Don't be fooled: fence-sitters are not buyers
Diary of a Real Estate Rookie
By Alison Rogers, Monday, April 14, 2008.Dear friend/person who read something I was quoted as saying in the media/random blogger:
Thank you so much for your thoughts on the state of the housing market. I was most impressed with your emphatic declaration that real estate is currently overpriced and that the nearly 70 percent of Americans who own their own homes are "just a bunch of ninnies."
It is not always easy to be smarter than two-thirds of the country, but you, with your smug declaration that you would "continue renting till prices fall 50%" are clearly some kind of exceptionally far-sighted genius.
The fact that you may have previously come to me as a potential client, only to be told that your target housing would cost five times your annual income, does not weigh in on this debate, I'm sure.
No, you may not have had the wisdom to pull your salary up or your desires down to get your income in line with a starter home; how could you have, when you were using that gigantic brainpower of yours to declare that home prices would keep falling till 2010?
When I first got out of college I went to work on Wall Street. I missed the crash of '87 but was in the office for the mini-crash of '88, where grown men (and they were mostly men) who had been in the business for 20 years stopped what they were doing to gather around a computer screen to watch a line go down, down, down.
That was a bad market day, the kind we used to say would drive investors "out on the ledges."
Well, clearly housing has cycles just as stocks do. The fact that America's real estate is in a slide is best illuminated by the statistic that last year home prices went down, the first annual decrease since the Great Depression.
But it really doesn't mean that all market activity has ceased. Existing homes may be selling at a pace of only 5 million a year, but honestly, that's enough business for me that you can stop cracking jokes about my needing to learn to flip burgers for a living.
What's more, not all of those home sales are the painful struggles that you imagine them to be. I know I'm in the Northeast, which has been spared some of the pain, but things up here that are listed at decent prices still go pretty quickly. I listed my suburban house at 3 percent less than my Realtor advised — yup, I wouldn't sell outside of my own real estate territory, just like a doctor wouldn't cut out his own appendix — and I got an offer the week after I listed.
Now, giving up that 3 percent didn't make me happy, and the price my Realtor advised was probably 10 percent less than it would have been a year ago. But that 13 percent off the peak is still 50 percent higher than when I bought, ninny that I was.
But these are joys that you too can experience, the gut-wrenching thrill of watching neighborhood prices pop up and slide down, when you become a homeowner. (You can also experience the unique frisson of watching money you thought you were going to vacation on turn into roof shingles instead.)
Until then, don't act supercilious and tell me, "oh, everything's overpriced, I'm not a buyer." True, some listings are overpriced, but the ones that aren't are attracting people who have kids and need more space, or people who have to move for their jobs. I'm a homeowner because paying a mortgage is my way of hiding money from myself, and the monthly loan payment is made in dollars that would otherwise get frittered away on shoes and sushi.
Even as the market cycles up and down, I'm building equity, and in 30 years I expect to be richer than I am now. Even as the real estate market is getting stomped on, nearly 5 million people like me are around. You tell me at these prices you're not a buyer? Honey, you never were.
Alison Rogers is a licensed salesperson and author of "Diary of a Real Estate Rookie."
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Submitted by Jim Lee, Knoxville TN Realtor on April 14, 2008 - 4:14am.
Are there actually any markets that have dropped 50% in overall value?
Our average sales price in Knoxville increased 2.7% overall in 2007 versus 2006.
Generally we see about a 3-5% increase in prices year after year.
Submitted by Rob Aubrey on April 14, 2008 - 5:31am.
Yes, I to have ninnies too. I talk to them on the phone, they rant on my blogs.
I had a ninny recently ranting on my blog saying that I was not to be trusted and that he was waiting because prices in our market were going to drop 25%. Then I happened to run across this ninny somewhere else ranting that prices were going to drop 40%. Of course none of it was backed by anything intelligent.
3 Pounds Of Real Estate
Submitted by Dan Homan on April 14, 2008 - 6:25am.
Don't get me wrong, but real estate fundamentals still apply - homes selling at 7 times their anual rental value are considered priced well, 10 times are priced high but OK, over 10% they are a poor business choice. Another rule of thumb is to price a home at 90% of new construction cost. I am sure that you kow that in 90% of the country these numbers are out of whack and need to adjust. This could happen over night if sellers lower their prices across the board, or it could take 5 years. Regardless given the mess we have now, a year and half in the future (2010) is a good guess.
Perhaps more buyers would work with you if you stopped the sarcastic attitude.
Submitted by Mary Bargteil on April 14, 2008 - 2:31pm.
How utterly refreshing to hear a stellar wit at work with words. In addition to a sound, rational take on the topic, Alison Rogers delivers her opinion while demonstrating verbal acuity. I must sadly confess that I am a poor, uninformed ninnie and the home I bought in 2002 has more than doubled in price in the last five years. In the last year, the market value has come down, but less than 5% so my investment is still remarkably sound. As for Mr. Horman suggesting that your attitude is "sarcastic", I can only suppose he was taking the high ground when he referred to homeowners as "ninnies."
