[ParkTwain]

Originally Posted by bumpercar

Absent affordability, sustained velocity requires appreciation, otherwise why would anyone buy a house they couldn't afford when there's no prospect for appreciation and they could rent for less? An argument to the contrary is an argument that people will act against their own financial interests.

"Sustained velocity requires appreciation" is simply not true/obvious, in theory nor in fact. (1) There might be newfound employment expansion in a town or city previously without economic expansion that results in an influx of new residents, resulting in an uptick in sales if not in price. (2) A person's economic evaluation of a home purchase versus renting also includes tax considerations and therefore might still result in a home purchase in the context of falling prices. (3) A person might also buy a home for noneconomic reasons (proximity to other family, uniqueness of a property or neighborhood, etc.). (4) A person might buy a home with the idea that near-term falling prices are not significant compared to their expected period of ownership (which might include inheritance by an heir).

[olecapt]

Originally Posted by bumpercar

The statement was made within the context of affordability, which was the title and focus of my entire message. Absent affordability, sustained velocity requires appreciation, otherwise why would anyone buy a house they couldn't afford when there's no prospect for appreciation and they could rent for less? An argument to the contrary is an argument that people will act against their own financial interests.

No it was not . You added a bit on affordability to the end. You were obviously incorrect so you modified your statement.

It's poor polemic form to extract a sentence and then subject that single sentence to the entire weight of an argument. Doing so exposes bias and weakens the strength of one's position.

It is poor rhetoric to modify and argument by attempting to expand an aside into the main thrust.

These markets have seen sustained appreciation.

No they have not. Both have had years long flat or down times. And sales continued...down some but not by half. Now it is of course reasonable to assume that 2004/2005 were overly entrhusiastic and we should not expect to maintain those sorts of levels. On the other hand the homes coming onto the market are reasonable for years past. Thus we are failing to sell to a balance. A properly functioning market would be one between the present levels and the exuberance of 2004/2005.

The principle reason for this is a belief on the part of the potential buyer...particularly the first time one...that the market is going to come down in price a lot more. I have more than enough exposure to people considering a home to know this is true. And at the present I generally counsel them to wait. If they have no personal pressures forcing them to a purchased home I am reasonably sure they will not lose a thing by waiting until spring or a clear uptick.

Right, but the problem is people can't afford a median-price house. You can say they will buy below the median, which of course some will, but if there aren't enough homes available below the median price then total sales will be below the median volume and the median price will be distorted higher.

You seem utterly convinced that there is a relationship between a median income and purchasing a median house. But you offer no argument as to why such a piece of silliness is true. Many well able to buy a median or better home chose not to. Economically that may be a wise decision. Then again people who leveraged all to hell and gone in 2002 made fortunes. In a couple of transactions they effectively built their retirement. And they did not and are not likely to lose it in the present downturn.

Of course there are enough homes beneath the median. Think about median a bit. Now if the median rises out of sight...a different story. But that has not happened has it? There are a group of people who suffers as this goes on. But they are no where near the median income. There were a set of people who suffered before the runup. At a lower income but none the less real. There are a class of people who are forced to rent. And they are likely to be around regardless of how the price of homes moves.

The prospective home shopper who buys at the margin for fear of missing out on the next speculative boom is long gone. Surely there will be another speculative mania but it will arrive in a different asset class. Without a mania, real estate volume in a typical market will be driven by new home buyers.

Again that is silly. The population continues to grow newbys as time passes. And they will flood into the market past all good sense at the first significant upturn. Do you guys think human nature has been reconstructed by a minor blip in the housing market?

What we are doing at the moment is stacking the cords of wood for the next fire. When it catches it will be a doozy.

[bumpercar]

Originally Posted by ParkTwain

"Sustained velocity requires appreciation" is simply not true/obvious, in theory nor in fact. (1) There might be newfound employment expansion in a town or city previously without economic expansion that results in an influx of new residents, resulting in an uptick in sales if not in price. (2) A person's economic evaluation of a home purchase versus renting also includes tax considerations and therefore might still result in a home purchase in the context of falling prices. (3) A person might also buy a home for noneconomic reasons (proximity to other family, uniqueness of a property or neighborhood, etc.). (4) A person might buy a home with the idea that near-term falling prices are not significant compared to their expected period of ownership (which might include inheritance by an heir).

If you can't afford something then you can't buy it. Is this statement really refutable? This doesn't change if (1) you move to a new city [you still can't afford the house in the new city] (2) get a tax break [if you still can't afford the house after the tax break] (3) really like the neighborhood [you still can't afford the house even if the neighborhood is adorable] (4) will be living there a long time [you can't live there a long time if you can't make your mortgage payments]

I'm being silly. Perhaps we just have a different notion of what unaffordable means. By unaffordable I don't mean "uncomfortably affordable", as in stretching to make the house payment. I mean not having the funds to buy the house with a huge cash down payment and not having the income ratio to secure a mortgage now that the era of free money has past.

