Huh?
Nice to start the New Year with some sunshiny optimism, courtesy of our local King of Real Estate:
“Going into 2008 mine may not be the only optimistic voice you hear, the majority opinion is that we have passed the worst of it. The National Association of Realtors is predicting a slight increase in existing home sales for 2008. While the market may not bounce back to what it was a couple of years ago, things are not expected to get any worse.”
Well, the 10th largest bank in the US, National City, just closed its wholesale lending division today and cut its shareholder dividend by 50%. Other lenders, such as Countrywide, are discontinuing stated-income and low-downpayment programs on an almost daily basis. So…where are all the buyers going to come from that will sustain the market at its current levels?
There’s no more funny money available out there, and no more buyers will enter this market until prices take another radical dip lower. It’s not about rates anymore; it’s about affordability. And, NJ housing will need to drop another 20-25% in price- across the board- before we’ll see any significant uptick in sales.
Sellers in the current environment deserve some straight talk about what’s going on right now. And, what’s transpiring amounts to the beginning of the biggest real estate crash in American history. A seller’s best opportunity right now may be to get things done ASAP, thereby cashing out as much equity as possible, before things get worse. “The worst has passed”??? This thing hasn’t really even started yet. Every real estate boom in US history has been followed by a bust of equal proportion. That means a local market which ran up 100% from 2001-06 will retrace 50%. To date, we’ve only shaved maybe 15-20% off the highs of that market.
Of course, making a statement like the one I’ve made above doesn’t get you on MSNBC or get you invited to be a guest speaker to groups of real estate agents. However, consider that The King of Real Estate relies on a statement made by the National Association of Realtors to bolster his case. That’d be nice…except for the little problem NAR has with the accuracy of its predictions and its credibility. In 2007, NAR issued 12 (yep, one for every month) monthly housing reports, which were then followed by 12 monthly revisions of its forecast and outlook. That’s right: for the calendar year 2007, NAR batted .000. Of course, NAR finished off its stellar ‘07 by predicting a slight increase in existing home sales in ‘08. Amazingly, NAR’s new Chief Economist, Lawrence Yun (who, in mid-’07, replaced the totally discredited David Lereah) seems to have developed a projection algorithm based entirely upon hope and wish, as no statistical evidence exists to back his assertion.
I’m not down on the long-term ownership of real estate. I do not- as I have been accused- hate my own profession. There are narrow opportunities for both buyers and sellers in the current environment, and I do believe that falling prices will act as a purge that will ultimately strengthen the market by forcing a return to fundamentals in both financing and pricing of the asset class.
Forces Are At Work to Silence Me
January 31st, 2008 at 5:44 pm
I am sure your negativity has gotten you very far in your business.
January 31st, 2008 at 6:29 pm
Susan (1)-
What negativity? Is an acknowledgement of difficult facts “negativity”? Is any opinion other than “it’s a great time to buy” invalid?
You’d be surprised to know that I- and the associates in my office- get real enjoyment and a sense of accomplishment from helping people with their real estate needs. However, many of the problems we’re solving now involve some sort of foreclosure avoidance or loss mitigation. Not surprisingly, many of the people we’re helping bought homes from 2004-2006 after having been pumped full of sunshine by any number of semi-skilled, semi-literate hucksters. First, these folks got sold a house that couldn’t possibly go down in value (har!), then got sold fraudulent financing, based on the premise that the loans could be refinanced within two years…since houses couldn’t possibly go down in value.
Susan, are you a Realtor? Are you a motivational speaker? If so, I appreciate the intensity of your pronouncement of my “negativity”…since there is no worse thing to be than a “negative” person in the world of conventional real estate. Negative people are pariahs, to be avoided at all costs.
Why is it that Realtors are never admonished to avoid people who walk around all day with vacuous smiles, little-to-no intellectual abilities and questionable skills? Are these people not as dangerous to themselves- and their clients- as negative people? I’d submit that we’re now in the process of sorting through the wasteland that’s been created by the happy-happy-joy-joy set.
As to your comment about negativity getting me far in my business, I don’t follow you. I’ve been doing this a while, and one of the things I’ve learned is that real estate is a market, pure and simple. The market isn’t positive, the market isn’t negative. It just IS. Every time I’ve personalized- or otherwise viewed this market in an emotional context- I’ve gotten my head handed to me.
January 31st, 2008 at 10:01 pm
I will ask Jesus Christ to share is love and mercy on your cold hart. My the lord our God lift you up. Amen
February 1st, 2008 at 12:55 am
Hopeful (3)-
Thanks for your prayer. What on Earth does your comment have to do with real estate markets?
