From Inman News:
Housing is falling much faster than reported
The housing market has softened much more than is being reported. We have been advising our retainer clients for more than one year about misleading national sales information, both with the existing-home sales and new-home sales data. We are now going public with our concerns because we are concerned that policy makers are relying on national data to conclude that the housing market correction has not been severe.
…
Closing Data: We purchase and compile actual home closing data for approximately 181 counties across the country, which captures the counties where about 55 percent of the U.S. population lives and a significant percentage of all of the counties where the large home builders are active. This data shows that sales have fallen 22 percent if you compare sales over the last 12 months to the prior 12 months. On a straight year-over-year comparison, the decline is much more.Mortgage Bankers Association (MBA) Data: The MBA seasonally adjusted purchase application index, which is a measure of the number of people filling out loan applications to buy a home, is down 18 percent from its peak in September 2005. With presumably more applications being filled out by borrowers who now have to shop around for a loan, how could sales have fallen by less than 18 percent?
Builder Data: The nation’s two largest home builders, D.R. Horton and Lennar, are reporting that orders have declined 27 percent to 37 percent year-over-year. D.R. Horton and Lennar have dropped prices significantly in many markets to generate sales, while the resale market has not. How could their sales have fallen more than the resale market, even if new-home communities tend to be in fringe areas?
Realogy Corp. Data: Realogy, which is the parent company of Century 21, Coldwell Banker and ERA, participated in roughly 1.9 million brokerage-related transactions in 2006 compared with 2.3 million in 2005, representing a year-over-year decline of 18 percent nationwide.
2005-2006 NAR State Data: The National Association of Realtors state data does show sharp year-over-year corrections in major states: 28 percent drop in Florida, 24 percent drop in California, and a 28 percent drop in Arizona. Our data, however, shows the sales have probably dropped by 34 percent, 27 percent and 38 percent, respectively. The national numbers include some large states where sales volumes have not corrected substantially, such as in Texas and Ohio, but we believe these markets are not very healthy for other reasons. Interestingly, our calculations were tracking very closely with NAR data through 2005, as illustrated above. We did investigate NAR methodology and have found absolutely no reason to believe that the NAR is intentionally misleading anyone, as some have suggested.
From the Wall Street Journal:
Home Down-Payment Gifts May Cease
Proposed Aid Ban Would Deal a Blow To Nonprofit Groups
By MICHAEL CORKERY
May 14, 2007; Page A9
In what could be a crippling blow to downpayment-assistance programs, the Department of Housing and Urban Development is proposing that home buyers using certain government-insured loans be prohibited from accepting down-payment gifts that are indirectly funded by the home seller.
HUD’s proposed rule threatens dozens of nonprofit groups, including Nehemiah Corp. of Sacramento, Calif., that have doled out hundreds of millions of dollars of payment assistance to mostly low-income home buyers across the country.
Such groups have been controversial because many provide down-payment gifts to buyers and are then reimbursed by individual home sellers and home builders. Critics say some builders have included the cost of the gift into the price of the house, which inflates values. Critics also say these gifts lead to higher than normal foreclosure rates.
HUD officials declined to comment beyond the rule, which was proposed Friday. The rule comes one year after the Internal Revenue Service said many seller-funded gifts benefit profit-driven sellers and may not qualify as a charitable activity.
Down-payment assistance is typically used by borrowers who take out loans insured by the Federal Housing Administration, which requires borrowers to have a minimum down payment of at least 3%. In fiscal 2006, according to HUD, about a third of borrowers using FHA loans to buy single-family homes, or about 103,000 borrowers, used down-payment gifts from nonprofit groups.
According to HUD, the overall foreclosure rate for FHA-mortgages used to purchase homes in 2004 was 3%, while such loans involving down-payment gifts from nonprofit groups had a foreclosure rate of 6.4%.
Watched bougth and sold on HGTV yesterday. what a bad show. u see only realtors talking on the phone. in fact, I think it backfires, when people see what little work agents do, specially selling agents.
From MortgageDaily via PRNewsWire:
Nonprime Originations Sink
U.S. nonprime mortgage production has
recently tumbled by nearly a fourth, according to an analysis of quarterly
production data by http://www.MortgageDaily.com — the dominant source of
online news for the mortgage industry.
First quarter 2007 nonprime originations, including subprime and home
equity loans, declined approximately 24 percent from the fourth quarter
2006, the report said.
MortgageDaily.com analyzed reported fundings from 11 major nonprime
mortgage bankers. In the aggregate, the group originated nearly $90 billion
in nonprime volume during the first quarter.
The decline in nonprime numbers starkly contrasts increased first
quarter conforming production at several large lenders.
From Newsday:
A high-flying company loses
The first public indication that Melville’s high-flying American Home Mortgage Investment Corp. might be losing steam came in an April 6 news release headlined “American Home Mortgage Expects Reduced Earnings in the First Quarter and Full Year 2007.”
The release said that “market conditions” were forcing the company to take losses in some of its investments and that both dividends and earnings would be substantially lower than the company had indicated in January.
By the end of the month, the company released its first-quarter financial results: Earnings had declined 44 percent during the first quarter, and sales were down more than 15 percent. It was a far cry from the consistent double-digit growth investors had come to expect.
Although American Home did little business in the default-ridden subprime market, large institutional investors, spooked by the decline of that area, lost their appetite for mid-level mortgage-backed investments.
Foreclosure facing more homeowners
Housing market weak
Posted by the Asbury Park Press on 05/13/07
http://www.app.com/apps/pbcs.dll/article?AID=2007705130389
Worth the read
“At the current rate, there would be nearly 36,000 foreclosure filings statewide this year, up from 23,875 in 2006.”
From article [post,5],
Oh boy. A 50 % increase over last year. I can not even imagine what will occur when a recession hits.
SG (2)-
You’re basing an opinion of what we do in the real world upon the CONTENTS OF A TV SHOW?
All the characters on “Friends” seemed to have cool clothes, lots of free time, good looks and either no jobs or minimum-wage McJobs. Nobody thought that show was “reality”…why should “Bought & Sold” be considered any differently? It’s just cheap content for a snarky little cable channel; instead of paying a cast of celebs millions of dollars per episode, they get their “talent” for nothing.
I will grant you this: any self-respecting Realtor would NEVER, EVER be caught dead appearing on this serial joke of a program.
M. Farrell CEO Annaly Mtg
“The country is going through a real estate depression.”
Barrons May 14 2007 page 33.
“DEPRESSION”
Lots of upset realtors posting at CBS after last night’s “60 Minutes” program:
http://www.cbsnews.com/stories/2007/05/11/60minutes/main2790865.shtml#ccmm
DC area market continues to slow. More evidence that the bottom has not yet been reached.
http://www.recharts.com/AroundDC.htm
jb
SG #2, check out “Million Dollar Listing” to see the same thing with higher stakes (6% of a $5M sale):
http://www.bravotv.com/Million_Dollar_Listing/
You have agents driving around people in $150,000 Bentleys.
Mortgage Woes Force Banks
To Take Hits to Sell Homes
By JAMES R. HAGERTY
May 14, 2007; Page A2
SAN DIEGO — An auction of nearly 100 foreclosed homes here Saturday showed that mortgage lenders are having to accept huge discounts in some cases to unload such properties.
A surge of foreclosures over the past year or so has left lenders struggling to sell a growing backlog of homes. Rather than relying on real-estate agents, the usual practice, some are turning to large-scale auctions to speed up the sale process.
Real Estate Disposition Corp., the Irvine, Calif., company that organized Saturday’s auction of lender-owned homes, plans similar sales May 19 in Los Angeles and May 20 in Riverside, Calif.
At the San Diego sale, houses and condos typically sold for about 30% below the previous sale or appraisal prices. In a few cases, the discounts were around 50%.
A four-bedroom home in Oceanside, Calif., attracted a high bid of $495,000 at the auction, 33% below the sale price recorded in November 2005 for the property. One condo in San Diego sold for $120,000, less than half of its previous value.
http://online.wsj.com/article/SB117910010258001458.html?mod=hps_us_at_glance_most_pop
Isn’t it amazing how realtors want full disclosure? Transparency in reporting.
It will be fun watching this bunch cheerlead prices down now.
Think or your pockets will be picked.
hehehehehe
From the Record:
Tax ‘reform’ just another political gimmick
THE BIGGEST CHARADE promoted this year in politics is that the Democrat leaders in Trenton have actually given the people of New Jersey property tax reform. What the taxpayers have received isn’t anything like tax reform; it’s just another in a long line of election-year gimmicks that will leave the state facing a huge financial crisis and cause middle class taxpayers to clutch their wallets.
At best, some taxpayers will get a one-year reprieve from the continued rapid escalation in property taxes. The reprieve will be as costly as it is deceptive. The highly touted 20 percent tax rebate plan that Democrats are clinging to for their reelection hopes in November is actually a fraud. It is not sustainable and it is paid for in large part by the 15 percent increase in sales tax enacted by the Legislature last year.
…
Unable to summon the political courage to cut spending and stop wasting taxpayer money, the Legislature created the Office of State Comptroller, which in itself will increase state spending by $9 million and will likely result in no savings since any spending cuts suggested by the comptroller can be overruled by the Legislature.
…
In the name of reform, the state will create another layer of bureaucracy called the super school superintendent. These 21 new bureaucrats and their costly staff are supposed to save you money by reviewing the budgets of the local school superintendents. So we will have bureaucrats watching how other bureaucrats spend the taxpayers’ money. It’s not hard to predict the outcome of that scenario. No real savings will result – in fact, taxes will have to increase to pay for the super superintendent and his or her staff.
…
Trenton points to the 4 percent cap on municipalities and school districts as an example of reform. The truth is budget caps have never worked in New Jersey. Trenton creates too many loopholes to make them meaningful. And, if budget caps were such a good idea, why didn’t the state Legislature enact a budget cap on its own spending?
Not sure if that last piece requires any kind of disclaimer. Like always, consider the source.
jb
The internet the great equalizer.
http://housingpanic.blogspot.com/2007/05/livin-large-and-going-bankrupt-yum.html
Lender’s next tsunami?
