[photopress:the_sky_is_falling.jpg,thumb,alignright]Where have we heard that before? I thought I would share with you some historical comments in the media made about real estate by financial “experts
Rain City Guide
Your Guide to the Seattle Real Estate Market
I thought RCG was better than this. It’s like a bad chain letter than gets passed from lousy real estate blog to lousy real estate blog.
http://blog.seattlepi.nwsource.com/realestate/archives/125791.asp
http://coastalhomeinvestments.blogspot.com/
http://www.3poundsofrealestate.com/2007/11/13/have-salt-lake-home-prices-gone-too-far/
http://therealestatestory.blogspot.com/2007/02/presidents-corner-2.html
http://localism.com/article/266763/Market-Time-Report-The-Holiday-Market
http://blog.winecounty-re.com/
http://www.trumpuniversity.com/blog/index.cfm?blogpost_id=1274
http://www.palmabella.com/blog/index.php?/archives/6-Opprotunity-is-Knocking…-What-will-you-do.html
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A sense of perspective always helps eh Jim?
I’m not sure I agree that humans gravitate towards fear. Fear is mostly a healthy warning system. Unfortunately greed is a much stronger force which often overpowers fear which we see the results of now with banking crisis and foreclosures.
Fear serves us well when we need to keep a heightened sense of danger of our immediate vicinity. But it can also overtake the practical more logical part of the brain because it is so powerful. Not that greed is not powerful too…..
Is this some sort of mass NAR email that was sent with the message “go forth and distribute to the unbelievers?”
I only ask because Marlow posted the same list over on the PI blog (I won’t link because every time I do my comment ends up in the spam bin).
Check out the quotes provided by her 3rd commenter for examples where a little more fear would have been appropriate.
What is the sense in posting comments like these? $8,000 dollars in 2007 does not equal $8,000 dollars in 1948!
There is zero credible information that can be derived from these numbers. Show me inflation adjusted comparisons of $/sq. ft. for real-estate from year to year and then you might be on to something informative. Oh wait, someone already did that you say:
http://graphics8.nytimes.com/images/2006/08/26/weekinreview/27leon_graph2.large.gif
(sarcasm) Nope, nothing out of the ordinary there (/sarcasm)
This list was shared to me by my Broker here at Coldwell Banker Bain Lake Union Office on Monday. Obviously her Broker (Capitol Hill Office) shared it with her too. I blogged the list here a couple of days and was unaware she posted it somewhere as well. It sometimes takes awhile for things to things to get approved and posted here and I apologize for the repetition.
Still, quotes from the past can be fun to look at.
“Fear serves us well when we need to keep a heightened sense of danger of our immediate vicinity. But it can also overtake the practical more logical part of the brain because it is so powerful.”
In my view you got it wrong again. Fear can paralyze us when faced with extreme danger in our immediate vicinity and thereby impair logical and practical actions. For financial decisions that there is ample time to consider there is often to little fear involved not to much.
Jim said,
Funny you should say that, because it’s the practical, logical part of me that has come to the conclusion that it would be foolish to buy now, and it was fear of being priced out forever that drove many people to buy late in the run-up and at the peak.
A result of the sub prime fiasco has been for the fear to outweigh the greed, and so here we are now, in a declining national real estate market.
I think it’s obvious to everyone that much of the country has gone through at least some correction in prices. This has happened from time to time throughout history. I guess the point I think most people don’t consider is that over the long haul real estate has been about the best investment you could make. And often people who buy even at the top of the market are glad they made the investment years later. That being said, it hurts a property owner to see their values go down, even temporarily. Buyers new to the market should be smiling.
We aren’t in a typical ‘cycle’ therefore historical trends mean absolutely nothing to the current situation. In CA, less than 10% of families could actually qualify for a home loan based on income. The ONLY reason homes even sold there during the boom was because of bogus fraudulent stated/no doc loans which are a thing of the past. The blood shed is just beginning. Home prices have far outgained incomes…in fact, incomes have actually fallen in real dollars over the past 40 yrs..so you’re a fool to believe ‘everything’s cyclical’ and homes will continue to appreciate.
“I think it’s obvious to everyone that much of the country has gone through at least some correction in prices”
Yeah, and its obvious that its just the tip of the iceberg given upcoming ARM resets, inventory levels and new lending standards.
