Category Archives: Misc. Post

Internet Savvy Buyers

The internet has changed the way we live. From electronic shopping to scrapbooking, the internet has become the go-to source for researching just about anything. It’s completely changed the way people buy their airline tickets and turned the negotiation tables around on the car dealership show floor. There’s literally an entire world of information at your finger tips and people are taking full advantage of that. This is no different in the housing realm.

There is a wealth of information out there and anyone who chooses to look for it will find it. If you’re a regular reader on this site, you’re probably also a regular reader on many other housing blogs. In addition to blogs, you have a host of free services like Redfin, Trulia and Zillow that gives the general population information that used to be much more difficult to obtain. Even if you’re a renter, you can benefit from watching the market through Craigslist rentals. I alluded to this in my post about the future of real estate agents, but the growth of the internet has really put the ball in your hands.

Are there people who still rely solely on their realtor for information and services? Of course. But as more and more people become aware of the vast sea of internet content, the landscape will change. Actually, it’s already well underway and the fact that you’re reading this post is testament to that. Knowledge is power. If the average American saw the charts you’ve seen and read the articles you’ve read, they’d be much less confused about the housing situation and would probably laugh at those NAR press releases that keep calling the bottom.

When people ask me about housing news, I point them to Patrick.When people ask me about finance and economics, I point them to Calculated Risk.When people tell me they’re mad about the proposed bailout, I point them to STHB.

There are a ton of other great housing-related websites out there. What are some of your favorites?

Six Secrets of Internet Home Buying

Arcadia Properties in Distress

It’s the weekend and you’re bound to see a lot of open house signs everywhere. If you have nothing else to do, check out one of these distressed properties and get a good hard look at the market landscape. Heck, if it strikes you to do so, throw in a few ultra lowball offers while you’re at it just for laughs and giggles.

REO – 615 E. Sandra Ave. 4bed/2.5bath $893,000
Short Sale – 11240 Daneswood Dr. 3bed/1bath $550,000
Short Sale – 11248 Daneswood Dr. 3bed/1bath $499,000
Short Sale – 725 Tiffany TE. 4bed/3bath $968,000
REO – 307 E. Duarte Rd. #B 3bed/3.5bath $579,900
Short Sale – 37 Alice St. #C 3bed/2.5bath $598,000
Short Sale – 905 Rodeo Rd. 2bed/2bath $575,000
REO – 930 Panorama Dr. 3bed/2bath $998,000
Short Sale – 140 W. Foothill Blvd. 3bed, 1.75bath $770,000
REO – 1233 S. 6th Ave. 5bed/4bath $1,169,000
Up for Auction – 38 W. Forest Ave. 3bed/2bath starting bid at $100,000

There are others as well, but these are a few I came across while quickly scanning through Redfin before calling it a night. There were also plenty of sellers who were all “MOTIVATED” and supposedly “PRICED [IT] FOR QUICK SALE!!!” Let’s see who’s really motivated to sell.

Have a great weekend! 🙂

Shout About the Bailout

Unless you live under a rock, it’s hard to live life without hearing something about the market bailout. Whether you get the news from the local paper, television, internet or at the office water cooler, you’re bound to come across conversations regarding the drowning housing market. The Feds have bailed out Bear Stearns and there’s been a lot of talk about a housing bailout – more specifically, the proposed irresponsible bailouts as outlined by Senator Dodd and Congressman Frank.

It’s no surprise that we here at the Arcadia Housing Blog is vehemently against such a bailout. There’s no gray area for us and this is as black and white as it comes. A government bailout just transfers the risk and losses from Wall Street to Main Street. Not only that, propping up the inflated home prices does nothing to solve the affordability issues we’re facing. To compound the problem even further, a bailout would encourage speculation, reward irresponsibility and punish the responsible.

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Like many of you, I am a tax-paying citizen and I refuse to let the government use my hard earned dollars to bailout greedy companies and individuals alike. If you share similar feelings, I recommend you visit Stop The Mortgage Bailout and support the fight against a bailout. I have written to my representatives and encourage you to do the same. Although the responses I have received are generic, unsupportive replies, it is still important to voice your opinion. We are not alone, but unless we make a collective effort to speak out to the folks in Washington D.C., they may conveniently ignore the hard-working American families and individuals. Don’t give them that chance. Let them know that unless the bailout is stopped, we are ready to vote against any incumbents currently in office in order to bring in someone else who will listen and represent our values.

Don’t be shy.
Don’t be quiet.
Don’t be complacent.
Don’t be willfully ignorant.

Message from a local builder

I received an email from “John” last week. Thinking it was a friend, I opened the mesage and it turns out to be from John Laing Homes. My email is registered with all the builders so it wasn’t surprising that John had some comments regarding the current housing market. See for yourself and let us know your thoughts.

