In most bubble markets, the spring selling season has been a disappointment for the real estate industrial complex (REIC).
Even with Bernanke's optimistic outlook, the Fed chairman did make clear once again that the painful residential real-estate bust, which started last year, "appears likely to remain a drag on economic growth for somewhat longer than previously expected,"
Inventory continues to increase in the overwhelming of the bubble markets as prices are either declining slightly or remaining flat. According to Housing Tracker inventory has increased in these metropolitan areas in the past 3 months and compared to a year ago.
- Baltimore: 31% (3 month) 30% (1 yr)
- Boise: 23% (3 month) 84% (1 yr)
- Detroit: 15% (3 month) 13% (1 yr)
- New York City: 15% (3 month) 2% (1 yr)
- Sacramento: 30% (3 month) 11% (1 yr)
- Washington: 44% (3 month) 7% (1 yr)
For example, in metro Sacramento on March 20th there were 11,560 properties which increased by 2001 (16.9%) to 13,521 on May 6th [about 1.5 months]. Meanwhile, if we compare the year over year (YoY) for sold inventory we see 2,489 properties sold in metro Sacramento in March 2006 down 7.7% from 2,965 in March 2005.
Foreclosures are also rising significantly. The Central Valley Business Times reports that "There were 176,137 foreclosure filings -- default notices, auction sale notices and bank repossessions – nationwide last month, nearly 90 percent from May 2006 and up 19 percent from the previous month, according to a monthly report from Irvine-based RealtyTrac Inc., an online marketplace for foreclosure properties."
Inventory has increased significantly this spring. With the spring coming to a close, inventories remain high in the bubble markets.
The false hope of the 'spring boom' is being shattered by the harsh reality of a declining housing market. A spring boom is a mere fantasy .
Posts
During what should be the season of greatest appreciation for the year... we have falling prices.
ReplyDeleteWhat the heck is going to happen when credit tightens further? The Fed has started discussing banning "stated income" loans. (All income must be verified.) That will make things interesting.
Not to mention the MBS secondary market is tanking again. Bonds are dropping below the 82.5 cents on the dollar "floor" for the lowest traunches. In other words, trading is freezing up again.
It will be interesting once we hit October... the tradition season for home price declines.
Got popcorn?
Neil
Gee, what happened to "inventory is seasonal"? Housingtracker has DC inventory down 18.5% year over year. Sorry.
ReplyDelete"spring boom" or "spring bust"?
ReplyDeleteWhich statement is more ridiculous?
I don't recall any quotes from NAR calling for a "spring boom". I'm willing to be corrected. Is what we have witnessed a "bust"? Hardly, but you decide for yourselves where the rhetoric is coming from.
David J. keeps moving the goal line. I don't care about the vast RE conspiracy - they are paid lobbyists. David is merely a fear-monger who keeps backing off his earlier statements. (eg. I NEVER said 50% off; I said depression in the fall of 2005 - whoops, I meant 2007 or 2008 or .....
Oh the pain, the "shattering" of the market, the harsh reality...
Face it folks, there are extemists on both ends of this debate. Neither deserves respect or credence. Just a normal cycle people.
Got popcorn?
You should expect the quarterly inventory to increase because this is the time of year when people are putting their homes on the market. Only the year-over-year inventory changes are significant.
ReplyDeleteI would call it a bust if houses are for sale and no one buys them and then they are foreclosed upon. The authors logically states the progression of his theory. He states previous data, current statements, and in my opinion, future truths. Stop crying because you paid 600G for that loundoun condo.
ReplyDeleteJOhn
Home buyers waiting for prices to come down may be wasting their time.
ReplyDelete"What we’re likely to see is more of a flattening of prices," said Nicolas P. Retsinas, director of the Joint Center for Housing Studies, commenting on the new State of the Nation’s Housing report from the Harvard University Joint Center for Housing Studies.
"Prices might go down a percent or two or go up a percent or two," he said. Condominiums, however, "might be more vulnerable to a decline."
'Freddie Mac posts $211 mln net loss in 1st quarter. Freddie Mac, the No. 2 U.S. mortgage finance company, on Thursday reported an unexpected net loss of $211 million for the first quarter, citing a souring outlook for mortgage credit risk that widened credit spreads.'
ReplyDeleteMore things to choke buyers. By next spring, you have to be sparkling credit-worthy and ready to put 20% down payment to get a house. More sellers without less buyers.
Price in DC region is rising and inventory is down. See for yourself:
ReplyDeleteDate Inventory 25th Percentile 50th Percentile
(Median) 75th Percentile
06/14/2007 9,965 $330,000 $442,000 $619,900
06/07/2007 12,375 $325,000 $435,000 $599,900
06/01/2007 11,589 $325,000 $437,900 $599,990
05/28/2007 11,822 $325,000 $439,000 $599,900
05/21/2007 11,667 $329,000 $439,900 $614,000
05/14/2007 11,188 $325,750 $439,990 $614,777
05/07/2007 11,019 $329,000 $444,900 $615,000
05/01/2007 10,456 $329,000 $445,000 $619,000
04/28/2007 10,745 $326,900 $442,000 $619,000
david - get in touch with me
ReplyDeletekeith @ housingpanic
cheers
In the housingtracker data, it has inventory dropping by 20% in a single week, and drops well over 2000 houses. No other single week in the entire data set has a 2,000 house change up or down in a single week. That's a large enough change to look like either a misreporting or a serious move in the market. It's worth staying tuned to that.
