Friday Flashback: “The real risk is in waiting to buy a home”

Today’s flashback comes at you from January 2007, when Samuel L. Anderson, executive officer of the Master Builders Association of King and Snohomish Counties penned this free advertisement er, I mean insightful “opinion piece” in the Seattle Times: Local housing market resilient (emphasis mine).

Samuel L. AndersonThe media have been all abuzz over the past year about the softening in the housing market. … At the same time, local analysts point out that even though home sales in the greater Puget Sound region have slowed, now is still a good time to buy a home, particularly in our area.

What does this slowdown really mean for consumers? Is it wise to sit back and wait for a home in the hopes that prices may drop? Most real-estate experts in our region say don’t bet on it.

The reality is that in a softer real-estate market, buyers are now in the driver’s seat. Prices are competitive and interest rates have held steady at near-record lows. Today’s low rates give first-time homebuyers a golden opportunity to begin building household wealth.

In today’s housing market, the real risk is in waiting to buy a home.

Unlike some cities where the real-estate market is in a slump, the Seattle area is healthy and analysts feel certain it will stay that way. As a result, the deep discounted prices some consumers have been hoping for simply won’t be happening here.

For consumers sitting on the sidelines, the bottom line is simple. Homeownership is always attractive. Besides being a stepping-stone to a future of financial security, homeownership provides a sense of community and personal satisfaction. In fact, studies show that homeowners are more content with their lives, enjoying a stronger sense of belonging and increased activity in community groups.

The above nonsense was published just six months before Seattle-area home prices began a two-and-a-half-year (so far) slide. According to the Case-Shiller Home Price Index, Seattle-area prices have fallen 21% since Mr. Anderson penned his screed declaring it a great time to buy a home and “build household wealth.” I have a feeling that anyone who took his advice is not quite as financially secure today as he led them to believe they would be.

If you’re curious what I had to say about this article when it was published, check out my original post here, but be warned that it’s basically just a sarcastic dismissal, because honestly that’s all the response that tripe like this really deserves from anyone.

The purpose of our Friday Flashback series is to remind people why it’s never a good idea to base your home purchase decisions on the word of someone with a vested financial interest in selling as many homes as possible for as much as possible, no matter what. If you’ve got a good example of local home salespeople or other industry shills on record making fools of themselves in the years before the bubble burst, shoot me an email.
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About The Tim

Tim Ellis is the founder of Seattle Bubble. His background in engineering and computer / internet technology, a fondness of data-based analysis of problems, and an addiction to spreadsheets all influence his perspective on the Seattle-area real estate market. Tim also hosts the weekly improv comedy sci-fi podcast Dispatches from the Multiverse.

28 comments:

  1. 1
    Patrick says:

    My favorite part is this: “In fact, studies show that homeowners are more content with their lives”

    Anytime someone says “studies show” and doesn’t cite references, you know they’re pulling it out of their as*. Buying homes brings you life happiness!

  2. 2

    Great Article Tim

    Especially with Goldman Sachs accused of fraud today. My only real horrification with the bad calls and misleading advice by real estate professionals finally getting court attention is why this Goldman Case is a civil and not a criminal lawsuit.

  3. 3
    anonymous says:

    RE: softwarengineer @ 2 – You know why.

  4. 4
    Tim says:

    Ridiculous.

  5. 5
    BacktoBasic says:

    The risk is not to pick a good deal at a desiable location. I don’t want to repeat this twice. Location means close to major employment center, good school, good neighborhood. As economy recovers, people waiting on the side line will fight to grab properties in the area if the price is right. The stock market has already complete it’s 1st wave of recover, this is the prelude of economy recovery. Of course, you can never always get to absolute bottom. But you don’t want to ingnore the recover signal all together. A housing is a personal lifestyle as well as investment. Pick one you can afford and plan to live there for a while. Be diversified with your money, Just don’t put all your eggs in one basket including Tim’s word.

  6. 6
    ray pepper says:

    Is it the hair? Or is the smile on this guy that gives me the willy’s?

  7. 7
    Tim says:

    I dunno. Guy looks completely trustworthy to me.

  8. 8
    joe dirt says:

    Benefits to those who bought early:
    nothing down
    bigger loan
    low interest rate locked in or even reduced (regardless of original terms)
    principal reduction
    legal services when payments skipped
    no “deadbeat” stigma or credit hit when payments skipped

    As you can see, waiting to buy, was risky.

  9. 9

    RE: ray pepper @ 6

    I Agree With You

    He looks like one of the organized crime guys in Vegas or a swindling used car salesman telling you to step up to the table or sign the contract now, I betcha he has a gold chain and three gawdy looking rings….Rolex too.

  10. 10
    CCG says:

    By joe dirt @ 8:

    Benefits to those who bought early:
    nothing down
    bigger loan
    low interest rate locked in or even reduced (regardless of original terms)
    principal reduction
    legal services when payments skipped
    no “deadbeat” stigma or credit hit when payments skipped

    As you can see, waiting to buy, was risky.

    In today’s America, the real risk is not being a criminal.

