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Bobby J

Beach Fanatic
Apr 18, 2005
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Blue Mountain beach
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Many saw the peak when it was occurring. Many will note the bottom as it occurs. We aren't there yet--but we are closer than we were a year ago. ;-)

As for Kurt's example, if you need to sell when it drops to $275k, not only did the house drop in value by $25k, but you also lost your closing costs of 2-3% of the original purchase price, plus you paid 6% commission to sell the house. So, the 10% or so drop in value actually results in about a 17% plus loss of cash.

In addition, in Kurt's example, the $325k price in five years assumes appreciation (which is unlikely in this market for quite some time) and even with such appreciation, you would still only be close to breakeven after considering real estate commissions on a sale in five years.

Only buy if you have enough money to take a big cash loss ast the bottom is not in sight.

I actually think if you want to make money in this market you can do quite well if you are patient and know what you are doing. Bottoms are for Herds.
 

Smiling JOe

SoWal Expert
Nov 18, 2004
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Given that bottoms are found in only a moment of time, I wonder how many buyers will be in the handful of the small count in the trough. Since most people look at stats on a time period of once per month, even a month's worth of buyers (just over 100 for march), is a tiny handful compared to the properties on the market. If you look at the market on a moment by moment basis, you will likely find that the bottom holds even less people. Statistically, only a few will buy at the very bottom. Where's my Bell Curve?
 

30ashopper

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Apr 30, 2008
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Right here!
None of us know when we will truly be at the bottom until the bottom is passed but you surely want to buy before you come out of the bottom. I always say which side of the curve do you want to buy at? As a buyer you will get a lot more seller negotiation as you approach or are at the bottom then you will when the bottom is actually realized. The sellers will be sooooooo ready to tell the buyers to take a hike once we are on the other side of the curve.
I always tell folks we are near IMO because the buyer arrogance has far surpassed the seller arrogance of 2003-2005. Please no offense here just making light of a true reality.

IMHO, with 33 months of inventory, no seller is going to be telling a reasonable buyer to take a hike any day soon.

None of us know when we will truly be at the bottom until the bottom is passed but you surely want to buy before you come out of the bottom. I always say which side of the curve do you want to buy at? As a buyer you will get a lot more seller negotiation as you approach or are at the bottom then you will when the bottom is actually realized. The sellers will be sooooooo ready to tell the buyers to take a hike once we are on the other side of the curve.
I always tell folks we are near IMO because the buyer arrogance has far surpassed the seller arrogance of 2003-2005. Please no offense here just making light of a true reality.

That's a very dangerous game, whether it's real estate or stocks, and IMHO is incredibly bad advice for your clients. The flaw in that argument is that you might guess wrong and lose money on your investment to more downside. By following the market rather than leading it, you put yourself at much less risk and assure the lowest possible price. Seller negotiation at 20% above the bottom is still worse than accepting list after prices start to stabilize.

The other thing to remember is that real estate markets usually don't experience "V" shaped recoveries, they tend to follow more of an "L" shaped recovery with a long slow climb back up (see previous price histories in market booms and busts for examples). So the block of time you have on the rebound is much wider and safer, generally.

IMHO 2005 warped our view of real estate - from here on out most buyers shouldn't treat buying a home like day traders treat buying and selling stock. A home is the largest investment most will make in a lifetime and often involves debt financing that can stretch 40 years. If you're smart and you've been paying attention to what's going on, you've learned that exhibiting risky behavior isn't the smartest approach. (Afterall, risky behavior is what got us into this mess in the first place.) I sense people still acting irresponsibly will feel the sting of loss down the line, while those who approach the current market sensibly will reap the rewards of a reasonably priced asset and house to love.
 
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gmarc

Beach Fanatic
Jan 19, 2009
506
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I think what will frustate people is the saying "this time is different". I firmly believe wether its wall street or the real estate mkt americans have been taught to seek instant gratification. This time what is different is the usa has taken on the greatest debt load in world history by a factor of 5 which means we're basically another japan in the making were growth will be flatlined for 10-20 years as we try to escape 30 years of gluttony.It means asset prices when they hit bottom will flatline for possibly 10-20 years making quick profit impossible
 

fisher

Beach Fanatic
Sep 19, 2005
822
76
I think what will frustate people is the saying "this time is different". I firmly believe wether its wall street or the real estate mkt americans have been taught to seek instant gratification. This time what is different is the usa has taken on the greatest debt load in world history by a factor of 5 which means we're basically another japan in the making were growth will be flatlined for 10-20 years as we try to escape 30 years of gluttony.It means asset prices when they hit bottom will flatline for possibly 10-20 years making quick profit impossible

