I received this question via email from a reader a few weeks ago:
I’ve got to ask this because it seems nobody else is asking. We know that just 3-4 years ago there was a surplus of homes on the market. We also know that in the last 3-4 years home sales have remained relatively low.
So where did all those homes for sale go? Did they all just magically vanish because they didn’t sell? Where did all the inventory go?
Here’s my theory: In a typical market on average, about half of all homeowners in the United States move every five to seven years. That’s a lot of inventory that comes on the market fairly frequently.
It’s 2012. Five to seven years ago was 2005 to 2007 — Right at the peak of the housing bubble when home values were 20% to 30% higher than they are today.
In short, many of the people who would be sellers in today’s market are “priced in” to their homes and unable to sell.
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The inventory rests in the following:
1. Short Sales – People are feeling confident that their home will soon be rising out of the short sale status, and are able to make the payments… so they are holding on for some appreciation.
2. People are only selling because of a life change:
a. divorce
b. marriage
c. kids being born
d. job relocation
e. those taking advantage of the move up scenario (buy a bigger house at a bigger reduction in price, take a smaller loss on your lesser priced home)
f. because they can afford to (not many of them out there).
Investors are huge right now… 30% of buyers use strictly cash.
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Your response jibes with an article I read a few years ago that said that, all other thing being equal, income is lower where people own their homes because they are less mobile. They can’t move to where the work is on 30 days notice. They have to find what is available next to that ball and chain they live in.
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This is just loss aversion at work. People have a tendency to defer realizing losses, regardless of the character. The price the homeowner paid is not the main issue; it is their memory of their house being worth substantially more that causes them to defer selling.
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I think the “priced in” theory is part of it. The other part is buyers getting tired of waiting, and/or thinking it’s time to buy for some reason.
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Where did all the inventory go?
For sure: Many, many people bought houses at the peak of the market. Many of these people bought these houses with less than 20% down. So, fast forward five, six years, and these people are stuck in their homes. They can’t bring 100,000 dollars+ to the closing table to make up for the shortfall because they don’t have it.
But doesn’t it seem like the inventory became extremely low very quickly?
And the huge reduction in bank owned homes for sale? Did they just clear their inventory, problem solved? I don’t think so. The whole thing doesn’t smell right. I can’t put my finger on it, I’m not sure who to accuse of what. But something’s going on, and it’s more than just a function of the market doing it’s natural thing.
I know: I sound like a paranoid nutcase here. And maybe I am. But I smell a rat, and the players( the real estate industry, the banks, etc) have proven themselves untrustworthy.
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By Ira Sacharoff @ 5:
If you look at Tim’s stats on the foreclosure process, that has shown a significant decline for some time now. So if there is something going on, it involves delaying the Notice of Trustee’s Sale.
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By Ira Sacharoff @ 5:
It would be interesting to know what percentage of houses that is, as against the total number of housing units. Is it 10%, 20%, higher?
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each year less and less homeowners have been able to easily sell because of disappearing equity.
Spoke to a co-worker the other day, his family is 100K underwater on a tiny home in a cruddy neighborhood. They have hopes for another child but don’t have enough room for one. Mortgage payments are affordable but it will take them a looong time to get away from that place. If they do chose to default, they will probably stay as long as they can to save up money.
Inventory is going to stay low until prices go up, principal is forgiven or people are able to refi their underwater homes at low rates and really start paying down their debt.
I’d be prepared to have less to choose from for a long time.
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What I’d really like to know is how much “shadow” inventory is currently being held by the banks, and is not on the market for sale, and how many pending foreclosures are being postponed by the banks to avoid the process which ends up with them having to account for losses. Once we know that, we know what needs to be done. I think the gov’t is allowing the banks to not complete the process on these assets they are holding, in the hopes that the market will turn around. However this is just postponing the inevitable, and is responsible for some of the lack of inventory.
Anyone have any data to refute and/or advance my hypothesis? How many of you reading this have seen apparently abandoned properties that aren’t posted for sale? I have seen some, and who ultimately is paying for these losses when banks are allowed to hold assets and let them degrade for an even bigger write-off? What am I missing here?
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By Redneck Nerd @ 9:
What I’ve seen would tend to refute it. I saw a lot more vacant houses back in 2009 and 2010 than I do today. And I know it’s not exactly what you’re talking about, but when banks do finally foreclose they tend to get them on the market in days or weeks, not months. The exception to that is sometimes they cannot, because legislation keeps them from evicting existing tenants.
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RE: Ira Sacharoff @ 5 – Ira — it’s not just people who bought homes at the peak. Many others were long time homeowners who refinanced at the peak. Or worse, who serially refinanced over many years. It’s pathetic that someone who has owned their home for 20 years no longer has any equity left because they borrowed it all (and spent it all) during the boom.
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RE: Redneck Nerd @ 9 – Well, we’ve discussed this before, and you can have some fun w/ Redfin & your county recorder. Go to redfin, punch in your area of interest (King county?), deselect all filters. Only check “Property type” of interest and “Foreclosed homes” and you’ll get to see houses taken by the banks and not subsequently listed.
I just did this in cloudy Vancouver WA and see 41 of them:
http://www.redfin.com/homes-for-sale#!hoa=0&market=oregon®ion_id=18823®ion_type=6&sf=4&uipt=1&v=8
A quick check of one of the properties lists BAC HOME LOANS SERVICING LP as the owner, taking it in Oct 2010 for a mere $299,351.36:
http://gis.clark.wa.gov/gishome/Property/?action=account&account=7470120
Assessed at $213,868.00, I’d say that is wildly optimistic.
