust I have witnessed directly was SoCal in the 1990s. Prices peaked around 1990 and fell steadily until about 1997, then flattened for a couple of years before starting to rise again in 1999 or 2000. Even flat prices really mean falling prices if you remember to account for inflation. So the SoCal bust took about 8 or 9 years to hit bottom. And that was from a much much smaller peak than this time around.
jbunniii,
I witnessed the same thing as you did, and agree this will likely take much longer. I think there’s the potential peak prices don’t return for decades.
Things are so much worse this time than the last. The late 80s bubble didn’t have all the crazy financing, offering $500K loans to every waitress and shoeshine boy.
This will likely end very badly.
“A Duluth, Minnesota, reader writes, ‘The housing market is brutal, has been for months. Prices dropping at least $20,000, some as high as $60,000 just to get them sold. Most aren’t selling even with the drop.’””
Say it ain’t so. The Housing Mania made its way all the way to Duluth? That is frightening. I love Duluth. It is right on Lake Superior. The University of Minnesota Duluth is a good school. Grandma’s bars and restaurants by the water make it a fun place to be in summertime. Robert Zimmerman (Bob Dylan) was born in Duluth. But Duluth has had a flagging economy for decades from what I understand. The port was highly dependent on the iron industry that died long ago in Minnesota.
Did I mention that it gets a little cold in Duluth? That is serious cold, the type that makes your willie hide for weeks on end. You have to coax it back out with three fingers and a Snicker’s bar. If people were buying second homes in Duluth then they are just too dumb to drink, reproduce or vote. You can rent a hotel on the water for the two nice months a year. I just shake my head at all of this stuff. The leeches even violated my beloved Duluth. “You maniacs. You blew it up. God damn you, damn you all to hell.”
You have to coax it back out with three fingers and a Snicker’s bar.
(laughing)…Snicker’s bar? Never used that technique. I’ll have to try it some time.
Tx, NYCity! You intelligent.
How about buying a house in California for appreciation? Governor and all state/city staff will be putting in place health care for all business with 10 or more employees or 4% of payroll to state fund. How many will be able to afford this? Many don’t have the option to leave the state as their business is tied to a local market. Others who can will leave. Who is going to buy your house? The last time I checked you still have to have a job or something?? Middle class unemployed or lucky to get low wages. Perhaps Californians will feel better because of the good weather. Let’s hope so.
Or prices can go up, no?
Great post NYC!
I truly would consider living in Minnesota, good sensible folk, but willy thinks otherwise…
Hey it’s even the case in Managua, Nicaragua !
- “Chief economist for the Mortgage Bankers Association, Doug Duncan, is not as sanguine about a swift recovery in the housing markets, by the way.
He believes, based on past slowdowns that the slump will take until at least mid-2007 and likely late 2007, to work through.
****‘We have to work off the excess inventory before ……blah****
- Sorry Doug….when wages can catch up to debt, then recovery happens.
Right, like all we need to do is jog this holiday blubber off and all is well. If a market is overbuilt, it takes time to ‘work it off.’ You notice nobody high up is saying ’stop the building!’
And now that everybody agrees that many markets are overbuilt, how come no one is taking those who explained away the matter to task?
For example: telling us that boomers were going to now own 2 or 3 homes, or that poor immigrants were going to fill up all these $500k houses even with negative cash flow.
Don’t watch Duncan’s lips - watch the moving vans around his house. He moved to DC to take the job in about 1989 - he and his wife rented - when asked why, he used to tell people “we want to get to know the area.” They spent about four years doing just that and then stole a huge house in a fancy suburb at the bottom of the last bust.
Well, Mr. Duncan and his lovely wife sold that house in 2005 and moved into - yes - a rental apartment. Why? He told the newspapers they just “needed a change.”
Like I said, talk is cheap.
Brilliant observation. Also, how did you find this info?
As reported in the Washington Post. They are huge REIC cheerleaders, but the editors do have a sense of humor, and every once in while, they will tuck nuggets like that into the paper. You have to read between the lines a little bit to figure out what they are trying to tell you.
