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The Housing Bubble
Examining the home price boom and its effect on owners, lenders, regulators, realtors and the economy as a whole.
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Here’s one; what is a lowball offer?
‘Conventional wisdom claims that lowball offers don’t work. Homebuyers are warned not to “insult” sellers, who are counseled not to counter offers from “disrespectful” buyers.’
‘But conventional wisdom doesn’t always hold true. With a severe slowdown in sales, some experts now offer new advice. What is a lowball offer?’
‘Karen Monsour, a Realtor in Coral Springs, Fla., says any offer that’s 25 percent less than the asking price falls into the lowball category.’
‘Others say the term “lowball” is more subjective. Miriam Bernstein, an associate broker with RE/MAX Prime Properties in Scarsdale, N.Y., suggests that just about any offer could be labeled as “lowball” if it provokes the seller to outrage or anger.’
‘The best definition I’ve ever heard is that ‘lowball’ is an offer that’s so low the sellers can’t contain themselves. They get angry,” she says.’
I get angry and outraged when I see a “highball” sales price, especially when the property sits on Craigslist or MLS for >6 months without any play.
Disrespected and insulted??? It’s not a sellers market anymore so who cares what they think. That ship has sailed.
I would qualify a lowball as anything 25% or more below the intrinsic value of the house, not the wishing price. By that I mean 25% below 120 times rent, or some equivalent investment value metric.
IMO, it is those who are ready and willing to buy a house who should be insulted by the wishing prices being asked by “sellers” in the current market environment.
Who knows what constitutes intrinsic value when home prices have more than doubled in seven years’ time, followed by the overnight shuttering of the subprime lending industry? It would be quite easy for J6P home seller to overestimate intrinsic value under such volatile conditions.
Intrinsic value should be pretty easy to measure, the prior post gave his definition 120x monthly rents which shouldn’t be too terribly difficult to calculate. That’s the handy thing about intrinsic values they’re usually a trivial calculation that doesn’t fluctuate nearly as much as market prices.
as an architect I would consider intrinsic value the replacement cost given whatever the current materials and labor costs are plus around 5%.
I would love to agree with you; however, we’ve seen the price of materials themselves fluctuate by incredible amounts due to supply and demand. Hasn’t lumber dropped +/- 35% or so, not to mention labor?
I have no idea how to value what the wholesale cost of a house is.
There’s no such thing as “intrinsic” value. It’s a discredited concept; however, it has been endorsed by both communists and the medieval Vatican. The intrinsic value of a product was viewed as the sum of the value of the labor needed to produce that product plus a small entrepreneurial profit margin.
Something is worth what the market is willing to pay. An asset’s market value today may to you be ridiculously high, or ridiculously low, but if that’s what the asset sells for today, then that’s it value today. Whether that value holds over time is a different matter.
So maybe it’s a good idea to use either the term “rental equivalent value,” which would mean something like 120x likely monthly rent, or else “replacement value,” following Sleeper’s idea. Certainly these are values towards market prices may be expected to revert over long periods of time.
‘Others say the term “lowball” is more subjective. Miriam Bernstein, an associate broker with RE/MAX Prime Properties in Scarsdale, N.Y., suggests that just about any offer could be labeled as “lowball” if it provokes the seller to outrage or anger.’
The reverse of the unacceptable high costs of housing is bringing reality back to the ones who inflated their home values beyond what the market would bear. I think low ball offers are more along the lines of what the market would tolerate for that time period. On the seller side, people are often emotionally tied to their homes and therefore lose sight of common sense when dealing with a low offer.
The bottom line is simple, price your property to what the local market can afford or risk getting offers far below what you think your property is worth. Those who fail to price their property correctly will be subject to a lengthy period of the property being on the market. Low ball offers are nothing more than a message to the seller saying your property is not worth what you are asking.
We keep seeing stories about sellers who wished they HAD taken that ‘lowball’ offer they got 10 months or so ago. As Forrest Gump said, ‘Stupid is as stupid does’.
A house here where I live listed at 179,900 for 2 years, is now REO, listed at 124,900 and still sitting. Obviously for that one,30% below original listing price still won’t fetch a seller.
any offer that’s 25 percent less than the asking price
Unless the asking price is 33% too high, in which case the lowball offer becomes a fair market offer, yes?
If they think the offer’s too low, don’t accept it.
‘The best definition I’ve ever heard is that ‘lowball’ is an offer that’s so low the sellers can’t contain themselves. They get angry,” she says.’
Don’t forget your housing bubble stages of grief when making serial lowball offers:
- denial
- anger
- bargaining
- depression
- acceptance
Determine pre-bubble price, compound in 3%/yr to current year and there’s your market price. Any price greater is a rip off.
Are you compounding 3 pct annual inflation? And wouldn’t you expect the market price to actually be quite a bit lower than it was before the subprime implosion? Declining sales transaction volumes in bubble land are huge, and a leading indication of future price declines.
P.S. I vaguely recall Shiller’s assertion that real estate goes up by 0.5 pct/year over the very long run. Given the recent rate of appreciation, prices have to go a long way down to revert to trend.
Determine the price you can afford. Any price greater is a rip off.