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RE: ChrisM @ 12 –
Interesting. I’ve long had a feeling there is no possibility of getting a foreclosed house in my area of interest, and this pretty much confirms it. The few houses I see look, by the numbers, completely unappealing.
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By WestSeattleDave @ 11:
That very well may be a larger percentage of homes than ones that bought near the peak.
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Are new homes another factor in this? I know they make up a fairly small proportion of total sales, but historically new home construction has been there to absorb population growth. Construction probably went on the skids from 2007-on, while population growth to the region continued.
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Sorry “The Tim” I’m afraid you have the wrong answer! There is no such thing as being ‘priced in’! If you want out, you can short sell or walk away. But let’s pretend that you could be ‘priced in’ and that a significant amount of people were in this state and then they were suddenly not ‘priced in’. Wouldn’t most of those sellers also be buyers?. Wouldn’t it just be people moving from one place to the next, buying up or buying down…. Wouldn’t that equate to NO NET CHANGE IN INVENTORY!… Yes, it would.
To reduce inventory substantially in a short period of time, there would have to be individuals making MULTIPLE PURCHASES of homes.
The only people who behave this way are INVESTORS. Investors are the reason for the high inventory in 2007 after prices went too high (they got out) and investors are the reason there are no inventory today when prices hit bottom (they’re getting in).
I would think this would be obvious to ‘The Tim’ knowing that 30% of sales have been cash? Consider this question – “How does home ownership decrease at the same time housing inventory decreases?” Hmmmm… Dave Losh can’t understand this but as a fellow Engineer, I know ‘The Tim’ can…. Eureka! and there you have it….
…and how many investors do you think are financing…. I’d reckon many. So, investors might be buying 50% of the inventory or more.
Mystery solved….. next question….
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RE: corndogs @ 16 –
Oh, alright, as long as you asked nicely, I’ll explain it one more time.
This idea investors are buying multiple properties may be true, there are a lot of suckers out there.
I don’t look at the Real Estate market place too much any more, because the action is on the global economy.
What most people I talk with say is they will be riding out the Real Estate market because there is nowhere to go. You can sell here in Seattle for $560K and move to a much nicer house, on the golf course in Olympia for $350K, but then you are stuck in Olympia.
Let me say this again, most people would want to sell, to get out of debt, to get rid of the mill stone that is drowning them, but they can’t afford it. Where would they go? What would be the move up strategy? Come to think of it how secure are all of those high paying jobs right now?
People will pay high prices to live in neighborhoods for the sake of the children, but those properties are losing value every day. You can buy an equity position is a high end home, but even at that you are gambling.
Everything I read daily indicates that the price of housing will continue to decline until it is inconsequetial to an over all investment portfolio. There are way too many housing units that have been built, continue to be built, and in Seattle we have yet to start filling in higher density areas.
Where’s the inventory? Read the for rent section of anything and make that land lord an offer, if they are smart they will take whatever they can get. Make an offer on any property that has equity, because today is the very most those people will get in the next ten years.
Make offers; look around on any street, and you find people who want to sell, and are desperate to sell. There is tons of inventory out there, all you have to do is ask.
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Of course there are individual stories that fall into every category, but…
If the market sucks, why would anyone put themselves through that unnecessarily?
If selection is terrible, why would anyone give up their existing home if they didn’t have to?
Would a potential seller really be more anxious to get into a bad spot than a potential buyer?
That five to seven year turn is gone (for now). There is no conspiracy, just no incentive.
And in light of that, a 3600 drop in KC inventory since 12/08 isn’t much for 4.5 years:
Less than 100 per month.
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RE: David Losh @ 17 –
“There’s a ton of inventory out there”. There’s no there there, Dave. In your post, that is.
There may be lot of homes out there, but they are not for sale there, Dave.
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By Robroy @ 2:
Woo hoo, playa. Beans and berries may be done, but there’s gold in them apples. Seriously, that may have some truth if you’re talking about being invested into Detroit, but it’s not the reason you don’t see Kent Valley millionaires slumming through Hunts Point.
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Many of these responses are of the “would sell if they could”.
If that were the case, you would expect builders to be making new housing like crazy but at market costs to meet the need.
No, this smacks more of market manipulation with a lot of real estate being held to keep it off the market by banks and artificially inflate the prices.
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By Lo Ball Jones @ 21:
Wouldn’t that create even more of an opportunity for builders? BTW, if you got out in the burbs you would see what the banks foreclosed in lot developments because they have sold most of them to builders who have been pretty active over the last year. What you won’t see is much new lot development -because you can’t make money or get financing in that business. As the current lot inventory is absorbed, things will get very interesting.
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I think what Tim missed, and what most of the commenters have also missed, is that the question wasn’t “why aren’t there more houses coming onto the market?” but rather “what the heck happened to all those houses that were on the market just a short while ago?”
And I think part of the answer is that a lot of those houses that were on the market… are still on the market.
The complaints about “lack of inventory” from frustrated buyers don’t reflect a lack of stock; there’s still plenty of stuff out there that’s way overpriced, in crappy locations, in need of major repairs, or all of the above.
And that’s exactly what we ought to expect in a slack market, no? Lots of undesirable listings languishing unsold, and owners of agreeable properties perfectly happy to stay put?
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IMO, there are people who short sell or walk away, but most people who are underwater do not do this unless they are extremely underwater. It’s more typical for families who are say, 10 or 20% underwater to keep making payments and riding out the storm. This leads to low inventory, which is currently providing many people a sense of market strength. However, this is actually a sign of extreme market weakness. As the global economy continues to struggle, and we move through the traditional Spring bounce period, and people get used to extremely low rates, house prices will continue down the slippery slope.
