Mark Hanson:

I make calls to Realtors, mortgage loan officers, builders, housing investors, and various individuals actively involved in the house and mortgage markets every day. I think their street level perception and anecdotes are extremely valuable to housing and mortgage sector research. When talking to these folks I think asking the right questions is paramount.

In the month of March — taken from over 100 calls — below are the most common responses to questions surrounding this housing market, sense of urgency to sell or buy, why they think ‘now’ is a good time, why time it’s different, etc.

Not only are many responses extremely similar to what I was being told going into the 2010 during the tax-credit period but statements like these are too ‘matter of fact’, completely wrong in many cases, urgent, and reek of herd mentality. All of which generally do not generally precede “durability”.

Most frequent comments or sales quotes by:

Realtors and Loan Officers:

• “Rates are at record lows and have to go higher from here.”
• “House prices are at decade lows and are forecasted to rise this year.”
• “Mortgage loans are getting tighter. FHA is doing away with low down payments and almost doubling their up front insurance fee”
• “Affordability is at record highs” (at least to those that don’t already own a house they can’t sell and with the down payment, credit history and job needed for a mortgage loan).
• “Investors are snapping up all the foreclosures and short sales and there are no more coming.”
• “Warren Buffet wants to buy 200,000 houses”
• “You have to buy now or get left out.”


• “Foreclosures are going away.”
• “House prices are at their lows and are forecasted to rise this year”
• “The gov’t is going to give large investors bulk REO.”
• “We have to buy now or we will be left out.”
• “We hear Warren Buffet is buying 200,000 houses”
• “We can live with lower cap rates because of the appreciation we are going to get over the next 5-years.”

First time buyers:

• “Rates are at record lows.”
• “House prices are at their lows.”
• “Our Realtor and loan officer say that investors are snapping up all the low priced houses and we will get left out.”
• “Who’s this Warren guy everybody is saying will price us out of the market?”
• “Mortgage loans are going to get tighter making it much more expensive to buy (than zero down now)”.

Repeat buyers:

• “I would love to take advantage of these low rates and house prices and finally move but nobody will buy my house for what it’s really worth (obviously, for most their house is the best on the block and it should be “worth” what it takes to pay off the first and second mortgage, pay a Realtor 6% and provide cash to put down on a new house).
• “We don’t qualify for a new loan given how “tight” the banks are with respect to credit and cash down.”
• “We have reached out to our servicer who said we have to be in default to get a modification.”
• “Our servicer would consider a short sale but we may not qualify and are concerned about ruining our credit.”
• “Screw Warren Buffet, he wants to raise our taxes”
• “What do you know about the banks doing principal balance reductions for everybody from the $25 billion settlement?”


• “This time it’s different.”
• “We are really in recovery. All of our data tells us so.”
• “Also, Mark Zandi said so.”

Wall St Analysts:

• “The economy is expanding, jobs are growing and household formation will drive demand for years.”
• “Inventory is low, affordability is a record highs.”
• “Foreclosures are going away, and builders will have to bridge the gap.”
• “This will lead to 1.5 million housing starts in two years.”
• “House prices will increase 3% to 5% per year forever.”

Mark Hanson:

• “The Fed jimmy’s rates down to the unsustainable level of under 4% in Q3’11 through the Twist ops announcement.”
• “Liquidity (once again) rushes back into the financial and mortgage markets.”
• “The ECB starts printing and then goes vertical with LTRO. The world is awash in liquidity. Junk assets rotate in heavy favor.”
• “This is married with record low house prices and virtually no precipitation or snowfall in major metropolitan regions throughout the nation.”
• “FHA telegraphs big changes coming in Q2 that will result in a much greater cost beginning April 1 than the zero to buy a house prior.”
• “Banks and mortgage servicers continue to avoid foreclosures at all costs on the back of heavy government regulations, new government can-kicking programs, and cycle high loss severities, reducing distressed supply.
• “The gov’t then releases a half dozen “new and improved” mortgage mod type programs that results in ready sellers, short-sellers, and strategic defaulters not carrying through with plans to sell or defaults, rather apply for a government hand-out reducing supply even further”
• “Warren Buffett gives housing a “strong buy” for the third-year running”.
• “Lastly, headlines are filled with gov’t bulk REO-to-rental schemes aimed at institutional investors that lights a fire under private investors looking to front-run them.”

Bottom line, viola’! The perfect storm of increased demand meets decreased supply. Unfortunately, all of this is either unsustainable or transitory and will end just like the homebuyer tax-credit of 2009/10.