In my opinion, a lowball offer is any offer less than the lowest price I would sell the house for, if I were the owner.
I like your definition, as it allows for a little interpretive leeway in determining the lowest price — that is, a lowball to some is a perfectly reasonable offer to others.
What if you’re upside down? You can’t afford to sell for the “market” price (whatever that is), much less the lowball.
just about any offer could be labeled as “lowball” if it provokes the seller to outrage or anger
Oh boo hoo, what’s he going to do, hunt me down and slash my tires? The only disadvantage I can see to serial lowballing is that eventually you’re bound to encounter a seller who’s desperate enough to accept, and then BANG!, you’re the new greatest fool!
Lowball offer = setting a new comp.
But it’s moving target, totally relative, a February lowball offer could be wishing price in May.
Here’s an example of a lowball: I just offered this guy 250k, cash.
http://tinyurl.com/524eqt
Nice! You’ll have to fill us in on the seller’s reaction.
He’ll probably be mad, if I even hear back. But that’s about what it would’ve sold for 7 years ago. Will keep you posted!
Offer 295.000.
Did you get the possum pic?
Ouro - no, I think my spam blocked it - try gain, OK?
looks like a well built structure; good offer, Lost in Utah. only thing that spooks me is that deer head hanging on the brick chimney.
I would feel like dudley moore, half expecting a tweed jacket wearing duffer to appear, cleaning a shotgun while stating how much he cares about his daughter susan to his future son in law, and how he hates to see her sad, and how he handled a burgler with a butter knife who broke in to steal his bread when he was a boy . . . !!
The deer head goes. Instead, I feed the deer in the front yard.
Elmer Fudd comes to mind…LOL
“I feed the deer in the front yard”… Yea that will last about a year until the damn things get comfortable enough to eat everything, even on your porch. Then in the spring the does get territorial if they have fawns and will charge you. Yea…been there, now I let my son paint ball them.
a friend of mine who lives in the hill country west of Austin has been feeding the deer….and with the price of corn going up, that’s become an increasingly expensive undertaking.
No, sir! I had to kill it. It charged me.
It’s just that, since it was dead I just thought I would go ahead and put it in the freezer…
‘…only thing that spooks me is that deer head hanging on the brick chimney.’
Quit being such a wussy, aqius. Think how tasty venison is, if the Mad-Maxy time ever comes when you have to go bounding out the door and fetch your own meat. It’s like a comfort thing, I should think.
“….priced below appraisal! Seller is licensed agent in state of colorado.”
And it includes an inflated appraisal. You should have offered even less, just for that.
Nice house! Good luck to you.
160k… max. He doesn’t have that much in it.
“Seller is licensed agent in state of colorado.”
Double boo-yah! hehe
‘The best definition I’ve ever heard is that ‘lowball’ is an offer that’s so low the sellers can’t contain themselves. They get angry,” she says.’
Interesting. In an up market a low ball offer would provoke a seller to laugh (after accepting another, above asking price, offer). If the seller gets angry, its because there have been no other offers, which proves that the house’s value is dropping.
EXCELLENT observation, Colorado!
Lowball offers are below market value — lower than what a buyer thinks s/he will have to pay and at a level realtors and sellers fear to contemplate. That’s why realtors try to shame buyers into avoiding low offers.
Without lowball offers, the RE market would have come to even more of a standstill by now.
NB, from property tax records in my area, I can tell you it’s REALTORS who have been making lowball offers to get property off the MLS. What I want to know is: how long will they be able to throw bad money after good?
This might have been discussed before, but I’d be interested in knowing better how to judge whether a property is priced fairly or not. I have seen some properties drop by 100K or 200K but instead of making me feel like it’s priced better, I feel more like how inflated could it be if they can drop it by 100K so easily. What metrics are you guys using to determine the “true value” of a property?
What metrics are you guys using to determine the “true value” of a property?
Use a inflation calculator with the long term growth rate to determine the actual value of the property year over year. You should also look up the average wages in your area for single and married couples as these numbers will tell you what the local market will bear in terms of housing prices.
look up the average wages in your area ??
On a broad scale yes…But in selective locations, average wages have no bearing at all…
I like the income metric overall but it doesn’t speak to the ever growing amount of retired (or near retired) people and where they migrate to after the work portion of their life is over. I see so many people around here retired in their 50s. (High income background or for many, inherited wealth for others) They’re not downsizing to little condos.
I’m not really sure what the draw is for a retired brain surgeon from TX, a retired Clinton speechwriter, stockbrokers who have left Wall Street to go onto to more sedate opportunities, a former screenwriter (w/Cheers as one of his many credits) to come to a Syracuse burb. Usually children are mentioned in the explanation. The money these people bring to pay for their homes is not reflected in the local economy’s income stats but it has a great impact on home pricing, I assure you.
I think the question is more geared toward how to price a single house (or a collection of individual houses).
The income metric seems like a good macro indicator for a market, but I don’t see how one could apply it to an individual circumstance.
Exactly CarrieAnn….