IMO, the biggest problem is, the Fed must continue to put $trillions on its balance sheet, and the gov. must continue to borrow $trillions every year or we slip into a Great Depression. This is tricking people into believing we are amidst recovery fueled by “all cash buyers.” However, printing $trillions/year is not indicative of a recovery. It simply puts us further in the hole.
“All cash buyers” do not have enough cash to bring us out of the hole. The only way to get out is for people who do not have cash to be able to borrow at a rate that will properly support the market without government tricks, gimmicks, and intervention. Unfortunately, this cannot/willnot occur anytime soon. Quite the contrary. Too many people are already maxed out and must deleverage. Once the debt deleveraging cycle has ran its course, then we can grow “honest” GDP again.
The main thing to understand here is, credit money is the same as real money, but only if those who take out the loans can afford to make the payments, and they make good on the loans. Those who already have loans must make their payments, and new entrants must come into the market who are capable of doing the same. As soon as people become maxed out and unable to take out new loans, and potential new loan customers can’t find jobs, GDP takes a hit. So Uncle Sam prints and borrows $trillions/year to make up the difference. And the Fed lowers interest rates to 0 to tempt people to take on loans during times of risk.
And we have the pfffts of the world who believe all this printing has fixed the problem. Yet, after $trillions of funny money has been thrown into the economy, and interest rates hit historic lows, GDP was only 1.5% last quarter (most likely this will be revised down in the future).
Nothing has been fixed, and things are every bit as risky as they ever were. Proceed with caution.
I see so many people here continuing to make the same mistake year after year. As I have alluded to in the past, the U.S. will continue to slip in and out of growth as the government and Fed continue to go wild with the money. Don’t get fooled into believing a temporary period of GDP growth or house sales is a new paradigm. We are nowhere near being out of this mess.
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By whatsmyname @ 22:
The problem is, builders can’t make money at current land prices. They are being hit with exactly the same problem as house buyers. Nobody wants to take a bath when they sell. Thus, land prices must come down (or money must be cheapened) before the RE market can get healthy again.
It’s important to not confuse a frozen market where inventory is low with market health. It’s a sign of market weakness. Market strength occurs when sellers feel good about selling at a profit, and buyers believe that price bode well for their future. This is not occurring in the current market place, and IMO, will not occur for quite some time to come.
IMO, expect more of the same until GDP growth resumes a healthy sustained rate of upward growth. 1.5% growth is not enough to fix the economy or support a sustained housing recovery (especially considering it takes 2 to 2.5% growth just to keep the unemployment rate on an even keel).
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By corndogs @ 16:
Banks are still only approving SFR short sales in King County at less than 200 a month, on average, when there are about 2,000 pending short sale (as of the beginning of July). Only about 50% of short sale listings succeed. So you can’t always sell short.
Yes you can always walk away, but that can have adverse tax consequences (not to mention the effect on your future credit) if you’re not insolvent after the foreclosure (e.g. you have $50,000 in non-retirement assets and no other debt) and the Mortgage Debt Relief Act isn’t extended. (Note this depends on the theory your tax preparer uses, but IMHO the correct theory results in tax owing.)
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RE: 2kt @ 19 –
I’m always happy to respond to your insightful comments.
On my street alone there are five houses I can think of that would sell if they knew what to do with the money. One is a home that is currently rented because the return is higher than if they cashed out to put the money some place else, or so they think.
Another house is a retired gentleman who takes in exchanged students to help cover expenses, his retirement isn’t going so hot.
Oh yeah one just sold, it was on the market before, expired off market a couple of times, but this time they had an offer with a week.
Another is vacant, the owner passed on a couple of years ago, and there it sits, another a flipper bought, it will be on the market soon enough, and another one came on the market the kid who bought it is desperate to sell, but I don’t think a conventional sale will get the job done.
Oh, wait, that’s just my street, which is exactly like every frigging street in America today. Why would any one hold onto Real Estate? The answer is for the stability for the children, but other than for the kids? Forget about it.
Now I would really be happy to talk the macro economics of why builders aren’t making money, but it’s because many of them are trying to be smart, but the market place has changed, dramatically.
Tell me again about the supply, and demand, I always like bed time stories about how things used to be in the distant past.
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By 2kt @ 19:
Dave doesn’t understand what the term “inventory” means, and when it is explained to him he calls it BS. He doesn’t want to know, but instead just wants to repeat the same nonsense over and over and over.
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By Lo Ball Jones @ 21:
There is a considerable amount of building activity. Not 2007 levels, but a lot higher than 2008-2009.
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By Jonness @ 25:
What are you talking about? Pardon the pun, but land is dirt cheap. Many developers bought up land at less than what the cost was to put in the improvements.
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By David Losh @ 27:
If you think supply and demand no longer works it only means you never really understood supply and demand.
What you’re saying proves that. The people on your street are not selling either because they don’t like the current market price or because they can’t sell at the current market price without creditor approval. They are not part of the supply. Quit saying they are.
Now you in your infinite wisdom could go offer them more than the market price, and they might sell to you. That’s what supply is all about. Supply increases with price, and if someone is stupid enough to offer significantly more than market price for an asset, the supply of that asset may increase by exactly one.
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RE: Jonness @ 24 – Jonness said….”…….families who are say, 10 or 20% underwater to keep making payments and riding out the storm. This leads to low inventory” Do you have any data to support this or are you just Loshing.
