Wednesday, October 3, 2007

"Are we at the bottom yet?"

(I intended some comments, but didn't want the photo to wait...)

For everyone claiming the bottom is in sight, that the downturn was just about sub-prime turmoil the last couple of months, remember how we got here. Rising prices created an expectation of easy profits, which created more speculative fervor. No-down, no-doc, teaser-rate loans fueled the last push upward.

Finally the bubble stalled, from nothing left to inflate it further. Overbuilt and inner-city markets began falling. Our part of the Westside mostly plateaued on price, with a lot of impasse on overpriced inventory.

But the expectations and loan standards that got us here are gone. Our sales depend on assets, not just income and loans. But both houses sold to move up and stock prices based on an economy based heavily on housing and consumer spending become shaky too.

Will prices fall? Some owners have to sell, and will reduce prices if that's what it takes. High-end specs not selling will reduce demand for low-end tear-downs and fixers.

Last time prices fell 27%, mostly over three years from 1990 to 1994. If this year is 1990, we'll be nearing the Colorado River at the bottom of the Grand Canyon around 2011, give or take. We're only a little way down the trail.

29 comments:

NeedleBrain said...

By the comment abuse, I detect that someone is trying to close WestSide bubble down.... Amazing.

Their abuse answers the question "Are we at bottom yet?"

Obviously, "No."

Obviously, someone is feeling the bubble popping.

With regard to the Grand Canyon photo, we are only at the "looking down" stage, as in standing on Skywalk that the 1,500-member Hualapai tribe opened this year, a giant, 30-million-dollar steel-and-glass walkway over the Grand Canyon.

So we are standing here in Santa Monica on our own version of the glass bubble walkway over the Grand Canyon, and those that look down are saying, "that's a far way we have to fall."

Those Realtors, speculators, and others that keep looking up to the sky won't even notice until they hit bottom in about 18 months, after 18 months of free fall.

Ouch.

And stop the comment abuse! It's undemocratic and more than a little creepy!

Anonymous said...

Westside bubble,
Thanks for giveing us Realtors something to do all day!

Dr. JwB said...

its an anonymous cry for help if I've ever heard one.

what a chickensh/t. And not even much of a hacker . . .just someone who figured out that there is a copy function AND a paste function! Wow!

WB, if you have to moderate the comments, do so. If you have to shut the comments down, do so. But, please keep blogging.

JBR said...

Sad isn't it.

Actually, just grab the pinheaded morons ip address from your server log and post it here. We'll take care of it from there >:-)

Westside Bubble said...

Anon spammer, it takes me less time to delete you than for you to post, and I will always delete.

I'd prefer to let everyone else comment without the typing-the-letters thing, let alone the delay of waiting for me to moderate comments.

Thanks, Needlebrain, and see my additional posting.

Westside Bubble said...

Housing Panic just cited Reuters with this, consistent with what I just wrote, except I expect it'll take longer.

NEW YORK (Reuters) - U.S. housing prices may not start recovering until 2010 or 2011, according to a Barron's report that quotes bond fund manager Jeffrey Gundlach.

The report in the October 1 edition cites a Gundlach forecast that U.S. home prices may drop an average of 12 percent to 15 percent annually and not reach a trough until late 2008.

According to the report, Gundlach sees particularly sharp declines in bubble markets of California, Florida, Nevada and Arizona and areas in Michigan, Ohio and Indiana, with price drops of 30 percent to 40 percent in those areas.

jediwarrior said...

Hey Realtors. what do you care if prices fall. You just want a deal...thats how you get paid. Falling prices will mean more deals as more people can buy and pay you your bloated commission. So let it go....in fact help it get more affordable. Tell your sellers they are unrealistic and push those prices down with the same vigor that you used to drive them up.

Westside Bubble said...

With many Westside houses overpriced and not selling there's just that incentive for agents to push their clients for price reductions to find a buyer.

re king said...

"With many Westside houses overpriced and not selling there's just that incentive for agents to push their clients for price reductions to find a buyer."

But, how am I going to convince my clients to price their homes 20% below what they paid two years ago, when I was the one telling them back then prices would be up 50% by now? Won't I look like a hipocrat?

Realtor® said...