Jim said,
The only way I can see a claim like that holding any water at all is if you have a very, very narrow definition of the term “investment.” Buying a home is an “investment” that pays zero dividends, where well over half of the money you deposit in the first 20 years simply vanishes (interest, maintenance, taxes, etc.), and from which you can only withdraw your money by relocating and paying a 6-9% fee on the total sale price of the home. In my opinion, a home is not an “investment” at all, it’s a leveraged asset with a large debt obligation. That is not at all to say I don’t want one some day, but I’m not interested in overpaying when prices are likely to keep declining.
Buying a house is an investment only if you’re buying a rental property that actually cash-flows.
No, it’s an investment. Just a horrendously bad one.
The only thing that it has going for it is that tax-payers subsidize it by giving homeowners a nice tax-break and by the implicit backing of the GSEs and the explicit backing of FHA, which allows a buyer to employ huge amounts of leverage. Which, when prices rise, is terrific.
10% down, the house goes up 10% – Wowza! 100% gain!
But if it declines 10%, your principal is completely wiped out, as many are currently discovering.
I’ll make one of the comments I made over on the P-I blog. I’m not even certain the quotes are correct quotes! Has anyone verified this?
Oh, and my other standard comment: Assuming the quotes are correct, it Just proves that predictions are a dime a dozen and should be ignored.
I think the reason both Jim and I posted those quotes are because, in the present context of today, they are funny.
There’s no reason to try to make us both feel bad or rip us another one about doing that. I think most people would get a chuckle out of them.
Barbara Walters recounts a story about when she dated Alan Greenspan in the 1970’s. At the time, she was offered a co-op apartment in NYC in the same building Mrs. Onassis lived, for just a few hundred thousand. He told her not to buy it, it was a bad investment. Now that same co-op apartment is worth millions.
(http://www.dealbreaker.com/2007/09/greenspan_is_a_bad_economist_w.php)
Stories like that are funny, interesting, and a comment on human nature. No reason to be insulting to us for sharing information we think is interesting.
Please do not make ad hominem attacks on Realtors(tm). Make logical attacks on their economic assumptions all you like–fish in a copyrighted barrel and all–but vitriol is counterproductive. Thanks to specialized NAR training, every Realtor(tm) is capable of converting personal attacks into added selling energy and whiter teeth in just ten days. So save it.
In the face of rising foreclosures nationwide, rising delinquencies, hundreds of thousands of production workers and, yes, LOs in the financial services sector losing their jobs, the loss of subprime loan products which helped fuel the recent run-up, hedge funds imploding, investment banks continuing to try and hide their loan losses in toxic SIVs, banks continuing to post historical record losses, Countrywide dying a slow death, and Realtors having to obtain part-time jobs to pay their own bills, reading this blog article was a waste of my time.
The sky is falling?
Yes, for many people it is.
We might have a funny haha laugh about all this in 20 years but not today.
Jim, I’d like to read about a Realtor who went out into his or her market area and spent some time with a homeowner facing foreclosure. Preferably, I’d like the scenario to be the Realtor who sold that person the home. Now THAT would make an excellent read.
I’d like to read a story where we talk with laid off production workers in title, escrow, mortgage production (like the processors and underwriters) who all worked their asses off for the past 9 years giving blood, sweat, and tears to their employer only to be handed a cardboard box and a pink slip with no notice and no continuation of their health insurance.
“Barbara Walters recounts a story about when she dated Alan Greenspan in the 1970’s. At the time, she was offered a co-op apartment in NYC in the same building Mrs. Onassis lived, for just a few hundred thousand. He told her not to buy it, it was a bad investment. Now that same co-op apartment is worth millions.
(http://www.dealbreaker.com/2007/09/greenspan_is_a_bad_economist_w.php)”
Right – of course, the S&P 500 was at 95.10 at the end of 1977, and is at 1,451.15 today – a fifteen fold increase in thirty years. Sinking 500,000 into the S&P in 1975 would be worth $7.6 million today.