You responded to my post which had a specific point in refuting the Tim’s hypothesis, but you failed to make an argument against it. The point I made is that a large number of individual homeowners becoming able to sell their properties as they emerge from underwater would NOT significantly affect inventory because they would in turn just buy another house in the majority of cases. Please explain why the typical homeowner selling his house leads to higher inventory.
It seems ‘logical’ to me that if a person is holding off selling an underwater house he has some interest in keeping his credit up. Good Credit means another house. If his endgame is to rent he’d be more likely to short sale out…..
So, i would reiterate… being ‘priced in’ is NOT a significant driver of low inventory. A high level of foreclosures should be causing increased inventory as fewer people own homes, but that’s not the case…. It’s the investors that are taking up the slack….
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RE: Kary L. Krismer @ 29 – Krismer and Mr Whatsmyname are correct.(at least in my neck of the woods) My friend works as a city planner and they are busy. Existing developments that were mothballed are back in swing with permitting and houses are selling…. permits for lot development are being inquired about but not in full swing. If existing plots sell out, there could be some trouble finding more lots…. I admittedly have no feel for how that’s going in the Seattle area though.
I’d also say that new construction in my area is on the lower end which is significantly affecting median prices in my zip code. Maybe this will be the case for a few years.
We’ve gone from McMansions to Happy Meal Houses.
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By corndogs @ 33:
It really depends on the area. In some areas they were building first time buyer low end housing which can only be described as crap. These are likely well below what you’re calling the “Happy Meal Houses.” There would be little no market for the style of house, townhouse or condo today as new construction.
The same thing can carry through to platting. I’ve not seen an approved plat with this condition, but it’s possible that a plat was approved with lots or a style of housing that simply would not be marketable today. Assuming the changes needed don’t require changing any road locations, it could probably be re-platted fairly cheaply, but my point is the low low end of 2007 doesn’t even exist today in new construction.
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By corndogs @ 32:
I don’t entirely agree with your post, but you do raise a good point here. To the extent someone can sell without doing a short sale, they may be very likely to also buy. So that would contribute to more sales volume, but not really more inventory (or at least long term inventory).
Back in April when I wrote the Significant Market Shift blog piece, our move-up buyer was buying their new place and had their old place under contract before the new place even closed. They contributed to inventory for about a week, but prior to doing that they took one place off the market, so arguably the net result was zero (ignoring the multiple offers on the new place). But for the sales volume, they contributed to two sales.
http://www.trulia.com/blog/kary_l_krismer/2012/04/significant_market_shift
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RE: Kary L. Krismer @ 26 – I didn’t say you can always short sell. i said you can always short sell or walk away, which remains a true statement. There are tax consequences for any transaction. Including a legit sale so i don’t think that’s a major factor. The big factor you mentioned is the credit. Holding on to maintain the credit would be a strong indication that a person intends to buy again in the short term…. which supports my argument. Even if people are ‘priced in’ it isn’t affecting inventory… the people who are holding out, most likely intend to buy again. -1+1 =0
Inventory increases when people leave ownership with bad credit and cannot repurchase… this is countered by investors who buy multiple properties at huge discounts. It’s a pretty simple concept… and pretty well documented.
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RE: corndogs @ 36 –
Can you explain to me “this is countered by investors who buy multiple properties at huge discounts.” Specifically the part about huge discounts, because i don’t see investors getting huge discounts.
If banks would have been aloowed to fail, if the foreclosure process would have been allowed to work, then yes maybe huge discounts would have been possible. The way it is now the Real Estate market is artificially propped up by government, and bank manipulation.
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By corndogs @ 36:
That’s why I dealt with both. You can’t always sell short, but you can always let a property go into foreclosure. There might be consequences to that though.
As to the tax ramifications, selling short might have worse tax consequences than a foreclosure. I’ve been looking into tax issues lately, and what’s surprising is the different positions some tax preparers take as to relatively common events, like foreclosures. Some will report the entire transaction as entirely gain on a sale, while others will report it as gain on a sale and cancellation of debt income. Some probably report it however it comes out better for the particular client. Apparently it has to do with the same controversy over recourse/non-recourse status of our deeds of trust in this state that we’ve discussed before.
But more to the point, what I was noting is that you might not want to do a foreclosure because of the tax consequences. Continuing to make payments might be a better option than suddenly owing the government $20,000 which cannot be discharged in bankruptcy for 3+ years. Then there’s also the possibility that your financial situation is such that the bank might judicially foreclose. Yet another reason why someone might not want to just let the property go.
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RE: David Losh @ 37 – David Losh said… “Can you explain to me “this is countered by investors who buy multiple properties at huge discounts.” Specifically the part about huge discounts, because i don’t see investors getting huge discounts”.
Reference previous posts regarding case shiller lower tier housing prices following the market peak. If you can’t bring anything away from that, I can’t help you.
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RE: corndogs @ 39 – A better answer would be some of the entities have apparently been selling properties in mass to investors. I’ve not followed that other than what I’ve read about it here. I’m not sure any of that is local.
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RE: Kary L. Krismer @ 38 – Well, I guess you’d need to talk to a lawyer and accountant in each case. The one person I know who got foreclosed apparently had no equity and no tax ramifications according to them. They had a second mrtgage and that was sold to a guy who pursued them in court and they had to file bankruptcy.
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RE: Kary L. Krismer @ 40 – Right, I was going to mention that if there is anything ‘fishy’ going on with the banks along the lines of covert operations. Maybe we will find that huge bundles of properties are being packaged and sold to investors…. I haven’t tried to research that much yet.
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RE: corndogs @ 41 – Just having no equity doesn’t mean there are no tax ramifications. But yes, talking to an accountant is a good idea.