It’s “eerie” how the subprime correction appears to be repeating in Alt-A…”Compared to subprime it’s at a snail’s pace but I think it’s real,”……….pure mortgage companies have no place in tomorrow’s world dominated by investment banks, large financial firms and big diversified lenders that take deposits from consumers, such as Countrywide Financial.
http://www.ocregister.com/ocregister/money/article_1692958.php
Un (9)-
What a load of crap. The 60 Minutes piece was just laughable in its complete miss of the mark.
BTW, check this video of the Move.com vs Redfin debate, moderated by Inman (too bad 60 Minutes didn’t just broadcast the entirety of this, rather than doing a slice-and-dice in attempting to portray these limited-skill companies as a legit market force).
If you want, drop in at about minute 8:30, and watch Allan Dalton of Move.com absolutely skewer the Redfin CEO:
http://www.wellcomemat.com/epreview/384
From MarketWatch:
Countrywide Financial rolls out reverse mortgages
Countrywide Financial Corp. has launched a reverse mortgage aimed at allowing seniors with pricier houses to convert their homes’ equity to greater income, marking the largest U.S. home lender’s entry into one of the fastest-growing markets targeting baby boomers.
The nation’s aging population, along with the rapid housing-price appreciation from 2000 to 2005, has led to record growth in reverse mortgages, which allow homeowners 62 years old and above to turn home equity into income they don’t have to repay until they move out. The reverse mortgage takes its name from the way cash flows between a lender and a borrower. Rather than sending mortgage payments to a bank, as with a traditional mortgage, the borrower receives money in the form of a lump-sum payment, equal payments over time or a line of credit.
Dalton drops another bomb on Redfin at about 11:20 of the final segment of the Inman discussion:
http://www.wellcomemat.com/epreview/393
If you watch all four segments of this video, Redfin’s CEO is left speechless by simple questions at several different times.
It’s especially laughable that Kelman insists that a mutuality of interest between agent and client only occurs when the agent is compensated LESS.
From MarketWatch:
Wells Fargo’s mortgage application pipeline soars: CFO
Despite the residential housing slowdown, Wells Fargo & Co.’s backlog of new mortgage applications is up 19% this quarter, Chief Financial Officer Howard Atkins said Monday.
The increase reflects more refinancing of mortgages because long-term interest rates continue to be historically low and because rates on long-term loans are lower than short-term rates, he said at a conference in New York monitored by Webcast.
Atkins also said that in the bank’s core markets, primarily in California, home purchases continue to generate “decent volume.” The increase also may reflect slowly growing market share because mortgage brokers are directing more business to “strong providers” in the wake of a spate of bankruptcies from subprime mortgage originators.
…
The company’s residential mortgage portfolio, despite the growth in applications, also is being more tightly managed. It represents about 26% of Wells Fargo’s total assets, down from about 30% through much of last year, due to tightened standards and smaller loans imposed during the first quarter to borrowers with weak credit histories.
It became official this weekend, people: we’re not buying this year. We’ve been renting, have our 25% to put down (we’re trying for 30), and we’re still gunning for a 15-year loan.
The only way we’ll be buying this year is if someone goes for our pitch – any discussions on the house you have will BEGIN with 100k off the price. So if we see something for 475 and we can say 375k, a deal could be had. But since nobody’s willing to go that route (and would rather sit and watch as it drops 50k and then 75k over the next year) …
And I’m the same guy that talked about finding a house in Ridgewood for $375k. A few of you laughed. We’re hopeful, and she’s an optimist.
Also, we’re going to brush up on buying a foreclosure property. Seems like if we educate ourselves there, a great deal could be found.
Clot, realtors claim they add value, yet are unwilling to prove it in the open market, instead relying on a cartel-like hold on information.
Were it not for public access to tax records, the consumer would be completely at the mercy of realtors.
It’s striking that the greatest fear realtors have, is that consumers will have access to information, and have different choices available to them when buying or selling a home.
I will grant you this: any self-respecting Realtor would NEVER, EVER be caught dead appearing on this serial joke of a program
Thanks clot!
Now I am really glad I turned them down, but I was really just worried about that whole camera adds 50lbs thing!
Really I did turn down an appearance to present an offer I had on one of the homes being sold, I did not know it was involved until I had an offer. It will be presented, and I am really hoping they use Caroline Rhea as me, I feel she would best portay my quirky sense of humor, and she “has such a pretty face” (-:
KL
Clot (#7)
You’re basing an opinion of what we do in the real world upon the CONTENTS OF A TV SHOW?
By most accounts, the Realtors on this program are very pleased with the way they are being portrayed and encouraging potential clients to tune in.
(e.g. http://www.suburbandigs.com/ )
I think it speaks to the perceived “value” that most realtors think they bring to the table (I ‘showed’ your house at an open house [which we all know serves to help agents find new clients], I printed flyers [and maybe even had to change the ink cartridge, whoa is me], I spent hours… well, an hour, on the phone finalizing bids from buyer agents, etc.).
I truly believe that many agents who have never had a seriously demanding corporate job and all the politics and stress that go along with it honestly believe that these are high value services that clients can’t do for themselves. I have seen too many examples of poorly written marketing documents, poorly photographed homes, and first grade level “negotiating skills” to get on your boat of thinking that this show represents only a minority of the agents out there.
YOU are the exception to the rule. You obviously can string a sentence together, and typically an eloquent one at that. KL is an exception, I am sure she would insist that her clients clean their house before she takes her photographs or advise them they might as well not even bother trying to sell it.
95% of the home descriptions and marketing materials I read on a home only serve to make me not like it. Very few make me want to kick the tires no matter how “charming” it would be to have “pride of ownership”.
When you take hundreds of hours of footage and edit it into a narrative structure, you are essentially creating scripted television. Some shows are worse than others with the degree to which they literally put words into ‘characters’ mouths. Until I hear from these agents that they were specifically asked to say certain things, I am willing to accept that they actually did what they said and believed that what they were doing was valuable.
As for Allan Dalton (your #18 post), I didn’t think he skewered Refin’s CEO at all. Redfin needs to stop comparing itself to Amazon, its just the wrong comparison. But to suggestion that Redfin is a bad business model because we can’t compare how much homes could sell for with a realtor vs how much they sell for with Redfin has no merit.
The model is in fact more closely aligned (though still not a perfect comparison) to buying a portfolio of equities at $14.95 a trade online vs. using a financial adviser/broker to select stocks for you and subsequently charge you a larger commission for their ‘expertise’. We all know that a monkey throwing darts at the financial section has a good chance of beating a professional stock picker much of the time.
I don’t know who the guy was at the end who said “The marketplace will decide…, we should let these innovations happen” but I am with him. LET the marketplace decide. Realtors should be praying to find home sellers who want to use redfin because as you say, you can rip these sellers to shreds and get an excellent price for your home buying clients. So why not embrace the business model?
By the way,
…instead of paying a cast of celebs millions of dollars per episode, they get their “talent” for nothing.
Some would regard this as a good business practice by the HGTV programming department. Not sure how it is a valid reason to discount the entire contents of the show.
I agree that no self-respecting person would be caught dead appearing on this program but again, I refer you to Roberta Baldwin’s website linked above. She seems pretty damn impressed with herself.
My take on realtors…
“It can be the hardest, high paying job you ever had. Or, it could be the easiest, low paying job you ever had. But, you decide.”
You just want the one that is going the first route.
JM
Frustrated #22
… any discussions on the house you have will BEGIN with 100k off the price. So if we see something for 475 and we can say 375k, a deal could be had.
And if the home is priced at 2001 levels adjusted 4% a year upwards for inflation, you still expect 100k off? If so, I understand your screename.
Were it not for public access to tax records, the consumer would be completely at the mercy of realtors.
Senator Rice (D-Essex) was gunning to shut down public access to tax records, making them available to owners and “professionals” only.
How is this for a “strange hold”:
http://www.njleg.state.nj.us/2006/Bills/S1000/879_R2.PDF
except that a real estate broker, broker salesperson, or
44 salesperson who is licensed by the State when acting within the
45 scope of his profession, and a State licensed real estate appraiser or
46 certified general or residential real estate appraiser, who is acting
47 within the scope of his profession, shall maintain the right of access
S879 [2R] RICE
5
to the information contained on 1 a property record card made,
2 maintained and kept on file, which information is necessary for
3 those licensed or certified professionals to perform market analyses
4 or site plan comparisons of properties, or that is critical to the
5 process of evaluation of comparable properties for application of
6 the “sales comparison approach.” This information shall include,
7 but not be limited to: the size of all structures on the property, the
8 date of construction of the improvements and additions on the
9 property, and the overall quality of the features of the
10 improvements. In this instance, the municipal tax assessor shall act
11 as the custodian and shall redact information and assess fees in
12 accordance with the provisions of P.L.1963, c.73 (C.47:1A-1 et
13 seq.)1.
jb
FYI, Rice has ties with both the real estate sales and title industries in NJ.
Hard to believe that he simply thought this one up all by himself.
jb
Seneca –
If that were the case, sure. But good luck finding any home priced as such.
As many have repeated on this board … everybody still wants what their neighbor got in 2005.
Greed is a very bad thing. As someone who bought in 2005 and sold in 2006 – and had to drop the price 30k instantly before i got caught holding the bag – I realize how exciting it can be to walk away with a lot of money on a relatively small investment. But if you don’t want to get F’d, then drop the price to a sellable level.
Redfin’s business strategy if they are the buyer’s agent….Redfin keeps 1/3 of the 3% commission and refund the remaining 2/3s to the new home buyer. I see nothing wrong with that.
From Reuters:
Accredited Home dips as “significant” loss seen
Accredited Home Lenders Holding Co. (LEND.O: Quote, Profile , Research) shares dipped on Monday after the struggling subprime mortgage lender projected a “significant” first-quarter loss and cut 1,300 jobs, but said it ended March with more than $350 million of available cash.
In a filing late Friday with the U.S. Securities and Exchange Commission, San Diego-based Accredited Home said it cut its work force to 2,900 as of March 31 from 4,200 at year end, to slash costs amid a “turbulent mortgage industry.”
…
Delinquent loans as a percentage of loans serviced more than tripled to 8.96 percent from 2.85 percent a year earlier. Accredited Home said results were also hurt by its Oct. 1 purchase of Los Angeles subprime lender Aames Investment Corp.
