Tuesday, February 12, 2008

That Sentimental Feeling

With Valentine’s Day fast approaching, I thought it would be a good excuse to discuss buyer sentiment (and my latest conspiracy theory…see note at bottom).

There are many in the RE industry that mistakenly believe they merely have a PR problem on their hands (and not a speculative bubble). In other words, some have been quoted saying that the negative press has soured buyer sentiment. They have theorized that their problems would be solved if the media would just be a little more upbeat about things (and many have written positive spin pieces with that in mind….I find the latest NAR campaign absolutely nauseating).

If you are buying a home to live in, as opposed to an investment, is sentiment really driving your purchase? Back in the “priced out forever days” I can see how sentiment was a factor. But now that the market has cooled and prices have dropped a bit, the artificial sense of urgency has evaporated.

Ironically, now that there are plenty of homes in my price range, I feel even more compelled to wait, since I am assured that something reasonable is out there if I needed to purchase immediately (as opposed to last year at this time when there were only a handful of homes at or below my range).

I think sentiment comes into play in the decision to look or list a home. But sentiment will not save this market because it cannot actually purchase a home. Without access to piggyback, no-doc, ARM, or interest only loans, the spirit may be willing, but the financing gods may not be (although there does seem to be a lot of anecdotal stories to the contrary). And who actually has 20% down these days unless they have come from the Bay Area?

For the financially disciplined who actually have the 20% and the access to credit, their hearts and minds are not as likely to be swayed by NAR ad campaigns and Realtor spin.

A campaign to win back buyer sentiment?
So over the last 3-4 months I have started to wonder if members of the REIC (especially NAR operatives) have been posting on some of the RE blogs in an attempt to try and turn around buyer sentiment. While this might sound a bit far fetched, I think it would be a perfectly logical action to take if someone thought they had a buyer sentiment problem.

BT on conspiracy theories
I happen to love conspiracy theories. For instance I am still holding out hope that we will find out who really killed JFK and why, since very few can resist a death bed confession/memoire. The mastermind behind it should be getting up there in years right about now.

31 comments:

Patient Renter said...

"some have been quoted saying that the negative press has soured buyer sentiment. They have theorized that their problems would be solved if the media would just be a little more upbeat about things"

Yea, I actually had a close relative recently tell me that she shared this opinion. It doesn't fly though. Remember how hard the NAR was working to float the bubble as long as possible? They were allowed to spread their misinformation every day in nearly every media outlet across the country. This clearly kept sentiment positive longer than it should have, but the bubble still burst just the same. Some things are just more powerful than sentiment.

BTW: I drove by Blackstone on the way back from Kirkwood the other day. The houses look ok, but my god those are the ugliest colors I've ever seen. Every shade of dirt is represented, and even some mud.

Jacob said...

This boom collapsed under its own weight. Nothing external to housing caused housing to collapse.

All anyone needed to do was make a chart in Excel and add a trendline to see where prices were going and realize what would eventually happen.

I do agree with the buyer sentiment though. I see a couple nice homes in roseville/lincoln under 300k now, one was 235k which is the lowest I have seen for my settings which are 4/2 2000ft2. In 2004 or 2005 I probably would have jumped at one of these. Now, not so much.

Prices are coming down, there is no rush for me, so why not wait.

And if (god forbid) banks start lender money only to people that will pay it back (gasp) then how many people qualify, like 5%?

Another thing is there are a lot of entry level homes that I should buy, stay in for a few years, then eventually sell and move up. But now I want something better and since I figure I would have to sell at a loss anyway, might as well rent and get that move up home directly.

If a lot of people do that then you will have a lot of homes that will see huge price declines, because they are run down dumps that noone even wants to flip anymore.

Husmanen said...

Jacob...

Excellent point(s), you hit the nail on the head here. We too are excited that so many homes fit our criteria and our streched budget. Then we start to think, why should we stretch so much, wait a little for the prices to come down more and enjoy life now. The element of stress and 'artifically created scarcity' is gone.

Paul said...

Trolls posting on the blogs? Please say it isn't true!

An agent told me just the other day that prices are headed up in the second 1/2 of 2008, so I should hurry up and buy now. Sadly, I think this above average intelligent person believed it.

Blackstone: This is on Latrobe Road, right? Someone is building what appear to be new models, south of the existing homes, up the hill (third street on the left, past the sewer treatment plant). I saw it out of the corner of my eye as I drove Latrobe Rd on Sunday. Kinda surprised me that some other builder thought we needed more inventory!

Observant One said...

As far as conspiracy theories, I'll venture that most people posting on RE blogs are doing so in a manner reflecting their bias (whether they realize it or not) as a consequence of their particular self-interest concerning RE. From what I've read, I'll venture further that the vast majority are potential buyers who are monitoring and/or cheerleading the price declines that have occurred as they make preparations to purchase. I'm sure there also are some sellers who are monitoring and supporting their self-interests, as well.

