The BubbleBrains swooped in en masse today, having only just now discovered my 21 reasons to bank on the Phoenix real estate market. Courage, confidence and competence are often found together in a solitary soul, but cowardice, cowering and impotence — these are the attributes of character of men who run in packs. I am more than libertarian enough to let them go to hell in their own way, but it seems only common courtesy to point the way. So I sent them hither and thither — blithering Bubbleheads lathered up into a dither. Now that’s just good, clean fun.
Technorati Tags: arizona, arizona real estate, blogging, phoenix, phoenix real estate, real estate, real estate marketing
jon streest says:
You would have to be an IDIOT to buy into the Phoenix market. That 50% gain last year was an illusion of the worst sort, sucking happless victims in with the promise of getting rich quick! How can this realtor sleep at night knowing he may be ruining the lives of people by not giving an accurate account of the RE market.
Hope you sleep well at night!
July 30, 2006 — 5:27 am
tinman can says:
Hope is the most powerful driving force for human beings. Without it we perish. Gregg, I admire your hope for the future. I’m sure you have bills to pay and a family to support. And I am also sure that somewhere within yourself, you mean well for the people around you and the clients you serve. But hope is no reason for remaining in a state of denial. And by the way, I don’t think you are necessarily in denial. I would called it more of a delusion. Denial means knowing the truth and then simply refusing to admit it. A Delusion is believing in and fiercly defending something that just isn’t true. If you care about your clients, find the truth, acknowledge it, and tell them.
July 30, 2006 — 7:42 am
Randy says:
Mr Swan, I believe it was you who started the flame wars with the Nazi analogy. Remember Godwin’s law?
So with that in mind, I don’t think anyone takes your faux Churchillian (or fill-in-a-lone-wolf icon [Conan the Barbarian, John Wayne, Atticus Finch, Gore Vidal]) stance seriously though it was a nice attempt at making you appear to be a contrarian when in fact, most consumers in America still believe in ever bullish RE valuations and the bears are in the minority. Think that over.
July 30, 2006 — 8:38 am
Greg Swann says:
> Do the math
It’s here. You don’t know what you’re talking about.
July 30, 2006 — 8:50 am
tinman can says:
What about the people who aren’t looking for a greed driven quick profit, but simply looking to buy an affordable home to raise a family without leveraging to their eyeballs? When was the last time you told a client to rent for a while because it might be in THIER best financial interest. My guess is never.
July 30, 2006 — 9:12 am
Robert Cot says:
An assumption of 5% appreciation per year is not doing the math. I was also wondering about the 7% fixed and 10% fixed 80/20 loans on a non-owner/occupier fully disclosed 100% commercial loan package. I’d have expected a full point higher at least along with some substantial upfront costs that would easily add 15% to the monthly debt service payments and carry forward to the payoff costs at the end of the investment. And your spreadsheet doesn’t include lost opportunity costs. $500/mo invested compounded 5% for 8 years is $60,000. In short, I could be just a reasonable and “prove” what a terrible investment this is. One thing I could but didn’t do is use my rearview mirror to drive forward as you did. I’d use the 6% Phoenix appreciation rate to estimate future returns. With 20% and 30% these last two years to get back to 6% eight years from now we’d have to conclude that the next 8 years will see 1.1% annual appreciation. Now, don’t get me wrong. My “analysis” is completely worthless for predicting future appreciation. Indeed -if- I were a Realtor? then I would be violating the Code of Ehtics to even suggest future returns/loses were likely. My point is that while my spreadsheet is worthless so is anyone elses’.
July 30, 2006 — 9:58 am
iwtoll says:
Swann, if you don’t like the Arizona Republic’s coverage of the real estate market, why don’t you do what any courageous, libertarian, Churchillian man apart would do in your situation? Call up all your realtor colleagues and get them all to threaten to pull the advertising! Teach those pesky scribblers where their bread is buttered.
July 30, 2006 — 10:19 am
iwtoll says:
this guy is hugely entertaining. love some of the shots he takes — should have been an editorialist. but he’s better at using the thesaurus function in MS Word than he is at debating the actual issues. And the whole “my enemies run in packs while I am a lone courageous soul speaking truth to power” is just hilarious, given that he is basically towing the line of the REIC, which has a megaphone a thousand times louder than all the housing bubble blogs put together.
