Tuesday, July 25, 2006

NAR's Playbook on Home Buying

Over at the The Housing Bubble Blog commentator Chris from Jacksonville FL wrote this:

The NAR’s underlying message is….drum roll please…

Last year, “Home prices are increasing…..its a good time to buy”

Now, “Home prices are leveling off…its a good time to buy”

Next year, “Home prices have fallen……its a good time to buy”


Very well put!

26 comments:

  1. If you think Realtors' words are harmful, you should pay attention to their actions.

    Read about what they're doing in Michigan.

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  2. The realtor's commercial on the radio says, "It's now a buyer's market! Buy now before prices start going back up!"

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  3. Of course that is what NAR says. What would you like them to say? People need to get their news and base their financial decisions on information and recommendations from a variety of outlets, and of course, consider the source. Buyer beware...

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  4. I wish we could get data from an independent source. How reliable is the NAR data? Are there ways they can fudge it?

    Then again, I don't much trust government data since 1992 or before either. They have been doing so many adjustments since the Boskin Commission and related changes that I don't know that government data is particularly reliable either.

    The Benengereth (sp.) data on that Housing Tracker website shows declines in asking prices in a lot of urban areas. If those declines don't start showing up in the NAR's sales prices soon, I will start to wonder.

    A Redskins fan

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  5. BigWalt said...
    "You've got to hand it to the Realtors--at least they're consistent--it is ALWAYS a good time to buy! At least in their version of the world...."

    A smart buyer knows that there is never a bad time to buy ... just people bad at buying. This is probably the best time to buy ... Prices have stalled in outlying suburban areas and interest rates have gone up just a bit. By next year, prices on condos and the like may have dropped 10 - 15% but interest rate hikes will more than offset any savings from price drops for those who mortgage a property to buy it. Bubbleheads, now is your chance to finally be homeowners! Go for it!

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  6. Lance said...
    “A smart buyer knows that there is never a bad time to buy ...”

    “….By next year, prices on condos and the like may have dropped 10 - 15% but interest rate hikes will more than offset any savings from price drops for those who mortgage a property to buy it.Bubbleheads, now is your chance to finally be homeowners! Go for it!”

    So what if interest rates go up next year? They could double, matters not because “A smart buyer knows that there is never a bad time to buy ...” Or two years from now….. “there is never a bad time to buy”

    Five years from now?









    Yep, you guessed it…. “there is never a bad time to buy ...”

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  7. What a Moron. So interest rates go higher...

    That's when you get an ARM. By the time it rests, rates are going back down. Buying anything on the monthly payment is the action of a very stupid monkey. You buy on price.

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  8. Lance,

    If interest rates go up, I get to claim a much larger mortgage deduction and I end up saving even more!

    This message brought to you by the letter I (for interest).

    My $0.02.

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  9. Robert said:
    "So what if interest rates go up next year? They could double, matters not because “A smart buyer knows that there is never a bad time to buy ...” Or two years from now….. “there is never a bad time to buy”"

    That's right there is never a "bad" time to buy ... i.e., a time when an intelligent buyer should refrain from buying. yes, there are better and worse times to buy, but never a time when a smart buyer feels he should not even consider buying. Is this too complex for you to understand Robert? Btw, did you ever understand why cash sitting in your pocket doesn't earn interest like cash sitting in a bank account?

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  10. john said:
    "Buying anything on the monthly payment is the action of a very stupid monkey. You buy on price."

    If you are paying cash, then yes this applies ... but definitely not if you are paying on time. Then it is your monthly payment that will make you or break you into the longterm. It's becoming painfully clear why some of you are still renting and probably always will. You are your own worst enemies ...

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  11. Lance said...
    That's right there is never a "bad" time to buy ... i.e., a time when an intelligent buyer should refrain from buying. yes, there are better and worse times to buy,

    Lance, thanks for the semantics. Wait for a better time to buy? Nope buy now!

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  12. Lance said...
    “Is this too complex for you to understand Robert? Btw, did you ever understand why cash sitting in your pocket doesn't earn interest like cash sitting in a bank account? Btw, did you ever understand why cash sitting in your pocket doesn't earn interest like cash sitting in a bank account?”

    Lance, they have these little “do hickys” now called “ATM cards”. No, it’s not your house. It actually fits in your pocket. (it’s gosh darn like having thousands in that there pocket). Anywho, that little ATM thingy allows me full access to my cash (I don’t have to find a buyer). Right now that cash is earning 4.5% interest.

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  13. Forget it. Lance is apparently the perfect programmed consumer. Anything on EZ Credit is just fine, as long as you can make the monthly minimum payment.

    Ah, the culmination of America. This is what the Founders fought for.