Back before the 250/500 exclusion for gain on the sale of a residence, people used to avoid gain on the sale of their residence by buying a new house and rolling the basis of their old house over into the new house. That meant a lot of people would have debt in excess of basis, and if they had a sale of their residence without a new purchase (e.g. a foreclosure situation), they would have a tax hit. I once had a client who had about a $40,000 tax hit from such a foreclosure sale, which occurred only a few months before the law changed. If she had seen an attorney prior to being foreclosed, it’s possible something could have been done to avoid that result.
As to your friend, as I just mentioned to Losh, discharging that second mortgage in bankruptcy would not be a taxable event (although it could cause tax attributes to be adjusted, if they have certain tax attributes). As to your friends, it’s possible that some combination of exemptions kept them from having any tax liability.
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By Ira Sacharoff @ 5:
Agree, and a major reason why I have let go of any idea of buying in the near future. Dirty renters rule!
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I did some spot checking of homes for sale that expired or cancelled in 2008. A fair amount of them sold in 2011 and 2012. A few of them sold in 2009 and 2010. Several that were rented in 2008, 2009 and 2010 sold in 2011 and 2012, but some never came back on market. Apparently some people rented a house they would buy, and then bought it when the time seemed right, without moving. Somewhat like a silent lease-purchase.
It’s easy, though painstaking, to track the exact answer to the question:
“I’ve got to ask this because it seems nobody else is asking. We know that just 3-4 years ago there was a surplus of homes on the market. We also know that in the last 3-4 years home sales have remained relatively low. So where did all those homes for sale go? Did they all just magically vanish because they didn’t sell? Where did all the inventory go?”
The records are all there. You just have to narrow it down to your area of interest to get the answer. In fact back to David Losh’s “find a house that isn’t for sale” strategy, it is very common for agents to find their clients a home by searching the expired and cancelled listings. Theory is that if they once considered selling the home, they may be amenable to a private transaction. The lower commissions of a private transaction can often put everything together when “the open market” could not.
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RE: corndogs @ 39 –
I really can’t take anything from that. $200K being a base price for in city property is a throw back to 2004, nothing more. I don’t see huge discounts. I see very tight margins for flippers who are selling to people who pay way too much for a property.
I see spot lots at $150K, but also flippers taking those to sell to unsuspecting buyers.
I also see a lot of would be land lords loading up on crap property to take advantage of these “high rents.”
When the market for rentals begins to correct, because the rental market can, and does, correct more quickly than the housing market, those land lords will be stuck with crap.
It’s a fifteen to thirty year gamble. I don’t see Real Estate coming back the way it did after the VA purcheses after WWII, or recovering from the Savings, and Loan scandal that morphed into a stock market bonaza, that in turn turned from recession to a tech bubble.
That should cover you for the past thirty years of Real Estate appreciation, but the future looks much different.
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RE: ARDELL @ 45 –
Let me also add that there are properties that could be had with creative financing that would not include a Real Estate commission. If you wanted to talk about the past that is what happened in previous recessions. Attorneys can make great Real Estate agent alternatives, but most people don’t see that.
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By ARDELL @ 45:
It’s probably much more common for agents to use that information to attempt to list the house under a new listing, but what you describe does happen. They may even go through the listing agent if they have a buyer.
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RE: ARDELL @ 45 –
You, know this is why I like reading your comments, I wonder what happened to all of those lease purchase agreements that got written in 2008.
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RE: David Losh @ 37 – forget about the word huge David. Obviously, whatever example I’d pick wouldn’t be huge by your definition. Just stick with the main argument i made. Which is inventory has dried up at the moment due to investor activity, which was in contrast to what the Tim suggested…. I have no desire to help you get the ‘Losh Pit’ of unorganized ideas thrashing around and spewing out of your cranium.
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By David Losh @ 49:
LOL.
For those who don’t recall (or never knew) that was one of Ardell’s ideas where having two attorneys (Craig and myself) tell her it was not a good idea didn’t deter her. I imagine those stupid enough to use such a tool had them fall apart, either due to financing or “buyer” default due to lower prices. At least that would be for the lucky sellers. The unlucky sellers probably had to do contract forfeiture actions, which are similar to judicial foreclosures.
http://raincityguide.com/2008/09/06/might-lease-purchase-be-this-markets-il-salvatore/
David, were you purposefully trying to bring that topic up?
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RE: corndogs @ 50 – Hey it’s been at least 24 hour since you told us how much you made last year, what a great deal you made on your house, how smart you are, how anyone that disagrees with you is stupid, what a great guy you are, etc. Could you please tell us again since we peons have short memories and we believe anything we are told?
I am disappointed since it is summer and you have not even invited the bubble crowd over for a barbecue where you could show off your wares and we could sample them. You could really make us feel small, stupid and insignificant and we could all bow down to you……..
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RE: Kary L. Krismer @ 48 –
Unfortunately many agents lie and say they have a buyer when they are only trying to get the listing. That makes it harder when you have an actual buyer who is interested in the house, but I usually do OK with it. People tend to believe me.
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RE: David Losh @ 27 –
Have a deep breath, Dave. Houses on your street that “could” become an inventory, ain’t yet an inventory. It’s like money you have not yet made, Dave – It’s not yours yet. The same concept with inventory. If it’s not yet for sale, it’s not the inventory. Cabish?
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RE: Jonness @ 25 –
Low inventory and rising prices are a sign of market weakness. You just pulled a Losh, Jonzo.