Well, if you ask a realtor, they’ll tell you that the true value of a property is the value of similarly sold properties in the area. I don’t believe this metric. Something is only worth what someone is willing to pay. If you like a house and want to buy it, calculate what you think its worth based on your budget and how much work you’re going to have to put into the home to make it your own. If that number doesn’t line up with the seller, so what? If no one is willing to pay x dollars, then the home is not worth x dollars.
I put my house up for sale in January. Before I did, I used the 1998 price (at which we bought it) and adjusted upward for inflation. Determining the rate of inflation can be difficult, but you can use a range of rates to get a ballpark.
I moved in October ‘98 for 70,000 and sold in January of this year. Since I was doing this calcualtion in December, I used 9 years.
At 3% inflation (probably too low) 91,334.
At 5% inflation: 108,592
We sold it for 101,000 (had it listed at like 103 I think). This was a pretty decent price in that area for that house. That is near the top of the market.
That is just one data point. Others can talk about rent/income ratios and all that. I also researched what houses were selling for at that time in my hood.
Sounds perfectly reasonable and fair to me. When I see homes that pique my interest, I look at the late 90s price and adjust for inflation as in your example. Problem is, that end result is always much lower than the listing price.
I use Cleveland as my true metric. Or Bodie, CA (a ghost town).
The true metric bases itself on durable incomes of the residents.
If the prevailing and durable incomes are high then the surrounding real estate prices will be high. if the prevailing durable incomes are low (or nonexistant) then RE prices will be low (or nonexistant).
The true value (market value) is what it will sell for today; however, market values can, and do, change over time. What you want to pay is a sensible price, which may be less, but never more, than current market value. Here’s what I look at:
Does the price reflect the socio-economic class of the neighborhood? For example: if it’s a neighborhood of $75,000 a year households then can someone with that income afford to buy the house? If they can’t then the house is probably over-priced.
What’s the going rent for similar houses in similar neighborhoods? If the rental cost is significantly less than the ownership cost (with standard financing) then the house is over-priced (price contains a large element of hoped-for appreciation).
Estimate or find the price of the house during a period of time when prices were stable. Assuming the neighborhood isn’t changing (for better or for worse), that price should increase in line with the incomes of the type of people that lives in the neighborhood.
Is the neighborhood changing? You can pay more for a house in a neighborhood that is becoming more desirable to higher income newcomers. You should pay less for a house in a neighborhood that’s deteriorating. Better yet, don’t buy in a deteriorating neighborhood.
Ask yourself: if I buy at a given price will too much of my income be devoted to housing? Maintenance, replacements, and utilities are expensive. Also, even if you have a fixed-rate loan taxes, insurance, utilities, maintenance, and replacement expenses are variable and almost always increase over time. Remember, lenders are only interested in whether you can afford to make the payments; they don’t care whether you can afford to live the way you want to live.
How about we all propose solutions to this mortgage mess.
I know I only have a simplistic understanding of these things (and will probably be torn apart by the more knowledgeable posters here), but here’s mine:
Proposed Solution to the Mortgage Crisis
• Do not bailout those in foreclosure with taxpayer money.
• Enact a temporary requirement for banks to: (a) reduce principle on adjustable rate loans made between 2003-2008 by a fixed amount such as 15% and (b) work out rates for 30-year fixed mortgages for those purchasers who either put or could put at least 5% down on the newly appraised value. These rates would be higher than the boom year rates. Those that purchased between 2003-2008 with 15 or 30 year fixed loans and at least 5% down would have a choice of (a) having their principle reduced 15% and paying the higher “work-out” rate on their 30-year fixed loan or (b) keeping their current loan terms as is without a reduction in principle. Because prices are higher when rates are lower and rates are higher when prices are lower, it would be a windfall to the prior fixed loan purchasers to give them both a lower price (i.e. reduce their principle) and rate. The banks would not be able to charge pre-payment penalties on any of these work-outs. People who own their own homes outright will not be affected by this proposal. Although the paper equity in their homes would be reduced by this plan, it would be less anyway because of the market correction. Besides, equity is not realized (i.e. actually your money) until you sell your home. Before that it is only “on paper” and goes up and down with the market.
This plan would benefit society by keeping people who bought in good faith in their homes even if they unwisely signed an ARM because the neighborhoods in which they live avoid the problems associated with vacancies resulting from foreclosures. It would also be fair to the people who purchased within their means by allowing them to take advantage of the same work-out being given to those in trouble if they so choose. It would not cost the taxpayers money because the government would not be assuming or insuring the loans. The banks and lenders who recklessly made these loans would take a loss on these properties, but would still be better off than they would have been if they had to go through costly foreclosure procedures, pay for the upkeep of the foreclosed homes, market the foreclosed homes, and sell the foreclosed homes for pennies on the dollar.
• Any borrower that does not meet the above requirements would have their home foreclosed by the banks. The banks, as the owners, would be required to provide upkeep of the homes until they are sold to prevent neighborhoods from deteriorating. If they fail to keep the homes in proper repair they would suffer additional fines.