Jim, I’m sure you meant to post this with only the best of intentions but sometimes that backfires in a blog post – particularly one like RCG. However, to respond a small bit to Jillayne’s comment, I am currently working with a client that while I wasn’t the person who sold him his current home I am helping to rid him of the last house. I can’t go into full detail just yet because we are still working on the situation but I’ll be able to provide later some interesting details to our readers about the situation of a person “underwater” and what happens as we navigate helping him out of the mess another agent helped put him and his family in.
Wow, Jillayne!
“I’d like to read a story where we talk with laid off production workers in title, escrow, mortgage production (like the processors and underwriters) who all worked their asses off for the past 9 years giving blood, sweat, and tears to their employer only to be handed a cardboard box and a pink slip with no notice and no continuation of their health insurance.”
Jillayne, you must have heard that Countrywide handed out cardboard boxes to their subprime unit…I’m sure many of the CW employees were wondering why they signed a Loyalty Oath in exchange for a rubber green bracelet made in China that’s not worth a US dollar (or Loony).
While such comments/stories may be “funny” to some, aren’t they also packaged to convey a message? Seems to me that the “message” such anecdotes are meant to imply is that home values appreciate over time, i.e. that real estate is a can’t lose investment.
It is certainly likely that if anyone purchases a home now and holds on to it for 40 years, it will be worth more in nominal dollars in 2047 than in 2007. However, what is conveniently left out is discussion of the following:
Adjusted for inflation, real estate “investments” have shown less return than both the stock and bond markets (also adjusted for inflation). This shouldn’t come as a surprise, since homes are basically a commodity (shelter) and commodities in general typically only increase in lock step with inflation (in the long run).
If you plan on purchasing a property and intend to hold it for less than 20-40 years, you take on a healthy amount of risk, namely, that after transaction and carrying costs (insurance, upkeep and interest) you could lose money (in either nominal or more likely inflation adjusted terms).
So, if many economic fundamentals indicate a market shift in one direction, why might one decide to do the opposite? Only a couple things come to mind and unfortunately, not many are good. One could simply be that an individual places a significant premium on a metric not taken into account by said fundamentals. Another is that the individual is simply misinformed. Yet another, is that the individual is taken advantage of (by one of a variety of means).
Both buying and not-buying have associated market timing risks. One can only hope to make the best decision, by being as informed as possible. Unfortunately, many people do not do their own research and make purely emotional decisions.
Everything has a cost. Everything has a premium. Everything has a message. What irks me about anecdotal collections like the OP, is that they convey zero useful information and instead only feed the emotional animal. They do not serve to calm fears, instead they only incite new/different fears…
Hi Reba,
I’d love to read about that story. If you can write about it when appropriate, and change any identifying info to preserve client privacy, (I’m sure you would have done that anyways) I would be grateful.
Excellent, Lucas.
Lucas, Whereas the original post was a set of anecdotes that were sent for all to read, and draw their own opinion, your (bitter) posts certainly STATE an alternate opinion that is neither more fact-based or valid then the OP. I, for one, would MUCH rather chuckle (possibly in total disbelief) at a set of interesting quotes, than read your self proclaimed truths. You make the statement
“adjusted for inflation, real estate “investments
Writer above…were you impressed by your own worthless writing?
Well I am not. I am not exactly certain why you even respond…
angry then others? angry then what?
idiot, don’t write anymore please.
Geez, I had no idea I would cause such a commotion. Well, to those who were offended, and there are obviously at least a few, I’m sorry. I found the quotes interesting, and yes, a bit humorous. Please don’t interpret that as being insensitive to those who have been tragically affected by some of the recent fluctuations. When you loose your job, it hurts. When you loose your job, it hurts.
I stand by my comments about the great long-term benefits of home ownership as an investment, however. When you take into account the leveraged effect of your initial capital outlay, the great tax advantages, the intangible values of pride and community involvement that comes with having your slice of the American Dream, it don’t get any better.
It’s okay to differ on this. We are free people. Go rent in peace if you prefer. But I’ll stick with my belief that home ownership is king, thank you very much.
Jim said,
Hi Jim, welcome to the internet. You will find that the internet is serious business.
you could give away money on the rain and you will offend some. Don’t sweat it.
Jim I certainly hope you do stick with that thought, else you’re in the wrong business. With that said, your personal opinion on the matter of home ownership is heavily biased, and with agendas to pursue.
