Indecision 2011

By
Real Estate Agent with RLAH Real Estate AB95346

All around me, my colleagues are selling houses.  At the moment, I am not.

Over the past couple of months, I've run into buyers, both my own clients and those of other agents showing my listings, who seem to be totally impaired when it comes to buying a house, at least right now.  Why?  They are informed.  They listen to the news.  And their car radio tells them that housing sales for May were down compared to May of 2010.

  • They're afraid prices will go down further
  • They're afraid that Greece will go down the tubes
  • They are afraid that congress will take away the mortgage tax deduction
  • They are afraid they'll lose their jobs
  • They are afraid that they won't be able to sell the house easily if they have to

They're just afraid.  And when other people are afraid to jump into the market, that is precisely the time to buy.

Did anyone ever get famous for giving advice to "Buy high, sell low"?  But that is exactly what so many of us are prone to do when it comes to real estate.

In 2006, red flags started to go up for me.  Buyers were having to do crazy things to get a house, sometimes paying hundreds of thousands of dollars over an already inflated asking price.  But they jumped in enthusiastically.

Today, in 2011, you can buy a house with an amazing interest rate, and usually for less than a deflated asking price. 

Could prices go down again?  Sure.

But in the entire history of our housing market, they've gone back up again - and gone even higher.

So is it a good time to buy?  Well, it's a whole lot better to buy now than it was in 2006.  That's for sure!

close

Re-Blogged 8 times:

Re-Blogged By Re-Blogged At
  1. Cheryl Ritchie 06/24/2011 01:21 AM
  2. Brenda Mayette 06/24/2011 01:28 AM
  3. Charlene Hammontree 06/24/2011 01:33 AM
  4. Terrie Leighton 06/24/2011 03:30 AM
  5. Carla Muss-Jacobs, RETIRED 06/24/2011 05:45 AM
  6. Susan Neal 06/26/2011 05:20 AM
  7. Sharon Sapp 06/27/2011 03:58 AM
  8. Winston Heverly 10/17/2011 06:32 PM
Topic:
Home Buying
Groups:
Realtors®
Club Chaos
Diary of a Realtor
Tags:
indecision 2011 real estate market

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Rainmaker
639,197
Bill Reddington
Re/max Southern Realty - Destin, FL
Destin Florida Real Estate

In Destin the market went wild and of course burst like the rest of the bubble. What I am telling buyers is Don't miss it this time! Prices are at the 2002 or so level. It may correct a little more but the deals are starting to go away. Submitted an offer where there are multiple offers. First time in forever. Inventory is starting to drop. PS Don't watch the news.

Jun 25, 2011 04:44 AM #51
Rainmaker
288,942
Pippa Mac
Chevaux Group Realtor, The Woodlands and Spring - The Woodlands, TX
The Woodlands TX Real Estate

Hi Pat ..... I'm glad history always repeats itself!!!!

Pippa

Jun 25, 2011 05:05 AM #52
Rainer
143,795
Sylvia Jonathan
Coldwell Banker Platinum Properties - Irvine, CA
Broker Associate, SFR

The funny thing is that, at least in our area, INVESTORS are buying. It's the first time home buyers who are paralyzed and can't make decisions.

Jun 25, 2011 05:38 AM #53
Anonymous
Kathy Opatka

That "fear factor" can be paralyzing!  Just keep on with an upbeat nature and KEEP IN CONTACT WITH YOUR WOULD-BE BUYERS!

Jun 25, 2011 05:39 AM #54
Rainmaker
966,685
Jan Green
Value Added Service, 602-620-2699 - Scottsdale, AZ
HomeSmart Elite Group, REALTOR®, EcoBroker, GREEN

Pat  Great post as always.  My tag line, "If you're reading about it in the paper, you probably missed the market."  I tell buyers and sellers that I "feel" the market long before they "read" about it.  Best of luck!

Jun 25, 2011 05:45 AM #55
Rainmaker
288,406
Tim Bradley
Contour Investment Properties - Jackson Hole, WY
Commercial Real Estate Expert in Jackson Hole, WY

It IS a good time to buy a house. Values are down, interest rates are down, what else do you want!

Jun 25, 2011 05:51 AM #56
Rainmaker
1,013,621
Rob Arnold
Sand Dollar Realty Group, Inc. - Altamonte Springs, FL
Metro Orlando Full Service - Investor Friendly & F

It is a great time to buy a house.  Prices are way below replacement cost and you can buy where your mortgage payment will be far less than your rent payment for the same home.

Jun 25, 2011 06:07 AM #57
Rainmaker
1,505,617
Lyn Sims
RE/MAX Suburban - Schaumburg, IL
Schaumburg IL Real Estate

Pat:  Have to agree with you hear, everyone is 'afraid' of something & have shut down. I can't imagine ALWAYS being afraid as how can one move forward in life if you always are? I know that many people are currently stuck where they are for one reason or another & would LOVE to purchase something but their current house just won't sell.  Some would have to bring all their downpayment money to the closing of the existing house so no $ for a new one.

