patrick.net

Little link to a bit of the Freakanomics stuff. The guy is entertaining. The real estate agent article is under "Articles' and has a house next to it.

http://www.freakanomics.com/

FAB,

1800 Gough Street penthouse had ANOTHER open house again today. Honestly, that thing has been on and off the market for about four years.

On record, I must protest the use of the term “realtwhore”, which I consider too degrading. It is not right to blame any one profession for the current situation.

Could you say the same for Criminal Defense Lawyers?

This house is for sale for $7,750,000. It sold about 18 months ago for $10,875,000.

http://tinyurl.com/3cgt2a

Suds, welcome, but one thing, I live in $anta Barbara. hehehehehe

Dear Suds,

Thank you for sharing.

Please consider this: as you described it, your experience here is very limited in time, in geography, both on the continental scale, and also the the Santa Clara County microcism, in the sorts of people you come into contact with, in your life experiences in the USA.

Wisdom only comes with time and a diversity of experiences, which takes time. But you can learn through the diversity of others who share their points of view here.

But seriously, the term “realtwhore” is specific to a particular kind of real-estate agent - the sort who will say or do anything just so s/he can pocket the commission.

Which is all of them that are still in the business.

An agent with integrity who truly represents their client and uses his/her knowledge, expertise, contacts and experience to get the best possible deal for the client - that kind of agent is a professional.

Which is all of them who left the business because they couldn't compete with the Realtwhores.

SFWoman Says:

> SP, I do think that it is the Realtors’ interest to start
> asking people to lower their expectations/prices. Would
> they rather get $0 from their share of an unsellable /Marina
> style 3/2′ in Bernal Heights priced at $1,000,000 or the
> $10,000 that they’ll get (after splitting/brokers etc.)
> of the same house at $500,000?

The best Realtors can look in to the eye of a seller and tell them with absolute certainty that the market is tanking and convince them that if they don’t lower the price they will never sell and moments later look in to the eyes of a seller and tell them with absolute certainty that this house is sure to go up in value that if they don’t write an offer at this moment is will be sold to someone else in the next hour (this is one of the reasons that I left the world of investment brokerage)…

P.S. to Suds thanks for the info on your situation. Remember to always ask yourself where information is coming from since it is possible (as I learned as captain of the debate team) to find support almost anything (as many skilled real estate people do every day)…

P.P.S. I can’t speak for others on this BLOG, but my life will not be any different if you continue to rent or buy three investment homes in AZ…

SFWoman Says:

> This house (2863 Pacific Ave. in Pacific Heights) is for
> sale for $7,750,000. It sold about 18 months ago for
> $10,875,000.

I was going to ask if you heard the story on this place. Tax records show that the $10.875 Million sale recorded less than a year ago and I heard that the buyer was a Kellogg Guy and the CEO of a Biotech Firm.

A Pacific Union Realtor from the Presidio office (who has not had a sale in a while) said that the place was first listed for sale at just over $6 Million and she actually had a buyer that was interested but heard the place had multiple bids and was told it was under contract at $7.25 Million.

Many of the homes in that area are just about 100 years old and it is interesting that it took almost 90 years for one to first sell for over $3 Million and in recent years some have gone up by $3 Million in a single year and now it looks like we are seeing that (like other high beta assets) that they can also go down in value by $3 Million in a single year…

2006 was a transitional year, but I think 2006 allowed people’s income and confidence to catch up to housing prices.

Hilarious.

Peter (! "Peter P") :

Congratulations on your home. There is enough difference of opinions on this site. What you are saying is perfectly fine. You know you might be paying more for the house, you suspect housing prices might be going lower in real terms and you are aware of the big ownership premium. You made an informed decision that is right for yourself.

What most people on this site are against is "it always goes up" and "American Dream" type arguments. In various flavors.

Speaking for myself, I believe buying a home will be a right decision for me. But I am convinced it's not the right time for me. I am willing to take the risk that prices may permanently go out of my reach, because I believe the risk is extremely small. IMO if I wait, the only thing that will happen is I will have more down payment.

Now I see what kind of "sweet deals" was Casey talking about:

http://shortsalemagic.com/lp-coaching-white.htm

This guy has the ads on zillow.