To buy or not to buy? Read what Time says.

Dear Arcadian,

Are you in a wait-and-see mode about buying a new home? Famed Money Manager Peter Lynch has some good advice, “Ignore the headlines.” In a recent article in Time Magazine, Lynch reaffirmed to the author his view “that homeownership should be your first investment, since an owner-occupied home is nearly always profitable.” In fact, the article points out that waiting may not be a very good decision at all.

“Let’s say you are emotionally ready to be a homeowner. You have good credit, plan to stay put five years and have been waiting for the perfect entry point. It’s time to get serious – before an inevitable rise in interest rates wipes out your advantage.”
Time Magazine, 2/14/08

“Risk always seems more acute when the headlines give you ulcers. But that’s exactly when you should think long term – and get off your thumbs.”
Time Magazine, 2/14/08

The bottom line? You find the home you love and we’ll do everything we can to help you achieve your goal.

Best Wishes,

John Laing Homes

It’s never a good sign when you’re encouraged to make a purchase by the same party that will directly profit from the transaction.

The Data Does Not Lie

Most bubble blog readers know that the housing correction will be severe, but I sense that the average Joe still does not quite understand the magnitude of the consequences caused by this Great Ponzi Scheme. The mainstream media is partially to blame for their cheer-leading headlines and quotations from the National Association of Realtors’ (NAR) misleading reports, but it is the homedebtors’ natural reactions of denial and hope that brings mixed feelings to the market.

I spoke to a homeowner last week about the housing crisis and she told me that she’s not worried because once we get all the subprime lending out of the system, everything will revert back to normal and “be okay.” My breakfast almost ended up all over my keyboard and monitor. I cannot say this enough – the problem is much bigger than just subprime loans. Tomorrow, we will be at #16 of this now infamous Credit Suisse chart. As you can see, we still have a long way to go.

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This isn’t the first housing bubble we’ve come across and I hear many people comparing this bubble with that from the 80s and 70s boom. While history doesn’t always dictate the future, it gives us a good basis of comparison. There’s no exaggeration when I say that we’re making our way through a bubble of epic proportions. It’s not a joke; this is history in the making.

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Remember how the NAR always says that “every market is different” in those malicious tv commercials? Well, there is actually some truth to that. Some markets, like California, Nevada, Arizona and Florida are in fact different – they’re especially bad when it comes to the percentage of new and refinanced mortgages with option payments. It’s no wonder these states enjoyed the biggest run-up and will soon experience the biggest correction, as compared to other parts of the country.

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California is in it for a rough one and Los Angeles is no exception. During the boom, we saw homes that doubled in price over just a few years with the bidding frenzy feeding off the people’s greed and ignorance. Now that the fountain of kool-aid has stopped flowing, many are left to wonder how the correction will play out. This is a projection based on the Case-Shiller Indices and according to this chart, the end of the correction is sometime in 2011 or 2012. We are currently at about 225 on the index.
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Yesterday, TheArcadian reported the numbers at the national, state and city level. Nothing in the data suggests that we’re “turning around” or “at the bottom.” During the boom, many laughed and scoffed at me like I was a mad woman when I entertained the possibility of home prices crashing 35-50% from the peak. All the bulls and wishful homedebtors should put away their hopes of a rebounding 2008. February’s report shows that Arcadia’s sales volume is down 28% and its median home price down 20.6%, both year-over-year.

We’re not even halfway through the correction yet and all of a sudden, 35% off the peak doesn’t sound so crazy after all.

Dear Homedebtors…

After doing property profiles on AHB day in and day out, it has come to my attention that most sellers are still overpricing their property for sale. As a potential buyer, I would like to share something with them. Perhaps they are still in denial and believe that buyers are willing (and/or able) to meet them at their sky-high prices. If that’s the case, this should clear things up. If I spoke to a seller today – this is what I would say to them.

Dear Sellers,

I am writing to you on behalf of myself and many other prospective buyers regarding the current housing market. This is not an attempt to mock or ridicule you for your past actions, but rather a letter to inform you of our thoughts as it relates to the buying and selling of real estate today. Surely I cannot force you to read this letter anymore than you can force me to buy your house, but it is to your benefit to at least hear what I have to say. Whether you agree or disagree with me is another story.

There’s no roundabout way to put it so let’s just get to the point. If you are serious about selling your property – price it to sell. If your property has been on the market for more than a month, then it is not priced to sell. Period. The market price is what we, the buyers, are willing to bid regardless of where you set your asking price. If you set the right price, then someone will put in an offer for it – even in a down market like we’re in today.