Of my seven “perfect storm” items I list above, SIX are government induced. Only the “weather” phenomenon is not. I can’t give much durable economic weighting or benefit while forecasting to conditions created by the government or Mother Nature.

Category: Psychology, Real Estate

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.

22 Responses to “Mark Hanson: Most Common Things I Hear on Housing”

  1. RW says:

    Anecdotes from the field are very useful but the problem with the conclusion is that none of the “perfect storm” phenomenon are simply government: The SIX “induced” phenomenon are government responding to demand from powerful actors as a consequence of market failures (often caused by those self-same actors).

    The “government did it” meme needs to go away: It is inaccurate, a distraction from consequential analysis, and frankly tendentious; the problem is the levers of government have been captured by private interests who are doing what private interests do, maximizing their own profit while covering their own a$$es.

  2. louis says:

    “You have to buy now or get left out.”

  3. Bob A says:

    A lot of people are just tired of waiting and think the risks have come down to a level where they’re ready to move forward.

  4. whskyjack says:

    All housing is local, even down to zip code and in some cases block.
    The investors I’ve talked to (mom and pop rental operators) say this looks like a good time to expand
    As a mom and pop myself I agree.
    But, I backed away from a good opportunity the other day because of the risk I would have to hold the property and tie up money I may need elsewhere. Because it didn’t fit my model of a good rental, renting instead of selling wasn’t a good escape option.
    In my personal opinion any investor in real estate making such comments as above is a fool and soon to lose his money.


  5. MayorQuimby says:

    There will be no sustainable recovery in housing for a decade or more.

  6. Petey Wheatstraw says:


    In mid 2006, I addressed kick-off meeting of, RRE & CRE/Retail/Office developers and builders who had planned a large scale mixed-use project along the Dulles corridor in Northern Virginia. The meeting was attended by the principals and officers of several privately-owned/financed and publicly-traded companies, along with some of their management, planning and marketing personnel and consultants. At that time, despite my (privately) repeated warnings of a sustained downturn to some of those present (who countered that we had “hit a bump in the road — and cited employment projections as their basis for differing), I forecast a housing/commercial RE slump of at least 12 years. I was not the most popular guy in the room.

    While the RE market has held up comparably well in this region, the project has been developed (infrastructure, primarily), but the original concept has been scaled waaaaay back. IMO, Those moving forward with construction will regret that decision (although some had to proceed due to financial obligations entered into prior to the bust).

    I agree with your assessment that at this point, we’re still a decade out. Maybe even further.

  7. If you have a long timeline and can find a property you like why wouldn’t you invest in it today? I’ve seen a lot of clients buy a better house and hold onto their current one as a rental. Locked at 4% for thirty years it seems like a reasonable choice. Especially when you look at the uncertainty coming down the pipe with tax reform and the bond market from here out. Or are you just going to slowly melt away in cash. He who has the crystal ball please let us know.

  8. Through the Looking Glass says:

    Once again herein lies all the problems. One guy lies to it, another swears to it a 3rd believes and it becomes then a well known fact. Its all turd polish so try and teach your kids the difference between Shat and Shinola.

    Actually I think they the next generations know how the oligarchy disrespects the rest of the world. I just read and article by a Harvard grad who was being courted by Goldman Sachs and others and he said “no way,” I want to improve the world we live in and make something. Wall street makes nothing and just moves paper around and doesn’t contribute anything “

  9. sbcharo says:


    Very well said. A factual understanding of how we got to this point, and how government and business function (or better yet, how business and government create dysfunction) is necessary if we have any hope of changing this dysfunction. The language we use to describe the situation is of course incredibly important.

  10. “…He who has the crystal ball please let us know…”


    with..”…Locked at 4% for thirty years it seems like a reasonable choice…”

    One needn’t a ‘Crystal Ball’ to understand that that ‘observation’ misses, at least, 2/3rds of the ‘Equation’..

    Home Owership isn’t, merely, ~ Principal + Interest..

    add in Taxes, Insurance, Maintenance, and Energy, at the min., to get a ‘fuller Picture’..

    Total Negative Annuity ~ P+I+T+I+M+E

    and, from this Phase, it’ll, most likely, not be Peach(-y)..

  11. DSS10 says:

    “Rates are at record lows and have to go higher from here.”
    “House prices are at decade lows and are forecasted to rise this year.”