• To encourage buyers to enter the market, there would be a temporary 15% tax credit for any citizen purchasing a foreclosed home (equal to the 15% reduction being given to the prior purchasers). The buyers would be able to take a credit equal to 15% of the purchase price against their taxes spread over a certain number (5-10) years. Banks purchasing foreclosed homes from delinquent buyers will not be able to take advantage of this credit. Because the troublesome resets will continue until 2012, this incentive should be in effect (i.e. available to purchasers) until maybe 2015 to give enough time for all of the foreclosed and vacant homes (excess inventory caused by overbuilding during the boom) to be absorbed. Although this requires the use of some taxpayer money in the form of credits, the money will not be given to the bad actors that got us into this mess. It will be given to those getting us out of this mess by purchasing foreclosed homes. The credit is fair because it will be equal to the reduction in principle already given to previous purchasers. It benefits society by encouraging the purchase of vacant/foreclosed homes thereby rebuilding and strengthening communities. These new purchasers would be required to put at least 5% down, provide proof of income and employment, and have a good credit score, etc., and use fixed rate loans.
This proposal would be fair to all, while helping move home prices back in line with incomes. It would shorten the recovery period, rather than drag it out by unsuccessfully trying to prop up prices. It will reduce foreclosures. The Fed would no longer have to keep interest rates artificially low because the troublesome ARMs will have been converted by the banks to 30-year fixed loans. The Fed could raise rates which would strengthen the dollar thereby lowering inflation and easing the gas and food crisis. If the Fed raises its interest rates, banks should also offer higher interest rates to depositors. This will encourage savings and allow the banks to raise capital to use for investments.
The mess already happened, but to help prevent or minimize future messes, adopting a stable money would help.
14% + Mortgage rates
Sorry Ben…I couldn’t resist.
hwy50, you’re not SO far wrong: bear in mind that my perfectly performing trailer trash clientele are all paying rates of 8 1/2% and up. Still nobody in default these past few years, though a few have called to request payment extensions (which I can always afford to give, provided they pay the extra interest). Hey, az_lender should’ve been the chairwoman of Citibank, then they wouldn’t've had a Mortgage Mess. Their profits and bonuses might not’ve looked so hot either, though.
Desperate house sellers start swapping
http://www.9news.com/news/article.aspx?storyid=90963
Ha. Do they have any metrics to back up that it’s the ‘hottest trend’? They didn’t even interview anyone who had successfully swapped a house. To say the least this is not very accurate journalism. Sounds like someone surfed to a bunch of websites, interviewed one dude, then called it a day!
If you ask me the hottest trend in real estate right now is foreclosure. Foreclosures are up 75% nationwide. that’s a trend!
I saw a house listed for a swap last night on the MLS. It was listed at $337 sqft when all around it were at $140. That is so going to work - not.
I guess house swapping would involve a key party?
Oh my goodness, it is the seventies all over again! Break out the Barry manilow!
Speaking of 70s music, break out the Barry White with those keys..
saw a super ‘97 film from Australia called Love Serenade (same song as Barry White’s) quirky and the sound track is terrific.
Think grain silos and a stuffed marlin.
gotta rent it. Funny.
With great anticipation I clicked on the link then much to my chagrin I found out that the article was not about wife swapping.
‘I found out that the article was not about wife swapping.’
Well, not yet, anyhow. Give it a couple months and see how the desperation grows.
One in 5 manufacturing jobs in the US has now been ‘outsourced’ just since 2000.
College expenses are shooting up and more young people are delaying or eschewing college altogether.
Immigration to the US is increasing, creating more competition for low wage jobs.
Job growth has been flat to negative for the Q1 2008.
our corporate & farm plantation overlords LOVE unbridled immigration as wages drop and STAY down.
they look at the rest of the 3rd world and then blow a fuse because these common people have the gall to ask for a living wage.
“why, just look at chindia where they somehow make-do on a rupee a day. heck fire, if Gupta Lee can survive AND manage 9 children than I am paying my own help wayyyyy too much. and if they dont like it, tough” !
sorry, mr mega bucks, but I always thought america was supposed to be a shining example of how good life can be, not how bad it can get !? my mistake, and by the way, have you seen whom yer daughter is bringing home to dinner? heres a clue; it’s not Biff or Cliff, probably one ofthose poor scholarship cases like Estefan, G-Money, or Baller Baller. (hint; thats not a sports nickname).
what goes around, comes around, my good man. WOULD YOU pass the grey poopon please !?
Upper management and Exec classes have no qualms about stockholders paying for their excessive ego-inflated lifestyles — blowhards like Jack Welsh has to have mommy GE pay for his country club fees?–while the rest of us are made to feel like Oliver Twist asking for more lumpy porridge.
Did any of you catch this last year (from one of the Cohen & Grigsby’s seminars for immigration attorneys)?
http://www.youtube.com/watch?v=QR1Jke2NWTA
“Our goal is clearly is not to find a qualified and interested U.S. worker…………………in a sense that sounds funny.”
“Immigration to the US is increasing, creating more competition for low wage jobs.”
There should be a moratorium on immigration, legal and illegal, for at least a couple of years until the system can be satisfactorily fixed. The issue of immigration is an irritant and distraction at this time. If the underlying issues are fixed, the problems of immigration go away.
hey there palmy
if yer suggestions actually caught fire I’d finally be motivated enough to register & vote for ‘em.
laws, yes, M.O.O.N spells “run for office”, mr palmetto.
