Today’s really, really bad call harkens back to November 2006:

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Well, they were half right.

When that NAR ad campaign came out exactly two years ago, it was a pretty damned good time to sell a home.

Buying one ?

Not so much . . .

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Previously:
It’s a great time to buy or sell a home! (November 3 2006)

http://www.ritholtz.com/blog/2006/11/its-a-great-time-to-buy-or-sell-a-home/

Analyzing why “It’s a great time to buy or sell a home!” (November 4, 2006)

http://www.ritholtz.com/blog/2006/11/analyzing-why-its-a-great-time-to-buy-or-sell-a-home/

Category: Markets, Psychology, Real Estate, Really, really bad calls

Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data and lack of respect for scientific knowledge. Be sure to create straw men and argue against things I have neither said nor implied. If you could repeat previously discredited memes or steer the conversation into irrelevant, off topic discussions, it would be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.

15 Responses to “Follow Up: “It’s a great time to buy or sell a home!”

  1. joej says:

    Hindsight is 20/20, but I still feel as though purchasing my first home in a suburb of New York in June of 2006 for what was 5-7% higher than current comps was a good move. The way I see it, at least we didn’t plow the down payment into our IRAs, Qualified plans and brokerage accounts only to watch it go down 25+% all the while still renting. Obviously each individual situation is different, but as a late 20′s early-career professional, I think purchasing our home(30 yr Fixed with 30% down) was the best investment my wife and I could make over the next 10+ years….at least I hope so.

    ~~~

    BR: Ahhh, but as the links show, this was contemporaneous — not hindsight!

  2. NiNM says:

    They are still saying it’s a great time to buy or sell a home. It’s the only line the NAR has.

    @joej

    You are paying interest and taxes as if your property was still valued at 100% its value. That must be unpleasant.

    If you lose 25% in the stock market you still have the cold comfort of being able to use your capital losses to reduce taxes.

  3. SteveC says:

    In the end, I think the Fed will try to inflate the economy to get household income up to 1/3 current house costs, not have housing fall to current income levels. That means higher wages but higher costs for raw materials, energy, and everything else. Otherwise, the losses for banks are going to be astronomical, on top of the gigantic losses they’ve already taken.

  4. They are still saying it’s a great time to buy or sell a home. It’s the only line the NAR has.

    “It is difficult to get a man to understand something when his job depends on _not_ understanding it.”
    - Upton Sinclair

    “It’s always a great time to give us money!”
    - NAR

  5. more comtemporaneously,

    They, the NAR, are now on the radio with ads talking up the ‘fabulous’ opportunities in CRE~ solid strength, long-term growth potential, and on y on.

    http://www.thefreedictionary.com/contemporaneous

    KN,

    would you think that this: “It is difficult to get a man to understand something when his job depends on _not_ understanding it.”
    - Upton Sinclair

    would make a good “Big Picture” T-shirt? quote on the back, logo on the sleeve..

  6. c kincaid says:

    houses are not stocks, two homes built side by side are not the same. owners can maintain them differently, improve them differently, etc. comparing houses by SF or number of bedrooms doesn’t work either. my house overlooking the ocean in Shell Beach, CA is not the same as a luxury home in Des Moines, IA or Bakersfield, CA with all of the same descriptions. I bought my house in May 2006 and it’s worth more today than when I purchased it by several evaluations.

  7. drtomaso says:

    Houses are not stocks, but much like stocks, they are only worth what someone else is willing (and able- consider how difficult it is to secure lending today compared to last year) to pay for them. Appraisals, for the very reasons you list, are only estimates. I couldnt speculate as to how long such evaluations stay accurate in todays market.

    The NAR has one goal- to increase the pace of sales, and get commissions flowing to its members. For that to happen, someone has to buy. They don’t care if its actually a good thing for those buyers or not.

  8. would make a good “Big Picture” T-shirt? quote on the back, logo on the sleeve..

    That’s a good one, I’m also a fan of Heinlein’s TANSTAAFL (“There Ain’t No Such Thing As A Free Lunch”), but that might be a bit too libertarian for folks ;)

    And don’t get me started on Mencken or Bierce..

    (ok… “The most costly of all follies is to believe passionately in the palpably not true. It is the chief occupation of mankind.” .. “Every normal man must be tempted at times to spit upon his hands, hoist the black flag, and begin slitting throats.”..)

  9. drtomaso says:

    “Hindsight is 20/20, but I still feel as though purchasing my first home in a suburb of New York in June of 2006 for what was 5-7% higher than current comps was a good move. The way I see it, at least we didn’t plow the down payment into our IRAs, Qualified plans and brokerage accounts only to watch it go down 25+% all the while still renting.”

    This is a major pet peeve of mine, and it may not be applicable to you per se, but my experience with these “happy owner vs bitter renter” discussions is that the happy owner always forgets the leverage, cost of ownership and taxes, etc.

