I'm not surprised... not at all. The numbers cited were y-o-y comparisons... so what have they done for me lately?
Did they compare this quarter to the period before? If the bulk of those gains occured in the spring & winter of 05 the y-o-y numbers would still be terrific but not be a measure of 'current reality'... anyone see anything on this?
Also sounds like NAR is lobbying for more rate hikes... with hype like this, they might get their wish... If AG equates this with 'exuberance' look for a couple more on top of what is in the pipeline already.
One statement that they mention is important is the ratio of income servicing debt and they say its only slightly higher than average. But that does not take into account the fact that homeowners are using much riskier loans now.
Check out the LA report. Prices have only gone up 65% in the past 3 years??? Prices have more than doubled in LA in the past 3 years. It looks to me like a enormous amount of data massaging went into these reports.
The report uses mortgage servicing cost to income ratio and explain that as this ratio is not as high as at it's peak (in most markets around 1981 because of high mortgage rates) home prices are in line with historical trends. However this is a very naive analysis. It is like creating a business plan where you only look at income and expenses for this year and claim that you are far from going broke.
A better analysis would make five or ten year projections and calculate the ratio over multiple years using projected income over multiple years. In 1982 when the ratio was at the highest point, salaries were increasing rapidly along with inflation. Even if a home buyer took out a conventional 30 year fixed rate mortgage with very high debt servicing costs the rapid rise in incomes would make it easier to afford the mortgage.
Currently incomes are growing very. The high debt service costs are likely to remain with homebuyers for a long time. If you do the calculation over five years assuming a fixed rate mortgage and income growth over the next five years the same rate as the previous five years you will find that the mortgage servicing costs are higher than they have ever been.
df and all - you know I think the top of activity (sales) has already been seen. For prices, I think we are close to the top, but we might see another couple of quarters of price appreciation nationwide. Some local markets are already seeing price drops.
While I haven't read the 130 odd reports on local markets, I'm willing to bet that all deny strongly that there is any such thing as a bubble in their areas. Of course -- the local realtors organization in that state would dispute the bubble in that area.
I just linked to the Akron page more or less arbitrarily and I would recommend this to get a real taste of this blow back.
So what dryfly, erg, Paul, Gavin, and CR said.
Ok I can't resist:
How would you rate a neighborhood whose house prices had increased 4% over the past 3yrs?
--"modest" despite the national average being 32%. LOL
Net immigration over the past year?
(-)[that's MINUS folks] (people are dying off or leaving)1400.
--"unfavorable", not depressing, disgusting, debilitating and surprisingly not "environmentally friendly". [Actually what disturbs me is that zero in the national column that purports to claim that there is no immigration in this country. I can't tell you how that undermines all these numbers for me.]
Last thing. The President is on his way to Mongolia (looking for cowboys)[no, better ratings] and en route, defending his position [ie we're staying to the bitter end.] on Iraq (to soldiers as he cannot face the citizens) with the same dynamics. In response to a growing belief (housing is cresting, America was misled to war) statements from authorities with vested interests (NRA POTUS) are made that are not accurate, fair or sensible. [Fuggedabout 'true' --it is a red herring.]
It is not a good time to buy.
there's plenty of greater fools still sucking up properties as an investment. i heard one today in Jersey City, NJ (along the Hudson across from Manhattan). $700k for a 1 bedroom in an 'up and coming' neighborhood that still has muggings.
this is going to end bad folks. i don't think the real pain will start until '07 into '08.
I just linked to the Akron page more or less arbitrarily and I would recommend this to get a real taste of this blow back.
Thanks Calmo... that was pretty good. I then had to check out a few other 'garden spots' I knew about... Youngstown OH is even better... even more out-migration... Hell Gary Indiana had better numbers than either Youngston or Akron... Driving by the US Steel Works in Gary late at night is like driving by the gates of Mordor.
But looking over the whole center of the country, it is hollow or hollowing... And you know those folks heading out don't go to the coast with a wad of cash ready to buy that $700K 1 BR in Jersey that Richard described.
What a steaming pile of manure! The conclusion for EVERY market is the same - "With home prices rising strongly in most parts of the country, there has been widespread media coverage on the possibility of a housing market bust. A thorough analysis of the XYZ metro market, as detailed below, reveals that there is very little danger of this."
