Northern Virginia's October 2011 housing sales were down 13.4% YoY, and median prices were up 2.6% to $347,750. The average days on the market increased by 18% to 66 days.
(The above statistics include Alexandria City, Arlington County, Fairfax City, Fairfax County, Falls Church City, Fauquier County, Loudoun County, Manassas City, Manassas Park City, and Prince William County).
Saturday, November 12, 2011
Northern Virginia's October Housing Sales
Posted by Harriet at 9:28 PM
Labels: October housing sales mris
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44 comments:
sounds like a topping manuever.
Now i know cheryl and Anon says it's all about the inventory, but, i believe a slowing with increasing prices leads the inventory rise.
I wish those charts went back further. Pat, can you cite anything that would support your theory? Clearly, inventory lead both the rise and fall in the 2000-2010 time period. Fear and apprehension about the economy is likely responsible for lack of volume. Why would a "slowing" of price increases cause inventory to rise? Foreclosure filings in this region will continue to drop, imo.
I heard that the big anticipated reo "dump" by BOA fizzled. What is the source for "shadow inventory"? I'd like to see what it is for this region.
Strange twist on my short. I have a short closing on Monday and another on Tuesday. The Tuesday property is the one that the guy wanted to rent back.
I went for the walkthru on the Monday short (which I am going to flip). The people are not moved out but planned to move their stuff into storage tomorrow and camp out with relatives until they find a rental in their son's school district. This is not an easy task due to the credit hit on the short.
Well, I happen to have a vacant rental as of Tuesday (my other short). They are on their way to see it and I believe they will be moving in Wednesday. My only reservation is that their house is somewhat (alot of "what" for my personal standards) messy. The positives are: no down-time or fix-up on my rental and a "captive" tenant. Win-win.
"Jumbo mortgages may be next in line to default"
http://www.washingtonpost.com/realestate/jumbo-mortgages-may-be-next-in-line-to-default/2011/11/08/gIQAoLK9BN_story.html
I don't know how this will play out in the DC area, but there seem to be plenty of underwater homeowners in the area, particularly further out, e.g., Vienna, etc. Will these ppl eventually walk-away?
cheryl
what i meant is increasing DOM is a slowing of velocity, at the peak, the last buyer always vacillates
http://unitedshortsalegroup.com/news/2011/11/09/new-report-50-of-all-homeowners-now-underwater-and-getting-worse/
"Its a fact that this housing crash is now officially worse than even the Great Depression.
Few facts:
* Nevada has the highest share of underwater borrowers, but just over 300,000.
* In total 11,000,000 Homeowners (loan owners) are underwater.
* Estimates are that up to 50% of ALL HOMEOWNERS (with a mortgage) are now underwater.
Consider the following from mortgage analyst Mark Hanson:
On US totals, if you figure average house prices use conforming loan balances, then a repeat buyer has to have roughly 10 percent down to buy in addition to the 6 percent Realtor fee to sell. Thus, the effective negative equity target would be 85%. You also have to factor in secondary financing, which most measures leave out.
Based on that, over 50 percent of all mortgaged households in the US are effectively underwater — unable to sell for enough to pay a Realtor and put a down payment on a new purchase without coming out of pocket. Because repeat buyers have always carried the market as the foundation, this is why demand has not come back. It’s as if half the potential buyers in America died over a two-year period of time.
"
Another EXCELLENT report from CNBC’s Diana Olick on underwater mortgages. See http://video.cnbc.com/gallery/?video=3000056102
Mike-
There should be almost no one who is underwater on their house in Vienna, unless they bought at the absolute peak and put 0% down (or perhaps condos fell more). Even if they did this they are basically at breakeven. Zillow shows the median price peaked in Vienna at 693K in August 2005, assuming they had a 6% interest rate with nothing down the loan balance would be 629K. Zillow shows the median price is at 641K currently. So unless people were using interest only loans or something like that and put nothing down they should be above water. Were are you coming out with lots of people are underwater in Vienna?