Mary Bargteil
Submitted by Bob Smith on April 14, 2008 - 5:21pm.
I'm not sure I understand the point of your column. I've owned one or more homes for all of my adult life and I purchased the home I currently live in in 1999. I would like to move up to a larger home (about twice a big as my current home) and I could afford to pay cash for the new home even without selling my current house even at today's prices. However, I live in Southern California and I believe that prices here will continue to decrease over the next few years until the ratio between median income and medium home prices are closer to historical norms. As a result, I plan to stay on-the-fence until I think a move up purchase makes sense. Not everyone who is reluctant to buy at current prices is against home ownership in general, it's just that we believe that prices will continue to decrease and therefore it doesn't make sense to buy now.
Submitted by Diana Gavin on April 14, 2008 - 11:28pm.
Oh Alison! Amen Sister! Anyone who can't see humor in this article obviously has not been out showing homes or you would know the frustration that Alison is talking about. Like me, I am sure that she holds her professional behaviour with clients, but you come to a point where you really wonder if people will ever have faith in the investment of real estate again or that they are just what Alison suggests. I work in the trenches daily and I hear from potential buyers or "professional career home shoppers" that they have decided to wait for another 50% off after we have seen anywhere from 10 to 20 in some cases 40 homes. Trust me.. you won't get the home for free! People are reading dated data, they are Zillowbots and the newspapers perpetuate negative housing/economic data over and over again. Any Realtor or Agent that wants to start their day right...check the MLS FOR PENDINGS AND SOLDS. IT WILL GIVE YOU A BIG SMILE...NEXT..SEND THE PENDING HOMES AND SOLDS FOR THE RECENT TWO MONTHS TO YOUR CAREER SHOPPERS OR I MEAN BUYERS! Then advise them that the home that they really wanted but thought that the price would come down another 10%,30% or 50% is pending to close escrow in less than 5, 10 or 30 days or it sold already. I had one buyer tell me "Well! The homes in pending won't close because the banks can't lend the money or the buyer won't qualify"...hmmmmmm ...you are right Alison..some are never buyers! It is all happening here in North County San Diego!
Submitted by Bob Smith on April 15, 2008 - 9:21am.
Interesting that the new strategy seems to be for Realtors to insult those who are in the market for a new home but have done their homework, believe that prices will continue to decrease and therefore have decided to wait for a year or two to see what happens. I personally am not wasting time looking at houses now and I'm capable of ignoring the barage of emails, NAR radio ads and flyers from agents trying to convince me what a great time it is to buy a house. Good thing I didn't listen to that advice two years ago when I would have paid 1.8M for a house I was interested in that just sold for 1.1M.
I guess one good thing to come out of this is that based on columns like this one, when I get serious about buying, there is no way I will consider using a traditional agent (it's ZipRealty or Redfin for me). Keep the insults coming and I'll probably rule out any possibility of using a traditional agent for listing my current house also. I also wouldn't be surprised if as time goes on, more and more buyers begin to realize that with the availability of information through the internet, there is very little reason to use a traditional agent to buy and sell a house and the service they provide doesn't come close to justifying the commission they earn on the transaction.
Submitted by Bob Smith on April 16, 2008 - 1:20pm.
"I had a ninny recently ranting on my blog saying that I was not to be trusted and that he was waiting because prices in our market were going to drop 25%. Then I happened to run across this ninny somewhere else ranting that prices were going to drop 40%. Of course none of it was backed by anything intelligent."
OK, here's something intelligent (at least in my opinion) that leads me to believe that prices will continuing to decrease
"Last month, the California Realtors' association (folks who in October managed to "project" that prices would fall 4 percent in 2008) reported that, actually, California house prices in February fell 26 percent from a year ago. In the places where the foreclosure boom has hit hardest, it's worse.
A quick, almost random survey of some foreclosure prices in Southern and Central California:
In San Bernardino, a house bought for $310,000 in 2005 is now being offered by the bank for $199,900.
A 2,000-square-foot ranch house in Rancho Santa Margarita is down from $775,000 to $565,000.
A starter home in Sacramento, sold for $215,000 in 2004, is now down to $129,900.
These are not sale prices. They are asking prices. Don't doubt that they are negotiable.
Unfortunately, when it comes to the California crash, these striking numbers are not the end. They are the beginning. (To give Paulson his due, he said that, too.) Which brings us to the other scary part of the California story: a coming wave of interest-rate resets in prime loans given to people with good credit that are just as bad, or worse, than we've seen in subprime."
link to article: http://www.slate.com/id/2188982/
Submitted by Michael Daly on April 17, 2008 - 4:59am.
I love you, Alison!!!
Somehow you're able to articulate the thoughts and feelings that I wish I could about this crazy business!!
Michael Daly
Re/Max Beach Properties
The Hamptons , North Fork and Shelter Island
Submitted by Noyb Noybnoyb on April 21, 2008 - 1:43pm.
I agree with Mr. Homan's comment: "perhaps more buyers would work with you if you stopped the sarcastic attitude".
No wonder you're still considered a "rookie".