Weekly Twitter Digest (Link Roundup) for 2011-11-19

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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.

20 comments:

  1. 1
    ARDELL says:

    Regarding the headline “Mortgage Rates Ticking UP to 4%”, I receive email quotes daily and have not yet seen one say 4%. For some reason they are saying 3.99% I have never before seen rate quotes succumb to this type of sales gimmickry. Rates have always been quoted in 1/8ths at 3.875 to 4 to 4.125.

    I mention this because I am also seeing Builder-sellers advertising low rates of 2.875% or so. In the past few years that meant the builder was doing a buydown of the rate as a traditional 4th Quarter incentive to purchase. Then you had to check if it was a 30 year buydown or a short term buydown.

    To my surprise this year, unlike previous years, the answer was neither! It is not a builder incentive buydown at all. They are merely quoting a 5/1 or 7/1 ARM. There is virtually no spread right now between the two, and yet they seem to be quoting the 5/1 vs the 7/1 just to be able to quote a small difference, when clearly the 5/1 makes no sense for anyone right now. Unconscionable!

    I am saddened that the lending industry is resorting to sales gimmicks right in the middle of the huge credit mess. The lending industry hates to be blamed for what happened, but seeing this 3.99% and pretending a low rate is a builder offering vs a switcheroo to a 5/1 ARM is showing that the lending industry…no matter how and who charges them with “fiduciary duties”, is still in the business of pushing more loans via any means available. Sad.

  2. 2
    Pegasus says:

    RE: ARDELL @ 1 – ” Unconscionable!”

    Like its OK for the real estate industry to continually pump out false ads and news releases, conspire to get baloney stories written ad infinitum, agents to consistently predict false bottoms with nothing more than a Oujia board for facts…… There is a lot more to be concerned about than whether ARM’s are being offered or not. Especially if they are being marketed properly.

  3. 3
    ARDELL says:

    RE: Pegasus @ 2

    I disagree. Wholeheartedly.

  4. 4
    Scotsman says:

    http://www.irvinehousingblog.com/images/uploads/01%202011%2011%20Posts/priced_out_forever.jpg

    “.I felt we could afford around $350,000. We called a real estate agent named Mitch, who had signs on all the bus stops: Talk to Mitch! He picked us up in a gold Jaguar, and suddenly we were looking at houses that listed at $500,000 or more. ”

    http://www.irvinehousingblog.com/blog/comments/the-financial-planner-who-advocated-heloc-abuse-lost-his-house/?source=patrick.net

  5. 5
    David Losh says:

    RE: ARDELL @ 3

    Well, of course you would, but the fact still remains we are all trying to make a living.

    My wife, and I were discussing Real Estate this morning at breakfast. One of my past clients was sitting at the counter. His place sold for less than he could, would, and should have gotten if he only listened to me the first time. Another person who I referred out a couple of weeks ago, again should’ve, would’ve, and could’ve, but is now settling for a lot less.

    My wife pointed out a couple we know who just sold thier place for $365K, and we thought that was a lot. They had paid $470K in 2007, and are now taking that loss. Hey, but it’s OK, because they have bought another place for $600K that was reduced down from a Million, so it all averages out.

    Another person I talked to over the course of a year listed with redfin. She got what I consider top, top dollar, and I just want to see what agent represented the buyer. I can’t understand the rational for the purchase, at all.

    Let’s leave you out of the equation, my point is that a lot of claims are being made today to keep the Real Estate Industry moving.

    I understand there will never be a time when Real Estate stops changing hands. There could be a time when the Real Estate industry just runs out of steam.

    A guy called me yesterday afternoon who wants to make an offer on a house in his neighborhood. I referred him to John Wagner Law Office on Roosevelt. There’s no reason for me to be involved other than to tell him he’s doing the right thing. He’s a squared away kind of guy, and he can do this.

    Mortgage companies are no different, and maybe worse, than Real Estate professionals who make claims that may be a bit puffed up. It goes with the industry, so I don’t know why you would be sad, or surprised.

  6. 6
    Jonness says:

    “The “housing affordability index” is calculated by the Washington Center for Real Estate Research at Washington State University. The index is based on interest rates, median home sale prices and incomes in the various counties.”

    How can you call something affordable that has a loss rate of 10% per year? I’m having an extremely difficult time finding any difference between U.S. politics and its RE industry.

    “His [Hitler’s] primary rules were: never allow the public to cool off; never admit a fault or wrong; never concede that there may be some good in your enemy; never leave room for alternatives; never accept blame; concentrate on one enemy at a time and blame him for everything that goes wrong; people will believe a big lie sooner than a little one; and if you repeat it frequently enough people will sooner or later believe it.”

    http://en.wikipedia.org/wiki/Big_Lie

  7. 7
    The Tim says:

    By Jonness @ 6:

    How can you call something affordable that has a loss rate of 10% per year?

    Because affordability has nothing to do with the rate at which something is getting cheaper. Affordability is not a synonym for value, and especially not “best value.”

