Housing: 2006 thread, use the 2007 thread instead.

[dullard]

The Office of Federal Housing Enterprise Oversight says that the home price growth for the last quarter was just 1.17%. The drop in home price growth (from last quarter) was the largest quarterly drop ever measured (data since 1975). The OFHEO numbers differ from the Realtors numbers because the OFHEO uses only homes that have been sold before, thus this is supposed to be a true picture of how prices change. That is, it isn't affected by a large amount of new expensive/inexpensive homes being bought for the first time. It still shows that prices are growing. But the excessively high growth rates are no longer here.

 

[Slew Foot]

Im assuming that that is national numbers. Because looking at homes that have sold before in CA, you're looking at a 5-10% drop in the last quarter. Someplace must have some staggering appreciation to offset CA.

 

[dmcowen674]

Originally posted by: Slew Foot
Im assuming that that is national numbers. Because looking at homes that have sold before in CA, you're looking at a 5-10% drop in the last quarter. Someplace must have some staggering appreciation to offset CA.

Lost $20,000 here.

 

[Slew Foot]

Behold! Businessweek's Map Of Misery

CA is in for a serious ass-kicking.

 

[dmcowen674]

Originally posted by: Slew Foot
Behold! Businessweek's Map Of Misery

CA is in for a serious ass-kicking.

Florida too

 

[Zorba]

Originally posted by: Slew Foot
Behold! Businessweek's Map Of Misery

CA is in for a serious ass-kicking.

Man I love living in the Plains.

 

[imported_Tango]

Originally posted by: Slew Foot
Im assuming that that is national numbers. Because looking at homes that have sold before in CA, you're looking at a 5-10% drop in the last quarter. Someplace must have some staggering appreciation to offset CA.

New York City is doing fine.

 

[Vic]

Originally posted by: Slew Foot
Behold! Businessweek's Map Of Misery

CA is in for a serious ass-kicking.

Pretty much what I've been saying all along. It's CA that's going to get its ass kicked, like it always does every decade or so. The rest of the US is just going to see a slower market for a few years. And, quite honestly, we don't much give a sh!t about CA and its arrogant irrational exhuberence.

 

[Slew Foot]

The midwest is immune to price declines.


Home Prices Fall in Nearly One-Fourth of Metropolitan Regions

By VIKAS BAJAJ
Published: September 6, 2006

Prices of traditional single-family dwellings fell in 87 of the nation?s 379 major metropolitan areas from the first quarter to the second, the government reported yesterday, as the overall value of homes leveled off across the country.

On a quarterly basis, prices were lower in Boston, Sacramento, Pittsburgh and much of the Midwest, where the loss of manufacturing jobs has hit the housing market hard.

http://www.nytimes.com/2006/09/06/reale...aa&ei=5090&partner=rssuserland&emc=rss


Oh wait, no it isnt.

CA is what, 20% of the US economy? If CA tumbles, the rest of country will feel the aftereffects.

 

[BoberFett]

Originally posted by: Slew Foot
Behold! Businessweek's Map Of Misery

CA is in for a serious ass-kicking.

It's like looking at an election map. Why are the blue states doing so badly? Shouldn't the corruption and greed in red states cause the opposite to happen?

Come on, Dave. Please show me the light!

 

[dullard]

This isn't really news, just an update on a forecast, so I won't put it in the OP. However, I thought this article shows that the NAR is finally admitting that there is at least a temporary slowdown in housing. Link.

WASHINGTON (Reuters) -- U.S. home sales will be a good deal weaker this year than earlier thought as potential buyers remain on the sidelines waiting for better deals, a national real estate group said Thursday.

The National Association of Realtors said sales of existing homes were likely to drop 7.6 percent this year to 6.54 million. A month ago, the group thought existing homes sales would fall only 6.5 percent to 6.61 million.

The association, which said housing prices were likely to dip temporarily below year-ago levels, also revised and lowered its forecasts for new homes sales and housing starts. It said new homes sales looked set to drop a steep 16.1 percent to 1.08 million units, compared to a previous forecast of a fall to just 1.12 million.

NAR said builders were now likely to break ground on just 1.87 million units this year - 9.6 percent lower than last year's level and a bit below its prior 1.88 million forecast.

