Who Should You Believe?
The post you are about to read is true. The names have been change to protect the... Well, mainly because I don't want to start a blog war. For this same reason, I have not provided links to the posts I mention. They are available for verification upon private request.
By now, most sensible people know that the proclamations of national real estate sales spokespersons should be given little to no weight. The most visible example of course is NAR "Economist" David Lereah, who consistently spews positive predictions, despite market realities to the contrary.
Of course, "all real estate is local," right? So David Lereah's national predictions are fairly meaningless to us anyway. To get a feel for the local market, most people are inclined to turn to their friendly neighborhood real estate salesperson. However, is the friendly neighborhood real estate salesperson any more likely to be open, honest, and/or correct about what is happening in the local housing market, and where it is headed? Let's take a look at a few recent examples.
As January drew to a close, area Realtor "Marzipan" stated of the local housing market that inventory had "shrunk over the last month" and that supply was "tighter, not in excess of the demand." When the data for January became available from the NWMLS, it turned out that (King County res + condo) inventory actually rose 11.7%, with 3,744 new homes coming on the market (supply) and just 2,492 pending sales (demand). Keep in mind that as a member of the NWMLS, Marzipan has access to the data before it is published to the general public. Why she chose to make a verifiably false statement about inventory and demand is anyone's guess.
In another recent episode, real estate agent "Homestar" reprinted a verifiably false headline from the Seattle Times, and used it as the subject of an entire post. Referring to October - December of last year, the headline claimed that "Housing sales fall in 40 states; but not in Northwest." In reality, year-over-year sales declined 8-12% in the last three months of 2006 over the entire region covered by the NWMLS, continuing a trend that began in November 2005.
When called out on his inaccurate assertion, Homestar did not step up to correct the error. In fact, he appeared to ignore the issue all together. However, another local real estate salesperson, "Carol" readily stepped up in an apparent attempt to defend Homestar. Her tactic was to mount personal attacks and divert the discussion to home sales price, which she continued to harp on despite repeated attempts to point out the simple fact that the headline was in error. Carol utterly refused to acknowledge that the headline claim about sales was demonstrably false.
These are just a few of the most recent examples. Anyone who cares to spend some time reading the archives of the near-innumerable local real estate sales blogs is sure to find many other instances of verifiably false data being presented as fact to an unwitting public. In my experience, local real estate "professionals" are no more reliable than national PR talking heads when it comes to providing honest, accurate assessments of the present housing market.
If they can't even manage to honestly convey things that have already happened, why should we believe their predictions of what is going to happen? In my opinion, we shouldn't.
23 comments:
Nitpick: Proper grammar would be "Whom Should You Believe?" ;)
-LHR, resident grammar cop
I got bored one day so I went to a blog that is frequented by RE professionals. I wanted to see just how "professional" some of these RE types are, so I started my usual bloviating about how a banking crisis would be bad for real estate.
There is one REALTOR in particular that has me intrigued. I will not use her real name, but will call her, oh let's see...how about something original..."Carol."
"Carol," as it turns out likes to hear herself talk more than I like to jack my jaw - hard as that may be to believe. I posited the notion about banks and how fuzzy accounting, and crappy loans could bite us all in the butt.
She was quite abrupt and said that general banking was of no concern to her. Banking panics would not raise her level of concern over "rat's ass" level.
Now, the reason I brought all this up was she went off on how she could smell appreciation in the air and feel it in her bones.
That's some trick! I need to get a pet REALTOR that can do that for me.
Now, I'm curious how a "professional" can have complete disregard for the mother's milk of real estate (easy money), but can still "smell" and "feel" appreciation.
I wonder if they are nothing more than used car salesmen with no more expertise on any macro factors than your garden variety chimp?
BTW, there are some inquisitive people on those blogs that do pay attention to things that will weigh on their livlihood. Unfortunately, none of them seem to be RE agents.
BTW, "Carol" really likes to lower the boom on people that, in her enlightened opinion, are giving advice without a license.
Things are getting pretty testy. I don't think it is any freak accident that the proprieter of "MarinBubble," which is the only local bubble-blog that I would rank ahead of this forum, received death threats and has since shut down.
REIC violence is one of the condition for a CRASH-CON upgrade.
