Not sure if you’ve visited TruliaVoices lately – there is an active thread currently running, at last count, 1,599 responses. I believe that is the longest running thread in Trulia’s fledgling history. The poster has since updated the question with more information qualifying the question due to the overwhelming number of responses, however, the basic question is, “Why should someone buy in this market?”
When initially posted, the question was a legitimate query into an expert’s view as to why someone in the poster’s circumstances should buy in Chicago. Personally, I had a problem with the question – should the response be a multiple choice response?
a. buy low, sell high
b. interest rates are at historically low levels
c. Jill is half as tall as Bill and 3/4 tall as Sally
d. Vicodine
e. There is insufficent data to answer to this question
I like “e” – and for the first time in almost 30 years, I can now fully appreciate the significance of that answer on the SATs. For those of you who found Vicodine to be the logical choice, may I suggest an intervention?
Ok – so I’ve been following the thread from time to time, watching it morph from being a useful discussion to – lately – a discussion regarding the existence of nuclear weapons in Israel. Almost like a game of telephone gone bad. More disturbing to me however is how the question has evolved into a rhetorical question “WHY THE HELL would someone buy in this market? What are you, an idiot?”
If you’re familiar with the TruliaVoices rating scheme, you understand that comments are rated by either a thumbs up or thumbs down. Honestly, I think there’s a conspiracy brewing. As you read the responses of the many realtors who answered the question, “There is no better time to buy!”, many of those responses were met with a burrage of thrumbs down. You can almost hear the resounding “BOO!”, “LOSER!” – you know, while you’re at, why don’t you just poke me and call me fat.
On the flipside, the number of written responses as insults were flying back and forth, discrediting realtors who provided insightful responses to a fairly ambiguous question. Again – thumbs up to the responder who really stuck it to the realtor – thunderous applause – BRAVO!
I think the collective mindset – or groupthink has become, any agent who tells a consumer to buy in this market is nothing but a realtwhore. Of course you want to tell people to buy, otherwise you won’t make your ridiculous commissions.
Well, I don’t think NAR’s national campaign blanket statement, “There’s no better time to buy! Consult your local realtor” has gained us points in the credibility deparment. A good majority of consumers aren’t convinced. Honestly, I did whince at a few responses (some with big hair) – shiney, happy people providing generic responses to a very generic question. Interest rates are low, inventory is high, it’s a buyers market! Buy! Buy! Buy! Sorry – they do kinda sound like realtwhores.
It’s a tough crowd in there, many of whom are well armed – spouting out data statistics from Standard and Poors, the Case Shiller Index, weighted averages etc. Even Fortune magazine wrote an article about the state of the market. Astonishing that Fortune’s article had higher credibility that a broker of greater than 20 years experience who has shared her thoughtful, specific responses throughout the thread. Hmmm – I thought Fortune sold magazines, not real estate? Why is the Case Shiller Index the defacto standard instead of NAR’s market stats? … because NAR’s nothing but a bunch of realtwhores.
I will say I did find a great deal of humor by reading the responses. I’ve been following the thread and have noticed a good number of real estate professionals’ responses. Many continue to dent their armor, they stood their ground – they took a few for the team, but then again, they do this for a living.
I couldn’t help but be struck by one agent’s response who up until then had been fighting the good fight, but then sheepishly admitted, oh I don’t actually use this site as a prospecting tool, I just come here from time to time and “check-in”.
Excuse me?
Let me get this straight – you fill out a profile in detail, providing all of your contact information, designate yourself as a real estate professional, actively participate in discussions, follow a thread that has grown to almost 1,600 responses, share your knowledge and expertise, but you don’t want consumers to think you’re a realtwhore – is that was you mean?
Who are you kidding? After I read that – the groupthink just took a survey: *DING*DING*DING, survey says *REALTWHORE* Suffice it to say – when a potential client now calls said agent, it is their duty to say – oh, I’m sorry, while I appreciate the fact that you enjoyed my knowledge and experience, I was not seeking any potential business – I’m afraid I can’t help you – I’m a realtor, not a realtwhore.
Some how realtors who admit they use social networking sites as prospecting tools are looked upon as less credible. How far from the truth can that be? When you establish a web presence, you’re prospecting. Consumers are using these sites in exponentially increasing numbers. While some consumers enjoy the game of discrediting the experts and the realtwhores, a greater majority are seeking sage advice. They need expertise and knowledge and they are seeking out the experts. Groupthink tells that buying and selling is a do-it-yourself job. For some that very well may be the case – some are not seeking to be converted and you know, that’s ok. Where better to draw the distinction between a realtor and a realtwhore?
