Time for the monthly reporting roundup, where I read all the local paper rehashes of the NWMLS press release so you don’t have to.
First up, an excerpt from the NWMLS press release itself: Northwest MLS brokers agree "there’s a lot to be optimistic about"
“There’s a lot to be optimistic about,” according to one director of the Northwest Multiple Listing Service upon reviewing summary statistics for September’s housing activity. The report shows a big jump in pending sales compared to a year ago (up almost 27 percent), continued drops in inventory (down 17.7 percent versus a year ago) and brisk demand for homes at the lower end of the price spectrum.
…
Joe Spencer, president and COO of John L. Scott Real Estate, estimates up to 10 percent of pending sales do not close because they’re caught in the short sale cycle. Still, he comments, “There is a lot to be optimistic about.” He cites interest rates that are now in the high four percents as bordering “on being epic” and the federal tax credit as stimulants to the market.
…
Activity at open houses is reported to be brisk in many areas…
Sweet! The return of the ever-popular “open house traffic” metric of market health. I love it. Also classic is the heavy focus on the pending sales stat, which has been rendered practically meaningless in the past year. FYI, that 10% estimate is way too low. I’d put it around 20-25%.
Anyway, click below to read the rest of this month’s reporting roundup, in which the incredible surge and uplifting rally is detailed by the enthusiastic local press corps.
Eric Pryne, Seattle Times: King County home sales surge in September, but prices continue to fall year-over-year
Matt and Priscilla Karwoski bought their first house last month: a new, three-bedroom town house in West Seattle. One factor: the $8,000 tax credit the federal government approved for first-time buyers this year.
…
The $8,000 credit has helped fuel a surge in home sales, nationally and locally. Closed sales of single-family homes in King County were up 14.3 percent in September from the same month last year, the Northwest Multiple Listing Service reported Monday.It was the fourth consecutive month of year-over-year gains.
But the tax credit is scheduled to expire Nov. 30. After that, some observers say, home sales could drop again, just as auto sales plummeted after the federal “cash-for-clunkers” program ran its course.
…
As for the $8,000 tax credit, it wasn’t the decisive factor, he [Matt Karwoski] added — but it was a factor.
Eric quoted a few thoughts from me on the current state of the market in today’s article. If you’re interested I have posted the full text of my comments to Eric. It is interesting to note that the buyer profiled in today’s article admits that $8,000 tax giveaway was not “the decisive factor.” Here’s another potential buyer in the comments on the Times’ site:
The $8,000 tax credit is one of the big reasons I’m trying to buy a home before November 30. … Without the tax credit I’d be willing to watch things for another year decline.
…
I even had some friends who bought a house a month before his wedding because of the tax credit. The bride already had a condo, but the groom bought a house, got the $8,000 and they have the condo rented out on a 2 year lease.
Another example of today’s $8,000 tax credit-inspired buyers being either borrowed demand or purchases that would have happened anyway. What a complete waste of a program.
John Stang, Seattle P-I: King County home sales surge, but pitfalls remain
Seattle-area house sales continued to show signs of life in September. But the magic economic window to encourage homes sales is closing.
…
Coldwell Banker Bain Managing Vice President Ron Sparks crowed about the report in the listing service news release.“Our market has certainly come a long way since this time last year,” Sparks said. “For all the challenges that remain, it would be difficult to not appreciate the reemerging market vitality that continues to build even as the summer buying season closes.”
Crellin said it remains to be seen whether all of the currently pending sales will translate into closed sales. He said the turnaround time for short sales — in which a banks agrees to accept less than its owed as part of a sale to avoid the costs of foreclosure — has jumped from 4.5 weeks a year ago to 9.5 weeks today, according to Campbell Communications of Washington, D.C.
Short sales also have helped keep down prices, Dick Beeson, a director of the Northwest Multiple Listing Service, in the news release.
“Because there are so many short sales and bank owned property sales, it was inevitable that prices would fall slightly,” he said.
I can’t help but feel that Crellin’s being pretty disengenuous here. We’re not just looking at a time delay. We’re looking at a large number of completely failed pending sales. As of September there are now 4,887 “orphaned” single-family pending sales in King County for 2009. There is absolutely no way that those are all going to eventually translate into closed sales. I’ll be surprised if even half of them do.
Mike Benbow, Everett Herald: Prices down, but home sales up 9 percent in county
Snohomish County home sales rose for the fourth straight month in August, aided by falling prices and a rush by first-time buyers to beat the deadline for an $8,000 tax break.
There were 755 homes sold in the county last month, a 9.1 percent increase from a year ago, The Northwest Multiple Listing Service reported today.
…
The tax break was also a big issue, said Bob Maple, an Everett broker for John L. Scott Real Estate.
…
The tax credit, that’s what’s driving sales,” Maple said. “Nearly all of our business has been from first-time buyers.”
…first-time buyers that probably would have bought in 2010 or 2011, had a free money giveaway not pulled them into the market before they were otherwise prepared to take the leap.
C.R. Roberts, Tacoma News Tribune: Real estate rallies, agents say
We’ve already hit the bottom and we are no longer there.
So say real estate professionals who have reviewed the latest numbers, out Monday, from the Northwest Multiple Listing Service.
“It appears that we’ve seen the bottom, and we’re starting to climb out,” said Bill Riley, an owner of GMAC Real Estate in Puyallup and president-elect of Washington Realtors.
“People now know they can buy a house and it will be worth more down the road,” he said Monday. “I wasn’t sure last month, but we are definitely in an upswing. There’s a possibility we can see the price of homes increase in 2009.”
…
According to Dick Beeson, a Windermere broker and a director of Northwest MLS, the latest numbers reflect “a lot of pent-up demand. A lot more people are realizing closed sales.”The demand for homes, he said Monday, “is there. It’s just getting the darn things to the point where they’re actually closing – and that’s starting to happen. I think it’s pretty close to a trend. More people are getting into the market and off the fence.”
Nice. Another explicit bottom call for the scrapbook.
Rolf Boone, The Olympian: Home sales start Rally, agents say
Pending home sales in Thurston County rose more than 11 percent in September, a sign that first-time homebuyers rushed to take advantage of an $8,000 tax incentive program before it expires next month, South Sound real estate agents said Monday.
…
Windermere Olympia real estate agent Gregory Moe agreed that the tax incentive program has boosted pending sales. Moe said he recently worked with a buyer who wanted to buy specifically to take advantage of the program.
…
Although the housing market is improving, the lack of local employment is holding the market back, he said.
Huh, so people without jobs can’t buy houses? Go figure.