Even markets that are regarded as the most over-priced and are already experiencing contraction, such as Boston and San Diego, say "A thorough analysis of the Boston-Cambridge-Quincy metro market, as detailed below, reveals that there is very little danger of this." So shameless is their cut-and-paste work
that the data sometimes contradicts the text! For example, the Philadelphia analysis says "jobs are being created and ... suggest potential for further price gains.". However, the Philly numbers - right above this comment - contradict this statement and shows negative 3 year job growth (-0.2%, compared to 7.2% for the top 20 metros) and negative net migration of -4,800 over the past three years! The job situation is called "unfavorable".
The cherry on this sh*t sundae is that after the market busts maybe congress or Spitzer will investigate/indict real estate agents as the frauds that they are.
If you're daughter comes to you one day and said "Dad I want to be a call girl" or "Dad, I want to be a real estate agent", it's hard to figure which would cause you to be more chagrined...
i get so damn irked at the blanket statements made that agents are scum and horrible people. people need to chill out.
just today, my clients came to me and told me that had refi'ed their 2br condo with a pay option ARM with neg am so they could use the cash out to buy a new home that they would move into. they didnt realize that the neg am would total $15k over the year. it was the only way they could get their current condo to "cash flow".
they called me at 9pm last night wanting to put a contract down this AM for a $699 house which would have netted me nearly $20k just for filling out paper work.
i told them to hang on and that we'd talk in the morning.
i called their mortgage broker and found out the true details of their refi (b/c they didnt know and didnt realize what they had done). turns out that the cash-out was possible with a pay option b/c the appraisal was way inflated. so now by virtue of the neg am pay option arm they were in effect instantly upside down. in a stagnant to declining market with rising rates, this was suicide.
so i got them both in my office and told them what they were doing was risky and not recommended.
they rescinded the refi this afternoon.
all this so i didnt have to pocket a $20k commission for filling out paperwork.
so all yall just chill on the all agents are scum and i hope they go to jail talk.
people suck in general. just right now you are focused on real estate.
Way to go dc - this is why when the dust settles you'll likely still be (1) free and not in the cell next to Ken Lay's accountant (2) solvent (3) respected and still in the electronic Rolodex of most of your customers.
Kudos.
Unfortunately - and take this from one salesman to another - you are a rare bird.
Read two, SF area and Portland Or. My home and my daughters place.
I thought as I read the reports that the Risk Factors was the whole story. Lots of risk! These guys spin the numbers but they have to fess up to risk.
Time will tell. Hope the smart guys can keep the wheels on the cart.
These are great to have (for the price!) My problem with them is really twofold:
1. they're regionally aggregate, but ignorant of local markets and we all know that the local market makes all the difference.
2. they're based on old data. What they really tell us is that early in 2005, things weren't that bad. However, I can show you right now where the affordability numbers go off the charts and where they sit in healthy zones.
(full disclosure: our business sells this market research for a living, but we give some away for free.)
mike reminds us of the local nature of RE and the timeliness of information and am I here just to pound that message again because we just don't get enough reminders?
Well maybe we are that stupid...no, think of all the messages we get that tap us the other way with regional, dated information.
No, think of those folks who are not interested in a major personal real estate decision. The regional/national and (somewhat) dated information is informing them of the broad landscape and helping them make decisions that are not attached directly to buying/selling a property.
These folks are not in a hurry to invest/divest (although the insider trading at Toll Bros indicates that some of us have dated notions of what 'timely' means) --they have deeper cushions than those who only have an expiring IO mortgage on a house that is not appreciating like the RE agent said it would.
its so strange dryfly and calmo, as a grew up i was always so cynical. then i got into the business world and turned into a doe-eyed idealist that thought the best of people. its taken a few years now to realize that my early cynicism needs to be rekindled. my rep is my most important asset and as such i've taken hits along the way to build it. now with a few years under our belt, its time to get tough.
i just couldnt let those kids make financial suicide like that.
but a $20k commission woulda been really nice right now. realllllllllll nice.
many good deeds go unheard and unseen.
phew. did you guys know biz was tough?
j/k
but damn, people do suck
and sales is a bitch. its amazing b/c the world couldnt function without sales. rather, business can't function without sales. but why or why is it so F'ED up?
getting people to do what i want them to is my job. i just have to keep my ideals in the right spot and then everyt'ing 'ill be a''ight
Ya I knew business was tough & people were... well... people.