“Hey Realtors. what do you care if prices fall. You”

I wish it was the way you think. We, Realtors®, don’t set the prices but the market does (buyers and sellers). Sellers tend to think that their property is the best, in the best location and is sheltered from downward market pressures. The only ones that are realistic about it are the ones that need to sell for one reason or the other and price is not the sole motivator. If both sides don’t agree, there is no deal, we can’t push sellers or buyers do what they don’t want to do. Buyers that step up to the plate, the ones that need/want to buy now and write offers, at whatever price that may be, are able to clearly explain, justify and relay their thinking to a seller or seller’s agent, can end up making a deal at a great price in this market.

I can assure you that today’s buyers are not speculators/flippers and are buying to live in those homes. Is it smart or stupid it is not for us, Realtors®, to decide. We are not financial advisors. Our job is to provide tools to our clients that allow them to make sound decisions when it comes to their purchase, negotiate the best possible price for them and to guide them through the process. Commercial real estate is purchased based solely on current numbers or future projections, residential real estate has a thing called emotions and once emotions take over, all bets are off. It is the same like someone paying $100K, or even worse, $200 K for a car, or $500K for a piece of jewelry, etc. Are they making a sound “investment” decision, very unlikely but they do it anyway because they want to have it. Especially here in LA, where everyone is judged on appearance, many can’t afford to even rent without a roommate but they will make sure to drive a leased Mercedes or a Porsche they can’t afford. Where is the sense in that?

While I do agree that there are Realtors® who don’t belong in the industry and on occasion I have to deal with them, I am hopeful that soon they will be washed out of business. Unfortunately, few of the very seasoned Realtors®, have been spoiled by the recent market run-up, which allowed them to get away with many things and overpricing is one of them, and they became nothing more than merchants, piling up inventory and hoping for someone to walk-in and buy it. Those days are over.

What is interesting thought, the same sellers that eventually sell, become buyers, just like you, and then suddenly, there price perception takes a 180 degree turn and the house that they just sold is no longer worth what they thought it was when they were selling it.

It's a good time to buy, or sell, or both said...

"Is it smart or stupid it is not for us, Realtors®, to decide. We are not financial advisors."

So where do the "Buy now or be priced out forever" and "It's a good time to buy" mantras that at least 80% of your fellow Realtors advised between 2003-2006 fit in with your disclaimer?

"...residential real estate has a thing called emotions and once emotions take over, all bets are off."

And a Realtor would NEVER play on those emotions by threatening someone to "buy now or be priced out forever", right?

I know there are bad apples in every bunch, but when those bad apples make up at least 50% of the bunch, it might be time to throw the whole bunch away.

Anonymous said...

Could it be that the "bottom" will occur when affordability numbers get back into a sustainable range. How 'bout starting with avg home price to avg family income? Maybe something closer to reality (6.5 or so to 1) than the ridiculous (12 or higher to 1) numbers we have now. The current number simply is NOT sustainable...period.

To me (physicist by trade), the term "finanacial physics" has some meaning and sooner or later it all balances out...painfull as it may be.

Anonymous said...

Hey realtor®,

Honestly, and I'm not trying to be sarcastic here, if I were a realtor, every morning I'd wake up, kiss the ground and give thanks for the system we have that allows you people to make such a great living while bringing very little to the table. If you don't agree, see what happens as more and more previously held only by realtors information becomes available to the general public online. Real Estate sales will be a straight fee based profession within the next 5 years. You can count on it...I think. Unless The Wizard figures out a way to keep the curtains drawn while he works the controls.

Realtor said...

"Real Estate sales will be a straight fee based profession within the next 5 years. You can count on it...I think. Unless The Wizard figures out a way to keep the curtains drawn while he works the controls."

Anything else? You have the right to dream, I allow you and it is OK.

"Buy now or be priced out forever"

Wasn't that your kind of a realtor, Zip Realty, tag line and I think it read "if you don't buy through Zip Realty, you'll be priced out forever."

Maybe we should institute a wage embargo on doctors, business owners, attorneys and everyone else for that matter, what a heck, lets just extradite everyone that makes more than the average.

The bottom line is, ones that are not worthy 6-8% commission, charge 3% (Catalyst) and even give rebates to buyers (Zip Realty). And I agree with you that the ones that are not worthy to be real Realtors®, should not be paid even a penny. You, as a buyer or seller have choices, I recommend that you use them wisely. You get what you pay.

