Washington Post, Saturday October 11, 2008
Where Fantasy Meets Reality, by Ylan Q. Mui
Richard’s Ramblings Note:
I’ll be paraphrasing this story, I recommend that you read it if the premise reflects your emotions on buying or selling. Any comment by me will be in italics.
“Maybe we can even get used to letting go of our castles and just living in a home, according to Harvard University psychologist Daniel Gilbert.
“People [buyers] have a preconceived notion that it’s [buying a house] like walking into a store and you’re going to see something and pick it out…” which isn’t realistic, according to Ruth Peters, a psychologist. “Sometimes, buyers can become so intent on getting a deal that they lose sight of the true goal: finding a home,” says Rom Brafman, a behavioral economist.
He said that, “Instead, house hunting is more like gambling. They begin to dismiss important questions such as how much house they can afford and whether the investment makes sense. Rather, they wonder: How do I know this is really the bottom?” “Buyers feel entitled to a deal and fret about finding the bottom of the curve” according to Mui. And Brafman says… “Buyers should take a long-tem view and not think of the housing market as a casino.”
According to the author, “The process [buying/selling a house] has become so emotional on both sides, that psychologists rank it on par with divorce and even death.” I don’t know that I agree with that from the buyer’s perspective, but it may be more true for some sellers.
For sellers, Mui says, “the first and often largest stumbling block is the price at which they list the house. Many recall what their homes could have sold for just three years ago. She says that sellers are becoming depressed as their homes sit on the market.”
“Sellers who insist on higher [list] prices for their homes generally take a month to shed the rose-colored glasses,” say Kathryn Higgins, a New York real estate agent with a master’s in psychology. They start wondering why more people haven’t stopped by their open houses and why the home is still sitting on the market….They tend to live in the past, not in the moment.” she says.
Our research at McEnearney Associates, Inc. shows that there is a definite relationship of days on the market (DOM) and eventual sales price. As of our most recent statistics show that (Sept. Stat pack) houses priced realistically near the most probable sales price receive 98% of list price in the first three weeks. Houses that are overpriced and sit on the market for more than 90 days sale at 11% less than the list price.
So what are buyers and sellers to do?
According to this article, buyers should use caution in not being too demanding because sellers aren’t just going to give the house away. Sellers should negotiate legitimate offers and understand that according to Gilbert, “…that we often believe the consequences will be worse than they are. We underestimate our ability to adapt.”
What are your experiences and thoughts?
Monday, October 13, 2008
Thursday, October 2, 2008
Richard's Real Estate Rumblings
Perspective
This is my first entry in my blog. I was thinking about what to discuss and was focusing on the infill debate of North Ridge in Alexandria and my poll below this discussion. Then recently, our government couldn’t do what it supposed to do, lead and legislate, and a lot of negative doubt was sowed into the minds of all of us. I will begin the infill discussion next time.
At our regular Tuesday office meeting our managing broker, David Howell, presented us with some numbers, and I will present them as part of this initial entry. Below are the numbers and you can give them some thought, and then look at the answers and editorial comment.
24.9%
6.1%
4.6%
3.0%
778
-7%
2725
~13,000
0
18%
5.75%
98%
FMHU
PHTLS
We of course had some different answers; the zero answer had the most varied comments! This information was given to us in order to keep our perspective on the market and temper what we read and hear on a daily basis.
***
Now for the answers and editorial, please feel free to make your own comments:
24.9% The unemployment rate in the Great Depression
6.1% Today’s national unemployment rate
4.6% Virginia’s unemployment rate
3.0% Northern Virginia’s unemployment rate
We need to watch these numbers; however, this is one of the reasons that the markets in Beverley Hills, DelRay, and other areas in Alexandria remain strong and why I remain confident about values where we live.
FMHU Financial Markets Hate Uncertainty
778 Drop in stock market on September 29th, now Black Monday after the House didn’t pass the “bail out” bill
-7% The percent in loss that equals 1.2 trillion dollars, but this 7% loss doesn’t even break into the “top ten” of historical daily drops in the stock market. On the other hand, real estate values have never dropped that much in one day.
2,725 This is the number of homes in the greater metro area that have gone under contract since Fannie Mae’s takeover a few weeks ago
~13,000 Number of houses in the metro area that we expect to go under contract in the next 90 days
0 Number of houses that will be sold in Galveston this week and for the foreseeable future
From time to time, we all think that interest rates or tax savings is why most people buy houses. While those reasons are very valid, people by homes for more personal reasons, they need some place to live, their marital status changes, a death occurs, or a job-related relocation requires it.
In the greater metro area, the Metropolitan Regional Information System (MRIS) has 40,000 subscribers, of that number, more than 30,000 are active real estate agents. Of that number, more than one-third hasn’t sold one house this year. Fortunately, my transactions to date equal nearly 4 million dollars in closed sales, and I intend to be included in those 13,000 possible transactions in the next 90 days.
