patrick.net

Only the ones that make themselves look too obvious....you don't have to paint them, cause they already show their true color!

Yes, And it's going to get very ugly in some places.

On average, the market balance turned during the summer. This is more than the usual seasonal shift... The cyclical slowing and price declines are just getting starting.

Supply has finally outrun demand by enough to shift the balance, and there is more supply under construction. The effect will be strongest in the condo market.

Want to see a realtor who makes him/herself look obviously honest? Show me one that will put their own welfare behind their promise. Show me a realtor who will sign a contingency agreement that reads "If the value of the property sold falls in value and the buyer is forced to sell for whatever reason, the realtor will pay the difference". I would buy right now regardless of the bubble......but that's never gonna happen is it?

RIC says:
It is also sad to see people, who market themselves as professionals, either shamelessly or out of ignorance, use outright falsehoods to try to sucker people into taking on debt burdens of 700-800 thousand dollars. And there is no shame in calling such people to the mat.

Well, what about the "professionals" who suckered people into $600k debt burdens two years ago? They made their clients money. Maybe only funny money, but it's very real and believable today. Was real estate overpriced in 2003? Of course it was.
How do they know that they won't make their clients money now?

The cracks are showing right now, but the cracks showed in 1998 and in 2001, and the following years, it was up another 20%.

I have a friend who's lived in the Silicon Valley for 30 years. She's not in a technical profession, and honestly thinks every single software engineer in the valley makes millions now or will make millions later. She also believes honestly that real estate in the valley will always go up, if only for that reason. She will advise you to buy now, and that has nothing to do with deliberately sucker you into something to make her some money.
If she had the money, she'd buy herself.

Allah, You expect too much from the realtor. Their job is that of a middleman. They find a buyer for a house, and a house for a buyer. They should also shepherd the deal to conclusion.

If you expect them to be able to predict future price movements for you, you are dreaming. It is certainly unrealistic to expect them to guarantee the profitability of your purchase decision.

Girgl, Thanks for the interesting links yesterday.

RIC, After many years of interaction with many realtors I have come to the conclusion that most of them (like most of the general public) are ignorant of how market cycles work. So, I expect that the realtor in question is far more ignorant than deceitful. Neither condition is good. I agree that in a perfect world such people would not be realtors, but there is a shortage of well-intentioned visionary economists willing to sell real estate. So, we are largely stuck with what we have.

If you expect them to be able to predict future price movements for you, you are dreaming. It is certainly unrealistic to expect them to guarantee the profitability of your purchase decision.

I never expected them to gaurantee this....only the ones who state that it will just keep on going up.....I have been told by 3 different realtors that it will keep going up and I had asked for that contingency, not because I thought that they would agree to it, but just to show there true faith in the market....that is priceless! If they really knew that it would keep going up, there would be nothing for them to worry about, would there? If they truely believed this, this would be an excellent marketing strategy!! Imagine how many buyers would flock to them!

I suspect that there is a natural selection effect with new realtors where the more optimistic ones are more likely to succeeed. Being ignorant makes it easier to be constantly optimistic (this is also true for being constantly pessimistic).

There are also many very savvy and honest professionals in the real estate business. In my experience, I have seen these people ultimately become successful investors as well as realtors. I believe ScottC is one of these people. They do exist.

RIC, Hope is on the way... it's always the most insane at the market top.

The next round of elevated insanity will be the over pessimism as we near the market bottom in a few years. When the bottom arrives I will be helping people escape the disasterous real estate market by purchasing property from them.

There are also many very savvy and honest professionals in the real estate business. In my experience, I have seen these people ultimately become successful investors as well as realtors. I believe ScottC is one of these people. They do exist.

There is noone on this blog who disagrees.

Of course, I have limited resources, so I can not save everyone. That is why it is better that I wait for the very bottom to help those who are in the greatest need.

How is this for legalized fraud?