I watched a little of Ben Bernanke taking questions from the House Budget Committee on Bloomsberg TV this morning. Some interesting topics were touched upon including the need for tougher guidelines in the sub-prime lending market and how alot of people are using the equity in their homes as ATM machines. But the one thing that really became annoying after awhile was the way he would not answer a question or make a statement directly. I found myself talking to the TV, "Why don't you just come right out and say it for God's sake!"
It's all spin anymore. Wikipedia's definition of "spin" includes, ".. creative presentation of facts...".
Maybe I have become too cynical, but anything I see in the media anymore I believe to be biased or an outright attempt at manipulation of public perspective. Everyone is motivated by self-interest and the truth can be something that gets in the way. I learned that when I had to deal with a used car salesmen when I bought my first car at 17 years of age. Of course Mr./Ms. Realtor "filters" the facts. I expect it. Doesn't everybody?
"I wonder if they are nothing more than used car salesmen with no more expertise on any macro factors than your garden variety chimp?"
BWAHAHAHAHAHAHAHAHAHAHHAHA
classic, just classic - and definitely expresses my feelings towards 99.9% of RE agents better than i ever could have
If you really want to see the fur fly...
Wait until the barristers get done with all the appraisers. They will take out their knives and go after them for inflating the appraisals, and failing to see how the prices were poised for an epic drop.
After that, the appraisers will be low-balling the appraisals in order to keep ahead of the curve, and to keep them out of court.
The worst kept secret in the REIC is how lenders pressure appraisers to "hit the number" or "find the value."
If an appraiser doesn't play ball, he gets blacklisted and finds out what food stamps are like.
"I wonder if they are nothing more than used car salesmen with no more expertise on any macro factors than your garden variety chimp?"
Actually, car sales have become EXTREMELY transparent. A lot of times it is harder to get a car loan than a home loan! Although dealers still inflate blue book values on used cars to get the loans bought, there is less hands in the cookie jar. I would say car salesman are much more honest than real estate salesman these days.
A friend of mine is considering selling her condo, so I spent part of yesterday meeting with her and her RE agent.
The RE agent spent a little time trying to talk her out of selling, however it was obvious to me that it was all an elaborate ruse.
In sales we call this tactic the "reverse negative sale". (see 'Sandler Sales Institute')
Just as the prospect seems like they're ready to pull the trigger you say something like "Well, John, this is a big decision - I'm not sure it's the right call."
This gives the salesperson a little bogus credibility, enough to push the prospect over into the "sale" column.
Realtors, whether they be Rain City Realtors, (or simply agents?) are just plain liars and are just doing their job.
They lie so much they actually believe the lies, so it's actually truth to them.
Its' a lot easier to lie and believe the lies than go out and find a different line of work... replete with a whole new set of lies.
The end always justifies the means in the world of commission sales. The salesman actually believes that whatever they are hawking is GOOD for the customer, so no amount sound, logical objections are going to stand in the way of the sale.
Coffee is only for closers.
It completely blows my mind that anyone considers a house salesman a "professional" with the credentials and experience to guide one through what is typically the largest and most significant financial decision made in a lifetime.
It's all so much more banal than that.. over at the RCG and other house salesman blogs, you get the sour tinge of nervous sweat in the air. It's almost palpable these days.
I can't smell 15-25 percent appreciation, but I can smell FEAR!
I keep coming back here to hopefully read some insight on the Seattle housing market. But I get a sense this blog is more about bashing agents then information about the housing market.
My question is are the fringe areas more vulnerable to the bubble then Seattle itself? Most of Seattle and Bellevue Home (not condo) prices are 500k the majority of 500k home owners have a equity (20% – 40%) in their house. 500k isn’t your typical starter home price range. That being said you have the fringe markets like Federal Way, Woodenville, Everett, Tacoma and North Bend that have more traditional first time home buyers price ranges. These are the areas I see as the scary areas way more so then Seattle. If there is a dip those with equity can wait it out no equity your upside down.
There were 27,000 home sold in King County last year that is about ½ of 1 percent of all the homes in King County.
AB,
Your questions have been answered previously. Contrary to popular belief, we do discuss more than just the real estate agents on RCG.
Do I believe that "fringe" areas are more likely to feel the side effects of the bubble? Yes. Obviously the closer to downtown Seattle you get, the more desirable the land/houses become.
Do I think that means areas in Queen Anne, Magnolia, etc, are bubble proof? No.