From what I've seen, most of the rabid-dog cheerleading/exhortation comes from those who I anticipate are potential buyers undertaking to fan the flames of the decline. I don't see much vitriol from the other side of things. Regardless, it's always good to keep things in perspective in the medium of the RE blogs.

coffee is for closers said...

Blackstone is nothing special.Seems the only thing that keeps land valuable is the bullshit regulations to build in that area.Who's ass do you have to kiss to get a building permit? Restrict the supply and what do you get?People would have a shit fit if they actually opened up some more land fore development.You would have every rich bitch down at city hall afraid of their property values dropping.We have a corrupt system my friends, especially placer and eldorado counties.

Patient Renter said...

"I'll venture that most people posting on RE blogs are doing so in a manner reflecting their bias"

Maybe nowadays, but it was the opposite two years ago. Anyone who dared to predict price any price declines was called an idiot who didn't "get it", and was just jealous because they'd missed out on all the bubble gains. (Read some SacBee comments from 2 years ago).

Bias swings both ways, though as I pointed out above, it has little actual effect on the momentum of the bubble.

smf said...

"From what I've seen, most of the rabid-dog cheerleading/exhortation comes from those who I anticipate are potential buyers undertaking to fan the flames of the decline."

And paying less for something is bad in what way?

You know, most people who have money give you the same secret to having money...NOT spending it.

Spending way too much money on housing means you don't have enough to support other businesses as well.

As to ourselves:

We bought in 2003 and paid $348K. Put $90K down from sale of previous home. At the top, we 'could' have sold our house for about $600K. But we really like it, so we are riding the wave all the way down.

After all, for every $100K you spend in a house we will be charged over $100/month in taxes and other incidentals.

We don't have to fan the flames of the decline, it will decline simply because that is what bubbles do.

But I can't wait to finally soon find a larger home at a price we can really afford.

Anonymous said...

"I don't see much vitriol from the other side of things"

I take it you were born in 2005 then?

Obviously you have not followed the comments on the SacBee site over the last couple years.

While the "prices will just go flat, sorry poor renter, you are priced out forever" nonsense has almost disappeared, certain real estate cheerleaders have been on the blogs pushing real estate all the way down from the peak. Anybody who listened to certain notorious flipper/realtors who were posting on the blogs calling "bottom" every month for the last 2 years lost a lot of money.

Everybody wins in the long run with affordable housing. The thought that every future generation should or could be priced out of starter homes forever in a state worker town like Sacramento is ridiculous. So I see a lot to cheer about with prices returning to where they would have been all along with the historical 4% a year appreciation.

Looks like we are going to overshoot that to an unknown degree though.

HappyInSF said...

"I don't see much vitriol from the other side of things"

HAHAHAHAHAHA!

I wonder if John Lockwood archives his posts. LOL.

Anonymous said...

AgentBubble? Are you out there?

Can I PM you? I'm looking for a Realtor.

Thanks!

Observant One said...

No, I don't, and haven't, read the Sac Bee blogs. There's enough crap on the dedicated RE blogs without having to wade through it on a mainstream media blog.

PR, two wrongs don't make a right. If it was abhorrent then, what makes it any better to do so now (albeit in a different direction)? It looks to me like the very same people who lamented the giddiness on the way up have no problem indulging in it themselves on the way down. Hypocritical much?

Anyway, getting back to basics, Anonymous, I'm curious with respect to your theory of "prices returning to where they would have been all along with the historical 4% a year appreciation." What base year are you measuring the 4% from?

Anonymous said...

Hey OO, you were the one who said the cheer leading seemed one-sided and then you have the nerve to scold the posters who point out it was totally happening on the other side as well. Maybe you shouldn't post about things you apparently just started tracking last summer. I suggest lurking for a while.

"What base year are you measuring the 4% from?"
Good question. My opinion is that Sacramento was slightly undervalued in the 90's, so I am leaning towards pre-dotcom bust, like 2000 base year. This seems fair since during the tech boom even Sacramento real estate was already "booming" so it was kind of a bubble on top of a bubble until 2005. 2000 as the base year seems about right, generous even.

Observant One said...

Anony, if you read my posts above again, you'll see that I explicitly limited my comments to what *I've* read" and "from what *I've* seen". Don't read into it more than actually is there. And I'll post on whatever I like, as no doubt you will as well.

2000 base year sounds about right to me. However, I'd probably use 3%, rather than 4%...though I recognize that the CPI understates actual inflation.

smf said...

Instead of following inflation, should houses not follow wages? If wages have stagnated, it follows then that prices should, too.

Anyways, I have glimpsed 2002 prices already.

Patient Renter said...
This comment has been removed by the author.
Patient Renter said...
This comment has been removed by the author.
Patient Renter said...

grr, 3rd try is the charm.

"two wrongs don't make a right"

There was only wrong wrong. Cheering for bubbles is wrong. Cheering for a return to normalcy is certainly not.

"Hypocritical much?"

You might want to educate yourself on the meaning of that word:

http://dictionary.reference.com/browse/hypocritical

Loathing something that is bad (such as an artificial asset bubble) and enjoying something that is good (such as the deflation of an artificial asset bubble) has no relevance to the word hypocrite.

