Why would you possibly buy now when we’re staring the Alt-A recasts (not resets) square in the face, unemployment rates not seen since the time of the Depression and we need to see if the Chinese will stand for Obama’s financial “acumen” and Bernanke’s “buying down the long end of the curve” shenanigan’s. The recasts will flood the market with a serious number of higher priced foreclosures, unemployment will dry up demand and a bond market dislocation will drive rates sky high.

In the case of higher rates, this does not mean “buy now” in case they do go higher. It means wait because higher rates will drive home prices down even further.

As numerous other people have already stated, the market will not suddenly shoot back up to bubble prices. There is absolutely nothing to lose by waiting and everything to gain. Go find a nice place to rent. Seriously, does it matter if you rent a house from a landlord or “buy one” and rent it from the bank?

And somewhat off topic but as a former (and now reformed) Seattle-ite, I gotta say you people are just too nice. Here in So Cal we don’t put up with the realtor bull that they spew. Kary has 20 postings on this thread telling you why you have to buy now and that’s about 19 too many.

“How about rather than just calling it BS, try to say why Iâ��m wrong? In what market would you buy? Was it July 2007 when everything had been great for a long time. Was it anytime this century? Have you ever thought it was a good time to buy?

As Iâ��ve said before, owning any asset is always risky, but itâ��s better than the alternative.”

wow, how pressure sales tactics and really bad advice all in one! where do I sign up?

How is that either a pressure sales tactic or bad advice? I think this is just a situation where you don’t understand what I was saying.

Of all the people here, perhaps only Eleua (presumably) made a good decision not to buy for the right reason. He saw the potential for a systematic economic collapse. Many of the rest of you just look at a chart of what happened in the past and think that somehow tells you what will happen in the future. Anyone who is good at doing that would be rich from the stock market, and own a very expensive house that would be about 1% of their net worth.

As to the assets comment, name an asset that you can own without risk. There isn’t one. Even some bonds that adjust for inflation would be dependent on the entity that issued the bond.

“Anyway, it just shows how pointless it is to try to time the market,”
No it doesn’t, just beacuse you didn’t manage to time the market doesn’t make it pointless for others.

Rather than pointless I should have said impossible. Being impossible makes it pointless.

As I’ve said before, owning any asset is always risky, but it’s better than the alternative.”

wow, how pressure sales tactics and really bad advice all in one! where do I sign up?

it’s the tactic the real estate industrial complex has been using for 3 years now. it’s been disastrous financial advice that led millions astray.

Sorry, not even close.

The recourse is foreclosure. The PMI is a mechanism in between. it’s a scam, it’s all a scam, mortgages are a scam, that’s why we are were we are.

We pay $300K for a $150K property because the mortgage makes it possible.

If we were in a normal 4% appreciation without the depreciation we have today you would be at the 20% in five years and refinance.

That was the purpose. No one thought we would have 19 million empty houses. The worst case scenario argument is mortgage babble.

BTW, when I sold I didn’t re-buy, because I was living in the house my wife owned when we got married. When we sold that in very early 2008 we were just a bit too late getting it on the market, but our timing was based on the actions of a neighbor moving out, not the market overall. And the house we bought has fallen in price less from the peak than what that other house had, so even though we increased our exposure to real estate, we ended up better off than doing nothing.

Oh, and renting isn’t an option. I’m a control freak and would have a hard time living at the whims of a landlord, especially in these times where you hear of landlords being foreclosed. But I like to live places at least 10 years, and you don’t have that kind of control being a tenant (although it can happen).

Correct, since while you lived in the condo you only made paper gains but what you initilaly overpaid you lost.
When you sold you moved into another home which you had to pay the market increase for so no real gain unless you sold and waited for another deep downturn. Buying at the right time is the key.

Or perhaps during more normal times, people should liquidate their retirement accounts any time an investment drops below what they paid.

Our current house is probably down about 10% from when we bought, but that doesn’t bother me any more than what I’d be excited if it were up 10%. It’s pretty irrelevant.

