patrick.net

Reading some of these comments one gets the idea that the problem must be lack of understanding of average person who does not have enough IQ to do the sums right. That's why he is susceptible to anxiety attack and screams unnecessarily for a mere thousand bucks or so reduction in his house price!

Thankfully it seems there are quite a number of "ordinary concerned citizens" trying to calm and help these few high strung people with low threshold for anxiety.

I guess as unemployment gets nearer to 25%, the established practice of spontaneous replies from Patriotic Citizens which originated in Mass Media will soar even in more sane sites like this.... What a PITY

SubOink says

As a freelance person I have noticed that when I am personally doing bad, it feels like the wheels are coming of the economy…when I am doing great, everything seems to be picking up. I change my own view often depending on how well I am doing. I think a lot of people do that. Once you lost your job, you almost want others to lose theirs too so you feel like its not your fault. The economy is just bad. So you get into the negativ outlook. You stop eating out, doing things that cost money and you are stuck at home being completely miserable.

I think many posters here must be in that frame of mind. Klarek and co…sound a lot like that. But that does not mean they are right.

You couldn't be more wrong. I don't think I'm very negative, I just don't accept an "everything is on the up-and-up" kind of baseless, unsophisticated analysis.

The tax credit is a testament to how people who think they are smart can ignore the recent lessons of the housing bubble and believe the same kinds of bullshit that the bubble-buying idiots believed. It was obvious from its inception that the housing market was getting a temporary boost from the credit. For purely economic reasons, it was obvious that this boost couldn't "kick-start" the market, but delay the inevitable. I didn't think prices necessarily had that much further to drop, but at that point, the real recovery was delayed. It didn't take long for me to develop a morose attitude towards the folks (idiots) who took the market turnaround at face value, and were clamoring on about how the market bottomed, or that we were in a recover mode. How could they be and remain completely and inexcusably incapable of drawing a correlation between a temporary incentive which could (and did) create buyers out of (previously) ineligible renters? How did they see this as a coincidence, or sustainable?

I don't think the sky is falling or that the market is going to crash 50% over the next year. But I do think that typical buyers and owners today are every bit as naive and stupid as were those who bought during the bubble. The financial justification in what they're doing today is offset by the benefit of having hindsight and a financial milestone in our very recent history.

klarek says

I don’t think the sky is falling or that the market is going to crash 50% over the next year. But I do think that typical buyers and owners today are every bit as naive and stupid as were those who bought during the bubble. The financial justification in what they’re doing today is offset by the benefit of having hindsight and a financial milestone in our very recent history.

Most people, including many current buyers, simply do not put forth any effort into understanding what they are doing. What they understand is very simplistic stuff...."oh, this house sold for $650K in 2006 and now its listed at $400K...monthly payment is now $1600....we can afford that...THATS A GOOD DEAL!!!!!" with zero regard for outside influences and conditions that may color that decision.

Look, theres a reason that any time you walk on a car lot, the first two questions out of the salesmans mouth are "how much payment can you afford" and "are you looking to trade in your car". People SHOULD buy a car based on total purchase price(same as a house), NOT based on what monthly payment they can afford. Its a scam, albeit a legal and probably ethical(though I doubt moral) one. All designed to loosen money from fools.

What boggle my mind, even moreso than the notion that there are actually boobs who engage in this mindset, is that there are people who are despicable enough that not only will they use such "scam", but they will actively argue and assert that one can only buy what they can afford and other such nonsense.

dodgerfanjohn says

Most people, including many current buyers, simply do not put forth any effort into understanding what they are doing. What they understand is very simplistic stuff….”oh, this house sold for $650K in 2006 and now its listed at $400K…monthly payment is now $1600….we can afford that…THATS A GOOD DEAL!!!!!” with zero regard for outside influences and conditions that may color that decision.

So how do YOU evaluate if a house is worth its money or not? If not using a monthly payment as a reference. Any given house, is it worth 500k or 515k? or 495k? or 350k?

Using the monthly payment IS the way to determine what you can afford as its directly linked to the purchase price.

The thought process is in essence very basic. Here is what I make every month. 25% of that I am using to pay the rent. Rent is a monthly payment, except with no equity ever being built. It's a 0% down, life-time loan, don't get it twisted. If you don't own a condo or house, you have to rent for ever. And rents go up over time, so in essence you have a balloon loan that only gets more expensive as time goes by. There is no "freedom" as you have to live somewhere.