Pat-
If you are trying to say that not many people will move and Realtor fees will be low I agree. If you are trying to say that housing prices will get crushed I disagree. Although these people will not buy houses that also means that they will not sell their houses so this takes both supply and demand out at the same time.
housebuyer: are you serious? have you done a search for homes there recently? I went to redfin, plugged-in "vienna" and *literally* the first three house I pulled-up appear to be underwater:
http://www.redfin.com/VA/Vienna/1403-Desale-St-SW-22180/home/9539842
http://www.redfin.com/VA/Vienna/9219-Brian-Dr-22180/home/9530360
http://www.redfin.com/VA/Vienna/904-Timber-Ln-SW-22180/home/9453456
I also recently talked to a real estate agent specializing in short sales in that area. I asked him if
things were slowing-down and he informed me that if anything, things were picking-up.
Not surprisingly, the lobbying continues to raise conforming loan limits ...
http://www.bloomberg.com/news/2011-11-08/wealthy-qualify-for-mortgages-intended-for-poor-under-higher-loan-limits.html
Mike-
I guess I forget to say some people could be underwater, because they pulled way too much money out of their house. So you are right there are some people like that.
Although when I searched active houses in Vienna there were 324 when I also required them to be short sales it fell to 18. There appeared to be an additional 11 foreclosures. So no I am not kidding when I say that 29 houses out of 324 is hardly a problem at all. I am not sure what search you did to get so many underwater people. If you wanted to pick a place with a lot of underwater people you should have picked something a lot further out e.g. Leesburg/PWC not something on the metro line.
Mike-
Out of curiosity what filters do you have when sorting that showed you so many short sales. I have no filters and sorted by DOM and there were very few.
If you are screening for low price houses than you are self selecting the population where all the short sales are. (cheap houses fell more and short sales sell for below market prices causing them to come up in your searches).
If instead you look at the whole population you will see that normal sales are the vast majority and the median price in Vienna has fallen roughly the same amount from peak as Arlington.
HB
bear in mind people underwater who can hang in often do, but create the pool of "Strategic Defaulters".
Will DC get strategic defaulters? Hard to say. I'd say people here respond to the same stimuli as in vegas or SoCal.
Also, you say 10% of the vienna market is shorts or foreclosures and that's not a big deal.
10% unemployment is a big deal, 10% crime rate is a big deal. If vienna were 10% black, would you call it a "Good Neighborhood"?
housing like many commodities is priced at the margin. if 10% of the units are in distress, will that pull down the marginal pricing?
Bernanke is still pumping trillions into the major banks so they aren't dumping inventory, of course we now have occupiers hanging out in every major city.
If Bernanke and Obama try TARP 2, do you think civil disorder may break out?
Housebuyer: here are some Redfin search parameters: “Vienna, va,” under $750K, active & under contract and exclude condos (this exclusion isn’t meant to cherry-pick the results; I’m just not interested in condos). You should come-up with 49 results.
Of these results, 11 (or, a whopping 22%) are either short sales or situations where the sales price will not net enough to cover the previous sales price, including closing costs (see list below). Not all of the listings in the latter category will be “underwater,” but they’re certainly good candidates. This is just a back-of-the-envelope exercise where the previous sales price shows-up on Redfin. There are probably others who HELOC’d themselves into underwater status. And, regardless if these ppl are technically underwater (maybe their down-payment covered the depreciation thus far), it is not a healthy market when *at least 22%* of the sellers will sell for less than they paid.