What famous enterpeneur said 'best time to buy is when blood is running in the streets?' We are in a buy cycle.

Jun 25, 2011 07:00 AM #59
Rainmaker
92,266
Brad Yzermans
First Time Home Buyer & Down Payment Assistance Specialist in So Cal. - Temecula, CA
Temecula-Murrieta-Menifee FHA/VA Mortgage Lender

I don't think prices will go higher then where they were in my county for maybe 15-20 years.  We lost 50-70% of the values.  I sold high for this reason....no sense in keeping a home that is 170% loan to value.  I can walk away and re-purchase in 3 years and my mortgage will be half of what it was when I purchase 7 years ago.....and I'll be in an instant equity position.  Ten years from now I will have $100K+ equity where if i kept my current home, would mayb be at 110% LTV.

 

Jun 25, 2011 07:07 AM #60
Rainer
67,953
Carole L. MacCollum
HOME AT LAST REAL ESTATE - Wells, ME
Broker/Realtor 207-337-4792

Hi Patricia!  You are singing my song with this post!  After a pretty good winter and early spring, I seem to now be surrounded by this Indecision 2011!  But - along with the indecision, I am running up against a ton of buyers who think that houses these days are only worth what THEY think they are worth.  No market analysis in the world makes a difference.  12 years in the business means nothing to them...I'm about ripping my hair out!  I just don't know what people are thinking...they are ready and able...but they are not WILLING to buy.

Great feature, congrats! 

Jun 25, 2011 07:43 AM #61
Rainmaker
68,838
Cari Dandy
Russ Lyon Sotheby’s International Realty - Scottsdale, AZ
Homes for Sale - Scottsdale AZ

Patricia, it's certainly a great time to buy here - buyers who could only before buy 30 miles from Scottsdale can now afford it since things are "half price."  But now that means LOTS of people can afford it and we have multiple offers on the beauty pageant winners!  You have to be at the top of your game to make it here (and CASH buyers never hurt either!).  Good luck! We all know this business is a series of ups and downs!

Jun 25, 2011 09:54 AM #62
Rainer
12,615
Bill Schallmo
The Virtual Realty Group (Newport Beach, CA)The OC - Newport Beach, CA
Focus on the details

Patricia - Here is Southern California we run into plenty of buyers and sellers that continually live their lives "on the fence". Unfortunately, the media does a great job of confusing our client's because they take segments of data and apply them nationally or the other way around. For example Case-Shiller:  most people don't realize that their reports are completely outdated by the time they're released. For example, data released in May 2011 was for the three months ended 2011 (Jan, Feb, and March)

Home Prices...Up or Down?

Here are two important headlines that appeared recently:

LA Times: Case-Shiller Home Price Index Hits New Low

Forex: CoreLogic: Home Price Index Increased 0.7%

A Tale of Two Colliding Reports

In the Los Angeles Times story, David Blitzer, chairman of the S&P index committee, was quoted as saying:

"This month's report (Case Shiller) is marked by the confirmation of a double-dip in home prices across much of the nation. Home prices continue on their downward spiral with no relief in sight."

In the second article, Forex quotes Mark Fleming, chief economist for CoreLogic:

"While the economic recovery is still fragile and one data point is not a trend, the month-over-month increase based on April sales activity is a positive sign."

The Case Shiller and the CoreLogic price indices are both very well respected.

How can they come to seemingly opposite conclusions?

There are two reasons for this:

1. Each Index Has a Different Lag Time

Each report is actually looking at data from different periods of time

Therefore, they are not technically comparing apples to apples.

How can they come to seemingly opposite conclusions?

The Case Shiller Index Methodology:

The CSI is reported with a two‐month lag and is based on three months of data

For example, data released in May 2011 was for the three months ended March 2011

 (January, February, March 2011)

The CoreLogic Index Methodology:

The CoreLogic HPI is published on a 5 week lag from the end of the data collection period

For example, the CoreLogic March HPI will be published in mid‐June.

Reason #2: The REO Saturation Level Has Changed

The Case Shiller report covered data several months old. This data contains transactions where prices were negatively impacted by the large number of distressed properties on the market.

However, inventories of distressed properties have decreased recently because the process of foreclosure has slowed. The CoreLogic data, being more current, would have fewer homes impacted by distressed properties. Therefore, prices would be higher.

The difference in time table helps explain some of the conflict in the conclusions of the reports.

Rent vs. Buy

"Fundamental drivers now appear to be in place that favor homeownership over renting ...conditions (historically low mortgage rates and relatively low rent-to-price ratios) now seem in place to favor

future purchases." 

- Eli Beracha, East Carolina University

- Ken H. Johnson, Florida International University

Rent vs. Buy - Citigroup

"When mortgage payments are compared to the cost of renting, home prices actually appear cheap."