The rest of the article is short but doesn't add much, so I won't clutter the forums with the full text.

 

[Zorba]

Originally posted by: BoberFett

Originally posted by: Slew Foot
Behold! Businessweek's Map Of Misery

CA is in for a serious ass-kicking.

It's like looking at an election map. Why are the blue states doing so badly? Shouldn't the corruption and greed in red states cause the opposite to happen?

Come on, Dave. Please show me the light!

To me it looks like a pretty even split of red/blue with cali being the worst, of course. People living beyond their means seems to be pretty universal as far as party is concerned.

 

[HomeAppraiser]

Originally posted by: BoberFett

Originally posted by: Slew Foot
Behold! Businessweek's Map Of Misery

CA is in for a serious ass-kicking.

It's like looking at an election map. Why are the blue states doing so badly? Shouldn't the corruption and greed in red states cause the opposite to happen?

Come on, Dave. Please show me the light!

What we are seeing now is a micro-recession caused by the Fed raising interest rates a too many times over the past year. As with all recessions the upper-end of the market is the first and hardest hit. No one needs a million dollar home, but plenty of folks could sure use a $100,000 basic Cottage. Demand at the top is dropping fast. Example

The states that saw the greatest up swing in value over the past five years are having the hardest down slump, sort of like wave action. The Midwest has always just plodded along at a modest appreciation so it is not going to get hit as hard.

 

[LegendKiller]

Originally posted by: HomeAppraiser

What we are seeing now is a micro-recession caused by the Fed raising interest rates a too many times over the past year. As with all recessions the upper-end of the market is the first and hardest hit. No one needs a million dollar home, but plenty of folks could sure use a $100,000 basic Cottage. Demand at the top is dropping fast. Example

The states that saw the greatest up swing in value over the past five years are having the hardest down slump, sort of like wave action. The Midwest has always just plodded along at a modest appreciation so it is not going to get hit as hard.

Yeah, it's just the rate hikes that are causing a slow down...

If the Fed didn't raise rates then inflation would skyrocket and the economy would tumble uncontrollably downwards. That is an inevitable outcome of a boom-bust cycle that is unmoderated. All the Fed has done is moderate the level at which the economy speeds up or slows down.

I am sure the Realtors and such would have loved for the boom to continue, to the ruin of the country. As long as they got their buck they wouldn't care. Then they go point fingers and ask "who stole our cheese?"

 

[Vic]

Originally posted by: LegendKiller

Originally posted by: HomeAppraiser

What we are seeing now is a micro-recession caused by the Fed raising interest rates a too many times over the past year. As with all recessions the upper-end of the market is the first and hardest hit. No one needs a million dollar home, but plenty of folks could sure use a $100,000 basic Cottage. Demand at the top is dropping fast. Example

The states that saw the greatest up swing in value over the past five years are having the hardest down slump, sort of like wave action. The Midwest has always just plodded along at a modest appreciation so it is not going to get hit as hard.

Yeah, it's just the rate hikes that are causing a slow down...

If the Fed didn't raise rates then inflation would skyrocket and the economy would tumble uncontrollably downwards. That is an inevitable outcome of a boom-bust cycle that is unmoderated. All the Fed has done is moderate the level at which the economy speeds up or slows down.

I am sure the Realtors and such would have loved for the boom to continue, to the ruin of the country. As long as they got their buck they wouldn't care. Then they go point fingers and ask "who stole our cheese?"

IMO, it was the other way around. The Fed lowered rates too low and kept them low for too long, then was too slow to raise them. That triggered the irrational exhuberence boom that is leading to the slowdown now. It happens everytime. It's not that the boom-bust cycle was created by a lack of moderation (prior to the Fed, boom/bust cycles were caused by irrational panics, now they are caused by irrational confidence), but because a committee like the Fed cannot hope to ever move quickly enough to keep up with the needs of the market. In other words, the Fed totally fails at the primary mission for which it was supposedly initially created, as it has several times in the past, and will continue to do so into the future.

edit: And you continue blaming the realtors (and I assume, mortgage brokers), which is disingenious in the extreme. The buyers and sellers alone are at fault. A realtor or a broker who refuses business on the basis that the buyer is making an irrational decision is merely sending that business to his competitor. The buyer's attitude is that if they won't do it, then they'll find someone who will. I've had an analogy for this for many years. If a customer looking for a new suit insists on buying an orange plaid suit and no other, then he will insist on buying that orange plaid suit from a salesperson who will sell him an orange plaid suit. If then the customer looks bad because he's wearing an orange plaid suit, how is that the salesperson's fault?

