Saturday, December 02, 2006

BubbleSphere Roundup

Housing.com Blog reports on the DOJ versus the Realtors. He opines that "The collusive practices of realtors have contributed to an environment where buyers and sellers don't have the information they need to make the best decisions possible. Given how easy it is to become a real estate agent, and how the Internet enables such wide and open sharing of information, realtors need to adapt to a flat-fee structure or get ready to share some quality time with the dinosaurs."

Deceptive Realtors? I'm schocked, schocked I tell you. Southern Maryland Housing Bubble News reports on How To Screw Homebuyers And Doctor Statistics - A Re/Max Educational Series.

Calculated Risk tells about the Housing Optimists. "In spite of the steady stream of bad news for housing, there are a growing number of forecasters and stock analysts that are bullish on housing and housing stocks."

Nouriel Roubini explains his predictions for a US recession in early 2007.

42 comments:

  1. As you view that listing photo on my blog think about this quote "Although the realty association (NAR) might be viewed as having an ax to grind, its quarterly reports on median prices and sales generally are viewed as authoritative by economists and are cited by the federal government," as mentioned in:

    Average days on the market and list price to sales prices stats are being doctored...

    The Median Is the Message

    http://www.washingtonpost.com/wp-dyn/content/article/2006/12/01/AR2006120100018.html

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  2. The 'Housing Optimists' are the same ones who in July of 2000 said to hold and buy Cisco and SUN- With Cramer and Kudlow screaming that they where 'a buy'.

    The downturn in housing has a long way to go- and the so called 'vaunted economy' that could handle the housing downturn is proving these same optimists wrong again.

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  3. DC inventory plunges down to April levels:

    http://www.housingtracker.net/old_housingtracker/location/DC/Washington/

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  4. http://www.cnbc.com/id/15837671

    she gets it!

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  5. Open the MLS, information should be available. There is no excuse for the statistics not being known.

    I see DC inventory is "only" 30% higher than last year. Just wait until the credit tightens. (It will. California and Florida are going to rock the national mortgage market. We're already past the point of no return.)

    Neil

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  6. Today's report on Boston has been released on both my blog and our new website. History has shown us that Boston is a great indicator of what will happen in the rest of the US.

    thebubblebuster.com
    or
    Daily Home Price Analysis

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  7. Anonymous said. 6:04 AM


    please post that link in april when inventory explodes, with all those "new" listings.

    reminder: most people take their home OFF the market in the winter.

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  8. The only stat that matters on that page is 12 month +31.3%. Inventory always drops in the winter; just looks at 2005 numbers on the same page. You can expect a large inventory expansion this spring.

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  9. "Anonymous said. 6:04 AM


    please post that link in april when inventory explodes, with all those "new" listings.

    reminder: most people take their home OFF the market in the winter.

    December 04, 2006 1:41 PM


    Anonymous said...
    The only stat that matters on that page is 12 month +31.3%. Inventory always drops in the winter; just looks at 2005 numbers on the same page. You can expect a large inventory expansion this spring.
    "

    LOL, that's not what you people said last Spring when inventory went up. You were all to happy to proclaim victory. Well, go ahead and proclaim defeat. trolls.

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  10. The end of the housing bubble may mean hard times for the Realtors® as well. One day soon people will tire of paying a 6% surcharge on the biggest purchase of their lives. I don't think recent buyers will soon forget the bad advice they received from the REIC.

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  11. Ahhh, another year of living in a rented group house is on the horizon. :-) Chicks dig dudes in group house arrangements, right? RIGHT?!

    Eh, doesn't matter. What matters is that you DON'T own a home now, and you won't own one for the foreseeable future. That is the most important aspect of your life. All other aspects (individuality, independence, women, etc.) are secondary to the fact that you pay low rent.

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  12. threadkilla said:
    "reminder: most people take their home OFF the market in the winter."

    reminder: most people take their home off the market when prices have dropped. FEW people are in a position of having to sell. most can just wait for prices to go back to normal. I've read where the home improvement folks have experienced a surge of business lately. Rather than move up and make their homes available for first time and "move up" home buyers, a lot of people are just staying put and improving their homes instead. Good for them ... N
    OT good for those looking to move up or to buy their first home. BHs will have more "justification" to keep them from buying now ...