(Eric Pryne, Seattle Times, 10.05.2009)
(Eric Pryne, Seattle Times, 10.06.2009)
(John Stang, Seattle P-I, 10.05.2009)
(Mike Benbow, Everett Herald, 10.06.2009)
(C.R. Roberts, Tacoma News Tribune, 10.06.2009)
(Rolf Boone, Olympian, 10.06.2009)
Kary L. Krismer » Oct 6, 2009 at 12:55 pm
I wouldn’t be surprised if short sale pendings are below 50% in closing.
For SFR King County, there are over 1100 in some stage of pending, and less than 120 closed in September.
For Condo King County over 230 in some stage of pending, and less than 20 closed in September.
Numbers from NWMLS sources but not compiled or guaranteed by the NWMLS.
Scott Weitz » Oct 6, 2009 at 1:39 pm
Here’s the flip side.
As a home-owner to be (someday), I have been watching the foreclosure auctions on a weekly basis. The number of high end (over 750k) homes in the foreclosure process is starting to be eye-opening. Unfortunately, i don’t have stats, but in my opinion, its an obvious sign that the high end will be headed further south in the near future.
softwarengineer » Oct 6, 2009 at 2:22 pm
RE: Scott Weitz @ 2 –
Not to Worry Scott
If the dollar can tank today with subsequent higher commodity prices and gold going up too; coupled with chronic high unemployment/underemployment signalling the bottom of the re(de?)pression/cession….yet the stock market flourishes…..why, I wouldn’t worry about foreclosures at all anymore….we’re clearly on the road to recovery….LOL
Back to basic » Oct 6, 2009 at 3:29 pm
It’s a good time for current home owner sell and move up. The 8k credit will probably be extended after dec 1st so 1st time buyer could move in. I see there are so many side liners waiting for the bottom price (or simply can not afford the bubble price). The economy is still at the U-shape recovery bottom. People are still losing jobs. Interest is low. Shadow inventory is too high. Home owner are still holding asking price firm. Houses priced to sell are moving fast. Bubble headers are still hoping price down further. Home owners still have their job with Obama 2nd stimulate package coming. Current owner can still refinance their house at 3.875~4% 5yearArm.Savers watch their saving worthless by lending to the bank. A 4000000 USD house interest+tax costs about 1667USD which is close to rent. 5 Years from now, the world comes out of recession. The inflation is 6~7% a year. Interest is infaltion+GDP for about 8%. Housing price back to bubble price. Your wage still lag behind inflation cause your jobs can be done by Indians for 1/3 the cost. People are working overtime w/o pay to compete with other countries. People here are still complain the high price and high inflation. Rent is up cause mass immigration from South seeking for American job push the apt vacancy lower. Some people here bought good deal and locking a one in a lifetime rate. Some people here will be a lifetime renter are most people in other countty. Some people regret did catch a good deal during low tide and start a new web SeattleRentBubble.com. The economical cycle will go over and over again.
Sam DeBord, SeattleHome.com » Oct 6, 2009 at 3:47 pm
The numbers could definitely be worse. I don’t think it’s irrational to feel good that the market seems stable right now. That doesn’t mean we’ve bottomed, just that we’re not in the free-fall of last winter. Short Sales are clearly closing at very low percentages, but I still don’t see them as a huge factor in the Greater Seattle market –yet.
Is there a list of bottom-callers here? Maybe a timeline with names associated with the dates they called it? Agents would be much better off giving their clients the current state of the market and that’s it.
Scott, did you see my post about luxury foreclosures in Seattle? You’re right on, the bank-owned homes over $1 million are rising, and there are many more to come.
Ray Pepper » Oct 6, 2009 at 4:11 pm
No where near a bottom!
Short sales and Foreclosures will trend higher and higher but don’t count the FED out !
These homes are all coming back my friends. People are not stupid and they will NOT continue to pay on their upside down homes! Its just a matter of time and in the end it will be a short sale/foreclosure!
Patience Buyers! Find your GEM!
But, for the sake of Dick Beeson I offer this………..
http://www.youtube.com/watch?v=WpqPVJFzKdc&feature=related
Jonness » Oct 6, 2009 at 8:17 pm
“Pending home sales in Thurston County rose more than 11 percent in September”
And pigs fly.
Example 1 of a common NAR representative’s tactic: The claim that you missed out on a huge money making opportunity by not buying near the beginning of the bubble and selling at the peak.
This is a pitch meant to ramp up your greed and get you to separate with money you otherwise would never spend. The truth is, the typical person who bought in 2005 is currently near or under water (especially if he has to pay the NAR another 6% to sell the house). IOW, the representative failed to mention enormous risks accompany speculating on highly leveraged assets. Instead, they simply pointed out the single most profitable example they can think of to trick you into thinking you missed out. This takes your mind off the fact that market fundamentals could currently weigh heavily against you. Suddenly, your greed kicks in, and you lose touch with the fact you are about to gamble, in a highly leveraged manner, that the market is heading toward a V-shaped recovery.
Hey, you could have missed out on a million dollars buy not pulling the lever of a Casino machine you walked by once. But intelligent investing requires probability theory, and the probability of winning big in Vegas is horrible compared to the probability of losing $1 or more. When you are considering making the single biggest investment of your entire life in a highly leveraged manner, pay attention to probable outcomes.
Example 2: The claim that it’s impossible to know whether house prices will go up or down in the future.
Is there a single RE agent in the entire state of WA that actually believes the median price will not be lower this coming January than it is now? We’ve all seen the charts with data displaying the winter price decline pattern and the typical spring bounce. Yet, I often see it claimed that, “charts and data are worthless when it comes to predicting the future of house prices.” These NAR mouthpieces have effectively debunked their own claim using proof by counter-example…spring bounce.
The truth is, the probability that house prices will decrease from now to January is WAY higher than the probability they will increase or stay flat. There is no guarantee this will be the case. Yet, intelligent investing requires consistently betting when the odds are in your favor. Why would you desire to place a highly leveraged bet when the odds are against you?
Example 3: The claim that houses are not investments; they are a place to live.
If the tactics in example 1 and 2 don’t cause the buyer to leverage against his future, this is a great way to get the buyer to stop thinking about the money aspect of houses and instead buy purely for impulsive and emotional reasons. Yet, my impulse-driven neighbor, who purchased a home that’s worth several hundred thousand dollars less than he bought it for, has found out the hard way that a home is, at least in part, an investment.
The classic counter-argument is, it won’t matter in 20 years because you’ll have made money by then. Well, by that time, my neighbor will have long been evicted. Please remain very careful when you encounter this classic sales pitch. The argument fails to account for being trapped in a home for 20 years when the typical person needs to move every 7-10 years. It also fails to account for the psychological discomfort present when paying for something worth WAY less than what you owe on it. It also fails to account for the massive risks involved in buying highly leveraged assets in highly volatile markets. It also fails to account for the money you could have made had you bought a house in a market where fundamental indicators had not ran to enormously risky levels. It also fails to account for the potential to be forced into bankruptcy due to over-leveraging yourself in a market where home prices are far greater than what is considered historically normal.