    And there will continue to be flat or declining income growth for the near future so one of the two statements above is false and I’m betting it’s the secound. Banks are not going to loosen up on lending standards. Fannie Mai is backing off on risk insurance so the only part of the market that can take the hit is the existing home owner. I say flat prices for the next 5 years (when it will get frothey again).

  12. bulfinch says:

    “In my personal opinion any investor in real estate making such comments as above is a fool and soon to lose his money.”

    Nobody “invests” in residential real estate — it’s just plain old speculation.

  13. theexpertisin says:

    I have to laugh at many instant expert landlords buying cheap foreclosures.

    We’ll see many of these homes back on the market in relatively short order . Poor tenant selection, late or nonpayment of rent, eviction processes, trashing of the home (the larger the rental home, the more likelihood it will be trashed), utility bills that are not paid, repairs and renovation at retail cost, etc., and then reliving the nightmare again and again, guaranteees an investment from hell.

    Most novices that enter this business without a plan over and above buying a house and collecting rent. They possess limited people skills and only know about pricing repairs through watching rehab shows on cable. Failure is the only option. Seasoned property investors with skills developed over many years will pick up the properties of these rookies at even more advantageous prices and terms, while the frustrated and bitter pseudo-landlords curse those responsible for encouraging them to become landlords in the first place.

    Hot shot, inexperienced real estate investors, like hot shot inexperienced stock traders, are outed in a hurry.

  14. NMR says:

    whskyjack Says:

    April 5th, 2012 at 9:50 pm
    All housing is local, even down to zip code and in some cases block.

    Absolutely true. The amount of generalising (including Hanson’s) about the RE market is bizarre.

  15. louis says:

    The guy buying a second home is going to be the winner. As soon as he stops paying on the first.

  16. gordo365 says:

    Loans at record low = headwind for price appreciation.
    Loan standards returning to “normal” = headwind.

    IF you can rent with model that includes adequate positive cashflow, and have means to manage tenants and repairs – then it may work.

    Does anyone have data to suggest that we have too many or not enough overall housing units in US? Retiring baby boomers, % people living alone, # vacation/2nd homes etc?

  17. DrungoHazewood says:

    I was talking to my dentist, which is probably not a good idea, when he asked me what I do. When I told him I was in RE rentals, he said he had bought a house before he sold his old one. I thought ‘I’ve know what’s coming. Heard this a million times’. He couldn’t sell his old house for what he wanted and was now a landlord. Bingo! Luckily he rented to a Korean exec at the local car plant and they were paying big money and taking good care of his house. Dodged that bullet for now. Now just a few more to go.

    Tenant selection is all important and I suck at it. Most people find it impossible, and if your location sucks or your property is not top notch, you’d better be really be good. After 15 years, I was still not very good. My partner was a top salesperson for ODP, and it took her 10 years before she got really good at judging tenants and closing leases. Close it! Her superior tenant selection and salesmanship has really saved me. So now I just have to mow the grass and plant a few flowers. And occasionally shopvac turds at 3AM. And like theexpertisin said-all the expenses. Installation and maintenance of heat pumps has skyrocketed with the R410 systems. A $1500 R22 job is now a $4500 R410 job. You have to have a team of reliable service people and be sure not to piss them off. I accepted a bid on a heat pump installation lower than the one by my regular HVAC guy. Bye, bye. Wouldn’t take my calls after that. So I was stuck with the low bid jackleg for a few years. And you have to be able to do a lot of things yourself. At least basic plumbing, wiring, landscaping and carpentry. Or the expenses will eat you up! And a good painter: good painting is a lot more time consuming and difficult than most people think. Even using a roller is difficult. I have a great cheap painter I’ve known for decades, but a lot of them drink too much. Luckily he drinks at night, never on the job, and doesn’t show up all hungover. Painting is really expensive, and if you pay full freight for everything, you’ll never make it in a million years. You have to get people that do good work and do it fast work. And you run into all kinds of characters. My carpenter is really good, but I can’t understand a word he says. He talks fast and mumbles. And he freaks me out by eyeballing a lot of stuff. But somehow his work is fast and turns out beautifully. I have no idea how. And taxes have gone up 50% since ’00, and insurance too. The taxes leveled off the last few years, but will soon resume their climb. I found an insurance bill from 1967 and it was $48 for a year. Insurance on the same property is now $1200. The rent has gone from $100 to $800. A lot of rookies landlords will start out buying for too much and get hammered from there on the expenses.