My father was a WWII vet.. enlisted BEFORE Pearl and stayed with it all the way to VJ... then did another 20 years in the Reserves & Guard... plus went to college on GI Bill, raised a family and did the sacrifice-for-the-comapny career thing... rose to upper management. American dreanm stuff.
But that didn't save him or his friends. He and a number of his buddies were tossed on the ash heep in the stagflation era... a couple of his buddies shot themselves - no shit. No different than now really - what have you done for me lately.
Anyway he started his own biz when I was in high school & college and we almost lost the home (went seven months without making a payment - but banking wasn't corporate consolidated then and he knew the banker so they took a chance on him and everyone won)... But even then the hosing continued... screwed on contracts & all. Life.
But he was ethical and built a reputation as a hard working hired gun and it worked out for him. More people wanted him to work for them than fired him so he built his business. He retired a millionaire... not a mega-millionaire... but a millionaire (net too - not just assets).
I swore I'd never do anything like that... got an engineering degree instead and found myself doing plant start ups all over hell and back. When my first son was born & I was around for only four weeks of the first five months... my wife said 'get a new job'... It was the Reagan recession sliding into midwest ag crisis and so jobs weren't everywhere... Plus my employer paid us A LOT more than we were worth... golden ball & chain... common thing to do to good engineers.
So I went to work with the old man and learned to be a hired gun too. I planned to do it for a couple years to massage the resume but I've been at it for over 20 years now... long after he retired. Some engineering, some sales, some business development.
I've been through three recessions if you include the 'ag crisis'... had to sue folks who screwed me, been hired & fired more times than I care to count... sometimes by the same people 2-3 times. Like baseball for Steinbrenner.
So 'ya'... I knew business was tough.
You'll do fine. You did the right thing for those kids... both ethically AND business wise... Do that enough and you'll always have people who want to work with you on projects. That might save you in this up coming mess.
I'm not surprised... not at all. The numbers cited were y-o-y comparisons... so what have they done for me lately?
Did they compare this quarter to the period before? If the bulk of those gains occured in the spring & winter of 05 the y-o-y numbers would still be terrific but not be a measure of 'current reality'... anyone see anything on this?
Also sounds like NAR is lobbying for more rate hikes... with hype like this, they might get their wish... If AG equates this with 'exuberance' look for a couple more on top of what is in the pipeline already.
JMHO.
One statement that they mention is important is the ratio of income servicing debt and they say its only slightly higher than average. But that does not take into account the fact that homeowners are using much riskier loans now.
This is a huge pile of crap.
Check out the LA report. Prices have only gone up 65% in the past 3 years??? Prices have more than doubled in LA in the past 3 years. It looks to me like a enormous amount of data massaging went into these reports.
The report uses mortgage servicing cost to income ratio and explain that as this ratio is not as high as at it's peak (in most markets around 1981 because of high mortgage rates) home prices are in line with historical trends. However this is a very naive analysis. It is like creating a business plan where you only look at income and expenses for this year and claim that you are far from going broke.
A better analysis would make five or ten year projections and calculate the ratio over multiple years using projected income over multiple years. In 1982 when the ratio was at the highest point, salaries were increasing rapidly along with inflation. Even if a home buyer took out a conventional 30 year fixed rate mortgage with very high debt servicing costs the rapid rise in incomes would make it easier to afford the mortgage.
Currently incomes are growing very. The high debt service costs are likely to remain with homebuyers for a long time. If you do the calculation over five years assuming a fixed rate mortgage and income growth over the next five years the same rate as the previous five years you will find that the mortgage servicing costs are higher than they have ever been.
Previous post should read
Currently incomes are growing very "slowly"
df and all - you know I think the top of activity (sales) has already been seen. For prices, I think we are close to the top, but we might see another couple of quarters of price appreciation nationwide. Some local markets are already seeing price drops.
Best to all.
I have list of markets that experience median sales drops betwene 2Q and 3Q 2005 in the NAR reports over at my blog.
While I haven't read the 130 odd reports on local markets, I'm willing to bet that all deny strongly that there is any such thing as a bubble in their areas. Of course -- the local realtors organization in that state would dispute the bubble in that area.
RE saleman says:
1: Buy now before they go up.
2: Buy now on the dips.
3: Buy now for long term appreciation.
I just linked to the Akron page more or less arbitrarily and I would recommend this to get a real taste of this blow back.