 

[dullard]

Originally posted by: Vic
IMO, it was the other way around. The Fed lowered rates too low and kept them low for too long, then was too slow to raise them. That triggered the irrational exhuberence boom that is leading to the slowdown now. It happens everytime. It's not that the boom-bust cycle was created by a lack of moderation (prior to the Fed, boom/bust cycles were caused by irrational panics, now they are caused by irrational confidence), but because a committee like the Fed cannot hope to ever move quickly enough to keep up with the needs of the market. In other words, the Fed totally fails at the primary mission for which it was supposedly initially created, as it has several times in the past, and will continue to do so into the future.

The Fed did lower rates too low and yes, they did keep them low for too long, and yes they were too slow to raise them. However, I disagree with much of the rest of your post. The Fed's main goal is to keep inflation in check. For the last 20 years, inflation has been between 1.1% and 6.1% (Using Dec to Dec CPI numbers). Those inflation numbers are well within reasonable ranges. They aren't deflation numbers, and they aren't massive (10+%) inflation numbers. So, overall the Fed has recently done quite a good job.

Yes, you could argue that the CPI is incorrectly calculated. But their job is to keep this fuzzy CPI number in check, and they have done quite well with that recently. Actually, save the period from 1973-1981, inflation has been in check since just after WW2. And in that one bad period, I don't think the Feds could have prevented inflation.

The Fed is an imperfect and slow moving beast. But that beast (for the most part) has done its job.

 

[HomeAppraiser]

You have to understand that purchasing power is directly related to interest rates. The Fed, by only looking at the numbers and ignoring the real world (Katrina, gas prices and stagnant wages) has gone too far. That's why they did not make any changes during the last meeting and why they are going to sit on their hands this month.

I don't think the Fed lowered rates too far, couldn't really get any lower could they, just too FAST. I think that was all political after 9/11. Just like now it should have been "change 1/4%, wait a few months, change 1/4%, wait a few months, etc.? Rapid punching the economy with constant rate hikes has knocked it on its @$$. Any inflation we see now is all supply push (higher gas prices) NOT demand pull. Continuing to raise rates now will not stop inflation; it will only hurt families who have to pay higher rates on consumer loans while maximizing the saving returns of the ownership class!

IMHO the Fed should have stopped raising after Katrina and made only half as many hikes in 2006.

Originally posted by: Vic
edit: And you continue blaming the realtors (and I assume, mortgage brokers), which is disingenuous in the extreme. The buyers and sellers alone are at fault. A realtor or a broker who refuses business on the basis that the buyer is making an irrational decision is merely sending that business to his competitor.

Wow, just wow. I have seen plenty of Realtors and mortgage brokers drive the price of a home up in order to get a buyer into a home they couldn?t afford for zero down and a low monthly payment based on a teaser rate. It works like this: Listing & sales price = $200,000 but the buyer has no cash. Realtor/broker says ?Let?s raise the price to $212,000 and have the seller ?kick back? $12,000 to the buyer.? Now the buyer has enough money for closing and the seller still gets his/her full price. All they need now is an appraiser to ?play ball? and ?hit the number?! That usually involves a phone call from the Realtor or broker who says ?You?d better come it to value on this deal or a) we are not going to use you any more, b) no deal no appraisal fee c) we are going to complain to the state that you did not appraise to the sales price which is after all market value. In all likelihood the market value of the property is $195,000.

So Vic, is an appraiser who refuses business like this on the basis that the buyer is making an irrational decision merely sending that business to his competitor?

 

[Vic]

Originally posted by: HomeAppraiser

Originally posted by: Vic
edit: And you continue blaming the realtors (and I assume, mortgage brokers), which is disingenuous in the extreme. The buyers and sellers alone are at fault. A realtor or a broker who refuses business on the basis that the buyer is making an irrational decision is merely sending that business to his competitor.