By demo_kid @ 3:

The market has declined enough such that you’re not going to take a bath on this, and while the price may decline a little more as the market returns to fundamentals, you’re not likely to be underwater with the loan.

Based upon the Case-Shiller index, we are probably a third of the way down to the bottom. And who knows how far it will overshoot at the bottom. If you can afford it, like it, play to live in it for years and don’t care about losing money on paper, go ahead. But no one can say with certitude that you are not going to take a bath on this purchase.

This is one of the most scary misconception when it comes to home buying, that if your home looses value after your purchase it is somehow “paper losses”. It is not, it’s very real losses compared to if you would have waited and paid the lower price. The delta from what you paid and what you could have paid if you waited is very real losses that you will make every month you pay your mortgage.

Paper losses is if your home goes down in value but not below what you paid and you are not selling. It’s very different from if you buy a home now and the value goes down. Not only are you in risk of being underwater but you also overpaid and will do it for the duration you have the mortage. I doubt many readers here can fund anything they like to, if you like me belong to that group I don’t want to buy a home just because I can afford it if the value is likely to continue to decline. I rather wait and by lower and use the savings to fund other stuff like retirement, the kids college and hobbies.

RE: Kary L. Krismer @ 64 –

You’re confusing the process of owning a home with what is going on today. No one bought a home with the idea they would lose it.

The 80/20 was a response to the Mortgage Insurance scam. .

It’s that type of thinking that made the 80/20 so popular.

First, whenever you do anything you should think of the worst case scenario. People lose their jobs, get an illness, get into an accident, etc. There are a lot of things that can happen that can cause you to lose your house, beside just buying too expensive of a house. Why would you want that worst case scenario to be losing your house and owing $80,000 (20% of $400,000), when it could be simply losing your house?

Second, PMI is not a scam. That’s absurd. There is more risk to a loan over 80%, and the PMI accounts for that. An 80/20 is a different way of accounting for that risk, but PMI can eventually be dropped off in many situations. The interest rate you have with an 80/20 you’re paying until you refinance, sell or payoff the loan.

You’re confusing the process of owning a home with what is going on today. No one bought a home with the idea they would lose it.

The 80/20 was a response to the Mortgage Insurance scam. It became a 0 down tool, as it should be. Now people are losing a home and maybe the 20% will still be owed, otherwise, if they had a down payment, they lose the down payment and the house.

I think the 80/20 is more fair than giving the lender a wad of cash that may reflect the bulk of your savings. Come to think of it the bank ends up with your savings anyway, when you begin paying your mortgage with your savings.

I think the lender should be happy to make a loan secured by the value of the asset.

RE: Kary L. Krismer @ 56 -

Sorry, I don’t get it.

The 80/20 was to avoid mortgage insurance. 0 down has been available for a long time. Some lenders used to lend on the asset, they still did up until 2007.

Yes, but from the borrowers’ point of view it was a fool’s bet. We’re talking about the risk of owning assets here. Well with an 80/20 your risk is much higher because there’s a much greater chance that if something goes wrong in your life that you’ll not only lose the property, but you’ll still owe the money owed on the 20. With a single loan at least you’d only lose the property. The goal was to avoid PMI, and obtain a blended rate slightly lower than what you’d pay on a single loan, but in doing so you increased your risk incredibly.

Also it was sort of a fool’s bet from the lender side, because in a down market rather than lose maybe 10-30% of your money loaned, you’d likely lose 100%.

Kary this is what I call BS on “As I’ve said before, owning any asset is always risky, but it’s better than the alternative.” It is NOT better than the alternative all the time that simply is an incorrect statement.

Either you don’t understand, or you think that being totally broke or possibly insolvent is better than owning assets.

“In the end, the “real” value of a property is simply what someone is willing to pay for it, right?”

That’s the market price.

The value of an asset is its economic return to the owner if it’s not sold – in the case of a house, its net rental value.