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  13. I'm out of the country for a few months, come back, check this blog, and it's still non-stop gloom and doom.

    It gives me comfort and lets me know that I am home.

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  14. I released three more Q3:2006 reports today - San Francisco, Seattle and Los Angeles. Seattle is particularly interesting because it's never had a period of nominal price decine. We can influence this market back to reasonable prices

    thebubblebuster.com

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  15. Lance said...
    “reminder: most people take their home off the market when prices have dropped.”

    Reminder: some of these folks have placed their home on the rental market. Locally, rental inventory has increased and landlords must compete with each other and local rental complexes for tenants, which can possibly drive down rental prices. Furthermore, these new landlords are finding out that even current rental prices do not cover mortgage and expenses, and they are having to feed one hungry alligator.

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  16. Lance said...
    “FEW people are in a position of having to sell.”

    Then we should see a decline in foreclosures, no?

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  17. Patch,

    Resetting the DOM to freshen the listing is not uncommon and if you have an RE agent or access to the MLS you can get the listing history for a particular address, so any interested party won't be fooled. What doesn't make sense is RAISING the list price after it's sold, which looks like what happened. Isn't in the agent's (and agents') interest to have the list price close to the selling price? Perhaps the agent wants to show this to sellers in an attempt to get them to lower their expectations. In any case, it does make the MLS stats suspect.

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  18. Lance said:
    "reminder: most people take their home off the market when prices have dropped. FEW people are in a position of having to sell. most can just wait for prices to go back to normal."

    First statement: Provide empyrical proof of seller motivation for removing a home from the market that supports your claim.

    Second statement: I disagree with "FEW". If anything, this number of people is on the rise. And that number will probably continue to rise, outside of external influences such as illness, job relocation, etc., simply due to the large number of ARMs.

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  19. analysisguy said:
    "Seattle is particularly interesting because it's never had a period of nominal price decine. We can influence this market back to reasonable prices."

    If it's "never had a period of normal price declines", why call such an occurence normal? I don't know much about Seattle, but I do know that it is a very young city with a young population just finding it's place as a west coast city ranking up there in importance with the likes of LA and SF ... and other world-class cities. Perhaps an escalation in prices IS the normal trend for an area gaining in international importance? Is it still cheaper than LA and SF?

    The problem with using trends and other analysis based on the past is that there is a built in error caused by the underlying assumption that the fundamental factors affecting price are constant. In a city like Seattle they clearly aren't even close to being constant. In an era where the US's role is being redefined within a pan-global economy that is itself just beginning to define itself, the fundamental factors are far from constant.

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  20. Robert said:
    "Furthermore, these new landlords are finding out that even current rental prices do not cover mortgage and expenses, and they are having to feed one hungry alligator."

    I agree with you that increased supply of rentals would put downward pressure on rents ... were it not that there is also increased demand from those "waiting it out". I'd suspect that at a minimum these two balance themselves out ... i.e., when a house doesn't get sold (and becomes a rental) you end up with an additional renter somewhere along the chain of move-ups and first time buyers. The upward pressure on rents comes from the fact that builders have stopped building ... although the population hasn't stopped growing and young couples or individuals moving out of their parents homes (or out of dorm rooms) hasn't stopped. Additional upward pressure comes from the very housing costs you mention. Landlords are on the whole in a better bargaining position than renters. How many instances do you know of of people going in to rent and saying "You're asking $X, I'll offer you $Y"? For whatever reason, renters are for the most part "price takers" ... and these new landlords will "give" a price that allows them to cover their costs at a minimum ... and renters being renters ... and there being more people looking than newly built rentals available, rents are almost certain to rise.

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  21. robert said...
    "Lance said...
    “FEW people are in a position of having to sell.”

    Then we should see a decline in foreclosures, no?"

