Wednesday, August 19, 2009

Lawrence Yun Makes Another Inane Comment


With all the competition in the market for mid- and low-priced homes, Yun said there are reasons for potential homebuyers to be optimistic about the current market.

“People who are buying today might see a home equity gain a year from now,” he said. “Further decline in prices could be minimal -- if there are price declines at all.” (San Diego Source)

What is this statement supposed to be? Spin. More Spin. Another inane statement from Lawrence Yun, who is the Chief Economist for the National Association of Realtors.

54 comments:

  1. David -- are you surprised? The guys a rug merchant, its his job to pimp the product.

    Further, recognize there is going to be the day when the statement

    “People who are buying today might see a home equity gain a year from now,” he said. “Further decline in prices could be minimal -- if there are price declines at all.”

    is true. It may not be now, but it will be at some point in the next 50 years. When that happens, dont get upset when the then current head of the NAR points that out.

    It is what it is my man!

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  2. Here is the market madness indicator: inventory of homes in July '09 drops from 5.39 to 3.62 months in Northern Virginia and from 6.6 to 4.19 months if we include the exurbs. Less than 6 months supply of homes - is a seller's market.

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  3. Anon - Interesting. Are the 5.39 and 6.6 numbers, are they from June or last July?

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  4. Wow - what an idiot.

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  5. I would rent. When you rent, you don't care if prices go up or down. And if the house needs a new furnace, it's not your problem. The value you get from having peace of mind that you don't own it is enormous!

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  6. When you rent, you do care if prices go up or down because that affects your ability to buy if you ever intend to buy. Also although there is no 1 to 1 corrolation between rental prices and home prices they do impact each other. Also if you are renting you care greatly if the furnace needs to be replaced because having no heat affects the renter more then the owner because the owner can replace the furnace. The renter has to wait and hope that the home owner replaces the furnace.

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  7. Agreed. AC crapped out on me and it took the LL 12 days get it fixed. It only got fixed after the first of the month when I withheld rent and told him I would continue to withhold til he fixed it.

    So whats my recourse? Sue? Please - since I am an attorney and I know how futile that would be. Even if I prevail, my provable damages would be minimal,
    and the time and inconvenience spent in general district court is something I would never get back.

    Sure not all LL are like this - but enough are to make the whole experience a crapshoot. To me its not worth the risk of dealing with another asshole again. After this lease is up, I am buying come hell or high water and fixing the AC when I damn well please.

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  8. Actually, my landlord is responsive. You need to do your due dilligence. Further, rental prices have not increased in tandem with home prices. Drink more Kool-Aid and be a slave to a mortgage while I enjoy life! Anyone who decides to buy a home based on an AC "crapping out" needs their head examined!

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  9. Wooowww, 3.62 months of supply in July 09 in Northern Virginia. That's a great seller's market!!!

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  10. Yeah, well owning has it's own types of excitement. We just got a letter from the HOA telling us that certain things needed "Paint/repair". But the exterior of the house was professionally painted in 2007, and I can't see any problems that would require repairs..

    All you folks who are renters never have to deal with this crap.

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  11. "Further, rental prices have not increased in tandem with home prices. Drink more Kool-Aid and be a slave to a mortgage while I enjoy life!"

    What are you 5 years old?

    As a renter you are still a slave. The only difference is you are a slave to the person who ownes the place vs being a slave to the bank. I actually greatly enjoy home ownership. I use to around $2.5k a month for a 1br 40 year old appartment that flooded about 2x a year. For 1k more a month I know own 20 year old a 2400sq foot house in the same area. I personally love the change.

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  12. "Actually, my landlord is responsive. You need to do your due dilligence."

    Classic.

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  13. "Further, rental prices have not increased in tandem with home prices. Drink more Kool-Aid and be a slave to a mortgage while I enjoy life!"

    Being a renter is so care-free that you have the time to enjoy all that life has to offer to those released from the bonds of a mortgage...like read and comment on a blog about home values, which happens not to have any relevance to you as a happy renter.