“Price is what you pay, value is what you get” – Warren Buffett, after Ben Graham

Sorry, I don’t get it.

The 80/20 was to avoid mortgage insurance. 0 down has been available for a long time. Some lenders used to lend on the asset, they still did up until 2007.

It’s a formula that lenders used. In my case the CMAs would come in 20% higher than loan value. That’s the deal, take it or leave it. I very seldom put much money into a deal, there again I bought em to sell em. Now I’m out of business.

The formula went very, very wrong. I blame a flood of inexperienced agents and loan originators. The reason is painfully clear today. The paper had value. The Notes were bought sold and traded internationally. They were packaged and had derivatives.

Derivatives, I just love that term, I think it means there is a sucker born every minute.

But wait there’s more. As we are watching the housing market, which has a correction that needs to be made, there is an economic collapse all around us. There are millions of people out of work with no real skills, no money, big bills, and families.

We keep talking about the little people but what about the hedge funders, doctors, dentists, lawyers, accountants, and all the people who depend on the little people to pay thier bills.

Buying a house kid is a simple formula. You buy it, live in it, and do what ever you have to to make the payments. Make a deal, the best deal you can.

Never give money to a land lord. Land Lord, I love that term also, I think it means there is a sucker born every minute.

RE: bob @ 35 – I’ve stated before that I’m not really personally concerned with buying “at the bottom.” I’ll buy when the answers to those five questions in the post are all “yes” for me, bottom or not.

Ditto. People keep asking me when I’ll buy as if that is some sign that it is safe to go back into the water. But we might well buy before the bottom, with the following slightly modified rules:

* Do you like the home well enough to stay there for at least 10 years?
* Do you feel that the home is priced fairly relative to equivalent rent?
* Can you afford it using a conventional 15-year fixed-rate loan?
* Do you have a minimum 6-month emergency fund that is not part of your down payment?
* Would you be able to handle it both financially and emotionally if the value of your home dropped considerably after purchase?

The market has declined enough such that you’re not going to take a bath on this, and while the price may decline a little more as the market returns to fundamentals, you’re not likely to be underwater with the loan.

Based upon the Case-Shiller index, we are probably a third of the way down to the bottom. And who knows how far it will overshoot at the bottom. If you can afford it, like it, play to live in it for years and don’t care about losing money on paper, go ahead. But no one can say with certitude that you are not going to take a bath on this purchase.

When you use data as Case Shiller to determine the current direction of prices it’s no longer a guess. That’s the whole point.

Case Schiller is a useful tool and should continue to be, but laws, theories and rules only work until they don’t.
Robert Schiller is a human being, and as accurate as he’s been in the past, he and his index are not infallible.
I look at and value the Case-Schiller index, but even Robert Schiller is not God.
Using the Case-Schiller index is far better than just guessing, but despite what some people claim, it’s not the be all and end all for all times.

People started looking at mortgage payments and interest rates. That’s a suckers bet.

Yep. That’s what led to the 80/20 loan package. The solution to the question that was never asked.

Things like “Your approach seems to be a never ever buy real estate approach, because itâ��s always possible it will drop after you buy. ” is typcal agent BS to try to convince people to not be logical since then they will never buy. s.

How about rather than just calling it BS, try to say why I’m wrong? In what market would you buy? Was it July 2007 when everything had been great for a long time. Was it anytime this century? Have you ever thought it was a good time to buy?

As I’ve said before, owning any asset is always risky, but it’s better than the alternative.

Real Estate is a constant. You determine the value of Real Estate in Reality. The price of the dirt is a percentage of what you can build on it. There are zoning codes, environmental impacts to the zoning and lastly land use restrictions. Real Estate is the price of the dirt.

There may be a view or economic impacts, all that can be determined once you chose a neighborhood.