I’ve always been more of a results guy than a prayer/meditation one. “By their deeds, you shall know them” is my favorite Bible verse. Not to toot my own horn, but I’m actually a pretty happy person, involved in coaching youth soccer, working on the Foundation at Somerset Vo-Tech HS and busy on other charitable activities.
Does the fact that I’m not pumping real estate sunshine make me a cold-hearted, Jesusless person in your eyes?
February 1st, 2008 at 12:58 am
Would Jesus sell you a McMansion today at a 2005 price, then suggest you take out a 2/28, 100%-financed ARM to pay for it?
February 3rd, 2008 at 2:42 am
Spouting your selfrighteous indignities doesn’t make you a better person. Preaching your self-serving accomplishments as a defense doesn’t raise you above the rest you wish to condemn. Your words and tone are pompous and hateful and appear to be from the core of a bitter and jealous man.
Hopeful may be on to something.
February 3rd, 2008 at 2:07 pm
TMac-
Self-righteous? Indignant? All I’m doing is stating an opinion that’s different from the party line and pointing out the danger of agents who parrot the dangerous twaddle promulgated by NAR. I only posted the activities I’m involved in to demonstrate that I’m not some self-loathing, hateful creature. I’m a very ordinary and reasonably happy person. Of course, the fact that I find pumping sunshine to be irresponsible and unethical makes me a “negative” person, the most-loathed of real estate pariahs.
Why do these recent comments focus on my personality and not on the content of my statements? Could it be that the posters who pray for my aberrant soul or upbraid me for my alleged “negativity” cannot rebut my arguments? Easy to go after the person or the tone of what he says when you can’t argue the facts.
TMac, I assume you’re a Realtor. How are you at short sales, loss mitigation, prospecting for people in the first stages or foreclosure and REO? How are you at working with multiple lienholders to save a client’s credit? Know how to talk to a client who’s considering bankruptcy in order to stave off a foreclosure? If you aren’t comfortable with these things, you’re gonna be in for a few lean years.
Is there anybody out there who wants to debate me on the facts?
February 3rd, 2008 at 3:07 pm
Chip:
I do not dispute the fact that there are many homeowners that are on the verge of being homelosers. In part to their own greed and shortsightedness and in part for not being completely informed by their lender and/or their Realtor.
However, the issue that I have with you is that you do not seem to be joking and that your attacks on someone that differs with your opinion are more than just “invective and humor,” they are insulting and border on libel.
The tone of most of your other posts are quite pompous. You assume a holier than thou position and chastize everyone and everything.If YOU have all the answers, why aren’t you on the front lines championing the cause of the poor lemmings following the “happy sunshine” crew instead of sitting behind your computer screen taking pot shots at those that have done more good in the community than you will allow them credit for?
You’ve talked the talk, let’s see YOU walk the walk!
February 3rd, 2008 at 5:58 pm
TMac-
“However, the issue that I have with you is that you do not seem to be joking and that your attacks on someone that differs with your opinion are more than just “invective and humor,” they are insulting and border on libel.”
TMac…those comments were meant to insult. Any agent who is out there right now parroting NAR’s party line and sounding the “all clear” signal and telling everyone “it’s a great time to buy” is doing far more damage than I could with a lifetime of insults. NAR’s new ad campaign emphasizes that houses, on average, double in value every ten years; that’d be great, except for the little fact that ANY investment that barely tracks inflation does the same. Telling a first-time buyer to get into this market right now is like a stockbroker telling someone to buy Enron as it was collapsing and justifying it by telling the buyer to consider Enron’s past stellar performance (lots of stockbrokers did this, by the way).
This market presents opportunity for a narrow group of buyers and sellers; I’m not advocating that nobody buy and nobody sell. But, given the narrow nature of current opportunities, it’s not an environment for for the first-time buyer, the financially-inexperienced or someone who may have a short expected window of occupancy. There is growing evidence that prices will fall further and credit markets will continue to tighten.
Libel? Again, I’d direct you to about 10,000 blogs out there. Clearly outlandish statements- intended as hyperbole- cannot be prosecuted as libel.
As far as my “holier than thou”, “pompous” position, excuse me for having a strong, reasoned opinion. Perhaps I’d be easier to rebut if all I did were hurl insults without substantiation. If I take the time to write something here, it’s going to have some pop behind it. Sorry if you or your friends are caught in the crossfire. I’m still perplexed by the ruckus that this single blogger has caused. Is the concern over my misguided sense of humor…or is it that I’ve called someone out for promulgating a self-serving and potentially destructive message? The personal reference- and my insult- have been removed from this blog (don’t ever want to hurt anyone’s feelings now, do we?), yet that doesn’t seem to be enough. I’ve got a feeling that there are a few folks out there who would like to see me silenced.
