tag:blogger.com,1999:blog-13164186.post114843154852621935..comments2024-01-27T19:26:32.604-05:00Comments on Bubble Meter: It's The Inventory StupidDavidhttp://www.blogger.com/profile/11169148764438565562noreply@blogger.comBlogger38125tag:blogger.com,1999:blog-13164186.post-1149906608518721122006-06-09T22:30:00.000-04:002006-06-09T22:30:00.000-04:00“Fritz said... Rather than reading about economic ...“Fritz said... <BR/>Rather than reading about economic fundamentals and how RE has moved historically, Bryce is too busy posting his hopes and fears on this website, wishing them into existence.”<BR/><BR/>And “fritz” and SuperNoVA are posting here to try to plug the damn. “All things being equal” can you sell the matching H2’s to help pay off the HELOC?Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-13164186.post-1149145461298008972006-06-01T03:04:00.000-04:002006-06-01T03:04:00.000-04:00Jim, please find a better place for you money, TIP...Jim, please find a better place for you money, TIPS "protects" you only from hevily supressed CPI increases, not from real inflation...Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-13164186.post-1149092924052422922006-05-31T12:28:00.000-04:002006-05-31T12:28:00.000-04:00" What do you guys expect from the Fed minutes out..." What do you guys expect from the Fed minutes out at 2pm today?"<BR/><BR/>Worries about inflation. Some mention of cooling or slowing housing market. <BR/><BR/><BR/>"Any references to Japan's housing collapse?"<BR/><BR/>No way. Can't panic the market.<BR/><BR/>"How will the market react?"<BR/><BR/>Not much reaction.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-13164186.post-1149040042657310092006-05-30T21:47:00.000-04:002006-05-30T21:47:00.000-04:00keith - i could also make a judgement call about y...keith - i could also make a judgement call about your posting and say that you have a vested interest and hidden agenda in not having other sellers lower their prices - I could assume that you are trying to sell or will soon try to sell your own property in the DC area and therefore you have an interested in prices remaining high to get good comps....<BR/><BR/>not saying that you do, but trying to make a point, that unless you know for sure don't assume anyone has a hidden agenda - it seems the agenda here is to enlighten people on the housing excesses of the last few years, and to stop the destructive behavior now but it takes us ALL down soon.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-13164186.post-1149039778613266922006-05-30T21:42:00.000-04:002006-05-30T21:42:00.000-04:00"I don't trust agents. There is too much of a conf..."I don't trust agents. There is too much of a conflict of interest going on. I have seen alot of unethical behavior over the past 25 yrs and have learned from my misjudgements of people."<BR/><BR/>The only agent I would hire is one that lived in a house just like mine in my neighborhood. That would give them the maximum incentive to get good deal.<BR/><BR/>But I still wouldn't pay full price even then.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-13164186.post-1149036881625214132006-05-30T20:54:00.000-04:002006-05-30T20:54:00.000-04:00Why would an agent take on an overpriced listing? ...Why would an agent take on an overpriced listing? Perhaps they plan to get the seller to lower the price in a few weeks. Perhaps the agent suggested a high price to get the listing - knowing full well that a reduction would be necessary.<BR/><BR/>I don't trust agents. There is too much of a conflict of interest going on. I have seen alot of unethical behavior over the past 25 yrs and have learned from my misjudgements of people.<BR/><BR/>I trust myself. I do my own due diligence. If something is a terrific deal, I call only the lister. They don't want to split that commission and will push my deal.<BR/><BR/>There are some excellent agents out there I'm sure. I just haven't encountered any.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-13164186.post-1149029265820740102006-05-30T18:47:00.000-04:002006-05-30T18:47:00.000-04:00For a guy who claims to want to help people, David...For a guy who claims to want to help people, David is giving some awful advice.<BR/><BR/>David actually thinks it's the realtors who tell their clients to set a high list price, because the eeevil realtor wants to make as much money from the commission as possible.<BR/><BR/>Actually, realtors tend to encourage people to sell their house at too low a price, because realtors capture just 6% of the benefit of the sale price, and make their money by turning over houses quickly, not by holding out a long time for a higher price. After all, if you sell your house for $10,000 more by waiting a week longer, a realtor only sees $600 of that, and they aren't interested in working longer and waiting longer for that $600, when they could be spending that time selling other houses.<BR/><BR/>In fact, Steve Levitt the economist found that realtors kept their own homes on the market 10 days longer and sold them for 2% more than when they were selling other people's houses.