So the thought process continues...if instead of paying rent, I buy something where my payment is the same every month, then nothing really changes financially for me except in 10,15,30 (depending on loan) I own the house. If I want to sell before, I can...if I want to rent it out, I can.

That is the only thought process that matters, not what the house sold for in 2006 or yesterday or 20 years ago.

E-man says

My sources tell me the average DOM is 58 in April for SFH.
http://scc.rereport.com/market_reports

Yeah, I've seen rereport report less than half of what Juliana reports. The reason is that Juliana goes back to the original listing date, whereas rereport only puts the most recent listing that closed, ignoring when people pull a house off MLS and then put it back on. Repeport's stats are juked.

SFH’s in the market I’m looking at go pending in a week if priced accordingly.

Yeah, everyone always says stuff like that, but it's rarely true. I pointed out in another thread that someone else's "houses in Cupertino go 10% over listing all cash, off market in less than a week" was bogus, and that there were only 5 houses out of 41 that could have even possibly done either of those things, and the 5 that were 10% over were not the same 5 that could have been all cash and off market within a week.

You would have to give us specific examples to really show this. From what I see on Juliana's list 31 SFRs went pending in May and only 19 closed. At some point, these numbers should be evening out if houses aren't falling out of escrow. That's why I disagree that going pending is "off the market" -- in the current environment, a decent number of houses fall out.

SubOink says

So the thought process continues…if instead of paying rent, I buy something where my payment is the same every month, then nothing really changes financially for me except in 10,15,30 (depending on loan) I own the house. If I want to sell before, I can…if I want to rent it out, I can.
That is the only thought process that matters, not what the house sold for in 2006 or yesterday or 20 years ago.

This sounds verbatim like what a shithead realtor would tell their clients during the housing bubble.

"If you want to stay, great, nothing changes. If you have to move, sell it or rent it out and make money!! Win win! Nothing else should ever be considered in your decision to buy."

It's all predicated on false assumtions like, "Nothing else changes for me." or "If I want to sell before, I can."

And it's pure horseshit

bob2356 says

Oh bullshit. For every million plus dollar apartment in the most expensive cities in Germany I can easily show dozens of nice houses in rural France or Spain for under 100k even at 1.45 exchange rate.

Duh!
Of course there is cheap housing when you go to some place way out in the country in poor romania. What argument is that?
I can also find you 3000 sqft homes for $100k in the US. Just look in Palm Desert. Or go to Utah or Oregon, you can get acres of land for 50k.

But when I compare Los Angeles to Munich then its a fair comparison and prices are WAY higher in europe than over here in the US. And that is without even figuring in the euro exchange rate.

Schizlor says

This sounds verbatim like what a shithead realtor would tell their clients during the housing bubble.

“If you want to stay, great, nothing changes. If you have to move, sell it or rent it out and make money!! Win win! Nothing else should ever be considered in your decision to buy.”

And it’s pure horseshit

No, its not horseshit. It's just common sense!

Btw, nobody said..make money. Is it not true that you can sell a house if you like? Is it not true that you can rent out your house if you like?

Just because you say its horseshit doesn't make it horseshit. Please explain why exactly its horseshit.

SubOink says

Is it not true that you can sell a house if you like?

Are you kidding me? You're not serious, are you?

I think the past 5 years have more than adequately proven this point (and why this site exists in the first place) but since you need it spoon fed to you, here it is.

Scenario:

Home bought in 2005 for $285,000
People want to move 2009
Home in 2009 is valued at $225,000
People only have $12,000 in savings
People are short $48,000
People cannot sell the home

Now, if by "sell" you mean the option to squat for 2.5 years and save their mortgage payments until the bank forcibly takes the home back, they trash their credit, and then leave the home in shambles after they ripped out all the copper and bathroom hardware, then yes......I guess they ALWAYS have the option to sell.

But if by "sell" you mean a valid financial transaction whereby they get money from a buyer in exchange for the property, and then they vacate it good faith, then no, they absolutely do not always have the ability to sell.

Schizlor says

SubOink says

Is it not true that you can sell a house if you like?