Regarding my own TruliaVoices involvement, in my own professional way, I would like to address the few of you who gave me thumbs down on my incredibly insightful responses. No – for you who choose to discredit me – I will not pick up my toys and leave the sandbox. Nope – instead I want you to follow these simple directions:
Apply lips firmly to my right buttock. Pucker and release. Repeat.
Now see? It’s all in the delivery.
Ginny McGonigle says:
Thomas: Thanks for posting this!! I have noticed this trend of beating up on agents also. I saw it on RedFin. I chimed in on a similar thread and simply said the market is cyclical. Right now, it is a ‘buyers market’ and I added that I think people who can buy, want to buy but do not because they are waiting for ‘the bottom’ will regret it. This was met by a slew of posts about how this price correction in the market is far from over, there is more to come as it should etc. etc. Real Estate Agents can get pounced in those threads.
Ginny McGonigle
westsidehomefinders.com
July 24, 2008 — 5:51 pm
David Shafer says:
In this internet age, everyone is an “expert” and everyone is suspect. Best to put it out there honestly and forthrightly. Real estate agents for the most part haven’t had to deal with this for a while, but anyone can look back and tell us what has happened (usually not more than 1 year though), and almost no one can look forward and pick the exact time the market will turn around. Does being an expert require one to be able to look into their crystal ball and be correct about the future? I think not.
July 24, 2008 — 6:16 pm
Bridget Magnus says:
I’m too busy helping people buy and sell property to be a realtwhore! The market has opportunities for anyone savvy enough to look for them. Likewise, it has pitfalls for anyone un-savvy enough to ignore them. A good Realtor knows when to say “You know, I’m losing money by saying this but it’s time to walk away from this one!”
But then again the NAR would kick me out if they knew I thought there were people who should not own a house!
July 24, 2008 — 6:56 pm
Brian Brady says:
“Apply lips firmly to my right buttock. Pucker and release. Repeat.”
Welcome home to Bloodhound, Tom. You’re gonna do just fine here.
July 24, 2008 — 7:08 pm
Bob says:
I’ve been in this business for close to 20 years. I think most realtors are realtwhores.
July 24, 2008 — 7:10 pm
Doug Lindstrom says:
Q- “Why should someone buy in this market?”
A- Because you need a place to live and landlord’s suck!
The distinction to me is, are you an investor (don’t buy, yet) or do you need a place to stay and will you stay there for a few years? Buy now or as soon as possible!
I also understand that it get’s cold in Chicago. Buy a home with a good furnace or trust your landlord to get it fixed when it’s -20 degrees.
I realize that this is a crude oversimplification but ownership is about creating your own circumstances including the buy low (it could go lower), sell high way of thinking. I’m upside down on my house, wife is happy, kids are healthy, I need to lose a few pounds but who cares, we needed a place to stay.
Nice post!
July 24, 2008 — 8:50 pm
Bob says:
http://calculatedrisk.blogspot.com/2008/07/fitch-projects-additional-25-percent.html
July 24, 2008 — 9:27 pm
RonOrr.com says:
It is really tough to time the market, could it go down some still, sure, but if you are going to live in the property for awhile maybe it’s worth it. I say just be honest with a client and tell them the full picture pros and cons.
July 24, 2008 — 10:19 pm
Gene Urban says:
The sociology is fascinating. People are angry and want to point fingers somewhere. I think blogs bring out the RAGE in many faceless voices.
I was posting quite a bit on Trulia and have pulled away as the conversations have become more and more RANT oriented and less about intelligent dialog. The name calling and blanket thumbs down for anyone with a real working knowledge is tiresome and small.
Let them pucker up. The smart money will make a killing over the next few years and the losers will do what they always do… be losers.
July 24, 2008 — 10:39 pm
David G from Zillow.com says:
Thomas –
FYI – S&P and CSI are the same thing.
The problem with the NAR’s data is not the source it’s the method. Median sales values are a flawed statistical approach to measuring home value trends in changing markets. When a market peaks, the remaining buyers initially buy more home for their money (instead of buying the home they could afford a few months prior at a discount.) This buyer behavior during a market’s peak continues to prop up the median sales prices which may even continue to rise while real home values are actually falling. That’s largely why Lereah got it so horribly wrong in ’06 and ’07 and it was because of this mistake that NAR continued to cheer a declining market long after it was obvious that we were in for very difficult times. I don’t think that the NAR was intentionally lying about the state of the market and I’m convinced that this flawed method is the reason NAR’s reputation for understanding home values was damaged and it probably contributed to Lereah being pushed aside. Very unfortunate.