I bought my house in 12/2006. They listed the house at 80k less than what a neighbor paid in 2005. Not sure if the neighbor over paid, or my house was under priced. I would like to think a little of both. Only other comparable I could find on my block was another neighbor who bought in 2001 for $170,000 (3 bedroom Cape Cod) Everyone else in my section of town seems to be in their 80’s and have lived there forever.
The same thing that happened to a lot of industries will ultimately happen to the real estate cartel. Years ago, I had a friend who started losing his hair in his early 20’s and was so devastated by it that he went to a hair replacement center and got hair added to his head in a non-surgical manner.
Once a year, the hair had to be refurbished or redone for a cost of around $3000 dollars. He also had to go to the this hair center every few weeks to get a “tune-up” as he called it for a price of $70 (I think) per visit. Along with that he had to get all these products and special shampoo and stuff that also added to his budget.
He did this for years and then… the internet took off. After 10 years of going through this expense he found a company that would “make” his hair for… get ready…. $100 dollars. He said it’s gotta be a total ripoff. We (friends) told him you’ve got nothing to lose, give it a shot. So, he did a point and click, supplied some info and submitted online. When he received the product, he said the quality was better than anything he ever got from the company he was going to.
I remember this story vividly because I was astonished that he went from spending $3000 per year to $100 per year for the product. His new “hair” looked the same as his old “hair”. I personally couldn’t tell the difference.
The same thing will ultimately happen to the real estate strangle hold.
>>The only way we’ll be buying this year is if someone goes for our pitch – any discussions on the house you have will BEGIN with 100k off the price.
see if you can get yourself a 5-year lease then cause you ain’t going nowhere.
From MarketWatch:
Weak spring may drive home prices lower
A spring home-selling season that’s looking like a bust and pressure from growing inventories of houses in the resale market should intensify home-price declines in the second half of 2007, Wall Street analysts say.
“We think the housing downturn has decisively moved to its second act of falling prices,” wrote Deutsche Bank in a report to clients Monday.
Most home builders posted ugly first-quarter results punctuated by red ink and land write-downs. Hopes for a spring rebound have faded, and several companies backed off their 2007 profit outlooks.
Yet the picture could get worse if home-price declines catch up with falling sales, and home builders’ profit margins are further squeezed.
“With the first act consisting of significant retrenchments in volumes, the second act is one with home prices falling back to more equilibrium levels after a period of breathtaking increases during the housing boom,” Deutsche Bank said.
During first-quarter conference calls, home-builder executives said they’re cutting prices or offering more incentives to make up for sales-volume declines. A key dilemma they’ve faced the past year and a half during the housing pullback is balancing volume and prices with an eye on protecting profit margins.
Home-order trends did rebound somewhat in the first quarter, with median orders declining 22% from a year earlier, versus declines of 36% in the fourth quarter of 2006 and 40% in the third quarter, according to Deutsche Bank.
“We view this as stabilization rather than an improvement because of the much easier prior-year comparison,” the analysts said, adding that more builders in the first quarter implemented significant price cuts in the face of slumping demand.
…
Deutsche Bank said home builders have found some shelter from the housing pullback in the larger market for existing homes. “Existing-home prices have proven sticky so far in the housing downturn,” the analysts wrote.
However, they think prices in the resale market “may begin to retreat in the second half of the year, as existing-home owners face a second [disappointing] spring season and as competition from a surge of resale listings increases.”
As existing home sellers throw in the towel, that could put more pressure on the builders of new homes to match the lower prices and remain competitive. Additionally, resale listings have risen “dramatically during the spring selling season” which could further pressure prices, Deutsche Bank said.
Post (14)
If we are looking to blame someone for the NJ tax mess, I suggest that everyone take a long hard look into the mirror and blame the image looking back at you. NJ voters are masochistic when it comes to paying taxes. If you want change, the legislature needs to be voted out regardless of your party affiliation. It is unfortunate that there is still not enough pain from the tax burden to influence the way NJ votes.
Post (28)
See, Mr. Rice want’s to keep you in the dark. If you don’t have access to PUBLIC tax records, how would you be able to appeal any increases? The less you know the less you can complain. Sen Rice must go!
From NPR:
Former Ameriquest Workers Tell of Deception
Some former employees of the nation’s leading subprime lender say the company encouraged them to conceal rate terms and make fake fixed-loan documents that pushed customers into loans they couldn’t afford.
“>>The only way we’ll be buying this year is if someone goes for our pitch – any discussions on the house you have will BEGIN with 100k off the price.
see if you can get yourself a 5-year lease then cause you ain’t going nowhere.”
Not necessarily – if you say begin, then that means you are willing to negotiate. But you do have to be realistic and understand that not every house is as overpriced as the next. Someone selling a place for 450 is not going to look at you the same way as someone selling a place for a million, when you ask to take 100K off. Also, you have to look at comparables before you do it – maybe the house really isn’t 100K overpriced. Some are, like the first house we bid on this year (and pulled our offer on) but certainly some aren’t (like the one we are going into contract on, which needs no work, is in a better location and is going to cost us the same as the first house we bid on, which was in a poor location and needed well over 100K of work – clearly overpriced). If you want to buy now, you have to work with what you’re given.
Also, many sellers, especially the most overpriced, won’t even negotiate from 100K off, because they’re stupid and greedy and overpriced in the first place. But if you have patience and are willing to try, maybe you will find one who will. It really depends on their personal situation.
If you really are set on waiting until you see a certain price decrease in real terms at least, then rent for a while. Now you can get a good deal.
Un (23)-
What “information” is being withheld from you? I have yet to hear of specific pieces of info that are being denied.
Un (23)-
I have no fear at all of alternative business models. I encourage them & hope they stay around. I also applaud their full inclusion in GSMLS…which- BTW- they have never been denied.
Their failures are a large source of business for me. Once a company like Foxtons has left someone high and dry, they’re totally ready for a different approach.
“We think the housing downturn has decisively moved to its second act of falling prices,” wrote Deutsche Bank in a report to clients Monday.
[36],
I agree. I posted, in the past, that this decline [like a play] will occur over years with a subset of acts/scenes. The only question is how many acts/scenes and the % of decline during each.
Seneca (25)-
I’m with a lot of your comments…until the point at which you make the flat-fee stockbroker comparison. The analogy just doesn’t fit, because stocks are marked-to-market; RE is not. The disposition of a liquid, fungible asset is necessarily- and only- a function of timing and accuracy…and that’s about it. It’s a task that doesn’t require a special skill; that’s where it diverges from the proper sale of RE (and, yes, I’m with you on the thought that 95%+ of us are complete clowns).
Frustrated (22)-
Put 100% of your time into the foreclosure thing. It’s the only place you’re going to get the kind of deal you want.
The market is difficult & getting worse, but what you’re describing is a post-nuclear scenario.
BklynHawk Says:
May 14th, 2007 at 10:06 am
My take on realtors…
“It can be the hardest, high paying job you ever had. Or, it could be the easiest, low paying job you ever had. But, you decide.”
You just want the one that is going the first route. JM
Hawk: spot-on; there is no free lunch, only cheap people and a lot of armchair quarterbacking
From Reuters:
Subprime bailout is not the answer: HUD secretary
A federal bailout is the wrong way to deal with a wave of foreclosures in the subprime mortgage market, the secretary of the Department of Housing and Urban Development said on Monday.
“While I am sympathetic to the people who are in these tricky situations, I strongly disagree with the idea that a bailout is the answer,” said Alphonso Jackson, top administrator for U.S. national housing policy.
Growing numbers of subprime loans offered to borrowers with damaged credit have faced foreclosure in recent months as the housing market has cooled and the early, low payments of those loans have given way to higher interest rates.
Early this month, Sen. Charles Schumer, chairman of the Senate subcommittee on housing, introduced a bill that would give $300 million to community groups that reach out to subprime borrowers facing foreclosure. The New York Democrat has said he envisions some of the money going to help borrowers pay off troubled loans and arrange more manageable financing.
But Jackson said that he opposes such an approach.
“In my mind, companies should not be rewarded for risky investments. The American taxpayer should not foot the bill for risky ventures,” he said in opening remarks at a HUD-sponsored meeting on how to help troubled borrowers.
General thought about this article as well as another post today about not seeing a bottom until 2008 based on my personal experience of being a buyer since Dec 2005.
This market will not be driven by resales. The resale market is driven by pricing by sellers and their realtor and buyers have little effect on encouraging price drops.
The new home market is driven by businesses that know the meaning of a “sunk cost.” When KHOV or Horton look at pricing their current inventory and future projects, they don’t care about what the price was yesterday, last year, etc. They try to figure out what it’s worth today. It seems they’ll even undercut what they believe today’s price is in order to sell more today if they believe tomorrow’s price will be even lower.
A reseller bases their listing price on comparables. They can price at, above or below current comparables. If a reseller wants to be aggressive, they price below comparables. Sometimes that house sells and sometimes it doesn’t. Depending on what happens other comparables either stay put or start to drop their price.
Right now it seems like for every 10 similar houses 1 is selling. It seems to be giving the other comparables enough hope to not drop their price that much. Then a few others will be aggressive just slightly lower and that gets bought, but another listing comes on the market and we’re still at 10 comparables. There seems to be enough buyers out there to prevent mass price reductions(just a few %’s here and there), but there are always 10 houses still for sale. I personally believe these buyers to be falsely making a decision based not on fundamentals, but on comparables, “I bought the cheapest of the 10 houses, so I must’ve got a good deal.” But 2 weeks later someone else bought one of those other houses you didn’t buy for 1% less than you and 2 weeks later someone buys for 2% less than you and so on.
Until we get to the point where it’s known that at the current prices there are only 5 potential buyers for those 10 houses and that in order to get another 5 buyers in the mix, prices need to drop another X%, we won’t see a bottom and unfortunately I don’t think that will happen for a few years without some outside pressure.
Luckily I think that outside pressure will come from the builders continous pricing so that they look more attactive than resales (they must be loving the fact that resellers are so stubborn because it helps keep their pricing higher). Until they empty their inventory don’t expect any price increases or even stabilization. They’d rather take a loss of $1 today, than $1 tomorrow with a greater chance for further losses than gains.
At some point resellers will see that their 4Br 3Ba home is listed at the bottom of the comparables, but still hasn’t sold for over a year and that a comparable or even better new home is priced 10% less and is selling. When that happens, prices will drop and the market will stabilize.
