I don't really get asked those questions. I think the typical buyer is smarter than you think....at least those I have worked with.

Most people seem to be aware of the fact that the housing market is cyclical. Housing CAN BE a good investment, but I don't make recommendations on investing. The stock market CAN BE a good investment too....if you buy the right stocks at the right time. At most, people ask me "what I think about the market" and I tell them what the numbers say. If pressed on my opinion, I simply say that the market is cyclical and goes up and down. We peaked in sales and pricing in the Summer of 2005. Sales fell slightly over the next couple of years with average prices remaining pretty high. Sales have fallen more with the mortgage shakeup this fall/winter.

The term "buyers market" gets tossed around a lot. I think that people use it to describe which side has the current advantage.... not whether it is good for buyers to buy, or whether it is a good time to buy real estate. This IS a buyer's market by that definition whether you like it or understand the term. IF you are currently a buyer and have the money/financing you have the advantage over the sellers right now. There are a lot of desperate sellers, there are people dropping prices left and right....and by all of the articles that get posted around here, foreclosures are at record numbers. It has nothing to do with whether or not the property you buy will increase in value. It also doesn't mean you should stop renting a become a buyer right now. All it means is that right now, buyers have the advantage over sellers. I think there is a difference, at least in the way I use the term, between "buyers market" and a "good time to buy a house".


I only hear that line posted on PB. As for the term "bubble" and the market here in Philly... the answer is I don't know. My crystal ball is in the shop. I can only offer the logical explanation which is that the market is cyclical. There are ups and downs. The data says we hit a peak and so logically speaking, we are probably going to see the market "come down". NO ONE knows exactly what will happen, how far sales/prices will fall....assuming they do. Again, history says the market is cyclical but I'm not telling people that values will fall or will increase. Its not my job. Its not my expertise. Legally, I can't give investment advice nor can I predict what the market will do. Again, all I can do is assist people with the process. If people want to know whether to buy or not they can consult an economist, a certified financial adviser, or the geniuses on Phillyblog.

Judging by the number of forecloses and the fact that housing has collapsed in places like Phoenix -- buyers were considerably dumber than I gave them credit for. Even better I have friends out there who are trying to get me to buy into foreclosures, they're not only dumber than I gave them credit for they are intent on compounding their sins.

And yes, Realtors try to give me financial advice all the time. I'm not a sh*t-starter like Suzy; when I'm looking at houses on a Sunday afternoon I'm not looking for a fight but it really pisses me off to hear Realtors trot out these tired canards. I've even had one tell me that housing was the key to my future and my safe retirement. That I was "throwing money away by renting."

I've seen both my sister-in-law and my sister (one in the Northeast one in Arizona) lose 100,000s of dollars so maybe I am "throwing my money away" by renting but at least I'm not giving it to some shill as part of their commission.

Edited to add:

What I really, really hate is how Realtors seem to be trained to zero in on the wife. 100% of the time the Realtor hones in on me and tries to make me worry about my financial future. Someone over at NAR has decided that women need to nest and the best way to make a sale is to make the woman worry about nesting. I love it when I'm told "this is the perfect house." There is no perfect house, there are other homes -- they will come up forsale. About a year ago we looked at a really nice place for 900k out in Penn Valley. I loved it, it had land and didn't need any work. It was more than we wanted to spend and it eventually sold -- this spring what do I see? A nice house, with even more land with no work needed on the house for sale for 200k less than we were looking at spending before. Awesome!

Buyers are not necessarily stupid....just blinded by soothsayers and $$$.

Anyway...this was pulled from the following source

http://www.hussmanfunds.com/wmc/wmc080512.htm

"The following chart, presenting the ratio of median home prices to median household income, is courtesy of Ned Davis Research. Note that the decline in home prices even through the first quarter is a fraction of what we can expect to observe over time. While the “mean” in this chart is biased higher by the elevated ratios we saw in recent years, the lower ratios observed prior to 1987 are also unlikely because they were associated with very high interest rates. Given those considerations, it appears that median home values as of 3/31/08 were probably 15%-20% above sustainable norms, though we may not observe the full adjustment in just one cycle. The relatively low level of short-term interest rates (though only partially translating to low rates on adjustable mortgages) will probably help to buffer the full extent of the potential decline, but there's little doubt that we'll observe further serious defaults, foreclosures, and credit losses."



