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I think if a RE agent wanted to mess with people and make "easy money" they would talk sellers into setting prices lower rather than higher so they would sell faster and easier.
The realtor is not interested in setting lower selling prices since that would proportionately reduce their commission earned. Remember, the RE agent is in it for themselves, they could give two flips about the seller, it's all about the $$$. Tell a RE you want to list your house, you tell them the price, not them - betcha you get a "discussion" about leaving money on the table, like my neighbors who could have sold their house, but listened to the agent, now two listing agents later, the house has been marked down more times than the stuff at National Wholesale Liquidators and they still can't sell it.
The realtor is not interested in setting lower selling prices since that would proportionately reduce their commission earned. Remember, the RE agent is in it for themselves, they could give two flips about the seller, it's all about the $$$. Tell a RE you want to list your house, you tell them the price, not them - betcha you get a "discussion" about leaving money on the table, like my neighbors who could have sold their house, but listened to the agent, now two listing agents later, the house has been marked down more times than the stuff at National Wholesale Liquidators and they still can't sell it.
I know a couple of realtors and they say that usually it is the seller who wants to price the home way too high and refuses reasonable offers.
The realtor is not interested in setting lower selling prices since that would proportionately reduce their commission earned. Remember, the RE agent is in it for themselves, they could give two flips about the seller, it's all about the $$$. Tell a RE you want to list your house, you tell them the price, not them - betcha you get a "discussion" about leaving money on the table, like my neighbors who could have sold their house, but listened to the agent, now two listing agents later, the house has been marked down more times than the stuff at National Wholesale Liquidators and they still can't sell it.
This discussion reminds me of the book Freakonomics: A Rogue Economist Explores the Hidden Side of Everything.
Using the data from the sale of 100,000 homes in Chicago, the authors found that homes owned by real estate agents stayed on the market an average of 10 days longer and sold for 3+% more than the homes of their non-real estate agent clients. In the book's Introduction, they write:
Quote:
When she sells her own house, an agent holds out for the best offer; when she sells yours, she encourages you to take the first decent offer that comes along. Like a stockbroker churning commissions, she wants to make deals and make them fast. Why not? Her share of a better offer--$150*--is too puny an incentive to encourage her to do otherwise.
*Based on $300,000 home with 6% real estate commision and 1.5% of that commission going directly into selling realtor's pocket versus the home selling for $310,000.
For more information, read the chapter entitled, "How is the Ku Klux Klan Like a Group of Real Estate Agents?" (Note: nothing to do with racism!)
Thanks for posting the link. I'm quite familiar with quantitative easing, hyperinflation, etc. I have a feeling history will repeat itself. We will not see slow, controlled inflation, but we will not see serious hyperinflation either. Instead, we will see something in between, where the inflation rate and the fed funds rate could rise as high as 15% to 20%. We have seen this before with Paul Volker, and we may likely see it again for a while. It would be a scary time for those who actually know and understand what is going on, but it has the potential to fix many of the financial problems we have gotten ourselves into...that is until the next time we screw it all up again.
The wild card is the debt... It's shocking to see the vast majority of new mortgages being FHA with our national debt quickly approaching our GDP. It's piling up and I understand the concept of printing money to generate inflation so the debt is counter balanced by the inflation - but it's just so much of it... and it's being compounded by the unemployment. Debt on it's way up and GDP on its way down.
I think you have to go back to WWII to where the national debt was equivalent to our GDP? That's very telling considering you're talking about the 80s as a precedence for how we get out of this... In the 80s the national debt was less then HALF our GDP! There's only so much fancy accounting you can do around so much debt when you don't have any liquidity to offset it.
At the end of this, a rise in house prices due to inflation is only going to compound the issues. You can make the dollar almost worthless and pretend the price went "up"... but seriously, that's a joke and a serious joke on the consumer.
You should pray that does not happen here in the States - not only will it crush house prices, it will crush the bond market and equities market - people will be house poor and have no pension either - including the supposedly secure government workers. The government will most likely confiscate gold and precious metals as well.
Im not sure what you mean. What should not happen in the states? The Germany scenario or the 15-20% inflation? Really neither one should happen as I believe in the Austrian School of Economics philosophy. If you are saying that a Germany type scenario would crush housing prices, you would be wrong. If a loaf of bread is a trillion dollars, the nominal price of a house would be astronomical! That is not crushing housing prices, it is the opposite. On the other hand, most people who already HAD mortgages would be able to pay off their $250K mortgages by selling a pack of gum. This is moot though, because if this happened, our whole way of life is over...as it was for the Germans.
The 15% inflation, like we had in the 80s, initially caused housing prices to go down (not much for some reason) due to the high mortgage interest rates, but then once people started making money on Wall Street and finally, the people on main street started getting raises to meet the inflation, the housing market started to gain again. The fed's current target is to keep inflation at around 3%. Lets see how well they keep to that.