I don’t see this happening until the fall of 2008 at the earliest. Even then, there will still be houses sitting unsold as sellers are too stubborn.
Grim (29)-
Do you know of specific organizations to which Rice has ties?
His proposal is insane and, I believe, illegal. What court would uphold a selective withholding of public records?
sold houses are dropping in price.
It takes a little patience and work. You do not think grubbers are going to rollover that easily.
In 1993 sellers were greedy to but they broke down. prices are at 2003 prices.
The first 10-15% off is here. Now the next 15% is starting.
put the pacifiers in for a bit longer.
gary (34)-
This would make a good SAT question: real estate is to hair replacement products as _______ is to __________.
Your argument is absurd. Huge numbers of Americans have a significant portion of their wealth tied up in RE…and you’re comparing the disposition of same to the marketing of wacky consumer products like hair replacement systems?
reposting from other thread because no one will look there
chicagofinance Says:
May 14th, 2007 at 11:40 am
Ultimately, this argument cuts both ways, and I actually think that 60 Minutes presented a very biased piece. It was run to try and create outrage, when in reality [not realty :)] this situation is a mere natural evolution. If this industry was such a ripoff, then you would find scores of wealthy realtors everywhere. In fact, this condition does not exist.
The savings is also overstated in my opinion, because you cannot assume that using this service provides a different NET NET ex-post result [supports my BIASED accusation].
I also think that the “refund” prohibition in Oregon is reasonable, because, as we are well aware, such a policy would taint selling prices. Further, why REFUND, just charge 1%. Something smells in there…..where there is smoke.
I don’t make these comments blindly. I worked on the business model of a prime brokerage platform, and understand the implications of margin compression and disintermediation on an industry.
#42 BC Bob: In your opinion, how many years, and what % lower when all is said and done?
Pretty easy to explain this: the transmission goes on your car….OK, you should get rid of the car…..BUT assuming you don’t….do you:
1. take it to the corner and have the local grease monkey fix it for $1500
2. take it to AAMCO – $2500
3. go to dealership – $3500
If you answered = you are biased to
1 = FSBO
2 = discount realtor
3 = full service
(51)-
“The savings is also overstated in my opinion, because you cannot assume that using this service provides a different NET NET ex-post result [supports my BIASED accusation].”
Well put, ChiFi. The only “discount” you get from these brokers is on what you pay them. They promulgate the erroneous assumption that the value of a home is a fixed number- that is knowable in advance of marketing it- regardless of the quality of the home, the marketing or the qualifications/motivations of potential buyers. Again, the internet model attempts to portray an illiquid, sui generis asset class as a marked-to-market commodity. And voila: if the asset is a commodity, then the way it’s sold can be a commodity, too! Just like plane tickets and rental cars.
There’s such an intellectual dishonesty to this approach, that I believe it’s a borderline scam. Certainly, scores of Americans who have been “served” by these companies would attest to that fact. Bottom line: if these internet RE companies are so great, why aren’t they setting the world on fire? Consumers should be flocking to them by the thousands (which they aren’t).
Clot,
Rice is an actively licensed agent, Realty 33 in Maplewood holds his license.
Rice was previously affiliated with “Rice’s Title Agency” on Sanford Pl. in Newark, and is currently affiliated with (obviously) “Ronald L. Rice & Associates” a title agency on Johnson in Newark.
jb
Grim (55)-
Thanks. I just puked a little.
I’ve already contacted my representatives about Mr. Rice’s proposal when JB first posted this.
I recommend you let your reps know how you feel as well.
From National Mortgage News:
http://data.nationalmortgagenews.com/columns/hearing/
Fannie Mae plans to tighten its underwriting guidelines on certain loans especially where risk layering is involved. A spokesman confirmed to National Mortgage News that changes are coming in regard to high loan-to-value ratio mortgages and “very low” downpayment loans. He noted the idea is to prevent consumers from getting into trouble…
a couple general comments based on various posts:
Last year’s spring market didn’t happen. “If you blinked you missed it.”
Many of us have argued this spring is key. Will the market wilt or start growing again? So far, it looks like the former. Prices for existing homes are proving sticky, while builders are aggressively discounting, providing incentives, financing, etc.
Overpriced listings can sit for a year or more. Who wants to show their house for a year? You got me. Masochists? If this spring officially goes bust (which some in the industry are starting to admit) will seller psychology change? Will they be willing to negotiate with a ready buyer’s low bid?
The full results for this spring won’t be in for a few more weeks, but the trend is clearly still down. Sales volume is dropping, inventory building. Will prices finally cave to downward pressure in the second half? Maybe, maybe not. I think it’s fair to say there are a lot of deluded, unsophisticated sellers out there who feel entitled to their top price.
My own guess is that transaction volume continues to decline, which will further pressure RE agents and ripple into other related industries that feed off home sales, especially first-time buyers. Could be a continuing stalemate as some buyers boycott and sellers refuse to budge. Which is more or less where we’ve been for awhile. The difference, however, is a second spring season that flops. That may take time to sink in, but when it does, we may finally see some price movement.
Thanks for the Princeton restaurant recos. We went to Mediterra and had an excellent dinner for a reasonable price. Ice cream afterwards at the Bent Spoon was a fantastic nightcap.
– Linc
This is a little off-topic, and forgive me if it’s already been discussed, but I am wondering about the HUGE number of properties that have been relisted in my town, often after only a few days on the market. Instead of a price reduction on the current listing, they relist as a new listing at a different price. The OLP never reflects the previous price and the DOM is not accurately revealing the actual days on the market. My question is this: how is this not fraudulent? It is deliberately misleading. I understand if a property is changed in some way, or changes agents, etc. But otherwise I cannot understand how this is legal.
>>reposting from other thread because no one will look there
like anyone reads your drivel.
Could the HELOC market be next to see a shakeout?
Downgrades of HELOC securitizations seem be to coming at a pretty rapid pace over the past two or three weeks. Here is the most recent:
Fitch Takes Various Actions on 9 Credit Suisse First Boston (CSFB) Home Equity Mtge Trans
The most shocking part is how quickly the most recent vintages are going bad.
For 2006-1, approximately 6.31% of the pool is more than 60 days delinquent (including loans in Bankruptcy, Foreclosure and REO). In two of the past three months, the excess spread has not been sufficient to cover the monthly losses incurred.
…
For 2006-2, approximately 8.82% of the pool is more than 60 days delinquent (including loans in Bankruptcy, Foreclosure and REO). In three of the past six months, the excess spread has not been sufficient to cover the monthly losses incurred.
…
For 2006-3, approximately 8.74% of the pool is more than 60 days delinquent (including loans in Bankruptcy, Foreclosure and REO). In one of the past three months, the excess spread has not been sufficient to cover the monthly losses incurred.
…
For 2006-4, approximately 5.86% of the pool is more than 60 days delinquent (including loans in Bankruptcy, Foreclosure and REO). In two of the past three months, the excess spread has not been sufficient to cover the monthly losses incurred.
#61- I see re-listing all of the time too, and the frequency has gotten much greater.
This fraudulency leaks into those mailers of “homes sold” that I get in the mail from local realtors too. Some have LP vs. sold price and I’ve seen instances where I know about the relisting and the truth is not shown. The SP was truly $100K off the OLP, but the mailer shows, sold at list. The avg person just isn’t informed and will believe the mailer.
Watch this: http://www.cbsnews.com/sections/i_video/main500251.shtml?id=2796105n
poorly photographed homes
Saw one the other day…I don’t have the link though…it was a home in Ringwood a friend was looking at for $400k. The agent couldn’t even be bothered to step outside of the car to take the picture. She stopped in front of the house and took the picture for the listing through the passenger window. She only rolled the window down half way.
I would be furious if I’m about to hand over $24,000 in commission to an agent who couldn’t be bothered to step outside of the car to take a picture of my home.
#61 re: re-listing
It is not fraudulent. Agents and sellers can do whatever they want in listing and re-listing their property. When I questioned an agent about the practice, she essentially said it is a marketing tool to “freshen up” the listing done at the seller’s bidding. Buyers may not like it, but it is a common practice and it is rampant. It just means informed buyers must stay all the more vigilant and keep their own records.
More on Rice.
Take a look at Rice’s Legislator’s Financial disclosure statement 2005.
City of Newark compensation in excess of $50,000
State of NJ up to $25K
His Bio states that his occupation is: Legislator..
Mrs Rice works for Essex Community College earns up to 25K (yea right)
Look up your legislators financial disclosure statement if you want to see why NJ is so screwed up.
http://www.njleg.state.nj.us/ethics/FinanceDiscloseForms.asp
A question for the Realtors on this site. I agree that the amount of $ “saved” by using a Redfin cannot be truly quantified. No one truly knows what every house should/could’ve been sold for whether you use a realtor or a discount broker. So I’m wondering in your opinion what’s the % of homes you truly belive that you added value. I’m sure you’ll agree that there are houses that you sold that you really didn’t need to much at all and it would’ve sold regardless of your marketing and then there’s times where you helped sell a house quicker and for more $ than if you weren’t involved.
How often do you add significant value? Beyond that, how often do you add value equal or close to the commission paid?
I know it’s tough to quantify this way as well, but in your heart, do you have an idea?
I would think this is something that you would track as I would say if only 1 in 10 houses that I put all this extra work and $ into selling really increased the value, then maybe it’s not worth it for me to do.
If you don’t agree with this practice, boycott the agents and agencies that use this “strategy”.
jb
Clotpoll (50),
It was an example, I’m not comparing industries.
#67 (TS): I have seen houses relist after 2 weeks. How “fresh” do they need it?
Couldn’t one argue that it is interfering with the buyer’s access to information that is used to determine the value of a home? Aren’t they deliberately hiding the lack of demand for a property? And simply being factually incorrect about the statistics of a house?
the only reason you do not see more wealthy RE agents is because there are so many freakin agents.
If you consider instead the aggregate amount of wealth that has been shifted to these “transaction engineers,” it is staggering.
6% of deal value is about what an investment bank gets for doing an IPO. Ever do an IPO? It is a bit more complicated than selling a house.
