What Does Caramel Coated Popcorn and Zillow's Chief Economist's Opinion Have in Common?

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Do you want something to chew on? Then read this!

Original content by Rob Magnotta

Question: What does caramel coated Popcorn and Zillow's Chief Economist's opinion have in common?

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Answer: You can find them both in a Cracker Jack Box. (I know, some of you figured it out before I told you... nicely done :-)

"But Rob, why all this venom?" you say. Don't worry, I'll tell you!

Even though I loathe clicking on these types of articles, I found one yesterday entitled:

"Now They Tell Us: Experts Say Housing Is A Lousy Investment And Always Will Be" posted on August 23, 2010, by Henry Blodget. Now I fully admit, I don't know Mr. Blodget. Never have spoken with him, in fact, for all I know, this could be the first article of his I've ever read. And to be fair, it isn't his assumptions that got me all riled up. As best he could, given the information provided by his "expert", he was pretty fair.

On the other hand, the ridiculous statements made by his source are beyond laughable. Just about all of the quotes are useless, and the irony is they're no different from the "expert opinions" that came out during the boom, only instead of predicting 25% appreciation, we've now swung completely the other way.
One quote in particular stood out; a quote from Stan Humphries, chief economist for the real estate site Zillow, which is "There is no iron law that real estate must appreciate". I suppose on the surface, that's true. I mean, think about it for a second. Huntington Beach Short Sale Real Estate Agent

There is no iron law that tomatoes will grow.
There is no iron law that movies will get made.
There is no iron law that anyone will ever buy the New York Times ever again.
Heck, there is no iron law that Zillow will be around in ten years!

I'm going to go out on a limb here and state, in my expert opinion, that tomatoes will grow, movies will get made, someone will buy the New York Time, and yes, Zillow (gulp) will be around in ten years.

So since "iron laws", it seems, don't need to exist for things to happen, let's move past that and on to some logical theories, shall we? Great!

1) If you're working in today's real estate market, you've probably noticed that prices sometimes go down, or depreciate. If you're living in a cave, you've probably noticed it too, although it depends on how much cave-painting you've been up to lately.

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2) So if prices have been dropping for a while, and could be stagnent in some parts of the country, that means, at the moment, prices aren't going up. I can only speak for myself and my little corner of the world, but here in Orange County, CA, prices are generally flat in the low to mid price points and still falling a bit in the higher price points. That's a very brief generalization, and it may change if I'm talking about Huntington Beach or Irvine or Seal Beach or Fountain Valley, but you get the idea.

So if there is no "iron law" that prices must go up, that's bad, right? Not really, because we've already established that iron laws are clearly not what makes the world go around. So forget that.

But if the idea behind the "iron law" statement is that prices don't have to go up every again.... well that's just insane! I'm sorry, I know, I just lost a bunch of you and offended several others (if I said grow a thicker skin, would that be better or worse?) I reject the idea that prices will never go up again because it's tied to several other ideas, whether we want it to be or not, that also don't make sense. Unemployment won't improve, the economy is doomed, banks will never lend in a capacity that makes sense again, and appreciation was invented during the last boom and has since been uninvented. You buying any of this?

I'm not. And there are historic cycles that back me up, so I'm not overly concerned about it. There are several other points made in this useless article that I vehemently disagree with, but there's only so much time in a day and I've got to go sell some homes! If you want to read this trash (and I'm sure you do... it's like watching a train wreck), here's the link.

My advice, for what it's worth... Stop worrying about it so much! Homes are meant to be lived in. Interest rates are ridiculously low! So buy a home you can afford with a 30 year fixed loan at an amazing interest rate, and live in it! If it goes up in value over the next 30 years, and I'm guessing that it will, great! If not, at least it's paid off, and you still have equity... how about that?

Oh yeah, one more thing. While we may not be running out of land, it's not all "buildable land", and it's not all located in places where people would ever consider living. Here in Orange County, CA, we are running out of land. It's not going to happen over night, but eventually, we will run out. Don't believe me?
Let's chat again in 30 years :-)

Posted by

         Kenny Salame                                                                                                  Equal Housing

Kenny Salame
Senior Loan Officer
All Western Mortgage Inc.
8345 W. Sunset Rd.
Suite 380
Las Vegas, NV, 89113
Mobile: 702--506-3301
Direct: 702-947-0609
Office: 702-369-0905
Fax: 702-952-0887

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