"we might throw out a $350k offer" ... that seems to be too much.
Considering the 50% crash you should be shooting for 250K.

There is really nothing wrong with buying so long as one has realistic expectations.

A friend and his bride purchased late 2005 in LaJolla.

On a guess, I'd say it was a combination of peer pressure and 'starting a new life'. Tiny bungalow at about $800k, but as that's ~2x their combined incomes, they should be fine if perhaps a little conflicted.

FAB,

I heard that the guy who paid $10.875 for the house was CEO of a neurosciences company (they must be paying a lot more than when I was working in biotech!).

Hey, the price reduction (for asking price) is only $3.1. Maybe they'll start a bidding war?

I have a couple of friends who live on that block, and a few on Raycliff, but none of them know the people who own the house.

What you guys won’t admit, is housing isn’t a stock, housing provides a function: shelter.

Won't disagree with that.

As long as people move out of their parent’s homes, graduate from college, get higher paying jobs and have children, housing will have demand.

As long as FB's foreclose on their houses, builders overbuild and people just want to get out, and most of all, tighter lending standards, there will be much more supply than demand! ...and where are these higher paying jobs?

Stocks aren’t the only investment vehicle out there, but houses are the best shelter vehicle. We don’t live in hotels or cars, we live in houses and apartments, with houses being the more desirable option.

That's why it is a much better to rent a house and invest money elsewhere.

Bay area housing has always been expensive, yet people still live there and they’ll still buy homes. With the current perceived weakness in the market, people feel the time is right to buy. Mortgage rates are still low and believe it or not, most people don’t take out subprime mortgages.

Housing is overpriced, face it; and just because people are buying, doesn't mean prices are holding either. There also isn't nearly enough buyers to absorb current inventory inventory and come springtime, there will be a whole lot more.

On top of that, financing is more accessible to people who were previously disenfranchised.

Standards are tightening; leverages is limited.

Suds says :
1. It is not possible that every single buyer who buys now will regret it 10 years later.

I think, very few buyers today will regret it and of those who do even fewer will admit it. There are lot of intangibles associated with the house. And there are enough mental accounting opportunities to feel warm and cozy.

Say one buys a 1M house today that rents for 2.5K, and sells it for 1.1M after 10 years. You think the person will regret it ? Gas might be $5, gold might be 1000 and the 12 oz soda at 7-11 might cost $2.50. Even then, they would claim to have come out ahead.

This is the real problem. It's not just whether buying is right or wrong. Most people don't even know how to evaluate that right or wrong. Hence spread the word about the bubblizer. At least people will make more informed decisions.

This is the real problem. It’s not just whether buying is right or wrong. Most people don’t even know how to evaluate that right or wrong. Hence spread the word about the bubblizer. At least people will make more informed decisions.

Even if it makes sense by way of calculating all expenses; the prices will continue to fall and there is no way to factor that in using any kind of calculator.

I think what people really need to be aware of is that prices have gotten very heavy by way of exotic financing and will soon collapse under their own weight; the subprime market is in a downward spiral and soon there won't be anyone willing or able to finance the suicide loans. Without this crazy funding, it is impossible for people to pay those crazy prices!

Anyone who buys now without using a suicide loan is going to be buying a real POS and even though they may be able to afford it, they will eventually see what they really could have gotten; not a pleasent experience.

If there is anything worse than paying the mortgage for a premium piece of real estate, it's paying that same amount for a POS!

someone wrote.
"I think, very few buyers today will regret it and of those who do even fewer will admit it. There are lot of intangibles associated with the house. And there are enough mental accounting opportunities to feel warm and cozy."

Well, under the present circumstances, there's a loose negative correlation between that sentiment and the number of years that someone's lived in Santa Clara County. The shorter the time they've lived here, the more likely to have that sentiment.