ReplyDeleteIf the pattern holds, you cana rgue that we've seen a bottom, and we smart renters can cash in by buying now, and we can rightly pat ourselves on the back for our patience, which is now being rewarded, and for listening to the brilliant and insightful David J and blowing off morons like lance and anonytroll.
The housing tracker with smaller geographic coverage areas also shows a big decline in inventory for DC today. Interestingly, a huge drop in Baltimore is also reported. http://www.housingtracker.net/old_housingtracker/
ReplyDeleteHowever, there was an increase in Baltimore on the new housing tracker reported 3 days ago. http://www.housingtracker.net/
I've never seen such a large jump in either direction, and usually the two trackers move in the same direction. Wonder what's happening?
Keith said:
ReplyDelete"If the pattern holds, you cana rgue that we've seen a bottom, and we smart renters can cash in by buying now, and we can rightly pat ourselves on the back for our patience, which is now being rewarded, and for listening to the brilliant and insightful David J and blowing off morons like lance and anonytroll."
Yes, you should pat yourselves on the back for holding off from buying while waiting for a bursting price bubble that never happened. So here you are now, 3 years later, having to pay no less than you would have paid if you'd just bought back then. Yep, REAL smart. You endured 3 additional years of living in a rental ... and for what?
I think even David J. has to have recognized by now that he was wrong ... very wrong. When are the sheep going to concede they followed a leader who didn't know what he was talking about?
RE: Home buyers waiting for prices to come down may be wasting their time.
ReplyDeleteThe quote offered in support of this statement proves the opposite: Buyers who wait will be no worse off for waiting to buy if prices stay flat.
To the contrary, if they are buying for investment, they may be better off investing in a 5% money market or 5.5% CD than in housing. Those investments can be liquidated for free, unlike a house that has significant transaction costs. If they are investing for long term, they could still save their money and invest it at 5% instead of buying and will actually earn more, which would give them more purchasing power in subsequent years if housing appreciation stays under the rate of inflation.
What the quote suggests is that buyers who are waiting for large price reductions may be waisting their time. However, nothing in the quoted statement shows any support that would make his prognostication credible, save a gratuitous reference to some affiliation with a snobotorium of high regard.
"So here you are now, 3 years later, having to pay no less than you would have paid if you'd just bought back then."
ReplyDeleteI just got accepted an offer for a condo in Arlington for 20% lower than the same size condo my friend bought in the same building LAST year. He was soooo not happy. I told him he should've waited. Thanks Dave for all your post; I was really tempted last year but held off and it paid off.
Keith:
ReplyDeleteIt is worse than 2,000. Housingtracker reports for the week of 6.4.07 38,310 units and 6.11.2007 30,280 units, a decrease of over 8,000 units, which is over 20%.
Anyone else following the ABX indexes? "A" rated and below are falling off a cliff! That's going to sting the mortgage market...
ReplyDeleteMy guess: the Bear Stearns Hedge fund "margin call" is rocking the market. Could this be the "United Airlines" of this credit market? (Recall how tight credit became when United couldn't finance going private?) Probably not... But the ABX market has gone from sick to dying in only a week.
On topic:
I cannot get in a group of more than 20 people right now without at least one trying to sell their house. Anyone know anyone seriously looking?
As to the bubble... as always the greatest price declines are at the end. Prices are dropping, too many sources to dispute that now (ok, excludes parts of SC and TX...). Credit is going to continue to tighten. So as someone with excellent credit and quite a bit of investments... I'll continue to wait. The mortgage resets, per the Credit Suisse graph, just became interesting... All of the old timers advice to buy (or upgrade) a home only when its tough to get a mortgage. We aren't there yet... so wait.
As to the cost of waiting... I save over $2,500/month renting versus a home purchase. With afford ability on a national level at ~42% versus the normal 65%... all my analysis shows there being less risk waiting. (It shouldn't be that way...)
Got popcorn?
Neil
Quote from Lance:
ReplyDeleteSo here you are now, 3 years later, having to pay no less than you would have paid if you'd just bought back then.
Yep, REAL smart. You endured 3 additional years of living in a rental ... and for what?
...Did you take into account that some might not have been able to buy 3 years ago because potential buyers were still in college, didn't get started in their careers, decided to wait and see what prices would do AND save up a 20% down payment for a fixed mortgage, not a junky adjustable mortgage that could go up 2-3% in two years? How about taking into account the phsycological damage of buying too soon and seeing an investment go down in price after three years? Holding onto an investment losing value is the worst feeling in the world.