Cmyst said...

So, BT, to answer your conspiracy question:
It's been obvious to me since the first of the year that the REIC is hitting the bubble blogs hard. Probably because the MSM and the fence-sitting public have started to take notice of our contrarian views.
And this latest wave of REIC shills don't have sippn's smooth demeanor.
They sashay right in, insult the long-time denizens, and assume they have the same privileges as those of us who have been here debating these issues when they were still cashing their commission checks.
(Sorry, noobs. You're about 2 years late.)

HOUSE2008 said...

I drove by Blackstone on the way back from Kirkwood the other day. The houses look ok, but my god those are the ugliest colors I've ever seen. Every shade of dirt is represented, and even some mud.

LOL. Damn, and I wanted a ton of kids in my "new home". No home no kids. Good form of birth control really:) JK.

HappyInSF said...

Cymst,
I too have noticed a lot of new and rather aggressive realtor/flippers on the blogs lately. Is it some kind of last ditch effort to spin some good PR? Or a desperate hope that their posts will somehow help them get an offer on their short sale in South Sac?
I recall Sippn saying that he is not here in any attempt to prop up the market since, as he says, these blogs have no effect on the market.

So what's the deal?

Gwynster said...

I can't improve on anything Cmyst has said.

I've seen the same thing though I've really quit reading and posting so much. We've explored the data and the first 24 months of predictions have come true. There is no amount of crapaganda that will viagrate the market. All that's left is the pointing and laughing.

And frankly I'm tired of arguing with the belligerent nOObs >; )

Gwynster said...

Oh and for BT, it wasn't a lone shooter >; )

Buying Time said...

G - I was wondering if I was going to get any takers on JFK!

As you all know, my typical retort to the overly optimistic is to encourage them to buy, and set us some new comps! If they truly believe the market is so strong, and a bottom is here already...then they need to do something about it (as opposed to telling us to).

I kinda liken the situation to religious evangelism. If you truly believe in your faith, then why do you spend so much time and effort convincing others that you are right. To me, the most sincere form of faith comes from those who are confident enough in their beliefs that they live accordingly, this demonstration is more powerful than any words. The greedy self-serving behavior I see in many Americans is very difficult for me to reconcile with their "deep religious beliefs".

Patient Renter said...

Cymst: Very well said :)

Gwynster said...

BT,

I read the HGTV boards and I have to tell you, some of those people are freaking pathalogical.

There is one blue-haired, former beauty queen who sells RE in FL that blames the media and she is downright shrill about it. She is the 1# champion of the NAR and trot out the link to the new NAR ads to anyone that asks (and many who don't). I'd probably swerve* for her.

Speaking of the HGTV boards, that place more then anything else has convinced me that buying a home in a HOA development is a rotten idea. I'd be in jail in short order and those women would drive me postal. The little old biddies there are now debating whether it's ok to ever park in front of your neighbor's house. seriously

*the swerve factor: used as a measure of personal loathing vs. your moral conscience. If you found the person on a country road, changing a tire and there were zero witnesses and no way the death could ever be linked to you, would you swerve to take them out?

Anonymous said...

SMF: "Anyways, I have glimpsed 2002 prices already."

I guess that means the home you purchased in 2003 for $348K is worth what now??

HappyInSF said...

BT,
I don't know.. Oswald was a freaky guy, defected to USSR, was a sniper in the Marines, had no friends.. even his brother believes he acted alone. A friend of his wife's got him his job at the book depository, I do not believe she was in on a plot against the president. Oswald had even had a failed attempt to assassinate General Walker with the same rifle he used to shoot Kennedy. he was a total crank that even the Russians failed to see any potential in his use.

I love conspiracies but there doesn't seem to be anything there.

Gwynster said...

I'm not big on JFK but wait until I have a few cocktails in me and ask about the Iran hostage crisis and the elections >; )

Jacob said...

I always figured the government would rather people believe in a massive conspiracy than to let it be known that one person could actually kill the president.

watchingthebubble said...

Personally, I found that the optimistic posts of housing bubble cheerleaders made for good theater during the past two years. They would trot out their views, only to get the blogosphere equivalent of a thousand snowballs thrown at them. Fun!

The most important thing I've gotten out of this housing bubble is confirmation of my belief that, in capitalism, no one is looking out for you - not your realtor, not your mortgage broker, not the government, not even your builder (Dunmore, anyone?). You have to look out for your own best financial interests, ask hard questions, bargain hard, and strike the best deal you can with the resources you've got. If anyone can get the best deal they can out of this market, I ain't mad at 'em.

I'm still getting over the agent at a DR Horton development who tried to get me to buy a house -- that very day -- that had fallen out of escrow, despite the fact that I could see this huge crack running through the foundation in the kitchen, under the kitchen island and her neatly pedicured toes in peep-toe pumps. I guess I just looked stupid. She was willing to throw in $8,000 in front and back landscaping, though. Guess I missed out.

No one with intelligence should subsidize stupidity.