Monday, July 17, 2006

What Sort of Realtor BS Is This?

Ok, check this out. Here is a realtor who is claiming that 'it is never a good time to hold off buying a house' because their market is weakening, buyers are "holding off", and so realtors are having trouble selling people's houses.

So let me get this straight as I am a person of very little brain...when the market was going up it was "Buy now or be priced out of the market forever". Ok, got it; fear is a strong motivator and fearmongoring is worthy of a realtor. And now that markets are just starting to come down (which casts some doubt upon the first assertion) the mantra is "It's never been a better time to buy". So in other words, it's always a good time to buy a house. Do I have that right Mr. Realtor-man?

What sort of BS is this?

Whose interests exactly are such realtors serving? Yours, the buyer's? Or theirs, the realtor's commission? Duh.

The Marin Market Heat Index is now at an all time low of 0.52. And yes, I know that Vision RE practically soiled their collective pants when their estimate of June's median and average prices went up. That move should not come as a surprise because:
a) the majority of sales were in the priciest of Marin's markets (e.g., Tiburon, Sausalito, Kentfield) (and what's up with that 500% increase in YOY sales in Greenbrae -- so only 1.2 houses sold in June of 2005? If it was a typo, what other typos are there in their data? Hmm...)


b) if you look at the chart of DataQuick's data, Marin's appreciation rate has been bouncing around like a superball in an ever shrinking room and if the pattern holds true then you would expect June to be an up month. So not too surprising.
All that this means is that the market is like what Michael Shedlock says in his post for today -- it's a "procrastinator's market", not a buyer's market. The people who will do well are those who know to wait it out. If anything, it is currently a "fence-sitter's market"...the impulsive people who have been itching to buy a house and who jump in thinking it's the bottom when they see a small drop in prices. Hence, the superball-bouncing-inside-of-a-shrinking-room analogy.

When all of the impulsive fence-sitters have been shaken out, who is left to buy? The only people left are the folks who had the intelligence, the common sense, and the intestinal fortitude to wait this thing out to buy their home to live in at a reasonable price.

The realtors are just scared. They are scared of people like you who know to wait.

Anyway, then that realtor goes on to say that you have to buy now because interest rates are only going up. Hold on, wait just a minute. Why should rising interest rates convince you to buy now? As interest rates go up, the amount of monthly mortgage that you can afford just went down (assuming, of course, that your income has not gone up appreciably). That means, all things being equal, prices have to adjust down to compensate (albeit with a time delay which is some sort of proportionality function based on seller stubbornness/hubris and the amount of BS that realtors can make sellers swallow). And, as we all know, in today's market folk psychology all that matters to people is the monthly nut, not the total loan amount. Here is one good reason why the total loan amount should matter to you: property tax. The lower the purchase price, the less you have to pay in property tax year after year after year. Furthermore, the longer you wait as prices come down, the more you can save, the greater your potential downpayment, and ultimately the smaller your loan. Additionally, the higher the interest rate, the greater the likelihood that you will be able to easily refinance that loan down to a more palatable interest rate. It's a win-win situation for buyer's who can restrain their impulsiveness and buy when sanity has returned to the market.

Oh, you don't think Marin's market has gone insane? Then check this out.


Anonymous Anonymous said...

Great post. When interest rates are at an all time high is when it is best to buy (with a short term fixed loan) If rates are at a peak then rates can only go down. Unfortunately no one knows when the peak is. But like you said, people buy homes for monthly payments. So if you buy when rates are high, then prices will be low, and you can refinance. So it is a great time to buy in about 5-10 years. And it is an even better time to go on a vacation if you are a realtor. The question is; Why are interest rates and income levels where they were 4-5 years ago, but home prices have doubled?

Jul 17, 2006, 3:23:00 PM  
Blogger Marinite said...

When interest rates are at an all time high is when it is best to buy (with a short term fixed loan)

Isn't it when interest rates are high is when you really want the variable rate loan? (Unlike today's logic). That way you can borrow at a low adjustable rate and then lock in a fixed rate when rates come down.

Jul 17, 2006, 3:26:00 PM  
Anonymous Anonymous said...

it is a really bad time to buy,especially here in the bay is still not a bad time to sell if you have enough brains to price realistically.if you live in your dream home,and have a fixed payment you can afford,good on you,if it is adjustable,it is time for a reality check.i am seeing the first short sales in santa rosa,not too bad,$30-$50k short,on stuff bought two years ago.prices are going down,and will continue to go down for some years,i expect a 30-60% drop depending on neighborhood and property type.aand at least 20% down yoy july 06 to july 07 in sonoma county.

Jul 17, 2006, 3:30:00 PM  
Anonymous Anonymous said...

I rode my mountain bike through Sausalito on July 9 and July 16. Yesterday I noticed a bunch of for sale signs on Bridgeway, particularly near the north 101 entrance, that I don't recall seeing the week before. (I might have just missed them, but I keep my eye out for this sort of thing.)

Jul 17, 2006, 6:54:00 PM  
Anonymous Anonymous said...

Anyway, then that realtor goes on to say that you have to buy now because interest rates are only going up.

Didn't they used to say "you have to buy now because prices are only going UP UP UP!"?

Here in Orange County CA, there's a lot of radio commercials on heavy rotation about how "You Need A REALTOR (TM) If You Want The Best Price On Your House!!!" Over and over and over...

Jul 18, 2006, 11:38:00 AM  
Blogger Marinite said...

They jack up the price of your house so that it will cover the cost of the realtor's commissions? Hence, you sell your house for more. No mention of the fact that you pocket less.

Ok, that was a cheap shot I admit.

Jul 18, 2006, 12:26:00 PM  
Anonymous Anonymous said...

Over the weekend, I ran by the intersection of San Pedro Rd. and
Manderly (Loch Lomond) in San Rafael and noticed 3 for sale signs. On my run back, there were five signs. Later that afternoon all but one was taken down. The remaining one was removed the next day.

The point is, it appears that the realtors in the county are now colluding to in a feeble attempt to "spin" the fact that there is a lot of inventory of homes on the market.

No wonder Real Estate agents rate below used car salesman in polls of trustworthy professions.

Jul 19, 2006, 12:48:00 PM  

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