If you want fair market value you look at rents rather than sales. Sales used to be a good indicator that got smashed in the past five years. People started looking at mortgage payments and interest rates. That’s a suckers bet. Figure your interest at 6% to 10% then the mortgage payment. Let’s pick a number like 25% over fair rental value for a mortgage payment, factor in code, land use, environmental, and economic impact. You can play with the percentage over rental price for a fair payment on a mortgage.

There you go, you have a formula. Nobody but the buyer determines the price of Real Estate.

I heard on the radio today that the Florida market has a big upswing in home sales volume. An agent was interviewed and instead of stating the pleasant likelyhood that the price levels have now reached affordability for more people levels she started the fear tactics immediately and proclaimed that people are now starting to realize that these prices will not last! Redicolous.

Second, just when do you think you can buy real estate without that being a concern? Your approach seems to be a never ever buy real estate approach, because it’s always possible it will drop after you buy.

You may not have noticed this, but we are now in once in a century housing downturn, where housing prices are dropping like a stone nationwide.

It’s as if you woke up in the middle of the night, noticed signs that your house was on fire, and said, “Yeah, well, there’s always a chance that a house can catch fire, a person can’t live their life worrying about such things, I’m going back to sleep because a good night’s sleep is important to me”.

Real estate is almost always a reasonable investment. This is one of the rare times when it is not. That smoke coming under the door and the crackling sounds of flames are not your imagination.

By Ira sacharoff @ 48:

RE: Kary L. Krismer @ 45 –

Kary has a good point. There are lots of reasons to buy a house, and it doesn’t always or shouldn’t have to do with whether it’s a good investment financially. Some people just want to own a home, it makes them feel secure, they’re not at the whim of a landlord, and don’t feel whole or complete without owning a home. I’m not going to judge whether it’s a valid feeling or not, you feel the way you feel.
If it’s going to increase your level of happiness to buy a home, then you should do that.
People here know that I expect home prices locally to continue falling, and that waiting to buy is likely to be beneficial from a financial standpoint.
But if you want to buy a house, and you can afford to make the payments, and it’ll increase your level of happiness, go for it!

That sounds great, but how many people’s level of happiness will be increased when they’ve bought a home and, 2 years later, realize it has gone down in value by $75,000 and now they couldn’t sell it if they wanted to because they have no equity and couldn’t pay the realtor fees and taxes?

Buying a house in this rapidly dropping market is one of the dumbest financial mistakes one could make, unless one is planning on living there for 20 or 30 years.

And, as people keep saying, knowing when the market has hit bottom will be easy. When a couple years have gone by and prices have stayed the same, you’ll know we’ve hit bottom.

Well first, I went through that in the early 80s (although the magnitude was less than 75k) and it didn’t affect my level of happiness.

Second, just when do you think you can buy real estate without that being a concern? Your approach seems to be a never ever buy real estate approach, because it’s always possible it will drop after you buy.

RE: Kary L. Krismer @ 45 –

Kary has a good point. There are lots of reasons to buy a house, and it doesn’t always or shouldn’t have to do with whether it’s a good investment financially. Some people just want to own a home, it makes them feel secure, they’re not at the whim of a landlord, and don’t feel whole or complete without owning a home. I’m not going to judge whether it’s a valid feeling or not, you feel the way you feel.
If it’s going to increase your level of happiness to buy a home, then you should do that.
People here know that I expect home prices locally to continue falling, and that waiting to buy is likely to be beneficial from a financial standpoint.
But if you want to buy a house, and you can afford to make the payments, and it’ll increase your level of happiness, go for it!

That sounds great, but how many people’s level of happiness will be increased when they’ve bought a home and, 2 years later, realize it has gone down in value by $75,000 and now they couldn’t sell it if they wanted to because they have no equity and couldn’t pay the realtor fees and taxes?

Buying a house in this rapidly dropping market is one of the dumbest financial mistakes one could make, unless one is planning on living there for 20 or 30 years.