Think of yourself as a buyer. When you bought the property you’re currently trying to sell, what did you consider? Did you buy it because the current owner said it was worth the asking price? No, I didn’t think so. You bid whatever you thought the property was worth at the time. It’s the same with the potential buyers looking at your property today. Unfortunately for you, most buyers today think the market (especially here in California) is wildly inflated and subject to a steep correction for months or years to come.

That being said, there are still some people who are in the market to buy right now. They just don’t like the asking prices. Generally speaking, these people are not trying to offend you with their lowball offers; instead they’re just trying to compensate for the reduction in home values they expect in the foreseeable future. Wouldn’t you do the same if you were on the other side of the fence? Be honest with yourself. Denial is not a solution and can be devastating to your finances.

Instead of chasing down the market with small, mediocre price reductions every few months I suggest you reduce the asking price today. Not tomorrow, or next week or next month – today. Everyday your house sits on the market unsold is another day you have to swallow carrying costs and maintenance fees. In addition, you also risk losing even more money as the neighborhood comps drag you deeper into the red. The outlook does not look good. With sales volume falling off a cliff and prices starting to slide even in the more desirable areas, buyers are more cautious than ever about entering the market. Your buyer pool will shrink as the housing correction continues and the decline in home prices will be the only factor that will bring buyers back into the market.

If you think things are going to “turn around” or “pick up in the spring” then you’re hanging on a very thin thread. It doesn’t matter what you think. Buyers don’t care what you think your house is worth or what your realtor/neighbor/wife/dog thinks its worth, nor do they care that you need the money to get out at “breakeven” or to pay off that HELOC. They also don’t care what you banked your whole retirement on this property or that you overpaid and looking for someone to bail you out. It doesn’t matter to them. All they see is an overpriced house they’re might not even like that much.

Again, if you’re serious about selling your property – reduce the price. Buyers don’t have to buy, but many sellers have to sell. We have all the time in the world, but you don’t. If you did, you wouldn’t be selling right now. Wouldn’t you rather just rip off the band-aid than to peel it off slowly? Either way, it’s coming off. How it’s done is up to you.

Yours,
SBG

Fight the Nesting Instinct

The nesting instinct is typically characterized by the irrational behaviors of women during and after childbirth. Its symptoms are also common among newly-weds and young couples. This irrationality often entails purchasing a home with or without sound financial prudence. As a woman, I understand that and accept responsibility for the financial and/or emotional trauma our half of the species often cause those of you from Mars.

Instinct is hard to fight because well, it’s instinct. By definition, instinct is passed down to us by our forefathers (or foremothers I suppose) through thousands of years. Do not underestimate Mother Nature; it is a very powerful force. Those of you who are in a relationship may already know that. Don’t let the following happen to you.

While this isn’t an excuse, please try to understand. Women just want to be able to provide a warm, clean, safe and stable home for their children and family. That’s a normal and healthy goal. There’s nothing wrong with it if they don’t go outside of their financial comfort zone to do it.

There’s not a woman on this earth who wouldn’t like a home in a quiet neighborhood to raise her family. Not a single one. The problem arises if they want a monstrous 4000 sq-ft, 5 bed, 4 bath mansion when all they can afford is a 1200sqft 2 bed, 2 bath attached condominium. Unfortunately, some women can’t separate “safe and secure” from buying the biggest house they can get their hands on. Too many times have I seen the men in their lives succumb to their unjustified desires to buy more house than they can afford. The stress that financial instability can cause is often much more than a couple can withstand. I don’t wish that upon anyone.

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Here is where our other half comes into the picture. Generally speaking, men are more logical than women. Once guys are focused on one thing, their mind is locked in that compartment until that issue is resolved. Women on the other hand think in 3107 tangents – simultaneously. Generally speaking, men are rational problem solvers and women run on emotion. Of course there are exceptions and not all women are irrational, but I’ve seen happen more times than I can count.

A nest to raise the kids could be a comfortable condo or a large rental house. As a kid, I moved around more than you can ever imagine and trust me, kids don’t care whether the house they live in is purchased or leased. They do care if you’re too busy worrying about mortgage payments to play with them. Renting a place doesn’t mean you can’t make a home out of it. Home is eating dinner together as a family, doing crafts with the kids and watching a movie with your wife. You can do those things wherever you live. Buying more house than you can afford is much more financially straining than renting within your means. It’s also less stressful too which could do wonders for family time.

Most men don’t want to deal with the very tiring and emotional battle and just give in buying more home than they can afford. FIGHT THAT INSTINCT. Fight it, but don’t ignore or argue with her. Instead, try to reason with her and show her with realistic numbers why it makes sense to rent (or buy). She will appreciate the fact that you’re sharing your thoughts and working to provide a stable environment for your family.

Have a wonderful weekend.