Lastly, to your comment: “why aren’t you on the front lines championing the cause of the poor lemmings following the “happy sunshine” crew”, all I can say is…I am. My agents and I have worked on a number of short sales in the past few months, and there are more in the pipeline. I speak to any number of people now who are on the edge of bad times, and I’m happy to offer whatever help I can, free of obligation or charge. If you know anything about doing short sales, you’d know I’m “walking the walk”, as 50% of proposed short sales fall through and the properties go to foreclosure. I’m not doing it because of the windfall profits that could be made. In addition, if I see an opportunity for mitigation or a mortgage recast for someone in trouble, I’ll counsel them to go that route, rather than just taking the listing and attempting to sell it short.
So, how well are you walking your walk?
February 3rd, 2008 at 8:18 pm
Chip:
Mother always told me that having discussions or arguments with some people is like winning the Special Olympics. You may finally win, but you’re still handicapped.
I’ll head my mother’s advice and leave you to your own little world. Stirring up the voice of three or four people seems to have made you a celebrity in your own mind. I’ll leave you with this. When I lay myself down to bed at night, at least I’m not sleeping with Chip Hughes. You are! And for that, I do feel sorry for you.
February 3rd, 2008 at 10:39 pm
TMac-
Thanks for your pity. I’d thank you in person, but you left a bogus e-mail address. Why the reticence in identifying yourself? Believe me, I’ve stirred up a lot more than the three or four people who may have posted here. You might also be surprised to know there are a lot more people- in and out of the profession- who agree with me than don’t.
I figured your next post would be your last, as you appear incapable of discussing actual real estate issues.
February 4th, 2008 at 7:49 pm
Alright, I’ll engage.
Perhaps you can explain when is a good time to buy? When the rates are over 8%? When home prices are shooting through the roof? Perhaps, like a couple I just bailed out of their home as their ARM just killed them (BTW, they bought the home with you as their agent).
Home buyers with the means to assume a fixed rate mortgage, which should ALWAYS be a prerequisite, are in an IDEAL position to buy right now. Prices have dropped significantly and now appear to have stabilized and interest rates are incredibly low. So, I ask you, Mr. Knower of All Things Righteous, why is it NOT a good time to buy?
Is that real estate related enough for you?
And I left an altered email because I don’t need you to email me or harrass me which your previous post has demonstrated you attempted to do. See, some of can see ahead and don’t rely on 20-20 hindsight.
You can answer, and I will allow you the last word. You win the race. And to the victor go the spoils.
February 5th, 2008 at 12:46 am
TMac-
Wow. You seem angry and kinda paranoid now. You’ve told me twice that you’ll give me the last word, but you keep coming back. Great! I enjoy a good fight, too. BTW, the only e-mail you’d ever get from me is the one that automatically goes to anyone who posts here, thanking them for taking the time to do so. The e-mail my autoresponder sent you bounced back. Please be assured I don’t feel the need to harass people or violate their privacy.
Your previous statement, “…home buyers with the means to assume a fixed rate mortgage, which should ALWAYS be a prerequisite, are in an IDEAL position to buy right now”, is perfectly compatible with a statement I made earlier in this thread: “this market presents opportunity for a narrow group of buyers and sellers; I’m not advocating that nobody buy and nobody sell”. If you’re a buyer with good credit, a real downpayment and a long horizon of expected occupancy, there are great opportunities out there. In addition, a trade-up buyer gets the extra benefit of being able to take advantage of prices that are falling in unison across all price levels.
However, another statement of yours, “…prices have dropped significantly and now appear to have stabilized”, can only be- charitably- described as fantasy. Where, locally, has this occurred? We’re coming off a Winter in which inventory levels remained high (GSMLS over 30,000 listings), and GSMLS may hit an all-time high by May. Where are the numbers of sales that would back up your claim? The January ‘08 version of the Otteau Report (the NJ “bible” of real estate) advises sellers to do the following:
“Best-Practice for a weakening housing market is to price ‘ahead of the decline curve’ to shorten marketing time and capture a higher selling price before prices drift even lower.”
For argument’s sake, if we were to go with your assumption that prices have stabilized, they’re probably about to fall out of bed again…and keep dropping. Every real estate boom since WWII has been followed by a drop of equal magnitude. Let’s say that local prices went up 100% between 2001-06; that means they need to drop about 50% to find equilibrium (i.e., a 200K house in 2001 rises to a value of 400K by 2006, then drops 50% back down to 200K in the down leg of the cycle). Locally, we’ve only sliced about 15-20% off the recent highs, depending on housing type and location; that leaves us another 30-35% to go. Sound crazy? Well, Merrill Lynch stated last week that they see prices dropping 15% in 2008 and another 10% in 2009. Goldman Sachs and Bill Gross, of PIMCO Funds, are also on the record as seeing further significant price drops over the next 12-24 months.