“There should be a moratorium on immigration, legal and illegal,”
(exhale) the thought of trying to enforce that scares the crap out of me.
‘laws, yes, M.O.O.N spells “run for office”’
One of my favorite books and a story my mind has flashed to often while reading this blog (or sometimes when watching the news.
Ahhhh! M-o-o-n spells…
That’s one of my favorite books of all time!
Define increasing. I haven’t checked US composite numbers yet but they are down in CA and in Sacramento and to a lesser extent, AZ., areas that we study. Also, from what we’ve seen, the movement into gateway states is decreasing, Texas being the exception.
The push of the gateway states has been going for quite a while. Interviews show that CA and AZ hispanic immigrants don’t perceive that states offer many opportunities anymore due to the political and economic climate.
Need a sign that this is an ongoing trend? how small were the immigration rallies in those areas compared to previous years?
Here’s Slim with the Mayday Rally Report:
In Tucson, the “pro” rally, which is heavily attended by illegal immigrants, had lower turnout than last year. There also was an anti-illegal immigration rally. Its attendance was up from last year.
“Need a sign that this is an ongoing trend? how small were the immigration rallies in those areas compared to previous years? ”
IN LA the immigration rally drew just 8000 marchers, way down from last year. It was a complete fizzle and shows that The pro-immigrant crowd is feeling the heat from a recessionary economy which means these folks are more scared about hanging onto their jobs than reforming immigration laws. Also the sentiment around the country had turned definitely more anti-immigrtaion which is natural in a declining economy with lots of former middle class citizens now having to compete with immigrants for lower paying jobs such as retail.
The powers that be have decided that they will use the discretion allowed them to bus a woman invader back home 128 times… whenever she feels like her pan handling is done for the week.
[2000 - 2006]In that period, the nation’s undergraduate enrollment swelled by nearly 2.7 million students, 18.7%,
http://www.usatoday.com/news/education/2007-09-12-census-college-enrollment_N.htm
Doesn’t sound like a lot of eschewing going on right now at all.
There’s a demographic phenomenon involved here. This year 2008 is supposed to be the peak year for college applications, based on I guess echo-boom statistics. I guess that would be the grandchildren, rather than the children, of the original boomers, since the peak birth year of the original boom was 1957. Hm, that doesn’t work…their grandchildren should be only pre-teens…well, maybe the early boomers had more kids than the later boomers, due to the economic woes of the mid 1970’s. Anyway I stand by my assertion that demographers project peak college apps this year; it doesn’t mean there isn’t also a lot of “eschewing” happening, and IMO “eschewing” is the right reaction to ridiculous tuition costs. Go learn from life, then see what college has to offer you.
az–re: your demographic phenomenon.
There was a recession in ‘81-’83 during which a lot of young, lower-to-middle management corporate females were “downsized” from their well-paying jobs. Let’s say you’re late twenties, educated, and suddenly unemployed for the foreseeable future…what do you do? I know what I did. The result is graduating from college (thank the gods) next week.
when one ‘eschews’ do you have to floss afterward?
SHADES OF GREEN
Home-price data has its flaws
Market anomalies painting skewed picture, index producers acknowledge
By Chris Pummer
Last update: 7:28 p.m. EDT May 1, 2008
SAN FRANCISCO (MarketWatch) — Commonly cited measures of U.S. home prices are overstating the degree to which the vast majority of Americans’ home values have declined in the last year, producers of two of the most widely tracked indexes acknowledged this week.
Top officials with the National Association of Realtors and Standard & Poor’s, which issues the S&P/Case-Shiller Home Price Index, agreed this week their monthly reports are giving imprecise readings of price changes at all levels — national, state and regional — due to rare market conditions that are skewing survey results.
…
The S&P/Case-Shiller index, which Tuesday posted a 12.7% decline for February, is skewed for two reasons of its own — it tracks just 20 major markets, many among the hardest hit, and its “repeat sales” survey by design pulls in individual homes both bought and sold in the last few years. Many of those are now being dumped by distressed homeowners and investors who bought at peak market prices and face higher mortgage-rate adjustments.
Nobody in the REIC had much trouble with the home price indexes when they were steadily rising on falling volumes as bubble pricing went parabolic back in 2005. Now that they don’t like the price movements, the measures must be flawed.
I personally don’t buy the story that the Case-Shiller index is somehow misleading because it “tracks just 20 major markets.” Aren’t those major markets where the vast share of the value of U.S. housing resides (I am guessing 90 pct+, to pull a figure out of my arse). I would go so far as to suggest the Case-Shiller index may understate the damage to bubble prices, as owners of homes which have dropped by the largest amounts (e.g., many of the 18.6 m - 2.3 m = 16.3 m vacant homes not currently on the market) have the greatest incentive to avoid selling them.