Peter Says:

> I’ve been reading this site for a few months now and
> it’s kind of funny sometimes. It’s almost like there’s
> an expectation that people should NEVER buy a home

Many of us have owned homes and plan to buy again, but not when the property tax bill is getting close to or in some cases even more than the rent of similar homes and condos (like it is in parts of San Francisco)

> The prices have softened, that’s why we’re buying a new
> home. It’s a great buy in my opinion. Sure we could rent
> and save maybe $1000 a month

You are not going to get many people giving you a hard time if you are only paying $1K more to buy than rent (in doing my taxes I added up all the costs of my race car for 2006 and I’m paying almost $1,000 a month for a toy I use less than 10 times a year)…

P.S. Where in the Bay Area did you buy a place for just $1,000 more than the cost of renting?

allah,

CEPR attempts to factor in the erosion of equity basing their calculations on that particulat market's overvaluation. Granted, it's a guess at best but for the time being it's one of the better tools out their. Give it a try just for a goof! :)

particulat? How about particular?

PAR,

Good summation. Totally accurate, and good for you btw! My youngest sister lives in Thousand Oaks and my accountant brother-in-law has repeatedly said that many of the folks that bought recently in their area simply can't afford to offer any kind of price reduction. Buyers at or near the median came in w/zip down or MEW'd out cash so they HAVE to ask close to what they owe if they expect to walk away without a short sale.

There's not a lot of wiggle room. For sellers above the median "many" came in w/equity from previous sale so these are the ones that can take a loss (however unpleasant that might be).

allah,

CEPR attempts to factor in the erosion of equity basing their calculations on that particulat market’s overvaluation. Granted, it’s a guess at best but for the time being it’s one of the better tools out their. Give it a try just for a goof! :)

I checked it out and yes it is just a guestimate; it seems that the combo box for fixed rate/ARM doesn't seem to have any effect. Wow, for my area he has the appreciation at -56% (yikes!) which is worse than I thought.

The problem with this calculator is that many people who buy will put down 30 years as the amount of time they will stay in the house and this will usually favor buying. The problem is, can you honestly plan out the next 30 years of your life? Some people just don't get it!

Going and looking up the tax information and sales history on a property you're interested in can be telling. A few of the houses on the market that my wife and I have looked at have been priced at 6% over the loan amount made 2 years ago.

Gee... I wonder where they got their price point? :D

Those are the people PRAYING for a spring bounce.

allah,

Yeah, I'm trying to make it to Friday but some FB playing w/the calc. keeps skewing it until it DOES make sense! If the REIC had their way everyone in America would re-fi every year and flip every other year?

We keep being told that (7) years is the avg. stay in a residence but I seriously doubt that's accurate. It seems to me that over half of the existing homes for sale are from 2004 and newer? Again the mid-west could be be a stabilizing force.

PAR :

True. The sales volume has crashed, and prices definitely have stalled or decreasing depending on who you ask. So far all the bulls have completely ignored (or failed to answer) one question.

In spite of good job market, good stock market and historically low interest rates WHY is the market stalled or falling ? These should be good times. So what is it that's keeping it lame ?

So stop complaining about the bearish attitude here. Stop that "owners will pass on the cost via rent increases" crap. Stop that "how everyone wants to live here" and "BA will always have a lot of rich people" blah blah.

Just accept that it was the credit bubble that caused it, and not economic fundamentals.

allah,

We keep being told that (7) years is the avg. stay in a residence but I seriously doubt that’s accurate. It seems to me that over half of the existing homes for sale are from 2004 and newer? Again the mid-west could be be a stabilizing force.

I would say (and I can only speak for my area) that most people who are planning on buying for the first time will need to trade up to a bigger house in 5 or more years due to a growing family and this is not going to happen even if they can afford to keep it that long.

I like to study the psychology of those who are buying and one of the best places to find these people are at sites such as this.

You might want to look at sites like that in your area just to see what these buyers are thinking (Newlywed women love to talk about this stuff). It seems one of the first things couples want to do after getting married is to buy a house and alot of them don't even know what a housing bubble is!

Here are some that just want to get the hell out of Long Island.

allah,

When we really look at it, a couple only has a few catalysts to necessitate a move.

1. Just got married, fixer upper/starter home.

2. Kids, need more room so a move up home.

3. We've "arrived" dream home.

4. Down-sized home.

Obviously no (1) home can suit all these life events. In many cases (with a little updating and/or additions) you could easily dwindle that down to 3 moves and with some effort 2 homes. So why is it that we're we find it so necessary to swap houses every 3-5 years?