<BR/><BR/>http://www.j-bradford-delong.net/movable_type/2003_archives/001918.html<BR/><BR/>By the way, don't waste our time with by asking if Levitt adjusted for "this thing" or "that thing." First read the paper carefully if you're going to get into that. Economists are masters at the empirical methodologies that adjust for various differences.<BR/><BR/>So David's just plain wrong on this. Sell your own house, keep your expectations realistic, but don't let a realtor pressure you into lowering your list price too much, because that realtor just wants to move your house as fast as possible. <BR/><BR/>Remember, David's just a blogger with an agenda, and not always a good source of advice.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-13164186.post-1149021682298058422006-05-30T16:41:00.000-04:002006-05-30T16:41:00.000-04:00I expect the gap between rents and prices to rever...I expect the gap between rents and prices to revert towards the historical mean as the value of housing as an "investment" (i.e., the investment fad) fades. The question is whether this will come about from declining/stagnating prices, increasing rents, or some combination of the two. <BR/><BR/>The early evidence is pointing towards some combination of the two. However, prices are certainly further from the fundamentals at this point than rents.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-13164186.post-1149015556327887642006-05-30T14:59:00.000-04:002006-05-30T14:59:00.000-04:00dc condo watcher -- you are correct that the merry...dc condo watcher -- you are correct that the merry-go-round will slow down or stop. My point is that many of these units are already in the rental market by those who planned to rent them out, so there won't be a massive inventory spike. <BR/><BR/>Of course, nobody really knows what percent are those who levereged themselves to buy 4 condos and flip them veruss those who took a conservative approach. DC, however, is one of the strongest rental markets in the country due to the transient nature of people living here. Barring a financial catastrophe, I'd guess that as more people decide not to buy that the pressure on the rental market will increase. Renting or buying, people need a place to live.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-13164186.post-1149011423454757752006-05-30T13:50:00.000-04:002006-05-30T13:50:00.000-04:00This is not entirely true. There are many buyers w...<I>This is not entirely true. There are many buyers who recently purchased multiple condos, hoping to sell them to an "end-user". These end users are not materializing because all the real end-users already have found places to live.<BR/></I><BR/><BR/>That's why I said "all other things being equal." It is of course entirely possible that the rental market has pent up supply that can absorb the new demand for housing. I'd look to vacancy rates in rental housing for some answers on that.<BR/><BR/>My post was not meant to assert any particular data, but to note that as demand shifts from the home ownership to home renting markets, that shift in demand tends to put a brake on the economic stimulus causing that demand in the first place. The market defends the equilibrium pretty forcefully.SuperNoVahttps://www.blogger.com/profile/16904585645336377657noreply@blogger.comtag:blogger.com,1999:blog-13164186.post-1149011074809909862006-05-30T13:44:00.000-04:002006-05-30T13:44:00.000-04:00Sorry, comment got cut off..Your arguments are sou...Sorry, comment got cut off..Your arguments are sound, and the Frederick News-Post has a great <A HREF="http://tinyurl.com/nadhn" REL="nofollow">article</A> on how the federal spending is at unsustainable levels no matter which party comes in in 2008, and that this could be the trigger for the next recession. If MD is hit hard, DC will likely take some of that hit as well, although not as badly. Less gov't spending doesn't bode well for areas that rely heavily on fed workers.Nikkihttps://www.blogger.com/profile/04033205277611042860noreply@blogger.comtag:blogger.com,1999:blog-13164186.post-1149010821113737992006-05-30T13:40:00.001-04:002006-05-30T13:40:00.001-04:00Good comments dc_too. Speculative renting--well, i...Good comments dc_too. Speculative renting--well, if you could do it, I'm sure there are some that would...Nikkihttps://www.blogger.com/profile/04033205277611042860noreply@blogger.comtag:blogger.com,1999:blog-13164186.post-1149010808126935402006-05-30T13:40:00.000-04:002006-05-30T13:40:00.000-04:00supernova - your analysis is based on a fundamenta...supernova - your analysis is based on a fundamental assumption, which may be incorrect. you assume that for each condo converted to a rental, there is now a need for the owner of that condo to need a place to rent.<BR/><BR/>This is not entirely true. There are many buyers who recently purchased multiple condos, hoping to sell them to an "end-user". These end users are not materializing because all the real end-users already have found places to live.<BR/><BR/>Their real end-user was another speculator, also buying multiple units.<BR/><BR/>Now that the speculation is coming to an end, we find that DC has a whole lot more condos than anyone ever really needed, and this will be reflected both in decreases of rent and housing prices.