Profile picture for Lady Chattel

Well, I thiink I will rent another year, and this is why........

Spring 2011 Guide of 30 Key Charts to See Before You Buy or Sell Your Home

I can afford to buy, I have cash to buy, I have income, I have good credit......but all alarms still say RENT!  My specific area is still about $75-100K over priced above the long term trend......and based on incomes, my area is still overpriced.  The DC metro has held prices under the guise of gov't jobs, but when gov't is forced to face the music the employment numbers may contract and then the downward pressure may happen.   Even if my rent went up 1% a year, which thus far it has gone up 0%, it would take another 20 yrs to be worse bet than buying. 

As much as I want my own home, my own garden, to paint, and other intangibles that I have loved as a previous homeowner, I can't seem to let the emotion to have those things over ride my desire to have money in my pocket!   
So.......maybe I should tell the hub that we can plan that massive trip to Disney since I won't need the $$ this year for a home. 
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March 31 2011 - US
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Replies (104)

Profile picture for Pasadenan
This may be the one to watch:


But what is not considered is change of inflation rate, and ability of those not caught in the debt burden cycle to make other choices take advantage of others' need to liquidate while the demand is lower.
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March 31 2011
Profile picture for Lady Chattel
Exactly Pasa.   Wages are being inflated away, there is no justification for prices to be any higher than a decade ago because wages are in fact lower than a decade ago. 

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March 31 2011
Profile picture for Pasadenan
In terms of "waiting"; this one is the "eye opener":


As long as there is substantially more than 6 months of inventory, prices "have to" drop in order to liquidate the inventory!

But obviously, one doesn't want to wait until there is less than 6 months inventory and have no negotiating power and less selection.

And what the chart fails in is the small pockets in the country that may not have that kind of inventory for whatever reason.

It is too bad that Zillow doesn't make it easier to see the inventory level.  It can almost be extracted from the local info pages combined with the home searches; but it appears that Zillow is missing a large portion of the listings, and "present inventory" still doesn't properly consider "shadow inventory" of distressed properties that will eventually have to be liquidated one way or another.
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March 31 2011
Profile picture for Lady Chattel
Exactly, I would love to know the real inventory levels in my area, but a REA will only tell me their white washed numbers or the ones that support the "buy now" ism.
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March 31 2011
Profile picture for Pasadenan
Just ask for the total number of housing units presently listed in the Multiples for the city.  Then check that with a Zillow search to see if they lied.  And then, extract the total number of units by downloading data from two of the Zillow "local info" charts, and calculate with Excel.  Then calculate the ratio.  Then, do a Zillow search of "sold in past 6 months", and compare, calculating the # of months using the ratio of listed to sold.

Then, ask the agent to tell you the number sold in the past 6 months to see if they lied.

Still, there could be a "seasonal adjustment"; so it may be worth using a full year data instead of 6 months, and using the additional factor of 2.
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March 31 2011
Profile picture for Pasadenan
This one tells a slightly different story than what first might be apparent:



Foreclosures always lag behind "delinquents" and "non-currents".  And though the foreclosure level is still rising on the chart, what the chart is stating is that the peak level of foreclosure rate is rapidly approaching, and that after that, the foreclosure rate will start tapering down.

Still a ways off, as a foreclosure can take about a year from a 90 day late notice; but the chart is indicating it has been about a year since the "delinquent" peak rate.
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March 31 2011
Profile picture for Pasadenan
I really like this chart, providing a comparison of forecasts from 5 well recognized established sources with "real data" and a verifiable published method of analyzing the data:



So, 9% decline in median prices predicted for the U.S. for 2011 on average.

And 11% total decline predicted to reach the historic trend, with the bubble "fully deflated".

Leaving about 2% decline for 2012, for the "flat growth" point.

(And others are stating inflation starts kicking in in 2014).

But that doesn't help with those that keep stating "their area is different; as it already fully experienced the bubble correction"; or "that doesn't consider specific price ranges, and a given economic sector moves slightly different than the median".  But then, I still say; "show us your data and your methodology"!
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March 31 2011
Profile picture for Pasadenan
"Another year" sounds about right; but why does it state that it was published on April 1st if this is still March?
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March 31 2011
Profile picture for Kickadoo

Most agents want you to buy not rent.

You are a wise rabbit.