We beat it to death on this blog and one of his friend’s used to post here.
He also said he felt like he need to take some chips off the table with a near $500K tax free gain.
DC_Too,
Great information,
thanks
“Chief economist for the Mortgage Bankers Association, Doug Duncan”
Am I remembering correctly that he was the one who planned to sell his DC home in 2005, and rent for awhile? If so, what ever happened with that?
DC_Too - you beat me to it!
Yes, it could be good time to buy a house if NAR could somehow negotiate prices with sellers to be brought 50% down.
I couldn’t sleep and was flicking through the TV channels. Happened to catch Lereah putting forward his nonsense. Up against him was a finance manager arguing that this was a bubble. Being Fox, the frontman were completely unbiased and mocked the finance manager. Fair and Balanced, My arse.
“Being Fox, the frontman were completely unbiased and mocked the finance manager.”
????
So that wouldn’t happen on any of the other mainstream media outlets (ABC, NBC, CBS, CNN)?
We all know CNBC is very fair. There’s no pumping at all
Well, I don’t think many would disagree that Fox is the main cheerleader and defender of President Clouseau and the other 2 parts of the axis of evil, Namely, Cheney and Rumsfeld. Nothing wrong with styanding up for Presient Clouseau of course. He’s been a great asset to the USA. He has brought Freedom and Democracy to the middle east. Enhanced the reputation of the USA all around the world. Kept the country from going into debt. Kept tight control over the oil corporations and drug corporations. Shown the world how competent the USA is in situations like Katrina and Iraq. So much good stuff President Clouseau has done we haven’t room on the blog to name them. If only Fox would list them.
OK Mike, you’re right, you would never see someone on ABC, NBC, CBS, and CNN “mocking the finance manager” to give a positive spin on real estate. Thanks for your persuasive argument.
You need to watch Maria Bimbolini on the “left wing” CNBC. She kisses more financial managers and CEO ass’s in an hour than I had hot meals last year.
Then of course, we have that other “left wing” supporter, Larry Kudlow. If he had his way, office cleaners would make 50 cents an hour in order to increase corporate profits.
The only guy I can think of who does lean to the left is Keith Obermann but I doubt if he would lean that far if he wasn’t, like the majority of Americans (who are finally starting to wake up from their fantasy world and sensing something ain’t right) and the rest of the whole world, sick of that moronic, incompetent, useless, spoilt little ex-alcholic rich boy who’s going to get his arrogant ass kicked in the middle east if he isn’t careful. Sorry! Wasn’t thinking! Correction: He’s going to other young American’s ass’s kicked in the middle east. He always covers his own ass by doing things like getting daddy to get him in the Texas National Air Guard so he doesn’t have to go to war. Or though, to be fair, he is proud of getting his military age daughters to serve their country and stand next to other young Americans in the Iraq conflict and risk their lives…..lol. Not sure how many terrorists they will find in the expensive, trendy night clubs around the world but you never know. Maybe President Clouseau is using them for intelligence reasons. If he is, lets hope they find some intelligence and give that amazing moron some.
Of course, after Obermann’s show he’s followed up by that “Left Wing” Republican Joe Scarbourgh who always has left wing leaning Buchanan as a guest and after that by that “Left Wing” conservative nerd with the bow tie. He’s such a nonentity I can’t even remember his name.
Oh, yeah, the left wing liberals certainly control the tv stations……lol.
Indeed very funny Mike !:)
Conservatives like arroyogrande are soo laughable.
Funny conservatives with the 9 trillions out of control deficit. Hey arroyogrande you should read what the Comptroller General thinks about your republican religious sect in power and the wonderful management of the government in 2006.The Comptroller General thinks that the US is going the way of Argentina. Even real conservatives are disgusted by what is going on.
Real funny comments Mike! and it’s soo true.
“Conservatives like arroyogrande are soo laughable.”