18% Mortgage rates in 1980!
6.25% Today’s conforming rate
98% Percent of fiscally sound banks
PHTLS People Have To Live Somewhere
In 1978, when I first received my Kentucky real estate license, the best rate was 8% with 20% down, and 8.5 for 10% down…and these were very steady rates for long periods of time. In 1980, our pocket-size amortization books from the S&L’s that gave us factors to figure out monthly payments based on variables of term and rate became obsolete. Why? Unfortunately, our books only went up to 10% and interest rates were racing past that high-water mark. In 1981, with the rates so high, inflation was in the double digits, and unemployment was moving higher, the market was all but dead.
Out of self preservation, I moved from Lexington, Kentucky and took a job in DC. That job consisted of buying and selling transferred employee’s homes. We actually sold homes with 14% mortgages. I remember our client, AT&T (think long distance rates then) paid 8 points to offer buy downs on their employee’s home that we took in inventory for resale. My relocation job taught me some valuable lessons, and one of them was people needed to still buy and sell homes. That lesson is helping me know in this market.
So, how many did you guess?
My point in bringing you this information is when you listen to the news and you here the “sky is falling,” hopefully these numbers will give you a different perspective. It’s hard staying positive, but it is a better alternative than sounding like Eeyore.
This is my first entry in my blog. I was thinking about what to discuss and was focusing on the infill debate of North Ridge in Alexandria and my poll below this discussion. Then recently, our government couldn’t do what it supposed to do, lead and legislate, and a lot of negative doubt was sowed into the minds of all of us. I will begin the infill discussion next time.
At our regular Tuesday office meeting our managing broker, David Howell, presented us with some numbers, and I will present them as part of this initial entry. Below are the numbers and you can give them some thought, and then look at the answers and editorial comment.
24.9%
6.1%
4.6%
3.0%
778
-7%
2725
~13,000
0
18%
5.75%
98%
FMHU
PHTLS
We of course had some different answers; the zero answer had the most varied comments! This information was given to us in order to keep our perspective on the market and temper what we read and hear on a daily basis.
***
Now for the answers and editorial, please feel free to make your own comments:
24.9% The unemployment rate in the Great Depression
6.1% Today’s national unemployment rate
4.6% Virginia’s unemployment rate
3.0% Northern Virginia’s unemployment rate
We need to watch these numbers; however, this is one of the reasons that the markets in Beverley Hills, DelRay, and other areas in Alexandria remain strong and why I remain confident about values where we live.
FMHU Financial Markets Hate Uncertainty
778 Drop in stock market on September 29th, now Black Monday after the House didn’t pass the “bail out” bill
-7% The percent in loss that equals 1.2 trillion dollars, but this 7% loss doesn’t even break into the “top ten” of historical daily drops in the stock market. On the other hand, real estate values have never dropped that much in one day.
2,725 This is the number of homes in the greater metro area that have gone under contract since Fannie Mae’s takeover a few weeks ago
~13,000 Number of houses in the metro area that we expect to go under contract in the next 90 days
0 Number of houses that will be sold in Galveston this week and for the foreseeable future
From time to time, we all think that interest rates or tax savings is why most people buy houses. While those reasons are very valid, people by homes for more personal reasons, they need some place to live, their marital status changes, a death occurs, or a job-related relocation requires it.
In the greater metro area, the Metropolitan Regional Information System (MRIS) has 40,000 subscribers, of that number, more than 30,000 are active real estate agents. Of that number, more than one-third hasn’t sold one house this year. Fortunately, my transactions to date equal nearly 4 million dollars in closed sales, and I intend to be included in those 13,000 possible transactions in the next 90 days.
18% Mortgage rates in 1980!
6.25% Today’s conforming rate
98% Percent of fiscally sound banks
PHTLS People Have To Live Somewhere
In 1978, when I first received my Kentucky real estate license, the best rate was 8% with 20% down, and 8.5 for 10% down…and these were very steady rates for long periods of time. In 1980, our pocket-size amortization books from the S&L’s that gave us factors to figure out monthly payments based on variables of term and rate became obsolete. Why? Unfortunately, our books only went up to 10% and interest rates were racing past that high-water mark. In 1981, with the rates so high, inflation was in the double digits, and unemployment was moving higher, the market was all but dead.
Out of self preservation, I moved from Lexington, Kentucky and took a job in DC. That job consisted of buying and selling transferred employee’s homes. We actually sold homes with 14% mortgages. I remember our client, AT&T (think long distance rates then) paid 8 points to offer buy downs on their employee’s home that we took in inventory for resale. My relocation job taught me some valuable lessons, and one of them was people needed to still buy and sell homes. That lesson is helping me know in this market.
So, how many did you guess?
My point in bringing you this information is when you listen to the news and you here the “sky is falling,” hopefully these numbers will give you a different perspective. It’s hard staying positive, but it is a better alternative than sounding like Eeyore.
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