Maybe the analogy between real estate commissions and fixed stock broker commissions is slightly off, but a quick tour of what other “transaction engineers” charge clearly shows that realtors are by and large grossly overcompensated
How often do you add significant value? Beyond that, how often do you add value equal or close to the commission paid?
Two things need to be accounted for here, it’s not the total commission paid you need to focus on, but the difference in cost between using a real estate agent and FSBO. Selling FSBO isn’t a zero-cost effort, even though many sellers assume it to be. Also, you’ve got to attempt to put a value on the “time on market” difference between Agency and FSBO.
jb
with respect to the main article of this thread, if this RE consultant thinks that NAR stats are vastly understating the RE decline, and if he thinks it’s not intentional, then what’s his explanation?
skep-tic (73),
Which is why I sold my first house without a realtor and will sell my current home the same way. Now, I wish I could buy without a realtor but they seem to like to hoard the listings. Gee, I wonder why.
Instead of hair products, how about stock brokers? I think that could be a better comparison.
Like everthing in life, you can’t put a blanket statement and expect it to work in all cases. I would assume that some houses really don’t need a realtor, while some really do. As we’re seeing discount brokerage and FSBO’s do work, but they don’t work in all cases.
Just like using a traditional broker or E-trade. If you need to work a large order on a limit you’re not going to E-trade. But if you just want to unload shares at the market do you really need to pay $0.05 a share commish, or just $7.00 to a discount broker?
Some realtors are worth their price, some are not.
Just like some trolls on this board have good points…uhhh scratch that.
Hot off the wires.. From Marketwatch:
Banks significantly tightened real-estate loan standards
U.S. banks dramatically tightened their standards for approving individual real-estate loans in the first quarter of 2007, the Federal Reserve said Monday. At least 38% of banks surveyed made it harder to get a mortgage loan, the Fed said in its quarterly senior loan officer survey. Fifty-six percent of banks toughened standards for getting a subprime loan, the Fed found, while 46% of banks raised standards for obtaining a nontraditional mortgage. Meanwhile, 15% of banks made it harder to get a prime mortgage loan. The Fed also said 34% of banks surveyed also raised standards for getting a commercial real estate loan.
From the Federal Reserve:
The April 2007 Senior Loan Officer Opinion Survey on Bank Lending Practices (Big PDF)
74-JB, I agree. I sold my house through a realtor because I thought I would do better with him than without. I took into consideration everything from pricing to time on market to my own time to the most important piece, getting him or another realtor to bring in a buyer. I considered selling myself and offering 2.5% to the buyers agent, but I didn’t think that would garner the same interest. Things have changed a lot in a year and I think an FSBO has a better chance for a higher price today than they did yesterday. Time will tell if that trend continues or if traditional RE agents will prevail.
I think the overall point is there definitely some value added simply for “doing the deal.” There is also value in marketing the property and in providing advice. The question is why is 6% the magic number? I know that Clot’s argument will be, “try to go lower and see what kind of service you get.” I’m sure that’s true, but it doesn’t really answer the question.
We also need to consider the commission split. Sure, that 5-6% is all going to the “agents”, but realize that at least 4 people are involved.
Seller’s Agent
Seller’s Broker
Buyer’s Agent
Buyer’s Broker
To muddy things up even futher, in some situations contractual obligations require the following individuals to be compensated:
Referring Agent
Lead Generation/Referral
jb
RE: chicagofinance (51)
The Redfin refund is to the BUYER not the seller. So the regular 3% commission goes to Redfin and they give 2% to the buyer. On the other hand a Redfin seller only has to pay a 1% commission to Redfin.
I see nothing wrong with this. If a buyer chooses to use a low cost agent and they should be allowed to benefit from it. An alternative would be to lower the final price of the house 2%. I doubt that this would ever happen because this would lower the comps for the area 2%. Now if the comps were calculated after real estate fees that would be a different story.
I wonder what it’s like being a realtor in lower cost housing areas? 2.5% on a $100K seems like a waste of time. I don’t think I’d lift a finger if I was an agent in an area like that. I guess there’s probably a lot less agents compared to NJ and they get more quantity.
skep-tic Says:
May 14th, 2007 at 2:05 pm
I know that Clot’s argument will be, “try to go lower and see what kind of service you get.” I’m sure that’s true, but it doesn’t really answer the question.
WHY NOT?
skep: I’m not here to defend realtors, stockbrokers or even what I do for a living.
However, to provide the example that everyone here will understand.
Buy a home in 1982 for $100,000 putting down $20,000.
Sell home in 2006 for $500,000.
I made a 2000% profit.
Buying a home is obviously hands-down the best investment – period.
Do you agree with this statement?
Maybe/maybe not…..but there is damn sure a lot of nuances that need to be considered.
I would argue the same issue with the 6% realtor fee. You pay the fee and question whether you received requisite value. Ultimately, who is at fault?
“We also need to consider the commission split. Sure, that 5-6% is all going to the “agents”, but realize that at least 4 people are involved.
Seller’s Agent
Seller’s Broker
Buyer’s Agent
Buyer’s Broker
To muddy things up even futher, in some situations contractual obligations require the following individuals to be compensated:
Referring Agent
Lead Generation/Referral”
I know I don’t care (as I’m sure most people don’t) how the fee is split. It is still 6% of the total deal. This is high for a relatively straightforward transaction.
Every time you purchase a service in any industry, the fee is split among many people. You don’t judge the price based on what THEY get– you judge based on what YOU pay.
I wonder what it’s like being a realtor in lower cost housing areas?
It’s likely that in these areas the total number of agents and agencies is very small in comparison.
2.5% on a $100K seems like a waste of time.
It’s more like 1.25-1.5%. Unless, of course, the agent is also the broker, or the agent has one heck of a sweet split set up with his/her broker.
jb
Lurking Renter Says:
May 14th, 2007 at 2:19 pm
RE: chicagofinance (51)
The Redfin refund is to the BUYER not the seller. So the regular 3% commission goes to Redfin and they give 2% to the buyer. On the other hand a Redfin seller only has to pay a 1% commission to Redfin.
THAT’S NOT WHAT THEY SAID
I doubt that this would ever happen because this would lower the comps for the area 2%. Now if the comps were calculated after real estate fees that would be a different story.
YOU DON’T THINK THAT THERE IS AN ISSUE HERE?
I know I don’t care (as I’m sure most people don’t) how the fee is split.
You should when your state legislation mandates that these 4 roles must exist within the framework of the transaction.
jb
In all fairness, I should amend that statement to make note of the “transaction brokerage” relationship, where the agent represents neither party. I suppose that in this type of relationship, a broker who is also acting as agent could facilitate the entire transaction alone.
… sounds like an interesting business model.
jb
#85
I agree that anyone in the real estate business with any talent is not going to work for a fee of less than 6% as things exist today.
But this alone does not mean that 6% is the “true value” of the service provided since there is no actual, competiting business model that challenges the traditional one.
I know that discount brokerages have come and gone over the years, but we all also know that their failure has largely been the result of anti-competitive collusion on the part of traditional brokers.
Discount business models exist in just about every industry. What is so unique about selling houses that one can’t survive in that space?
As for your second question, I don’t really understand what you’re getting at. I will say though that it seems to me that there’s room in RE for those with expertise who can and should charge a premium, and room for discount brokerages, which would likely be more appropriate for most people. There is probably also room in the middle.
To draw an analogy– very few people need or want to pay for a private banker. Right now, everyone who tries to sell a house is paying for a private banker when all they really need is a checking account
#72:
“Couldn’t one argue that it is interfering with the buyer’s access to information that is used to determine the value of a home? Aren’t they deliberately hiding the lack of demand for a property? And simply being factually incorrect about the statistics of a house?”
Yes to all three. And re-listing after two weeks is ridiculous. The problem is it is the agents and sellers who control the information available about a listing. This does put buyers at a disadvantage and that’s the idea. You just have to do your homework.
It’s bad enough with listings that are in multiple listing. For a “Broker’s exclusive” you can’t even get a clientfull description sent to you. I’m not sure you can get any written info at all on an exclusive listing, let alone OLP, DOM etc.
That appears to be the system as it stands today. I may be wrong, and if so, would welcome any correction.
I suspect that the same people on this site who would defend the 6% commission to the grave are the same folks who will haggle for hours with a car salesman to remove shipping charges, dealers prep fees and advertising fees off an automobile sales contract before shaking hands. Debating the former can save you thousands, the later maybe a few hundred.
Buying a house may not be on par with purchasing hair replacement treatments but it is also not like buying a Renoir. (And even Sothebys has a sliding scale it charges for the ‘buyers premium’ when a sale is made.)
#93 Can the destination charge be haggled when buying a new car? Never heard of it…am curious if others have had luck.
Talking of fees, I hear Mitsubishi dealers have the nickname MitsuFEEME.
Mortgage brokers cashed in on U.S. housing bounty
LOS ANGELES (Reuters) – Money may not grow on trees but for a while it seemed to grow on houses, and Colleen Moorhead knew exactly where to turn when she needed to harvest some cash.
With a few phone calls, broker Joyce DeAngelo could put Moorhead and her husband into a new mortgage and cut them a check. They used more than $100,000 in cash they netted from the refinancing for living expenses and renovations.
Between 2001 and 2006, the Moorheads refinanced their three-bedroom San Diego home at least nine times, county records show.
More at:… http://www.reuters.com/article/domesticNews/idUSN0419258120070514?src=051407_1331_FEATURES_subprime_mortgage_fallout
>>The only way we’ll be buying this year is if someone goes for our pitch – any discussions on the house you have will BEGIN with 100k off the price.
If foreclosured homes are not shaving 100K…
I have a 3 bedroom for rent in Greenpoint for $2200. Let me know if your interested.
How’s the ramen taste?
hehehehehehehehe…..
It’s payback time baby!
There is still hope. It appears there are a few uninformed dolts still wandering around.
But this site as well as others have done a great job of educating buyers.
Take at least 25% at a minimum off of 2005 peak prices. Comoprende………?
Got real close this weekend to buying an exp toy at a real good price. Problem is the show & teller does not realize it yet that he will accept my price. Patience cost money. Their money.
BOOOOOOOOOOOOOOOOYAAAAAAAAAAAAAA
Bob
#94 I walk in with the attitude that all fees are negotiable but I will admit, the Destination Charge is almost always part of the cost of the deal. Just make sure you know the true fee before you sign on the dotted line, dealers are known for marking this up for extra profit.