    Absolutely NOT! As Va_Investor has explained many, many times, as the market was heading up, it was almost impossible to have a foreclosure. Now that we are in more normal times, we can expect to see a large rise in foreclosures ... as they head back toward normal levels! And btw, in a normal market, foreclosures are a good thing (watch, I know you'll take that quote out of context!). If you don't have foreclosures in a normal market, then that means that credit standards are TOO strict ... i.e., the standards are set so strict that while they are screening out that one bad apple, they are also screening out a 100 good apples that would never default on their mortgages. Another way to look at is is if we wanted a zero foreclosure rate, then we could make it that only people with cash savings equal to the mortgage amount (and willing to turn over control of those savings) could get a mortgage. That would give you a low foreclosure rate ... AND keep lots of responsible folks from becoming homeowners.

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  22. Anon 0530:

    Resetting DOM-MLS is legally OK to refreshen a listing...however, there is another metric called DOM-Prop (Prop=property) which does not reset unless the home is off the market for 6 months. This is based on the tax ID. So an agent can relist the same property 6 times with 6 new MLS numbers, resetting the DOM-MLS in Zip and other search engines, but the DOM-Prop should never reset unless the property has been off the market for 180 days. Manipulating the Tax ID so it even looks new to agents is shady, and I wonder if it's illegal.

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  23. I looked at the listings - it is a new construction. The county would not have issued a TaxID number. The 'Sold Information' is a label only for 'resolution'. It is the same in rental listings. To assume that the agent is 'shady' because he/she does not design or control the system or does not set the TaxId is disengenuous, to say the least. This is a perfect example of 'a little information is dangerous'. Lastly, the NAR does NOT control local MLS systems. Local associations decide which software they deem best suited. The danger of the internet is that neophytes think they know more than professionals who have taken years to learn their profession.

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  24. Lance said...
    “Now that we are in more normal times, we can expect to see a large rise in foreclosures ... as they head back toward normal levels!”

    Adding even more inventory.

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  25. Lance said...
    “I agree with you that increased supply of rentals would put downward pressure on rents ... were it not that there is also increased demand from those "waiting it out". I'd suspect that at a minimum these two balance themselves out ...”

    At a minimum, it balances out, leaving rental prices still much lower than monthly mortgage payments, therefore making renting still attractive. At maximum, the increased rental inventory drives rental prices down farther, leaving even more owners/landlords holding the bag on a mortgage they can’t pay and/or an ARM that keeps getting reset higher, and further alienating the prospects of buying when renting is so much more affordable.

    “Landlords are on the whole in a better bargaining position than renters. How many instances do you know of people going in to rent and saying "You're asking $X, I'll offer you $Y"?”

    Please folks, tell me that at least some of you negotiate rent? If not, at least look at your local rental inventory and show your current/potential landlord his/her competition.

    “and these new landlords will "give" a price that allows them to cover their costs at a minimum ...”

    Again, as with homes that are for sale, they can “ask” for any price they want.

    For each rental unit you see coming off the market, that’s one more family not looking to buy for at least another year, putting more strain on homes that are currently for sale. Only one thing will break this cycle, lower prices.

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  26. as they head back toward normal levels! And btw, in a normal market, foreclosures are a good thing (watch, I know you'll take that quote out of context!). If you don't have foreclosures in a normal market, then that means that credit standards are TOO strict ... i.e., the standards are set so strict that while they are screening out that one bad apple, they are also screening out a 100 good apples that would never default on their mortgages.

    Yes, Lance has a good point that in a normal market a nice low level of foreclosures is a good thing. There should be an appropriate risk to mortgage lending. The problem is right now mortgage payments are such a non-normal fraction of income that if anyone stumbles, people will get forclosed upon.