Next quote:
I think even David J. has to have recognized by now that he was wrong ... very wrong. When are the sheep going to concede they followed a leader who didn't know what he was talking about?
...When will you Lance admit that it isn''t always a good time to buy?
For everything there is a season,
and buying into a bubble near the top is never a smart thing to do.
Don't gloat until October 2007, that will be the time to see who was right, the buyers or the renters.
Happy Holloween.
"You endured 3 additional years of living in a rental ... and for what?"
ReplyDeleteThousands of dollars in gains in my equity investments because they didn't go to a downpayment for a depreciating asset.
Cha-ching, loser.
Hey “Lance”, take your arguments to (and I’d never thought anyone would be able to say this) Lawrence Yun, a National Association of Realtors economist.
ReplyDelete“The median U.S. home price probably will fall this year for the first time since the Great Depression in the 1930s, according to Lawrence Yun, a National Association of Realtors economist. Tumbling prices make it difficult for people who fall behind in loan payments to escape foreclosure by selling, said Doug Duncan, chief economist for the Washington-based bankers' group.”
``Housing is in a recession, and we're seeing that reflected in prices,'' Duncan said ``If you're in a position where you can refinance or sell, but house prices have fallen below your outstanding loan balance, you're in trouble.''
http://www.bloomberg.com/apps/news?pid=20601087&sid=
aLwz4ThaWzAg&refer=home
"So here you are now, 3 years later, having to pay no less than you would have paid if you'd just bought back then."
ReplyDeleteDoesn't, matter because despite a combined household income of 170K, we still cannot afford to buy anything that is reasonable for our needs.
It is kind of cute how lance still insists on trying to argue with the obvious on this board.
ReplyDeleteI am picturing him standing outside at night trying to win a debate with the moon. He is standing there shaking his little fist at the sky and cursing it out, thinking all the time that he is winning the argument...
What can I say? Prices are down... prices are dropping... price drops are picking up speed... even the housing industry admits the housing market is heading down the tubes and isn't going to recover anytime in the near future... and lance still wants to pretend none of the above is happening and that we should have bought at the peak in spring 2006.
Bidding wars in May right lance?
Average rowhouses doubling from $1million to $2million in the last 12 months right lance?
New paradigm! lol
"How about taking into account the phsycological damage of buying too soon and seeing an investment go down in price after three years? Holding onto an investment losing value is the worst feeling in the world."
ReplyDeleteYes, it's a bad feeling to see an investment lose value, but it's not end of the world. Besides, I don't think of my home as an investment.
Speaking of investments, I am a value investor. A lot of times, I buy stocks that are undervalued. At times, they go down even further. But I hold on to the stock as long as I think its value is not fully realized.
I guess it's a matter of attitude. If your home is your castle, then don't worry if it loses value. If your home is an investment, then be prepared for it to lose value like any investment.
David,
ReplyDeleteCould you add the Irvine Housing Blog to your Regional Sites? (http://www.irvinehousingblog.com/)
It is an excellent resource and one of my favorites. I think the analysis section should be required reading. Lance and the rest of the "bulls" here really should check it out. Maybe it would give them a better understanding of what is going on. Then again, I guess for them "Ignorance is bliss."
Ostriches said...
ReplyDelete""So here you are now, 3 years later, having to pay no less than you would have paid if you'd just bought back then."
Doesn't, matter because despite a combined household income of 170K, we still cannot afford to buy anything that is reasonable for our needs."
You can't be serious, can you?
"You can't be serious, can you? "
ReplyDeleteNot everyone wants to use an IO loan and put renters in their basement so they can "buy" a $700k house on a <$100k a year salary like you did lance. (at the height of the bubble no less!)
You can't be serious, can you?
ReplyDeletelance, since you can generally rent a place for a smaller monthly payment than you can get a mortgage for a similarly-sized place, this is entirely possible. What they're "enduring" by renting is "enduring" living in a larger place than they could otherwise buy without having to worry about maintenance. In a stalled or falling market, that's worth a lot.
I've got a riddle for everyone:
ReplyDeleteWhat do you get when you take an old apartment building unit worth about $120,000 renting for $1,100 a month and add $25,000 in renovations?
http://washingtondc.craigslist.org/mld/rfs/352131527.html
MICA, going for $632K
BWAHAHAHAHAH!
Dean nails it. Even if "now" is the time to buy (doubtful), I've enjoyed 1200 feet of living space right above a metro and saved money in the process. Had I bought in that same area, I would've paid at least twice my monthly housing payment and seen depreciation in my house. No thanks. Thanks to my smart decision to rent in '005, I've "endured" fantastic living conditions at low cost and major appreciation in my investments.
ReplyDeleteThank God I wasn't one of those empty-headed morons who need to own to feel any sense of self-worth. Those putzes are doomed.
ka said...
ReplyDelete"Yes, it's a bad feeling to see an investment lose value, but it's not end of the world. Besides, I don't think of my home as an investment.