What’s more, these are just the people that have decided to try to sell their homes. Imagine how many are on the sidelines, waiting for the market to improve, so that they can sell for “break even.” Perhaps some have simply resigned themselves to staying put, but divorces and relocations can force sales. Imagine how many are contemplating a strategic default.
http://www.redfin.com/VA/Vienna/413-Course-St-NE-22180/home/9378155
http://www.redfin.com/VA/Vienna/506-Macarthur-Ave-NE-22180/home/9446929
http://www.redfin.com/VA/Vienna/311-Charles-St-SE-22180/home/9447200
http://www.redfin.com/VA/Vienna/204-Elm-St-SW-22180/home/9454725
http://www.redfin.com/VA/Vienna/316-Owaissa-Rd-SE-22180/home/9464792
http://www.redfin.com/VA/Vienna/1008-Park-St-SE-22180/home/9467479
http://www.redfin.com/VA/Vienna/904-Timber-Ln-SW-22180/home/9453456
http://www.redfin.com/VA/Vienna/503-Princeton-Ter-SW-22180/home/9524278
http://www.redfin.com/VA/Vienna/1420-Desale-St-SW-22180/home/9540092
http://www.redfin.com/VA/Vienna/411-Orleans-Cir-SW-22180/home/9528381
http://www.redfin.com/VA/Vienna/1403-Desale-St-SW-22180/home/9539842
Mike-
I agree there are a lot of people who will not net a profit from their house sales, but this is different than being in a distressed situation. If you noticed a couple of people even commented they are not short sales. So they probably put a lot of money down when they bought (possibly from the sale of a different house that had gone up a lot in the bubble).
So I think it still comes down to ~10% of transactions are short sales or foreclosures. I just don't see 10% driving the price of the other 90%.
I think there is a lot of demand that places that show decently and are reasonably priced tend to move quickly
Pat-
Yes there are some things where 10% is a lot, I don't think housing sales are 1 of them. You could argue that there are 10% more houses for sale because of the distressed inventory, but new homes have fallen from ~15% of sales to ~5% nationally (I believe this is probably true locally as well, but have no data) so this would make up for the entire amount of excess inventory.
Either way the important thing is the amount of distressed inventory has been falling for 3 years while prices were roughly flat so why would prices all of a sudden tank now.
As for banks needing TARP2 they don't. Bernanke keeping rates low does not help banks. They always pay people almost nothing on checking accounts and usually they can lend at high rates, but because interest rates are low they are making less money on these deposits.
Although I know you think bankers are all spawns of Satan and haven't seriously studied economics so its probably not worth trying to argue this point.
HB
I've studied more economics then you can imagine. Just because I don't believe the dogma, doesn't make me ignorant.
"Pat said...sounds like a topping manuever."
And let me ask you again, do you have a shred (and I do stress, even a single, solitary shred) of evidence to believe this is correct?
I ask because a rough eyeball test tells me your criteria would predict (approximately) 20 of the last 2 tops. Translation, 18 of those 20 times you would be wrong.
Moreover, of those 2 times where it was correct, it also was after a significant increase in inventory (1989 and 2005). So in my case, the sign I look for for a local top is 2 for 2.
Again, if I am wrong about this, show us. I am willing to learn and I do concede it is "possible" that you are right. If so, is there any proof that what you say is true?
Also, assuming you have no proof (as I suspect) let me ask you, why do you choose to believe in an indicator that is wrong (approximately 18 of 20 times) versus another indicator that has proven correct 2 of 2 times? I ask this because it seems like what you are doing is simply wishful thinking (i.e. ignoring highly probable things that tell you something you dont like to hear, and embracing dubious things that tell you what you want to hear).
So is that the case Pat? Is there anything to this theory, or is it more or less, wishful thinking? And assuming it is wishful thinking, why do you want anyone else to believe it if it means discarding a method that has proven more reliable over time?
PS. I expect you to answer this. I also expect the answer to be basically a "yes" or "no" (or a "yes, but _____" or a "no, but ____") type format. Please dont respond with something about "bernanke" or "x number of people are underwater" or other similar tangents. You are in law school now, and I expect the quality of your arguments to reflect this.