Wow, just wow. I have seen plenty of Realtors and mortgage brokers drive the price of a home up in order to get a buyer into a home they couldn?t afford for zero down and a low monthly payment based on a teaser rate. It works like this: Listing & sales price = $200,000 but the buyer has no cash. Realtor/broker says ?Let?s raise the price to $212,000 and have the seller ?kick back? $12,000 to the buyer.? Now the buyer has enough money for closing and the seller still gets his/her full price. All they need now is an appraiser to ?play ball? and ?hit the number?! That usually involves a phone call from the Realtor or broker who says ?You?d better come it to value on this deal or a) we are not going to use you any more, b) no deal no appraisal fee c) we are going to complain to the state that you did not appraise to the sales price which is after all market value. In all likelihood the market value of the property is $195,000.

So Vic, is an appraiser who refuses business like this on the basis that the buyer is making an irrational decision merely sending that business to his competitor?

Isn't that what you just said?

And even though the property might (in your hypothetical argument and expert opinion) be worth only $195k, who is the party who will be the most pissed-off and the most likely to file numerous complaints if you don't appraise it for $212k? That's right, the buyer you're trying to "protect." So who is ultimately at fault? That pressure doesn't start with the realtor or broker. It starts with the buyer who wants that house -- no matter what.
And sure, there's dirtbag bottom-feeders out there who go "dialing for dollars" looking for buyers to push into homes, but they're the minority doing an even smaller minority of the business. More than 80% of all real estate-related business is marketed by word-of-mouth, and that begins with a buyer looking to buy, iniating the transaction by calling up a realtor and/or a broker that they want to buy from.

You might want to look for higher quality realtors and brokers to work for. Oh, wait...

 

[LegendKiller]

Originally posted by: Vic
IMO, it was the other way around. The Fed lowered rates too low and kept them low for too long, then was too slow to raise them. That triggered the irrational exhuberence boom that is leading to the slowdown now. It happens everytime. It's not that the boom-bust cycle was created by a lack of moderation (prior to the Fed, boom/bust cycles were caused by irrational panics, now they are caused by irrational confidence), but because a committee like the Fed cannot hope to ever move quickly enough to keep up with the needs of the market. In other words, the Fed totally fails at the primary mission for which it was supposedly initially created, as it has several times in the past, and will continue to do so into the future.

edit: And you continue blaming the realtors (and I assume, mortgage brokers), which is disingenious in the extreme. The buyers and sellers alone are at fault. A realtor or a broker who refuses business on the basis that the buyer is making an irrational decision is merely sending that business to his competitor. The buyer's attitude is that if they won't do it, then they'll find someone who will. I've had an analogy for this for many years. If a customer looking for a new suit insists on buying an orange plaid suit and no other, then he will insist on buying that orange plaid suit from a salesperson who will sell him an orange plaid suit. If then the customer looks bad because he's wearing an orange plaid suit, how is that the salesperson's fault?

Economic theory and practice state that monetary policy drives growth, due to availability of funds at a price that was relatively better (or worse) than previously available. The cheap funds allow for expansion both consumer driven (purchasing relatively cheaper houses or cars) or by businesses (loans..etc).

While one could say that the all-in cost, including borrowing and the direct result on Purchasing Power. One could say that borrowing drove the bubble, but borrowing has been low previously and have not driven bubbles to this extent. You have to remember that borrowing is lock-step (in modern cases) with inflation. In *REAL* ( not nominal) terms, borrowing is the almost same in 1978 as it was today or even 24 months ago.

The confluence of events surrounding the bubble are astounding. Yes, borrowing costs did factor in. However, even when they increased it still was sky-high. Furthermore, other assets that depend on borrowing or personal wealth are exposed to booms and busts, such as equity.

What I personally believe is that the .bombs occured too quickly and were not severe enough, the asset transference, and more importantly the behavioral transferance, caused a continuation of the .bomb bubble into houses. The irrational exuberance wasn't driven by relatively cheaps funds, it was driven by material greed and stupidity.

The Fed looks at inflation and growth, if the growth oustrips population and monetary growth too quickly you get inflation. The curb on that is higher rates. If the Fed needed to cool the economy down, evidenced by inflation, then it would have done so at a faster pace. However, all indicators showed that the economy has been chugging along at a good clip and normal inflationary tendances exist.