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-13164186.post-1149010459238268512006-05-30T13:34:00.000-04:002006-05-30T13:34:00.000-04:00JimL - there's a flaw in your logic. As real esta...JimL - there's a flaw in your logic. As real estate prices start rising more slowly, or stop rising altogether (as in the case of the DC condo market), then there will be no more buy-live in 2 years-sell rotation going around, because there won't be $500K increases every 2 years. <BR/><BR/>I agree a lot of people are now cashing out their $250-500K tax free profits, but this is the last time in this cycle they get to do that - their next purchase won't appreciate anywhere near $500K in two years, and in fact they may actaully loose money.<BR/><BR/>The "ring around the rosey" game has come to a stop, and a lot of would-be sellers have found that they've fallen and can't get up.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-13164186.post-1149010148427238472006-05-30T13:29:00.000-04:002006-05-30T13:29:00.000-04:00DC is losing population????How is that relevant at...DC is losing population????<BR/><BR/>How is that relevant at all to this discussion? First, the population was limited to certain areas of the District of Columbia, not the metro area as a whole. Second, the population decrease did not mean you had empty houses, it just meant you had 1 or 2 people to a house instead of 4 or 5.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-13164186.post-1149006866032653932006-05-30T12:34:00.000-04:002006-05-30T12:34:00.000-04:00Rents may decrease in the next year as investor ow...Rents may decrease in the next year as investor owned houses/condos that are for sale are pulled off the market because the price has dropped. Many of these houses are empty right now. They could flood the rental market.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-13164186.post-1149003789350952472006-05-30T11:43:00.000-04:002006-05-30T11:43:00.000-04:00The housing slowdown will probably take upto ayear...The housing slowdown will probably take upto a<BR/>year to start affecting other sectors of the economy.<BR/>Job growth which has been especially strong in the DC<BR/>could be other factor why rents are not declining just<BR/>yet.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-13164186.post-1149002888773804202006-05-30T11:28:00.000-04:002006-05-30T11:28:00.000-04:00I like the idea that rents are increasing because ...<I>I like the idea that rents are increasing because condo conversions are limiting apartment supply.<BR/>It's also possible that rents have been lagging so far behind purchases because so many people want to buy that it was limiting rental demand, and now that purchase demand is softening, more people want to rent? Who knows.</I><BR/><BR/>I think you raise an interesting point, which reinforces the general economic principles at play.<BR/><BR/>First, I don't know about the absolute or relative number of condo conversions in DC or other markets. My own anecdotal observation - no data behind this - is that condo conversion has actually been relatively modest compared to the 80's. I don't think that many rentals have been taken off the market in conversions.<BR/><BR/>Second, you point out that as demand for ownership declines, rental demand increases, which should put pressure on rental prices. As rental prices increase, owning a home becomes more cost-effective, and you shift some demand back to home ownership.<BR/><BR/>It's the principle of equilibrium - supply and demand tend to work these things out.<BR/><BR/>Say persons X1 through X10,000 take the advice of any number of anonymous posters here and sell in a panic. Now X1 through X10,000 need a place to live, and their demand shifts to the rental market.<BR/><BR/>Since the housing market is divided roughly 2/3 owner/occupied and 1/3 rental, the shift of people from the ownership market to the rental market has a bigger impact on rental prices, all other things being equal. So if housing prices decline by 10% in the ownership market as a result of that 10,000 household stampede, rents will increase by 20%. Again, all other things being equal. <BR/><BR/>Now, if rent prices go up 20% and home prices go down 10%, you've got a new rent/own ratio, and, on the margin, people are more likely to buy. Maybe 3,000 of those 10,000 shift back to ownership, and you've got a 3% rebound in home prices and a 6% decline in rents.<BR/><BR/>In reality, the feedback loop on supply demand is more dynamic than that - it becomes increasingly harder to convince x2, x3, x4 .. . to go to rental as rents increase. So you wind up with an equilibrium more like a shift of 6,500 people and housing price declines of 6.5% and rent increases of 13%.