Are you kidding me? You’re not serious, are you?

But its not 2006 anymore. Wake up? We are not talking about what happened in 2006 to now. We are talking about 2011.

Schizlor says

I think the past 5 years have more than adequately proven this point (and why this site exists in the first place) but since you need it spoon fed to you, here it is.

To clarify my point...look back in real estate. How is everybody doing that bought a house from 1950-2000?

Schizlor, all those people that bought in 2006, that you use as an example to prove me wrong did NOT actually do the common sense approach. They did NOT buy houses that they could afford. They did NOT take out fixed loans. And they bought houses that could be rented for half or a third less...

Go back to my original post and read. If those buyers had done simple math rather than hype.

But my common sense approach comparing rent vs mortgage every month still goes. But nobody did it in the bubble years.

And what I am talking about, is the fact that no matter if it is 1610, 2011, or 3048, telling someone that the ONLY logic they need concern themselves with when thinking of buying a house is:

"Pick a payment affordable right now (and pretend NOTHING could ever change that, like getting laid-off, hurt, divorced, cancer, etc) and then buy the home feeling safe knowing that if any of the aforementioned undesirables happens to you, you can ALWAYS sell the home or rent it out to someone else if you like."

This is a DANGEROUS proposition. What you're basically saying now is, "Well, the madness is behind us so we can get back to irrational exuberance." when you say "It's not 2006 anymore."

I agree, it's not 2006. And nobody should be that fucking stupid anymore.

Seriously, I cannot believe anyone besides a realtor would actually suggest in 2011 that, "Just tell me what you can afford and let's lock it down, the downside is practically nil" is a rational way to go about homebuying. Unbelievable.

SubOink says

Schizlor says

I think the past 5 years have more than adequately proven this point (and why this site exists in the first place) but since you need it spoon fed to you, here it is.

To clarify my point…look back in real estate. How is everybody doing that bought a house from 1950-2000?

So I guess in essence you are framing your argument in the context of "The housing bubble and it's effects are well behind us at this point."

I know things were rational and between 1950-2000 you definitely could reasonably expect your scenario to play out. I was in that camp too. Where we differ is, I still think we are deeply entrenched in this mess and are NOWHERE NEAR a point where we can confidently say, "Ahhh...well...that was 5 years ago, we've moved on" and pretend were back to normal. THAT is the part that I say is nonsense (actually I used a more colorful term)

I'm not debating that was sound logic for half a century up until the year 2000. I'm saying, to claim that's still sound logic is ridiculous.

If everyone had looked at what they can afford, we would never have had a bubble like this in the first place.

If you don't want to buy a house because you think you can get laid off, then fine. Don't buy a house. I am not saying its for everyone. But I am saying that if you get laid off, get sick etc...you still have to live somewhere, eat somewhere. So you are not getting around having to spend money every month for a place to live. If you choose a payment that is comfortable then part of the common sense is also that you should have a years worth of reserve saved (or more) in case you don't have a job.

I don't know why you are fighting me on this, with the horseshit, you are a realtor speech.

SubOink says

Using the monthly payment IS the way to determine what you can afford as its directly linked to the purchase price.

I suggest you read up on the recent housing bubble in the United States. The fact that you could read dodgerfanjohn's point, miss it by a mile, and argue against it is mind-boggling.

Everybody that bought into it used your rationale. At least they had the excuse of not living through a precedent.

klarek says

Everybody that bought into it used your rationale. At least they had the excuse of not living through a precedent.

The point is really, that they did NOT use my rationale. They went to the bank, said...I need a million bucks and the bank said...how much you make?...and they said...uh?..hm...well...300k/year...and the bank said...DEAL! No Doc, required...lets roll.

Far from my rationale...

SubOink says

klarek says

Everybody that bought into it used your rationale. At least they had the excuse of not living through a precedent.

The point is really, that they did NOT use my rationale. They went to the bank, said…I need a million bucks and the bank said…how much you make?…and they said…uh?..hm…well…300k/year…and the bank said…DEAL! No Doc, required…lets roll.
So far from my rationale.