Any fee with an acronym is most likely a BS fee and you shouldn’t pay it (ADP, FDAF, LMDA, etc. The best is if the salesman actually says s/he doesn’t know what a fee stands for, thats when you get up and walk out.)
Drive off deposit is another good one that dealers use to stick it to anyone financing. There is so much info on the internet now, there is no reason to pay anything extra if you just do your homework.
Never pay retail!
Okay once in a while.
Seneca #99,
“There is so much info on the internet now, there is no reason to pay anything extra if you just do your homework.”
That was my point originally, but some here think that concept is absurd.
RE: chicagofinance (88)
THAT’S NOT WHAT THEY SAID
See:
http://www.redfin.com/stingray/do/how-you-save?direct-section=buy
They are refunding the BUYER not the seller. I was wrong about the Sellers. The charge a flat $3000 fee. So it could actually be less than 1% for there fee if the price of the house is more than 300k.
Why is this unreasonable?
I’ve sold homes both FSBO and full service. I believe that the HO knows what type of property he has and what type of market and demand is out there.
In 2003-05, if the house you sold was in any type of decent condition you’d be a full to give away 6%. If you just put up a sign you’d have 5 offers in a week. If it’s a predominately ethnic…russians or indian or Jewish neigboorhood then you’d put an add in their local media newspaper or TV ad.
And you’d actually get a bidding war started.
In today’s market however moving a house in less then 90 days is well worth it.
If this industry was such a ripoff, then you would find scores of wealthy realtors everywhere. In fact, this condition does not exist.
Chi,
Not necessarily. What you do have is an excess of realtors. You have a bloated pot of money being divided by an even more bloated supply of realtors.
As we know, markets tent to gravitate toward equilibrium. Excess profits create opportunities for new market entrants and rarely last forever. In this case, there are barriers in place to achieving this equilibrium through price competition. As a result, the equilibrium is achieved through adding more realtors. This is evidenced by statistics like 1 in 75 Californians hold a real estate license.
Breaking-up of the MLS cartel and lowering commissions doesn’t mean that someone can’t earn a good living in real estate. It will clear the jokers out of the market and leave behind the professional realtors. More reliance on the Internet will also mean that more of the legwork is done by consumers. A professional who can leverage these tools to their advantage will do fine.
I know when I buy a new car, I do my homework first. I know exactly what I want. I know what the invoice price is and I know what I am willing to pay. While the commission is thinner, its also a smoother transaction for the salesperson. He isn’t spending all night showing me different models and arguing over prices.
Category Jacks Outlay by 20.3% to Dispel ‘Myth’ That It’s a Bad Time to Buy
….NAR is especially sensitive to accusations of cheerleading these days. Its chief economist, David Lereah, extensively quoted throughout the housing boom in the financial and mainstream media, stepped down one day before the organization released another round of bad numbers May 1; it reported an 11.3% drop in existing-home sales in March, compared to last March. It is the biggest drop in 18 years.
Bloggers went nuts, and even personal-finance website Motley Fool weighed in about how Mr. Lereah “consistently told the press that all was well. I still have no idea how self-respecting business journalists anywhere could have parroted his biased misinformation for so long.”
http://adage.com/article?article_id=116601
link
Most overpriced U.S. home markets
1. San Diego
2. Miami
3. Sacramento
4. San Francisco
5. Washington, D.C.
6. Honolulu
7. New Jersey
8. Los Angeles
9. Boston
10. San Jose
Source: Forbes.com
http://www.signonsandiego.com/news/business/20070512-9999-1b12forbes.html
Reading all of teh above discussion with interest.
I have to admit, the salesman model, 6% commission, closed information system currently in place really bothers me. And I say that as an ex B to B sales professional (and a good one).
I have absolutely no problem with a real estate agent charging what they believe they are worth in a truly competitive and open market. The point is that the market be truly open with information widely and freely available. That can only help the truly good agents as it would weed out those who rest on their access to information in lieu of carrying out a solid professional job. Good realtors will always find customers through referrals and by bringing real value to the table.
The current model of realtor as commissioned salesperson is highly problematic for the simple reason that they have no incentive (outside of professionalism) to truly work in their clients best interest. Refusing to show a discount brokers properties because of low commission or additional hassle is not in their clients best interest – they may miss out on the house of their dreams. Needing a commission may mean they encourage a seller to jump on an offer. Wanting a decent pay day means frequently encouraging a buyer to purchase a more expensive house.
I’ve worked as a commissioned salesperson. The incentive is to get someone to buy something. A solid professional will try to ensure that the buyer purchases something they will be happy with to ensure future sales and referrals. The truly good will waive a sale if it is not in their customers best interest, in the interest of good will earned. Having spent years in an aggressive bullpen in an aggressive industry, I can say this for a fact – truly professional sales people are few and far between. The vast majority go for the quick kill.
There has to be a better system.
Please be advised that the spring selling season is a disaster..Prices are high…mortgage is cheaper, and there is just enough byers to prolong the misery…
This is not good for someone like myself who is looking for a quick correction, actual overshooting the other way and start making money AGAIN.
This is also not good for the economy as RE affordability is looking to correct itself by keeping prices high and awaiting inflation and income to catch up. This could take up to a decade. EX Japan
and my renters that is a long time to pay rent and barbeque indoors.
Make [109],
Just stop the nonsense. If this is a Japan like market, the only sensible alternative is to rent.
and my renters that is a long time to pay rent and barbeque indoors.
You do realize that single family detached homes are available for rent as well, don’t you? Many of these come with amenities such as grass, a backyard, decks, and even an occasional grill.
and my renters that is a long time to pay rent and barbeque indoors.
How does one apply this gem of wisdom to those looking to buy apartments in mid or high-rise buildings? Is it OK to pay a mortgage for a long time and barbeque indoors?
jb
The entire post #109….. new material make money, pleeeeeeze….
I will get you started…
“and my renters that is a long time to pay rent and not be able to own a pet. Or, worse for you but better for me, I charge you a pet fee and earn even more interest on your hard earned money so you can have an under-10-lbs dog in your tiny apartment. MWaaaa-haaaa-haaaa”
Make money, i’m not really sure what to say. Your rants are getting old, make little sense, and do not specifically address the arguments made here.
I’d love to hear more on the real estate bull angle but your broad generalizations regarding real estate are kinda lame.
my point is that there are just enough byers out there to keep the market afloat. Meaning as soon as you lower prices around 15% from 2005 it sells. And this will not allow a quick correction and then back to single digits increases.
This housing market is poised for the inflation(which is real)regardless of what Ben says and income to catch up to affordability.
I don’t see a recession coming due to financial markets and consumer stupidity.
Rents are going to increase slowly to keep up with Taxes and inflation.
If you continue to rent for a longhaul then you’ll be fine, however if you intend to purchase RE at discount prices in the near future…think again.
Since we are in a middle of debt deflation you can forget about Ben raising interest rates.
Recap,
no recession, no interest rate hike, just enough demand to hold of a massive decline, marginally tighter lending standards…
it all adds up to a flat market for years to come.
Sorry, if you don’t have the vision to see the big picture.
Gee, it seems the industry pimps are very convincing. My coworker said that he heard the worst is over and now values are going back up.
BC Bob,
If you wonder why Japan was flat for over a decade now then see conditions above they’re indentical.
In the Flat Market there is low volume…so there’s gonna be a lot of unemployed realtors.
Being a realtor is not going to be a rewarding occupation for a long time.
make money Says:
May 14th, 2007 at 5:31 pm
I don’t see a recession coming due to financial markets and consumer stupidity.
MM: What the hell are you talking about?
MM: What the hell are you talking about?
DOW and Consumer Confidence aka overspending.
make money Says:
May 14th, 2007 at 5:41 pm
MM: What the hell are you talking about?
DOW and Consumer Confidence aka overspending.
MM: My bad. I meant to imply that I disagree with you.
make money
Please help me see the big picture as I am near-sighted and my contacts are drying out.
“and my renters that is a long time to pay rent and barbeque indoors.”
What does this mean?
Are you feeling sorry for people who are currently renting because they have to go to Memphis in May to taste World Championship BBQ?
Are you rubbing salt in the wounds of renters who didn’t purchase prior to 2003?
You seem to be saying that now is a bad time to buy and will continue to be a bad time to buy for years to come. But you end your comment with what sounds like an insult. Do you intend to insult renters or are renters misreading your concluding statement?
Please clarify for me, I have not had 20/20 vision since 1996.
What Macro-economic factors are you looking at when you predict a massive decline in prices. As oppose to flat for years to come.
Historically the biggest declines happen the first 2 years, Assuming August 2005 top..we are very close to the bottom. It’s flat from now on.
Do you intend to insult renters or are renters misreading your concluding statement?
I only intend to insult those that think that you will enter RE at 2002 prices.
bergenbuyer (69)-
That’s easy: 100%. The day I don’t believe I add value is the day I walk away.
124 clot,
Do you really think you added value in 200-2005?
possiblebuyer (72)-
While I do not agree with this practice- and find it unethical- potential buyers are not being denied this info. Just ask for the listing history on homes you’re considering. Any omission or non-disclosure of previous listings could land an agent in some hot water.
In 2003, people would ask me to please find them a house that they can overpay to buy.
What do you need a realtor with crazy demand like that?
Historically the biggest declines happen the first 2 years, Assuming August 2005 top..we are very close to the bottom. It’s flat from now on.
Wow and what about areas that are not willing to budge on prices?? I have seen many properties throughout NJ that are still around 2005 prices.
—————————————–
I only intend to insult those that think that you will enter RE at 2002 prices.
I agree we will be entereing at 1999-2000 prices. I am still tgrying to figure out who can afford these prices that you dont think they will drop. If the average household income in NJ is 65,000.00 than who are these magical elves you think can afford theses homes?? All I see is forclosures, magic loans flopping. So I think you need to think and do research before you post these half wit comments.
Make, thanks for your input, in all seriousness. But if prices stay flat for years to come, as you predict, won’t renters easily be able to enter RE at (inflation-adjusted) 2002 prices?
gary (76)-
If you had a hard time finding a good doctor- or had a bad experience with one- would you cease having checkups or treatments altogether?