    Let's not forget that demand is desire and ability. If you want a low purchase price the best time to buy is when credit is tight. :) I'm waiting for a normal mortgage market before I buy. Today's mortgage market is not-sustainable. When I bid, it will be against someone with a down payment. I'm not thinking that will cause a price increase. 2Q 2007 is when bad mortgages, ARM resets, inventory, and several other factors converge to finally give us a buyers market. :)

    Neil

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  27. Nikki,

    The Tax ID trick only works with clueless agents. Searching a particular address in the MLS, at least in the DC area's MRIS, will provide all the listings going back a number of years. Shady? Sure, they're real estate agents aren't they? But since it's common and brooked by the brokers, I'd be surprised if it was illegal.


    anon 5:30

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  28. Lance, look up the word 'nominal' in the dictionary. (Google 'nominal definition' if you don't have one.) 'Normal' is not one of the options. The definition you want is number 5 b (business usage) in the free online dictionary: b. Of, relating to, or being the rate of interest or return without adjustment for compounding or inflation.

    Example: A house bought for $100,000 in 1989 sells for $100,000 in 1994. There is no nominal change price. What is referred to as the real price, however, has depreciated by the inflation which has occurred over that time period.
    There's no point in trying to engage in debate if you won't accept the standard definition of terms.

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  29. lance said.....in a normal market, foreclosures are a good thing.


    :lol:

    you have GOT to be a troll!!!

    i can not wait until next year as i'm sure you'll give us some more gems like this one!!!

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  30. The way that the DOMP is being changed is by removing or adding the Tax ID to the listing. Some properties, especially new construction are purosely listed with a blank or bogus Tax ID's, then when the house is done or near done, if it hasn't sold, they add the Tax ID in at that time and roll it out as a new listing. Old properties that had valid Tax ID's simply have them removed to reset the DOMP to zero.

    Nikki, you're correct about the 180 days, but everyone needs to keep in mind the statistics these actions affect such as list price to sales price, and average days on the market, which is only calculated based on sold properties.

    Maybe Lance could educate the group about the personal statistics that real estate agents have?

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  31. Isn't it rather amusing that all of those trying to justify the relisting behavior, especially in regard to DOMP, which is against MRIS rules, are failing to talk about the NAR Code of Ethics?

    What does it say about deceiving buyers? Lance? Any other cheerleaders?

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  32. On price/credit trade off.

    The key here is that low price/higher credit can always be resolved. In that circumstance, you take out the ARM, or even I/O ARM, with the expectation of Refi when reates inevitably drop.

    Thus in the medium run you end up with low price/low(er) rate.

    What is happening now is the exact reverse. We are at historically low rates/high prices. But idiots are taking out ARMs, I/O ARMs to squeeze in the prices.

    The problem is obvious. Rates can go nowhere but up, barring a massive recession, as we have been very near 0% real interest. We'd need to hit "Japan in the 90's" level of economic downturn to move rates lower (Japan spent years at negative real rates).

    So present buyers are looking at medium run high price/high rate, the very worst scenario possible. Because in that environment you are almost guaranteed to be underwater at the same time. If the bubble had run up under normal rules, with 26-28% maxiumum income/payment and mostly fixed and longer term straight ARMs, it wouldn't be a bubble.

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  33. Sarah in DC said...
    "Lance, look up the word 'nominal' in the dictionary. (Google 'nominal definition' if you don't have one.) 'Normal' is not one of the options. The definition you want is number 5 b (business usage) in the free online dictionary: b. Of, relating to, or being the rate of interest or return without adjustment for compounding or inflation.

    Example: A house bought for $100,000 in 1989 sells for $100,000 in 1994. There is no nominal change price. What is referred to as the real price, however, has depreciated by the inflation which has occurred over that time period.
    There's no point in trying to engage in debate if you won't accept the standard definition of terms."

    Sarah, If it wasn't obvious to you that I mis-read nominal for normal, than I'm not going to try to explain it to you. Notwithstanding, what I said about the Seattle area stands ... and for the same reason why one wouldn't expect to see normal prices drop, one wouldn't expect to see nominal prices drop either.

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  34. patch tuesday said:
    "Maybe Lance could educate the group about the personal statistics that real estate agents have?"