Deal on conforming loan limits?
http://online.wsj.com/article/SB10001424052970204323904577038642586370380.html?mod=WSJ_hp_LEFTTopStories
And, in related news: The Federal Housing Administration's cash reserves have fallen so low that there is a "close to 50%" chance the agency could run out of money and require a taxpayer bailout in the next year. http://online.wsj.com/article/SB10001424052970203503204577038160049596868.html?mod=WSJ_hp_LEFTTopStories
Only in America, folks.
http://www.google.com/url?sa=t&rct=j&q=&esrc=s&source=web&cd=2&ved=0CCMQFjAB&url=http%3A%2F%2Fwww.napavalleyneighborhoods.com%2Freports%2Fsample_1.pdf&ei=M_fBTsW_OKTX0QHQrbyLDw&usg=AFQjCNEs0q-MPnv5TYnfOTbkXZ3vEy-OPA
There you go anon, the longer stuff sits, the worse the price differential between ask and sell. Now can you explain why things would sit longer but command a price rise? Me, i watched a property decline for 189 DOM, but, you think i'm a fool for paying 30% less then ask.
http://www.altosresearch.com/research/DC/washington-real-estate-market
DOM seems to have a nice correlation to price declines. Inventory rises to price.
No surprise, when prices rise, people want to sell.
However, when the herd turns around,
Glug, Glug, Glug...
Hold up Pat. Ive noticed you just focused on DOM. IMO this is more likely to lead you on the right path, as I see DOM similar to another indicator near and dear to me (MOI). I will get back to this in a moment.
Now that said, for the past year, you have been citing (a) declining volume and (b) rising prices as signs of a local peak. It was only this combination of indicators that I thought was insipidly stupid in that they so often gave out false readings of a "local peak". However, as your responses at 12:26 and 12:29 said nothing about (a) and (b) can I assume you have now backed off them.
Is that the case Pat? Are you now abandoning factors (a) and (b) as a sign of a "local peak" and adopting something more likely to be correct such as DOM?
Im being serious here. Please clarify your stance.
pat,
Even assuming, arguendo, that your theory about DOM supports a top, how does this translate to declining prices vs. stagnation?
My take is that DOM increases can be explained in several ways that have nothing to do with a declining market. One hypothesis is that the bargains are, largely, gone. The decrease in distress sales with slashed pricing indicates that today's sellers are, by and large, in no great hurry to sell. If they were in need of a quick sale you would see corresponding price drops. We are not seeing that.
Frankly, I really don't see strategic defaults from homeowner's that can afford their mortgage. Perhaps they cannot "move-up" and this accounts for the lack of volume as people find themselves "priced in" or can't psychologically stomach a loss even if they aren't underwater on their mortgage, but merely their purchase price.
You seem to always make the assumption that people are hanging on by the skin of their teeth while depleting all their savings. This is true for a percent of homeowners, but I'd guess that percentage is quite low.
I've seen a pattern in distressed sales; granted, my personal experience is limited. The majority could not afford the home to begin with, put little to nothing down because they had/have no assets (these folks are largely gone and will not produce significant inventory). Next, we see a job loss or other financial calamity coupled with a lack of assets to carry them through this. Both of my recents shorts were brought on by this situation - not a desire to "walk" (in fact, just the opposite). Others, that I am not seeing as much of, involve investor's who can't afford to carry the negative that they bought into.
The "carpet cleaner" had one place that was a 2K per month negative. He happily bought the property anyway, sure in his belief of selling for a 100k more in 2 yrs.
hb is correct in stating that most people in the more expensive homes sold at peak to trade-up and have not really lost that much. The true loser's are the first-time buyers who entered the market at peak and, by and large, these are properties in the lower tier.