[Rolls eyes yet again]
Sorry to confuse you, but I’m not a conservative; however dogmatic political zealots like you guys like to apply the “if’n yer not for us, yer against us” principal, so call me what you want.
However, for the sake of whatever political party you belong to, please don’t post any more political retoric…
Here’s the strategy…
http://tinyurl.com/y4glcu
Any rich folks out there want to produce an “opposing view” campaign? You could probably buy time on the same shows through your local cable company way cheaper… But we gotta hurry!! oh well… I can dream cant I
I am not a marketing guy and therefore not familiar with airtime costs but it sure seems like a lot more than $40 million described. Maybe the NAR is getting contributions from other members of the REIC i.e. Wall Street or even the PPT to finance the ad campaign.
>>
A Ha and a major Bingo. There you have it, I’ve been wondering why theres been such a disconnect in what they are reporting and what I’m seeing.
“Yet, when the NAR released its third quarter median sales prices, the downturn was very modest, just 1.2 percent compared with 12 months earlier. Why is there such disconnect between the numbers and reports from the front lines?”
Could be…
Numbers “tweaking”…
or, manipulation…
or dishonesty…
or maybe even
Chicanery!
I vote for Chicanery. It sounds cute, kind of like chewing gum.
The word comes from the french word “chicanerie”. It means fighting for nothing, “se chinaner pour rien”. In the case of real estate values or statistics, it’s a real real good expression.
Figures lie and liars figure.
Speaking of “media blitz”, is this happening in other states?:
WA. State Realtors have an ad running on TV here. It’s ostensibly about their concern that homes are unaffordable in WA.
The ad directs people to go to the site http://itsapriority.com where you find a pre-written letter to email to local politicians.
I’m thinking it’s their way to pressure lawmakers to support the high prices.
Fortunately, you can delete their pre-written letter and write your own. I requested that lawmakers take a look at fraud appraisals and ultra loose lending as the cause of high prices (rather than the “everyone wants to live here” theory put forth by the realtors).
This email/letter goes out to a long list of lawmakers.
The ad began playing a couple days ago and now, whenever I turn the TV on, no matter what station or time of day, it seems to be there.
Is this going on in other states?
It seems to be a concerted effort by realtors to get the average person involved in badgering politicians into price supprts for RE.
First of all they are very expensive.
Second, your never sure of its health
Third, it’s very easy to get hurt riding one
Fourth, you have to feed them every day, even if you don’t use
them very much
Therefore, IMHO, it’s probably never a good time to buy
a horse.
What???? Oh, a house! Well now, that’s a horse of a different color.
It’s a good time if you really want one, can afford it, and are aware there’s a high likelihood of its value depreciating for a few years.
I got out of the horse business 20 years ago… burning the money is a lot less work. These days I’d rather somebody gave a skunk than a horse (you won’t get in trouble if you shoot a skunk).
Firstly, anyone who claims there is no housing bubble OR the market has already bottomed is either a shill OR a nincompoop.
Secondly, no amount of adverstising is going to change housing market reality. A lot of people bought more than they could afford and now they all want to give it back. As a result, the return lines are going to grow longer and longer and emotions will begin to boil.
Lastly, unless speculators start selling to each other OR prices fall to levels first timers can afford, the market will continue its slow grind.
I agree, no amount of advertising is going to change the facts in Silicon Valley or the greater bay area region. Most of us are priced out of our own markets, I couldn’t afford to buy here if I moved here now and I can’t move to another location in San Jose even if I used the equity I’ve gained over the years. My Mortgage payment would easily double even with a suicide loan. Meanwhile my taxes, HOA, and cost of living have all risen while wages have remained stagnant. Yes, there are a lot of places for sale, all hopelessly overpriced. Without major and I mean 40-50% reductions they can advertise all they want and nothing wlll change.
“A lot of people bought more than they could afford…”
Exactly. And these folks won’t be trading up anytime soon because they won’t have the equity built up. Add in that first time buyers can’t break into the market, and voila, you have a market that’s going nowhere for a while. Prices have to fall.