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March 31 2011
Profile picture for Pasadenan
Lady C; how did you rate a "sticky" for your thread?
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March 31 2011
Profile picture for Lady Chattel
Oh heck, not sure how that happened Pasa.....I iz a Lady and well, there is a Royal wedding this coming month!

I will still check out the homes available, and if I see one that peaks my interest, I shall offer 10% less than list......and then walk if they balk.....wait 5 months and have them beg me to buy at that price, then I will offer them another 10% off list!
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March 31 2011
I don't disagree that home prices are still falling. The thing for potential buyers to keep an eye on now is interest rates. Right now they are low and make many homes more affordable than renting. The last time a major real estate decline happened the interest rates went into double digits. Crazy!!! Just watch the interest rates and if they start to climb it may be time to leave renting behind. Best of luck to all of you!
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March 31 2011
Ceteras paribus, if interest rates rise prices will simply fall further. 

So the "hurry and buy before rates rise" theory today is just as stupid as the "hurry and buy before prices rise" was 3 years ago.

There is always a reason to hurry and buy according to those who need a sale.  
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March 31 2011
Profile picture for Lady Chattel
I hope interest rates shoot to 15%......because the house price will decline by more than that %.  I can always refinance the loan, but I can't renegotiate the price I paid.   If only there was a price guarantee and an adjustment period.....so if you bought a home today and the price declined you would get an automatic reduction.  If banks offered that you bet your sweet bum I would buy.
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March 31 2011
You make srrong points.  Suggest you also consider income tax deduction for real estate taxes and interest paid on mortgages.  Also, please consider appreciation, assuming we are at or near bottom of price trend for home prices.  Have a great day.
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April 01 2011
Profile picture for klarek the realist
Mortgage Interest Deduction is a crock.  Hopefully the govt does the right thing and removes that provision from the tax code like they did in the 80's with car loans and credit cards.  Govt should NOT be bribing people to take on debt.
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April 01 2011
Profile picture for Pasadenan
I keep hoping that Realtors® will start doing their own tax forms, so that they could actually start understanding something about tax law, and why their statements about taxes make absolutely no sense of any kind for over 80% of potential home buyers...
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April 01 2011
Profile picture for Lady Chattel
Fun link about rising real estate taxes


"you might think property taxes have declined 30%, paralleling declines in housing values. But nope--property tax revenues have shot up 27% just since 2006."

"Something remarkable happened to property taxes in the U.S. while housing lost 31% of its value from 2006 to 2009: they went up by $100 billion (27%). Equally remarkably, as we can see from this U.S. Census Bureau data on state and local tax revenues, property taxes went up even when housing slumped in the early 1990s."


I looked at a house recently that was similar to the home I rent but in a different neighbrhood.  Priced at $535K and the property taxes were $8500 per year........Explain to me why a renter paying $2.2K a month would ever buy that?  No federal tax break would ever come close to making that a good deal.  Symbiosis needs to occur and this ain't an example of it. 


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April 02 2011
Profile picture for Pasadenan
Even in California where property taxes cannot be more than 1% of assessed value plus other voter approved taxes and fees, and where assessed value cannot rise more than 2% annual, the property taxes collected went up in spite of fewer house sales and lower sold prices on the houses that were selling and the State government complaining that tax revenues were down!

It is not surprising, as that 2% annual change limit meant that many houses (and other properties) have substantially lower assessed value than the assessed value would be if "sold", so essentially the government gets locked in on this 2% annual rise in property tax, plus the increases on any properties that did sell that had been held from prior to the "bubble".

State revenue in California didn't go down because of "property tax", but rather due to the "losses" and "lower income" people reported on their business and personal income taxes.

Yes, an indirect result of the housing bubble "correction", but certainly not related to "property tax".

And any buyer that doesn't properly factor in property tax and property tax law for the location they are buying is being "foolish" ignoring an important part of the decision making process.
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April 02 2011
Profile picture for buco

This thought comes from a person who has her life in order, what happened to the rest of the world. (Jumping) in the ocean without googles.

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April 02 2011
Profile picture for Lady Chattel
buco......it would seem so, otherwise how do you account for the millions who have been foreclosed on and the 1 out 10 currently 30 days delinquent on their mortgages.
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April 02 2011
Profile picture for sunylu
Interesting post. How relevant is this to the DC market? Pardon me for my ignorance - I am new to the country.
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April 02 2011
Profile picture for klarek the realist
DC market is still way overpriced.
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April 04 2011
Profile picture for Pasadenan
Considering the amount of money Lady C' is saving each month in the D.C. area by presently renting, it appears the entire thread is directly relevant to the D.C. area.