__________________________________________________ ________________________________________

"When everybody is blind the blind believe they can see...."

Complete article: http://www.nytimes.com/2008/05/06/bu...mc&oref=slogin

Doubts Raised on Big Backers of Mortgages
By CHARLES DUHIGG

As home prices continue their free fall and banks shy away from lending, Washington officials have increasingly relied on two giant mortgage companies — Fannie Mae and Freddie Mac — to keep the housing market afloat.

But with mortgage defaults and foreclosures rising, Bush administration officials, regulators and lawmakers are nervously asking whether these two companies, would-be saviors of the housing market, will soon need saving themselves.

The companies, which say fears that they might falter are baseless, have recently received broad new powers and billions of dollars of investing authority from the federal government. And as Wall Street all but abandons the mortgage business, Fannie Mae and Freddie Mac now overwhelmingly dominate it, handling more than 80 percent of all mortgages bought by investors in the first quarter of this year. That is more than double their market share in 2006.

But some financial experts worry that the companies are dangerously close to the edge, especially if home prices go through another steep decline. Their combined cushion of $83 billion — the capital that their regulator requires them to hold — underpins a colossal $5 trillion in debt and other financial commitments.

The companies, which were created by Congress but are owned by investors, suffered more than $9 billion in mortgage-related losses last year, and analysts expect those losses to grow this year. Fannie Mae is to release its latest financial results on Tuesday and Freddie Mac is to report earnings next week.

The companies are sitting on as much as $19 billion in additional losses that they have not yet fully acknowledged, analysts say. If either company stumbled, the mortgage business could lose its only lubricant, potentially causing the housing market to plummet and the credit markets to freeze up completely.

Can't cheat an honest man.

More reason to be concerned about Fannie May & Freddie Mac balance sheets..

http://www.msnbc.msn.com/id/24580917/

"With quietly expanded powers, the Federal Housing Administration is already offering the next-best thing to nothing down on a house: a payment of just 3.0 percent will get practically any American with a pulse and a job a mortgage of up to $729,000, at least until the end of this year.

No need for loan originators to worry about defaulting loans; taxpayers shoulder the risk that these loans bring to the FHA's pool of loans. All of the mortgages insured by the agency are backed in full by the U.S. government so when borrowers default, Uncle Sam takes the hit and makes the mortgage payment instead."

Tim, funny you should ask this. I can see that there are 7 years in the color key above the chart. However, I can only see 6 lines in the chart. I can see the Cyan, Red, Yellow, and Pink / Violet lines (2005, 2007, 2004 and 2003, respectively). I can see 2 other lines that are sort of purple / blue (can't tell one from the other), and maybe another that joins up with the Pink/Violet line around March at the "C" in Copyright (it's also sort of purple / blue).

Is the bottom-most 2008?

The one that merges with the pink one above the "C" in copyright is 2008. The bottom-most line is blue-ish and is 2002.

Perhaps I should look into the colors/lines again in excel to try to make them more legible....

Well, that's an EXTREMELY general statement about FHA loans. The max loan amount is dependent upon your area. In Philly and around it maxes out at $420k for a "jumbo" or $362,790 for a conventional. It must be owner-occupied. Max LTV for NEW Construction is 90%. There are other restrictions if you have a co-signer or if you have prior bankruptcies or foreclosure. Credit score of at least 580....etc. And condo requirements, unfortunately, can be very TOUGH.

These are just some of the specs, you should really look into the exact requirements.

Petra you may be interested in this. It discusses how to determine when it makes sense to purchase a property (as opposed to renting). You probably know all this already; I found it interesting.