July 30, 2006 — 10:25 am
Bubble Believer says:
Look, we can all accelerate the coming real estate crash, and we all know the sooner the better because it’s already gotten so out of hand already, and here’s how:
Despite our amazement about it, there are still prospective homebuyers out there still looking to buy a home, who are unaware that they are being led to financial slaughter, and it’s these people who are postponing the inevitable, so here’s what we do:
Post links to this housing bubble site and a dozen others “ONLY” where prospective homebuyers are looking because that’s the only way they’ll find out. Post all over Craigslist and every other real estate listing site you can get into and use tinyurl.com links so they won’t know where they are being referred to. Explanations to those links should be preceded by caveat emptor warnings like “Don’t buy any real estate until you’ve read what’s happening to the real estate market” or “Here’s why you’ll be able to buy real estate for 25% to 60% less in the next 12-36 months”.
The few idiot buyers still out there (I know they deserve it, but let’s get this over with already) will disappear and then we’ll have a pricing freefall, initiated by lender REOs.
I’ve been told lately by many people how surprised they are at how many REOs they are seeing or how many neighbors they now know are in trouble for having bought in the last 3 years and who HELOC’d on top of an exotic or no down payment loan.
People, this giant boulder of a coming crash is just teetering on the edge of a cliff. If we all join together and give it a big push, we can make it happen sooner and get our economy back on track – What do you say? Heave Hoooooo!
July 30, 2006 — 10:28 am
sam says:
Most of the time solitary souls are psychotic or emotionally challenged.
July 30, 2006 — 11:09 am
Robert Cot says:
Mr. Swann is not “damaged.” There’s lots of adjectives but “psychotic” is not fair. What this looks like is the classic attempt to appear calm when all around are panicing. The image of Kevin Bacon in his ROTC uniform in Animal House comes to mind. “REMAIN CALM!”
Mr. Swann thinks Churchill but speaks Chamberlin. It was the bloggers he so viciously attacks that have spent the last 2-3 years “in the wilderness” that parallel Churchill. As a cheerleader whose paycheck relies not on his team winning or losing but on keeping the game going it is important to also remember Mr. Swann is not unbiased despite his glaring omission of any potential conflicts of interest in his writing contray to the Code of Ethics of his profession.
July 30, 2006 — 11:28 am
Randy says:
‘Mr. Swann thinks Churchill but speaks Chamberlin. It was the bloggers he so viciously attacks that have spent the last 2-3 years “in the wilderness” that parallel Churchill.’
During a bull run, the bears are always in the minority. So why’s Mr Swan attempting to enlarge their presence/influence? Real Estate is still bullish. Isn’t it?
July 30, 2006 — 12:57 pm
marinite says:
It’s here. You don’t know what you’re talking about.
What makes me sick is that this is all about making money from a house. It’s not about buying a home. It’s not about having a place to raise your kids and make memories. This web site and Greg Swann are all about making a quick buck from housing. Nothing more. It is indeed a speculative mania and Greg Swann was probably one of the first in and will no doubt be one of the last out. I will come back in a year and see if you are still around.
July 30, 2006 — 1:17 pm
iwtoll says:
Why wait a year? Here’s what our friend Mr. Swann wrote in his blog back in November of 2005.
“Chicken Little can rage on, but it’s a great time to buy a house. There are plenty of sweet homes to choose from and sellers are ready to negotiate.”
Boy, looking back, that was a great time to buy a house in Phoenix, back in November last year. I wish I’d jumped in, used an I/O mortgage to get myself into a house, paying 50% more than what it was worth in 2004, knowing I could refi before the reset, and take some cash out to buy myself a new SUV. Everyone who ignored the “bubbleheads”and bought themselves a home back then is just as happy as can be, as today’s article in the AZ Republic confirms.
Why are we bothering to argue with this character? He’s no different from the rest of the slimeballs that infest his profession, except he’s got a bit of literary flair. It’s shame poets can’t make an honest living anymore. He’s been right about one thing — we’re looking at each other from opposite sides of a sewer grating, but we’re the ones breaking out the sunscreen, and he’s the one up to his waist in sewage.
July 30, 2006 — 7:59 pm
tinman can says:
Mr. Swann,
Aren’t you going to defend yourself? Or have you come out of your delusion?
