Timing the Market, A Banker’s Viewpoint

September 1, 2008

Credit for this post really goes to 3 Oceans contributor Eric Trailer who sent me this content in a letter this week. My clients got it last week, and the blogoshpere can now benefit. We can assume that Eric has better things to do on Labor Day than blog. I’m guessing something involving his lovely wife and son . . .

To see current market data and price trends over the past year for local communities and confirm or refute Eric’s prognostications on the local market in Palo Alto and the surrounding communities,

CLICK HERE to see real-time market data, courtesy of our friends at Altos Research.

As you have likely been hearing, there continues to be more and more evidence that it will cost prospective home buyers more to purchase a home in select areas of the Bay Area as they allow time to go by.
Why? Let’s look at the basic reasons, then review an example:

1.        The median price across the board in Palo Alto and the surrounding communities has risen since the beginning of the year.

2.        On a national basis, the trough of the market was reached in April.

3.        The conforming loan limit will DECREASE over $100,000 in 2009 to $625,000.

4.        Rates have risen about .5% since the beginning of the year, despite the increase in the conforming loan limit to $729,750

5.        Loan qualifications are becoming more restrictive with each passing week.

6.        More restrictions on loans and a tighter supply of money forces rates to go up

7.        Because loans require more work to process them (requirements today are 4x what they were a year ago), rates will go up.

8.        Inflation is the number one concern of the Fed, and should be the number one concern for all of us.

Let’s say for a moment that you agree that rates are on the rise, but feel as though prices may come down on a $1mm property today; thus, you want to wait. Let’s further assume that you are right and the future price is $950,000, but rates have increased .5% at that future time. Using 20% down, waiting just cost you an ADDITIONAL $117 per month-over $1,400 per year.

But now let’s be more realistic given the appreciation rates of desirable areas of the Bay Area. If rates increase and the $1mm home appreciates to $1,050,000, you are looking at an ADDITIONAL $550 PER MONTH-OVER $6,000 PER YEAR!

What’s the take-away here?   Price matters much less than true cost… My motto has always been that it always pays off to buy sooner than later, provided your holding period is greater than four years. And to prove that I walk the walk, I am happy to share my personal situation written as an article titled, “How to Afford a Home in Palo Alto Without a Trust Fund.”

Kindest regards,

Eric

To call Eric on his walking the walk comment, and get a copy of his article, “How to Afford a Home in Palo Alto Without a Trust Fund.”, click on his pretty picture over there in the contributor column to send him an email.

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Written by Chris Iverson, Realtor · Filed Under * Type of Content, Altos Research, Articles, Buy vs. rent, Buyer and seller tips, Buyers, Companies and products, Consumer, Financing Process, For buyers, Home buying, Lenders, Market updates, Mortgage, Mortgages, Palo Alto, Personalities, Real estate, Strategy, Technology | Leave a Comment 

Today’s Real Estate Gossip: Move.com Does A Microsoft; Foxtons Does A Countrywide

September 27, 2007

Exciting times indeed in real estate! Market woes, mortgage troubles, bankruptcies, lay-offs…

Foxtons, a discount real estate brokerage, lays off works

Adding to the bad news is that Foxtons, the UK-based discount real estate brokerage, is laying off 350 employees from its New York and New Jersey operations. Some have predicted that this down market will weed out the non-traditional players [see comments section], Redfin being the company most commonly named. Michael Wurzer, meanwhile, says his long-time prediction of declining agent numbers may finally be coming true.

move-active-rain.jpg

Inman reports that Move.com, the 800-pound gorilla of the business, is being sued by Active Rain, the utterly addictive 50,000-strong online real estate community. It has been an open secret in the real estate world that Move.com was positively salivating over Active Rain’s strong viral network of real estate professionals, and that negotiations had broken off. Now the full story has come out. Active Rain’s side of the story is, essentially, that Move.com took a page out of Microsoft’s playbook of the 1990’s, before they got smacked down by some unfavorable court rulings: court a smaller company, find out everything you can about its business model, technology, and market…then break off the talks at the end and do it yourself. Move.com, meanwhile, says that nothing Active Rain showed them during negotiations was even remotely earth-shattering.

ActiveRain’s official statement to the ActiveRain community: (login required)

Members of the ActiveRain Real Estate Community,

Recently Inman News reported on a lawsuit brought by ActiveRain against Move, Inc. Of course reports of this nature raise a lot of questions, and it has always been a part of our culture to openly discuss things with our community. We would like to be able to discuss these issues more with you. However, since this is a matter of pending litigation, our counsel advises us not to comment.

Should you be interested in the positions of ActiveRain and Move, Inc. in this lawsuit, attached are ActiveRain’s Complaint and Move, Inc.’s Answer filed with the Court in this proceeding.

We thank you for your continued support and understanding.

ActiveRain members, by and large, appear to be supportive of the company, suspicious of Move.com’s intentions, but perhaps a bit concerned that ActiveRain would have considered consorting with Move.com in the first place. The delightful and ever-opinionated Laurie Manny says: [boldface mine]

Imitation is the most sincere form of flattery.

How did Realtor.com/Move.com expect to become successful without us, the membership? Realtor.com has been repelling Realtors with their high prices and lack of performance for well over a year now. Free blogs - for how long? They do not rank up on the engines now on their own, they need AR to do that. What are they offering the membership that we do not already have? Ok, so maybe in about 6 months we would all acheive similar rankings to what we already have?

I think you guys at AR are fantastic, but I have to ask. Why the hell did you jump into bed with such losers to start with? If they were going to pay it somebody else would have as well.

Live and learn.

ActiveRain complaint

Move.com response

Other commentary on the same story:

Pictures courtesy of thisfabtrek.com, foxtons.com, gorillahub.com, move.com, and activerain.com

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Written by Kevin · Filed Under Active Rain, Countrywide, Foxtons, Industry, Move.com, Redfin | 27 Comments