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  14. "So whats my recourse? "

    Move out, he is breach of contract. Being a lawyer, you would have known that, but you arent, so you dont.

    Right now in the dc metro area, rents area a dime a dozen.

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  15. Jack Russell, I hear ya man. As my insurance company reduced my coverage last month (effectively raising the price in the process because I pay the same for less coverage), I read what has now been excluded. This is prompting me to take more proactive steps in making sure the house is physically protected from damage, damage that would be catastrophic and is no longer covered like it was.

    So now I spend every waking weekend digging up and trenching around my foundation, uprooting tree's and pray to a higher power that there is no sinkhole below, silently getting ready to eat my house (no longer covered).

    Time is money, and now more time working on the house == to less money I could be making or enjoying with my boys.

    Why is renting cheaper? It should cost more than owning, because behind every renter, there is a landlord dealing with the headaches and doing the footwork, and often the cost is not reflected in the rent.

    Renting is purely a free market capitalist exercise. There are no government or bank "incentives" for renters. This is why renting is affordable. You will notice as as soon as the govt (or anyone) gives away money (or cheap $$ in the form of lowers interest rates via the fed) for anything; mortgages, college, Govt subsidized health insurance, the price just balloons.

    Renting is a better deal financially, especially in a state that has rent control. At which point you get a benefit of home ownership by locking in a monthly payment forever.

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  16. "Renting is purely a free market capitalist exercise. There are no government or bank "incentives" for renters. This is why renting is affordable."

    "Renting is a better deal financially, especially in a state that has rent control. At which point you get a benefit of home ownership by locking in a monthly payment forever."

    So, if the gov doesn't intervene, renting is great but if they do, it's great.

    Funny how many angry, happy renters there are. That explains it.

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  17. "For 1k more a month I know own 20 year old a 2400sq foot house in the same area. I personally love the change"

    That 1k a month extra is money out the window. Don't forget those property taxes and maintenance costs. Spend the weekends doing work around the house. I think home owenership is good for people who have nothing to do on the weekends or for those who are bored with their spouses.

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  18. What I like about renting is moving around when I want. I came to the DC area in 2004 and have (moved to/checked out) 3 different areas now. Im planning on moving again in 3 months when this lease is up too.

    The best part is that each time I move, I get cheaper rent. Im going to start bartering with landlords this weekend. This gives me another month or two to come back to their empty home and price them down again.

    Must suck for them with a $4K a month mortgage.

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  19. Renting is like having the girl without having to get married. It's the best of both worlds. Owning a home is probably exciting at first, but like marriage, becomes a drain on the wallet. This idea of owning a home for 30 years is comical at best. It is not the 1940s where you stay in one place for 30 years. So your comment about moving around is well-taken.

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  20. 48% of homeowners are underwater!

    The share of borrowers owing more than 125 percent of their property’s value will increase to 28 percent from 13 percent, according to Bloomberg.com.

    Home prices will decline another 14 percent on average, the analysts wrote.

    Enjoy!

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  21. When I bought 14 years ago, renting was $200 more than renting. It took me 7 years to "break even" and achieve rental parity.

    Now in addition to the mountain of equity I have accumulated I am saving $850 a month by owning. How exactly is this a bad deal?

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  22. It's not genius! But today is not 14 years ago.

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  23. Actually, it could be. In 1995 we were out of the "straight down" poriton of the 1990s bubble, but still had several years of stagnation/slight losses ahead.

    Its not unreasonable to say we are at a similar point now.

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  24. That 1k a month extra is money out the window. Don't forget those property taxes and maintenance costs. Spend the weekends doing work around the house. I think home owenership is good for people who have nothing to do on the weekends or for those who are bored with their spouses."

