How will the NAR ( Not Adjusted for Reality) spin this?

ice drop new york! i'm loving it.

this is before massive layoffs at lehman and city and obvious to come from bear stearns made the news. so i expect much more to come!

hope these people try to sell in mass (i know they are doing it with vacation homes in the hamptons) within the next few months. many of them are not great savers.

Not to worry. Remember, this is the most innovative, creative Fed in the history of Central Banks. They will think of something. Hey, how about mandating that all paper currency be exchanged for non-negotiable Best Buy gift cards?

I think that could help, but I'm no genius. The guys at the Fed will probably think of something better.

Not surprising to me as most all realtors are under the "spell" that spring will save the entire industry. Leave it to people who (most of them) have never had to perform hard work (or geeze maybe come up with a plan other than Hold and Hope) to rely on the seasonal fluctuations in order to continue not having to work.

Big Picture has a good thread about the counter productivity of the NAR.....something I've been mentioning for some time.

Ciao
MS

I still can't afford: SF, LA, SD [not buying a $350,000 condo], or NYC, and WDC, BOS, and SEA would be the kind of debilitating stretch that caused this mess [I'd have a house and be feeding my kid Ramen noodles].

It would be a challenge to get an equivalent job to my current in just about the rest of those markets, so they would probably be a stretch too.

The upside is that Philly isn't on that list. The initial prices on houses in my neighborhood have come off the [insane] highs of a year and a half ago, but the final sales prices are treading water.

Angry Saver

somehow I dont feel sorry for the wall streeters. Let them move in with their relatives

Let price discovery start and continue.

Yes, but the good news is that the $350K condo once went for $533K...and the bottom is not here!

SouthSanJose.com: South San Jose, CA Real Estate - Property History for

We haven't even seen unemployment get remotely ugly yet....just wait until our wonderful service economy starts to vaporize.

Not like we can all just become realtors anymore.

Maybe we could all start housing blogs...and start putting out a newsletter...and give pony rides!

Sebastian, as a high-cost-area resident, I can say that you're looking at it the wrong way.

First, most of us have a job in industries that are ONLY here. i.e. there is no substitutability of housing in Charlotte or wherever. For example, I'm in advertising and my wife is in the movie industry. Believe me, we'd move to Austin if we could keep our careers.

Anyway, the second reason you're looking at it wrong is that 90% of us living here don't have the extra $2000 per month to buy OR invest.

People here don't buy houses with amortizing 30-year mortgages (less than 30% do in Los Angeles, even now) not because they don't want to, but because they cannot afford any other way to buy a house. People who buy here usually have total debt ratios between 45 and 50 percent, though I hear that many lenders have started limiting it to 45 percent.

Simply, the $2000 difference between renting and buying (actually more like $1000-1500 these days) is simply too much money for people to pay, so they buy using IO loans and all the other "bad" loans of the last few years.

Right or wrong, you've got to look at it in the same light as people who live in these conditions.

Sebastian,

mbagrad is right, you are looking at it wrong but due to a much more fundamental reason.

you have to compare the monthly rent to the total monthly cost of owning. in my case in manhattan, i rent for $2k a house "worth" 875k. if you do the calculations, only the interest (lets assume 5%) on the principal of the loan is almost double my rent.

add maintenance, property taxes and insurance to that. so, you are losing money big time by owning even before paying a cent of principal. add the fact that your home is going down in value so the principal that you are paying goes to the toilet. for ex, the drop in price of the home i'm renting is equivalent already to 2 years of rent. only a moron would buy in manhattan.

"I would ask this: If one was paying $2,000/month to rent in one of those cities, but buying would cost $4,000/month, are you paying $4,000/month to own a house, or only $2,000 to own the house since you'd have to pay $2,000/month for a place to live, anyway?"

Sebastian,

forgot to mention, within utilities we only pay electricity. gas, heating, water are included. again, it's a no brainer to rent.

ipodius - I take it you've never been to LA?

Rent=safety here.

Our $1900/month rented house is actually pretty reasonable. On the Westside rent would be another $500-600 per month. Houses on my street "only" cost $550,000 to $600,000; on the Westside they're $700,000 to $1.5 million.

I live in a "marginal" but safe neighborhood, but three blocks away is gang territory. The other day I got stared down walking to the bus stop.

Sure, I could (and have!) pay less to rent in a worse neighborhood, but constantly having your car broken into or hit, and the occasional stray bullet makes one more willing to pay the additional $200 or so over living someplace like Highland Park.

What's the opportunity cost of being shot?

Anyway, while the cost of living is generally high here, I find rent pretty darn cheap. In San Diego rent is basically the same price but houses are 25% cheaper. Same for Riverside...

And Sebastian, you're right about the market. My group of friends from High School has dispersed all over the country, from Indiana to Washington, Oregon, Texas, Nevada, Arizona (the ones who wanted to stay near).

I have two work friends that are getting married and they've decided to move to the first low-cost city where they both get jobs. I hear they have interviews in Colorado...

OC seems like a retirement village, with the sole exception of young foreign immigrants. L.A. is a little better but we have thousands of young people from other states who move here for a bit before returning home.

I take it you've never been to LA

Actually in my last job, I split my time between Boston and LA. A friend of mine lived in Tarzana at the time, so I crashed with him for a bit because I'm cheap at heart. It's not great, but a step up from Recida

But I do hear you on the neighborhoods. And that's the choice and why people start moving further away from the city core...to pay less.

And adding to the rent v. buy battle:

Housing might drop another 10% or 50% in this crash, but it will be up 300% at the end of 30 years. It is bound to inflation.

It seems clear that in the mid term the FRB will be allowing higher inflation. The low (fixed rate) mortgage of today is on the nominal price of the house, not the real.

The buying time may not be today, but it is coming up. Rates remain historically low. Prices are trending down. Some housing generation of the near future is lined up for a life-making setup.

But rents will be low too. If they use the rent-versus buy and save money argument they will miss the bus.

Sebastian: So, you think if a house costs $4,000 a month to own and $2,000 a month to rent, it only "really" costs $2,000 a month to own? That is one of the worst examples of "logic" I have ever seen. Unless that extra $2,000 a month is just magically showing in your paycheck, such "analysis" of the situation is absurd. Check salaries, check housing prices. Compute the housing price affordable on those salaries based upon the no more than 1/3 of your gross income rule. Then, look at how absurdly overpriced the houses are. It's not that difficult, Sebastian.

You love to toss about your Wright Model B and other such silliness - care to look at the salary vs. housing price problem? Or, are you just going to sweep it under the rug with "if you can't live there, move someplace else." while ignoring the fact that you can't have a place that is so costly that nobody can really live there AND there is no "someplace else" - places with dirt cheap housing have few, if any, jobs thanks to the Bubble and easy credit. Finally, if everyone moved to those places, they would also be unaffordable. Try to get out a bit and look around instead of spending all day looking at your amusing little models or reality.

Oh, and this renter DOES fully invest the difference between his rent and the payments on a theoretical grossly overpriced shack-house that has more than doubled in price in the past 7 years while salaries have, at best, gone up 15%.

O-Joe: Yeah, that's right - all the "desirable areas" will still be unaffordable, forever. Right... everyone will live there, but nobody can afford it. Dream on! Your dystopic future of an America where only Bubble-flippers and fraudsters can live in the "nice" places isn't going to happen. Besides, don't you have to go long financials or something in the stock market?

The NAR has lost any and all credibility they may have had. stick a fork in this unethical organization.