We did "starter" and within 3 years got our move-up/dream home (10 years) and while renting we're looking for the right down-size home. So we were able to shave off one step. Gosh, it's funny b/c I don't "feel" deprived? Should I? :(

I looked at that site, and at least most of them are saying "Hey, offer below asking! It's not a seller's market!"

Even people who don't think (or know about) it's a bubble at least realize that prices are too high right at this moment. (Some of them probably still expect their house to start ATMing for them in the next year or two.)

PAR,

Agreed. Bulls may have one thing right? Up to this point there hasn't been any concrete reason for home prices and sales to have tapered off so significantly other than a change in perception.

Buying now, (just as the "hard stuff" is getting ready to be passed around) makes less than no sense. With "the re-set" fixin' to move in like Clark Griswold's rude relatives and the first wave of "must sell" properties hitting the auction block it's just a matter of enjoying the show. :)

SP,

Gotta' admire your energy! I'd read Nigel's post and got that feeling you get when someone from work asks if you can help them move. He's somehow drifted from being a one time "reason-a-bull" to.....?

I looked at that site, and at least most of them are saying “Hey, offer below asking! It’s not a seller’s market!”

Well yeah, it's definetly not a sellers market, but they are saying like $10k - $20k below asking, big deal!

Even people who don’t think (or know about) it’s a bubble at least realize that prices are too high right at this moment. (Some of them probably still expect their house to start ATMing for them in the next year or two.)

Seems that way.

One of the couple's even posted a link to my site; you will notice that everyone that shrugged off the fact that prices are going to fall are couple's that already bought. :lol:

I thought that was in El Salvador?

Hey all,
For a few good Monday morning chuckles, check out this cnn piece:

http://money.cnn.com/galleries/2007/real_estate/0702/gallery.tycoon_updates/index.html

Apparently, they profiled a bunch of real estate "tycoons"-in-the-making back in 2005, and this is a follow-up piece. It's amazing how every one of them is either unable to sell and/or trying to rent their "investment" properties. These are 6 answers to the question we kept asking, "who the hell are all these 'investors' who continue to buy real estate. They apparently are now some of the ones left holding the bag.

My favorite is Sky Minor, the "rock musician/real estate investor."

From that same link:

I agree. The housing prices will not plummet because face it, LI is a popular place to live. It is near NYC and that will always keep LI booming (unlesss some sort of natural disaster strikes.) Its not like a house is going to be 500K today and 300K next year.

This is the typical Long Island mindset of those who have already swallowed the pill! Sound familiar?

The people who are losing out are those who bought in 2004/2005/part of 2006 at the height of the craziness and are now trying to sell (and make a profit!).

Yeah, those are the people who are losing out, we got our house for $10k less! We are lucky! :lol:

My favorite bit from the mortage news posts today :

Cassandra Grant of Hartford said she has been having trouble getting a mortgage to buy a home, because her credit score is 585 and her income is below $30,000 a year.

Well, at least lenders have wised up A LITTLE.

Dear Cassandra Grant,
If you want a house, please do the following :
1) Stop using your credit cards. Pay them off completely. Once they are paid off completely, then you may use them for small purchases that get paid off at the end of the month. No more carrying balances on your credit cards.
2) Once your cards are paid off, start putting what you USED to have to spend on paying your credit card bills into savings. Buy CDs, open a money market account, or SOMETHING.
3) Repeat 2 until you have 20% for a reasonable priced home in your area that you can afford on your salary from the job you can reasonably expect to keep. Given that you're 51 at step one, you may be 55 or 56 by now. In which case, calculate what you'll be able to afford when you no longer have a job and are living on Soc Sec benifits, unless you want to work until you're 86, you better aim for a house you can pay off quickly, which means the total price had better be less than 3x your salary. I'd aim for 2x, and sock every dime into paying it off.
4) Finally, you can buy that house.

SP, DinOR, rat patrol, PAR, Stuckin BA, Headset, allah & others,

Thank you for your tireless Troll-fighting efforts. We seem to getting a bit more traffic here today. Perhaps the pool of new suckers (and commissions) is drying up, and our REIC butt-buddies "Nigel" & "OpinionsPlease" have nothing better to do?