What they did is what you are shamelessly advocating: buy based on what you can pay per month. Read what dodgerfan said. Making a 6-figure purchase with no more thoughtfulness than the monthy payment is beyond idiotic. Why any of this needs to be said in 2011 is beyond anyone's comprehension. It's embarrassing. This is exactly the type of bullshit that realtors want people to be dumb enough to believe.

klarek says

What they did is what you are shamelessly advocating: buy based on what you can pay per month.

No, what I am advocating is buying what you can pay per month and locking it in. NOBODY did that.

People lied left and right about how much many they make, without making it. Jee, do I really have to go over this???
They barely bought what they could REALLY afford. If at all, they bought what they could afford that year and took out a teaser rate loan...then 3 years later the rate changed and they could NOT afford it anymore. The theme was not...be reasonable but get as big of a house you can possibly swindle yourself into. How is that what I am advocating????

You clearly are the master of misinterpretation.

Let's put it this way Klarek...

What's your rationale? Fill us in.

I want to buy a house...so smart Klarek, advise me...what's the rationale?

You just constantly throw out useless and wrong criticism, let's actually hear your solutions. It's easy to say...that's crap, that's what realtors say..

Let's hear it...

SubOink says

Let’s put it this way Klarek…
What’s your rationale? Fill us in.
I want to buy a house…so smart Klarek, advise me…what’s the rationale?
You just constantly throw out useless and wrong criticism, let’s actually hear your solutions. It’s easy to say…that’s crap, that’s what realtors say..
Let’s hear it…

Rent parity is only one of the factors for making the buying decision. One has to consider job security and possible further house price depreciation.

To me, in today's new economic reality below are the only people who should buy
1. One who has plenty of assets, can pay all cash and still have other liquid investment in the portfolio
2. Singe income earner who works in the public sector or union protected field
3. Dual income family that live close to job centers, while only 1 person's income is sufficient to cover the mortgage payment if the other gets laid off.

APOCALYPSEFUCK says

If you can’t buy a house for cash, fuck it, squat or camp out in a car until you’ve saved up enough.
Debt = slavery.

Everything is slavery. Having a job is slavery. Paying taxes is slavery. Camping out in a car is living like a slave. You are a slave to something, one way or another...

For now, I'll be a slave in a nice big house and enjoy slavery in my pool while you camp out in that car and save money for 50 years. :) You'll be a slave to saving...

Future Cash Buyer says

One has to consider job security and possible further house price depreciation.

Also consider time horizon. If you only plan to live somewhere 3-5 years, it may not make sense to buy because of high transaction costs and low liquidity. If you need to move because of job, family situation, etc., this needs to be factored in. There are also slightly more intangible factors, e.g. ability to absorb risk or desire to take risk.

The "starter home" is a very dangerous concept. The used house salesman industry marketed this concept to increase transactions, so that used house salesmen get more commissions. Instead of buying a house that will surely underserve them in the future, most people would be better served by saving a larger downpayment and waiting a few years to buy a house that makes more sense, and they'll probably make at least slightly more in salary in the future too.

Buying a crappy starter house that won't meet your needs in the near future only makes sense if you have bubble appreciation that will overpower the massive transaction costs. It made sense if you bought in 2004 and sold in 2006, but rarely makes sense otherwise. This is one reason why 1BR condos have poor marketability in some cases.

SubOink says

For now, I’ll be a slave in a nice big house and enjoy slavery in my pool while you camp out in that car and save money for 50 years. :) You’ll be a slave to saving…

I think APOCALYPSEFUCK is asking us all to look inside ourselves to the place where we want freedom to reside.

Hurry up and own something! That's the point of living!

FunTime says

Hurry up and own something! That’s the point of living!

Right, that's the mentality that caused people to buy ridiculous "starter homes." Poor location? No problem. Won't suit me for more than a few years? No problem. Needs to be sold if I want a job out of the area? No problem. I just wanted to buy instead of piss away rent!

SubOink says

For now, I’ll be a slave in a nice big house and enjoy slavery in my pool while you camp out in that car and save money for 50 years. :) You’ll be a slave to saving…

Before you purchased, did you look at rental comps for a house like that with a pool? I'll bet you didn't, because "hey I can afford this monthly payment".