  8. 8
    ARDELL says:

    RE: David Losh @ 5

    I don’t really understand the logic…never did. People come to me to buy or sell a house the same way that people go to a lawyer to get a divorce. If the lawyer sees the marriage is not 100% dead, he might suggest they try a legal separation first. Same if people come to me to buy or sell and I see any hesitation or lack of conviction. I might suggest they wait and give it more thought and also give some additional information to help them make an informed choice before proceeding.

    But it someone is dead set on getting a divorce…there’s nothing a lawyer can say to change that If someone is dead set on buying or selling a house, there is nothing a real estate agent can say to change that.

    That’s different than lenders manipulating data. That’s like a doctor talking you into an operation by saying a 4 week recuperation period will only be one week…once you are out of work for 4 vs one, it’s too late.

    Convincing someone to pay more for a home than they originally budgeted for, by pushing a below market rate of 2.87% to “make it work” is like finding a way to help them overpay for the home. Builders do this instead of reducing the price to where it would sell.

    “Oh…let me show you how you CAN pay (me) more…can you spell E-X-O-T-I-C?

    It’s a trap to convince them to spend beyond their means on a long term basis, or more than the home is worth in today’s market at today’s “going rate”, by pushing a cheap “start rate”. ..well, let’s just say…I thought it would take a dozen years or more before I saw that again.

    Apparently lenders did not “Live and Learn”. Hopefully buyers have.

  9. 9
    The Tim says:

    By ARDELL @ 8:

    But it someone is dead set on getting a divorce…there’s nothing a lawyer can say to change that If someone is dead set on buying or selling a house, there is nothing a real estate agent can say to change that.

    Sorry, not buying the analogy. Why would real estate agents form a nationwide association then run ads specifically designed to convince people that it’s (always) a “great time to buy” if people only or even primarily came to real estate agents when they were “dead set on buying a house”?

  10. 10
    Azucar says:

    I wonder how many divorce attorneys have ever said “Divorce now, or be priced out forever!”

  11. 11
    ARDELL says:

    RE: The Tim @ 9

    Here’s where I’m coming from Tim. Three times in the last 8 weeks I presented an offer to a builder on a house…let’s say it is priced at $599,950 so as not to give away my client. NONE have sold since June at that price, so we offered $550,000.

    THREE times the answer is you have to call the builder’s lender. No counter to the offer. No rejection of the offer. Then you comply thinking they want to be sure the buyer is preapproved, even though you have a preapproval from a different lender.

    The builder’s lender proceeds to tell the buyer HOW she can make the builder’s ASKING price “work” for the buyer, by using an ARM. The builder keeps saying the lender “works miracles”. Miracles like that we don’t need.

    I don’t want to mess up your whole Whack-a-Realtwhore game. I was commenting on the LENDER tweet re rates are UP TO 4%. I posted a warning to consumers to be wary of these offerings from builders for a rate of 2.87%. It is not a buydown as it used to be. Don’t like the warning…disregard. I thought it was helpful…and maybe it is…to someone reading.

  12. 12
    redmondjp says:

    By The Tim @ 9:

    By ARDELL @ 8:

    But it someone is dead set on getting a divorce…there’s nothing a lawyer can say to change that If someone is dead set on buying or selling a house, there is nothing a real estate agent can say to change that.

    Sorry, not buying the analogy. Why would real estate agents form a nationwide association then run ads specifically designed to convince people that it’s (always) a “great time to buy” if people only or even primarily came to real estate agents when they were “dead set on buying a house”?

    And their latest ads, the ones showing an elderly man and his grandson, with the conversation going something like “Grandpa, I sure hope I can have a house like this someday” and the voice-over implying some doom and gloom situation about people not being able to ever afford a house again, but (lucky for us) the NAR is working hard to make sure that this never happens. This ad makes my blood boil! If you look at the percentage of profit per RE transaction, NAR members made more $ than the banks did!

  13. 13
    David Losh says:

    RE: ARDELL @ 11

    Glad you brought up builders.

    No one should be buying a new construction.

    Builder’s lender? forget about it. Offer $499K, and they can take it, or send the project back to the bank.

    What I really resent is that low life builder scum wrap themselves in the American flag telling the public they will “jump start” the economy. Builders are thieves.

    Your warning about the terms of Adjustable Rate Mortgages, but it’s the builders product that is a complete scam.

    I know you can’t stop people from making the worst mistake they possibly can in today’s market place. I mean some body will write it up, right? Maybe the builders listing agent can get that deal together?

    My point is that every one in the Real Estate business today has things to do. Making one point about one aspect of the business isn’t fair.

  14. 14
    ARDELL says:

    RE: The Tim @ 9

    Do you lump all the Redfin agents in there too, Tim?

  15. 15
    ARDELL says:

    RE: David Losh @ 13

    Haha! If you knew the whole story you would puke. :) I’m heading out of town for Thanksgiving to L.A. with the kids and grandkids. But I’m planning a Holiday Party…maybe right after New Year’s when all the office parties die down. Hope you can make it with the wife. We’ll have a laugh over this one.

