What the NAR Does Not Want You To Know

[jpatter666]

Re: What the NAR Does Not Want You To Know

Yep, my wife really wants a single-family house. We *do* actually own a townhouse, but we bought it well before the bubble and it will be paid of this year. We also have a metro line being built that will open here in 2013.

There are times where I really think I should consider selling, but I *think* the downside for us is limited -- in any case, since the place will be paid off, zero chance for us to be underwater.

Patrick's site kept us from doing something stupid in 2005 time frame.....unfortunately, we know many friends who are convinced "now is the time".

[Prazak]

Re: What the NAR Does Not Want You To Know

I dunno. If a bank wants to give me money that I get to pay off over 30 years at 5 1/2%, on a property that's deflated in value to its 1999 level in real terms, in an environment in which real inflation is running at close to 9% and likely to run much higher in the coming years, and I can cover much of the payment through rental income, and obtain income tax deductions on top of it all, what's not to like?

[aaron]

Re: What the NAR Does Not Want You To Know

Prazak: There is nothing not to like in this scenario. Where I live, rent is still half the cost of buying. If you can find a piece of real estate where rent will pay the mortgage, etc. (for now and the next 30 years), go for it!

reallife --> I am in exactly the same boat. Prices are starting to come down. 2013 baby! The year aaron buys his wife her last house!
By the way, have you looked at property auctions? My former house was sold at auction in December for HALF what I paid in 2007. I could have even afforded that mortgage payment. F***ing bank.

[cjppjc]

Re: What the NAR Does Not Want You To Know

The NAR's cheerleading during the bubble is borderline criminal especially when you consider that there is good reason to believe they knew there was a housing bubble and the advice they were pushing was absolute bunk. In a way, the NAR's fear-mongering during the housing bubble, "Buy now or be priced out forever," is akin to shouting, "Fire!" in a crowded theater.

While I can't speak to what the NAR "really" thought, most people; teachers, doctors, indian chiefs, including real estate agents, builders, appraisers, lawyers, save for a very small percentage in each of these groups thought housing prices were safe. I felt there was a bubble. Big deal I was right. It's easy with 20/20 hindsight. I had a very smart, ethical lawyer ask me what do to for a client who had purchased a few new construction units as it was apparent prices were rolling over. I told him to tell his client to walk from the deposits. He and his client instead renegotiated the price. So even with the writting on the wall people think they know better. I never heard people other than agents ever quote the NAR. They are not that big a deal.

Buyers agents make money on the sale of homes. This doesn't suprise most people.

[don]

Re: What the NAR Does Not Want You To Know

“The report described several types of fraud (Bill Black cited a random audit that came up with 90% plus fraudulent docs) that were detected most often. These include so-called “liar” loans, in which mortgage professionals knowingly listed false income claims for borrowers; inflated appraisals, in which mortgage loan officers or brokers pressure appraisers to overvalue a home so it would qualify for a bigger mortgage (remember the petition signed by half the country's appraisers protesting these conditions- it got fair airplay on iTulip); and false occupancy claims, which is when buyers claim they will live in a home but are actually buying it for investment purposes.”

The country's meds seem to follow events.

http://www.doctorhousingbubble.com/

[cjppjc]

Re: What the NAR Does Not Want You To Know

While I can't speak to what the NAR "really" thought, most people; teachers, doctors, indian chiefs, including real estate agents, builders, appraisers, lawyers, save for a very small percentage in each of these groups thought housing prices were safe. I felt there was a bubble. Big deal I was right. It's easy with 20/20 hindsight. I had a very smart, ethical lawyer ask me what do to for a client who had purchased a few new construction units as it was apparent prices were rolling over. I told him to tell his client to walk from the deposits. He and his client instead renegotiated the price. So even with the writting on the wall people think they know better.

With respect to knowing the future I know 3 people who had never ever bought a stock, or could talk finance for more than a minute. Two bought withing a few weeks of the March lows. One in a index fund, the other in bank stocks. He then talked the third into a financial stock I can't remeber which. Go figure.

[aaron]

Re: What the NAR Does Not Want You To Know

Obama said it was time to buy stocks. Could that have had something to do with it?

[nitroglycol]

Re: What the NAR Does Not Want You To Know

An interesting viewpoint on the subject:

Canadians love to buy houses.

Not only does the rate of home ownership surpass that of the United States, Canada seems to have dodged the crisis that so vexes the U.S. Sales are up, and property values keep appreciating as U.S. prices have fallen 30 per cent or more.

As an investment, home ownership seems to match Canada's national character: it's responsible, practical and risk-averse.

Or at least it has been.

This week, financial analysts at Edward Jones rained on the real-estate parade warning that current conditions – prices that are too high, easy credit and lax government policy – could lead to a big downturn in the market.

Which may not be such a terrible thing because home ownership is an impediment to Canada's long-term prosperity.