This country is so fucking dumb it's pathetic.

klarek says

SubOink says

For now, I’ll be a slave in a nice big house and enjoy slavery in my pool while you camp out in that car and save money for 50 years. You’ll be a slave to saving…

Before you purchased, did you look at rental comps for a house like that with a pool? I’ll bet you didn’t, because “hey I can afford this monthly payment”.

This country is so fucking dumb it’s pathetic.

No, I didn't check anything of course. I loved the house and I can easily afford it. This house is a palace compared to our last rental (rental had no pool). Now, it happens that our neighbors are renting for 500/month more than what we pay in mortgage but I won't tell them that..I promise. And their house is 300sqft smaller and no pool.

I think I just saw their nametag on the mailbox...it said "Klareks"

:)

klarek says

when he stares at the McDonalds combo meal options before making an order. Pretty sure you spent more time doing the latter.

Yes! How did you know that? I spent hours looking at the combo's. And when I am ready to have you ring up my order, I often change my mind last minute because the choices are so tough. :) :) :)

Oh, and here is my rationale about job security. There is no such thing as job security.

Job security should be your education and your skills!! Good people are always wanted and will always have a job.

SubOink says

Oh, and here is my rationale about job security. There is no such thing.

Oh but there is! It's called Teacher Tenure.

sybrib says

SubOink says

Oh, and here is my rationale about job security. There is no such thing.

Oh but there is! It’s called Teacher Tenure.

Let's not go there :)

SubOink says

Oh, and here is my rationale about job security. There is no such thing as job security.
Job security should be your education and your skills!! Good people are always wanted and will always have a job.

I agree. But you can bring your education and skills with you a lot easier than the house you purchased when you move.

SubOink says

No, I didn’t check anything of course. I loved the house and I can easily afford it.

I didn't ask if your neighbors were paying more in rent, I asked if you looked at the rental comps. I didn't even make the presumption that you're paying more or less by owning rather than renting, just that you based your purchase on such pathetic thresholds that you didn't even bother to look at craigslist.

Thank you for proving my point, as well as points made by Schizlor and dodgerfan. Your decision was 100% emotional. Your "I can afford it" threshold is set by the lenders. You didn't make any decision there. You would have accepted whatever they told you that you could afford.

Had you been born a few years earlier in this world, you would have purchased at the height of the bubbe, and used the exact same rationale. We've all tried to point out to you how dumb this is, why our country is full of idiots who make six-figure purchases without a care or thought in the world, only to the benefit of their scumbag realtors and mortgage pushers. But you relent every step of the way.

SubOink says

APOCALYPSEFUCK says

If you can’t buy a house for cash, fuck it, squat or camp out in a car until you’ve saved up enough.

Debt = slavery.

Everything is slavery. Having a job is slavery. Paying taxes is slavery. Camping out in a car is living like a slave. You are a slave to something, one way or another…
For now, I’ll be a slave in a nice big house and enjoy slavery in my pool while you camp out in that car and save money for 50 years. You’ll be a slave to saving…

you rock man- I agree. I'm on my way to be out of all these slaveries in next 10 years. That's my goal

SubOink you rock :-))

SubOink says

Oh, and here is my rationale about job security. There is no such thing as job security.
Job security should be your education and your skills!! Good people are always wanted and will always have a job.

With the way you talk, you should not even need a job.
You sounds like that you are richer than Bill Gates.

The other important aspect of this low is that this low is actually incredibly high. When a house forecloses, the price it forecloses is usually on the owed amount (which is much above its value). These are recorded as sales, without actual sale taking place.

You can even verify that on trulia. Averages get completely skewed by Foreclosures of 1.2 million and 700,000 houses in a 250,000 neighborhood.

If foreclosures were not considered, there would be almost no sales listed. which is why I think we are a long way from the bottom, at least in our area.

SubOink says

To clarify my point…look back in real estate. How is everybody doing that bought a house from 1950-2000?

Like me, doing well.
WE didnt buy into inflated prices.
WE didnt buy more house than we can afford.
WE didnt buy into the hype.
WE learned high home prices kill jobs in local industries.

xenogear3 says

SubOink says
Oh, and here is my rationale about job security. There is no such thing as job security.
Job security should be your education and your skills!! Good people are always wanted and will always have a job.
With the way you talk, you should not even need a job.
You sounds like that you are richer than Bill Gates.

With the way you talk, you think Bill Gates was just born rich?