[ParkTwain]

You were focusing on the median price, so I thought that was your metric for affordability.

[olecapt]

Originally Posted by bumpercar

If you can't afford something then you can't buy it. Is this statement really refutable? This doesn't change if (1) you move to a new city [you still can't afford the house in the new city] (2) get a tax break [if you still can't afford the house after the tax break] (3) really like the neighborhood [you still can't afford the house even if the neighborhood is adorable] (4) will be living there a long time [you can't live there a long time if you can't make your mortgage payments]

I'm being silly. Perhaps we just have a different notion of what unaffordable means. By unaffordable I don't mean "uncomfortably affordable", as in stretching to make the house payment. I mean not having the funds to buy the house with a huge cash down payment and not having the income ratio to secure a mortgage now that the era of free money has past.

You buy a smaller house. There is no particular reason why an individual with a median income must buy a median priced house. They are different medians. You buy what you can afford. And some people at median incomes may well be able to buy a median house. Others can't. So what?

[ParkTwain]

Isn't it more like, you can afford what the bank says you can afford. The "bank" was WIDE OPEN for business the last few years.

[bumpercar]

Originally Posted by olecapt

No it was not . You added a bit on affordability to the end. You were obviously incorrect so you modified your statement.

The title of my message was "The bottom line is affordability". LOL.

Originally Posted by olecapt

You seem utterly convinced that there is a relationship between a median income and purchasing a median house. But you offer no argument as to why such a piece of silliness is true.

Many an amateur gardener died penniless in the 17th century, clutching a wad of wilted tulips, waiting patiently for the embers of the forlorn mania to rekindle. Good luck. Perhaps we'll see the laws of economic reality repealed once again in our lifetime. In the meantime I suggest you learn a trade.

[bornandraisedinphoenix]

Originally Posted by beach08

The East Coast is in a huge slump, we have Realtors stating even the top of the re-sale listings, immaculate homes, ready to move- in condition, priced well...are on the market for weeks and weeks, weeks,weeks without a showing. Where as historically the 1st week to 3 weeks is typically where they see the majority of activity. I think I comprehend what caused the downward market, but to be honest I am confused or should I say don't understand why there are NO Qualified Buyers. Are greedy investors, banks, lenders, Realtors, etc. the root cause...by allowing individuals to buy a home that ,under normal standards would have never qualified, so therefore everybody and there brother jumped on the wagon regardless of financial ability. Prior to Sub-prime, the Realtor was always the 1st line of defense to ensure buyers were qualified and then lenders opened the doors and everyone walked in and jumped on the money wagon. Now the entire economy has been affected by ill-will. The only people have have pity for are the poor legitimate homeowners that are now trying to sell for one reason or another and cannot...so who gets screwed, because of greed... I
f unemployment is at a low, mortgage rates are lower than June 06- 6.74% -East Coast, July07- 6.37%., prices are down..., I would think this would benefit the buyer?

I believe it was greed that has turned the re market to crap. RE Agents fueled that fire that destroyed the housing market. A bunch of agents would get together, buy something they were called in to list, did a crap job remodelling it, and then sold it at an inflated cost. The average homeowner got talked into the great market in the SW, and now will pay the price. Fortunately, some of these greedy creeps got in too deep, and will lose their ***** HAHAHAHAHAHA

[olecapt]

Originally Posted by bumpercar

The title of my message was "The bottom line is affordability". LOL.

Which in no way speaks to your first paragraph. I would LOL but I don't ever do that...kinda silly.

Many an amateur gardener died penniless in the 17th century, clutching a wad of wilted tulips, waiting patiently for the embers of the forlorn mania to rekindle. Good luck. Perhaps we'll see the laws of economic reality repealed once again in our lifetime. In the meantime I suggest you learn a trade.

And this speaks how to your inability to grasp that medians of different set do not have a causal relationship?

Ahh yes a trade. Perhaps if you were good at one? No too much to hope for.

[gulfer]

Blaming Real Estate Agents for the RUN UP??? What is that? People bought with loose money, sometimes liar loans, and bought what they could not afford. Many many books say 3:1 ratio for home loans. Meaning if you make 50K - you can afford a 150K home. So if you make 50K in Vegas and buy a 300K home - guess what? You will be house broke. The only people to blame are the buyers. They saw instant equity and never thought what would happen next. Ask the stock holders who bought Yahoo when it was over 300 a share then steadily fell to less then 40. If you gamble like that...you get get what you ask for.