DOM is correlated to volume.
http://1.bp.blogspot.com/-Q0-6-Ax5-LE/TqhD3KdrZKI/AAAAAAAALAo/2UyrWeD_6_c/s1600/EHSSept2011.jpg
peak volume happens to correlate nicely to peak price, and look, the spike in 10 matches the Obama mini boomlet.
http://www.crgraphs.com/p/existing-home-sales.html
and months of supply nicely ties to DoM....
http://1.bp.blogspot.com/-6577tBD2DR8/TrhO256oMaI/AAAAAAAALPc/hGP0SWufHKo/s1600/HTNARPrelimNov2011.jpg
now if you want to track inventory alone, it is going to say prices are headed up, but if you look at C-S
http://1.bp.blogspot.com/-TP3PnvLbRFY/TqhH8fsTkfI/AAAAAAAALBI/7GQkTyiNP7A/s1600/CSAug2011.jpg
you don't see that.
Inventory can grow in high demand environments, DoM indicates velocity for the average transaction, and people who have waited for a while will accept lower prices.
but you think i'm a goon for buying a house that sat 179 DOM and went
for 30% less then ask.
Pat-
Calculated risk fairly regularly shows that prices are pretty closely correlated with months of inventory. Nationally prices are flat when there are ~6 months of inventory. Prices fall when inventory is higher and rise when it is lower.
I would think for DC you could probably substitute something like ~4 months instead of 6, because we always have less inventory. Either way months of inventory is closer to 8 nationally (although falling) so we should expect national prices to fall a little less than 5% over the next year. DC inventory is tighter though so I would think the losses will be slightly less. Either way I would consider down 5% to still be in the roughly flat environment I predicted a couple of years ago.
but if you want a good indicator,
http://4.bp.blogspot.com/-VTEpDqh8TXU/TqhH-qs2iVI/AAAAAAAALBo/_k-ED9pfWaQ/s1600/PriceRentAug2011.jpg
"Pat said...but you think i'm a goon for buying a house that sat 179 DOM and went
for 30% less then ask."
We will get to your diversionary statement after we clear up the issue at hand (see below).
"Pat said...DOM is correlated to volume."
No its not. From 2001 til 2005 DOM traded in a very tight range. Yet during that same timeframe, Volume MORE THAN DOUBLED.
"Pat said...but if you want a good indicator,
http://4.bp.blogspot.com/-VTEpDqh8TXU/TqhH-qs2iVI/AAAAAAAALBo/_k-ED9pfWaQ/s1600/PriceRentAug2011.jpg"
OK, and what part of that price to rent ratio tells you (per your words that started this whole discussion) we are witnessing a "topping maneuver"?
http://www.ritholtz.com/blog/2011/04/case-shiller-100-year-chart-2011-update/
there's your topping manuever anon.
BTW, you've never said what Yield or CapRate is appropriate for housing...
please, tell us, what level of yield is acceptable?
Pat-
Based on this chart and this chart over the last 20 years it looks like rental yields have been roughly equal to mortgage rates. So I would think that rental yields should be around 4%. I think historically expensive areas have below average rental yields and cheaper areas have above average rental yields so you would also want to adjust for this depending at where you are looking at.
I should also comment that when looking for US rental yield graphs I saw a bunch of these for other countries and was surprised to find rental yields in the US appear to be much higher than in other countries. Although I guess this stems from the fact that US houses compared to median income are dramatically cheaper than in most parts of the world
HB
lots of people were buying "Investment" properties with negative yields or 1% yields. I spent 2 years watching Arlington roll with 0% yields post bubble, which speaks to the durability of delusion.
i imagine a lot of people are going to figure that out in europe as yields are changing rapidly on treasury and corporates there.
"Now i know cheryl and Anon says it's all about the inventory, but, i believe a slowing with increasing prices leads the inventory rise."
volume decreases, DOM increases, inventory increases. pretty simple IMHO.
"Pat said...there's your topping manuever anon."
And now you provide us with the 100 year CS price chart that in no way references volume. How does this prove that declining volume and rising prices is indicative of a "local peak"?
_______________________________
"Pat said...BTW, you've never said what Yield or CapRate is appropriate for housing...
please, tell us, what level of yield is acceptable?"