No they will be trading down real soon.
A lot of the spin also comes from Wall Street. They are trying hard to make sure housing doesn’t bring down the markets. It’s only a matter of time as truth usually prevails in the end. The Realtors need to make a living so they’ll say anything they can to make a sale. The homebuilders appear to be the most honest of the bunch (aside from Toll) because they have to report to their shareholders.
The million dollar question is whether housing will bring down the economy or not. If it does bring down the economy, then foreclosures will bring down housing at least another 20-25 percent. I’m afraid the “now is the time to buy” message is getting out there because many people are telling me this. I wouldn’t be surprised if we had a dead cat come out of the freezer this spring.
I think a dead cat bounce is a given, there are always bargain seekers and the psychology of these buyers will always convince them to pull the the trigger too soon.
I agree. There is at least some “pent up demand” from folks who have been priced out. Many have waited for some time and may be under emotional pressure to buy (e.g. newlyweds). They will jump the gun. I am not sure there will be enough to do much in terms of lifting prices, but they will certainly hurt themselves.
DCB depends on how much inventory has built up against the “don’t list until spring” ice dam. Yes, bargain hunters and false-bottom feeders may cause a bounce, or they may be drowned out by the spring inventory flood. It all depends on how much flow was trapped behond the melting dam. We’ll know soon enough.
All Hail the Spring Selling Season!
Hat tip to Cote:
Bring on the Spring Sting!
“The homebuilders appear to be the most honest of the bunch (aside from Toll) because they have to report to their shareholders.”
They may also be trying to signal the need for corporate welfare assistance, to be paid for out of the pockets of some of the same folks who paid record-high prices for new McMansions over the past few years.
“A lot of the spin also comes from Wall Street.”
No kidding! Their incentives are well-aligned with the REIC, as they provide (and profit from providing) the financial fuel for bubble construction and home buying. And I am pretty sure at least some folks who work on Wall Street are well aware that the last seven out of seven real estate construction recessions led to or were otherwise concurrent with GDP recessions, which generally entail falling stock prices and sales. So small wonder they are helping to propagate the soft landing happy talk.
Goldilocks has a wicked case of the crabs.
Since 2001 housing is the economy. No question here.
p.s.: Where’s my million dollars?
Dang. Italics OFF.
I see the RE industry using the 8 percent appreciation Per year they are not going to get to there advantage.
Price did not go up this year, hence price fell 8 percent, buy now.
The government uses this all the time to tell us they are spending less money , stupid program [that should have been killed anyway] was supposed to get a 10 percent increase this year but only got 5 percent , than according to the government they have saved the taxpayers 5 percent this year.
To Add…….
Heard the same Radio spot the other day in San Jose for an attorney trolling for wronged ARM, Toxic Mortgage holders that someone brought up last week here.
Lereah isn’t telling the whole story, even from his point of view.
“Prices will not drop further. Therefore everyone who didn’t buy before 2002 will live a vastly poorer life than past generations. So you might as well buy now and start suffering, because you’ll be the loser sooner or later.”
I’m begining to suspect the NAR has two economists, one to tell them the truth so RE agents and homebuilders can unload property and land early and then they have Mr. Happy, David Lereah, to keep coming out with creative phrases to induce buying in the public.
WT,
I absolutely love the way you put that. So simple and easy to say, and yet so true and shocking to those who “pump” this bubble as a good thing.
Yes, if you own a home, its a good thing. If you don’t, as you have so eloquintely (sp, I know) said, you will lead a vastly poorer life then those who bought before 2000-2002 (depending on your area. So simple, and yet so correct.
Now, the question that follows, why should those buying after 2002 live a poorer life? Is that what we want for the younger generations?
Nothing that has happened or is going to happen from this bubble is a good thing. It was not good on the way up (as it removed affordability and 1st time buyers) and its not going to be good on the way down (as people who struggled to get into a home find its worth 50% of what they paid 3 years from now). The only group that benefits are those selling homes and not buying new ones (like, dead people) and the RE establishment (like, people that make you wish you were dead). Everyone else loses.