I understand clearly that this is your feable attempt to somehow get the readers of RCG to re-think about buying house in few months again…re-wash their brain with media.
Yes, in many respects the internet is serious business. (And in many other respects it certainly is not.)
But, for goodness sakes peple, lighten up. You are taking yourselves much too seriously.
People are entitled to their opinons, whether or not you like them. If you don’t feel that way, don’t participate/comment.
Ubersalad…
Please feel free (at some time) to make a point. So far you have only shown up to bash others. You are obviously VERY passionate on this subject. (Did you really say “idiot?”) What IS your opinion on Home Ownership and Real Estate Investment. This is Your chance to state your analysis of the current and future real estate market. Please try and add some value to this forum without a negative reference to others. The stage is yours.
-REI
Jim, a problem with this kind of post is that it risks turning RCG into just another broker propaganda blog. It will likely make consumers start ignoring RCG which would really be a pity since contributors like Jillayne for sure and Rhonda most of the time and Ardell occassionally provide very useful information for consumers.
The sky is falling?
“Investment” is always a slice of timing—Stocks –Real Estate–Commodities–will always fluctuate but continually go up over time. Short term investment have always been risky.
I am helping many clients through their acquisitions and selling in a “down” market; there are different formulas to both. We all will get through this time in the real estate market just as we have in the past years as they have fluctuated. The Banker is under strict observation and scrambling to stay in business through wrong doing in the industry. In this Buyer’s market the Buyers are going to learn to that they must save money to invest money in real estate or other choices.
REI I just find it amusing that you really “try”, but you’re way off on everything you’re saying.
I am here to seek resources and gather my own opinion, which I am humble to say is worthless.
I’ll share one. Over the history, many bright minds have made huge fortune in real estate. In this last RE boom, many people begin to feel like they’re becoming one of the bright minds and begin to think and act like one.
News flash, you are not. RE has been turned into a monkey business, any trained monkey could have made money in real estate in the last 4 years.
Ubersalad,
I’ve been out of touch for a few days, but am just now reviewing comments from the past few days…
Consequently, this is your first and last warning. Do not call anyone an idiot on this site again and do not EVER tell someone they shouldn’t write on this site. That type of intimidation is never appropriate at Rain City Guide…
I don’t give much credence to this sort of “analysis” as it is just as easy to find ridiculous quotes on any topic (to wit: the oft purported statement by the the founder of IBM that there existed a “worldwide market for 5 computers” – which is, of course, likely an urban legend). It’s kind of like forwarding spam.
But providing links on these comments to the purported “source” as if to provide support for their credibility but not bothering to find the actual article to verify they are accurate is at lazy at best and at worst misleading.
Moreover, when taken in context of short-term media focus and ever shortening ownership periods – the timing of many of these articles is pretty spot on: if you look at Shiller’s work, they were published right at major inflection points in the market where real estate values dropped 5-10% in REAL $ terms over the next few years
– late 40’s
– late 70’s/early 80’s
– early 90’s
http://www.1stmillionat33.com/posts/06-09-12/house_his.gif
deejayoh,
Note that I posted a link to the same graph (different source) in #7.
😉
deejayoh,
I wasn’t trying to make any major “analysis” here. I just found it interesting and a bit humorous so I thought I would pass it along. I think looking at history gives a unique and perhaps broader perspective. I started to try to find the original source on some of these older quotes and quickly realized most of these are so old they cannot be found online. So I just linked back to the publication of origin. I wasn’t trying to “mislead
Bottom line:
Returns on the S&P average the last 80 years are superior to returns in RE.
Sure Barbara Walters could have bought a condo in NY for a few hundred thousand. She could have also bought the same amount of stock in Microsoft and be worth 100 million.
It amazes me that people still at this point, while our nation is facing the myriad of problems that Jillayne eloquently outlined, is still promoting articles such as these. Mind boggling. Truly people have no clue how dire the situation is.
The odd thing about the bubbleheads is they have been spectators about investing in the stock market with their cries of “Dow 5000”, spectators about investing in real estate with their cries of “housing is going to crash” and specators in life as they post away alone in their one bedroom apartment! Alone. Life is finite, enjoy it while it lasts. Anger and resentment is a waste of energy. Happy Thanksgiving.