As in all things, it's a cycle. It just so happened that people were as stupid about houses as they were with stocks, if not more so.

 

[Vic]

Originally posted by: LegendKiller
As in all things, it's a cycle. It just so happened that people were as stupid about houses as they were with stocks, if not more so.

I completely agree. In fact, I've been warning people, both online (including here) and IRL professionally, about the dangers of irrational exhuberence for years. But, as I told you a week or so ago, being irrationally pessimistic is just the flip side of that same coin.

 

[LegendKiller]

Originally posted by: Vic

Originally posted by: LegendKiller
As in all things, it's a cycle. It just so happened that people were as stupid about houses as they were with stocks, if not more so.

I completely agree. In fact, I've been warning people, both online (including here) and IRL professionally, about the dangers of irrational exhuberence for years. But, as I told you a week or so ago, being irrationally pessimistic is just the flip side of that same coin.

Go tell the brits that. Credit Card portfolio defaults are 3x what they were just 18mo ago. They are just in the beginning of a credit crisis.

 

[smack Down]

Originally posted by: Vic

Originally posted by: HomeAppraiser

Originally posted by: Vic
edit: And you continue blaming the realtors (and I assume, mortgage brokers), which is disingenuous in the extreme. The buyers and sellers alone are at fault. A realtor or a broker who refuses business on the basis that the buyer is making an irrational decision is merely sending that business to his competitor.

Wow, just wow. I have seen plenty of Realtors and mortgage brokers drive the price of a home up in order to get a buyer into a home they couldn?t afford for zero down and a low monthly payment based on a teaser rate. It works like this: Listing & sales price = $200,000 but the buyer has no cash. Realtor/broker says ?Let?s raise the price to $212,000 and have the seller ?kick back? $12,000 to the buyer.? Now the buyer has enough money for closing and the seller still gets his/her full price. All they need now is an appraiser to ?play ball? and ?hit the number?! That usually involves a phone call from the Realtor or broker who says ?You?d better come it to value on this deal or a) we are not going to use you any more, b) no deal no appraisal fee c) we are going to complain to the state that you did not appraise to the sales price which is after all market value. In all likelihood the market value of the property is $195,000.

So Vic, is an appraiser who refuses business like this on the basis that the buyer is making an irrational decision merely sending that business to his competitor?

Isn't that what you just said?

And even though the property might (in your hypothetical argument and expert opinion) be worth only $195k, who is the party who will be the most pissed-off and the most likely to file numerous complaints if you don't appraise it for $212k? That's right, the buyer you're trying to "protect." So who is ultimately at fault? That pressure doesn't start with the realtor or broker. It starts with the buyer who wants that house -- no matter what.
And sure, there's dirtbag bottom-feeders out there who go "dialing for dollars" looking for buyers to push into homes, but they're the minority doing an even smaller minority of the business. More than 80% of all real estate-related business is marketed by word-of-mouth, and that begins with a buyer looking to buy, iniating the transaction by calling up a realtor and/or a broker that they want to buy from.

You might want to look for higher quality realtors and brokers to work for. Oh, wait...

Well the bank is utlimitly the one at fault for writing loans that are for more then the property is worth and they are also the ones who will get to eat the loses.

 

[Vic]

Originally posted by: smack Down
Well the bank is utlimitly the one at fault for writing loans that are for more then the property is worth and they are also the ones who will get to eat the loses.

Besides the fact that you missed the entire point of my post, I won't disagree that the banks are the ones who will eat any potential losses. Which is why they work so hard at carefully reviewing each and every property they lend on. It seems to me that the sole experience that most people here have with banks and lenders is with their sales forces. I got news for you: that's only half of the equation. Banks and lenders decline more applications than they approve.

Then there's the next issues: exactly what is a property worth? How is that value derived? What determines it? Is it static or does it not constantly change? You really think banks and lenders, with countless experience and trillions in vested interest, don't know more about this than you do? Don't tell the doctor how to operate.

 

[HomeAppraiser]

Originally posted by: HomeAppraiser
So Vic, is an appraiser who refuses business like this on the basis that the buyer is making an irrational decision merely sending that business to his competitor?

Originally posted by: Vic
Isn't that what you just said?

