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The New Math

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April 23, 2009 – Comments (12)

As explained by a Realtor.

Their mood brightened when they began shopping in the spacious neighborhoods of this suburb northeast of Seattle and found a 3,000-square-foot, four-bedroom split-level on a half-acre of towering fir trees that they wound up buying for $425,000. That’s $86,000 less than the $511,000 peak value placed on the home by real estate Web site Zillow.com, $64,000 below the original asking price of $489,000 and even well below the final asking price of $438,000.

“Do the math,” said agent Mark Zawideh, who has been selling homes in the suburbs west of Detroit, where prices have declined 18 percent in the last year alone. “If you’re in a $200,000 house (the median price in the area) and you lost 18 percent, that means you lost $36,000,” Zawideh said. “But if you’re moving up and buying a $500,000 house, that person just took a $90,000 loss, so you can see you’re making 54,000.”

Shame on you, Mike Stuckey, Senior news editor at msnbc.com, for swallowing this nonsense whole.

 

12 Comments – Post Your Own

#1) On April 23, 2009 at 2:22 PM, outoffocus (23.25) wrote:

What a crock.

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#2) On April 23, 2009 at 2:29 PM, TDRH (99.66) wrote:

Is that before or after commission?   That is the saddest spin I have heard in while.

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#3) On April 23, 2009 at 2:41 PM, 4everlost (29.53) wrote:

Is that math spin or stupidity?

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#4) On April 23, 2009 at 4:04 PM, TMFCHarris (99.61) wrote:

I read that quote twice, and the second time it gave me a nosebleed.

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#5) On April 23, 2009 at 4:23 PM, MrSucrose (< 20) wrote:

That one hurts my head...

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#6) On April 23, 2009 at 5:19 PM, TMFBent (99.82) wrote:

Just emailed this:

-------------------

Hi Mike,

I just had to email and tell you I’m pretty disappointed in the ridiculous Realtor math presented in your column. Pretending that a home buyer “makes” the difference between the price drop in their home and price drop in the home they buy is beyond logic, and it's typical, dangerous, self-serving Realtor speak from the folks who brought us the housing bubble.

It’s precisely analogous to pretending that buying a dress, marked down from $100 to $50, “makes” you $50. 

You can do better. 

Next time a Realtor or Realtor PR rep calls with a story idea, please take a look back through a couple years worth of NAR press releases, the ones promising the bottom in housing, calling homes “investments,” and never admitting the reality. 

Then, make sure that what they’re pretending is math really adds up. And I’m not talking about the digits. 

Seth Jayson

 

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#7) On April 23, 2009 at 5:29 PM, pitchandtoss (24.48) wrote:

Later on in the article it goes on to say: 

 Molony stressed that price declines and lowinterest rates have combined to offer buyers “record affordability,” as calculated by its national index. The national number is currently 167, which means that median income households can afford homes that cost 167 percent of the median price.

While rising prices can push affordability down, realtors point out that rising interest rates can work against would-be buyers much more quickly. A one-point hike in interest rates boosts monthly mortgage payments the same as a 10 percent increase in prices.

“The affordability conditions are optimum right now,” Molony said. “We will be seeing a little pressure on rates later this year. It’s really hard to time the bottom of the market, which will be apparent in hindsight. If we aren’t at the bottom of interest rates now, we’re within an eighth of a point.”

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Should I judge this statement by the Math in the rest of the article and assume that Mortgage rates will be much lower soon? 

what do you think will happen with mortgage interest rates in the next 5 years?  I have been watching the Santa Monica, CA market for the last 5 years looking for an affordable entry point, but have yet to find anything that looks very affordable.  I expect housing prices will continue to drop, but I have very little understanding of where interest rates are going...can you shine some light here?

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#8) On April 23, 2009 at 5:37 PM, ralphmachio (26.83) wrote:

Everyone is looking to the banks for a model, what is it called? "taking the Mark to market" or whatever... good stuff.

In a con scheme, the 'Mark' is the victim, for the three or four people who will not understand my attempt at making humor out of the ridiculous system or $h!tstem, as peter Tosh referred to it.  

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#9) On April 23, 2009 at 7:50 PM, scott0807 (78.39) wrote:

i have this discussion all the time with my family. "these shoes are $50 off, so...if we buy 2 pair it's like making $100. they get sick of me saying  "it's only a bargain if you really need it" followed by "and you know only fools have needs". it seems we are also guilty of practicing "new math" albeit on a smaller scale 

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#10) On April 24, 2009 at 6:13 AM, Chromantix (97.89) wrote:

No surprise - having just bought a house last year I got the same thing from several brokers.  But it's really a salesman thing: these peoples' lives are based on making sales - it's no suprise they'll say next to anything in order to close the deal.

Now I'm selling a (different) house, I'm getting the same thing from the brokers of "potential" buyers: you're paying for the house to sit, so if you take the offer, you're making money over the long term by taking the cash now.  I've also heard arguments of "lowering my risk portfolio".


It's not just television - it's anybody whose livelyhood is based on commissions.

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#11) On April 24, 2009 at 10:24 AM, saunafool (98.88) wrote:

I agree. I read this thing once and my nose started bleeding.

How can anyone actually believe such tripe?

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#12) On April 24, 2009 at 11:09 AM, whereaminow (24.34) wrote:

by that logic, shouldn't they look at the highest priced home possible?  I mean, if they move into a $20,000,000 home that person would have lost $3,600,000 so therefore this couple would make (hold on while I wipe out my calculator)

....  divide by seven

.....  carry the two

..... subtract the ubiquity of the elliptic

..... and

...... $3,564,000

Congratulations, you're millionaires!

David in Qatar

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