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By Kary L. Krismer @ 30:
That’s odd. I’ve been looking at a lot of land lately. But I’m finding I can get better land with a house for not much more than the sellers want for just raw land. Perhaps, I just haven’t seen any of your listings. Can you link a dozen or so of your listings for lots in the Seattle area (not the burbs please) where the owners have put in improvements that cost more than what they are asking for the land? I would like to buy a couple of these properties.
http://blogs.wsj.com/developments/2012/07/25/land-problem-weighs-on-new-home-sales/
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By 2kt @ 55:
You can’t possibly be that ignorant. But just in case, give Jerry Springer a call and ask him if he could use you on his show.
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wouldn’t a lot of folks who manage to sell their homes and protect their credit have learned enough to not go back in and buy (for a while, anyway)? then it wouldn’t be true that 1 + 1 = 0 in the short term?
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By Jonness @ 56:
You’re making two rookie mistakes here.
1. Relying on list price some sellers are asking to determine price. That’s particularly a problem with land, where many owners will be trying to sell their land for years at unrealistic prices.
2. Relying on the press to tell you what’s going on in real estate.
I will say though it’s also possible that the price of land has recovered. What I’m referring to is what I’ve seen for lots which have already been developed. And I’m talking about buying larger groups of lots, not just one lot.
Part of this though will depend on what area you’re looking in. Please narrow it down.
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By rmid @ 58:
One of the reasons some people want to do a short sale is so that they can be able to buy a new house sooner relative to a foreclosure. So they haven’t even ditched their old house, which they are selling at a loss, and they’re contemplating their next purchase!
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RE: Kary L. Krismer @ 51 – Wow, four thumbs down pointing out a bad idea Ardell had at a really bad time (right before the financial crisis hit in 2008), that David still thinks was a great idea, because it’s something Ardell thought of? Do any of you people do your own thinking?
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By Jonness @ 57:
I’m going to side more with Jonness on this one, given the limitations of his arguments in post 25 (the first part of which I disagreed with). Low inventory exists because of an increasing number of buyers, but it also exists because many sellers feel they can’t sell. That’s largely the fault of the banks in still not processing short sales properly, but that’s our market.
On the other hand, part of the low inventory is due to relatively few bank owned properties, and part of the reason for rising prices is increasing sales of non-distressed properties. Those both indicate market strength. Also, Jonness mentioned needing buyers to feel the current price “bodes well” for them, and I think that does exist today.
So this is a mixed bag. Neither side is entirely right.
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I sold my home and will rent for a year. These prices are too high in the Seattle limits. Thanks for all your insights here on the blog. I cannot bring 20% to the table.RE: Sweet Pea @ 44 -
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By Kary L. Krismer @ 61:
People have sold houses using lease purchases. It wasn’t Ardell’s idea, and David didn’t mention Ardell’s Rain City Guide post, you did.
So…I don’t think you got thumbs down for the content of your post as much as people thought you were finding an excuse to bash Ardell. Not that people here think Ardell is the bastion of accuracy, just that when you bring her name up and point out how wrong she is, people are praying that she doesn’t respond ,and hope this will not erupt into another flame throwing, name calling war.
A certain amount of disagreement is to be expected on any blog and it’s a good thing to see others viewpoints, but you guys raise it to an art form.
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RE: 2kt @ 55 – RE: 2kt @ 54 –
It’s all inventory, on the market, off the market, or in between.
Real Estate agents work in the market place.
Do you think Real Estate agents invent inventory? Do you think Real Estate agents create inventory? Maybe builders are creating inventory. Yeah, that’s the ticket, builders create inventory for when the buyer decides to buy. It’s just good business that if you build it they will sell.
A buyer, any buyer, with money, and a down payment can find a deal, or an agent who will do a deal for them.
If you want to stare at your computer screen all day, and jump when the odds are against you, go ahead. You’ll pay a premium for that, you will settle for less, but hey, we are here to prop up Real Estate prices for you.
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RE: 2kt @ 55 –
You did get this part correct, it is a very weak market.
People are paying ridiculously high prices for property because they are waiting, on the internet, for that perfect home to pop up, that meets the needs. It’s a questionable way to buy a property.
Sellers have benefitted from this market place for the past five years. If you sold congatulations.
If a buyer appraoched you and were going to give you the gift of cash, you should have taken it, and been extremely grateful. Anything you got in 2008 was more than you got in 2009, and so on.
The price of property will continue to decline, and the people paying mortgages are stuck with a mill stone. It’s debt, just debt, and in this country, thank goodness we have foreclosure, and bankruptcy. In Europe they are still on the hook for the debt.
The real question is if the banking system will survive. Will banks be making loans five years from now? Will banks be making any loans five years from now, or will our banking structure change.
Those are the only questions you should be concerned about, because if banking fails, the price of property falls like a rock.
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RE: Jonness @ 57 –
You are a shining light. A computer programmer that knows how to use charts in Excel. A rarity, indeed.
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RE: David Losh @ 66 –
A rambling note that has no connection between different parts. A typical Losh. Dave, I am sorry, but your posts make little sense.
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RE: 2kt @ 68 –
careful treading when entering the world of David because there is surely no escape!
Davids posts do make sense, in his OWN MIND! They maybe voices that are being transcribed, but nonetheless as long as Dave believes in what he is writing then they make tremendous sense.
Now, Dave…………………….continue.
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RE: ray pepper @ 69 –
I know. I am insane since I keep trying the same thing over and over. How are things in a great Pepperstan?
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RE: 2kt @ 70 – RE: 2kt @ 68 –
You’re not saying anything. If you want to prove me wrong, go ahead.
It’s all inventory. It’s a matter of price, terms, and conditions.
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RE: ray pepper @ 69 –
Well, yeah, for you none of what I say makes sense.