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  14. Robert said:
    "Lance, thanks for the semantics. Wait for a better time to buy? Nope buy now!"

    yes, and you still aren't understanding that unless you are very very lucky, the "discounts" you are likely to see from trying to "time the market" are dwarfed by the "discounts" you can realize by being a smart buyer in any marker under any market conditions.

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  15. whitetower said:
    "So, you are saying that a person who has a mortgage should ignore the total amount paid for his house?"

    now you're getting it! yes, yes, and yes. It is the present value and cashflow characteristics of the stream of payments that you will be making that counts. for example, you could be buying a $500,000 house with 20% down and a fixed interest 30 yr P&I loan. Under one set of conditions, that loan is 5% and under another set of conditions it is 15%. Under the first set of conditions, your mortgage payment is $2,147.29 for 30 years and then $0 forever after than. Under the second set of conditions (the 15% loan), yoyr mortgage payment is $5,057.78 for 30 years and then $0 forever after that. Which do you prefer? Now, under a 3rd set of conditions, you get that house instead a year from now at a 20% discount --- and put the same $100,000 down on it ... (i.e., you are mortgaging only $300,000 this time around instead of $400,0000 because the house is priced at 20% less = $400,000) but the interest rate is now up to 20% ... your monthly payment is $5,013.06 for 30 years and then $0 after that.

    Now, would rather have paid $500,000 today and had payments of $2,147.29 or waited a year when prices fell 20% but interest rates were up and you now get that house at $400,000, but it costs you $5,057.78 per month to live in it?

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  16. good video for you guys

    http://video.msn.com/v/us/msnbc.htm?f=00&g=18ceda69-a569-4655-94b2-be979c5b2959&p=&t=m5&rf=http://www.msnbc.msn.com/id/3032619&fg

    www.globalhousepricecrash.com

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  17. Va_investor,

    Lance is correct. Financing expenses are every much as important as purchase price for the long-term holder of a property.

    Prices will not drop enough to compensate. Again, the only ones harmed by high prices are those that are new entrants to the market (ie. not "trade-up") AND that are forced to sell.

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  18. Interest rates may go up more, but the more interest rates go up, the more home prices are going to drop.

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  19. interesting story tangentally related to our discussion:

    Mammoth Wealth Transfer Awaits the Area, Study Predicts

    By Jacqueline L. Salmon
    Washington Post Staff Writer
    Wednesday, July 26, 2006; Page A01

    Washington area residents are expected to bequeath $2.4 trillion over the next 50 years -- an amount to be divided among heirs, charities and estate taxes -- in what is believed to be the largest transfer of wealth in the region's history, according to a new study.

    www.washingtonpost.com/wp-dyn/content/article/2006/07/25/AR2006072501601.html

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  20. Anonymous said...
    "Interest rates may go up more, but the more interest rates go up, the more home prices are going to drop."

    Yes, this is correct. But as my example shows, it is not an even trade off. The bottom line is that you still end up paying more per month. Play with the figures run it under various scenarios and see what you get.

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  21. "Yes, this is correct. But as my example shows, it is not an even trade off. The bottom line is that you still end up paying more per month. Play with the figures run it under various scenarios and see what you get"

    Lance, are you telling me that you don't see any advantage in buying at a lower price and higher rate, even if the payment is the same?

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  22. The "per month" and "how much can I afford" is a very shortsighted view lance, and it's a view that ignores value. If you pay less, with a higher rate, there is a greater chance of your asset appreciating, in which case, you can refinance if rates go lower. If you buy with a low rate at a peak price, and prices decrease, you're not doing yourself any favors.

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  23. The news stories are finally conceding that the slow down is 'sharp' and that the halt has been swift. What do you think comes next? Severe price drops.

    The housing slowdown is going to affect us all and even possibly cause a recession. Once that starts, what do you think the Fed will do? For political reasons, the Fed will stop raising rates and may be even lower them again.

    What then? Then, you can buy at a low price AND a low interest rate....

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  24. "If you pay less, with a higher rate, there is a greater chance of your asset appreciating"

    Not only that, but as you make more money through the years, you can pay down principal in chunks which would reduce the total interest paid more rapidly than if the principal were higher.

    How can any thinking person argue against that?

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  25. Has anyone paid any attention to the Christmas in July sale from K. Hovnanian? 10K off the original 494K price plus 15K in closing costs. Location is North Michigan park..interesting

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  26. It would be great if Lance would acknowledge that A: if interest rates rise, homeowners will get to deduct a higher percentage of their mortgage payment and B: his ridiculous scenario of interest rates at 15% and 20% are absolutely ludicrous.

    How about 7% interest rates next year, at a 10% discount off from today's prices? How does that compute?

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