Oh, one other group wins big, government taxing authorities get a windfall from this, and will likely never adjust their budgets downward as they have become accustomted to the 20-30% increases in tax revenue every year.
The only consumers who benefited from this bubble are the bubble-sitters who sold and rented while waiting for prices to drop.
Seriously, even home “owners” didn’t benefit unless they cashed out. In many cases (unlike states with Prop 13 or “Save Our Homes” - type prop tax caps), property taxes increase so much the “owners” could no longer afford their homes. Hardly a winning deal for them.
Cashed out bubble-sitters, the REIC and the companies whose business did well due to MEW are the only ones who benefited, IMHO.
Wasn’t it Hitler who said if you repeat a lie over and over again it becomes the truth (or something like that)?
I believe the NAR and all local RE agencies are conducting a huge propoganda campaign to essentially “wish the bubble away” by repeating over and over again….”it is a great time to buy and the bubble is over”.
On the radio yesterday (Seatte KOMO) I heard an ad by “concerned realtors” that the average joe is getting priced out of the market and that they “feel our pain” and that we need more affordable housing, and that they are going to work with the WA legislature (oh God no) to do something about it…ad nauseum. I am getting so much “condo spam” in my mailbox I am almost afraid to open the box. Of course it is always for the new downtown “live the high life” in some glorified apartment in the sky. The ads always picture the perfect couple living the perfect life…until they venture out and get hit up by panhandlers, approached by prostitutes, gassed by a bus, or are robbed. But hey, they need some GFs and YOU will do just fine. Must be selling like hot-cakes..
During this time of the year there is a “lull” so this is literally the “last chance” the RE industry has to try and make everyone “believe it ain’t so”.
Problem is….it IS so and come March listings will skyrocket and the popping of the bubble will really accelerate.
The REwhores are getting desperate…
No. It was his propaganda minister Goebbels.
I thought it was Tony Snow.
Tony Blair.
Tony Soprano.
Tony Montana
The phrase was also used (on page 51) in a report prepared during the war by the United States Office of Strategic Services in describing Hitler’s psychological profile [1]
His primary rules were: never allow the public to cool off; never admit a fault or wrong; never concede that there may be some good in your enemy; never leave room for alternatives; never accept blame; concentrate on one enemy at a time and blame him for everything that goes wrong; people will believe a big lie sooner than a little one; and if you repeat it frequently enough people will sooner or later believe it. - OSS report page 51
Sound familiar?
dang Moose, that’s the same ad that’s been running on TV for 2 days staight. They are SERIOUS about pressuring the legislature via the Average Joe.
write a letter on “itsapriority.com” and tell those lawmakers what you REALLY think!
“…all he’s looking for is to sell for what he owes…”
Yeah, tough break. Apparently, he owes far more on the house then it is worth. Oh well, back to Econ 101.
Yeah, sorry you can’t sell it for what you owe becase you’re a MORON. LOL
Call the lender and try the short sell route.
“‘The National Association of Realtors is launching a $40 million advertising campaign to encourage Americans to buy houses amid the ongoing housing slump.’ NAR President Pat Vredevoogd Combs said that now is a good time for consumers to buy a home, given low interest rates and high inventories. ‘You can walk into a marketplace and have a choice what you buy,’ Combs said.’”
A beter use of that money would be to create a fund to help realtors who are starving and cannot make sales.
“Let them eat stucco.”
Yum yum yum. It’s good for the bones but it creates a lot of constipation.
OK, this is an opening that DC_Too can’t pass up.
Folks, the NAR is a trade association. It is staffed and run by many, probably hundreds, of full time employees. David Leera is the poster boy mouthpiece - not the brains. The “president,” whatever her name is, is a rank-and-file realtor who is most likely unpaid and serves for a year and is then replaced by another volunteer (all expenses paid, of course).
