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BucsFan1976

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#15 : April 11, 2007, 02:42:48 PM

Interesting article..


A Word of Advice During a Housing Slump: Rent


http://www.nytimes.com/2007/04/11/realestate/11leonhardt.html?_r=1&oref=slogin

 
A promotional spot for the National Association of Realtors came on the radio the other day. The spot, introduced as something called “Newsmakers,” was supposed to sound like a news report, with the association’s president offering real estate advice.



“This is the best time to buy,” Pat Vredevoogd Combs, the president, said cheerfully. “There’s a lot of inventory in the marketplace. Interest rates are low. It’s a wonderful tax deduction.”

By the Realtors’ way of thinking, it’s always a good time to buy. Homeownership, they argue, is a way to achieve the American dream, save on taxes and earn a solid investment return all at the same time.

That’s how it has worked out for much of the last 15 years. But in a stark reversal, it’s now clear that people who chose renting over buying in the last two years made the right move. In much of the country, including large parts of the Northeast, California, Florida and the Southwest, recent home buyers have faced higher monthly costs than renters and have lost money on their investment in the meantime. It’s almost as if they have thrown money away, an insult once reserved for renters.

Most striking, perhaps, is the fact that prices may not yet have fallen far enough for buying to look better than renting today, except for people who plan to stay in a home for many years.

With the spring moving season under way, The New York Times has done an analysis of buying vs. renting in every major metropolitan area. The analysis includes data on housing costs and looks at different possibilities for the path of home prices in coming years.

It found that even though rents have recently jumped, the costs that come with buying a home — mortgage payments, property taxes, fees to real estate agents — remain a lot higher than the costs of renting. So buyers in many places are basically betting that home prices will rise smartly in the near future.

Over the next five years, which is about the average amount of time recent buyers have remained in their homes, prices in the Los Angeles area would have to rise more than 5 percent a year for a typical buyer there to do better than a renter. The same is true in Phoenix, Las Vegas, the New York region, Northern California and South Florida. In the Boston and Washington areas, the break-even point is about 4 percent.

“House prices have to fall more before housing becomes a clear buy again,” says Mark Zandi, chief economist of Moody’s Economy.com, a research company that helped conduct the analysis. “These markets aren’t as overvalued as they were a year ago or two years ago, but they’re still unfriendly. And that’s one of the reasons the market is still soft — people realize it’s not a bargain.”

There is obviously no way to know what home prices will do in the next few years. But there are two big reasons to doubt the real estate boosters who insist that it’s once again a great time to buy.

The first is history. After the last big run-up in house prices, in the 1980s, a long slump followed. In the New York area, prices peaked in early 1989 and then fell 9 percent over the next three years, according to government data. (Adjusted for inflation, the drop was much bigger.) Not until 1998 did prices pass their earlier peak.

Keep in mind that the 2000-5 boom was even bigger than the ’80s boom and that house prices on the coasts, according to the official numbers at least, have fallen only slightly so far. So it is hard to imagine that prices will rise 5 percent a year, or another 28 percent in all, over the next five years.

The second reason for skepticism is that buying has never been quite as beneficial as Realtors — and mortgage brokers, home builders and everybody else who makes money off home purchases — have made it out to be. Buyers have to pay property taxes on top of their mortgage, while renters have the taxes included in their monthly rent bill. Buyers also face thousands of dollars in closing costs (and, in Manhattan, co-op charges). Renters, meanwhile, can invest what they would have spent on closing costs and a down payment in the stock market, which hasn’t exactly delivered a bad return over the last 20 years.

And that famous mortgage-interest tax deduction? Yes, it reduces the borrowing costs that come with a mortgage, but it doesn’t eliminate them. Renters don’t face any such borrowing costs.

Almost two years ago, I interviewed a thoughtful 37-year-old man named Tchaka Owen, who happens to be a real estate agent. (Whatever the sins of the Realtors’ association, there are a lot of smart, helpful agents out there. Just remember that they have a financial interest in getting you to buy a house.)

Mr. Owen and his girlfriend, Polly Thompson, had recently moved from the Washington suburbs to the Miami area and decided to rent a two-bedroom apartment with spectacular bay views. “You can get so much more for your money, renting instead of buying,” he said at the time.

Sure enough, house prices soon began to fall in South Florida, and Mr. Owen and Ms. Thompson started to think about buying a place. A three-bedroom Mediterranean-style house that they liked was originally listed for $620,000 last year, but the price was later cut to $543,000. They bought it in June for $516,000. Since then, the market has fallen further, but Mr. Owen said he didn’t mind, because they plan to stay in the house at least a decade. “We love it,” he told me.