Speaking of investments, I am a value investor."
It doesn't matter how you think of something. What matters is what it is. You can think of a basketball as a puppy dog, but it doesn't mean it is one.
Any real estate, even your own house, is an asset that has a financial value. Sure, it's a fixed asset rather than a liquid asset, but if you ever plan to sell in your lifetime it will have an effect on what you can afford in the future. Also, the amount of your monthly housing expenses—whether a mortgage or rent—will have a significant effect on how much you have left over to spend on other goods, services, or investments. Right now most people in bubble markets can rent for less than they can buy.
If you are a value investor, you've almost certainly heard the Warren Buffett quote, "The price you pay determines your rate of return." Right now, housing is not a value.
I am with Lance. Some of you seem like such losers. If you bought 3 years ago with a responsible 30 year mortgage you would have 3 years of principal paid off on your house, but importantly you would have a HOME for your family and your kids. Maybe the house would be worth less, maybe more, but who cares if you aren't going to sell? Why spend one second renting???? A place where you can paint the walls whatever color you want, put a tree fort in the back yard, know you will have the same schools for 10 years +, etc. A HOME IS NOT AN INVESTMENT. Please read that again and get back to me, thanks. Do you folks realize that the populations of this country is going to go up by 25 million in the next decade or so? Where are they all going to live?
ReplyDeleteQuoting "anti-Lance" Don't gloat until October 2007, that will be the time to see who was right, the buyers or the renters.
ReplyDeleteJudging from the CMBS market (its spread beyound the ABX's...)... Fall will be telling.
But right now home prices to rent are ridiculously out of balance. Not to mention the fraction of income required to pay a mortgage. Its fine to pay 10% to 20% more to buy vs. rent (e.g., the normal ratio in California). But at today's rates? Its ridiculous. No one believes me when I tell them how much per month I'm saving renting versus buying... except a few. (Another coworker just sold their home and are renting another.)
Hopefully the Fed acts soon and bans stated income loans and neg-Am. But it will take four years to get those foreclosures through the system.
And since I'm in an industry that actually manufactures a product... the trends in manufacturing have me concerned...
The Fed just reported that every single district, except for two, have "weak housing markets." This isn't local... its national. It might be slow, but its there. FYI, my grandfather told stories of people who warned about the stock market in 1927 and were laughed at... He freely admitted to begging for work from one of them in 1931... Its going to be an ugly recession (not depression, that I differ from my fellow bears). This Austrian school calls this economy a "correction of a mal-investment."
Got popcorn?
Neil
dean said...
ReplyDelete"lance, since you can generally rent a place for a smaller monthly payment than you can get a mortgage for a similarly-sized place, this is entirely possible."
Dean,
With all due respect, if you think square footage is the sole determinant in one's living arrangements, than you really don't understand the difference between renting (i.e., being allowed to use someone else's property ... and thus submitting to their rules and whims) and owning.
And remember, those who bought wisely have NOT seen the value of their homes decrease ... despite what the bubbleheads would have you believe. By and large, they're helpless when it comes to buying a home and as such are hanging all their hopes on a recession/precipitpus price drop that hasn't happened and never will happen. Start to educate yourself on the vast differences between renting and owning, and you'll be on your way to being in control of your housing options rather then letting them control you as the bubbleheads advocate. Have you noticed that they are still waiting? ... and always will be ... short of moving the end goals as a few on here have done in recent days.
"You can't be serious"
ReplyDeleteLance, in talking about Ostrich, I believe is commenting on some "entitled" idiot who makes 170K per year claiming to be unable to find a "suitable" house.
What the hell? That income would put them in a 600 or 700K house, using the old 28/36 or 33/39 qualifying ratios. This would not be for any "exotic loan", just what has been standard for 30 years.
Here, again, we see the "entitlement" issue. What is "suitable"? A McMansion or a prime close-in large home or What?
Unless Ostrich has 10 kids, the "I can't afford a SUITABLE house" nonsense is just that, nonsense.
I am really getting sick of whiners. If you thought prices had topped-out in 2001 or 2002 and have been waiting for a correction to buy, then too bad for you because you "out-smarted" the market and are now paying the price. You rent and complain and hope for a crash; so you can get your second chance. Got Popcorn?
You can't just say "hey, I miscalculated, I missed the boat". I don't think I've ever seen such an admission here. Jeez, we all make mistakes or misjudgements - it's very odd to see an entire group blame their circumstances on some vast conspiracy.
Hell, if I screw-up I'll be the first to admit it. I lost almost 7 figures in the dot-com disaster. Ces la vie. I don't blame others for things that are within MY control.
If you want to own, buy what you can afford. If you can't afford what you WANT, then join the club. If you can only afford to rent where you would like to live - then you are living beyond your means. Get over it and quit whining.
I am sickened by the x and y generation that post here. Get a grip on your life. If you can't afford a house, it is no-ones problem but yours. Your expectations are too high or your work ethic too low.
Sick of Cry-babies.