Here is the rub: The NAR, like every other trade association, pays a bunch of very slick, sophisticated people a lot of money. These people’s first priority is to themselves, their triple-secretaries, their expense accounts and their $150 on-the-company daily lunches. They don’t give a sh*t about any starving realtor.
When there is trouble in any industry, and it doesn’t matter if it’s the realtors, the bankers or the indian chiefs, and the constituency at-large is up in arms, they will go after the leadership of their trade associations. There’s little, if anything, the associations can do, but obviously, they must respond.
Part of political survival in any arena is the old adage that “perception is reality.” In other words, it is often far more important to APPEAR to be doing something than to actually BE DOING something.
The point here is, the $40 million ad campaign is very likely part of the NAR leadership’s survival strategy. When the starving realtors demand to know, “What are you DOING about the slump?” the fat cats can respond, “Why, we are supporting a nationwide campain to get buyers motivated.” No one with a smidgeon of sense thinks this will do any good, but that doesn’t matter. What matters are the six-figure salaries, the secretaries, etc.
These guys are spending their members’ money and they will triple-down to shore up their cush jobs if need be. Our colleague flatffplan has a burr in his saddle over “gov workers,” not one of which is half as bad as an association manager.
There you have two more of DC_Too’s cents.
You mean like in Washington or at big fat cat multinationals. Do they have stock options plans too ?
DC_Too-
That is one of the most brilliant posts I have ever read. Thank you!
I believe that the average person has absolutely no idea that there are cycles in real estate nor do they evn know to do any independent research. Instead, when J6P decides to start looking for a new house he actually believes that the REIC is there to help him make the best choices and represent his interests. The fact that housing is in the news of late and there are some reports of problems is negated in J6P’s mind by the confusing and contradictory information he is getting. For every talking head that has concerns about RE the MS showcases 3 others who have been drinking the kool aid and claim that everything is going to be fine. By making the claims of a recovery just around the corner in a national ad campaign the NAR is adding one more message to J6P. I also believe that we are all subject to this lack of due dilligence at some point in some way - may not be in RE - Gawd I hope no one here would believe anything that comes from the REIC. But we may go see a film without checking it out for ourselves or blindly follow a doctor’s advice.
I completely agree with the fine two cents DC_too shared with us. $40 million is a drop in the bucket meant primarily to assuage the members who are wondering what NAR is doing to help them. But is is also visible to J6P and may have some effect,
BUT, as many have said here, no amount of lipstick is going to pretty up this pig for the simple fact that housing is no longer affordable. While it may seem like common sense to many here, I do not believe that J6P think in detailed economic terms, but rather in terms of simple affordability. And this is why the NAR campaign and claims of a soft landing or quick turn around will fail to convince J6P to buy. Housing is overpriced and the ability and eagerness of borrowers to get mortgage loans that they can afford to pay each month is diminishing with every day. The one thing J6P will respond to is the risk of foreclosure because that is something that will lessen his/her social standing in a world where the appearance of wealth is all important.
As we and many others have been saying now for years. This Bubble is a ponzi scheme, a house of cards built on loose lending and toxic loans with no support from basic fundamentals. It is starting to come down and it will come down hard simply because of the price heights and scope of the bad lending decisions and practices. I anticipate a ragged decline with a few dead cat bounces comprised of the simple, the foolish and the greedy who look to the REIC for guidance. The only reason that it is a good time to buy a house is to transfer your wealth into the pocket of the people telling you it is a good time to buy.
‘We have to work off the excess inventory before real estate returns to trend lines,’ he says. That will take 24 to 30 months from the peak, which he has pinpointed as July 2005.”
But even if it is only 2 years total, how can we say that this 2 years is not itself a trend line or part of the trend line? How can we treat it as something OUT THERE, and the real trend line is what we say it is? Don’t you have to take some stat courses as a prereq to an economics degree?
Lereah: “The good news is that the steady improvement in sales will support price appreciation moving forward.”
Why is price appreciation good news?