  11. 11
    Cheap South says:

    Last time I saw Erik Estrada, he was pushing lots in North Carolina.

  12. 12
    deejayoh says:

    just for fun, went to http://www.nwhomefacts.com/ (run by the MBA) and checked out the latest “news you can use” stories!

    Construction jobs in state fall 18.4% in past year
    Seattle’s office towers stop getting emptier
    Mortgage rates fall after rising 4 straight weeks

    Oops! RSS feeds run amok! those were sposta be happy stories!

  13. 13
    One Eyed Man says:

    RE: ray pepper @ 6

    It’s not just the smile, its the fact that they cropped the picture so you can’t see the new home buyer bent over in front of him. In the original there’s a blank spot that says “your picture here” so they can photo shop you in after you by the house.

  14. 14
    HappyRenter says:

    By joe dirt @ 8:

    Benefits to those who bought early:
    nothing down
    bigger loan
    low interest rate locked in or even reduced (regardless of original terms)
    principal reduction
    legal services when payments skipped
    no “deadbeat” stigma or credit hit when payments skipped

    As you can see, waiting to buy, was risky.

    Add to that free rent once you stopped paying the mortgage.

  15. 15

    RE: One Eyed Man @ 13
    I’ve met more than a few real estate scumbags who looked pretty similar to that guy. They’re usually teaching seminars in things like ” how to get rich in a down market” or ” How to profit from foreclosures” or ” You too can buy a mansion with no job and no money down!”

  16. 16
    Everett_Tom says:

    Turns out this Dude didn’t stop there…He’s got a Twitter Feed:
    ( http://twitter.com/mbaceo )

    with gems like

    # Reuters article says housing bottom is near, if not already there. http://tinyurl.com/dadfcg 11:08 AM May 4th, 2009 via web

    and

    # Jim Cramer of TheStreet.com says housing market has hit the bottom. http://tinyurl.com/d3lf6j 9:26 AM Apr 17th, 2009 via web

    and

    # Trying to figure out ways to help home buyers take advantage of this market with record low interest rates, price reductions and supply. 10:28 AM Feb 12th, 2009 via web

  17. 17
    akfish says:

    Add to that free rent once you stopped paying the mortgage.

    RE: HappyRenter @ 14

    Zero down, with a low interest-only loan => capped risk (only the monthly difference in price between renting and buying). If prices go up before your loan resets, you keep the profit, and the sky’s the limit! If prices go down, your principal is lowered to match, or you can just walk away. If all else fails, it’s not like there was a downpayment to lose, so again… low risk, high potential benefit.

    The more responsible the loan was, the more there was to lose: anyone who put 20% down in 2007 lost their downpayment in falling equity.

    Game theory would suggest that making risky purchases in this case is a rational behavior.

  18. 18
    buystocks says:

    By BacktoBasic @ 5:

    The risk is not to pick a good deal at a desiable location. I don’t want to repeat this twice. Location means close to major employment center, good school, good neighborhood. As economy recovers, people waiting on the side line will fight to grab properties in the area if the price is right. The stock market has already complete it’s 1st wave of recover, this is the prelude of economy recovery. Of course, you can never always get to absolute bottom. But you don’t want to ingnore the recover signal all together. A housing is a personal lifestyle as well as investment. Pick one you can afford and plan to live there for a while. Be diversified with your money, Just don’t put all your eggs in one basket including Tim’s word.

    Can you repeat that again…

    Regarding the stock market, we’ve been in a secular bear for a decade now. So can’t really use where it is to justify any argument.

  19. 19

    RE: Everett_Tom @ 16 – Re: Cramer. That scares the hell out of me. See the second to last comment here, from September, 2007.

    http://raincityguide.com/2007/09/27/jim-cramer-says-dont-buy-nowexcept-for-seattle/

  20. 20
    wreckingbull says:

    Can we have a Friday Flashback dedicated to Mack McCoy from the moribund PI blog? I’ll bet you could find some great podiagastronomical quotes in their archives.

  21. 21
    S. Marty Pantz says:

    Has anyone, anywhere, in any medium, asked Mr. Samuel Anderson to comment on his past prediction (quoted here); or to provide his prognostication on the local housing market from 2010 on?

  22. 22
    BillE says:

    I think the Friday Flashback is a nice edition to the site.

  23. 23
    BillE says:

    RE: deejayoh @ 12 – More “news you can use” headlines:
    Mortgage rates, poised to change, could torpedo housing’s rebound
    Program to help rural homebuyers is nearly broke

    And this dandy from the “Current Market Trends” section:
    “Sellers are eager to deal and experts predict that buyers who wait, hoping for even lower prices, could end up paying more should interest rates rise. If the house you purchase costs less but your interest rate is higher, the interest rate you pay could wipe out any potential savings from that lower sales price.”

    So what they’re also saying, is that if you buy now you could be underwater later or be out your down payment?
    http://www.nwhomefacts.com/LearnbrsmallTheFactssmall/CurrentMarketTrends/tabid/74/Default.aspx

  24. 24
    Jonness says:

    By ray pepper @ 6:

    Is it the hair? Or is the smile on this guy that gives me the willy’s?