Remember probability theory? When you are hit with the BS above and its cousins, think about what is the most probable outcome. If you can’t figure it out, I recommend staying out of the market while saving as much money as possible toward a down payment. Eventually the volatility will decrease, and picture will become clearer. For instance, I first started looking at purchasing a home in late 2005. However, I judged the market was out of line with historic fundamentals. I’ve waited 4 years and have yet to buy. Prices went way up, have come down to where they were, are heading lower, and I’ve saved a sizable downpayment I didn’t have when I first began looking. In fact, instead of looking for a starter home close to where I work, I’m now looking for a waterfront home on Puget Sound close to where I work. That’s the difference bypassing the NAR hype can result in. I recommend paying attention to charts and data and avoiding the NAR consensus.
IMO, the NAR has a conflict of interest with the buyers it represents, just as politicians have a conflict of interest with the people they represent. In order to figure out what’s what, I recommend always tracing the flow of money and asking yourself who profits when you make a decision to vote or buy and whether this has influence the entity or person’s behavior who is representing you.
Don’t get me wrong. I feel many good RE agents are presently working in the field and will represent you in an honest and professional manner that provides you equal value for the money you spend. My point is that you must choose extremely wisely to ensure the agent has your best interests in mind.
The former is my personal opinion and in no way is affiliated with or represents the viewpoints of seattlebubble.com.
Scotsman » Oct 6, 2009 at 8:35 pm
I think we need to moderate the “open house traffic” metric with an adjustment factor that covers the quality/quantity of free food being offered, the number of currently starving realtors, and the weather. As it stands, this well worn measure of economic activity is far too subjective.
Jonness » Oct 6, 2009 at 8:40 pm
Another common claim is, “You better buy now. If you wait, the money you save buying a cheaper house later will be ate up by higher interest rates.”
This claim is 100% unfounded. It has been used numerous times in the media since the bubble popped, and many friends and acquaintances have attempted to influence my purchase decisions with it. Yet, interest rates remain near historic lows–despite the fact I’ve been holding off buying for 4 years!
The one liners never cease to amaze me. Here’s one I actually think works though: Never buy a house you cannot afford.
Scotsman » Oct 6, 2009 at 8:42 pm
RE: Back to basic @ 4 –
“Your wage still lag behind inflation cause your jobs can be done by Indians for 1/3 the cost. ”
If that’s indeed the case, I think your wages aren’t just lagging, they’re gone, along with your job!
“Rent is up cause mass immigration from South seeking for American job push the apt vacancy lower.”
Ummm, no- rents are falling and VACANCIES are up. Not just in Seattle, but across the country.
Buy now or be priced out forever!… has become: Buy now, and lose your down payment! Don’t be stupid.
Jillayne » Oct 6, 2009 at 8:54 pm
Hi Jonness,
A lot of home buyers make the decision to buy purely on emotion and only later do they search for logical reasons to support their emotional decision.
A salesperson by nature is not going to help the home buyer search for logical reasons not to buy. I wouldn’t expect the average random real estate agent to do this.
Further, if we were to do an unscientific survey of homebuyer, I would hypothesize that most home buyers chose their real estate agent also based on emotion and not logic.
And yes, there are always real estate agents and home buyers at the other end of the bell curve.
Scotsman » Oct 6, 2009 at 8:58 pm
RE: Jonness @ 7 –
Nice. Very nice. Way too logical though! ;-)
Ira Sacharoff » Oct 6, 2009 at 9:06 pm
“Is there a single RE agent in the entire state of WA that actually believes the median price will not be lower this coming January than it is now?”
I’ve met a few who claim that we’ve hit bottom.Either they’ve drunk the Kool-Aid or are lying or just have an absurd sense of optimism. Real Estate agents aren’t always the sharpest knives in the drawer . Another common argument is something like ” The median in January might be a tiny bit lower, but the selection may be far fewer, so isn’t it worth it to pay a tiny bit more now for the house you really want?”
AMS » Oct 6, 2009 at 9:07 pm
RE: Jillayne @ 11 – During the run-up of the market, the market was irrational. If you were a rational buyer, you were out.
Driven to firmly over 200 to 1, the whole ratio of purchase price to rent amount is way out of whack. I could never be attracted to buy a home with such cheap rent.
An overly emotional buyer will ignore rational metrics.
Hector » Oct 6, 2009 at 9:39 pm
I appreciate it when the papers go to someone like Tim for his POV, but then they go right back to John L. Scott and NAR folks, roll with what ever they say, and publish it like it’s gospel instead of taking 5 minutes to do some research to validate what was said. Way to help your readers folks. It’s like asking a travel agent if you should fly or drive….
Ira Sacharoff » Oct 6, 2009 at 9:54 pm
RE: Hector @ 15 –
Or like going into a candy store and asking if a low carb diet is healthy.
S-Crow » Oct 6, 2009 at 10:03 pm
Do not underestimate the potential for sub 5% fixed rates to juice the market. There is plenty of room to argue for higher rates to pressure home prices down along with all the REO and other distressed inventory to work through, but the more home sales take root, the more building blocks and ammo for appraisals to find stability in housing prices.
buystocks » Oct 6, 2009 at 10:16 pm
RE: Ira Sacharoff @ 16 –
Then they’ll just smile and offer you sugarless candy (3.5% down FHA)
AMS » Oct 6, 2009 at 10:22 pm
RE: S-Crow @ 17 – This low interest rate driven market needs more than sub 5% fixed rates to juice it back up. How about subzero fixed rates? I hear the market as I am walking by all the homes for sale, “Could you spare a quarter. If I could only get another hit of low interest rates, then everything would be just fine forever.”
what goes up must come down » Oct 6, 2009 at 10:27 pm
RE: Back to basic @ 4 – Why would any person with half a brain get an ARM right now — give me a break.
David Losh » Oct 6, 2009 at 11:16 pm
I think the article in today’s paper is very acurate. People have bought into this $8K tax credit in a big way.
For me the numbers add up like this: we had a 14% run up in prices in 2005 to 2006 and 17% in 2006 to 2007. That’s 31% and we are only down 22%. That leaves roughly a 9% decline before we hit the often talked about 2005 pricing that is the bottom call of a lot of agents.
9% of $300K is $27K. Help me out here $27K minus $8K is $19K, so why are people in such a hurry to keep prices propped up for that $8K? If the $8K weren’t there wouldn’t more people be paying less? Lastly what happens when the $8K goes away, which it has to at some time?
Markor » Oct 6, 2009 at 11:25 pm
RE: Jonness @ 7 –
Good post.
David Losh » Oct 6, 2009 at 11:30 pm
RE: Jonness @ 9 –
The interest rate argument has bothered me for over ten years. Of course i started in the business when properties, in theory, could be bought with cash. $50K or even $120K were price points that were high, but if you bought and paid down the principle you could amortize quickly, like seven to fifteen years.