"What they're "enduring" by renting is "enduring" living in a larger place than they could otherwise buy without having to worry about maintenance."
ReplyDeleteAnd being some landlord's bitch.
The move in the last week in housingtracker is astounding. It is a colossal drop in inventory.
ReplyDeleteIs this reality, or did something change in the way they measured things?
If it is reality, it is very interesting. But that kind of unprecedented drop makes me wonder if there was a change to the way listings were counted or something.
The housingtracker data drop... I am not sure about it. I have been tracking five zip codes in Montgomery and PG Counties for the last two years. These are not necessarily typical of the area- they came late to the party and have been slower to fall.
ReplyDeleteNonetheless, none of them are showing inventory drops, much less gigantic ones. I wonder what happened at housingtracker.
You can't be serious, can you?
ReplyDeleteIf you replace needs with wants, it makes sense -- they can't afford to buy what they want, but they can easily rent it. Therefore, they rent the kind of place that they want to live in, as opposed to buying an extremely overpriced place that they don't want to live in.
anonymous said...
ReplyDelete"I lost almost 7 figures in the dot-com disaster."
Now we know we've got someone who can't identify a market bubble. A leopard doesn't change its spots.
__k said...
ReplyDelete"If you replace needs with wants, it makes sense -- they can't afford to buy what they want, but they can easily rent it. Therefore, they rent the kind of place that they want to live in, as opposed to buying an extremely overpriced place that they don't want to live in."
That's right, like I've said repeatedly before, there are many short-sighted people who want it all now and are willing to trade off future financial and and domestic stability in exchange for a taste today of what they otherwise weren't yet read to afford. It's the "live for today" mentality.
Like David's post one up says ... even a half percentage rise in interest rates on a $300,000 mortgage translates into a $100 increase in monthly mortgage payments. Mortgage interest rates have been at historically low levels. Any one with any sense knows they cannot last. Anyone with any sense will not be waiting around to save maybe 5% on the price of a house when even a 1% percentage point increase in a mortgage easily negates that savings. And since historically mortgage interest rates have been at least double what they are now, anyone with any sense knows that the power of compounding means it is not wise to wait around for a bust in house prices that is very unlikely to ever occur. Of course the bubble heads know better. They know that the stars will align perfectly for them. Prices will drop through the floor and interest rates will remain steady for them ... but go up for others so that prices in general drop quickly. Bubbleheads don't have to worry about actually thinking through how to get the most and best possible living arrangements for their money ... They can just sit back and await their entitlements due.
Lance said...
ReplyDelete“And remember, those who bought wisely have NOT seen the value of their homes decrease ... despite what the bubbleheads would have you believe. By and large, they're helpless when it comes to buying a home and as such are hanging all their hopes on a recession/precipitpus price drop that hasn't happened and never will happen.”
http://www.marketwatch.com/news/story/
housing-market-hasnt-bottomed-yet/story.aspx?guid=%7BC8E273FA-C663-439D-87B7-80A47C249E61%7D&dist=MostReadHome
-Housing market hasn't bottomed yet
By Rex Nutting, MarketWatch
Last Update: 12:01 AM ET Jun 17, 2007
WASHINGTON (MarketWatch) -- After upbeat reports on retail sales and consumer prices last week, financial markets' attention will likely turn to a more depressing topic in the coming week: home building.
The data in the coming week "will be a sobering reminder that the housing market has yet to bottom out," said Brian Bethune and Nigel Gault, economists for Global Insight, in their weekly preview.-
Lance said...
ReplyDelete“it is not wise to wait around for a bust in house prices that is very unlikely to ever occur.”
Have median home prices increased or decreased in the last year?
lance said:
ReplyDelete"That's right, like I've said repeatedly before, there are many short-sighted people who want it all now and are willing to trade off future financial and and domestic stability in exchange for a taste today of what they otherwise weren't yet read to afford."
The people who fit that description are the ones who bought near the top of the bubble instead of renting. (Well, more specifically, those who bought homes that they couldn't afford, instead of renting.) The only way to buy a home now and get financial stability out of it is to be able to afford the home via a conventional mortgage, which very few people can do now (thus the current housing affordability catastrophe). And even then, one would be paying quite a premium, as homes are priced extremely far above historical norms (based on housing expenses as a percentage of income).
"Anyone with any sense will not be waiting around to save maybe 5% on the price of a house...."
Houses have already dropped by more than 5%. And even the mainstream media is admitting that there's currently no end in sight to the "housing recession."
"And since historically mortgage interest rates have been at least double what they are now...."
Historically, houses cost (PITI) much less as a percentage of income than they do now, despite today's relatively low interest rates. And since it seems that lending standards will be tightening back toward the point that people won't be able to get mortgages that they can't afford, home prices will have to go back down to a historically normal level of affordability.