And, as people keep saying, knowing when the market has hit bottom will be easy. When a couple years have gone by and prices have stayed the same, you’ll know we’ve hit bottom. People have this fantasy that somehow they’ll miss the bottom, and that prices will suddenly begin surging up by 10% a year again. That’s simply not the way real estate markets work. This isn’t the stock market, there is no chance that you’ll somehow suddenly miss out on huge price increases.

When you use data as Case Shiller to determine the current direction of prices it’s no longer a guess. That’s the whole point.

It’s no longer a guess because it’s history. Right now the latest C-S numbers are from December. Those are for sales that were entered into largely in October and November! So right now Case-Shiller is telling us what the market was like five months ago. If Case-Shiller was our only news source, we might still not know that Obama won (or hell, he might not have won because no one would have known about McCain’s the economy is sound comment by the time of the election).

Using NWMLS sources, we know that March and April will probably be over 10% below what December was–the last month that C-S has information on. Or just using the published data for February, we know that the median was off 7% from December. That’s pretty significant, and something Case-Shiller cannot tell you.

BTW, NWMLS numbers are not guaranteed, but believed accurate–standard disclaimer.

Kary has a good point. There are lots of reasons to buy a house, and it doesn’t always or shouldn’t have to do with whether it’s a good investment financially. Some people just want to own a home, it makes them feel secure, they’re not at the whim of a landlord, and don’t feel whole or complete without owning a home. I’m not going to judge whether it’s a valid feeling or not, you feel the way you feel.
If it’s going to increase your level of happiness to buy a home, then you should do that.
People here know that I expect home prices locally to continue falling, and that waiting to buy is likely to be beneficial from a financial standpoint.
But if you want to buy a house, and you can afford to make the payments, and it’ll increase your level of happiness, go for it!

“Out of date”? Relative to what? When we do hit bottom, it’s going to be flat for a long time — at *least* a year. So even if it is out of date, who cares? You’ll only lose a couple of percent, max, by missing the bottom because you were waiting for Case-Shiller. Better that than listening to Kary, and buying now, and losing 15% – 20% as Case-Shiller continues dropping like a lead balloon.

First, the out of date comment is more in context of those who are looking for maybe a six month trend, which isn’t something I agree with anyway. But if you’re looking for six months when the data is 4.5 months out of date, that’s not a good thing.

Second, where have I said to buy now? My approach is a little bit similar to Tim’s, although not as spelled out. I say you should buy if and when you want to, based primarily on other factors (job, family, etc.), not concern over guessing something no one can guess. That’s just plain stupid, IMHO. There are a lot of reasons to buy, and a lot of reasons not to buy. I just don’t think guessing the market is one of them.

If you can’t wait for 2 months for Case Shiller you are bound to make a mistake. Being 2 months off the bottom will make little or no difference in price. Be patient and use the most reliable measure even if it’s 2 months delayed.

Amen, patient, amen. That’s what I’m saying: Case-Shiller is the closest thing we have to an objective, trustworthy metric about what actual prices are doing. So USE IT!

“Out of date”? Relative to what? When we do hit bottom, it’s going to be flat for a long time — at *least* a year. So even if it is out of date, who cares? You’ll only lose a couple of percent, max, by missing the bottom because you were waiting for Case-Shiller. Better that than listening to Kary, and buying now, and losing 15% – 20% as Case-Shiller continues dropping like a lead balloon.

By Rob Jellinghaus @ 33:

Personally, I can’t see why anyone would buy anything in Seattle this year if they didn’t absolutely have to for some strange reason.

I mean, just look at this graph:

http://seattlebubble.com/blog/wp-content/uploads/2009/02/case-shiller_seatiers-yoy_2008-12.png!

So in your world it was better to buy back when it had been heading up? That it’s heading down is a good thing for buyers. Trying to hit the bottom would involve pure luck, especially if you’re looking at C-S data which constantly out of date.

If you are so impatient and view buying homes as a day trading actviity you expose yourself to very big risks. If you can’t wait for 2 months for Case Shiller you are bound to make a mistake. Being 2 months off the bottom will make little or no difference in price. Be patient and use the most reliable measure even if it’s 2 months delayed.