I think the first areas to see a major price correction will be the outer edges of King County. I can't imagine people continuing to pay 300,000+ for a dinky little starter home in Convington, commuting 1 1/2 hours into Seattle every day.
Areas that will be hit hard: The top end of the market (houses selling for over 1 million). The single bedroom condo market (WAAAY over inflated right now). Areas further away from Seattle and Redmond. Sorry, but the 1+ commute every day gets real old, real fast.
Those areas will most likely be the first to see a correction. Eventually the blood will spill onto all areas. Nothing will be immune.
the problem is the general public remains uneducated about the housing market...
I still hear about some friends trying to close on a home or how somebody just sold their car to buy a house...
biggest kicker... complaining how they got out bid...
In my book, if you can't make enough for closing or your Income doesn't meet criteria that you have to take that 300 dollar monthly car payment off your credit profile, then you're in trouble before you get the keys...
Unfortunately the uneducated get their lessons from our friendly neighborhood realtors... and it's usually a realtor who's a family friend or friend of a friend... and the person feels that they'll never be lied to...
most of the bloggers here know they won't make that mistake, but does the average joe really read these blogs? I doubt it... usually they find it after they buy their house, then they complain how they get no information that agrees with their vision...
AB,
it just amazes me how your posts are mostly complaints on how there's no info in this blog... yet you're still here...
but don't take my word for it, I'm a troll anyway...
I keep reading about people using their home as an ATM. If im reading this correct people are taking loans against their home to payoff other debts. I have done this myself but it was a fixed rate and I know many of my friends have done the same thing. Mine was to pay for some home improvements and it was a 15 year fixed rate loan. Im sure other people took arms out to lower payments. If they are already over extended isn’t it better if they have the money out at worse case 10% vs the 18 -26% they are paying on their credit card?
AB,
There are actually reports of people moving their HELOC back to credit cards, due to the increase in mortgage rates. I dunno about you, but my credit is pretty damn good, I'm not paying 18 percent interest rates on any of my credit cards.
Taking out a HELOC to consolidate debt is one thing. Taking out a HELOC to buy a new car, a plasma t.v., to have plastic surgery, etc, is another.
AB,
in an ideal world that would make sense, consolidating debt to lower interest is always smart...
the problem is the psychology... most people didn't end up 50K in credit card debt because they wanted to... it was the easy money, keeping up with the Jones's and trips to the Bahamas, etc...
Problem with equity loans is it doesn't fix the base problem...
DON'T BUY WHAT YOU CAN'T AFFORD!!!
there was an SNL skit on this that was hilarious...
so yes for a guy like you who did home improvement, cashing out is good... when somebody is in credit card debt due to groceries and bills... it's just prolonging the agony... and risking losing the house (but it was probably already lost anyway)
If you can't stand the heat, RCG just either closes the thread for comments, or deletes your posts!
I have a co-worker moving to San Diego. she is opting to hold her condo here and rent one down there. I briefly tried to tell her that she can get a great deal on a condo down there right now as they are sitting like pigeons on a wire, just waiting to get plucked at a great price and that Seattle would soon follow, but after I saw what her Real Estate agent "friend" told her I decided to keep my trap shut. Who is she gonna beleive, me the idiot who won't buy now and will be priced out forever, or her "expert" friend?
T,V & Mr.B,
That's almost too bad about your friend. It seems like if she were able to sell her condo up here now - she might still hold onto some of that recent appreciation and she could get a decent deal in San Diego. I'd seriously consider that if I were in her position.
It's funny that the California stream might be reversing course.
I personally feel a condo purchase is one of the worst decisions a person can make. It has proven to be the most volatile sector of the real estate market. 1 month you could be surrounded by other condo owners the next you are surrounded by tenants. As soon as the complex becomes an apartment like complex you are screwed.
You don’t even see the flippers playing in the condo arena.
Actually, you do see flippers playing the condo area. They are just a different kind of flipper. They will buy up a few of the condos presale, and then turn around and dump them on the MLS once the place has been built for a profit.
Hence the investment limitation at some of the SLU units. Some of the condos require people to actually live in them for over a year.
>You don’t even see the flippers playing in the condo arena.
huh? That's not even remotely correct.. speculation in condos is more rampant than SFH - especially conversions.
syn
>speculation in condos is more rampant than SFH
Absolutely disagree with you.
ChinaLawBlog - Why is Seattle "special"?
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