You just cant help yourself can you? As I said before, I will be happy to answer whatever tangential questions you want, but can we first get an answer from you on this (declining volume & rising price = local peak) issue?
As I noted in the very beginning, do you have any evidence to show this or is this simply wishful thiking on your part?
Youve provided us with some proof on the usefulness of DOM, and I agree DOM is a useful indicator. Thus if your claim was "rising DOM could be a sign of a local peak" I wouldnt object to this degree.
But again, as I said in the first, do you have any proof that volume/price = peak or is it, as I suspect, merely wishful thking?
And if you have no evidence, why not just say so? Why attempt to refute me by asking my stance on cap rate? Do you think this is helpful, or somehow helps your cause?
Again, I sincerely hope you dont do this in school. When your Property law professor probes a weak point in your your reasoning about bailments, do you respond by saying something irrelevant like the "rule in shellys case? And if you do, do you think it somehow scores a point for you? I can assure you, it does not. Its obvious to everyone you are trapped and dont want to answer a question. Quite frankly, its embarassing.
So again, for the record, do you have anything to show that declining volume and rising prices is a reliable indicator of a "local peak", or can we conclude its just wishful thinking?
Read into DOM what you will.
If you think slowing DOM indicates volume is actually increasing, that is your call.
If increasing DOM is correlated to declining volumes, then, that's my argument.
Without the cahrt raw data it's tedious to plot it, so, i look at the data provided and that's my call.
Now if you want to pay my contrate rates to provide you a detailed chart that's fine, but, it's what i see.
Now, if you want to wait a few months, the game will play out.
Meanwhile you've always been very cagy about acceptable yield.
Personally i think any yields below 6% are folly.
"Pat said...If you think slowing DOM indicates volume is actually increasing, that is your call."
No. My point is, the facts show volume can move independently of DOM. My call is DOM (like MOI) is more reliably indicative of peaks and valleys. More reliably still is inventory spikes. By contrast looking at declining volume to determine "local peaks" will often give you false results, as in 1995when volume was declining and price was rising. Anyone using your criteria in 1995 to declare "topping maneuver" was devastatingly wrong when prices rose historically in the next 10 years. Had he instead looked for inventory spikes, he would not have made that mistake.
+++++++++++++++++++++++++++
"Pat said...If increasing DOM is correlated to declining volumes, then, that's my argument.
Without the cahrt raw data it's tedious to plot it, so, i look at the data provided and that's my call."
Your call on volume (in so far as it reliably relates to a "local peak" or "topping maneuver" in prices) is wrong. The data shows volume may or may not be suggesting a peak. By contrast, to our knowledge, the data shows that an inventory spike is an absolutely necessary ingredient in calling a "local peak", at least one of any consequence (i.e. stagnation is possible). And until we see that inventory spike (or at bare minimum, inventory rising on a YOY basis), your call is wishful thinking.
+++++++++++++++++++++++++++
"Pat said...Meanwhile you've always been very cagy about acceptable yield.
Personally i think any yields below 6% are folly."
Its not so much I have been "cagy" as I have been apathetic. Yield, while important to investors, is largely irrelevant to a blog of people who simply want to own. In other words, the longtime doomer mantra of "a home is a place to live, NOT an investment" is more or less my outlook on yield. I simply dont care, and thats why I dont discuss it much.
Now granted, if ALL areas in the DC region had poor yields, then yes that would be a problem. Thing is though, there are plenty of areas in DC where yield is now just fine, its just not in the areas you (and apparently many many many other people) like.
Also, there are a number of reasons (other than doom) that explain why the desirable areas have low yields -- disparate income growth -- highest best use valuation, etc. Robert Shiller has research papers from years past where he argues that low yeild areas will continue to be like that until new cities are built to attract the "overpayers" who keep yields low in desirable areas.
