It's Time for a Buyer's Revolution

Do you want to see this housing bubble come to an end sooner rather than later? So does Catherine Hockmuth of the Voice of San Diego. She is calling for an outright revolution to be carried out by potential buyers. Play "low-ball" she says. I agree.

Here's how:

1. First, realize that you buyers have the money and so the power. Furthermore, realize that the fearmongering of the real estate industry -- "buy now or be priced out forever" -- is history and is being proven incorrect every day now. Real estate agents know this and so want you to believe that it is a buyer's market (wrong: it's a "waiter's market"...the longer you wait, the cheaper you will get the house) and that there is "never a better time to buy" (wrong: it is always better to buy at reduced prices if for no other reason than the property tax you have to cough up year after year will be less). No, what they really mean is that it is always a good time for them for you to buy now.

2. Figure out how much that Marin house you are interested in cost five years ago when Marin was just as special as it is now, when the sky over Marin was just as blue, the beach was just as close, people wanted to live here just as much as now, the constraints of "no more land" was just as constraining as now, the weather was just as nice as it is now, the intangibles were just as intangible, and incomes were about what they are now.

3. Adjust that price from five years ago by +25% to take into account five years of inflation. Add another 2% for good measure. The result is how much you should pay for that house, no more, no less.

4. Don't worry about angry or so-called "insulted" sellers or even an embarrassed agent. Who cares? There are plenty of other agents to choose from (and they are getting hungrier). And with today's inventory there are plenty of other options. And don't fall for the old tear-jerker "Oh, but I can't sell for less than this because otherwise I take a loss". Too bad. It's not your, the buyer's, fault that the seller overpaid. Why should you make the same mistake now? This is business after all; it's not personal. Or maybe the seller HELOCed out most or all of their equity and so cannot sell for less. Again, too bad. Why should you the buyer pay for their "lifestyle choices", pay for the things that they bought with that unrealized equity?

Some choice quotes:

But I didn't write this column to analyze how much every home in San Diego would cost in monthly payments if buyers agreed to pay the ridiculous prices sellers are slapping on their homes. And slap is the most accurate term to apply to a market in which sellers routinely list homes with $100,000 price ranges.

What further evidence do we need that pricing is purely arbitrary?

Take a look around your own neighborhood and you'll likely find numerous comparable homes listed at wildly disparate prices even after upgrades have been factored into the equation.

Why are prices so arbitrary? Because the real estate market is so uncertain that sellers have no idea what their property is worth.

So you tell them.

If this is indeed a buyer's market why are buyers standing on the sidewalks anxiously hoping for a fire sale? Were investors passive about driving up prices in the first place? No, they were sharks who changed the market for everyone by marching up to the front doors of homes that weren't even for sale and throwing cash around.

So stop being passive. Be a shark. It's a buyer's market. If this bubble is going to burst, let us bring out the needles.

I'm calling on all buyers and wannabe buyers to join forces in a boycott against overpriced homes. That means stop monitoring price reductions and start marching right up to the front door and setting your price. Chances are good that they're not getting many other offers.

I'm talking low ball.

You know that house you've been eyeing. The three-bedroom, 1,200 square foot, 1920s house listed for $700,000 -- the one that's been on the market for five months. Offer $500,000. $400,000 if it needs a facelift. $350,000 if it needs major reconstructive surgery.

Or, figure out what the house was worth five years ago and tack on 25 percent -- 5 percent appreciation for each of the last five years, or what a normal market would have paid if investors and cheap money hadn't screwed everything up. If it was worth $300,000 five years ago. It's worth approximately $364,000 now. Offer that.

What's the worst that could happen? They say no and slam the door in your face? They get insulted? Your agent is embarrassed to be seen with you?

Who cares? You're the one paying the mortgage. Offer what you think the house is worth. As Gregory Smith said, it's a buyer's market. That means we set the price.

Take strength in that the N.A.R., C.A.R., etc. are scared. So scared that they've been pressuring the Fed to stop its regimen of interest rate hikes; they are fighting the much needed tightening of GSE (Fannie and Freddie) oversight and any tightening of current lending standards; they are preparing for impending lawsuits; they are redefining what "affordability" means so as to justify today's obscene house prices.