Conversely, for the one in eight Americans who live in California, these indices understate the rate of decline. It doesn’t mean that they’re inaccurate. They are what they are.
in a commission driven fee generating industry like real estate or law, the larger group of people always love the higher priced outcomes as they all make more money, and to hell with “gouging” the moving party(buyer).
if he wants or needs the item/services badly enough, then he pays the “premium” for it. how nice.
teeth gnashing on reverse; ONE person, the buyer, now has an advantage over many , and of course the commish/fee crowd (and govt) HATES it ….and has to use insulting term(s) like “lowballers”, “fence sitters”, or “bottom feeders” in the feeble attempt to shame the buyer.
my response?
these arent the ‘droids you’re looking for. move along. move along.
And you can add to that, you reap what you sow…
I have never understood the practice of insulting a customer. I have walked out of many auto showrooms because the sales droid insisted on insulting me. They really hate it when you show up with the invoice and kick back numbers from the internet and some will spew venom on you for doing that.
Every time I’ve purchased a new car. I’ve never taken thier offer on the first visit. I’ve walked out every time. They usually call you the next day and offer a lower price. I’ve also called out of town dealerships and negotiated a price sight unseen. I insist that I get a better price due to the travel time.
I don’t bother to show up unless I get them in line for a price I like. And then I have fun picking out things from the accessory book that I want for free.
I think the real problem with buying RE is that you’re actually buying from some know-nothing grocery clerk with the hindrance of a know-less agent. And with cars, a black accord LX is a black accord LX and the salespeople know it. I don’t know what convinces a seller and agent that their house is any different from the identical model down the street with different siding and a red accent wall.
Charliegator, that’s a good idea that I never tried. (Walking out on the car salesman.)
And with cars, a black accord LX is a black accord LX and the salespeople know it.
I have never met a Honda sales droid who didn’t act like he was doing me a favor in selling me a car.
why aren’t you guys buying online and sending in the faxed low ball proposal to the online sales guy?
Then when you send out 10-15 faxes to dealers w/in 200 mile radius, you will definitely get a YES at the end of the month for your exact price. And you walk in with $ to online guy and walk away with car in 1 hr or so. No haggling, no stress.
Works great. Saved 4k that way below list.
So will 2008 prove to be the year American consumers set a record for:
1. House price reduction’s
2. Declining SUV sales
3. Gasoline consumption
4. Bankruptcy’s
5. U-haul Rental’s
6. Used Harley Davidson sales
7. Credit card late fee’s
8. Wal-Fart tent sales
9. Rice pantry storage
10. Pawn shop visits
11. Property tax re-assements
12. Golf course membership renewals
13. R.S.V.P.’s to Cheney-Shrub X-mas bash in Texas
How many people are going to read this article in the LA paper and call up their mortager company to offer to buy out their own mortgage at 31 cents on the dollar? Is that on the principle only or on the entire amount that would eventually be paid?
I betcha I could talk some family into helping us pay it off for about what our down payment was (which was 20%).
Your loan is worth far more than 31 cents on the dollar because you’re paying it down, had a down payment, and likely can afford your home. That kind of pricing means the bank not only expects to foreclose soon, but that when they do, the collateral will be seriously degraded from the loan’s original value. Oh and pricing for debt is % of current balance so a $500,000 note with 27 years left would sell for ~$150,000. The new buyer with far lower cost can be much more flexible with terms adjustment for the borrower and still make a nice return.
That only happens when you’re loan was at or above the value at origination, and you really weren’t expected to pay off unless you refinanced.
Your loan might be selling for .98 or so though.
current balance = current principle? Thanks for the clarification. I remember when we signed some ungodly amount that represented the total of all the payments we’d make over the life of the loan - aaaaaaaaaaaa.
And yeah, I know there’s no way I’d be able to get it down to 31cents on the dollar - we’re just too responsible and pay our bills, darnit.
But if I do find a way to come up with that 98% overnight … I might consider it. Time to buy a lotto ticket ;).
If I ever own again after this (we bought a “lifetime” house we can grow into with our passel of kids and room to take in relatives if it is needed) I’ll buy land and learn how to build myself a strawbale house.
Okay, enough playing around. Time to go work in the veggie garden and get the next batch of beanpoles up.
Yeah current or unpaid balance is banker speak for current principle. Most of what you’re paying (the huge payment amounts) is essentially rent to have the money as long as you are contracted to have it.
and room to take in relatives if it is needed
Oh man! You better be careful with that one! As someone who has done it, and knowing someone else who is doing it right now, I highly recommend to anyone contemplating such a thing to think twice about that.
You’d be surprised how quickly a decently furnished, comfy house with meals, cable TV, wifi, and free aircon can destroy the work ethic in ordinary people.
OK, if it’s Mom or Dad in their declining years, that’s fine. But anyone of working age? Even if they are in a temporary hard spot in life, you’re better off renting them an efficiency apartment and paying with your money for three months, rather than letting them get settled into your place for “just one month”. Seriously.
Absolutely agree. MIL and GMIL stayed with wife and I for 2 months after being forlcosed on thru piss-poor financial/spending habits. Wife’s mooching uncle, sister and loser boyfriend never made it thru the front door. Had to draw the line somewhere. Bottom line: NEVER let spendthrift relatives get comfortable staying in your house so they can continue living their rockstar lifestyles. Be careful who you marry, be just as careful about who they’re related to. Wife is slowly being reformed.