Historically, a house has been like a savings account that keeps on growing. Keep it 20 or 30 years, and you can finance your retirement.

And yet, except for some exceptional booms, housing has never been that good an investment. Yale University's Robert Shiller, a keen student of economic bubbles, found that, in the U.S., from “1890 to 1990, the rate of return on residential real estate was just about zero after inflation.”

There are some important social benefits – home ownership generally instills in people a deeper commitment to their community. But it also can be very costly to the economy.

A study by the Federal Reserve Bank of Dallas in 1998, well before the boom and bust, found the U.S. had over-invested in housing relative to other forms of capital since 1929. It has drained off capital from productivity improvement, innovation, medical technology, software or alternative energy: sectors that could drive growth well into the future.

Source.

[cjppjc]

Re: What the NAR Does Not Want You To Know

Everyone knows that Canadians only buy houses because real estate agents make money on the sales.

[FRED]

Re: What the NAR Does Not Want You To Know

Based on statistics gathered from actual public complains of fraud by actual appraisers we in 2006 predicted the following states will have the biggest fraud-based pricing issues.

Florida was a no-brainer. The rest show that the correlation between fraud and price over time is low.

[photoncounter]

Re: What the NAR Does Not Want You To Know

With respect to knowing the future I know 3 people who had never ever bought a stock, or could talk finance for more than a minute. Two bought withing a few weeks of the March lows. One in a index fund, the other in bank stocks. He then talked the third into a financial stock I can't remeber which. Go figure.

Ditto. One of my friends didn't even have a brokerage account, which he opened in March/April time-frame and invested in bank stocks !

[metalman]

Re: What the NAR Does Not Want You To Know

Ditto. One of my friends didn't even have a brokerage account, which he opened in March/April time-frame and invested in bank stocks !

i know 2 - 3 folks who did this. here's how it went for them...

2007... 70% of portfolio in stocks... eg, $700k of $1m.

q1 2009... $385k in stocks... 45% loss

q1 2009... buy $20k in financials/banks

up 5x = $100k

may 2010... portfolio = $385k + 40% recovery x $385k = $539 + bank stocks $100k = $639

after all that, still not back where we started by bailing out dec. 2007 &...

[ASH]

Re: What the NAR Does Not Want You To Know

As a renter with no mortgage or bills to pay, I am waiting for the government bailout attempts to fade away before even beginning to look for a home after selling and relocating in 2008. My biggest fear is that my wife will 'fall in love' with something while upper-end home prices in our area are still dropping steadily.

I have a house-wanting wife as well. Articles like this help to keep her grounded. Sure, people in the industry hype their biz. The problem for most Americans is they hear no rebuttals- the NAR dogma is literally everywhere. At least without doing some digging...and joining the 'Tulip ;)

Yep, my wife really wants a single-family house. We *do* actually own a townhouse, but we bought it well before the bubble and it will be paid of this year. We also have a metro line being built that will open here in 2013.

reallife --> I am in exactly the same boat. Prices are starting to come down. 2013 baby! The year aaron buys his wife her last house!

I've been renting a 1987-vintage 4-bedroom house in an unremarkable suburban neighborhood for the past three years. Before that, we were in an apartment; we upgraded just before starting a family. I'm blessed with a wife who would generally prefer to rent than to buy, and who only entertains the thought of buying if it makes financial sense. (It seems that marrying an engineer helps to keep financial decisions about houses in the realm of arithmetic rather than the heart; to be honest, I am the one who gets most excited about the idea of owning a house, because I'm the one who is most interested in things like gardening and raising chickens.)

I am largely sold on the view that it would be smarter to deploy my stash of liquid cash to pay taxes on a Roth IRA conversion, rather than buying a home right now, but I did notice that the rent-vs-buy calculation seems to have swung in favor of buying in my area. For some reason, the rent for the house I'm in was and is lower than average for similar properties in my market. But even given that my rent seems to be 'cheap' by local standards, when I ran the figures last night, I concluded that in my area, I'm paying more in rent than I would if I bought a somewhat superior property (including property taxes for a particular example listing, and figuring home owner's insurance and maintenance costs at about 1% of the purchase price, each, per annum). The conclusion varies a little depending upon whether you're making a cash flow comparison (principal + interest + other expenses - tax breaks < rent?) or if you omit the principal payments from the comparison because you're gaining equity in an asset. From a cash flow standpoint, it looks like I'd break even, and if principal payments are neglected, I'd be ahead by about 10% of my current monthly rent. But these figures assume there's no opportunity cost for deploying the funds used for a down payment... I'm comfortable with that assumption, because those funds are mostly held in highly liquid forms that are unlikely to grow faster than inflation. I also applied the rule of thumb suggested in the article that Don posted, and it seems to corroborate my detailed calculation: annual rent/purchase price is a bit above 6%.

You'd think this means that rents should come down in my area, but they haven't, yet. And knowing that my current living arrangement is currently cost-inefficient sets my teeth on edge a bit.