Now we buy down points so we can get an affordable mortgage payment. Many loans have refinanced a half dozen times to get into better rates. Well refinancing your way to a better payment is about done along with equity skimming.
It seems to me that the mortgage business may be pretty grim in the near future. Less loans, fewer loan products, loans are on risky declining priced assets, and why wouldn’t we be headed to more managable cash based pricing for Real Estate?
If you can save 20% and prices decline 10% your dollars will be going further.
Markor » Oct 7, 2009 at 12:06 am
By Ira Sacharoff @ 13:
This is a concern of mine. I see that buyers in the L.A. area are making offers on multiple houses concurrently, due to underpricing by sellers (esp. banks) that result in bidding wars. I think it’s temporary though, with prices to stabilize lower.
AMS » Oct 7, 2009 at 3:48 am
RE: David Losh @ 23 – “Now we buy down points so we can get an affordable mortgage payment.”
What’s the Net Present Value of paying points?
David Losh » Oct 7, 2009 at 6:59 am
RE: AMS @ 25 –
What’s the difference on a 30 year Note?
Kary L. Krismer » Oct 7, 2009 at 7:20 am
RE: Jonness @ 7 – Wow, it’s a wonder that you ever do anything.
As to your example 2, that numbers are seasonal doesn’t mean you can predict the future. Numbers are seasonal for a few reasons, including the fact that few people want to buy and move in the dead of winter. If you want to, then yes you can pick up a better price, because there’s less demand at that point in time. You could also only buy new cars at the end of each model year and save a few bucks too. That doesn’t mean you can predict the price of cars next year based on that phenomenon.
But beyond that, your example is yet another example of people here simply applying generalities and not understanding specifics because they are not in the business. A few years ago I had a client that wanted to sell in the dead of winter, but who contacted me in late spring. My initial reaction was to tell them that probably wasn’t the best idea, but before doing that I actually did some research into their area. In their particular area I wasn’t able to find a seasonal pattern in the prior two years, and we in fact didn’t have a problem selling their house by putting it on the market in early January. So the point is, a buyer in that particular area can’t count on prices being lower in January.
Oh, btw, no one pays 6% to NAR. You should go to work for 60 Minutes or 48 Hours. They have your same sense of accuracy and credibility.
Kary L. Krismer » Oct 7, 2009 at 7:22 am
RE: Jonness @ 9 – That’s almost as tiring as hearing someone say prices will drop because interest rates went up 3/8th last week, and that’s the start of a huge rise in rates.
Kary L. Krismer » Oct 7, 2009 at 7:30 am
By what goes up must come down @ 20:
I’ve been saying that for years and years. They certainly saved a lot of people a lot of money, but at quite a risk. That risk eventually bit a lot of people in the butt. I like sleeping at night too much.
Kary L. Krismer » Oct 7, 2009 at 7:33 am
By AMS @ 25:
You can calculate the break even point, but it does require sticking with a mortgage for years. It’s been some time since I did the calculation, but I think it can sometimes exceed 5 years.
Ray Pepper » Oct 7, 2009 at 8:36 am
RE: Kary L. Krismer @ 29 –
Many holders of the option arms (Pick a Pay) tied to the COSI taken out 2-4 years ago on 40 year amort are now at or under 4.5%.
I currently hold three with WA MU(Chase) that are at 4.20% –1.05 index and 3.15 margin. An outstanding ARM!
I’m a HUGE fan of the option arms for cash flow.
Ahhh remnants of the old days of World Savings and Wa Mu will remain for a little while longer until we all get the FREE offer to fix the rates on these at about 5%!
Lord knows they won’t reappraise all these homes. They don’t want the consumer to know the mess they are in.
AMS » Oct 7, 2009 at 8:40 am
By David Losh @ 26:
Only the initial cost of the points if a refinancing comes sooner rather than later.
I know a guy who paid points, and then refinanced 6 months later. I hope it is clear that the Net Present Value was negative, and thus he wasted money buying down the interest rate. He would have been better off paying the very little extra given so few payments.
On the other hand, if you actually keep the note for 360 months (who does that?), then buying down the interest rate usually has a positive Net Present Value (NPV).
Back to basic » Oct 7, 2009 at 8:42 am
The ARM low rate surely is a major factor to help lower your housing cost. Consider this:1) Average American move average 5 years, 3) Your 1st few years monthly payment has majority percentage interest 3) ARM cut your interest from 5% to 4%is like a housing price reduction 20% out of 22% off peak price 4) Obama 8k credit only requires you to stay for 3 years 5) Recession is over 5 years from now 6) High inflation push up hard asset price high (high lumber cost, labor cost. Many factors here I mentioned link to stable housing price. There are two factors that may be negative: 1) Jobs 2) bank and home owner dump inventory too quick to change the equation of demand and supply. But like I said, buy when people in fear, sell when people are in high.
AMS » Oct 7, 2009 at 8:45 am
RE: Kary L. Krismer @ 30 – The break-even point on a discounted basis (we must pay in present dollars for a benefit in the future) can be computed in time, and then one can think in terms of expected duration of the note. If the duration of the note is expected to be longer than the break-even point in time, then it’s favorable for the borrower to pay the points.
Some people want to say I can pay $6,000 in points and saves me $100 per month, so in 60 months I will break even. That is computed on an undiscounted basis. One should consider the discount rate of the individual as well as the expected duration.
AMS » Oct 7, 2009 at 8:49 am
RE: Back to basic @ 33 – ARMs are great for the borrower when rates are decreasing. ARMs are not so good for the borrower when rates are increasing.
Which direction are interest rates headed?
(Note how ARMs provide a certain level of protection to lenders against unfavorable inflection points)
Kary L. Krismer » Oct 7, 2009 at 9:19 am
RE: AMS @ 34 – I would agree fully.
Hector » Oct 7, 2009 at 9:51 am
By Ira Sacharoff @ 16:
And then going to Bob and Jillian for advice, giving them a paragraph, but then basing the remainder of the article on the candy store’s response because hey, who can get down on candy?
I have to believe that even if the 8k credit is extended, we are still going to see a decline. You can only borrow so much demand from the future. I’m personally worried that the 15k proposal is going to gain traction. I would rather see DPA return…
AMS » Oct 7, 2009 at 9:54 am
RE: Kary L. Krismer @ 36 – Without proof:
NPV > 0 if and only if the expected duration > time to break-even point.
In simple terms, if the break even point in time is favorable, then so is the NPV, and, if the NPV is favorable, then so is the break even point in time. Both methods will produce the same conclusion.
old timer » Oct 7, 2009 at 10:32 am
FWIW -
Along my 1.5 mile ‘blood pressure’ walk, there were about 6 homes for sale.