I personally dont agree with this Keynesian method of running a countries economy. Much like SilverBulletZ06 I prefer a more conservative approach. As I said, I follow the Austrian School. But until enough people get together and force our government to reign in the Fed's power, that is the system we will use, because that is the system that benefits big business, and not the people.
The wild card is the debt... It's shocking to see the vast majority of new mortgages being FHA with our national debt quickly approaching our GDP. It's piling up and I understand the concept of printing money to generate inflation so the debt is counter balanced by the inflation - but it's just so much of it... and it's being compounded by the unemployment. Debt on it's way up and GDP on its way down.
I think you have to go back to WWII to where the national debt was equivalent to our GDP? That's very telling considering you're talking about the 80s as a precedence for how we get out of this... In the 80s the national debt was less then HALF our GDP! There's only so much fancy accounting you can do around so much debt when you don't have any liquidity to offset it.
At the end of this, a rise in house prices due to inflation is only going to compound the issues. You can make the dollar almost worthless and pretend the price went "up"... but seriously, that's a joke and a serious joke on the consumer.
+1
Great post. The huge debt on a global scale can make a big difference.
Im not sure what you mean. What should not happen in the states? The Germany scenario or the 15-20% inflation? Really neither one should happen as I believe in the Austrian School of Economics philosophy. If you are saying that a Germany type scenario would crush housing prices, you would be wrong. If a loaf of bread is a trillion dollars, the nominal price of a house would be astronomical! That is not crushing housing prices, it is the opposite. On the other hand, most people who already HAD mortgages would be able to pay off their $250K mortgages by selling a pack of gum. This is moot though, because if this happened, our whole way of life is over...as it was for the Germans.
The 15% inflation, like we had in the 80s, initially caused housing prices to go down (not much for some reason) due to the high mortgage interest rates, but then once people started making money on Wall Street and finally, the people on main street started getting raises to meet the inflation, the housing market started to gain again. The fed's current target is to keep inflation at around 3%. Lets see how well they keep to that.
I personally dont agree with this Keynesian method of running a countries economy. Much like SilverBulletZ06I prefer a more conservative approach. As I said, I follow the Austrian School. But until enough people get together and force our government to reign in the Fed's power, that is the system we will use, because that is the system that benefits big business, and not the people.
A couple of things: I was implying that if we were to have runaway inflation, exactly as you state, our way of life would be over. I too, am very familiar with that picture of the person carrying the wheelbarrow full of deutschemarks used not to go to the bank, but to buy a loaf of bread.
As far as Fed Target - well anything they target as recent history has shown has been way off mark. If they had to shoot anything to eat in the real world they would die of starvation. Personally, I don't believe they have any credibility - that is why there is a disconnect between official government propoganda and internal grumbilings about what is really happening in the economy. Today's report is suspect, first quarter GDP was first calculated at 3%, today's revised report indicates it is 2.7% - that is anemic in terms of a recovery. Coming out of the '81-82 beating, the GDP grew at 8.5%, its wishful thinking on the part of the government to even contemplate such a scenario this time around, nor is there any momentum on the horizon to enforce such a view. We are in for a lousy enviornment for some time to come, and dont' look to Asia to be your savior - their not, how did China go from double-digit GDP growth to mid single digits in the last 6 months? Europe is barely holding on - the Germans are not going to bail out the entire Union.
I am conservative as well, perhaps overly, but at this stage in the game, it's going to get much worse, before it gets better. Cash is King, nominal bonds are not that much far behind it - everything else is suspect, especially with all these artificial valuations being propped up by poorly conceived government policy. Rates are going lower in the market, banks will be lowering rates even further - welcome to Japan.
The wild card is the debt... It's shocking to see the vast majority of new mortgages being FHA with our national debt quickly approaching our GDP. It's piling up and I understand the concept of printing money to generate inflation so the debt is counter balanced by the inflation - but it's just so much of it... and it's being compounded by the unemployment. Debt on it's way up and GDP on its way down.
I think you have to go back to WWII to where the national debt was equivalent to our GDP? That's very telling considering you're talking about the 80s as a precedence for how we get out of this... In the 80s the national debt was less then HALF our GDP! There's only so much fancy accounting you can do around so much debt when you don't have any liquidity to offset it.
At the end of this, a rise in house prices due to inflation is only going to compound the issues. You can make the dollar almost worthless and pretend the price went "up"... but seriously, that's a joke and a serious joke on the consumer.
In the near term, we have a deflation problem. In the long run, we are all dead - as you say, we have a major debt problem.
Boy my little post really got an interesting debate going. yes our economy is in real trouble and I hope I can sell my house, only time will tell.
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