For anyone who wonders why I pay little to no attention to Forbes when it comes to real estate, here’s a little flashback from late November 2007, four months after home prices peaked in Seattle.
Scaled-back lending practices, risky loans, oversupply and low demand continue to plague the nation’s housing markets, driving down prices and stalling sales.
But it’s not so in [Seattle], where prices have continued to climb without so much as a hiccup.
…in Seattle, prices rose 6% to $394,700 [year over year].
Seattle ranked as the 8th best housing market in the nation. Woo-hoo.
The Emerald City housing market continues its ascent on the back of a strong local economy and the prudent construction rates of the past five years. Although prices are reaching record highs, the city remains a cheap alternative for Northern California residents and businesses looking for better value.
As I pointed out at the time, to say that Seattle’s housing market was “continuing its ascent” was to ignore practically all of the available data. The only way things looked good for Seattle in late 2007 was if you looked at year over year prices and completely ignored supply, demand, and the quarter over quarter price change.
The number of homes on the market had been climbing for 20 months. The number of sales had been falling for 25 months. The median price of single family homes had fallen 7.7% between July and October, compared to an average rise of 2.2% from 1994-2006 between those months, and a maximum drop during that time of 2.4%. When prices fall over three times faster than they ever have before during a quarter, it seems like something one might notice.
If you want entertaining—but ultimately meaningless—lists, go ahead and read Forbes’ pieces on real estate. If you want actual market insights, I strongly suggest looking elsewhere.
00
Just say no to Forbes, Moody’s and the NAR.
http://money.blogs.time.com/2010/11/02/study-no-reason-to-pay-realtor-commissions-when-selling-a-house/
“Our key finding is that Realtors do not offset the cost of their commission; they do not get you a higher price.”
Seriously folks, it’s time to stop listening to unproven experts, and use our own brains instead. Otherwise, we are flushing huge amounts of money down the toilet.
Rate this comment:
0 
0
RE: Jonness @ 1 – First, that only looks at price, which is a highly suspect data piece since you cannot sell the same house twice at the same time.
Second, it doesn’t look at time on market or probability of a sale, which are very important considerations and can cost you more money in the end (especially on a vacant listing).
Third, I’ve said myself that FSBOs can get a higher price because they’re more likely to deal with a buyer without an agent. As I’ve mentioned in the past, I once saw a house that was listed, didn’t sell, went FSBO at a higher price, sold, and over a year later still was not worth that price, even though that was before June 2007. I wouldn’t count on that happening though because you get back to the second point.
Rate this comment:
0 
0
RE: Jonness @ 1 –
Even the Rich Elite Are Ignoring the Real Estate Pundits
http://www.cnbc.com//id/40260336
Rate this comment:
0 
0
RE: Jonness @ 1 –
They never mention the function of time. Yes, for sale by owners who wait it out, refuse lower offers, and will only work in frame work of their choosing will command a higher price.
That’s always been true.
Rate this comment:
0 
0
According to this U. Chicago study, RE agents will get a better price for their own homes than for their clients.
The researchers believe that this is because an RE Agent’s objectives are not well aligned with the seller. The RE Agent wants to move a transaction quickly, and is not motivated by the marginal value of the sale. They would gladly push a seller to accept an offer at 95% of list price, because their lost commission on that 5% is miniscule, whereas for the seller that 5% could represent a major portion of their proceeds from the sale.
However, when the RE Agent is the seller, they are playing with their own money, not someone else’s. They work harder and negotiate tougher. As a result their own houses sell for 3.7% more than their clients, and stay on the market for 9.5 days longer, as compared to what they do for their clients.
http://citeviolent loveist.psu.edu/viewdoc/download?doi=10.1.1.137.3041&rep=rep1&type=pdf
Rate this comment:
0 
0
RE: Herman @ 5 – Yet another study with questionable data. Of course, that 97% commission is pretty sweet! ;-)
BTW, I think there’s an old NAR study floating around out there too. Guess what it found?
Rate this comment:
0 
0
RE: softwarengineer @ 3 – Love it!
Rate this comment:
0 
0
RE: Sara @ 7 – RE: softwarengineer @ 3 -
““The cachet that came with owning seems to be gone now,” he says.”
Not completely, but the tide has turned.
Rate this comment:
0 
0
RE: Kary L. Krismer @ 6 – you’re comparing the NAR’s credibility to that of the University of Chicago?
I think I’ll go with the University study, thanks.