Rent vs. Buy - JP Morgan Said It Best

JPMorgan analysts said ‘the continuation of falling rental vacancies and rising rental demand will make home buying increasingly attractive', especially as rental prices increase."  Housing Wire 5/11/2011

Forbes Magazine  - 9 Reasons To Buy A House Now

"If you're planning to buy a house right now, the next few months may be the best time to buy... It's a buyer's  market,  but like everything else in life, the bargain deals won't last."

 Not sure this is enough to get your buyers off the butts!!!!!!!!

If you'll email me I have some graphs that will help them see the light "maybe"...

Bill

 

 

 

 

 

Jun 25, 2011 10:18 AM #63
Ambassador
698,891
Lee & Pamela St. Peter
Berkshire Hathaway HomeServices YSU Realty: (919) 645-2522 - Raleigh, NC
Making Connections to Success in Real Estate

Thanks Pat, now I don't feel so bad ~ I thought it was just ME.  I shake my head for just the same reasons you mentioned - so far this year 5 or 6 folks just froze - good points BB made as the folks I've been working with were all higher end buyers... There seems to be paralysis around our fine homes market...  It's too bad because right now there are some stellar homes (still assessed over a million) on the market for 7-800K.  We'll see, but I have a feeling the moment things start to rise (even ever so slightly) that folks will jump.  <sigh>
Pamela

Jun 25, 2011 11:39 AM #64
Anonymous
Amy Bly

Ah, yes, we were among those who bought a house (2nd home, now rented) in fall of 06, thinking prices had dropped already, and weren't likely to continue to slide . . . boy, were we wrong! Now we're looking at buying another investment property in Bergen County, and I sure hope the market can't slide much more. 

Jun 25, 2011 02:00 PM #65
Rainer
72,135
Jeff Hollister
Native Californian with 20 years serving OC Buyers & Sellers - San Clemente, CA
Real Estate Broker, Serving Orange County, CA

You are so right, Patricia. You'll notice that investors have been out buying up bargains at warp speed. In Orange County, CA most homes have had multiple offers within days or weeks, and many have sold at over asking price. However, even so... prices have continued to decline in many areas. I have some thoughts on why this strange phenomenon has been happening, and will share that someday soon in a blog post of my own.

I too have noticed that consumer confidence seems to have declined in recent weeks, and I would guess that it is at least partially due to our overly stated shock and awe news media in the U.S.

Sometimes we need to sit down and draw out the course the market takes, and show buyers when the "buying season" is. However, if they are only planning on keeping a property for 3-5 years. I don't think I would recommend buying today. Buyers in this market should be planning on staying close to 10 years or more in my opinion.

Jun 25, 2011 06:19 PM #66
Rainer
471,164
Kimo Jarrett
WikiWiki Realty - Huntington Beach, CA
Pro Lifestyle Solutions

The only consideration a buyer needs to analyze is the cost of money and their time line for an exit.

Buying today at a 5% rate versus a $15k-$25k reduction in price with a rate of 6%-6.5% rate illustration should convince the buyer that taking action now is a better opportunityoverall than not, don't you think? When you factor in the tax deductions, starting now to own should be elementary, shouldn't it? just to be clear, this model works in desirable neighborhoods and not in distressed neighborhoods.

Rates will rise, although I hope it doesn't happen anytime soon. If that occurs, we are all going to adjust our quality of life, won't you?

Jun 25, 2011 07:01 PM #67
Rainmaker
84,930
Deb Harshman
Long and Foster - Christie's International Real Estate & Owner of Staged Home Decor - Potomac, MD
REALTOR & ASPMaster Stager, The Selling Advantage

You know Pat, you always write with insight and I love it. 

One thing we do have in the DC area is a better outlook and record of sales than most areas. 

I think we face the task in this world of social media, to make our own headlines. I mean, we have to work harder in this world of social media. Good source for us, but the task is just another one for us to add to our day and our week. 

We shall keep putting out the positive and it will catch on! I am optimistic!

 

Jun 26, 2011 02:28 AM #68
Rainer
247,800
Gerard Gilbers
Higher Authority Markeing - Asheboro, NC
Your Marketing Master

I think Tni (#11) hit the nail on the head with the current interest rates. I do believe the price of houses will rise in the future and the rising interest rate will be part of the reason! Sounds like the 70's again.

Jun 26, 2011 07:25 PM #69
Rainmaker
54,795
Sharon Sapp
Century 21 Gold - Reading, PA
For Old Fashioned Service with Today's Results!

Loved this. It really takes the point home. In fact, I liked it so much, I reblogged it. Thanks for the posting.

Jun 27, 2011 03:59 AM #70
Rainer
103,367
Marsha Cash
RE/MAX Advantage - Stockbridge, GA

My son bouht a home two years ago.  If he were buying today, it would be cheaper, but then he's had the use of the house for two years.  Can't get all balled up about this stuff.  You have to live.  If you buy now, you still get a good deal and who knows when the good deals won't be so good?

Jun 27, 2011 08:55 AM #71
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