Here’s a documented fact: homes listed with Realtors sell for around 15% more than similar homes sold FSBO. Bottom line, that’s why we’re not boarding up our offices.
Does it seem like a good deal for you to take that kind of haircut, just so you won’t have to deal with us mean, self-dealing jerks?
BTW, in your past dealings, how did you overcome the instant negotiating disadvantage that occurs when you allowed a buyer to directly approach you?
skep (73)-
So if I charge you 5-6% and get you a price 8-10% higher than you could’ve gotten on your own…I’m overpaid?
Please work the math for me on that.
lisoosh
Can you provide the name of the town and any MLS numbers for the “small development in hot Middlesex town” that you mentioned yesterday? Sounds like something I might be interested in.
Thanks,
AK
skep (81)-
Actually, that would NOT be my answer. “Service” is irrelevant to the process of selling houses for more. Service is what you get at Nordstrom’s. Service is what the Redfins and Zillows of the world would lead you to believe is important to selling homes, because service is easy to provide on the cheap and doesn’t require skill.
BTW, my fee is negotiable.
That being said, I price what I do according to my track record of value added. My negotiating skill, marketing ability, transaction management and networking have a tangible correlation to the selling prices I’ve helped my clients achieve. If I present evidence of all that to a potential seller and he disagrees, so be it. There’s always someone else who’s willing to pay for what I do. The day no one is there and no one is willing to pay is the day I re-evaluate, but it hasn’t happened yet. Funny, but probably 3/4 of my business is referral…so it’s coming from clients whom I’ve already helped.
These days, when a potential client chooses a route other than than working with me, I just mark the expiration date of the listing. If I don’t get ’em the first time, I get ’em on the second go-round. A lot. It actually helps me to have a client like that get all the stupid out of his system and waste his own- or another agent’s- time before understanding that he needs to get serious.
Clot-
How come you get to play fast and loose with the analogies but others don’t?
Hair transplant =/= selling a home
Selling a home =/= medical care
I don’t think you mean to imply the two things are equal but I don’t think Gary meant to imply that buying hair transplants was as simple a process as selling real estate.
Not everyone on this site is a lawyer, not everyone has been trained to make coherent arguments and fully connect the dots. There is enough stinky BS on this blog to save our accusations of the absurd for those truly deserving.
bergenbuyer (84)-
Some agents feel that way, but they’re dead wrong. If you’re a good agent, the idea is to build clients for life. That young guy or couple buying a 100K condo is looking to trade up in 3-4 years to something larger. If I take the time and care to handle his 100K purchase like it were a 1 MIL home, he’ll also tell his family and friends to work with me, too. After a succession of good interactions, that guy may turn to me as he’s into his peak earning years to help him find investment property or a second home. Add it all up, and one good “starter home” deal can turn into 15-20 associated transactions over the course of a career. And, in fact, it’s been my good fortune to have had this experience with a few great old clients (who are also now friends).
Clotpoll 130,
I let my lawyer handle all negotiations with the buyers lawyer. The buyers called me first, we had a nice conversation and I gave them my lawyers number.
skep (86)
“Straightforward transaction”? Certainly you are describing an industry other than residential RE.
Seneca 134,
Exactly. But hey, what do I know, I’m just a lowly Systems Analyst for a Wall Street Financial firm. I guess I can never understand the intricacies of selling something.
make (125)-
Even more so. You wouldn’t believe how many clients were ready to underprice their homes, because they had not idea of how fast things were appreciating.
If you don’t believe this, look at how many homes sold in one day with multiple offers. There’s only one reason this happens: the house was underpriced, and the market stepped in and corrected the mistake by taking the property higher, via the multiple offers.
I’m sure the LODs will find this revolting, but many, many sellers left tons of money on the table during the run-up by underpricing their homes (especially FSBOs).
Thanks for posting these great articles James!
(139)-
Just to follow up: I bought for myself & facilitated others’ purchases on several FSBOs from 2001-05. In a couple of cases, the prices we negotiated were so laughably low- relative to the market- that I had the seller sign a letter, stating my opinion that his property would sell for more were it to be placed on the listed market.
gary (136)-
If you need electrical work done, do you call a plumber?
Most lawyers are as good at being a Realtor as I am at being a lawyer.
Seneca (134)-
I think my analogy is apt.
Doctor= your health/big deal/one chance to get it right/favorable result more important than price paid
RE= biggest piece of your financial life/one chance to get it right/favorable result more important than price paid
Not all agents are professionals, or deserve to be considered as part of the professional class. That is our downfall; however, I think we should be better & become worthy of that consideration. I try to live up to that standard, and many other good agents do, too.
gary (138)-
Not accusing you of that at all. I’m sure you do understand exactly how to sell. Anyone who devotes time and effort to selling can sell his own home.
However, there’s a big difference between selling…and selling your home for more.
I happen to have a lawyer who knows a little about real estate… she specializes in commercial and residential property arbitration. She also happens to be my cousin. :)
Clotpoll 144,
That makes sense but I’m looking to sell my home, not hit the lottery. I priced it 5% to 8% under comparable sales and it sold. It was spotless, cluterless and neat as a pin. That was it… straight ahead, pragmatic approach.
Now, I need to go eat dinner or my chunky body will fall apart.
make [116],
Do you casually dismiss the Nikkei dropping 30,000 points over a 12 year span.
clot– just so you know, I am not attacking you personally. I am sure you are very good at what you do and more than earn your fee.
I am attacking the vast majority of agents who ride off your wave. Because it is possible to actually earn 6%, they treat it as a given. I think we are in agreement that it is not.
As for residential RE being a straighforward transaction– I’m sorry, but it is. That doesn’t mean that some can’t do it better than others, but it is not reasonable to say that the complexity of selling a house alone justifies a 6% fee.
As a point of comparison, M&A advisors usually get under 2% in deal fees. In fact, the only deal fee I can think of that equals RE agents’ 6% is (as I said previously) IB’s cut for IPOs.
Even the 20% carried interest in the private equity world might well be exceeded by RE agents’ 6% when you consider that carry comes out of profit only. Most people own their homes for less the 7 yrs (correct?) –> 6% is a huge chunk of the profit (if any) in most residential RE transactions.
gary (145)-
That’s great. You have all the elements in place…except for your home being offered in a competitive bidding envronment.
gary (146)-
Please call me the next time you’re selling such a nice home for less than market value.
Re: FSBOs being 15% underpriced on average:
I wonder if these stats hold in a down market as well as in an tight market. From my research it seems that FSBOs in my area are currently priced much higher than other comps. I generally think they have unrealistically high expectations.
skep (149)-
Agreed…the complexity (in and of itself) of the mechanics of house-selling don’t justify the fee. There’s a lot more that’s baked into that cake, though. Transaction management is one of many ingredients.
possible (152)-
You’re exactly right. Except, keep in mind that stat relates to sale price, not asking prices. FSBOs in up or down markets famously ask more- and accept less- than similarly listed homes.
FSBO in the current environment is akin to Russian roulette with five barrels loaded.
Clot
I’ve seen that stat re FSBOs being 15% underpriced on average and can’t help but think that it’s another example of the NAR using seriously misleading statistics. There aren’t too many 20 million dollar FSBO listings. Also, almost all new construction is marketed by realtors and its unfair to compare new construction and resales in a given town (of course new construction is more expensive). Basically I don’t trust that stat and wouldn’t use it as proof that realtors add value (even if they sometimes do).
Clotpoll 151,
Nah, that’s ok, I’d rather keep the 6%.
pooch123 (155)-
That statement is made by Move.com, which is a publicly-traded company (NASDAQ: MOVE). One of the things about publicly-traded companies is that they can’t make materially false, business-specific statements without facing consequences.
Parse these numbers any way you want, but don’t call them fabrications. And…the statistic clearly mentions a measurement between FSBOs and MLS listings of similar TYPE homes, not just similar PRICE. In no industry metric (of which I’m aware) are new homes compared directly with resales. And, there aren’t too many 20 MIL listings- MLS or FSBO- out there, period. That category of home is statistically insignificant.
Perhaps a more objective stat would be acceptable: right now, about 15% of all homes sold in the US do so without Realtor participation. If FSBO is such a great pursuit, are the 85% of sellers who use us all idiots? What does the 15% know that the rest of us don’t?
gary (156)-
Huh? I don’t want to represent you; I want to buy your house.
Provided it’s coming with your aforementioned 5-8% discount.
#158,
Sure thing, I’ll let you know when I’m ready to sell.
I didn’t say the statement was false. I just said it seemed misleading to me. And just because move.com said it doesnt mean it’s not seriously misleading. It just means nobody’s successfully sued them (admittedly, it’s an uphill battle to argue in court that this statement caused damage by causing them to use a realtor thereby making them net less money in the deal; also its hard to prove what they’d have otherwise gotten going FSBO).
Also, in situations where I’ve seen that statistic thrown around I’ve not once seen it mentioned that the statistic takes into consideration new construction versus resale. And although there aren’t too many 20 MIL listings, there are a lot of 4+ MIL listings the percentage of these that goes FSBO seems dis (un?) proportionally low (though that is just my own anecdotal evidence, I may very well be wrong, I don’t have reliable statistics on the matter).
And I’m not calling people who use realtors lazy idiots. In fact, I’m one of your (Clot’s) biggest fans here and genuinely believe that realtors do (sometimes) add value. I’m just saying that the 15% of people who do go FSBO aren’t crazy either. They have the same information as realtors in deciding what asking price to use, what type of offer they want to submit, and if they want to acquire the expertise necessary to do this themselves its not impossible (and to Joe Schmo seller who doesnt mind learning might be worth it to spend some time learning how its done properly to save the 6%)
grim: I thought this was interesting, but assume you would find this spellbinding….
http://www.chilloutzone.de/files/player.swf?b=10&l=197&u=ILLUMllSOOAvIF//P_LxP92A42lCHCeeWCejXnHAS/c
There is a lot of argument about whether FSBO sales can be accurately compared to Realtor sales. It is inconsistent to argue on the one hand that realestate sales are ‘sui generis’ and then argue that you can successfully compare FSBO vs Realtor sales.
You will need a lot of filtering to remove sample bias and the danger is that the results will still be suspect.