So what dryfly, erg, Paul, Gavin, and CR said.
Ok I can't resist:
How would you rate a neighborhood whose house prices had increased 4% over the past 3yrs?
--"modest" despite the national average being 32%. LOL
Net immigration over the past year?
(-)[that's MINUS folks] (people are dying off or leaving)1400.
--"unfavorable", not depressing, disgusting, debilitating and surprisingly not "environmentally friendly". [Actually what disturbs me is that zero in the national column that purports to claim that there is no immigration in this country. I can't tell you how that undermines all these numbers for me.]
Last thing. The President is on his way to Mongolia (looking for cowboys)[no, better ratings] and en route, defending his position [ie we're staying to the bitter end.] on Iraq (to soldiers as he cannot face the citizens) with the same dynamics. In response to a growing belief (housing is cresting, America was misled to war) statements from authorities with vested interests (NRA POTUS) are made that are not accurate, fair or sensible. [Fuggedabout 'true' --it is a red herring.]
It is not a good time to buy.
there's plenty of greater fools still sucking up properties as an investment. i heard one today in Jersey City, NJ (along the Hudson across from Manhattan). $700k for a 1 bedroom in an 'up and coming' neighborhood that still has muggings.
this is going to end bad folks. i don't think the real pain will start until '07 into '08.
I just linked to the Akron page more or less arbitrarily and I would recommend this to get a real taste of this blow back.
Thanks Calmo... that was pretty good. I then had to check out a few other 'garden spots' I knew about... Youngstown OH is even better... even more out-migration... Hell Gary Indiana had better numbers than either Youngston or Akron... Driving by the US Steel Works in Gary late at night is like driving by the gates of Mordor.
But looking over the whole center of the country, it is hollow or hollowing... And you know those folks heading out don't go to the coast with a wad of cash ready to buy that $700K 1 BR in Jersey that Richard described.
Ya I guess it isn't a great time to buy.
What a steaming pile of manure! The conclusion for EVERY market is the same - "With home prices rising strongly in most parts of the country, there has been widespread media coverage on the possibility of a housing market bust. A thorough analysis of the XYZ metro market, as detailed below, reveals that there is very little danger of this."
Even markets that are regarded as the most over-priced and are already experiencing contraction, such as Boston and San Diego, say "A thorough analysis of the Boston-Cambridge-Quincy metro market, as detailed below, reveals that there is very little danger of this." So shameless is their cut-and-paste work
that the data sometimes contradicts the text! For example, the Philadelphia analysis says "jobs are being created and ... suggest potential for further price gains.". However, the Philly numbers - right above this comment - contradict this statement and shows negative 3 year job growth (-0.2%, compared to 7.2% for the top 20 metros) and negative net migration of -4,800 over the past three years! The job situation is called "unfavorable".
The cherry on this sh*t sundae is that after the market busts maybe congress or Spitzer will investigate/indict real estate agents as the frauds that they are.
If you're daughter comes to you one day and said "Dad I want to be a call girl" or "Dad, I want to be a real estate agent", it's hard to figure which would cause you to be more chagrined...
Call Girl?
Well not likely to be outsourced and much more moral than screwing one's customers.
And more than likly to give more satisfaction for the pay.
i get so damn irked at the blanket statements made that agents are scum and horrible people. people need to chill out.
just today, my clients came to me and told me that had refi'ed their 2br condo with a pay option ARM with neg am so they could use the cash out to buy a new home that they would move into. they didnt realize that the neg am would total $15k over the year. it was the only way they could get their current condo to "cash flow".
they called me at 9pm last night wanting to put a contract down this AM for a $699 house which would have netted me nearly $20k just for filling out paper work.
i told them to hang on and that we'd talk in the morning.
i called their mortgage broker and found out the true details of their refi (b/c they didnt know and didnt realize what they had done). turns out that the cash-out was possible with a pay option b/c the appraisal was way inflated. so now by virtue of the neg am pay option arm they were in effect instantly upside down. in a stagnant to declining market with rising rates, this was suicide.
so i got them both in my office and told them what they were doing was risky and not recommended.
they rescinded the refi this afternoon.
all this so i didnt have to pocket a $20k commission for filling out paperwork.
so all yall just chill on the all agents are scum and i hope they go to jail talk.
people suck in general. just right now you are focused on real estate.
CHILL
you are an angel dc. (Working in hell.) Sorta.