  16. 16
    Jonness says:

    By The Tim @ 7:

    Because affordability has nothing to do with the rate at which something is getting cheaper.

    Perhaps for a few rich homeowners what you say is true. But for the rest of us, affordability has “everything” to do with the rate at which one’s investments are getting cheaper. I can afford to spend more when my investments increase in value. But when my investments lose value, European vacations become less affordable to me.

    By the same token, many senior citizens can afford to retire as long as their investments continue to increase in value, but they can’t afford to retire if their investments continue to decrease in value.

    Most people who took out HELOC’s during the bubble years understand exactly what I’m saying, as do the banks who loaned them the money. Life is very affordable when home prices are rapidly increasing, but as we’ve all learned, it’s not so affordable when home prices are rapidly decreasing. In the former scenario, you end up with a lot of gleeful customers who can afford to go out and spend money like crazy. In the latter scenario, you end up with a lot of angry customers, broken dreams, empty wallets, REO’s, and short sales.

    Need I remind anybody here that a home is first and foremost an investment and second a place to live? Be very leery of those who work in the RE industry who attempt to trick you into believing a home is nothing more than a place to live with a value solely based on the current monthly payment amount.

  17. 17

    By The Tim @ 9:

    By ARDELL @ 8:

    But it someone is dead set on getting a divorce…there’s nothing a lawyer can say to change that If someone is dead set on buying or selling a house, there is nothing a real estate agent can say to change that.

    Sorry, not buying the analogy. Why would real estate agents form a nationwide association then run ads specifically designed to convince people that it’s (always) a “great time to buy” if people only or even primarily came to real estate agents when they were “dead set on buying a house”?

    You’re assuming the ads are somewhat effective.

  18. 18

    By Azucar @ 10:

    I wonder how many divorce attorneys have ever said “Divorce now, or be priced out forever!”

    One good question to ask an attorney, assuming you’re involved in a dispute and have assets you can spend, is what percentage of their matters do they settle and how often do they go to trial. There are some attorneys who constantly go to trial because they make little effort to settle. Settling means fewer billable hours.

  19. 19
    Dirty Renter says:

    RE: Jonness @ 6
    “….concentrate on one enemy at a time”
    One word for the Fuhrer: Barbarossa

  20. 20
    Azucar says:

    By Jonness @ 16:

    By The Tim @ 7:

    Because affordability has nothing to do with the rate at which something is getting cheaper.

    Perhaps for a few rich homeowners what you say is true. But for the rest of us, affordability has “everything” to do with the rate at which one’s investments are getting cheaper. I can afford to spend more when my investments increase in value. But when my investments lose value, European vacations become less affordable to me.

    Need I remind anybody here that a home is first and foremost an investment and second a place to live?

    Unless you’re actually tapping the equity by taking a HELOC, then the house increasing or decreasing in value has no bearing on your ability to afford other things. And people who (used to) tap their home equity to go on vacations were not the people who bought the house that they did as a place to live… those were the people who were overspending for their house primarily as an investment. But IMO those days are over for a while.

    IMO a house is both a place to live AND and investment. The proportion of those two things is dependent upon the market and what you were thinking about the market at the time you purchased…. but it can be more than 90 percent one and less than 10 percent the other (in either direction) depending upon the market and the house and the buyer and the finances and intentions of the buyer and other factors.

    For people who are buying a house because the monthly payments cost roughly the same or less than rent payments and they would like to stop making those payments in 20 or 30 years, it’s more of a place to live plus a “nest egg” (or just nest, I guess).

    For people who are buying a house because they think they’ll be able to either tap some of the equity in the coming years (I don’t think anyone is doing that anymore) or will be able to sell it in a few years, it’s more of an investment.

    In the bubble days, people were buying it for both reasons… “why rent, when I can be leveraging myself into an appreciating asset for just a few thousand dollars a month more by buying”. So they were ok with paying way more than the going rental rate (that or paying the same with the help of creative financing that would reset to a higher rate in 5 years) on a monthly basis to buy the place. Now that houses have come back down a ways, it’s starting to make sense again to buy because from a cash flow standpoint it’s not any (or much, anyway) more expensive than renting.

    No one knows for sure what the future holds, but my guesses are:
    – Prices may continue to decrease for a couple of years, but by 4-5 years from now they’ll be back up to where they are now or higher… partially because of stabilization of the market, and maybe with some help from overall inflation
    – Rent prices will go up
    – Mortgage rates will stay low for another year or two

    So with the above guesses, I’m not anxious to buy now, but if I saw the right place at a price that I’m happy with I’d strongly consider buying it (I will be in it for the “long term”).

    The more cautious move in my case would be to reassess my guesses in a year or two and see if I still think that prices will be back up in 2016…. if I still think there’s another 2 or more years of downward movement, then I should wait another year or two to jump in.

    But when I’m waiting, if I get the feeling that the bottom has been hit and prices are on their way back up, then it will be time to buy… within a couple of years after it’s bottomed (if it goes up at 10 percent per year, I’ll still be buying in at less than 20 percent from the bottom).

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