There are no longer ninja/toxic mortgages available to provide today’s buyers with temporary and artificial leverage to purchase at today’s still-elevated prices. There are also not many buyers today with significant savings to use as a downpayment (and the few potential buyers who do are notoriously waiting for prices to drop lower before acting). Many potential buyers have begun to choose to leave NJ entirely rather than go eyeball-deep into hock to buy barely-adequate housing that carries the highest real estate taxes in the US. We’re losing population so rapidly that the state will probably lose a Congressional seat (that’s not my opinion…that’s from State Senator Kip Bateman). So, again I ask: where are all the buyers who are going to sustain prices at today’s levels?
Oh, but “interest rates are incredibly low” (again, your words)! Well…weren’t interest rates low when prices started dropping in late 2005? And, since rates are even lower now, why aren’t they stimulating any significant upturn in sales? A good friend of mine has the answer to that question, and he repeats it often: IT’S NOT ABOUT RATES, IT’S ABOUT SOLVENCY, on the part of both lenders and buyers. The Fed has just slashed 125 bps off overnight rates, yet lenders keep raising their mortgage qualification standards. What gives? Could it be that LENDERS DON’T REALLY WANT TO LEND?
Well, duh! Most lenders’ balance sheets have been completely shattered by massive defaults and writedowns. Many of them now have woefully-inadequate capital reserves. They’re going to take any opportunity available to hoard cash and begin to repair those balance sheets, and it can’t be done without restricting lending. Besides, at this point, most lenders are so skittish and skeptical about the quality of their borrowers’ collateral that they don’t even want to lend each other money overnight (hence, the credit crisis last August that prompted the Fed’s opening of the discount window and initiation of its term auction facility). A history buff might draw some interesting parallels between recent Fed/Treasury actions and the actions they took at the beginning of our last deflationary credit crisis, the Depression. I won’t go there, though gold sitting at over $900 an ounce makes me stop and wonder just what the heck is happening.
Since you provide no details on my alleged former clients you helped out of a pickle with their exploding ARM, I cannot confirm or rebut. If you could provide a sliver of information, I might be able to figure out who it is. I try to keep up with my old clients, and I can’t figure out to whom you’re referring. Your story sounds a little too convenient in its current form.
Thanks for coming back by, TMac. Sorry you don’t like my tone, but blogs that don’t take a provocative stand aren’t very fun to read. If you come back, please don’t feel compelled to announce each post as your last. It makes you look desperate when you return yet again.
February 7th, 2008 at 9:04 pm
Chip,
I’ll remain anonomous for now (hope I can) I just do not have the time to devote to this. I just wanted to say that your comment about other people out here agreeing with you about the “Kool Aid drinkers” is true. QUOTE: “You might also be surprised to know there are a lot more people- in and out of the profession- who agree with me than don’t.” Believe me when I tell you that far more people think that HE is a windbag than look at HIM as the “King of Real Estate”
February 8th, 2008 at 1:32 am
WOW-
Thanks for the pump! You can certainly remain anonymous here, if you choose.
Agents, buyers, sellers: chime in here! What’s your opinion? Is it necessarily better or easier to mainline Kool-Aid than to look at things in the cold light of reality?
Buyers and sellers, do you feel that agents who are upbeat and constantly on the sell are better advocates for you? Do you want an agent who’s “always closing” 100% of the time?
Agents, do you think it’s potentially dangerous to only push a “sunshine” agenda with your clients? Do you think the possibility of blowback- in the form of a dissatisfied client, or even a lawsuit- is a built-in danger in taking this approach?
If you choose to remain anonymous, your privacy will be guarded here at all times.
February 22nd, 2008 at 11:31 pm
Both techniques can be effective in the right situation.
February 28th, 2008 at 3:21 pm
Well Mr Highes, I have to tell you that you are one of the very few honest, upfront, and REALISTIC realtors I have ever come across. It truly is refreshing. It is entertaining to say the least the way these sunshine blowing, sheep walk around all day with plastered smiles and marbles rolling around in their head instead of a brain!
The psychology behind their thinking and mind-set is something that I am sure would be fascinating and telling. I just cannot figure out how most agents get sucked into the deceptive and illogical mentality? Maybe they really do serve kool-aid at those schools…and firms who hire newbies.
Your entries on this site are great, they provide real, unbiased points of view, and offer some levity at the same time - thank you, and keep up the good fight.