July 31, 2006 — 5:58 am
Greg Swann says:
> Boy, looking back, that was a great time to buy a house in Phoenix, back in November last year.
You got me. I predict the future no better than you.
But before we get too excited, let’s take a closer look.
If you had bought an average Market Basket home in 11/05, you would have paid $265,286. You might have paid less, as sellers were already starting to make deals. If you didn’t get closing costs rolled in, you were badly represented.
What’s that house worth now? $257,999 at the end of 06/06.
So were down about $7,300 on the value of the home. Ouch! But, of course, that’s a paper loss. It doesn’t become an actual loss if you don’t sell the home.
But there is more to consider. A house like that would rent for $1,100 a month, and we would have paid nine months rent between 11/05 and 07/06 — $9,900 — and those are taxable dollars.
If we bought the home with a 30-year fixed loan at 6%, still easily done in 11/05, our monthly payment would be about $1,600 a month — almost entirely tax-deductible dollars. We’ll have made 8 payments until now (mortgages are paid in arrears), so we’re out $12,800, of which perhaps $11,600 would be untaxed.
So after the paper loss, the before-tax marginal cost of owning the home versus renting it is around $333 a month. The after-tax cost or savings would depend your tax rates, federal and state. At thirty cents on the dollar, the tax cost of renting would be $2,970, where the tax saving of owning would be $3,480, netting out to a positive income benefit of $6,450 for owning versus renting. I don’t know how to calculate tax burdens, so your mileage may vary.
So we’re down $7,300 as a paper loss on the house, but we’re up $6,450 as a tax-benefit for ownership, a net lost of $850. Not wonderful, but it comes down to $100 a month. There are documented benefits to owning versus renting, and of course you do you own maintenance when you own, so you have to decide what’s worth what to you.
But, of course, you may think home prices are going to collapse, where I have named in abundant detail my reasons for thinking that will rise moderately in the long-run. If I’m right, you’re down less than $1,000 by now, and you could be up by many tens of thousands of dollars — untaxed capital gains after two years in the home.
July 31, 2006 — 7:46 am
kbr says:
“Courage, confidence and competence are often found together in a solitary soul, but cowardice, cowering and impotence — these are the attributes of character of men who run in packs.”
I agree. Since we bubbelheads are still in the minority I guess that makes us courageous and you the coward.
July 31, 2006 — 11:48 am
chilipepr says:
“If we bought the home with a 30-year fixed loan at 6%, still easily done in 11/05, our monthly payment would be about $1,600 a month — almost entirely tax-deductible dollars. We’ll have made 8 payments until now (mortgages are paid in arrears), so we’re out $12,800, of which perhaps $11,600 would be untaxed.
So after the paper loss, the before-tax marginal cost of owning the home versus renting it is around $333 a month. The after-tax cost or savings would depend your tax rates, federal and state. At thirty cents on the dollar, the tax cost of renting would be $2,970, where the tax saving of owning would be $3,480, netting out to a positive income benefit of $6,450 for owning versus renting. I don’t know how to calculate tax burdens, so your mileage may vary.
So we’re down $7,300 as a paper loss on the house, but we’re up $6,450 as a tax-benefit for ownership, a net lost of $850. Not wonderful, but it comes down to $100 a month. There are documented benefits to owning versus renting, and of course you do you own maintenance when you own, so you have to decide what’s worth what to you.”
Ummm… you are completely wrong on your calculations….
For renting, your cost would be $9,900 (well, you got that right!)
For Buying your cost is $1,600/month (using “arrears” is faulty logic because you still have to pay that last month even if you sold on that day… but you could subtract the interest you made on that $1600, about $6/month); so that cost is $14,400
Plus any taxes (I do not know what real estate taxes are)
Plus building insurance which you do not pay as a renter
Plus maintenance costs
but, just use the 14,400 number and assume you are in the 33% bracket you would reduce that to $9,600…
so, final comparison is $9,900 for renting
or $9,600 + $7,300 + maintenance + taxes + insurance for AT LEAST a cost of $16,900 for buyinig.
If you are going to give out numbers… be sure you know what you are talking about.
August 1, 2006 — 6:43 am
Mill Valley Homes says:
Not always easy to make predictions, but at least you tried.
December 3, 2007 — 12:15 am