And even though the property might (in your hypothetical argument and expert opinion) be worth only $195k, who is the party who will be the most pissed-off and the most likely to file numerous complaints if you don't appraise it for $212k? That's right, the buyer you're trying to "protect." So who is ultimately at fault? That pressure doesn't start with the realtor or broker. It starts with the buyer who wants that house -- no matter what.
And sure, there's dirtbag bottom-feeders out there who go "dialing for dollars" looking for buyers to push into homes, but they're the minority doing an even smaller minority of the business. More than 80% of all real estate-related business is marketed by word-of-mouth, and that begins with a buyer looking to buy, iniating the transaction by calling up a realtor and/or a broker that they want to buy from.

You might want to look for higher quality realtors and brokers to work for. Oh, wait...

To answer my first question YES by not "playing ball" I am merely sending that business to my unethical competitors. But those are the breaks.

I have actually been thanked by buyers for providing the realistic market value and not just rubber stamping the sales price. One investor, an Indian doctor from SoCal, was going to pay way too much for a rental here and said that he never got an appraisal that didn't equal the purchase price. He thanked me, but the Realtor, a "dialing for dollars" dirtbag bottom-feeder called and cussed my answering machine out for killing his deal. I played that tape for the State Real Estate Board. They did nothing.

Vic, you have to understand two things: 1) Legally a Realtor (Edit: the buyers Realtor not the listing Realtor) has a fiduciary duty to work in the best interest of his/her buyer, 2) In reality most Realtors only care about their deal closing and getting paid, screw the buyer.

Ethically if the buyers cannot afford that $212,000 house the Realtor should try to find them a substitute that they can make the payments on instead of scheming to get them in at all costs. But as the saying goes a bird in the hand is worth two in the bush and a deal in escrow is better than ten open houses!

Once a Realtor gets a deal in escrow they are like a hungry dog with a bone, which is why I don't blame the buyer 100% like you seem to do.

As for me finding higher quality brokers to work for, I have tried but 90% of them are as I described above! I do most of my work for major national banks who pay the appraisal fee even if the deal does not go through and tell the bad brokers that what they are asking is unethical before hanging up the phone. Unfortunately if a bad Realtor has a listing or sale and we get the appraisal assignment, we have to work with them.

 

[dullard]

Originally posted by: HomeAppraiser
I have actually been thanked by buyers for providing the realistic market value and not just rubber stamping the sales price. One investor, an Indian doctor from SoCal, was going to pay way too much for a rental here and said that he never got an appraisal that didn't equal the purchase price. He thanked me, but the Realtor, a "dialing for dollars" dirtbag bottom-feeder called and cussed my answering machine out for killing his deal. I played that tape for the State Real Estate Board. They did nothing.

Vic, you have to understand two things: 1) Legally a Realtor (Edit: the buyers Realtor not the listing Realtor) has a fiduciary duty to work in the best interest of his/her buyer, 2) In reality most Realtors only care about their deal closing and getting paid, screw the buyer.

Ethically if the buyers cannot afford that $212,000 house the Realtor should try to find them a substitute that they can make the payments on instead of scheming to get them in at all costs. But as the saying goes a bird in the hand is worth two in the bush and a deal in escrow is better than ten open houses!

Once a Realtor gets a deal in escrow they are like a hungry dog with a bone, which is why I don't blame the buyer 100% like you seem to do.

You'll likely get nowhere with Vic. I've said that exact same thing to him a couple of times. Buyers (who are the ones ultimately paying the realtors, bankers, and appraisers) should be able to trust what they are told from the professionals that they are paying for. In many, many cases that trust is unfounded and the realtors, bankers, and appraisers are not working in the best interest of the buyer.

Vic is correct that it is the buyer's fault for trusting these professionals - buyers should not trust them. But you have to assign some blame on the professionals who mislead (or worse scam) the buyers into a deal that they cannot afford. Vic is also correct that many of those professionals do their job admirably and ethically. Vic also admits that some are out there to mislead and scam.

Yet Vic refuses to put any blame on those professionals who mislead or scam. His point is that the buyers shouldn't have trusted those professionals. In an ideal world, yes, but the world is far from ideal. Not all buyers have the knowledge, training, or ability to sort out the good professionals from the bad. Thus the bad professionals also deserve to share the blame.