I appreciate the whippin to get some of us to sit up and fly straight.
Way to go dc - this is why when the dust settles you'll likely still be (1) free and not in the cell next to Ken Lay's accountant (2) solvent (3) respected and still in the electronic Rolodex of most of your customers.
Kudos.
Unfortunately - and take this from one salesman to another - you are a rare bird.
Read two, SF area and Portland Or. My home and my daughters place.
I thought as I read the reports that the Risk Factors was the whole story. Lots of risk! These guys spin the numbers but they have to fess up to risk.
Time will tell. Hope the smart guys can keep the wheels on the cart.
These are great to have (for the price!) My problem with them is really twofold:
1. they're regionally aggregate, but ignorant of local markets and we all know that the local market makes all the difference.
2. they're based on old data. What they really tell us is that early in 2005, things weren't that bad. However, I can show you right now where the affordability numbers go off the charts and where they sit in healthy zones.
(full disclosure: our business sells this market research for a living, but we give some away for free.)
mike reminds us of the local nature of RE and the timeliness of information and am I here just to pound that message again because we just don't get enough reminders?
Well maybe we are that stupid...no, think of all the messages we get that tap us the other way with regional, dated information.
No, think of those folks who are not interested in a major personal real estate decision. The regional/national and (somewhat) dated information is informing them of the broad landscape and helping them make decisions that are not attached directly to buying/selling a property.
These folks are not in a hurry to invest/divest (although the insider trading at Toll Bros indicates that some of us have dated notions of what 'timely' means) --they have deeper cushions than those who only have an expiring IO mortgage on a house that is not appreciating like the RE agent said it would.
its so strange dryfly and calmo, as a grew up i was always so cynical. then i got into the business world and turned into a doe-eyed idealist that thought the best of people. its taken a few years now to realize that my early cynicism needs to be rekindled. my rep is my most important asset and as such i've taken hits along the way to build it. now with a few years under our belt, its time to get tough.
i just couldnt let those kids make financial suicide like that.
but a $20k commission woulda been really nice right now. realllllllllll nice.
many good deeds go unheard and unseen.
phew. did you guys know biz was tough?
j/k
but damn, people do suck
and sales is a bitch. its amazing b/c the world couldnt function without sales. rather, business can't function without sales. but why or why is it so F'ED up?
getting people to do what i want them to is my job. i just have to keep my ideals in the right spot and then everyt'ing 'ill be a''ight
Ya I knew business was tough & people were... well... people.
My father was a WWII vet.. enlisted BEFORE Pearl and stayed with it all the way to VJ... then did another 20 years in the Reserves & Guard... plus went to college on GI Bill, raised a family and did the sacrifice-for-the-comapny career thing... rose to upper management. American dreanm stuff.
But that didn't save him or his friends. He and a number of his buddies were tossed on the ash heep in the stagflation era... a couple of his buddies shot themselves - no shit. No different than now really - what have you done for me lately.
Anyway he started his own biz when I was in high school & college and we almost lost the home (went seven months without making a payment - but banking wasn't corporate consolidated then and he knew the banker so they took a chance on him and everyone won)... But even then the hosing continued... screwed on contracts & all. Life.
But he was ethical and built a reputation as a hard working hired gun and it worked out for him. More people wanted him to work for them than fired him so he built his business. He retired a millionaire... not a mega-millionaire... but a millionaire (net too - not just assets).
I swore I'd never do anything like that... got an engineering degree instead and found myself doing plant start ups all over hell and back. When my first son was born & I was around for only four weeks of the first five months... my wife said 'get a new job'... It was the Reagan recession sliding into midwest ag crisis and so jobs weren't everywhere... Plus my employer paid us A LOT more than we were worth... golden ball & chain... common thing to do to good engineers.
So I went to work with the old man and learned to be a hired gun too. I planned to do it for a couple years to massage the resume but I've been at it for over 20 years now... long after he retired. Some engineering, some sales, some business development.
I've been through three recessions if you include the 'ag crisis'... had to sue folks who screwed me, been hired & fired more times than I care to count... sometimes by the same people 2-3 times. Like baseball for Steinbrenner.
So 'ya'... I knew business was tough.
You'll do fine. You did the right thing for those kids... both ethically AND business wise... Do that enough and you'll always have people who want to work with you on projects. That might save you in this up coming mess.
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