I do think that Realtors could benefit from learning about how the various home value indexes work and incorporating them in their analysis of local trends. And if you’re still reporting median sales values, I would also suggest:
a) normalizing your data by using something like median price-per-square foot and,
b) augmenting your analysis with leading indicators like the trends in DOM and inventory and,
c) not ignoring those leading indicators when they disagree with what the median sales data is saying.
Bob –
We will see. Personally, I believe that forecasting market values based on predictions of a few cherry-picked leading indicators is interesting but probably unreliable and it doesn’t account for the stubborn tenacity of human nature. IMO, Fitch and CSI are setting themselves up for a similar fall to the one described above with these 5-year-out predictions of massive home value declines. Just like the NAR’s method discounted buyer behavior, it’s possible that these predictions (often based on predictions of rental values) are discounting the behavior of home owners. But then again I’m no rocket-scientist and I may well be missing something. We will see.
July 24, 2008 — 10:43 pm
Jeff Brown says:
I’m sure I must be missing something here. Still, he plows ahead with disarming aplomb.
An amateur, or group of same, asks a question concerning the current housing market — should folks buy now — aiming said question at folks clearly untrained to answer.
As David so elegantly points out, (and without drawing a drop of blood, he adds with great admiration) their leader of the last few years didn’t get it. How are they supposed to answer?
I could go on about which horribly hit markets are now showing empirical evidence of what? Recovery? Hardly. At least a change in buyer behavior on a relatively large scale — and for the last 3-5 months in a row.
Or how ’bout this. With all the foreclosures and short sales, how is it that since March, and every month since, the national median home price as risen? And yes, I agree with David about the median price problem, but in a down market, the median rises four consecutive months? Really? Somebody, a lot of somebodys, are thinkin’ it just might really be ‘time to buy’.
Only the geniuses using 20/20 hindsight will let us know if these folks were prescient — or idiotic.
The answer to ‘when to buy’ will remain brutally subjective until the empirical evidence is so overwhelming, even the shoeshine boy begins happily informing his customers. Until then it will remain for those with much time spent with boots on the ground, (preferably their own) combined with serious and unbiased analysis. Even then, when the answer goes against the tide, courage is the seasoning needed to follow through.
Ask Brian Brady what’s happening in the investment market with lenders. It’s a joke. Still, there are lenders who’re obviously not afraid of those who think it’s not the time to buy. They’re not only lending, but lending 80, and yes, sometimes even 90% of the contract price.
Apparently they haven’t read the memo either.
This argument is in the script every time the movie gets to this reel. The next part is when everyone is shocked about sales numbers. Pretty soon, they feel a little silly calling thousands of home buyers and investors idiots.
Tom, you know how to stir it up. Good stuff. I’m with Brian — you certainly seem to fit in.
July 25, 2008 — 1:03 am
Mike Farmer says:
August 16 is actually the day everyone should buy.
July 25, 2008 — 4:13 am
Valerie Crowell says:
The question can’t be answered in a global fashion. Every property is different, every person is different, so every situation is different. Should a struggling family with a lot of personal debt consider buying with little down in this market? Probably not, but maybe. Should someone who’s planning on holding on to the property, has 30% down and the disposable income to run the property consider buying? Probably yes but maybe not. Should a growing family buy in this market? If they need the room probably yes. More importantly is whether or not someone should SELL in this market. Once again it’s their personal situation that dictates what they need to do. And yes, a good REALTOR will tell them not to if their situation dictates that they can hold for a couple of years.
Looking for the bottom of the market is stupid. Looking back on a transaction is equally inane. If the transaction makes financial sense to the client at the time, it’s a good transaction. Markets fluctuate, sometimes a lot. I have just recouped what I lost in the stock market in 2000-2001. It may take some folks that long to recoup the lost equity in this market, but at the end of the day, you gotta live somewhere.
July 25, 2008 — 6:02 am
Tom Hall says:
David – thanks for your comments – I am keenly aware that S&P and C&S are the same thing – In my market, Chicago – the city – where almost 2/3 of the market is condos, I struggle with the C&S.
I couldn’t agree more with you regarding understanding the indexes. My issue isn’t with the indexes, my issue is being talked down to by a number of individuals who feel they are more adept at analyzing the data than the individual who lives and breathes the reality of the market everyday.
Bottomline – it isn’t all about the data. If we all made rational decisions regarding the data, I doubt we would be in the mess.