Anonymous said...

"I know there are bad apples in every bunch, but when those bad apples make up at least 50% of the bunch, it might be time to throw the whole bunch away."

Give me numbers that you can substantiate and I'll believe you.

Westside Bubble said...

The bottom line is, ones that are not worthy 6-8% commission, charge 3% (Catalyst) and even give rebates to buyers (Zip Realty). And I agree with you that the ones that are not worthy to be real Realtors®, should not be paid even a penny. You, as a buyer or seller have choices, I recommend that you use them wisely. You get what you pay.

But Realtors have an unusual pricing structure, with the seller paying the buyer's agent's commission, that reinforces the commission rate. As a seller it's not just paying what I think my agent is worth, but having to dangle a commission competitive with what the other sellers offer.

Prices multiplied eight-fold in Santa Monica over 20 years. But the commission rate dropped only from 6% to around 5%, an increase of over six times.

Anonymous said...

realtor®,

"you get what you pay"...PLEASE give me a break.

I live in 90266 where the average home price is just under 2 mill (not for long). At the "discounted" rate of 5%, that's about $100,000.00...that's right ONE HUNDRED THOUSAND DOLLARS... for the agents to split. Please tell me what any realtor brings to the table that cannot be replaced by a professional, fee based (say...$10,000 cap based on home value) service person that helps guide a buyer or seller through information available on the internet. With MLS type listings soon available on the net (court ordered, if necessary), the curtain is slowly being pulled away...

It's a good time to buy, or sell, or both said...

"Wasn't that your kind of a realtor, Zip Realty, tag line and I think it read "if you don't buy through Zip Realty, you'll be priced out forever."

No, that was virtually every real estate clerk quoted in virtually every article published between 2003 and 2006 that said that, or the slight variant "real estate never goes down", or "it's a great time to buy", or "you can always re-fi in two years" (ha ha). Yeah, you all are definitely not financial advisors, but you sure pretend you are when it comes to real estate.

my wasted minute said...

"(say...$10,000 cap based"

You're talking about regulating fees, very anti-American;-)

If that is the case, lets provide free healthcare for everyone, including realtors, ban private schools (Crossroads School in SM charges insane $26,000 per year tuition) put the cap on gas prices, ban lawsuits, put cap on ceo salaries and bonuses, and in general, institute caps on how much an employee can make based on their profession, e.g. realtor $50K, attorney $100K, software engineer $30K, Walgreens clerk $10K, increase our taxes, etc. Hey, it starts to sound like N. Korea.

I love this, ha,ha,ha;-)

Westside Bubble said...

You're talking about regulating fees, very anti-American;-)

Naw, just suggesting a competitive market for real estate services, as opposed to the NAR's co-op and MLS monopoly.

Anonymous said...

"Naw, just suggesting a competitive market for real estate services, as opposed to the NAR's co-op and MLS monopoly."

Putting caps on fees/income one can earn, it is regulating. Just let the free market take care of it.

Monopoly? Westside Bubble, you must've sucked some realtor's d..k, to be able to get that "monopolized" information.

Information is out there and it is free and there are plenty of "for fee" brokers such as zip, help-u-sell, catalyst, and many others that will get your listing in to mls for as low as $125.00, so you can sell it as FSBO. I just don't get it, what are you complaining about?

Broker's fees are NOT written in stone and it is actually written on a listing agreement in BOLD, that fees are negotiable.

So NEGOTIATE and don't complain. If you're a pussy and can't negotiate, hire a good Realtor® who'll do it for you for 3% as you buyer's agent.

Anonymous said...

The problem with the current commission system is that both agents work for the seller. Period. Both agents have a vested interest in keeping prices as high as possible. And to be blunt agents simply don't bring much value to most transactions. A $50k commission is utterly ludicrous by any conceivable angle.

Agents also have a vested interest in only showing properties that are part of the NAR virtual monopoly for the same reason. Why compete with yourself by showing a buyer a FSBO or an independently listed property with a lower commission?

The answer is that the informed buyer will be doing this research himself - thereby negating much of the utility of an agent in the first place. If I have to do the research to make sure I know what's available beyond what an agent will offer up from their own MLS search then frankly I have little reason to use an agent altogether.