[snip]
"As long as we had the mantra that prices only go up, you could have the most stupid mortgages and it was great," he said. But going forward, "the public will see more foreclosures . . . people are maxed out with debt."

....and yet they still are pushing these mortgages!

No matter how risky these exotic mortgages are, they will continue selling them as long as they can make $$$. When mass defaults occur, the lenders will have their asses covered… I guarantee it.

Of course....at the expense of us taxpayers,...that is why I call it legalized fraud!

Zephyr says:
When the bottom arrives I will be helping people escape the disasterous real estate market by purchasing property from them.

Zephyr, what kind of properties will you buy, in which market?

However, when all the shit hits the fan, many of those lenders who got into the market just because of the boom will probably be filling out applications at starbucks and I will have no sympathy for them.

Girgl, For three decades I have been buying mostly Single Family Homes near the beach in major urban areas that have good weather.

For the future... Where the baby boomers migrate, the prices will rise faster than average.

Pop, It does seem that realtors are overpaid. But keep in mind that the commission gets split four ways, and the agent spends a lot of time on people and deals that they do not get.

The average real estate agent does not really make much money. But, some agents do make a lot of money. It is one of those occupations where most participants earn very little and a minority do really well.

I have a friend who’s lived in the Silicon Valley for 30 years. She’s not in a technical profession, and honestly thinks every single software engineer in the valley makes millions now or will make millions later.

Wrong.....Software Engineers are being outsourced every day....their days are numbered! She doesn't know much about the Software profession.

She also believes honestly that real estate in the valley will always go up, if only for that reason. She will advise you to buy now, and that has nothing to do with deliberately sucker you into something to make her some money.

No disrespect, but she doesn't seem to bright to me.

If she had the money, she’d buy herself.

She doesn't need money.....there are plenty of lenders out there who will gladly give her a 110% IO loan......even if she works at starbucks serving mocha-chinos........If she truely believes that it will keep going up, then she can't lose with these loans!Hell, if I believed that it can only go up, I would jump at these loans a long time ago....it would be a can't possibly lose situation!........but it's just not true and anyone who believes this is not too bright....but its good that she thinks she can't buy, it will prevent her from joining the group of lemmings that are marching off the cliff as we speak!

I do believe that real estate commissions are generally too high.

allah writes:
No disrespect, but she doesn’t seem to bright to me.

I think she's ok brightness-wise, just very very naive and optimistic. She wants to believe that only good things happen. And she does.
Sometimes, I want to be more like her :-)

Kherson, No thanks. I believe that the condo market in Florida is going to experience one of the morst price declines as all the inventory swamps the demand.

I think she’s ok brightness-wise, just very very naive and optimistic. She wants to believe that only good things happen. And she does.

The younger generation being completely priced out of the market is a good thing? I know the market is going to fall....and I look at that as being a good thing. Believing that when my children grow up, they will able to buy a house near me (or anywhere for that matter).

on that same note....people who own a house like to believe in what is good for themselves or at least let other people believe that they believe (self denial)....so naturally they will say that it will only go up (even if they truely don't believe it themselves). I am the only one in my family that hasn't bought a house....fortunatly my siblings have bought way before the big boom. They like to believe RE will at least hold its value and they do get aggrevated when I talk about an RE crash because they have found alot of the things I have said in the past have happened (such as the stock crash).....So I try not to bring these things up, but sometimes someone else usually does like on Thanksgiving. :)

Allah, There is hope. No generation will be priced out, other than on a temporary cyclical basis. I remember 30 years ago people were saying that young people would forever be priced out of the market. Then the cycle shifted. It happens about once every 10 years or so.

It is true that some locations will become permanently too expensive for the average buyer, but there will always be other housing that most people can buy at some point in the cycle. Right now is a very difficult point in the cycle. However, it will not stay like this. 70% of US households own their home today – a number that has steadily increased over the last 50 years. This would not be the case if people could be permanently priced out.