Bob and Ira

Bob, I do NOT believe he will use 500 Realty, Findwell, or Red Fin. We do run a sweat shop here and I’m happy one of the Agents you spoke to answered your questions. Our next show is The Seattle Home Show again. I’m not sure on the dates(most likely summer- they call all the time wanting our money for the next show).

Ira the bet is on. I say Tim Buys (and closes!) by March 24, 2010. If he does you treat me for a lunch at Claim Jumper South Center. My favorite restaurant! If I lose I treat you!

Mark your calendar!

(hmmmmmmm.. God, —–Can some Mtg Rep here get a Pre-Approval on him for me.) I may have made a bad bet. Just like WASH knocking off Purdue. Danggggggggggg.

Tim will buy soon (within 1 year)……..Hes chompin at the bit looking for GEMS…..He will find one……….I look forward to see if he utilizes an Agent, an Atty, or himself. If he chooses an Agent I can’t wait to see who he picks.

Maybe Ira, Losh, 500, Red Fin, Findwell??……….I can’t wait to see who , why, and how it went down. He will LOVE the short sale process.

Have prices stabalized anywhere yet? CA, NV, and FL have HUGE price declines and it appears volume is picking up in those areas. But from the limited data I’ve seen, prices are still falling. I would imagine those areas have to be getting close to the bottom now.

I think a decent, sustained year over year increase in non-distressed sales volume might be a good precursor to the bottom. At least double where we are today.

Personally, I can’t see why anyone would buy anything in Seattle this year if they didn’t absolutely have to for some strange reason.

I mean, just look at this graph:

http://seattlebubble.com/blog/wp-content/uploads/2009/02/case-shiller_seatiers-yoy_2008-12.png!

So in your world it was better to buy back when it had been heading up? That it’s heading down is a good thing for buyers. Trying to hit the bottom would involve pure luck, especially if you’re looking at C-S data which constantly out of date.

I mean, just look at this graph:

http://seattlebubble.com/blog/wp-content/uploads/2009/02/case-shiller_seatiers-yoy_2008-12.png

My wife and I are renting in Kirkland right now, sitting on $100K cash down payment, and we’re not going to buy until that curve climbs back up to -5% or so (and trending upwards towards 0%). But buying right now? When the YOY trend is almost -15%? WHY?????

Everyone wants to know when the bottom is. THE BOTTOM IS WHEN CASE-SHILLER’S YEAR-OVER-YEAR INDEX STOPS BEING NEGATIVE AND RETURNS TO ZERO! I mean, isn’t that the frickin’ definition??? Even if that were a false bottom, it’d be a hell of a lot more bottomful than this -12% YOY regime we’re in now!

I’d also recommend reading the following:
http://www.geldpress.com/2009/02/requirements-for-buying-a-house-dont-lose-money/

Tim’s 5-point checklist is great advice for everyone. If more homeowners followed this advice, the country would be in far less of a mess. As they say, common sense is becoming less common these days.

But what I’m saying is the current pendings are showing a significant drop in price for March through maybe April. The problem is that indicator can sometimes be misleading because some of those are short sales that may take a while to close, or some may flip entirely and never close. During 2008 the median pendings were below median closed (SFR) 8 times, and the price the following month went down 6 times. It was higher 4 times, and went up 3 times.

The median pending for February was $359,950, compared to $375,000 for median closed. I believe the median pendings for March will be below February’s median pendings. So, using pendings as a leading indicator, as this is written, the properties that are selling seem to have much lower medians than what February’s median closed figures would show. So buyers are operating in a better market than what they know, and sellers a worse market.

BTW, I think the dispute over MWMLS and C-S figures is largely a false debate. They both peaked in the same month, and in December they were both about 17% off the peak. Yes there gets to be a spread from time to time, but they do largely give us the same information. It’s just that C-S isn’t as timely, and covers a larger area.