    That $1000 includes all of that and does not include the interest I will get back in taxes. It also includes all exterior work. Unlike before know have the room for family and friends to visit. With the extra space I now have to guest rooms and a bar which I could not have either in the tiny space I rented. I have found it totally worth spending 30% a month to have over double the space in newer place. Also before I had to pay $100 a month for a space, now I have a 2 car gerage. If I needed extra money I could also rent one of the rooms. Although the place is 20 years old it also have 4 bathrooms and an oversize hot tub which you will not find in an appartment without spending an arm and a leg.

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  25. You are correct, it could be.

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  26. The old tax deduction claim again? Let's set the record straight--you get a "deduction" equal to your tax bracket and not all of the interest goes back into your pocket like most realtors assert. So if your tax bill is $6720 a year and you are in the 30% tax bracket, you get a whopping $2016 deduction not a credit! The $4704 is out the window. I hope you have an accountant because I am going to start charging you.

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  27. "The old tax deduction claim again? Let's set the record straight--you get a "deduction" equal to your tax bracket and not all of the interest goes back into your pocket like most realtors assert. So if your tax bill is $6720 a year and you are in the 30% tax bracket, you get a whopping $2016 deduction not a credit! The $4704 is out the window. I hope you have an accountant because I am going to start charging you.
    "

    1. People understand that you only write off interest and taxes no one has claimed otherwise.
    2. If you recently purchased a home in arlington chances are your deduction is going to be much greater then $6700 unless you paid up front cash for the home. The write off on taxes alone in most cases will be > $6700 a year in this area. In most cases if you have purchased a house in arlington you are looking at writing off $30k+ on interest. This can equite to a yearly savings of close to $10k the first year and approx $5k a year over the life of the loan.

    One may argue that I am throwing away $20k ($30k - $10k) an interest and taxes this year alone. I however believe it is better then throwing away the $36k + it would cost me to rent the same place.

    Granted 15 years from now if I pay the place off as planned I wont be able to get any tax write off from the place. O well, at that point I will only be paying approx ($10k a year to cover taxes and HOA and that assumes inflation). Unless we are a depression of DC gets blasted away good luck finding a house in 15 years to live that would cost you only $10k a year.

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  28. "DC gets blasted away"

    I commend you for recognizing that risk.

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  29. "DC gets blasted away"

    Killed by death!

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  30. by the way sorry for all of the typos...I am a little laisy about proof reading what I type..

    should be more like
    "Unless we enter a depression or DC gets blasted. You probably wont find a house 15 years from now for about $10k a year, which is about what it will probably be costing me assuming some inflation."

    Basically buying a house can be a reasonable choice to make even in the current market depending upon the location and price. If you lose money the chances are in the long run you will recoop it. Although you can wait for a better deal, there is no way to 100% predict the market (interest rates/inflation/ employment ect) so there are risks with waiting just as there are with buying now. I bought now because I was finally able to find a place that I could afford and liked a lot. Although I could have kept renting I was not saving much money by renting because of the high rental rates in the area and because I wanted to be in a larger and nicer place. Althouh arlington is a very expensive area, if you consider rental vs cost of ownership of equivant places there are currently "some" reasonably priced places in the area.

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  31. That's fine. But I am banking some serious cash while I am renting. The rule of thumb is you buy something that is 15 times your annual rent. We are not there yet.

    I'll buy when the costs of ownership: mortgage, taxes, maintenance, insurance, HOA fees-- are less than what I pay now. When we reach that point, it will make sense to buy. Studies have shown that home values increase at the same rate as inflation. Aside from the bubble we just experienced and won't experience in our lives, home ownership is now getting back to common sense. You buy a home because you like the area, like the home, and it makes financial sense. The story of you friend's home going up 30k last year is a memory.

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  32. Get used to the letter "L" because that is the symbol of the housing market for the next 10 years. No need to rush into a home son.

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  33. I think it is a wise investment to buy a home in the DC area at 14 years ago prices too! If someone could give me that deal, I would take it in a heartbeat.

    Lets hope they keep dropping to 14 years ago prices! I want to make a smart investment as well!

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  34. The rule of thumb is you buy something that is 15 times your annual rent. We are not there yet.