And here is the home value "bubble" chart posted on another thread, showing how much more the market needs to decline to get back in line with historic trends:



web address:
http://photos3.zillow.com/is/image/i0/i6/i1693/ISewmh5nr9wtk3.jpg

Obviously, they didn't "escape" the correction, the "timing" is just different.  Markets have to correct to the historic trend, unless there is substantial other reasons why "real changes" are occurring in a given market.

How many "new jobs" did Washington DC create locally?  How has the weather improved?  How have the local schools improved?

(And since the government states that the inflation rate was closer to 2.5% annual for that period of time, there could be even a lot more "correction" to occur).

It looks like the "correction" is going to be drug out for several more years in that area.  One or two years is not going to do it.
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April 04 2011
Profile picture for Lady Chattel
My calculations have my area priced $100K over where it should be. Incomes still do not support the house prices. 
I presently pay less than 15% towards housing, to buy a home I would be willing to live in I would have to spend more than double that %.  The DC market has experienced a slight uptick......but it is very sporadic and I am seeing new listings every day.......and a house that was listed on a few weeks ago just dropped the price $50K, not a hiccup but a phloem cough number.
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April 04 2011
Profile picture for Pasadenan
Housing units listed for sale on Zillow for the DC are indicate 3174; so I'm assuming about 3500 since many listed for sale don't show up on Zillow.

The local info is missing the number of units sold per month; but does give % sold per year, as well as % of total number of homes foreclosed on each month.

The Zillow "search" indicates 5497 sold in the past year, which would place the total number of ownership units at about 125k.

So, here is the chart of units sold per year by extrapolation:



web address:
http://photos3.zillow.com/is/image/i0/i6/i2204/ISeqm3qtkydcir.jpg

And then, the % of the units sold that were foreclosures (foreclosure saturation):


web address:
http://photos3.zillow.com/is/image/i0/i6/i2204/IS1jc2wrvc9uv8j.jpg

So, it still doesn't state the months of inventory...

A close approximation might be 3174/5497*12 = 7.3 months.

With the inventory discrepancy mentioned on the other thread, it is clear that people can play with that number, and that the # presently listed is not always clear.
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April 04 2011
Profile picture for Pasadenan
Lady C; that $100k expected drop for the median sounds about right looking at the charts, but is not enough for the higher range prices.

I'm wondering if you checked with an agent to see if they could look up the # of units presently on the market?
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April 04 2011
Profile picture for Pasadenan
By the way, Realtor.com only indicates 2783 homes listed in the Multiples for Washington DC. (6.1 months inventory)

So, what extrapolation factors should be used for "not in the multiples"?  (Foreclosures (not REO's), FSBO, family/friend sales, pocket listings, probate auctions...)

And apparently, Realtor.Com will not let you search an entire county.
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April 04 2011
Profile picture for Lady Chattel
I can ask, but my guess is many of these agents aren't schooled in the idea of math and calculations and it is doubtful that the NAR is providing them real time information on such things.  Heaven forbid one of their agents accidentally spilled the truth about the inventory, which we now know the NAR has been fudging the numbers on since 2007. 

I will send an email to my agent......but the reality is that our lease renewal request just came and my landlord is NOT increasing my rent for this coming year.......so for a little fun, I looked up the taxes......the house I rent and the houses around me have all seen increases of about $100-150 per month in taxes since I have moved into this rental......my rent has not increase one cent.   I just found out about another neighbor who has to move away this summer, moved in summer 2008......his house will likely sell for exactly what he paid.....who is the bigger fool.  
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April 05 2011
Profile picture for klarek the realist
Lady:  the reality is that our lease renewal request just came and my landlord is NOT increasing my rent for this coming year.......

Sweeeeeet!  I'm pretty lucky in that regard as well.  Living cheaply via rent is becoming harder to step away from over time.  I want to move out, but I cannot financially justify it. 

I've been sitting on a potential offer for a REO for over a week.  I won't send it until I can justify (to myself) paying an extra $1k per month.  It's not that the house isn't worth it, but I don't want to pay 1000 more dollars per month than I am right now.  I feel so spoiled:)
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April 11 2011
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