    I have no idea what statistic real estate agents use. If you'd been listening to what I was saying, you'd know that I am taking a macro view of the situation and couldn't care less what statistics or metrics about the past roll out from one person's or organization's data collection or not. It's really close to irrelevant when the very foundation of what gives things value is shifting so quickly as we move into a pan-global economy. Besides, like I've said before, the basic discussion here is "is it better to try to time the market and save a few pennies here and there by wishing on a general economic depression to dump a property in your lap for cheap?" or "is it smarter and better to realize that you can be the master of your own destiny and using your own skills you can ALWAYS and under ANY market conditions find a home that in the long run will cost you a lot lot less to live in then if you leave things to chance?" ... I of course believe in the second. Bubbleheads --- from everything I have read on here --- believe in the first. And believing in the first, I guess I can see why they are so concerned with stats on the past ... it's sorta like reading tea leaves. These stats will tell them when to expect to receive their unearned windfall.

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  35. Lance said...
    “If you'd been listening to what I was saying, you'd know that I am taking a macro view of the situation and couldn't care less what statistics or metrics about the past roll out from one person's or organization's data collection or not. It's really close to irrelevant when the very foundation of what gives things value is shifting so quickly as we move into a pan-global economy.”

    So Lance, the data has gone from “meaning ABSOULTY NOTHING” to “close to irrelevant"?

    Hum, I wonder what other numbers Lance would have us ignore?:

    Lance said...
    -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.”
    July 25, 2006 11:09 PM

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  36. "is it better to try to time the market and save a few pennies here and there by wishing on a general economic depression to dump a property in your lap for cheap?"
    There're so many things wrong with this statement.

    1. People who bought properties during the run-up aren't some trying to time the market thinking the housing prices are gonna keep going up so they better buy now to "save" a few pennies?

    2. What you call timing the market I called it being realistic about what one can afford to buy a property.

    3. The economy is still relatively strong and yet the housing prices are flat and falling (unless you deny the latest statistics). That tells people the affordability issue is still a problem.

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  37. Robert,

    Apparently you haven't a clue as to why cashflows (i.e., streams of payments) absolutely trump "sales price" in determining whether one is "overpaying" or getting "good value" for their purchase. Until you understand why they are so much more important than the nominal price you pay for your house, you'll not be in a position to get yourself a good affordable home ... unless it happens to fall into your lap. Now I understand why you are so much counting on a gloom and doom scenario to dump a home bargain in your lap.

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  38. Bottom Line: David was calling for "Economic Gloom late this year or early next year". He said that as far back as May 2006, as I recall.

    This year is finishing with very strong economic indicators.

    David, you've got three months for your pre-saged "Economic Gloom" to settle in! Or have you extended your timeline?

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  39. Lance said...
    “Apparently you haven't a clue as to why cashflows (i.e., streams of payments) absolutely trump "sales price" in determining whether one is "overpaying" or getting "good value" for their purchase.”

    My cash flow is greater now than if I were to have bought right after I sold in 05’. News Flash, Lance. Sales and prices are falling, rates are still pretty low.

    “Now I understand why you are so much counting on a gloom and doom scenario to dump a home bargain in your lap.”

    Lance, it is you who have indicated that this is a “normal” real estate cycle, and given that you have yet to re-define “normal”, I assume you’re talking about historical. Historically, after a considerable run up, there has been an equal, if not more so, down turn. So Lance, this is not gloom and doom, and I’m not counting on it. Taking your advice, this is a “normal” down turn, equal to the run up if not more so.

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  40. Robert said:
    "Taking your advice, this is a “normal” down turn, equal to the run up if not more so."

    Robert, do you really honestly believe that prices will return to pre-1999 (or whenever the "run up" started) level? I say never in a million years.

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  41. Lance said...
    Robert said:
    -Taking your advice, this is a “normal” down turn, equal to the run up if not more so.-

    “Robert, do you really honestly believe that prices will return to pre-1999 (or whenever the "run up" started) level? I say never in a million years.”

    Wait, hold on a second. I never said that I believed that prices would return to pre-boom levels. You must have missed the “taking your advise” part. You’ve touted this “normal” cycle for a while now, and now you’re saying is that this is not a “normal” real estate cycle? I’m confused. Or, I’m guessing that you have re-defined “normal”? Will you ever get your story straight? I say, never in a million years.

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