Ultimately real estate will shift largely to flat fee Internet services and most agents will be out of work. Maybe not five years, but it will happen.

Most agents simply don't add value to a transaction, and there is no logical reason to tie compensation to the value of the transaction because the "work" is the same whether the house costs $1 million or $100k.

The profession is a joke (and yes, I recognize there are "good" agents out there).

Anonymous said...

"The answer is that the informed buyer will be doing this research himself - thereby negating "

Just do it! No one is stopping you or telling you that you can't! If you can, go for it! This is what it is all about -- all of the options are available to you. Instead, all I read is bitching and moaning. Enough already. Don't you have any brain at all to really comprehend what the previous post said?

Let me reiterate it to you, moron - Monopoly? Westside Bubble, you must've sucked some realtor's d..k, to be able to get that "monopolized" information.

Information is out there and it is free and there are plenty of "for fee" brokers such as zip, help-u-sell, catalyst, and many others that will get your listing in to mls for as low as $125.00, so you can sell it as FSBO. I just don't get it, what are you complaining about?

What is your PROBLRM?????????? Get a clue already, DO NOT USE REALTOR ®, just go FSBO and if you're a buyer, go and find that house you want to buy on your own, offer what you want to pay and negotiate your deal, no realtor needed.

If I, a Realtor (r) have the product, and you a buyer want to buy it from me, I, a realtor dictate the rules, which are basically the rules that seller wants me to implement!

If you go to a Mercedes dealership and see the car you want, you have an option to buy it from them, on the terms you negotiate, to find similar car on your own or go to Germany and import it yourself.

Simple as that!!!!!!!!!!!! All I can say, that we, REALTORS® are here to stay, either you like it or not!

PS. I would never take an idiot like you as my client – you would waste everyone’s time, including yours and end up never buying anyway. I had a pleasure on many occasions telling “buyers” like you to take a hike. It is very easy to spot your kind :-)

Anonymous said...

"Ultimately real estate will shift largely to flat fee Internet services and most agents will be out of "

Yeh, that is exactly what they said about stock brokers, travel industry, car sales, groceries, etc. Internet is going to make the products for free. Also, with that house that you order, you'll be able to get your pizza (thin or thick crust) via the internet, that is if you have a broad band connection. And you'll be living forever in a virtual reality.

Anonymous said...

Amen.

Westside Bubble said...

What makes the Realtors' system different is the seller contracting to pay the buyer's agent's commission. Where else does such a practice exist?

The seller has no interest in doing that, but the way the system is set up, what buyer's agent would show a house without it? That's the monopoly.

And the buyer, although providing the funds for the commissions, has no say in their amount. The buyer's remedy is becoming commission rebates, however.

BTW, Anon, the style of your rants doesn't exactly demonstrate the professionalism I'd seek in an agent.

Anonymous said...

"PS. I would never take an idiot like you as my client – you would waste everyone’s time, including yours and end up never buying anyway. I had a pleasure on many occasions telling “buyers” like you to take a hike. It is very easy to spot your kind :-)"

I saw a mockumentary over the weekend called "Closing Escrow" that I would recommend everyone watch. Just like the above real estate clerk comment, the movie shows exactly who the real estate clerks work for- themselves.

Anonymous said...

"Don't you have any brain at all to really comprehend what the previous post said? Let me reiterate it to you, moron"

Insults are always the last resort of those whose arguments fail to conform to fact or logic. Your entire screed is a pointless rant that seeks to defend an arbitrary gatekeeper system. I notice not once among the insults are you able to demonstrate what VALUE an agent brings to the table, nor have you addressed the question of why agent compensation should be pegged to a percentage of the sales price since the work doesn't scale in tandem, nor have you addressed the pitiful fact that both agents work for the seller and have a vested interest in keeping prices high rather.

"All I can say, that we, REALTORS® are here to stay, either you like it or not!"

You really aren't. And with the professionalism you exhibited in this thread, you don't really deserve to, either. Agents will exist in the very high end, but as with the travel business the vast bulk of you will be replaced by Internet script.

Good riddance.

Anonymous said...

"I saw a mockumentary over the weekend called "Closing Escrow" that I would recommend everyone watch. Just like the above real estate clerk comment, the movie shows exactly who the real estate clerks work for- themselves."

Yes, and their fear is growing palpable. It's hilarious!