Some of them lingered for months, one almost a year.
Last month, they all sported “SOLD’ signs that popped up within days of one another.
I don’t know what prompted the sudden movement, maybe the great early autumn weather, but
it was surprising to see.
Now, this past week, I see that a bunch of new ‘For Sale” signs have popped up.
Maybe because the others finally sold, the current sellers have been given room for hope?
Time will tell.
Greg Perry » Oct 7, 2009 at 11:25 am
Yet… buyers currently.
From a tweet today by Talon escrow:
Yesterday marked the most open escrows since May 21st. Much better % of purchases this time around. Winter closings are looking up!
2 weeks ago we had the 2nd highest residential pending count in King County since July 2007. Last week wasn’t quite as strong, but still quite strong.
FTHB’s are shying away from the short sales. The lending environment is much better than 2 months ago. We’ll see a high percentage of pendings closing out this this bunch.
Jonness » Oct 7, 2009 at 11:12 pm
By Kary L. Krismer @ 27:
Uhhh…Yes Kary, microclimates are specfic. Why do you always point out the obvious and simultaneously insult others in an attempt to prove what an expert you are? I’m starting to believe it’s because, deep down, you don’t really believe you are an expert.
Many experts in the field speak in generalities. Of course you can find a single isolated instance of something to the contrary of the general trend. But why would you look only at the small picture at the expense of being cut off from the whole?
The going rate for selling a house is 6%. This is paid to NAR mouthpieces such as yourself. I’m astonished after all your years representing sellers, you haven’t yet learned how much it costs your clients to turn their houses.
Oh wait, Kary’s rule to the contrary. Some people use 500 Realty and save a fortune. Also, not all RE agents are NAR mouthpieces. Thus, 6% isn’t accurate. Wow, I’m impressed with your logical abilities, and you haven’t even had to insult me yet.
If you want to argue with every single point I post, that’s fine Kary.But please provide data that backs up your many unsubstantiated claims about RE.
Kary L. Krismer » Oct 8, 2009 at 8:47 am
RE: Jonness @ 41 – You said give 6% to NAR. That was a false statement. Nice attempt to backtrack. But in any case, not all agents are “mouthpieces” of NAR. I’m actually typically rather critical of NAR, although I think WR does some good things.
The first part is just as pathetic. You claimed people should wait because prices will be lower in January, and I explained why that was rather naive advice. Now you claim what I said was obvious, when in fact prior to my saying it you were simply ignorant. You don’t understand what drives peoples’ decisions or markets. That is what is obvious here.
patient » Oct 8, 2009 at 8:56 am
RE: Kary L. Krismer @ 42 – I agree Kary and that explains a lot of what happened. However you need fuel for a spark to cause a fire. That fuel was extremely loose lending and it’s gone. And, “Once burned, twice shy”, many, many got burnt this time.
Ira Sacharoff » Oct 8, 2009 at 9:32 am
RE: Jonness @ 41 –
Just for the sake of clarification:
In some states all real estate agents are Realtors and are required to pay dues to the Assn of Realtors.
Washington is not one of those states. While some of the big brokerages are members of the Assn of Realtors and all their agents are required to belong and pay dues, there are many others in this state who are not…If someone says they are a real estate agent, they tend to not be a Realtor, and hence are not paying Realtor dues.
So a good chunk of the house sales in this state don’t result in dues being paid to the Realtor Association.
I’m not putting a value judgment on it. Just the facts, Ma’am.
Kary L. Krismer » Oct 8, 2009 at 9:39 am
RE: Ira Sacharoff @ 44 – Also, in many places the MLS is owned by a Realtor Association. That’s probably what leads to them having to pay dues. Not the case here.
Jonness » Oct 9, 2009 at 10:01 pm
By Kary L. Krismer @ 42:
Here’s what I said:
“The truth is, the typical person who bought in 2005 is currently near or under water (especially if he has to pay the NAR another 6% to sell the house)”
There is no way that you actually believe that I think a RE office has to pay 100% of its commissions to the NAR? What would be the point of showing up for work? You are attacking me just for the sake of attacking me. Are you claiming you haven’t enough wit to read into the quoted statement? I don’t buy that.
.
And you call me pathetic? Here’s what I said:
“I often see it claimed that, “charts and data are worthless when it comes to predicting the future of house prices.” These NAR mouthpieces have effectively debunked their own claim using proof by counter-example…spring bounce…The truth is, the probability that house prices will decrease from now to January is WAY higher than the probability they will increase or stay flat. There is no guarantee this will be the case. Yet, intelligent investing requires consistently betting when the odds are in your favor.”
That is not a recommendation to buy houses in January. It’s a claim that charts and data can be used to show the odds are in favor of house prices being lower this January than they are now. Thus, using proof by counter-example, hypothetical syllogism, and many other techniques, I have disproved the claim that charts and data are useless for predicting future price. Given that unemployment is near 10%, credit is contracting at record levels, late payments are at record levels, and we are heading into winter, it seems you agree with my analysis 100%.
If I were to make an absolute market-timing recommendation of when to buy a house, it would be to wait far longer than January.
The biggest difference between our viewpoints Kary is, you put other people’s money where your mouth is, and I put my own money where my mouth is. Whether or not your clients win or lose, you make a profit. I don’t have that luxury. When I’m on the wrong side of a highly leveraged trade, I don’t eat. Thus, I have to use skill and strategy to time the market. The reason I am vastly better at it than you, despite your years of experience in RE, is because you’ve never found it necessary to do it. In fact, by your own admission, you don’t even believe it can be done.
You call me naive, but you don’t believe that for a second, and nobody here believes that you do. The point of your posts is obvious. You like to attack me for groundless reasons. Why is that?
AMS » Oct 9, 2009 at 11:23 pm
RE: Jonness @ 46 – 6% to the NAR? Not even close.
Read #44 above.
Kary L. Krismer » Oct 10, 2009 at 7:02 am
By Jonness @ 46:
Well first, I only attacked a small portion of your #7 post–primarily example 2 (and the NAR comment which was bull). The idea that someone buying a house would care a great deal what it’s worth 2-3 months from now is pretty absurd. Believe it or not, there are actually people who purchase now believing that prices will drop further for periods much further out than that. The reason? They have other reasons they want to buy now that are not dependent on timing the market (that and they probably realize that it’s impossible to time the market).
But ignoring that, I’d suggest you go back to my post 27. All I pointed out is that in the context of houses, you can’t use seasonal effects to predict future prices. As you note, prices over larger areas tend to drop in January. That’s fairly typical. But locally probably 20 of the last 22 years the prices the next January were higher or the same as the January before, mainly higher. So what exactly do you think this January effect is useful for when it comes to predictions?
David Losh » Oct 10, 2009 at 8:59 am
Real Estate is highly predictive.