    We are areawide - its just that its much better than that outside the beltway, and worse than that inside the beltway.

    Thats why I hate these "rules of thumb". When I bought, at the near bottom of the last bubble, purchasing was 19X rent locally.

    However, when I look at "historical stats" it says DC was at 15X rent - maybe some places but nowhere I wanted to live.

    Bottom line if I waited for 15X rent I wouldnt have bought in 1994, 1997, 2000, 2003, 2006...

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  35. 15X rent is buying a 4 bedroom townhouse in potomac for $260K! You cant find one for under $600K right now.

    As much as I want the DC metro area to go to realistic prices, they will probably NEVER be 15 times rent.

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  36. "15X rent is buying a 4 bedroom townhouse in potomac for $260K! You cant find one for under $600K right now."

    That's because $600k is the 15x rental price of a townhouse. Your make-believe price of $260k is not real. See http://www.realtor.com/realestateandhomes-detail/10420-Overgate-Pl_Potomac_MD_20854_1110757188

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  37. "As much as I want the DC metro area to go to realistic prices, they will probably NEVER be 15 times rent."

    Mr. Anonymous gave you example that the prices are already at 15x rent in Potomac you dummy! Do your homework before making such silly statements!!!!!!

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  38. Wow...how does this asshole sleep at night? Oh that's right...the same way all the Wall Street scumbags and POS hedge fund managers do...

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  39. "Mr. Anonymous gave you example that the prices are already at 15x rent in Potomac you dummy! Do your homework before making such silly statements!!!!!!"

    Yeah looking for the most expensive listing in potomac is homework. I bet he spent 5 hours looking through the under $2K/mo listings to find that $3K/mo ad.

    http://washingtondc.craigslist.org/mld/apa/1331287439.html

    http://washingtondc.craigslist.org/mld/apa/1334339583.html

    My "make believe price" IS my rent. Although I did talk down my landlord a few hundred bucks per month, it is real.

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  40. "The rule of thumb is you buy something that is 15 times your annual rent. We are not there yet."

    Where do all of these rules people state come from!? None of the rules ever seem to take in to connsideration factors such as local supply/demand, interest rates, local taxes, commute time and crime ect..... There reasons why some location are and have been more expensive relative to income levels than other places to live in. One cannot use a genaric rule to classify what a price should be.. It is kinda like saying a collectable should only be priced based on how much it cost to make or the number that was made with no consideration to how nice it is or what the demand for it is.

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  41. "There reasons why some location are and have been more expensive relative to income levels than other places to live in."

    Those factors didn't play into prices going up 800% in 4 years in Montgomery county though. So what is YOUR rule of thumb when buying in the bubblicious DC area?

    Mine is, just dont buy in the DC metro area.

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  42. "Where do all of these rules people state come from!? None of the rules ever seem to take in to connsideration factors such as local supply/demand, interest rates, local taxes, commute time and crime ect..... There reasons why some location are and have been more expensive relative to income levels than other places to live in."

    All of those factors are calculated in rental costs too. I swear you homeowners will believe anything that sustains the value of your homes.

    Studies have shown that there is a definitive correlation between rents and home prices. So take another bite of your hot dog and drink that Kool-Aid!

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  43. Realtor/Homeowner Creed

    Buy now or you’ll be priced out forever.
    Renting is just throwing your money away.
    Real estate values never go down.
    It’s different this time.
    _(insert location)_ is so desirable, people will want to live here no matter how expensive it gets.
    Boomers/immigrants/jobs will keep prices permanently high.
    If you’re waiting for the perfect time to buy, you’ll be waiting forever.
    You can’t lose in real estate –it’s a no-brainer.
    Real estate’s seasonal; after _(insert holiday)_ things will return to normal.

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  44. "Studies have shown that there is a definitive correlation between rents and home prices. So take another bite of your hot dog and drink that Kool-Aid!"

    Thats true, but there are differences within areas, or even between areas. For example, detroit has been at 10X rent for years, San Jose at 25X rent for years.