<BR/><BR/>These numbers are all made up, by the way, and shouldn't be taken as any kind of prediction. But it does illustrate the kind of rental/ownership feedback loop that creates resistance against steep housing price declines.SuperNoVahttps://www.blogger.com/profile/16904585645336377657noreply@blogger.comtag:blogger.com,1999:blog-13164186.post-1149001303793358452006-05-30T11:01:00.000-04:002006-05-30T11:01:00.000-04:00am i the only one overhwelmed by the inventory? th...am i the only one overhwelmed by the inventory? there's so many houses on the market i get a headache looking at all the ones in my price range. not that i'm seriously looking, just bubble watchingAnonymousnoreply@blogger.comtag:blogger.com,1999:blog-13164186.post-1149000217864536852006-05-30T10:43:00.000-04:002006-05-30T10:43:00.000-04:00I like the idea that rents are increasing because ...I like the idea that rents are increasing because condo conversions are limiting apartment supply.<BR/>It's also possible that rents have been lagging so far behind purchases because so many people want to buy that it was limiting rental demand, and now that purchase demand is softening, more people want to rent? Who knows.<BR/><BR/>-kevinAnonymousnoreply@blogger.comtag:blogger.com,1999:blog-13164186.post-1148999588650710682006-05-30T10:33:00.000-04:002006-05-30T10:33:00.000-04:00From WTOPNEWS.com. FAIRFAX, Va. - Communities nea...From WTOPNEWS.com. <BR/><BR/> FAIRFAX, Va. - Communities near Fort Belvoir need more state and federal money before thousands of new military jobs arrive at the base, a Fairfax County supervisor says.<BR/><BR/>Fort Belvoir is slated to pick up about 21,000 jobs starting in 2011 after Walter Reed Army medical Center in Washington and other military installations are closed.<BR/><BR/>Supervisor Gerald Hyland of the Mount Vernon District says roads and other local infrastructure will need to be upgraded.<BR/><BR/> Hyland says projects on the Fairfax County Parkway, Route One and Woodlawn Road must be completed by then.<BR/><BR/>The county's Planning and Zoning Department will look at the effects on schools, parks, water, sewer, and other systems once the Army gets recommendations on the new job sites.<BR/><BR/>(Copyright 2006 by The Associated Press. All Rights Reserved.)Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-13164186.post-1148999524471240392006-05-30T10:32:00.001-04:002006-05-30T10:32:00.001-04:00"what percentage is 20$ a month? "For Silver Sprin..."what percentage is 20$ a month? "<BR/><BR/>For Silver Spring? Probably 200%.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-13164186.post-1148999522807421162006-05-30T10:32:00.000-04:002006-05-30T10:32:00.000-04:00Rents are increasing because many apartment units ...Rents are increasing because many apartment units have been converted to condos around the Washington, DC region. Lower and middle income people are basically thrown out of their old facilities and they have to find scarce rental units.<BR/><BR/>Second, a small number of people bailed out of the ownership market because of the bubble. They sold at the "peak" price. These former owners are sitting the bubble collapse out through renting. <BR/><BR/>Third, this effects Maryland renters. The Maryland Public Utilities Commission is allowing the dramatic increase of electric utility rates by carriers (i.e. PEPCO and BG&E). PEPCO customers will see a 30-40 percent rate increase beginning this summer. This also effects apartment buildings since the management companies must now pay higher utility rates to keep the juice flowing for their tenants. There are still many apartment complexes that include the utilities with the rent. My rent increased 8 percent becuase of the electric rate hike.ihateyuppieshttps://www.blogger.com/profile/14656529543240441687noreply@blogger.comtag:blogger.com,1999:blog-13164186.post-1148999204366961752006-05-30T10:26:00.000-04:002006-05-30T10:26:00.000-04:00There is a CPI Housing Rent Index for the D>C> SMS...There is a CPI Housing Rent Index for the D>C> SMSA available through a gov't office (Bureau of something or other).<BR/><BR/>It was essentially flat through most of the nineties. I know this because I had one house where rent increases were tied to this figure.<BR/><BR/>FWIW.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-13164186.post-1148998988000321182006-05-30T10:23:00.000-04:002006-05-30T10:23:00.000-04:00Part of the reason rents will stay strong in the D...Part of the reason rents will stay strong in the DC area is that a big driver of the real estate market is the $500K tax-free incentive from selling a place you live in (2 of the past 5 years). Now I have no idea on the percent of investors who were buying and selling within too short of time to rent, but I'd guess that many investors who owned more than one property would do something like this: Live in property A for two years, rent out property B. Live in property B for two years, rent out property A for two. Sell property A (tax exempt), rent property B, live in new property C. When lots of people are selling every two years, volumn is gonna rise. Overall though, I'd imagine that many investors are already renting out their places, which is why rent won't soften like real estate (rents were already soft, though DC is one of the strongest rental markets in the country). For those who have seen relatively small increases in rent, it makes sense for landlords NOT to make big increases in rent since it is usually more costly to find new renters than increase the rent (not including some rent-control areas obviously).Anonymousnoreply@blogger.com