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QualityPicks (64.14)




November 08, 2007 – Comments (0)

Every now and then, I read Realtor's blogs to keep informed of how things are going. Often I find good comments, but often, they just drive me nuts. Why?

1. Because it is always a good time to buy.

2. They rarely mention anything about affordability. And when they do, it is not the real definition of affordability but the marketing definition. When house prices were sky high, banks will come up with "creative" negative amortization loans and tell you they were good because the allowed people to "afford" a house they couldn't buy otherwise.

I still remember a few years ago when I went buying for a house here in Southern California. I usually visited new home sites. I hated their sales people. They didn't really care about selling me a house, they were really arrogant, played on your emotions, were ignorant of the buying process, etc.

I just read a few blogs were Realtors warn people that "looking for a bottom could be a mistake". I didn't find anything that warned people about a massive amount of future foreclosures and that buying right now could be a mistake.

Then they say "they are not making any more land". Please. This is mostly to play on your emotions. I live in Irvine, CA, in So Cal, which is heavily populated, and believe me there is lots of land around. I also saw houses in AZ appreciate 100%, even though there is more land than anything out there.

Then I read a commentary "Think houses cost too much?" were they tell you "horror" stories of people that never bought a home because they were expensive, and how much they regret it as their rent kept going up and house prices up. So they make you feel like "you should pay whatever for a house, because if not, you'll regret it". Again, my main issue here is that Realtors never talk about real affordability. I don't have a problem with a house being "expensive", but I have a huge problem with houses being unaffordable.

Then I read a story that during 1930, houses were so expensive that mortgages were extended from 10 years to 30 years, and how now a days banks offer 40 and 50 year mortgages so you can afford your house. Well, I guess if we (buyers) let ourselves be bullied by realtors and loan companies, 50 year mortgages will now be the norm. Doesn't matter if you buy your house when you are 30 years old, you finish paying it when you are 80 years old. So forget about retiring when you are 70 years old, or else you won't have income to still keep paying the mortgage until you die. What's the difference with renting? Only that your kids might enjoy your whole life of mortgage payments by inheriting the house. Same if you use interest only mortgages, what is the difference with renting? well you get appreciation they say, but they don't tell you also get all the risk  of depreciation.

I can go on and on. They also emphasize a lot that there is a lot of people that want to buy a house, but they are terrified by all the negative media and are waiting for things to settle. They call this pent-up demand. And they make you feel that as soon as the bad news dissipate, pent-up demand will kick in and you will be left out having to pay a higher price than right now. Please. Just like there is some pent-up demand there is way more pent-up supply. I know several people that want to sell their house, but they want the price they saw at the top of the market. They tell me the market is not good right now and they would get "very little" for their house if they try to sell it right now. So they are waiting. I have also read the banks are holding large number of houses that they haven't put up for sale because they are waiting for the market to get better, or they have laid off so many people there is not enough people to handle this.

Anyway, just wanted to point out some of the things that make me mad. Little by little, the psychology will change. And buyers will once again understand that (collectively) they are in the drivers seat, always. It is your duty as a buyer to negotiate the best price you can get. Sellers have many reasons why they have to sell, but buyers can always rent. Don't let Realtors pressure you with all the sales slogans and techniques. Buy when it is right for you, which is when you can afford a place you would like to live in, and you will come ahead of renting in 5 to 7 years (not 25 to 30).

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