"Mortgage interest rates have been at historically low levels. Any one with any sense knows they cannot last. Anyone with any sense will not be waiting around to save maybe 5% on the price of a house when even a 1% percentage point increase in a mortgage easily negates that savings. And since historically mortgage interest rates have been at least double what they are now, anyone with any sense knows that the power of compounding means it is not wise to wait around for a bust in house prices that is very unlikely to ever occur."
ReplyDeleteIt is funny watching lance lay out the argument for prices continuing to drop, and the concluding by saying that they won't, and as always now is the time to buy.
Here are a couple clues for you lance...
First, if interest rates double in the near future, housing prices WILL crash. Affordability is already maxed out, and that is with low interest rates AND exotic loans. Do you think people are simply pay more? They can't... they have already bought as much as their housing credit cards can hold.
Second, I am cheering for higher interest rates. I have a very significant downpayment which means for me it is all about the principal of the loan. I don't think interest rates are going to return to historical numbers any time soon or anything... but every little bit helps.
As for your conclusion about now being the time to buy, as always...
There is absolutely no good financial reason to buy right now. You can spew all the garbage you want about a house not being an investment you want, but that doesn't mean you should over pay for one. A car isn't an investment either, but I know enough to wait till the end of the month to buy one.
Prices are dropping, prices will continue to drop for at least the rest of this year. There is no need to rush here.
Ah, Lance strikes again. This being the Lance with an I/O ARM.
ReplyDeleteYou see Lance, _now_ is the time to take out a 7/1 ARM. You take out ARM loans when rates are up, as the likelyhood is that rates will be going back down when you reset.
People like you inverted that, larding up on ARMs (and lord help you, I/O ARMs) when rates were historically low. That's just financial idiocy.
Simple rule. ARMs when rates are high, fixed when rates are low.
John said...
ReplyDelete"Ah, Lance strikes again. This being the Lance with an I/O ARM."
Sorry John, I don't have an ARM. I have a 30 yr fixed loan. It sounds like you are confused between the concept of Interest Only and Adjustable Rate Mortgages.
Thanks for your comment though ... It helps illustrate why bubbleheads are so confused. They like to make assumptions regarding how real estate works ... Rather than taking the time (and effort) to actually learn it.
Yep ... wannabe flippers and homeowners ... Without the skills or the smarts to be either.
"Have median home prices increased or decreased in the last year? "
ReplyDeleteMedian SFH price in DC is up year over year.
"They like to make assumptions regarding how real estate works ... Rather than taking the time (and effort) to actually learn it."
ReplyDeleteSays the IT tech...
lol
Anonymous said...
ReplyDelete“Median SFH price in DC is up year over year.”
Thanks anon for the link. The data you have provided is invaluable.
Lance said...
ReplyDelete“It helps illustrate why bubbleheads are so confused. They like to make assumptions regarding how real estate works ... Rather than taking the time (and effort) to actually learn it.”
Lance said...
“there is never a bad time to buy”
July 25, 2006 6:31 PM
If Lance now has a 30 year fixed, it is because he re-fied; he knows he has posted in the past about having a interest only loan.
ReplyDeleteI believe there may be fixed rate interest only loan varieties...
ReplyDelete"he has posted in the past about having a interest only loan. "
ReplyDeleteIn Lance's defense(hard to do)... he said he had a fixed IO loan, they do exist.
Of course... he also said that he has renters in his basement and that he works as a computer repairman. No doubt that is why he is working so hard to pump housing prices on a message board. He couldn't afford a $700k house by any normal measure and he is up a creek if its value falls. He is going to retire long before he pays off that mortgage...
Anonymous said...
ReplyDelete"If Lance now has a 30 year fixed, it is because he re-fied; he knows he has posted in the past about having a interest only loan."
Yes, I have an interest only loan. And again, you illustrate the bad assumptions that bubbleheads make. I do not have an ARM, I have a 30 yr fixed rate mortgage. Apparently, you don't understand even the simplest of mortgage concepts.
Anonymous also said...
""They like to make assumptions regarding how real estate works ... Rather than taking the time (and effort) to actually learn it."
Says the IT tech..."
I am not an "IT tech". Again, a bad assumption. I said I am in "IT". That does not mean I am a "tech". I am not.
Seriously, don't you bubbleheads see a pattern? Bubbleheads like to make assumptions. They don't look at a problem and analyze. They instead come to the problem with pre-conceptions that they bend the facts to match. No, they don't seek answers ... because they think they already have them.
robert:
ReplyDeletehttp://www.gcaar.com/statistics/2007-home-sales/dcsf0507.pdf
hope this helps. by the way, where's the guy who said it was gospel that sales peak in April?
Housing prices are dropping.
ReplyDeleteOne more time: prices are dropping.*
According to Lance's logic, I should rush out and buy now because of the possibility for increased interest rates. Higher interest rates, however, depress home price appreciation - - i.e., it's a wash.
I'm saving plenty of money which is appreciating at around 9% right now. When I see the right house at the right price, I will purchase, but not because I expect it to make me a ton of money, as you seem to infer. Rather, it will be because it is an appropriately-priced asset that fills a need and/or desire that I have. Nothing more, nothing less.