Dude, where’s my house?
What I want to know is, for those of us in the slower to capitulate parts of the country, what’s it going to take for people to lower their prices? When will the psychological barrier be broken and people admit they aren’t going to get even close to what they’re asking? I’m not seeing much info in the MSM out in my part of the country, I still suspect most people don’t even know what’s going on, they think it’s just their house that’s a bit slow to sell…when is the Great Awakening coming?
I agree that there is a lot of conflicting information out there in flyover country about home prices. Virtually all the news is from California and the worst RE markets. Instead of a tsunami of foreclosures, I’m seeing a completely stalled RE market in my area (Alaska) with slowly dropping prices. The conflicting info in the MSM is leading many sellers who aren’t in desperate straits (yet) to take their homes off the market rather than drop the price. It drives me nuts because there is a strong perception locally that the market is only dipping temporarily, and that bubble prices are sustainable because “we’re different here”.
By the way, I’ve gotten flak from some other posters by suggesting that market fundamentals aren’t exactly identical in every part of the country, or pointing out that the Fed has published data that there has been a lot of regional variation in the amount of subprime and exotic mortgages, or that bubble prices in regions that didn’t peak at the same time and rate as CA/FL/NV aren’t dropping at the same pace either.
Some HBBers need to realize that while undoubtedly the entire USA RE market nationally has taken a hit, it is not playing out the same way as California…yet.
I feel like this, too. And it doesn’t help that foolish people (like my neighbor) are still chugging kool-aid.
I think part of the problem, is the recent talk about how a lot of the “other places” (places other than the coasts and a few metro areas) didn’t see as much appreciation during the bubble. This is true, but it has led the local realtors to imply we will see NO depreciation.
It’s true that it was different here compared to the places covered most in the MSM, but it’s not true that it was so much different that there was no bubble. It’s going to take a bit longer for people to realize there was a bubble here and you are going to have to lower your asking price.
In a market that typically tops out at less than 4000 listings, the greater Syracuse market had 461 new listings come on this week (minus all the dupes and relists of course). I’m thinking increases in inventory could be applying some major pressure on prices as we move through the summer. After that I expect for it all to boil down to jobs and how the local workforce fares as the economy changes. (IMHO)
There are some towns (and they are not a convenient commute into town) that do seem to be immune from the listing inflation….for now.
The cost of borrowing money at the Fed Funds 2% rate serves as a benchmark. If one uses the official Consumer Price Inflation index, then something close to a 4% CPI is the prevailing figure. The ‘Real Cost of Money’ is Minus 2% but only if one resorts to a bogus CPI figure posted. But wait! The USGovt reported CPI has the purpose to minimize Social Security annual increases, to limit federal pension lifts, to offer low phony inflation adjustments to many other statistics like economic growth (GDP), and to maintain a charade for selling USGovt debt wrapped in USTreasurys at low yield. The divergence of the CPI from reality is a story in itself.
Rely upon the Shadow Govt Statistics website that measures in what follows. They remove nonsense, gimmickry, false lifts from hedonic adjustments. The SGS folks offer a shadow of great value. The true Consumer Price Inflation is shown as raging near 12%, as its divergence from the baseline false statistic is widening steadily. This means the cost of borrowing money at the Fed Funds 2% rate is over 10% lower than the CPI. So money really costs MINUS 10%, which breeds speculation, and rewards it heavily. This differential is astonishing in its magnitude. That fuels speculation and a broad attempt to seek effective inflation hedges in protection.
Government job numbers must be wrong. How about a thread to discuss the way the data is gathered. Jobs have changed a lot lately with more contract employees, part-time, commissioned, self-employed, undocumented. Is the old measurement still working? I know several people that are not technically unemployed but have had their work days and hours cut back a lot.
check out the Shadow Govt Statistics website
I hesitate to call the unemployment rate “wrong” because that propagates the myth that the unemployment rate is determined from those claiming unemployment. It’s not. It’s determined from the the monthly current population survey which uses ILO (Int’l Labor Organization) standards to calculate unemployment just like Eurostat (EU) does.
To answer your question, yes there is a problem with the unemployment rate. Realtors, mortgage brokers, etc. are either self-employed or considered enough of an independent contractor that it gets hard to determine when exactly they are unemployed. As for the “undocumented”, that means illegal aliens and of course the unemployment rate isn’t going to count that. It shouldn’t.
http://www.fedupusa.org
How unconstitutional Federal Reserve is stealing our money to help fellow Few bankers. Our savings and wages are being stolen by the Federal Reserve.
How about a detailed thread regarding housing in Connecticut and Rhode Island? I’ve seen a few things discussing Mass, but very little for those of us a little further south.
From what I’ve seen, prices are not declining much at all and houses seem to be moving well. New condo developments are filling up too. I’m not sure prices will decline here. There are a decent number of foreclosures in Providence, but that doesn’t seem to be affecting prices further out.
Today’s Headline Auto News from the WSJ:
Japan Sales of Cars, Trucks Jumped in April
Asia, South America Lift VW Earnings
Profit Hurt, BMW Diverts Cars From U.S.