Clearly, there are benefits to owning a house beyond the financial, like the comfort of knowing you can stay as long as you want or can fix the roof without permission. But real estate has been sold as more than a good way to spend money. It has been sold as a can’t-miss investment. Back in 2005, near the peak of the market, the chief economist of the Realtors’ association, David Lereah, published a book called “Are You Missing the Real Estate Boom?” The can’t-miss argument was wrong then, and it may still be wrong today.

After hearing that radio spot, I called Ms. Combs and asked her whether she thought there was any chance that she and her fellow Realtors had gone a bit too far in promoting the boom. “I absolutely disagree,” she said, still cheerful. “We help people look at the marketplace.”

So I asked what advice she gave her own clients in Grand Rapids, Mich., where she is an agent. “We often tell people that they need to stay in a house five to six years for it to make sense,” she said.

That’s a nuance that didn’t make it into her “Newsmakers” interview. In Grand Rapids, where the median home costs $130,000, it is probably good advice. In a lot of other places, it may still be too optimistic.

JavaBuc

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#16 : April 11, 2007, 02:50:12 PM

Good article, 1976.

BucsFan1976

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#17 : April 11, 2007, 02:55:35 PM

Good article, 1976.

Im renting a house myself, waiting for the right moment to buy one. Not sure if its going to be here in Fla or in the Northeast.

Morgan

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#18 : April 11, 2007, 04:10:12 PM

My company recently advertised for a position that is open. Although real estate has nothing to do with our field of business, it seems that about 90% of the applicants are current real estate agents. I guess that goldmine has dried up. LOL!

Some of those agents who didn't make it big are now struggling to pay the rent.

LOL?

I don't get that. You seem to get lots of pleasure out of other people's struggles.

???

Because many of us see real estate agents in the same vain as stockbrokers - trying to squeeze money out of everyday workers just for their commission - especially during the lastest peak in the real estate market.  Real estate commisions are a scam, IMO, and I'll try my best to minimize the real estate agent's profits when making a sale in my next home purchase.

One of my favorite movies is Glengarry Glenn Ross - probably nothing like the real estate world, but to me real estate agents fall in the same category as stockbrokers and lawyers.

BTW, thanks for the above article. Very interesting read.

ufojoe

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#19 : April 11, 2007, 04:41:55 PM

Good article. Makes me feel better about spending $26,000 a year on rent.
Well, maybe not.


Because many of us see real estate agents in the same vain as stockbrokers - trying to squeeze money out of everyday workers just for their commission - especially during the lastest peak in the real estate market.  Real estate commisions are a scam, IMO, and I'll try my best to minimize the real estate agent's profits when making a sale in my next home purchase.

One of my favorite movies is Glengarry Glenn Ross - probably nothing like the real estate world, but to me real estate agents fall in the same category as stockbrokers and lawyers.

Rea Estate agents compared to lawyers?

Anybody else feel like that?

You're painting the entire industry with a broad brush.

When my wife and I wanted to move from Burbank to Manhattan Beach, we
had a hell of a time finding an apartment. I went online and searched for
people who could give us advice. I found a real estate agent who responded
to my email. She gave us some advice and told us she would keep her eyes
open. She seemed really nice. I told my wife, "This woman is going to help
us get into a place." And my wife was like, "You just met her online, why
would she help us?" I just knew. Intuition.

On our own, we found a place that we liked. My credit wasn't great and my
wife had filed a bankruptcy. I filled out the application with just my name
on the lease. The agent renting the apartment said all looked good and
he would get back to us. Days went by and nothing. I called him and
he wouldn't call back. We were pissed and disappointed. We really
wanted this place and for some reason, we were getting rejected.
I even offered to pay a few months in advance if necessary.

I wrote my new real estate friend and asked her for advice. Turns out
she knew another agent that worked at the same place as the guy
who was ignoring us. She told us she would try to find out what
was going on. She got back to us and told us that she put a good
word in for us and that we should wait for a phone call.

The next day, we got a call from the guy. We could move in in
a few days. The place was ours. She did it.

And what did this friendly real estate agent want for helping us?
Nothing. I offered dinner and she refused. But after pushing her, she
finally agreed. That was May of last year. We still haven't had the
time to get together. Schedules always conflict. But we stay in touch.

If look for the good people, you will find them. Expect for the bad?
You'll find that too.

From the NY Times article..