Here is the link to the NAR page which says homes sold by realtors get 16% more than those sold the FSBO route:
http://www.realtor.org/pac.nsf/pages/fsbo
This is the same statistic that move.com has also issued. The realtor.com page doesn’t say the statistic accounts for homes in different price ranges or new constructon v. resale. Right off the bat it smells like a (suspect, at least to me) 1-liner selling point. I’ve watched the commercial and listened to the radio ad as well and they don’t make any disclaimers regarding this etiher.
Found some decent places in North Jersey during an online search tonight. Anyone else using Trulia? The site has a great feature where you can see the last sale of the house (date and price).
For instance …
Ridgewood home, 3/2 on the market for $499k.
MLS: 2388377
It sold in Oct. of 1997 for $183k. The percentage increase is done for you: 173%.
Now others have told me that you can assume a 4% increase per year … so in 10 years, you have assume a 40% increase, right? How about 50? The price is still WAY OVERPRICED.
I’m curious – if anyone can look this up – how long the place has been on the market and how many times it has been lowered.
Pooch (162)-
Let me go at this one more way: our local stats indicate that YOY, about 85% of FSBOs fail to accomplish a sale. Of the 15% who get to offer-and-acceptance, about half those contracts fail.
Where is the return- or advantage- in pursuing a course of action that overwhelmingly results in failure?
Where is the advantage of placing a home for sale in a non-competitive bidding environment?
Clot,
The fact that the FSBO statistics are kinda scary doesn’t mean you’d be crazy to try for one. After all, the rewards of a successful FSBO are high. And if you work hard and do it right, it’ll have been worth the effort. Kinda like the CFA exam. The first exam has a pass rate of 30% but if you work hard and do it right, it will have been well worth the effort. I hate to use analogies because obviously taking the CFA exam is very different from selling a home and there’s no simple-but-expensive solution for passing the CFA exam (duh, just hire a realtor) but I’m just trying to say not all people who go the FSBO route are arrogant crazies who know nothing about real estate.
My experience with realtors:
I sold a house in 1999, just as the market seemed to be coming back – in Hudson County. Some realtors wouldn’t even return calls, and others made appts. and then never showed up. I guess since the house wasn’t in Hoboken, no one wanted to bother. So, I looked up comps, I de-cluttered my house, and I then put an ad in the Hoboken Reporter with a picture and description. I had no problem selling close to asking. I did the negotiations myself – not a big deal. My lawyer handled everything – it was really easy.
Now I’m looking to buy another house. I really haven’t found realtors that add much value. Just a few weeks ago, I was looking at a house that was my agent’s listing – I asked how much the taxes were, and she gave me the wrong amount by about $5000.
To be fair though, right now I’m just browsing. I am assuming that when I am serious about a house, my agent will help the process along the way, and point out things I need to know.
Also, my parents sold their house with a realtor, and they LOVED her. But they are older and nervous and needed someone to hold their hand.
To summarize the realtor mantra:
* “FSBOs sell for less”
* “Using a realtor is better”
* “Statistics prove a realtor is better than FSBO”
* “Failing to use a realtor is like failing to see a doctor and neglecting your health”
Reality: Of course the realtor cartel makes FSBO destined to fail for most. Any given town will have 100 homes for sale, and 99% are listed by realtors and their closed MLS system — not by seller choice, but because the market is not fair and free, and sellers use the avenue available to them.
So, having positive stats to support the claim that “using a realtor is better than FSBO” is a self-fulfilling prophecy — until the realtor cartel, and legislators, allow a free and open market, we’ll never know how successful non-realtor transactions will measure up.
make money,
my BS detector is going off again.
SAS
We have one woman who works our neighborhood…..she sold us our place and represents a few others currently. She works the network, knows the locals….well worth the price if she closes the deal. IMHO
One main reason houses listed with a realtor sell for more, and more quickly is the far-reaching access of the MLS system. Some discount brokers offer listings on MLS. It could be argued that is not “full service” and that may be true. However, sometimes just getting the exposure on MLS is sufficient. In short, unseen is unsold.
Housing expert Shilling says WW recession
House of cards or solid foundation?
THE SAVAGE TRUTH | What will housing slowdown do to the economy?
May 14, 2007
TERRY SAVAGE savage@suntimes.com
Alan Greenspan said he was puzzled about why the sub-prime mortgage mess hadn’t had a greater impact on the economy. That was last month.
The latest economic data show that indeed the combined crunch of higher mortgage payments and higher energy prices are sapping economic growth.
A chilling effect
Clearly, the mortgage mess impacts all homeowners, even indirectly. If the house down the block is sold at a foreclosure auction, how much is your home worth? That thought is chilling for millions of Americans who count their home as their most important asset — both financially and psychologically.
How far can home prices fall? It depends on which economist you ask. Months ago, Robert Aliber, retired University of Chicago economics professor, told me home prices would drop 30 percent. The forecast was so shocking that I hesitated to print it.
The latest gloomy forecast — backed up by compelling data — comes from Gary Shilling, frequently bearish, but even more frequently correct. To be blunt, Shilling is forecasting a drop of 40 to 50 percent in home prices in the more overpriced areas such as California, Florida and Las Vegas, and the ordinary homeowner, he says, could see a decline of 10 to 15 percent in the value of a suburban home.
Shilling’s forecast is based on the historic value of homes, adjusted for what he calls the “McMansion effect” of today’s larger homes being worth more. Using historical data compiled by Robert Shiller, he says home prices would have to drop 45 percent to get back to their historic normal levels.
Existing-home prices peaked in October 2005, and are down about 4 percent on a national basis through March 2007. But Shilling says the worst is yet to come, because he estimates it takes about 18 months from when home prices first start to slide for homeowners to recognize that this is not a fleeting blip.
Now the “interval of denial” is about over, and homeowners will start realizing that if they want to sell, they’ll have to cut prices, Shilling says.
Even worse, he says there is no way this problem can be confined to the housing market. He estimated that overbuilding has resulted in at least two million “excess” homes — a factor that will depress not only home building, but related industries in the coming years. Already, housing starts have fallen 33 percent from their peak of 2.265 million in January 2006 to 1.518 million in March. Shilling predicts an additional 25 percent decline in housing starts, and says there is no way that capital spending by businesses can pick up the slack. Ugh!
Shilling predicts “an American recession to commence later this year, and to extend globally in 2008.” Time will tell. And that’s The Savage Truth.
Un (168)-
“Reality: Of course the realtor cartel makes FSBO destined to fail for most. Any given town will have 100 homes for sale, and 99% are listed by realtors and their closed MLS system.”
Of course! Realtors are responsible for FSBOs’ failure to sell. We’re the source of all the other problems, why not this one too? These poor, disenfranchised people couldn’t possibly be responsible for themselves. They only have forsalebyowner.com (the 2nd most-hit website in RE), alternative fee-for-service and discount models and tons of comps (probably supplied to them by Realtors) as resources.
Un, as usual, you make a blanket, trolling statement…yet offer no detail or example to support it. How, exactly, do we thwart the FSBO sales effort to a pool of buyers that we don’t control (BTW, we don’t control 99% of the houses for sale at any given time, either)? Until such time as you can back up your game (which I doubt will ever happen), you remain in the submental division here.
God, you’re annoying. You come off very self-impressed, and your ideas and writing are to the low side of average, at best.
Un (168)-
You’d be surprised to know that there are agents out there who actually try to help FSBOs sell. They give them info, comps and selling help, in the hope that once the FSBO fails, he’ll come to the agent to list. Even if the FSBO sells on his own, he mentions the agent who helped him to neighbors and friends. Very often, the agent can pick up another piece of business…even if he doesn’t get that listing.
That’s how I got started in the biz, many years ago.
#128 I not sure the top was 2005 for north Jersey, probably early 2006.
From that time to now, you have had the denial stage, the this is just a slow down blip, and prices will recover.
Well now I think we can agree that has not happened, and the Spring market after some acivity earlier in the year has not arrived.
So the real down turn in prices should be starting about now, and play out over the next 18 months.
#123 Make: 2002 prices will be a done deal;watch and learn grasshopper.
#85:
$100k -> $500k in 24 years = about 6.935% per year?
What was the term on the $100k loan, and how much in total was paid (principal + interest – mortgage deduction) for that $100k? Assuming a 1982 loan of what, 7% for 15 years with 20k principal.. $150k – deductions based on $50k in interest.. Call it a total price of $140k, so $140k->$500k compounded over 24 years is a rate of about 5.4% .
Not a horrible investment, but nowhere near 2000%…
“Until such time as you can back up your sgame (which I doubt will ever happen), you remain in the submental division here.”
Let me see, those who resort to ad hominem:
1) Strengthen their case.
2) Make themselves look like a jackass.
“You come off very self-impressed, and your ideas and writing are to the low side of average, at best.”
The irony is thick.
And you complain about “blanket statements” while in post #43 you wrote “I’m with you on the thought that 95%+ of us [realtors] are complete clowns.”
Your estimate is low by several percent.
If post #168 had too many words for you, try #171, who summarized things nicely.
Don’t know why others here find you fascinating, you’re nothing but a perpetual apologist for shady realtor tactics.
I tried to have a civil discussion, but you’ve proven once again you’re incapable…
First of all MLS houses would have to sell for at least 5% more just to break even so I hope they sell for more. Second of all when I did a FSBO I had all these “buyers brokers” try to enter my house. These “buyers brokers” actually took unsuspecting couples out house hunting including FSBOs and while the couple was looking around the “buyers broker” would try to force the owner into paying him 3%. I threw one out and then blocked the rest. My other favorite is when we were looking for a realtor a few offered to buy it on the spot for a low ball price and charge me commission and then their buyer who is actually related to then can flip it at a profit and collect a commission to boot. I know there are a lot of good realtors but at the boom of the market so many shady ones were desperate for listings and it was so easy to sell on your own I did not see the purpose.
Even with all I siad I still believe a good realtor in a slow market is worth his weight in gold.
Former NNJ Says:
May 15th, 2007 at 12:12 am
One main reason houses listed with a realtor sell for more, and more quickly is the far-reaching access of the MLS system. Some discount brokers offer listings on MLS. It could be argued that is not “full service” and that may be true. However, sometimes just getting the exposure on MLS is sufficient. In short, unseen is unsold.