Property Grunt

Wednesday, October 05, 2005

Reader comments

Here are some reader comments

It is early in the game...We barely started the whistle....It will be clearer later...It is no use to over analyze the current data.

It is always early in the game. Once the smokes clears it is already too late.

I thought I had made it clear that calling a peak too soon and acting on it too soon will cost you dearly. Timing is critical as I explained once here:

I couldn’t agree more. Let’s watch our backs

You really think you were the first to raise you hand here? There have been bubble reports for the last 3 years.

And I thought the Times article was not bad, when you read it. Prices are stabilizing with lower year over year increases, but increases none the less

I never stated that there was a bubble. That has already been established. What I am taking credit was having the cojones to alert everyone of what was happening at my open houses and that I felt it was a sign of things to come.

Hey grunt, I think you have provided an invaluable service by relaying your experiences.

I have posted many times before on the CL housing forum about the dangers of selling too soon and how the last year of appreciation before the prices go down typically shows the greatest gains. For that reason, the opportunity cost in selling before that final year is tremendous. However, selling after the peak has come and gone enables you to lock in those huge gains with a little lost on the way down. You lose a lot less doing it this way than to sell too soon. Read this for my thoughts on this and read the response to my post from someone who ran the numbers:

Having said that I thought we had hit the peak this year and called it the same time as you:

This was based on the same reasons as you gace which were less to do with fundamentals (because buyer mania, herd mentalility, etc. typically catapults prices way past the prices that fundamentals can sustain) but more to do with, as I wrote in that post, buyer sentiment. As soon as buyers stop thinking that they have to jump on board before the train leaves the station then that is when the tide turns. It certainly looks like that has happened.

Having said all this, the selling costs are high enough that most people who bought just over a year ago and before will gain nothing by selling to buy later as price declines (and this is where we differ) tend not to be as severe as the price increases. I reckon about 5%-8% per year for 3 years before a bottom.

Thank you for your support. I concur that buyer mania has dissipated. That is why that recent New York Times article is so signifigant. I do not think there such thing as a good deal for buyers or sellers. How one fares in this market depends on their finances, the property they are selling or buying, market conditions and luck. However what you proposed does make sense and I think it is worth investigating.

Grunt, I love your comments and I'm normally right there with you. But this time I gotta say, I think you're overstating the case. Looking closely at the market data just released shows that sales volume and price per square foot is up for the studios and one-bedrooms. It's only the luxury market that is slower than last quarter. Moreoever, the luxury market is only down from the last, totally crazy, never-before-seen-performance quarter. They are still up a good bit over last year's numbers for the same quarter. Since when has anyone been surprised when summer numbers were lower than the spring numbers? (That's what the current reports are telling us.)
Keep up the great blogging, Grunt. You're one of the best. I'm anxious for your reply.


Thank you for your support. I completely understand your position and I am not arguing against the numbers. The point of my last entry is the attitude amongst buyers has changed and the shift is taking place. No longer are they pressed to buy something immediately. If it doesn’t fit their requirements they will walk. As I have stated before there also are other factors coming into play including Asia, Ginnie Mae, the hurricanes, oil and interest rates.

The NYT article came up around the water cooler and brokers were unhappy. There was chatter of one broker losing some buyers because of the article. Some brokers felt that the NYT was insensitive towards their profession and there was talk of sending a message by not using their services. That will never happen since the NYT is the bible for brokers.But it is just chatter. It was pretty much business as usual.

One thing I have learned is that real estate is completely illogical. There is a cycle and fundamentals one should follow but it does not take much for everything to get out of whack. But now the inverse is occurring.

Btw, feel free to check out Dave’s set of blogs.