    We rarely get late payments, except for a few at Xmas, but it took about 10 years to learn how to avoid all the pitfalls involved in rent collection and how to message people the right way. Before that I had a ton of lates, and some would argue with me. I don’t want the late fees: I want the rent on time so I don’t have to earn it 3 times over. Now I get people including the late fees in their checks without me having to remind them. People think you sit back and a river of money flows in. You don’t have enough time to make all the possible mistakes, and learn the proper lessons from them. We got good after 20 years, and that was with a lot of help. And there are a lot more quality renters around. People still have property priced too high, and its all about what you pay for something. I am negotiating with a guy that’s getting washed out right now, but he still wants too much. Maybe someone swoops in and takes the deal, but I’ve overpaid for stuff before, and you’re finished before you even begin. I’ve let several sweet properties go because they were still too expensive. I bought lots of stuff in the 80′s and 90′s, but nothing since ’98. Then there’s when to sell. We sold some things for insane prices in ’06, but we should have sold everything. My partner said, “what are we going to do? Sit on the beach” Hell yeah, but no go! So the best I could do was sell her part of my share. What a journey, and I still have 10-15 years to go.

  18. maspablo says:

    what I never understand is , the thought that buying assets (mortgaged assets specifically) when interest% rates are low, are a smart investment ?
    ( yes, of course u must do something to protect your $ from inflation , BUT many other assets , specifically less mortgaged investments would be more attractive!)

    Dont mortgaged assets , almost always drop in value when % rates rise ?? basically from 1980-2005 we can see causal evidence that mortgage interest rates dropped and inversely home prices rose . So if the opposite occurs , which seems to me , % rates have no where to go but up , this will be a drag on home prices.

    I , feel like if/when mortgage rates are 8% or even higher again its going tremendously affect housing values.

    am i missing something ? thoughts? please , i never understand this , in my mind I wanna buy a house when % rates are high, not when they are low ???

    to me , if I could go back to 1980 with a couple 100k$ , or have cash in the future when % rates are high , i’ll be getting good buys!

    that being said , people have to live somewheres , and i think lower end investment properties, and rental units are and will fare better , but that is a totally different market .

  19. myold41 says:

    40 yrs. as a carpenter, plumber, builder, developer and speculator in residential housing and raw land, have taught me a couple of things. Inexperienced buyers/sellers of houses always buy what THEY like or would like to live in, almost always in error from an investment standpoint, and buyers who intend to become landlords are nearly always regretting things within a couple of turnovers of tenants. Being a landlord can cause you to need to behave toward your tenants in most distasteful ways, but if you don’t, it cost you dearly. The true cost of owning a rental is ALWAYS underestimated by the inexperienced and that’s without having to get the judge and the sheriff to help get a squatter tenant to leave. I have a very downbeat view going forward, that in 10 years, college educated young couples will still not be able to afford a home like the one they grew up living in with their parents. Think we hit the bottom, look over some of BR’s recent chart porn on the real shadow inventory. Try not to heave on the carpet. Best to all who pass by here.

  20. AlexM says:

    Location, location, location once was the gold standard for good home selection. Now you must add condition, condition, condition to that standard as anything that is not perfect sits while the perfect homes that are perfectly located (no busy streets, no bad corners, close to great schools and shops) sell quickly, but at a huge discount, of course.

    We are not only in a buyer’s market, we are in a market where if the buyer doesn’t perceive that he is getting a 30-50% off the new and much lower listing prices, he throws a tantrum. People with money are picking up some incredible bargains in my upscale suburb, so there are sales being transacted but at prices that have no basis in reality some times. Homes are selling way below replacement cost and lot values and assessments. People are finding that comps are totally useless as they are all over the map and a house is only worth what someone is willing to pay for it. Comps be damned! It is not wrong to say that prices have collapsed on some homes, especially the older homes that need renovation. Some are being sold so low that they are back to prices of 15-20 years ago.

    Where is the bottom? Probably it is close in some areas of the country, but not everywhere. We can use the Great Depression as an precedent, a great deal of real estate did not surpass their initial prices until the late 40′s and early 50′s when the soldiers came home from WWII. It could be another 10 years before there is a real uptick in demand as today’s young people are too strapped from student loans, and don’t earn enough from their McJobs to buy a house, even at greatly reduced prices.

  21. theexpertisin says:


    An excellent introduction to landlording. Everything you mentioned about the business is 100% spot on.

    I hope folks who you post have a better understanding of the landlord business, and the art it truly is.

  22. victor says:

    All that being said, including how it sucks to be a landlord, are there any opportunities in REIT’s?