You have an extremely expensive Brokerage business model that says we promise to do less, and charge you less.
What I like about you is that you are honest about your business model. You tell people to educate themselves, and not rely on your guidance.
No offense meant, but there are Real Estate agents that bring a lot to the table, well worth the measly commissions they earn.
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RE: David Losh @ 72 –
Can you please tell me what real estate agents “bring to the table” that warrant a 6% or as you are touting 7%? Don’t tell me CMA’s because we all know the banks dictate the value of what they will lend. Home inspections, title, escrow, appraisals, are all done by neutral third parties so what exactly are YOU blowing 6-7% on?
Tours? I hope not. Nobody has Agents find homes for them anymore. Advice? I hope not. There is been far too much of that given this decade and you would be better off following the advice of the 76 year old woman making scones under the Grand Stand at The Puyallup Fair.
Please tell me what you are proposing people should pay 6-7% for in a Real Estate transaction? I consider it the BIGGEST RIP OFF we have today based on all the technology and information that exists readily at the fingertips of consumers. But, please describe SPECIFICALLY what is worth 6-7% ?
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RE: David Losh @ 71 –
It’s a simple thing, compadre. Homes currently available for sale are called inventory available for sale. Note the key here – “inventory available for sale”.
The rest of homes out there, whatever and wherever they are, may or may not, become “inventory available for sale” some day. Note “may or may not” part of this, Dave.
Shadow inventory, bank inventory and any other inventory is NOT “inventory available for sale”, dude. Now tell me about them banks, crooks on Wall Street, unions that make the life a true blessing, or even free health insurance. I am willing to listen to all, but they are NOT inventory available for sale.
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By Kary L. Krismer @ 59:
Wrong! I always check neighborhood comps and compare it to time of year, length of time on the market, current market dynamics, etc. when estimating the cost I would need to pay to secure a piece of land.
Wrong! I have actively tracked every single listing for seven years in the county where I plan to purchase. As a professional data analyst, I have access to many tools and techniques not available to real estate agents and real estate lawyers. This provides me an extreme competitive advantage when it comes to understanding cost structures, market dynamics, and entering into business negotiations.
I would point out the mistakes you’ve made, but I don’t feel it’s relevant to the conversation.
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By 2kt @ 67:
Actually, I’m a professional data analyst, but I suspect you lack enough knowledge in the field of BI to discern a difference.
Most of the people here formulate their answers, and then attempt to make the data fit what they want to believe. As someone who analyzes data patterns for a living, I will say, there are a couple of people here who possess decent gut instincts. With enough time, I could turn them into decent analysts. The the rest are completely clueless when it comes to analyzing data and have no natural talent in the field. But I suspect these people have plenty of talent in whatever field they work at for a living. For most people here, that’s sales. Personally, I suck at sales. I guess it goes to show why we all gravitated toward our current professions.
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RE: David Losh @ 72 – Most real estate agents aren’t any better than the Avon lady or the kid selling t-mobile phones at the mall…. No education, no money in their pocket… just somebody’s wife trying to make a few bucks…. David…. that’s you dude… sorry!
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RE: Jonness @ 76 – When you say you’re a professional, what is your degree in?… I’m not feeling it.
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RE: Pegasus @ 52 – RE: corndogs @ 50 – Hey it’s been at least 24 hour since you told us how much you made last year, what a great deal you made on your house, how smart you are, how anyone that disagrees with you is stupid, what a great guy you are, etc.
I would be glad to comment about how stupid you are…. first you need to attempt to say something meaningful about real estate….. that of course would inevitably be stupid and then I could respond accordingly. Quit Loshing with me dude… get serious!
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By David Losh @ 71:
I proved you wrong in another thread. You called it BS because your incapable of understanding.
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By ray pepper @ 73:
David often says things that make me question his really being an agent. But this time it’s you!
You really think a buyer should rely on an appraisal to make sure they are not paying too much? The appraiser knows the contract price going in, and in today’s market very often that’s exactly the value they find the property to be worth. Relying on an appraiser is giving yourself a false sense of security.
As to what does a full service agent get you? This is from the buyer’s side, but how about:
1. Previewing houses during the day so clients can look at the best new listings after work the first day on the market.
2. Drawing up contracts on the promising houses before the client even sees the house, if necessary, so that they can make on offer that same night.
3. Having a quality offer that wins over another higher bid for the same property that comes in the next day, before the seller has decided on the offer I wrote.
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RE: Jonness @ 75 – You still don’t indicate the area that you are describing so that I can try to find some properties that sold cheaply.
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By Ira Sacharoff @ 64:
Not a lease with an option to purchase. A lease/purchase.
A lease/purchase is exclusively Ardell’s idea, as far as I know. I’ve never seen or heard of such a device any place else but RCG. And for good reason–it’s an extremely risky transaction for both sides, basically a make-shift real estate contract with a balloon payment due within a short period. It’s also expensive legally, both getting into it and getting out if things go bad, because it’s not a standard transaction with standard forms.
The reason I brought it up was it was the Trifecta of what’s wrong with agents and the Internet. David brought up something Ardell suggested on the Internet which was extremely risky, but that she refused to admit the risk of in her typical fashion. And this is the same Ardell who agent who thinks she can predict the future on the Internet, suggesting such a transaction at a point in time when the economy was on the edge of total collapse, which made it even more risky for both sides. And finally David taking the bait hook, line and sinker simply because it was something Ardell suggested on the Internet.
Not to say some seller couldn’t have actually tried a lease purchase back in 2008 and had it work out. Of all the cars I’ve owned the most reliable one was a Fiat X/1-9. Stats only determine probabilities, not necessarily the outcome for every single person.