Until then, I will be domiciled in accordance with my lease agreement. Perhaps that means "whim" in Lance's world, but in mine, it is a contract that binds both parties to certain responsibilities.
Really, Lance, the way you express your concept of real estate makes you sound like a psychopath.
* - Though I cited housing tracker above, I'm concerned about their data right now. It doesn't jive.
Anonymous said...
ReplyDelete“Gee, what happened to "inventory is seasonal"? Housingtracker has DC inventory down 18.5% year over year. Sorry.”
You need to double check your numbers there anon. Looks like you’re sadly mistaken.
Hey lance, my keyboard is sticking. Why don't you stop by this afternoon and swap it out?
ReplyDeletethanks in advance.
BTW, "in IT" is like saying you are "in car repair" or "in plumbing."
You are either a technician, or a glorified technician.
BH's should rent as long as they want. Lance's point, and a point that I have made many times, is that BH's would rather spend their time griping than trying to educate themselves and find a true bargain.
ReplyDeleteThe fact that they don't understand Lance's loan and continue (ad nausium) to misrepresent it; only shows their lack of a basic understanding of mortgage products. In other words, it shows an ignorance that anyone truly interested in homeownership would be embarrassed to display.
I missed out on a terrific oportunity last week - due simply to inertia and laziness. It could have made me alot of money and given me something to do over the next few months. I'll be kicking myself until something else (better) comes along. And it won't just drop in my lap, that's for sure.
I forgot who it was that claimed Ken Harney, whose articles appear in the Post on Saturdays, was a "shill". But this stupid, ignorant remark remains with me. If one really wanted to learn about RE, the Post Saturday section is a must.
Reading a few books could be very helpful as well. When you can understand Lance's loan, then MAYBE you will have something to contribute here.
Anon said:
ReplyDelete"According to Lance's logic, I should rush out and buy now because of the possibility for increased interest rates. Higher interest rates, however, depress home price appreciation - - i.e., it's a wash."
Do lower mortgage rates mean higher housing prices?
Authors: James M. McGibany a; Farrokh Nourzad a
Affiliation: a Department of Economics Marquette University Straz Hall PO Box 1881 Milwaukee WI 53233-1881 USA.
Abstract
Much research has shown that mortgage rates exert a negative influence on housing prices. This study analyses the long- and short-run relationships between housing prices and mortgage rates using advanced nonstructural estimation methods. As expected, a bivariate specification and a four-variable housing demand specification both show that these variables have a long-run relationship, and that there is a rather inelastic response of housing prices to changes in mortgage rates.
However, contrary to previous research, the results from Granger non-causality tests, impulse response functions and variance decompositions reveal that there is virtually no short-run influence from mortgage rates to housing prices.
Flat prices = real losses.
ReplyDelete"You need to double check your numbers there anon. Looks like you’re sadly mistaken. "
ReplyDeleteStill down 12%. you = pwn3d
Holy crap. I thought people were just goofing on Lance. But now he admits it. Lance has been going on all this time about what a financial genius he is for buying a house at the height of the biggest housing bubble in history, and how he has elevated his status in the social pecking order because he is now a mighty “homeowner” rather than a mere unwashed renter, because he “bought” his house with an IO loan. News flash, buddy: if you are not paying principal, you are still renting, but you are just renting from the bank, rather than a landlord. And you have no idea who your “bitch” is, because your loan is being bought and sold without your knowledge.
ReplyDeleteAllow us to educate ourselves on your brilliant financial move:
Here is Bankrate.com’s definition of a 30 year fixed interest only loan:
A mortgage in which the borrower is required to pay only interest during the first few years of the loan. The borrower may pay principal but is not required to. After a set period, often 10 years, the borrower is required to pay principal and interest. This can result in a large payment jump because the principal is amortized, or paid off, in 20 years instead of 30 years.
At some point, you have to start paying principal, and that is going to be a huge number. Take the following example, which you can convert to your actual mortgage amount by taking a percentage of these numbers.
Assume you take out a $1,000,000 mortgage 30-year fixed rate at 5.75% interest rate, and pay interest only for the first 10 years. Your monthly payment is 1/12 of 5.75% times $1,000,000, or $4,791.67. That number, theoretically, becomes a smaller and small portion of your monthly earnings as your income goes up with inflation, or if you are in an upwardly mobile profession where your income goes up dramatically (i.e., greater than the rate of inflation). But look what happens in year 11. Your monthly payment balloons to $7,020.84 per month, because you have to start paying the principal, and you are amortizing that principal over 20 years rather than 30 years. In total, you will pay $1,260,000 in interest over the life of the loan.
If you had taken out a real 30-year fixed, your monthly payment would be %$5,835.73, and you would pay $1,100,826 in interest. So your 30-year fixed IO is costing you $159,000 of equity, or roughly the first 16% of appreciation.