    During the bubble, these rose to say 15X and 35X respectively, but thanks to the bursting, are now much closer to their historical trends of 10X and 25X. Take all these areas and average them out and thats where the 15X comes from.

    Still, the guy using the 15X rule of thumb as his signal to buy in San Jose is going to be waiting for a long time - like forever.

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  45. "Studies have shown that there is a definitive correlation between rents and home prices. So take another bite of your hot dog and drink that Kool-Aid!
    "

    No one has claimed there was no relationship between home prices and rent prices. The claim is that you cannot use a subjective numbers to globally define value.

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  46. Do the math... include all the costs... and make an informed decision on whether it is financially sound _today_ to buy vs rent in your specific market. Go to FinestExpert.com - The Cashflow Search Engine. If it is positive cash flow for the landlord, then (financial considerations only) why rent? And vice versa.

    Then if you want to calculate the cost of funds and what you could be earning in the future instead of making a down payment, polish up your crystal ball. And please let the rest of us know how we should calculate the effects of inflation (on your cash vs on your home value) likely to be associated with our government's decision to print a ton of money. Today you should probably assume a 30-year fixed rate loan, say at 5.75% but assume rents increase at the CPI. Please include the effects of the baby boomers and echo boomers.

    Finally, when we get beyond the basic finances and recognize that for some people, there is emotional stability in "owning" a home while for others there is emotional freedom to rent and move at will.

    Robert T. Boyer, Ph.D.
    Co-Founder FinestExpert.com - The Cashflow Search Engine

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  47. Well Mr. Ph.D., you have solved nothing other than promoting a self-serving web site. I wish you had something of substance to offer. I actually got a little excited when I saw he designation "Ph.D." but went limp once I read your content.

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  48. JAMES:

    For crying out loud, get rid of the idiots who don't want to sign in and write as ANONS.

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  49. My name is Bob. You could spell it backwards and you get the same result. What's next? My favorite color?

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  50. Mr Limp Anon, I am sorry to hear about your problem. Let me type slowly so you can understand.

    There is NO SINGLE ANSWER. It depends on the context of the person. There are simple short term financial considerations, long term considerations, personal/emotional considerations, etc.

    Quite frankly, it is frustrating to hear the media talk up a national housing market - that is kind of like saying the temperature in the US today is 57-degrees. In my area, the news covers micro-climates and the same concept exists for housing.

    IF you break down the question to ONLY short term financial, then you have to look at each property individually. Some properties are better for you to rent and others to buy. This you can figure out by going to FinestExpert.com - The Cashflow Search Engine and yes, that was a gratuitous plug :-D

    From the long term value of my money, I personally believe that my home in San Diego is better to own (even though it would not cash flow) because I believe that its value will increase at least at the rate of basic CPI inflation or potential hyper-inflation, while my mortgage payments remain constant(effectively shrinking in proportion to inflation). My "rent" only goes up as my taxes, insurance, and HOA increase.

    I have a friend who has preferred to be a world traveler to owning a home. For the year that he traveled, his monthly "rent" paid for lodgings and travel etc. If I travel, I have those costs AND I still have to pay for my home. But, I always know where my home is.

    It is not a one-dimensional problem.

    Robert T. Boyer, Ph.D.
    Co-Founder FinestExpert.com - The Cashflow Search Engine

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  51. It depends on the context of the person. There are simple short term financial considerations, long term considerations, personal/emotional considerations, etc.

    This must be the sort of high-falutin' jargon they teach in PhD class these days.

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  52. "My name is Bob. You could spell it backwards and you get the same result. What's next? My favorite color?"

    Thats hillarious! My name is Bob as well, but I like to go by Rob. My favorite color is blue. I actually have 4 screen names on here but I like to use anonymous as I dont have to try to remember the passwords.

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  53. Mr. Ph.D. got his degree from a Cracker Jack box. That's why he is promoting his web site. He doesn't have a job!!!!!

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