Real Estate agents continued to sell properties way beyond value. A lot of that is because the vast majority of agents know nothing about the business and only thought about the Real Estate commissions. That includes the owners and Brokers of very large companies.
In 2005 it was obvious to any one in the business that things had gone terribly wrong. Commssion checks were piling up and banks became bloated with profits that boosted the stock market. None of that changed the value of the properties being sold.
So now that we know that prices exceeded value by at least 30% that is predictive. We can even speculate that prices will fall even further. The bottom line is that prices of real estate will continue to fall and people who paid a premium today will lose equity.
AMS » Oct 10, 2009 at 10:23 am
By David Losh @ 49:
It’s more like, Real Estate is highly speculative.
David Losh » Oct 10, 2009 at 10:42 am
RE: AMS @ 50 –
I’m going to engage you against my better judgment because Real Estate speculation is very separate from buying a home.
Speculation is when some one buys lots around where the new Light Rail stations may be, or picking where a Safeway is going to be built. Speculation is outside influences.
You pay a premium for living near Green Lake or pay less for a longer commute. Those things are factors rather than speculation.
AMS » Oct 10, 2009 at 12:58 pm
RE: David Losh @ 51 – I’m sorry, you are right.
Real estate is predictive.
All those underwater “homeowners” knew their blood was going to be sucked right out of them–every last drop.
What good is a home when it sucks your life away like a vampire?
Predictive.
Ira Sacharoff » Oct 10, 2009 at 1:19 pm
RE: AMS @ 52 –
I don’t know. Seems to me that there are some leading indicators. A few years ago, the number of homes being sold starting dropping, and the inventory of existing homes started rising, even as prices continued to rise.
It struck me at that time, and quite a few others, that it really wasn’t an ideal time to buy a home, that the peak was here or near. People have lots of different reasons for buying homes. And some of them have nothing to do with money. But at that time I was suggesting to sellers that they try to sell their homes right now before the market took a dive and suggesting to buyers that they wait, if they felt like they could.
AMS » Oct 10, 2009 at 1:36 pm
RE: Ira Sacharoff @ 53 – The fundamentals were all out of whack, but that does not suggest when the bubble would burst. I had expected it to happen long before and others had expected to happen long after. There are still many people who fail to admit that values have declined, even in the face of the strong evidence that exists. Then there are the programs designed to prop the prices back up, or shall I say lock in the years of rapid housing price appreciation.
Who can predict Congress, much less what might get vetoed?
What’s going to happen after the tax credit expires, even if it is extended?
Predictive?
I still believe that the fundamentals continue to show downward pressure on housing prices, but is this predictive?
(There are people who believe that negative talk leads to a self-fulfilling prophecy. I guess just the mention of something is predictive if you follow such philosophy.)
AMS » Oct 10, 2009 at 1:47 pm
RE: Ira Sacharoff @ 53 – What buyer buys at the peak? Certainly not those who think values are going to suddenly collapse.
Ira Sacharoff » Oct 10, 2009 at 3:07 pm
RE: AMS @ 55 –
Buyers buy at the peak for a couple of reasons:
1. They just want a house, they plan on occupying it forever, they can afford the payments, and they just feel the need to own a home now.
2. People who don’t have enough knowledge and information, and are being duped by some real estate agent who convinces them that this isn’t the peak, there are no more peaks because real estate always go up from now on. But he’s only looking out for their own interest, he just wants to see them happy in their new home.:)
AMS » Oct 10, 2009 at 3:29 pm
RE: Ira Sacharoff @ 56 –
#1 clearly is not a rational player.
#2 may be rational, but this is based on differences in information. Ignoring the technicalities, the Efficient Market Hypothesis suggests that all players have equal information, so clearly this move is not based on the EMH.
Thus the question becomes, how long will these ignorant players last, and how can we predict when these players will be fully consumed? A new one may be born every day, but that may not be enough to support an ever increasing market.
Ira Sacharoff » Oct 10, 2009 at 4:43 pm
RE: AMS @ 57 –
In the last fifteen or so years, a lot more access to information to investors and home buyers has become available.
Has that resulted in savvier investors or savvier home buyers? Not hardly.
Secondly, I just don’t think the Efficient Market Hypothesis holds for residential real estate. In stocks, the belief is that publicly known information is already reflected in the stock price, so that it’s very unlikely that any individual can beat the market.
Fact is: A lot of people did buy at the peak, with zero down, and even though the fundamentals suggested otherwise, this mania fueled prices for quite a while.
The real estate market is not efficient. I can’t tell you exactly how far the median home price in Seattle will fall or when exactly prices will rise, but I think home prices are far less random and more predictable than stock prices.
AMS » Oct 10, 2009 at 5:13 pm
RE: Ira Sacharoff @ 58 – The issue we are discussing is if the market is predictable. The Efficient Market Hypothesis suggests that the market is not predictable, so by eliminating such from the housing market, if anything, it adds to your position. I was trying to just eliminate that issue.
That leaves us with a couple of possibilities:
1. Trend analysis, including but not limited to fundamentals.
2. Irrational behavior, which is never predictable (otherwise it would be rational).
The entire first category you presented, where the buyer buys based on how the “feel” clearly is irrational. These buyers are not at all predictable.
The second category you mentioned was those who have limited information. We might be able to predict the behavior of these individuals, thus supporting the claim that the housing market is predictable. Differences in information can be rationalized.
I guess we can divide these into two categories, from your suggestions:
A. The increase in information newly made accessible from advance in information technology. I suppose this is measurable, and thus we might be able to predict these players. That is we might be able to figure out how those who use newly developed technology to decrease the information gap might play once the information is equalized between the various players.
B. I claim that there are new people born every day. These new ones have a learning curve. It might be pushed back (younger) by the discussion above (part A), but there is going to be unknowing individuals enter the market on a regular basis. At the same time people expire, and clearly these players exit from the market. If enough new unknowing players continue to enter the market, then as long as these new players are sufficient in quantity and buyer power, the market could continue to rise, and thus is predictable.
We could combine both A & B into one metric, such as the average number of unknowing buyers who enter the marketplace, even with all available resources. As long as more and more unknowing buyers are entering the market, then past behavior could continue, and thus the market might continue upward. To predict this market, we need to know the current rate these buyers are entering, or alternatively exiting, the market. Then we could predict the housing market. How do we do this?
Before answering, please consider that those who considered the fundamentals were out of whack were in the minority in 2006. The sentiment was that the market could continue on an upward path, no matter how fast, and the gains were locked in. It should also be noted when people think that the market will “bounce back” they are thinking in the relatively short-term horizon. Most people don’t consider a 5-10 year recovery to be a “bounce back.” Seattle has not be hit as bad as many regions, such as Las Vegas, Phoenix, and Detroit. Will a market that has gone down far further recover faster or slower? Specifically let’s compare Detroit and Seattle. Should I be buying Detroit property, as it will recover at a higher pace because it has gone down more, OR, should I be buying Seattle property, as it has not gone down as much? The fundamentals for housing price appreciation in Detroit must be better by just about any measure.