(Whatever the sins of the Realtors’ association, there are a lot of smart, helpful agents
out there. Just remember that they have a financial interest in getting you to buy a
house.)



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#20 : April 11, 2007, 07:09:12 PM

The entire real estate market(buyers & sellers)is heading for a total crash & burn!!  :o

Skull and Bones

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#21 : April 11, 2007, 07:30:13 PM

does that mean I can buy a mansion with my half a mil? the price I sold my home for in ca?

500k will get you a 3000+ sqr foot home with a pool on a pretty nice subdivision.

in the Boston area, only 30 miles from me, 500k is the average house price. 


ufojoe

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#22 : April 11, 2007, 07:47:44 PM

The entire real estate market(buyers & sellers)is heading for a total crash & burn!!  :o

And with those words, Chrispy made his return and immediately burned up into the atmosphere.

BucsFan1976

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#23 : April 11, 2007, 08:26:53 PM

April 11. 2007 12:19PM

Realtors group says median home prices will decline for first time in 4 decades

THE ASSOCIATED PRESS

WASHINGTON — The National Association of Realtors said Wednesday that it expects the national median price for existing homes to drop this year for the first time since the trade group began keeping records in the late 1960s.

The group also lowered its 2007 sales forecast for new and existing homes. Tighter lending standards and the continued fallout from the subprime mortgage market are to blame, NAR spokesman Walter Molony said in an interview.

NAR is forecasting a 0.7 percent dip in 2007 for the national median price for existing homes after a 1 percent gain last year.

The national median new home sale price is projected to rise 0.4 percent after a 1.8 percent gain last year, according to the association.

However, NAR forecasts a 14.2 percent decline in new home sales compared with its previous estimate of a 10.4 percent slide.

The group estimates that existing home sales will fall 2.2 percent this year, compared with a previous forecast of a 0.9 percent decline.



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#24 : April 11, 2007, 08:56:52 PM

And with those words, Chrispy made his return and immediately burned up into the atmosphere.

Ohhhh I'm sorry Joe, the real estate market is actually very profitable right now despite there being thousands of FOR SALE signs in just about every neighborhood around Hillborough & Pasco counties(meaning no one is buying or selling right now).  ::) :-

ufojoe

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#25 : April 11, 2007, 11:03:55 PM

Sorry for what? I was joking. Relax a bit. You just got back!

I agree that the market is about to take a hit.

I'm not buying a house. But that has more to do with the multi-million dollar
price tags here at the beach. Plus, I'm afraid to buy something that might
fall apart with one nasty quake.

Morgan

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#26 : April 12, 2007, 02:21:09 AM


Rea Estate agents compared to lawyers?

Anybody else feel like that?

You're painting the entire industry with a broad brush.



So you did your usual google-search, copy/paste to find a touching story about a real estate agent. I think I could find a story about an unethical real estate agent scamming innocent home buyers/sellers just as easy.

Sure real estate agents are trying to make a living - as are used car sales people and stockbrokers. All three jobs involve a commission - and in real estate, the higher the selling price, the higher the agent's commission.

The Real Estate business is an industry that I would have little trust that they were doing the best thing in my interest.

I guess I can blame the banking/mortgage industry drawing people into ARMs - but I'd like to see what the real estate business's role in enticing buyers into homes that they can't afford.


Skull and Bones

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#27 : April 12, 2007, 05:53:56 AM

I just bought my house in December.  We had twins on the way and needed a bigger house so we sold our old one for virtually no profit after the real estate commission(we had been in it for 3 years).  The house we bought sold for $30, 000 under the original asking price and city tax assessment.  I thought about renting a place for another year, let the market drop further, and then buy but the thought of moving all over again didn't appeal.


Morgan

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#28 : April 12, 2007, 06:43:11 AM

$30K from what asking price, if you don't mind me asking.

ufojoe

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#29 : April 12, 2007, 08:29:48 AM

So you did your usual google-search, copy/paste to find a touching story about a real estate agent. I think I could find a story about an unethical real estate agent scamming innocent home buyers/sellers just as easy.

No, sorry, I actually made a great friend with my agent. Even though I'm not in the market
for a house. Like I said, you're painting people with a broad brush and looking for the
negative. You would have never found my friend and received the help we did. Look
for the good oma. Look for the good...

Plenty of other commission-based jobs out there where the person selling to you will
make more with a higher price or more services sold. And among those people, you'll
find the ones who only care about profit (the ones you seem to attract into your
life) and the others who want to make money but also want to help you out
at the same time, to the best of their ability.

Cut and paste? Good one! I'm still laughing.
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