Rate this comment:
0 
0
One thing the Seattle has going for it is a reputation for being reader country. As a fellow writer, I quote Sherman Alexie: “…there’s something special too about being from the Pacific Northwest, which is by far the most literate region of the country and one of the most literate regions of the world. The Seattle to Portland corrodor is powered by books…”
Rate this comment:
0 
0
Sorry: I meant “the Seattle area”! My bad.
Rate this comment:
0 
0
RE: Hugh Dominic @ 9 – I think there are some economists that don’t think too much of the University of Chicago’s economics department. But in any case, do you really think they didn’t set out to find that real estate agents get more for their own properties?
Rate this comment:
0 
0
RE: Kary L. Krismer @ 10 –
In honor of Festivus, the holiday for the restofus,
I would like to proclaim that, henceforth,
Kary requests that everyone call him by his real name,
Pop-Tort.
Rate this comment:
0 
0
By Jonness @ 1:
The ignorant masses will eat from the hands of demons. It is the right that they are willing to fight for. Who are you to deny them this?
Rate this comment:
0 
0
RE: Kary L. Krismer @ 10 –
Kary,
The point of the paper was to test the hypothesis that compensation structure gives agents an incentive to convince their clients to sell their houses too cheaply and too quickly. Their data comes directly from mls listings, so I’m not sure it is bad data.
The results of the paper don’t mean that the agents intentionally are trying to “screw” their clients, or are bad people.
It is interesting that the paper explicitly notes that “The real estate agent is likely better informed about the value of the house and the state of the local housing market than is the seller”. How many sellers really listen to their agents? The agents make suggestions, but the sellers have to actually implement them.
There may be other confounding factors – do agents but more prep into their houses before selling?
Some of the comments really point out the cognitive dissonance on the SB. I would imagine that most members would applaud the findings since they feel prices are too high already. Any systemic factor resulting in lower sales prices should be lauded!
-Alex
Rate this comment:
0 
0
RE: Alex @ 14 – I haven’t read the study, but there are several factors that come to mind right off the top.
1. You can’t determine the relative value of different houses, so it’s 100% impossible that the study is valid.
Ignoring that, and assuming the study is somehow right (which I believe is 100% impossible):
2. Agents perhaps prepare their own houses better than their clients.
3. Agents perhaps price their houses better than their clients (this assumes the study looks at discount from original list).
4. Agents, when they control the decisions, make better negotiating decisions than their clients.
I will say I haven’t found 2 and 3 to be true in the real world. 4 is very possible. On the buy side I’ve said several times that clients tend to be far too impatient negotiating a purchase.
Rate this comment:
0 
0
By Alex @ 14:
BTW, I’ll point out that I responded previously asking whether they “didn’t set out to find that real estate agents get more for their own properties?” To me the quoted material above seems to indicate that you think that’s exactly what they did. Therefore it’s not surprising they reached that conclusion.
Rate this comment:
0 
0
When I got out of college 5 years ago and got a job, everyone and their dog hounded me to buy a bigger house. These days, more and more people tell me they are envious of the lifestyle I have chosen because it allowed me to rapidly set myself up in a financially comfortable position. In a nutshell, many of the debt slaves I know have switched from criticizing me to modeling their lifestyles after my example.
I realize it’s an old fashioned concept, but if you want to buy a really nice house, nice cars, a boat, etc, it’s much better to save for a while than it is to get trapped into debt slavery. It really helps if you want to buy a house while prices are going down. This allows you to hang on to your full down payment without appreciation eating into it. Also, the price of the house you want continues to get cheaper. It’s really a 3-way incentive. Your down payment increases, house prices decrease, and the amount you have to borrow decreases (saves lots of money in mortgage interest payments).
I look at the period from 2007-2012 as the best opportunity to save a down payment in Puget Sound history. Nationally, prices are correcting at a rate that’s even faster than during the Great Depression. It’s unfortunate that a lot of people could not foresee the obvious correction that was on the horizon. However, it’s not too late to get in on the savings. There is still plenty of pain ahead in the local RE market. The same way people made large amounts of money when the bubble was inflating, people can save money while the bubble deflates. It’s a great time for down payment savers!
Rate this comment:
0 
0
RE: Kary L. Krismer @ 15 – Another possibility would be that agents buy better houses, and thus get a better result when they sell.
Rate this comment:
0 
0
RE: Herman @ 5 –
One point in the study that is over looked is the listing agreement portion. The agent wants to sell the house, but they have a limited time period, with less latitude in what they can do with the property.