And finally, if certain desirable areas have had poor yields for 30-40 years, then, quite frankly, the market doesnt give a shit about your view that under 6% is folly. A person in 1977 who saw the poor yields and decided to wait would still be waiting today. If he was just looking for a place to live, do you think he would be happy, now in his 34th year of renting? At some point you have to accept that its the market (and participants in that market) who decide what is or is not folly, not you.
Anon
A man so apathetic as to not even want to guess a yield threshold for real estate purchases has very little basis to complain about lack of detailed analysis by others.
"Anon
A man so apathetic as to not even want to guess a yield threshold for real estate purchases has very little basis to complain about lack of detailed analysis by others."
What can I say?
When you make an assertion, and I find it relevant, (i.e. volume, DOM, MOI, Inventory), I can assume you have done some background analysis (which you have) and you can assume the same of me.
That said, when you make an assertion (yield) that is (a) is of little value to the vast majority of posters here who are owners, not investors and (b) is reportedly of little predictive value over a 30-40 year period, why should I care about it? Why should I waste my time learning about something that is so useless to a non-investor?
Its almost as if I were to demand you discuss with me the appropriate risk premium in a seller financed, 5 or 10 year demand note/balloon mortgage. Given that these are so few and far between versus the 30 year mortgage, why should I expect you to do the extensive background info to discuss this outdated relic that constitutes only a handful of annual transactions in the DC area?
If you want, I can throw a number out there to placate you, but how is that helpful given that I (literally) did no research to figure out what is accurate, nor do I plan to?
At the end of the day pat, im sorry but you really cant make someone care about something that they have no reason to care about. Thats just the way it goes my friend.
Anon
"That said, when you make an assertion (yield) that is (a) is of little value to the vast majority of posters here who are owners, not investors "
Who buys houses expecting 1% yield?
Who buy houses expecting -5% yield?
Most people expect a yield greater then 5%.
Did you buy your house expecting it to be worth more when you sell it?
Anon
Why dont you tell us about your house purchase?
"Pat said...Most people expect a yield greater then 5%."
No they dont. "Most" people dont treat their home as investment. Most dont have any idea what an acceptable "yield" is. Most people treat their investments as investments and their home as their home. They do care very much about yields for their investments, but not so much their home.
"Most" people treat their home, first and foremost as an expense. Something they must pay to allow them to live where they want to live and how they want to live. Now it is true, they would like their home to be worth more than what they bought it for some day, but I can assure you this is no hard and fast rule in terms of how much "more" they would like it to be when they sell.
That said, assuming you were correct and "most people want 5%" whats the right answer for those who want to buy in the areas that have been terrible yeilds for decades? What about our hypothetical 1977 fence sitter waiting for yields to be better before he bought. Thus far, he would have paid (approx) 500K in rent over the past 34 years, and immunozone prices have soared from approx 25K to 380K. Lets say the immunozone suddenly cratered to 300K and yeilds were excellent. How has this helped him.
If he had accepted the terrible yields in 1977 he would have paid 25K to buy and be payment free by now.
If he decided to wait til yields were good in 2012, he would have paid 500K in rent AND THEN paid 300K to buy.
So again, how is this helpful?
"pat said...
Anon
Why dont you tell us about your house purchase?"
I made bids on 14 houses. After losing 13 times, I finally won.
The first 8 of these bids were in 2009-2010 when I made lowballs to try to take advantage of the higher inventory and uncertainty in the market. I was outbid every time, the final bid was so far ahead of my max price, it was clear I needed to adjust to reality if I ever wanted to buy.
The next 6 places were all multiple bids. I won on the 6th, beat the next bid by about 5K.
My purchase price was about 80% higher than it was when I looked at similar places in 2003. At its worst, my place probably fell to 5% off peak, and is now at peak once again.
I have spent 8 years of my life and paid close to 200K in rent waiting for "better yields" and other similar "metrics" to prove its not different here in the immunozone. That never happened. Not wanting to be a lifetime renter, I accepted reality and got on with my life.
What else would you like to know?
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