July 25, 2008 — 7:24 am
Bob says:
Tom, I think you give “individual who lives and breathes the reality of the market everyday” way too much credit. Most are not in a position to be objective or honest. Tell people it is a bad time to buy and you may very well be out of business unless you have a listing based business model.
Yesterday I got a call from a Marine who wanted to buy a foreclosure. He has a 50/50 chance that he’ll be somewhere else in 3 years. he knows that it is 100% that he’ll be gone in 6.
If he uses his VA and has to sell in 3 years, the odds that he’ll be upside down are close to 100%. He’ll have to pay 5% to sell, so he’ll need the market where he is looking to not only stop dropping 2-4% a month, but go flat immediately, then go up 5% over the next two years just to break even. That is not going to happen.
Even with a 6 year window, if he buys a listed REO today, his sale will be the new market comp. with a modest 10% annual drop over the next 18 months, plus the 5% to sell, he’ll need an 8% annual appreciation for years 4,5 and 6 to break even.
Factor in inflation and buying for him is financial suicide.
The interest rate argument is absurd. When it comes time to sell, it doesn’t matter what the interest rate is, what matters is loan balance vs market value.
July 25, 2008 — 8:52 am
Tom Hall says:
Bob – I can’t disagree with you. Needless to say, this is a difficult market to negotiate. I can provide my professional opinion – honestly, because I do so, I’m getting to the point where those therapy sessions for my dog just might have to go 😉
July 25, 2008 — 9:00 am
David G from Zillow.com says:
“I’m getting to the point where those therapy sessions for my dog just might have to go”
ROFL. What’s next? The caddy or the hairspray?
Great thread. At least this corner of the blogosphere can have an intelligent and respectful conversation about this stuff.
July 25, 2008 — 9:05 am
Chuchundra says:
Upton Sinclair famously said that, “It is difficult to get a man to understand something when his salary depends on his not understanding it.” It’s important to keep this in mind when considering taking the advice of Realtors, whose business is to sell houses, whether it’s a “good time to buy”.
Yogi Berra, the philosopher king if baseball opined that, “Prediction is very hard, especially about the future”. And while that;s undoubtedly true, you don’t have to be Miss Cleo to figure out that if you hurl a cinder block heavenward, it will probably be on it’s way back to Earth some time soon.
There were plenty of people, myself included, who saw this train wreck coming years ago. The math was inescapable. I thought that the market would peak in 2003, but I failed to take into account the utter depravity of the mortgage lending industry, which propped up prices well past their natural breaking point. Bay 2005, plenty of economists and other financial experts has seen the cracks in the foundation and were predicting collapse.
Of course the majority real estate professionals — agents, lenders, etc. — were still in denial well into 2007. I don’t posit dishonesty, simply Upton Sinclair’s famous principle stated above.
Lastly, apart from denial, it’s obvious to me that most RE professionals don’t understand the dynamics of the market they work in. The main example I have is the oft heard claim that historically low interest rates make this a good time to buy. Actually, all things being equal, it’s almost certainly better to buy a home when rates are at historical highs rather than historical lows. The proof of this, as they say, is left as an exercise for the reader.
July 25, 2008 — 5:43 pm
Melina Tomson says:
Forget median home prices…one of the large brokerages in my area put in their newspaper ad “home prices are fine.” I loved the statistics used for that thorough and captivating analysis.
I can say in my market most real estate agents don’t run basic numbers like inventories. Asking them to understand Case Schiller doesn’t make sense when they can’t even calculate inventories.
July 26, 2008 — 7:15 pm
Ken Smith says:
Agents need to stop talking about things they don’t understand. General stats don’t apply across the board in real estate and whats happening in your market has little to nothing to do with the next.
San Diego happens to be in one of the worst markets in the country. Every bit of research I’ve seen shows they will continue to decline in value over the next couple years. Bob is in that market and he is saying that currently prices are dropping “2-4% a month” (at least were the Marine was looking). Naturally there are other markets that are in the same position as San Diego.
Then there are markets that are at or near the bottom that are expected to be flat over the next few years.
There are other markets that even the biggest doom and gloom reports are expecting to appreciate over the next 2 years.
Agents need to keep in ming real estate is local and stay out of conversations that don’t involve a market you know anything about.
The Chicago buyer question on Trulia has answers from countless agents from areas outside of Chicago telling this person it’s a good time to purchase. Not an agent in the Chicago market then how do you know it’s a good time to purchase a home here? You don’t so keep your mouth shut and move onto a question related to your own market.
July 26, 2008 — 9:34 pm