GM Posts $3.25 Billion Loss As Turnaround Stumbles
U.S. Car Sales Fall Again
Make fun of Jose Canseco.
I just don’t understand how one can earn my guess of $100M and now have nothing left. The best an agent could do for these type of ‘celebrities’ is take the first chunk of their $100M contract, and hire a financial planner to put it into something that would give them a guaranteed income for life (reasonable amount) when the glory days are over, as well as prepare them how to handle the end of the glory days. Obviously nobody did this for Jose. Damn shame. Ditto for Tyson, and a whole host of ones I can’t think of.
“We have to make a lot of money…….because we spend a lot of money.”
Sorry…..can’t remember the name of the athlete that said this, so I can’t give credit where credit is due
Patrick Ewing. = Moron!
It doesn’t mean necessarily that he is broke. He merely realized that the amount he owed on his house was much more than the value of the house. The shows a little bit of financial acumen.
The Oakland A’s did the same thing when they realized his value was less than that of his contract and traded him away to the Texas Rangers(in the middle of a game no less).
In the middle of a game?
Lol.
Don King once arrived at a fight with one boxer, the one that lost, and left with the other boxer, the guy who won.
When opportunity knocks …
Many professional athletes lose their money because their good buddy “financial advisors” either embezzle it, invest it badly, or both.
Lowball offer - if the buyer isn’t ashamed of being able to verbalize the offer, they they offered too much. If the seller immediately accepts, the buyer offered too much. Today, who cares about insulting a seller. Here is my offer, take it or leave it. What you owe the bank and think you are entitled to as ‘equity’ is irrelevant to me. A buyer should be blushing when he/she gives the ‘insulting’ lowball offer. Pat Benatar’s, “Hit Me with your Insulting Shot”. LOL
I think that a lowball offer is one that is significantly lower than other legitimate offers. Think of bids for a home improvement project. If the contractor bids are $5,000, $4,500, and $3,000 then the $3,000 bid would be a “lowball” bid. I think that if there is only one offer then by definition it can’t be “lowball.”
When my cousin got an offer (his first) on a Palm Beach County condo that had been on the market for 131 days, and on and off the market for 6 months before that, the offer was a full 93% of the asking price — too much, IMO, and I advised the cousing Just Take It. He is doing that.
I am pretty interested in the changing rules of credit. How to punish and/or restrict bad borrowers *and* bad lenders, in equal measure.
A good friend of mine told me yesterday with sincerity that it’s a good idea to carry a balance on your cards because it increases your credit rating. She’s technically wrong, but in a way she’s right, if lenders are making their money by stringing borrowers along, she’s a good customer and I am a deadbeat (I don’t carry a balance).
It got me thinking about the weird way borrowers and lenders play cat-and-mouse with one another: neither is looking for a fair deal, they’re looking for a chance to get the upper hand. It’s like the old story about dividing the cake fairly: the child who cuts the cake cannot choose which slice he gets. Knowing the other child will be able to select a bigger slice if he cuts unequal slices, the cutter will try as hard as he can to cut in as fair a manner as possible. Can we implement measures that provide maximum incentive to lenders and borrowers to seek a fair deal, or is that hopelessly naive? How would this change the relationship between buyers and sellers (who, at the moment, seem to be in a pretty hostile relationship, too).
Two stories on Marketplace this morning:
1. Fed works on credit card rules: Today, the Federal Reserve will put aside its worries about inflation and focus on your credit card. The Fed’s expected to endorse a crackdown on banks who get sneaky with credit card fees and interest rates.
2. Call for stricter bankruptcy laws in U.S.: A leading economics institute in Britain has found a new culprit to blame for the severity of the credit crunch — American bankruptcy laws.
http://marketplace.publicradio.org/display/web/2008/05/02/credit_card_rules/
(sorry for the ugly link).
Topic = Housing-related violence
Jim Troutman committed suicide in 1994 after was was mired by homeowner association lawyers into homeowner association lawsuits and fraudulent judgments.
Several years ago, Richard Glassel a 61 year old homeowner in Arizona walked into a meeting of his homeowner association with guns blazing and killed several board members.
Last week in Pompano Beach, Florida, Patrick Dellisanti, 57, walked into the clubhouse of his homeowner association brandishing a gun and demanded to speak with an employee of the association over the $4,000 fees charged to the condo of his 80 year old mother. He took two employees hostage.
http://www.ahrc.com/new/index.php/src/news/sub/article/action/ShowMedia/id/4437
“I don’t see how one could apply it to an individual circumstance.”
Well, unfortunately,there’s nothing individual about it when this situation is about 7% of a town’s population and applies to a similar proportion of a town’s housing stock. Believe me it’s a tide that lifts all boats.
This area is a graying market. I’d like to know what the proportion of non-working adults comfortably living off their investments is to working adults. That ratio is where the income/home price metric goes awry, IMHO. (or are dividend pay-outs reflected in an area’s median income stats? in which case I’d be wrong. OTOH, these aren’t taxed the same as income are they? More money in their pockets that can be paid into housing.)
This was meant to be under the part of the thread discussing income/home price ratios.
My apologies.