No wonder you are so delusional about the housing market. You have placed an enormous bet on housing continuing to climb at unsustainable levels. And if you are wrong? You are screwed, and not in a good way. What if you have to (or want to) sell before your house has appreciated 16%, plus enough to cover any repairs you have made (banks don't make repairs like landlords are required to do), plus closing costs, plus commissions.
Bottom line: housing prices have been artificially inflated with creative mortgages because PEOPLE ARE BUYING MORE HOUSE THAN THEY CAN AFFORD. Forgive all of us financial imbeciles for not doing likewise.
Oh, and your cite to the Marquette University economics paper proves only the fundamental truth of statistical analysis: if you torture the numbers long enough, they will confess to anything. Do you even have any idea what a "bivariate specification and a four-variable housing demand specification" are or even what "nonstructural estimation methods" are?
got Thioridazine?
Anonymous said...
ReplyDelete“robert:
http://www.gcaar.com/statistics/2007-home-sales/dcsf0507.pdf
hope this helps. by the way, where's the guy who said it was gospel that sales peak in April?”
Thanks for the help anon. You’d think that they would at least try to match up the numbers to the source they cite.
caveat, thanks for explaining what an interest-only loan is. You really are our intellectual superior. numbers and everything. wow.
ReplyDeleteAnonymous said...
ReplyDelete“Still down 12%. you = pwn3d “
Which is it anon? 18, now 12. How about 20? 25? I mean, if you’re going to pull numbers out of the air, might as well go large.
Anonymous said...
ReplyDelete"Still down 12%. you = pwn3d”
Even further anon, take your numbers to Bloomberg and tell them all is well. Nothing to se here, move along:
http://www.bloomberg.com/apps/news?
pid=20601087&sid=a.YQgRkCGscI&refer=home
-The worst housing recession in 16 years is restraining economic growth even as inflation is too high for the comfort of Federal Reserve officials. A jump in mortgage rates and a glut of unsold properties may further reduce demand in coming months, economists said.
``There is still some more downside to the housing market,'' said Nariman Behravesh, chief economist at Global Insight Inc. in New York. ``Mortgage rates started up again and there is still a shakeout going on in subprime.'-
-Record levels of unsold homes suggest the slump is far from over. Fed policy makers now say the housing recession may linger longer than previously forecast.
``The adjustment in the housing sector is still ongoing, and the slowdown in residential construction now appears likely to remain a drag on economic growth for somewhat longer than previously expected,'' Chairman Ben S. Bernanke said June 5.
A record number of Americans were at risk of losing their homes last quarter because they couldn't make payments as interest rates rose and growth slowed, according to a report last week from the Mortgage Bankers Association. The share of all mortgages entering foreclosure rose to 0.58 percent from 0.54 percent in the fourth quarter.
The failure of at least 50 subprime lenders, who make loans to consumers with poor or limited credit history, combined with the increase in foreclosures has raised concern more homes will be thrown back on the market.-
"Holy crap. I thought people were just goofing on Lance. But now he admits it. Lance has been going on all this time about what a financial genius he is for buying a house at the height of the biggest housing bubble in history, and how he has elevated his status in the social pecking order because he is now a mighty “homeowner” rather than a mere unwashed renter, because he “bought” his house with an IO loan. "
ReplyDeleteYep, he has stated in the past that he "bought" a ~$700,000 rowhouse in 20009 in summer 2005 with an IO loan. (IO for 10 years)
Not only that... but he has also stated that he is in his late 40's right now so right around the time most people are looking forward to retirement he will be looking forward to that principal coming due.
Lance is giving bad advice largely because he doesn't understand the numbers, but it is also because his priorities are all screwed up.
He honestly believes his huge amount of debt has made him rich and therefor a better and more responsible person than those of us with the patience to avoid throwing money away in a falling market.
anonymous said...
ReplyDelete"I lost almost 7 figures in the dot-com disaster."
Now we know we've got someone who can't identify a market bubble. A leopard doesn't change its spots.
lmfao!
game over,
ReplyDeleteI've got alot of 7 figures to lose. How about you?
"I've got alot of 7 figures to lose. How about you?"
ReplyDeleteJust 7 figures?
I am a freaking quadrillionare!
I buy and sell people like you before breakfast, by the dozen.
"I've got alot of 7 figures to lose."
ReplyDeleteA fool and his money are soon parted.
game over,
ReplyDeleteI've got alot of 7 figures to lose. How about you?
I don't lose 7 figures because I'm not you. But yes, I have many 7 figures.
I don't have any 7 figures to lose. That's why I'm being judicious with my money. Bragging about how you can make stupid decisions because you can afford the loss doesn't mean you're making smart decisions . . . that says a lot about you.
ReplyDelete"that says a lot about you."
ReplyDeletePlus he is almost certainly lying anyways. "many 7 figures," I will believe that when I see it...
Anonymous said...
ReplyDelete“Gee, what happened to "inventory is seasonal"? Housingtracker has DC inventory down 18.5% year over year. Sorry.”
Check your stats again anon. Humm, looks like the expired listings are creeping back up on to the market.