    Lets do the math. Assume a down payment of 20% and a loss of 5%. Whats your ROI? -25%!

    500k @20% = 100k Downpayment
    500k@5% loss = -25k

    Throw in taxes, upkeep, condo fees (if applicable) and insurance, and you were still better off parking that money in your 401k.

  10. KN,

    re: ol’ H.L., he was cantankerous sort, truly, an equal opportunity deflator of bubbles, anywhere found.
    if only our beloved hedgistas matriculated at schools that weren’t afraid of him, they might have found this nugget: “Moral certainty is always a sign of cultural inferiority. The more uncivilized the man, the surer he is that he knows precisely what is right and what is wrong. All human progress, even in morals, has been the work of men who have doubted the current moral values, not of men who have whooped them up and tried to enforce them. The truly civilized man is always skeptical and tolerant, in this field as in all others. His culture is based on “I am not too sure.”"–for the budding Mandelbrot in us all.

    but, then, of course, that presupposes that they were, merely, excercising their ‘animal spirits’…
    ~
    also, thanks for the reminder of yon’ Ambrose, I haven’t thought about him in awhile..
    http://www.biercephile.com/

  11. EdMiller says:

    I wanted to echo what SteveC mentioned above, and I’ve personally been dying to ask Barry his opinion on that matter. Is the better approach to lower home prices, or raise incomes? Since real incomes have stagnated for the past 6-8 years, it seems as though companies need to start “redistributing their earnings” to balance it out a bit. Incomes should rise as home prices fall, and they meet somewhere along the way.

    I realize how selfish is it to ask for Barry’s attention to -my- question, but I hope he will.

  12. philipat says:

    In a Global economy, even Uncle Sam can’t stand in the way of asset deflation. It’s going to happen irrespective, for the reasons BR outlined. If I were a US taxpayer, I would be almightily pi**ed off if irresponsible lending AND borrowing gets rewarded by the Guvmint as other responsible borrowers sit on a 30-year fixed with negative equity. Why not just walk away? Same sensiment if BAnks who have taken Paulson’s money just to shore up balance sheets without lending and then pay huge bonuses to the same folks who got us in this mess in the first place? I suppose the feeling is that, never mind, we can always go back for more when the bonus payments deplete capital again. The United Socialist Republic confuses the hell out of me.
    Incomes will NOT increase in the USR until Corporations also begin to understand that shipping all the manufacturing jobs to the third world needs balance. US Corporates have the highest profit margins ever, but of course the US consumer can’t buy because there are no jobs!

    Some re-engineering is definitely required BUT let’s not create even more problems in the process.

  13. philipat says:

    Sorry but in a global economy, even Uncle Sam can’t stop the tide of asset deflation. Let’s not compound the problem further.
    If I were a US tapayer, I would be almightily pi**ed of the Guvmint starts bailing out irresponsible BORROWERS. If I were sitting on a 30-year fixed mortgage with negative equity, I’d be tempted to stop being responsible and just walk away and take advantage of the largesse. Does this mean, then, that Guvmint will bail out every single mortgage in the country?

    On the other side of this arguement, real wages in the US will not inrease until the MNC’s start to understand that it is not in their own self-interest to continue shipping jobs to the third world. Thye may have the best damned profit margins in history but of of course there are no buyers because there are no jobs.

    Some re-engineering is clearly necessary but let’s not create additional Moral Hazards and longer-term problems in the process.

  14. brainstewn says:

    I’m not ready for America to fail, please medicate us by printing more money and redistributing the wealth so we can have another bubble and prices that are not congruent to our median incomes. I need more time to file bankruptcy on my creditors or to solicit government for a personal bailout because of my bad decisions. I need more time to save money and prepare for the imminent depression.

    All joking aside, Wall Street thought they were in Vegas and is hoping that, what goes on in Vegas stays in Vegas. In the game called Craps when you place your bet on the “Don’t Pass” line you are betting against the player. Betting on don’t pass is often called “playing the dark side,” and it is considered by some Craps players to be in poor taste, or even taboo, because it goes directly against conventional play. Wall Street has some extraordinary bets on the Don’t Pass line with an investment scheme known as Credit Default Swaps (CDS.)

    Bad Mortgages are a smoke screen, a mere drop in the bucket; they are not the cause of this debacle. It’s the unregulated bets, amounting to 62-Trillion dollars, that Wall Street has made using Credit Default Swaps. Ironically Wall Street is asking us to buy an active bet that will eventually expire or play out. When CDS’s expire the only loser is the player (Wall Street) not main street. Failure, like a common cold, cleans out the system.

    Incomes don’t need to go up, prices need to come down. America needs to return to saving for something. I’m a real estate broker in Utah and laugh at the NAR statistics and campaigns. The NAR is making us look worse with their false advertising. I’ve told all my clients if you don’t have to buy, DON’T, until 2010.

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