    Is it a wig, or is that real hair?

  25. 25
    BillE says:

    I think he looks like Ron White. Put a glass of gin in one hand, a cigar in the other, and he’d be a dead ringer.

  26. 26
    Jonness says:

    By joe dirt @ 8:

    Benefits to those who bought early:
    nothing down
    bigger loan
    low interest rate locked in or even reduced (regardless of original terms)
    principal reduction
    legal services when payments skipped
    no “deadbeat” stigma or credit hit when payments skipped

    As you can see, waiting to buy, was risky.

    Benefits to those who bought when 95% of the RE agents were claiming buy now or be priced out forever, even though it was obvious now was a terrible time to buy:

    -Owing more on the house than it’s worth
    -Too much leverage means no more eating out or birthday presents for the kids
    -Retirement at risk because all excess money goes to interest on debt
    -Massive stress from barely making monthly bills
    -Friends who rent have ski boats, but your car payment is late
    -In 10 years you’ll still owe more than the house is worth
    -Low interest rate means you paid more for house than it is worth
    -Wife is on the verge of leaving you because she believes you are a stupid moron for buying such an expensive house
    -Self esteem is in the toilet
    -Contemplating suicide for being dumb enough to believe a salesman with a vested interest
    -Realizing the low scores on IQ tests back in highschool were accurate representations of your ability.
    -Realize you must eventually default and file bankruptcy but you are too wore out, broke, and exhausted to go through the phone book and hire a lawyer.
    -Hoping Santa will come down the chimney and rescue you from the nightmare.
    -Can no longer get chicks because you refuse to pay for gas and dinner.
    -Food stamp credit card maxed out first week of month from buying fancy meat cuts. Must live 3 more weeks on Top Ramon before you get a refill.
    -Can no longer cash in paper food stamps at a penny over a dollar and get 99 cents back to buy beer.
    -Waterpump went out in car, but you can’t afford to fix it.
    -Took bus to gas station you work at, and big mean person took your wallet.
    -Fat chick paying for her gas was obviously trying not to stare at your bald forehead.
    -Water heater in house leaked all over fake wood floor and warped it terribly.
    -Couldn’t afford to fix leaky roof, and now you have toxic mold in your bedroom.
    -Starting to become jealous of those who own 10×52′ trailers on rented lots.
    -Realizing those who live in 10×52′ trailers on rented lots were the ones who scored high on highschool IQ test.
    -and last but not least, after having enough, you decided to ram your car into your house rather than let the bank have it back. You’ve been arrested and will spend years in jail.

    http://www.springfieldnewssun.com/news/crime/homeowner-rams-house-with-his-car-sheriff-says-653467.html

    Sorry to anyone I accidentally offended. It’s meant in good fun. :)

  27. 27
    Jonness says:

    By One Eyed Man @ 13:

    RE: ray pepper @ 6

    It’s not just the smile, its the fact that they cropped the picture so you can’t see the new home buyer bent over in front of him. In the original there’s a blank spot that says “your picture here” so they can photo shop you in after you by the house.

    One eye, that is completely hilarious! Your description perfectly matches the demented smile.

  28. 28
    Buy My House, Idiot Renters! says:

    “Can we have a Friday Flashback dedicated to Mack McCoy from the moribund PI blog? I’ll bet you could find some great podiagastronomical quotes in their archives.”

    Let me hear ya say Ya-ay!

    Mack be representin’
    Seattle Shoreline Downtown Edmon’
    Don wanna hear no blowin’ o’ no bubble
    Don wanna be inna middle o’ no trubble

    Think all the hobbyist
    Need to get ’emselves a life
    Know they ain’t experts
    But they preachin’ like dey right

    Life ain’t like a college playground
    Can’t be passin’ reefer ’round
    Go on talkin’ bout da Man
    And you ain’t even got a plan
    Ain’t got no dollas in yer pocket
    Us pros been makin’ cheese like Wisconsin

    Say you been trackin the stats
    I been out in the the world makin the stats
    Workin all day while you sit home and play
    You think you know the market
    Your money on your hip
    I be workin wit players
    Workin the game while you be spinning your lip

    Renters be payin’ my mortgage I got ta thank ya all
    But when you gonna add to your own bankroll
    I lived seventeen years in a Ballard house
    Walked away with three hundred thou quiet as a mouse

    Twenty-four thousand a year you pay the landlord
    Scrimpin and savin’ writin’ us dem checks
    Every year dat house is worth twenty thousand more
    Yeah you think you winnin’ but the party’s on our deck!

    Say that the party’s over, I’m just gettin’ started
    I don’t mean to sound mean and cold hearted
    Any time you want you can get into the market
    Let some other renter come fill up my wallet …

    – – – – – – – – – – – – –
    (c) John “Mack” McCoy 2007. All rights reserved. Specific right to unlimited publication granted to the Seattle P-I.
    – – – – – – – – – – – – –

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