Honestly if I were the correct demographic, I would be buying property in Detroit. I just don’t think I could make it given my personal demographic. A person could buy 100 homes for the cost of 1 or 2 Seattle area homes ($500,000, plus or minus). Yet many people consider Detroit to be a hopeless cause. Mind you I am negative on the housing market, but buying 100 units for $500k in an area that has the potential to bounce back? It could also linger on and on for years. My strategy would be to buy a block of 100 homes as close as possible in proximity to rebuild an entire neighborhood. I would clean up the streets in that area. It would not be easy, but I can see some opportunity. If I were to buy 100 average Seattle homes, say $350k/ea, it would cost $35M, and I doubt I could buy a track of homes as I could in Detroit. The Detroit investment would probably be more like $1M, or more, as there would need to be a fair amount of renovation. The renovation would realize cost reduction through economies of scale.
In summary, there are two strategies here:
1. Buy low and sell high.
2. Buy high and sell even higher.
Is the housing market really predictable?
David Losh » Oct 10, 2009 at 5:16 pm
This is an important point so I’m going to continue.
You are demonstrating why people buy.
People were sold properties. Most people don’t know anything about Real Estate so they have no comparative data.
A lot of that is because the vast majority of agents know nothing about the business and only thought about the Real Estate commissions.
Property has a value tied to the Consumer Price Index. Housing has a core value of what properties will rent for.
There is no top or bottom to the market, it’s just numbers. Real Estate is a hedge against inflation and was never meant to be the cause of it.
Kary L. Krismer » Oct 10, 2009 at 5:31 pm
By AMS @ 54:
And I would note that the declines locally were not initiated by local factors. But for the “credit crisis” in 2007 and the near “systemic collapse” of 2008, local prices would have probably gone much higher as buyers whipped themselves into a frenzy. With hindsight I think we might have been very close to that point in the summer of 2007.
Kary L. Krismer » Oct 10, 2009 at 5:32 pm
By Ira Sacharoff @ 56:
And what I referred to the other day as the herd mentality. The more people that are doing something, the more people want to do it.
AMS » Oct 10, 2009 at 5:43 pm
RE: Kary L. Krismer @ 62 – Until, like buffalo, they all fall off the cliff, even the ones near the rear…
Ira Sacharoff » Oct 10, 2009 at 5:46 pm
RE: AMS @ 59 –
I don’t know that the buyers who buy because they feel the need to buy a house are irrational.They’re not considering the home as an investment. They’re considering the home as a home. If they love the house, know it’s in good shape, and they make sure that their income easily covers the mortgage, how irrational is that?
As far as how rational buying 100 homes in Detroit is, whatever you’re demographic?
There are some awesome parts of the Detroit area, but very, very few within the City of Detroit, and it doesn’t look like people are going to be moving to Detroit anytime soon, it doesn’t like particularly hopeful for the auto industry, and well paid auto workers tend to not live within the city no matter their demographic, so it sure wouldn’t be a sure thing. Who you gonna sell them to? You gonna finance them at zero down?
I’m not at all suggesting that buying 100 homes in Seattle would be any more lucrative. It’d be more like which would be the least painful place to flush money down the toilet.
I still say that home prices are predictable. Not always, but generally the numbers revert to the mean, that large, out of the ordinary sustained gains ( the bubble) will always at some point result in a major decline.
Of course there are variables. What if Amazon, Boeing, and Microsoft all decided to relocate to Mississippi? Sure, that would make my predictions all go to hell. And if there were a sustained economic depression, which is absolutely a possibility, my predictions of another 10-20% decline would also prove very wrong.
AMS » Oct 10, 2009 at 5:48 pm
RE: David Losh @ 60 – “There is no top or bottom to the market, it’s just numbers.”
Let’s start with the lower bound. I claim the lower bound is zero ($0). Yes, there are examples of some properties with problems, but these are very few as contrasted to the entire market.
Basically everyone is ready to buy at $0, and then buyers drop off as the price goes up.
Now let’s move to the upper bound. My job is to show one exits, as the claim is made, “there is no top.”
I hope it is obvious that money is finite. All the money in the Universe is finite. Thus I will take an amount that is slightly above that to show that an upper bound does indeed exist.
For what it is worth, if you don’t like the lower bound of $0, then just use negative all the money in the world and add a little. No property can be worth less than all other resources.
Again this only shows that the bounds exist. I could go on to show that much more reasonable bounds exist, even in a market that is decreasing or increasing.
AMS » Oct 10, 2009 at 5:51 pm
RE: Ira Sacharoff @ 64 – Go look up a definition of rational/irrational behavior, and I am sure you will agree with my claims.
David Losh » Oct 10, 2009 at 7:27 pm
RE: AMS @ 65 –
You are demonstrating the problem perfectly.
Again this only shows that the bounds exist. I could go on to show that much more reasonable bounds exist, even in a market that is decreasing or increasing.
You are rationalizing. You’re self talking into a comfortable position. That’s exactly what most people do, they self talk.
However, in Real Estate the numbers are the numbers. Rents, straight line inflation and the Consumer Price Index are numbers. The value of Real Estate is tied to those numbers.
You are making that point with wild arm gestures. As a simple emotionless excercise in looking at numbers it’s obvious that things went out of control. It’s obvious that prices will correct.
AMS » Oct 10, 2009 at 7:38 pm
RE: David Losh @ 67 – It seems everything is obvious to you…
Is a Nobel in your future?
David Losh » Oct 10, 2009 at 8:06 pm
RE: AMS @ 68 –
Real Estate is extremely obvious. That’s why it’s a safe haven, a hedge against inflation, a very boring and practical investment dependant on the amortization schedule to build equity.
You can count on appreciation based on inflation and that’s why the value is tied to the Consumer Price Index. The rate of inflation is the variable.
AMS » Oct 10, 2009 at 8:37 pm
By David Losh @ 69:
Why are so many people underwater?
…not to mention all the bank failures, including WaMu.
Ira Sacharoff » Oct 10, 2009 at 9:02 pm
RE: AMS @ 66 –
While real estate values are not a constant, there are historical sale price to rent ratios and historical sale price to income ratios. These ratios get out of whack in one direction or the other, and then they correct.
In that sense, real estate is predictable. The fact that many intelligent people guessed wrong doesn’t mean it’s not predictable, it just means people exhibited irrational behavior. The prices in Seattle should never have become as high as they did, that’s why they weren’t sustainable, and that’s why they’re continuing to drop.