Exactly--IF we are lucky.
 

fisher

Beach Fanatic
Sep 19, 2005
822
76
Given that bottoms are found in only a moment of time, I wonder how many buyers will be in the handful of the small count in the trough. Since most people look at stats on a time period of once per month, even a month's worth of buyers (just over 100 for march), is a tiny handful compared to the properties on the market. If you look at the market on a moment by moment basis, you will likely find that the bottom holds even less people. Statistically, only a few will buy at the very bottom. Where's my Bell Curve?

Peaks and troughs in a real estate market--versus the stock market--are not moments in time. They happen over a period of time. The peak did not occur on a particular date and the bottom won't either. But, if you look carefully at trends, you will see it when it occurs.
 

Miss Critter

Beach Fanatic
Mar 8, 2008
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My perfect beach
I'm using this method.

crystal_ball2_bmwpreview.jpg
 
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Bobby J

Beach Fanatic
Apr 18, 2005
4,043
599
Blue Mountain beach
www.lifeonshore.com
IMHO, with 33 months of inventory, no seller is going to be telling a reasonable buyer to take a hike any day soon.



That's a very dangerous game, whether it's real estate or stocks, and IMHO is incredibly bad advice for your clients. The flaw in that argument is that you might guess wrong and lose money on your investment to more downside. By following the market rather than leading it, you put yourself at much less risk and assure the lowest possible price. Seller negotiation at 20% above the bottom is still worse than accepting list after prices start to stabilize.

The other thing to remember is that real estate markets usually don't experience "V" shaped recoveries, they tend to follow more of an "L" shaped recovery with a long slow climb back up (see previous price histories in market booms and busts for examples). So the block of time you have on the rebound is much wider and safer, generally.

IMHO 2005 warped our view of real estate - from here on out most buyers shouldn't treat buying a home like day traders treat buying and selling stock. A home is the largest investment most will make in a lifetime and often involves debt financing that can stretch 40 years. If you're smart and you've been paying attention to what's going on, you've learned that exhibiting risky behavior isn't the smartest approach. (Afterall, risky behavior is what got us into this mess in the first place.) I sense people still acting irresponsibly will feel the sting of loss down the line, while those who approach the current market sensibly will reap the rewards of a reasonably priced asset and house to love.


33 months of inventory but how many months of good stuff. The stuff that sells the week it hits the market. You are looking at the market in a general sense. You really have to look at pockets and values. You can look at an area and see 100 homes for sale. I may look at it and see only 5 that are of market value and a good buy. I would not call it Risky Behavior at all. A builder still builds. An investor still invest. A flipper still flips. There will always be risk in any type of market. Most of the buyers we deal with today are extremely sophisticated and are able to be buyers because they did not get caught up in the herd mentality of 2003-2005. These buyers are approaching the market sensibly. The majority of our sales this year I would feel confident putting back in todays market and selling for a profit. When I sell today I always tell the buyer this needs to be a long term hold to feel the value but it does not mean we don't try to buy properties they could get right back out of if they need to. The buyers understand the market. Basically, the purchase could compete the day they buy. That to me is not risky but just good business. You make money in life when you buy. Not when you sell.
 
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Smiling JOe

SoWal Expert
Nov 18, 2004
31,648
1,773
Peaks and troughs in a real estate market--versus the stock market--are not moments in time. They happen over a period of time. The peak did not occur on a particular date and the bottom won't either. But, if you look carefully at trends, you will see it when it occurs.


If that is the case, how about you tell us when it occurs? Your preface seems opposite of the bold part. If the trough occurs over time, how do you know where the bottom is, until AFTER we see the uptick which follows the bottom?
 

Smiling JOe

SoWal Expert
Nov 18, 2004
31,648
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Bobby J, good point about the "real" inventory. So many of the listed properties are not real inventory. eg- twenty lots for sale in a subdivision, where no homes are built. All lots have the same characteristics and value. One lot is priced at $59,000, a couple priced at $69,000, with the majority priced around $170,000, with a couple priced above $230,000. In my mind, there are three lots for sale. The remainder won't count as inventory anytime soon, unless the price is substantially decreased, and we aren't seeing that happen, unless the bank takes them back. I guess another way one could analyze this is that all twenty lots are for sale, but the price is really $59,000 for each of them.
 
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