Comment by Greg Depue on December 12, 2010 at 6:43pm

Tom, I absolutely agree with you, and from a Mortgage officers perspective, the 1 percent or 1/2 a percent interest point change will usually make more of a difference then haggling with the seller over the price.  The time to buy is right now! 

Comment by Ed Davis, PLS on December 13, 2010 at 12:06pm

Tom, thanks! 

Home buyers, distressed home sales = the bottom now, so you don't have to wait.

Investors, I'd like to tell you to wait until the opposite end of the bottom, so that there is less time before equity starts to accrue.

Hire a highly recommended Buyers Agent (no cost to you), watch daily, have the agent watch for you, get info from multiple sources (the entire professional team working for you), follow the hard facts, the RE principals and get ready to make a good buy.

Thanks again Tom, for being such an well read, informed and conscientious real estate professional!

Comment by LANDIE CHAPPELL on January 19, 2011 at 11:51am

Yes, Tom, I agree with you also.  Buyers will more than benefit by taking advantage of the still low rates and the low home prices now.  Waiting is a gamble as the rates may go down but there is a good chance that they could go up which will make the monthly payment even higher.  Remember the saying " a bird in the hand is better than two in the bush" - it is so true in this market!

Comment by Aaron Rollins on January 20, 2011 at 1:56pm

There are so many factors to consider that anyone who proclaims to "know" should probably not be trusted!  I tend to agree in theory prices are near bottom, but other factors like replacement/new construction costs, real inflation adjusted income trends, tax "credits" and other market factors can make simple supply/demand theory almost moot. 

The $8K "tax credit" (I say that in quotes because it was really a redistribution/welfare style check given to a select segment of the population and had nothing to do with your taxes in any way) severely distorted the market, taking all of the natural demand and shoving it into a specific window of time.  Now we are in a lull like after affect where almost anyone who had any reason to buy did and the natural demand is building back up over time. 

5 years ago lumber and concrete were almost twice what they are today. A swing like that in new construction costs will distort the market and change home prices independently of any other factor. Can you predict when China is going to build a dam that sucks up all the concrete in the world for 5 years and triples the price?  I sure can't and very few did.

In 2001 interest rates hit a low of 7%, every expert out there said "this is the lowest in 30 years and we are now seeing the bottom again."  Rates are nearing half that 7%, the experts were almost all wrong.  Six months ago the "experts predicted rates were on the rise again, they haven't risen enough to count. 

The moral of the story for me is that you can't really know or plan, you just need to do what makes sense for you given the circumstances of the day and what general themes you can take from history, since it will and does repeat itself.

Comment by Tom Clark on January 20, 2011 at 2:41pm

Well written Aaron.  Everyone has to make their own decision based on their situation.  There are those "on the fence" and for those who need a push there is alot to consider in this market.  The height of the bar is always set by replacement costs.  When asked to predict the future I always insert the disclaimer "barring any unforseen man made or natural disasters".  Thanks everyone for your comments above.

Comment by Ed Davis, PLS on January 20, 2011 at 3:18pm

Aaron, your addition to the Comments seems more than a little bit acrid and confrontational.

Real estate cycles tend to run in 7-10yr cycles.  Your reference to the year 2001 is interesting and maybe even points well taken, but I would like to point out that is was a part of the last cycle.  The cycle of which Tom speaks and that I and others have commented on is the current cycle.  It is true that experts are all wrong part of the time and that is a human trait.  The last time I checked my pencil the eraser definitely showed signs of wear, as I am certain yours does.

The most dependable price of a home is it's replacement value and WE ARE approaching that value.  Currently only some are at replacement value (some distressed sales), but soon all will be.  What Tom and others are trying to point out is that some nagging angst may be preventing new purchases at prices where one cannot be hurt and that is an error on the part of a buyer with a need on many points and levels.

I might point out that your profile describes you as an expert, but I would never be foolish enough to believe that you, me, Tom or any other studied and searching individual would never be wrong.

I have seen 6+ real estate and a number of interest cycles and can tell you that while each has common elements, each one is also unique to its own cycle. 

I personally appreciate your demonstration of some of the dynamics of the 2001 cycle(s) and hope that you will continue to add value to all blogs on Launch Pad INW.