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RE: Kary L. Krismer @ 83 –
I purchased my current home 20 years ago with a lease purchase. It worked out brilliantly for us because after the 18 month term our down payment was met and all that needed to be done was close in escrow. On top of that we went from a 14% mortgage to a 3.5% mortgage which was a bonus for us at the time.
Yes, there are risks involved, but pretty minor in my opinion. If we couldn’t get financing the deal would be dead.
For the right seller and the right buyer this could be a win win.
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RE: Julie Lyda, RE/MAX Northwest Realtors @ 84 – Lease purchase or lease with an option to purchase? What David referred to was the idea that Ardell came up with for the former.
And again, I’m not denying it can work–only that it’s more risky for both sides. But even a lease with option to purchase would not have likely been good for a seller in September, 2008.
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RE: 2kt @ 74 –
Everything is for sale, it’s a matter of negotiation, and finding the motivation.
Oh, alrighty if you want to stick with what is currently on the Multiple Listing Service go ahead. Real Estate agents will continue to beat the brush for you.
You should be thankful for that.
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RE: corndogs @ 77 –
I’m a guy who knows enough to stay away from Real Estate because the market place is completely screwed up. The only thing I can tell any one, is if you own property you should get rid of it.
How do you think that plays out in the world today?
So yes, I mess my $60K a year from Real Estate transactions, for myself, and others, but it’s no big deal, there is always more money.
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RE: ray pepper @ 73 –
and for you Ray?
The Real Estate commission is the cost of doing business, and the business is about making money.
You charge a lot of money as a write ‘em up Real Estate business model, and that is the choice the consumer has to make.
I know a good deal when I see one, and have the ability to negotiate through to closing a good deal.
I also know when to sell. Now is a time to sell.
A lot of people have argued with me over many ups, and owns, in the Real Estate market place. I have been lucky to buy well, and sell well, and my clients, I had six, also made money.
So I understand your business model, but I pick, and stand behind what is, and what isn’t profitable.
In the case you presented on Eastern, the agent got your client to pay an obscene amount of money for a questionable remodel job. I think that was well worth the measely $17610 she was paid. On the other hand you wrote ‘em up, but they had problems, so yes, I can see where that could be worth less than the other side.
An agent gets paid to know the trade.
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RE: Kary L. Krismer @ 85 –
Our purchase was a “straight lease purchase with an 18 month term”. Not a lease with option to purchase.
We also went out on a limb and gave the seller a $10K non-refundable deposit/down payment. You can talk about the risk on that one on another day :)
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Is it possible Kary and David are the same person?..or quite possibly Tim these are fictitous people that have been developed in your own mind. ………….Tim…Please check for me or fess up…….IP address?…something? ….
The distortion of rational thought is making me believe they are both shills to make threads longer, increase response rate, and cause me to slow down to read their responses sometimes 2-3 times to keep me on the Bubble instead of going to tube8.
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Is it possible Kary and David are the same person?..or quite possibly Tim these are fictitous people that have been developed in your own mind. ………….Tim…Please check for me or fess up…….IP address?…something? ….
The distortion of rational thought is making me believe they are both shills to make threads longer, increase response rate, and cause me to slow down to read their responses sometimes 2-3 times to keep me on the Bubble instead of going to tube8.
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Is it possible Kary and David are the same person?..or quite possibly Tim these are fictitous people that have been developed in your own mind. ………….Tim…Please check for me or fess up…….IP address?…something? ….
The distortion of rational thought is making me believe they are both shills to make threads longer, increase response rate, and cause me to slow down to read their responses sometimes 2-3 times to keep me on the Bubble instead of going to tube8.
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Is it possible Kary and David are the same person?..or quite possibly Tim these are fictitous people that have been developed in your own mind. ………….Tim…Please check for me or fess up…….IP address?…something? ….
The distortion of rational thought is making me believe they are both shills to make threads longer, increase response rate, and cause me to slow down to read their responses sometimes 2-3 times to keep me on the Bubble instead of going to tube8.
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By Jonness @ 75:
As a professional data analyst, what value assumption do you place on your time?
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RE: ray pepper @ 93 – http://www.hark.com/clips/ygmhswwswk-brown-acid-warning
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RE: Jonness @ 25 –
Builders do make money at current land prices, else, the banks would not lend to them.
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RE: Jonness @ 76 – RE: Jonness @ 76 –
Oh, here’s another extrapolator extraordinaire. When you are old enough, you will know that chart-based price prediction works, until it does not. I recall you predicted growing inventory and continued price declines into many years into the future. Life can’t always be charted.
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By 2kt @ 96:
It occurred to me that the difference in what Jonness is seeing and what I’m talking about is that he may be talking about trying to find a place where he actually wants to live, where I’m talking about a place where a builder would simply want to build and then sell to others.
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By Kary L. Krismer @ 81:
Gee, do you REALLY believe that’s worth 6-7% of the transaction? Either of us must be crazy. REALLY CRAZY….
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By Jay @ 99:
Well, first, it’s typically 3%.
Second, if you want to buy a property, saving 1% but not succeeding buying a property after looking at many properties really isn’t a good thing. It’s called wasting your time. Also, if you end up paying more than you had to, that’s not a good thing.
The last contract I won in a multiple offer situation my offer was reportedly over 2% less than the competing offer. One of the first multiple offer situations this year it was over 5% less, and I advised my client against increasing their offer by $10,000. But hey, if it makes you feel good to get a 1% rebate, regardless of the results, take the 1% rebate.
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