Around 1970 after the Boeing losing the SST contract, local home prices crashed. Way lower than they should have. Unemployment was up, but not to the point where houses were practically being given away. I know a guy who bought a house on Capitol Hill for 7500 dollars in 1972. Mortgage payments were as low as or lower than rents, and low house prices lingered for far longer than they should have. My landlord gave me first crack at buying our rental home in 1979, on 17th behind Group Health, for 36,000 dollars. I told him he was crazy and he’d never be able to get that high a price for that house. The house sold in 2006 for 600,000. Rational guy I was, huh?
AMS » Oct 10, 2009 at 9:14 pm
RE: Ira Sacharoff @ 71 – “My landlord gave me first crack at buying our rental home in 1979, on 17th behind Group Health, for 36,000 dollars. I told him he was crazy and he’d never be able to get that high a price for that house. The house sold in 2006 for 600,000. Rational guy I was, huh?”
Well many people only look at the bought and sold price, but we need the cost in the middle too. Also real estate is about as illiquid as it comes, and more so today than prior to the “financial meltdown.”
Also we need to agree on what rational behavior is.
Ira Sacharoff » Oct 10, 2009 at 9:29 pm
I think the standard definition of rational behavior, not specific to economics, is behavior that has the best chance to produce an optimal outcome, consistency between our decisions, our goals, our capabilities, and the situation we face.
In 1979, had I purchased that house, my monthly payments including taxes and insurance would have been less than my rent….Maybe I wasn’t irrational. Maybe I was just a young and stupid know it all.
AMS » Oct 10, 2009 at 9:40 pm
RE: Ira Sacharoff @ 73 – Is a goal of burning cash, that is taking out the Franklins and a lighter, rational?
Ira Sacharoff » Oct 10, 2009 at 9:47 pm
By AMS @ 74:
No, obviously not. Where are you going with this? What are you trying to say? Come out and say it!
David Losh » Oct 10, 2009 at 9:50 pm
The numbers are the numbers. in the 1970s many people bought based on the rental income. In 2005 many people sold, and again in 2006 and 2007.
It’s extremely predictive. Prices are going to fall another 10% this year and continue to decline over the next three to five years.
The banks made tons of money so they are for sure very happy that people over paid. Those Notes were bought sold and traded. That’s why we need a watch dog on the financial markets.
Of course banks and lenders encouraged this, yes the Real Estate industry encouraged this, it got so easy that we can now buy properties on line.
I sat in my office without exaggeration a hundred times while one idiot after another came into my office to tell me about the Real Estate business. What would you do? I sent them down the road as many agents did, but some agents just did the paper work, and idiots, who knew so much about my business, happily signed.
Imagine sitting in my office and me telling you in 2005 that house prices were going to tank, and tank hard. Would you believe that? If I told you to get rid of your property in 2006 would you have done it?
AMS » Oct 10, 2009 at 9:53 pm
I was trying to figure out what this means: “consistency between our decisions, our goals, our capabilities, and the situation we face.”
Decisions is what we are trying to do, so that can be stricken from the definition as circular.
Goals can now be stricken from that line under some situations, but who knows which ones… Some goals apparently are not rational.
Unqualified, “behavior that has the best chance to produce an optimal outcome” is acceptable, but we must place it within the rules of the game being played.
AMS » Oct 10, 2009 at 9:55 pm
RE: David Losh @ 76 – “God made the natural numbers; all else is the work of man.”
- Kronecker
David Losh » Oct 10, 2009 at 10:02 pm
So there is no point, it’s just a circlular excercise.
My thinking is you are trying to pirate the site. Most times there would be a goal for some interest you might have, but there is no link to your name.
So there is no point.
Ira Sacharoff » Oct 10, 2009 at 10:02 pm
RE: AMS @ 77 –
I looked up ” rational behavior”. There were a bunch of definitions, all similar.
Here’s one:
http://knol.google.com/k/peter-greenfinch/rational-behavior/2m7299842u04v/21#
AMS » Oct 10, 2009 at 10:08 pm
RE: Ira Sacharoff @ 80 – Using that definition, if one has a goal of burning cash, literally, then doing such is rational.
In any event, there are different personal goals. If someone has cash, then he or she can do whatever he or she wants. Financial moves that produce optimal results are much easier to measure, and one cannot predict irrational behavior. If you knew someone had a goal of burning cash, then one could predict their behavior, and under this set of circumstances, such behavior would indeed be rational, but not on a financial basis.
Irrational behavior, such as falling in love with a house or other inanimate object, can never be predicted.
AMS » Oct 10, 2009 at 10:15 pm
RE: David Losh @ 79 – Hand over ‘yer booty!
Ira Sacharoff » Oct 10, 2009 at 10:17 pm
RE: AMS @ 81 –
Again, I disagree with you. Irrational behavior can be predicted, and unscrupulous real estate agents take advantage of it all the time. When they see a client fall in love with a house, they can almost smell the blood, and also, when there is a bubble, you can predict the “follow the herd” mentality, at least for a while.
AMS » Oct 10, 2009 at 10:31 pm
RE: Ira Sacharoff @ 83 – Let’s agree on this:
“When they see a client fall in love with a house,…”
Yes, once the agent knows about the love, the shark attack is on.
The bigger problem is predicting which home will be the one that the “client” will fall in love with. I am suggesting that it cannot be predicted with which home the client will fall in love. Although after some knowledge is known, the agent can select homes that have a higher probability than others.
Also it is tough to know if a client will fall in love with a home, any home, without some other knowledge.
(I do not dispute, however, that statistics could be used to develop profiles of consumers.)
Scotsman » Oct 11, 2009 at 1:01 am
RE: AMS @ 84 –
Call your doctor- time to check the meds. Way too much mental masturbation going on here… Even David’s rambling has a point to it in a zen-like way. You just need to check your meds.
Kary L. Krismer » Oct 11, 2009 at 7:10 am
By AMS @ 84:
You’re right you can never predict what a client will like. And you’re right that after viewing a few homes it’s easier to zero in on it. That’s the advantage of agents previewing houses. Not only does it save the clients’ time, but it also allows the agent to weed out the worst properties–sometimes for the client’s own protection.
AMS » Oct 11, 2009 at 10:18 am
RE: Kary L. Krismer @ 86 – I was talking to an agent who was playing the game of showing an over priced, poor quality home to help set a baseline. Too the agent’s surprise, the buyer wanted it.
Jonness » Oct 17, 2009 at 11:24 am
“So what exactly do you think this January effect is useful for when it comes to predictions? ”
Disproving your nonsensical claim that charts and graphs cannot be used to make future predictions. It’s quite obvious you have no professional-level data analysis experience. Otherwise, the mathematical proof concepts I’m using here would be well ingrained. The fact you’ve never seen a concept proof before and believe it should be more meaningful than what is stated shows your ignorance in the subject matter.