Cheers,  Ed

Comment by Aaron Rollins on January 20, 2011 at 5:19pm

Somewhat of a correction, my profile does not describe me as an expert, but the company I work for as "IT experts" as a whole. I would also make a big distinction between those using an expert adjective when predicting the future vs. a company's combined knowledge of an industry as experts in what currently is true. Apples and Buicks.

You say that there is nagging angst preventing purchases at prices where one cannot be hurt?  How can we know they "cannot be hurt"?  There is no guarantee home prices won't fall 20% next month.

But I do see your point and agree with you that my post is a bit confrontational.  I have nowhere near the real estate experience you have, but have spent my share of time running in real estate circles and am a bit soured on the quick to predict and tell the future that often happens surrounding home sales.

The tax credit issue was an especially disheartening one for me.  I sat on the government affairs committee at the SAR for months while individually and as a whole the tax credit was praised and championed as a savior of sales.  I bit my tongue each time it came up as not once did anyone stop to ask if it was actually a good thing in its entirety. To do so would have been a suicide of sorts...it was a sacred cow, not to be questioned because it helped sales.  

Alas, the tax credit is relevant but a discussion for another day that I'd be happy to have...

My point in general is that on occasion those who retain 100% of their income from sales in a specific industry fall to the temptation of predicting and foretell the future of that industry. There are many industries where this holds true...stocks, commodities, anything really where a future value to an item is important.

Comment by Tom Clark on January 20, 2011 at 5:37pm

I'm not sure you aren't preaching to the choir here Aaron.  I was never in favor of the tax credits.  Very few of my clients were in a position nor made their decisions based on the Government's assistance.  Buying or selling a home is a personal decision and is usually made for a variety of reasons.  There seems to be a disconnect here as to the blogger's intent of sharing a view or their perspective.  I'm not sure anyone reads a blog post and expects it to be "fact".  I find it interesting to read other people's perspective and opinions regarding any number of subjects.  Most doctors don't agree every time on a treatment for an ailment although their training and experience is quite vast a majority of the time.  Whether someone can be "hurt" by a real estate purchase is relevant to that person and their situation.  I do believe in the product I sell as having a long term benefit to the purchaser.  I also believe history will prove me correct.  I don't know if the future will provide the same assurance but I'd bet on it.  :-)  I don't see anyone "foretelling the future here" so I guess I'm at a loss as to your point. 

Comment by Aaron Rollins on January 20, 2011 at 8:54pm

Fair enough if you were not in favor of the home buyer tax credit, but you were in the vast minority among Realtors.

My point is just that life is a study of incentives, all human nature is dependent on incentives, it is why people do what they do, always.  And in the case of those who have an interest in real estate giving opinions where home prices will go, those with vested interest will predict sunshine 9 times out of 10. It is human nature.

Ed mentioned buyers have "nagging angst" about buying homes right now. I would argue that is because it's pretty fresh in peoples memory when things were booming just a few years ago and virtually NOBODY in the real estate industry was saying to buyers "hey be careful this is a huge bubble that is going to burst".  Sure there were exceptions, but few. 

A related and relevant example is found here.  This guy (Peter) was about the only financial talking head anywhere to be found who predicted the market tanking.  He was a pariah, mocked by his peers, and 100% right.  http://www.youtube.com/watch?v=2I0QN-FYkpw

My point is just to say that the question itself is dangerous; "have home prices bottomed out?"  Sure it's fun to talk about and we all have our two cents worth, but some of the comments are fairly predictive in nature and that makes me squirm. (a couple of those comments quoted below)

Obviously I've stepped into the lions den a little here, but it's all in good fun.  I'm not afraid of some lively banter. =)

 

"That being said. it is a great incentive to buy now and not wait for another few percent in price drop."

"Home buyers, distressed home sales = the bottom now, so you don't have to wait."

"Buyers will more than benefit by taking advantage of the still low rates and the low home prices now."

Comment by Aaron Rollins on January 20, 2011 at 8:55pm

On a related note...this just hit the news wire a few hours ago.

http://apnews.myway.com/article/20110120/D9KSBQ680.html

 

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