This have been a proven theory repeatedly.
Rate this comment:
0 
0
Let’s look at the track record of the NAR”s chief economists.
“We’ve been expecting sales to remain at historically high levels, but this performance underscores the value of housing as an investment and the importance of homeownership in fulfilling the American dream” June 25, 2005: David Lereah
“The continuing shortages of housing inventory are driving the price gains. There is no evidence of bubbles popping.” – David Lereah, August 2005
“…housing activity will remain healthy for some time to come.” – David Lereah, October 28, 2005
September 25, 2006: “We’ve been anticipating a price correction and now it’s here,” Lereah said. “The price drop has stopped the bleeding for housing sales. We think the housing market has now hit bottom.”
“The steady improvement in [home] sales will support price appreciation…[despite] all the wild projections by academics, Wall Street analysts, and others in the media.” David Lereah, Jan 10, 2007
Were you wrong to be so bullish? “I worked for an association promoting housing, and it was my job to represent their interests.” David Lereah, December 2008
———————————————–
“I feel that the Seattle market is very healthy in terms of the local job market conditions. I don’t see any prolonged price declines.” Lawrence Yun, Nov, 2007
“Going into 2008, I see it as a year of opportunity. We are hitting low right now.” Lawrence Yun, Nov, 2007
“I think we are very near to the end of the housing downturn” Lawrence Yun, July 24, 2008
“[five years from now] many people will look back to 2010 and say ‘I should have bought a home back then,’” Lawrence Yun, Nov, 2010
Rate this comment:
0 
0
RE: Jonness @ 20 – I think everyone knows that. I’ve been critical of their projections for probably at least 3 years, if not 4. Seems like you went to a lot of effort to prove something no one contests.
Rate this comment:
0 
0
By Kary L. Krismer @ 21:
You and I know about the obvious ethics concerns brought about by the numerous attempts by the NAR to trick the buyers its agents represent into taking on massive leverage during a collapsing market. And we are well aware of the millions of people who have played the game and wound up bankrupt, foreclosed on, and/or underwater. Unfortunately, the majority of newbie buyers are completely unaware of the purpose and goals of the NAR and the games it plays. Clients need to be extremely cautious about believing anything released by the NAR. IMO, the NAR is to real estate studies what big tobacco is to cigarette addiction research and should only be mentioned in this context.
It’s not too difficult for me and you to guess what the study found, but someone who doesn’t know about the NAR’s true intentions would probably interpret your statement as support for the NAR instead of the obvious sarcasm in which it was intended to be. Thus, my post was necessary in order to remove the ambiguity from your statement. As a licensed RE professional, you have a duty to accurately represent your industry.
Rate this comment:
0 
0
F the NAR.
Rate this comment:
0 
0
RE: Jonness @ 22 – I think you’re overestimating the impact NAR has. I really doubt that even 5% of buyers know that NAR even makes predictions. I wouldn’t but for sites like this and an old broker pointing out how inaccurate they were (and that was pre-peak).
Rate this comment:
0 
0
RE: Jonness @ 1 – Odd that the news piece you linked to was from this month. That study came out years ago. I recall reading about it quite a while ago.
The part that I found really interesting was that the reason they chose Madison, WI was that there is a well-established FSBO-only site there: http://www.fsbomadison.com/ I recall reading that some surprisingly high percentage of home buyers in Madison are searching that site when they look for a home.
Unfortunately most markets do not have a viable non-MLS alternative like FSBO Madison, which makes going agent-free more difficult. Granted, you could use a service like MLS 4 Owners, but the problem is that if your house is on the MLS, most buyers will come with agents, who will naturally expect you to pay them a commission. On a pure FSBO site like what they have in Madison, buyers and sellers can both go agent-free, saving everyone money.
Rate this comment:
0 
0
“The Central Intelligence Agency owns everyone of any significance in the major media.” ~ William Colby (1920-1996) former Director of the CIA; Source: Derailing Democracy: The America the Media Don’t Want You to See (2000), by Dave McGowan
“When a well-packaged web of lies has been sold gradually to the masses over generations, the truth will seem utterly preposterous and it’s speaker a raving lunatic.” ~Dresden James
“Collective fear stimulates herd instincts, and tends to produce ferocity toward those who are not regarded as members of the herd.” ~Bertrand Russell
Rate this comment:
0 
0