Friday, November 24, 2006

The Buyer's Predicament

We've done seller psychology. Now it is time for buyer's psychology in this so-called "buyer's market".
"Buyers don’t want to buy in a buyer’s market, buyers want to buy in a seller’s market, they like the comfort of it...If I’m the only one [buying], there’s this fear that it might not be the right thing to do" [said agent Kathi Hammill].
Ah yes, the fear of looking stupid in front of friends, family, and neighbors.

But the more rational side of it is:
“What they’re worried about is, will prices decline further, so if they buy now, could they get a better bargain later?" said Delores Conway, at the University of Southern California. "No one can predict that.”
Maybe not. But consider that affordability is so abysmally low in the Bay Area that without significant year over year appreciation it doesn't make sense anymore (assuming it ever did) to take out a "suicide loan" (neg. am., IO, no down, stated income, etc.) because it is no longer likely that if you have problems with that mortgage that you will be able to sell above what you owe.

Yep, why buy now if the prices are coming down? The averages don't mean anything since they only reflect what actually sold. There is no way you can determine by just looking at the average/median price the quality of what sold, its desirability due to location, etc. You cannot assume that if the average is $X that your house is worth about $X. If you really want to understand what houses in your market are worth you have to come up with a way to figure out how much a house that didn't sell is worth.

The people who will do well are those who resist our genetically programmed social urge to follow the herd that is our family members, friends, neighbors, co-workers, friends-of-friends, people we read and hear about, etc. and just wait it out. This is a waiter's market; a procrastinator's market. Realtors and agents may not like anyone to say it, but it's true all the same.

And to think that if seller's would just get over their sense of entitlement and stubborn pride and lower their asking prices by significant amounts en mass, this housing downturn would be over by now. Yep, seller's are the problem now. Need help? Just ask yourself one quesiton: "Would I buy this house at this price?"

2 Comments:

Anonymous Mr. Tea said...

Excellent post.

That really says it.

There is no compelling reason to buy in now.
In fact there are many reasons not to.

I pity the fool.

Nov 25, 2006, 12:54:00 AM  
Anonymous bozonian said...

Not only that. Another factor which turns around 180 degrees when prices start dropping is lender confidence.

Why worry about your borrower defaulting when you'll inherit an asset worth even more than what you lent on it?

That's not true anymore. Houses will be worth less soon after the lender lends so forclosure means a sure loss.

Nov 25, 2006, 1:19:00 AM  

Post a Comment

Links to this post:

Create a Link

<< Home

Terms of Use: The purpose of the Marin Real Estate Bubble weblog (located at URL http://marinrealestatebubble.blogspot.com/ and henceforth referred to as “MREB” or “this site”) is to present and discuss information relating to real estate and the real estate industry in general (locally, state-wide, nationally, and internationally) as it pertains to the thesis that recent real estate related activity is properly characterized as a “speculative mania” or a “bubble”. MREB is a non-profit, community site that depends on community participation and feedback. While MREB administrators do strive to confirm all information presented here and qualify all doubtful items, the information presented at MREB is neither definitive nor should it be construed as professional advice. All information published on MREB is provided “as is” without warranty of any kind and the administrators of this site shall not be liable for any direct or indirect damages arising out of use of this site. This site is moderated by MREB administrators and the MREB administrators reserve the right to edit, remove, or refuse postings that are off-topic, defamatory, libelous, offensive, or otherwise deemed inappropriate by MREB administrators. You should consult a finance professional before making any decisions based on information found on this site.

The contributors to this site may, from time to time, hold short (or long) positions in mentioned and related companies.