Most of the people who owned homes 50 years ago are dead now. The current owners are the young people who were thought to be forever priced out of the market.

Kherson, Yes, the Florida Condo market is already overbuilt, and they are still building like crazy. It will get really ugly.

Allah, There is hope. No generation will be priced out, other than on a temporary cyclical basis. I remember 30 years ago people were saying that young people would forever be priced out of the market. Then the cycle shifted. It happens about once every 10 years or so.

Of course Zephyr, do you think I had any doubts :) , I was just explaining how my view is more optimistic. I know RE will crash....make no mistake about that.....and it is for this reason that it is illogical to say that it only goes up.....and like I say, that 70% ownership rate is flawed. Many people who bought will realize when they are underwater that they don't own the house, but rather the house owns them...and their only way out of that slavery is to run away from it and leave it to foreclosure.

Sometimes we become slaves to everything we have.

I realize that you expect a crash, and a better time to buy.

With or without a crash the market must ultimately return to better balance. It is much easier to be patient when one has confidence that the cycle will come around again.

Nobody has missed the last train. However, the scedule will be a little sparse for a while.

70% of US households own their home today – a number that has steadily increased over the last 50 years.

70% of US households have a mortgage on their home. I would hardly call the I/O loans so prevalent here in the Bay Area "ownership".

I admire your analytic nature Zephyr, but I can't help but think you are being a bit disingenuous about the motivations of a good many realtors and lenders right now. Of course, I am one of those "young people", so perhaps I'm not in a good position to have a disinterested opinion.

Have I mentioned my "Baby boomers (and U.N. and trilateral commission) conspire to put Gen X in perpetual debt slavery" theory? I can get quite wild eyed while talking about it. To the point that I will stoop to reading "The Nation" on the topic!

Cheers,
prat

Or, heaven forfend!, the village voice:

http://tinyurl.com/7b7wc

_smile_

Cheers,
prat

Their motivations are to make money.

I do not see what you are getting at with your claim that I am being disingenuous. My comments are honest and sincere.

Zephyr says:
Most of the people who owned homes 50 years ago are dead now. The current owners are the young people who were thought to be forever priced out of the market.

Exactly. The fact that life expectancy has been and is still growing is an additional constraint on supply these days.
There are lots of people living in my area who moved into their homes in the 60s, when the area grew like crazy. These guys are in their late 70s and early 80s now, and most are remarkably healthy. However, these people, sad as it may be, will start joining their ancestors in the foreseeable future and create a little supply bump. And it seems that this will coincide with not so good times in the real estate market.

I still fear that some day, the Silicon Valley market will look like Detroit's today. Tons of pretty nice houses built in the 20s and 30s, and expensive at the time, really cheap now. That'll be a while, though.

Prat, It would take an amazingly competent group to secretly conspire in such large numbers. Power brokers secretly conspire, but a whole generation is incapable of such.

Besides the truth is that the Boomer generation has been the most debt ridden generation in history. So if it is a conspiracy, it is the boomers who are the target, and the Gen Xers are just getting hit with the stray bullets.

Girgl, Some areas will end up like Detroit, while others will end up like Beverly Hills.

Excellent article prat...I especially agree with the part:

"The next generation is starting their economic race 50 yards behind the starting line," says Elizabeth Warren, a Harvard Law School professor and author of The Two-Income Trap. "They've got to pay off the equivalent of one full mortgage before they make it to flat broke, in order to pay for their education. They can never get ahead of the game, because they're constantly trying to play catch-up.

"And once you've got accumulated debt, the debt takes on a life of its own. It demands to be fed, and it takes that first bite out of the paycheck. And it means the opportunity to accumulate a little, to get a little ahead, to maybe put together a down payment—it's just never there. It's just staggering to me that this is not a part of our national debate right now."

Zephyr says:
Girgl, Some areas will end up like Detroit, while others will end up like Beverly Hills.

I take it that means it's better to buy in a better (more expensive) area when the time comes?