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The "facts" below come from NAR in an effort to dispel the perceptions of the public. Right or wrong, perceptions equal reality so letting perceptions based on inaccurate information rest unchallenged is a bad thing. Here are the facts and some narrative (not mine):
"For the past 30 years, the median price of existing homes has increased an average of more than 6 percent every year, and home values nearly double every 10 years.
Home prices typically beat inflation by one or two percentage points.
Housing sales in 2007 are expected to be the fifth-best on record.
While NAR expects a 1.9 percent decrease in housing prices, that's hardly the sickening slump the press makes it out to be.
If the national median home price is about $217,000, a 1.9 percent decrease would make it worth about $212,877, on a national scale. That's $4,123, or about the same annual hit you just took on your SUV.
If you've owned your home for only a year, you've got reason to be upset. But if you've owned your home for 10 years, as most buyers do, you've accumulated $108,500 in capital gains, which are non-taxable under $250,000 thanks in large part to NAR lobbyists. Take away the 4,123, and you're still $104,377 ahead!
So if your Chevy Tahoe doesn't have your panties in a twist, housing shouldn't either. Especially when it's expected to go up 3.1 percent in 2009, which I guarantee, your SUV won't do."
Now my comments. Rising house prices are good for the economy right? Sure, they represent growth in an industry, equity for home owners and because it is one economic engine, it propels other segments of the economy and things go round and round. All is good.
Now lets go back a few years. Remember when the average family could not afford to own a home in most major cities? What happened? Creative financing. Robo signed loan contracts, bad loans and so on. Of course rising prices were totally to blame but lets not kid ourselves, it had a lot to do with it as a catalyst.
Back to the NAR facts. If true, and there is no reason to disbelieve them, a house doubles every ten years, would not incomes need to increase at the same rate to maintain a ready supply of buyers for those homes? I mean, new homes built ten years from now aren't going to be priced using today's values are they? no, the will also increase in price. So where do the new buyers come from? The short answer is they don't come from anywhere. If there were always ready buyers with sufficient income to buy ever increasingly higher priced homes things would always go up. As history proves time and time again, things don't always go up.
I had to laugh about the comparison to the Chevy Tahoe. First, only a fool thinks of a car as an investment. Notice how they compared a house to a Chevy instead of gold? Hmmm, as soon as you compare investment to investment things change. So much for facts. Well, the facts were correct but the commentary wasn't and in fact was deliberately misleading. That brings me to my point. Misrepresentation and misleading the public.
Facts are wonderful things until industry (in this case real estate industry) media outlets get hold of them and twist them to manipulate them for self serving purposes. Sure, lets compare a Chevy Tahoe to a house, no one will figure that out. I bet more than a few gullible people will think, gee, dump the Chevy but most will see through it and that hurts whom? Yup, the real estate industry that NAR is trying so hard to illustrate as honest, for the home buying public and real estate professionals. Well, it is real estate pros that came up with the comparison in the first place. Now you know one reason why so many are inherently distrustful of the real estate industry. Sometimes you are your own worst enemy.
Back to incomes and house prices. Right now few locations in the USA see house priced with 100% appreciation going back to bubble days. Now take that 10 year double the price appreciation. Price itself is only one component that should be take into account. That chevy tahoe? I bet the buyer didn't spend many times the purchase price in interest did they? Take the average house bought 10 years ago. Subtract the interest paid and things look a little different don't they? Yeah, that Chevy Tahoe was paid off 5 years ago and you own it. That house? You've barely touched the principal. See what happens when you twist facts? Now how about that gold? Investment to investment. You bought the gold, own it and watch it appreciate. The house? You buy it and pay, pay, pay interest. In fact you pay interest on the real estate agents commission since without it you'd pay less for the house. Yes, that commission is built in so can;t forget that.
Am I against buying a house? Heck no and in fact I've bought them and was happy to do it. That isn't the issue, the issue is that real estate industry media is hyping house price increases. So house prices are going up faster than incomes. Incomes aren't going to catch up unless they go to double digit pay check raises by this time next year, Double digit people, not single digits. Who thinks you are going to get a double digit pay increase by next year? A few of you will. So while you might get a 10% pay raise, do you think everyone else will too? That isn't going to happen and not even the most optimistic forecasts call for that.
But say you got 10%. Wonderful. House prices are supposedly going up an average of 6%. The difference is that the 10% you get pales in comparison to the 6% operating on hundreds of thousands of dollars as the house price. Catch up? In what century.
The economy can't sustain a 6% house price increase year after year. The bubbles in various sectors of the economy are happening more frequently. The housing price bubbles are happening more frequently, some call it "correction". Now remember one thing, a 6% increase in house prices equals a 6% increase in commissions. When was the last time you go a 6% pay increase? There are hundreds of thousands, perhaps millions of Americans wait to get a job let alone a 6% pay increase.
Nothing I've said is meant to disparage what real estate agents make. I do however have serious concerns about how they make it and the way they fight to insure no one rocks the boat.
The next time someone talks to you about integrity and duty and all that, read a little with an open mind and do some due diligence on the obviously faulty comparisons to things like buying a car vs buying a house and ask why don;t they compare apple to apples instead of apples to oranges? It isn;t like they don't know exactly what they are doing or saying. They know exactly what.
A house sells today for $300,000. Two years later the owner wants to sell because it is worth so much more and it is time to upgrade? Hey, it happened only a few years ago all over the place.
What contributed to the price increase more than anything else? Can you say commissions paid? That owner has to price their house a minimum of 6% higher just to break even. Who sells to break even?
What contributed to the price increase more than anything else? Can you say commissions paid? That owner has to price their house a minimum of 6% higher just to break even. Who sells to break even?
Tell this to all the people who've had to sell at a loss the last few years or short sale their home. Anyone can save money and do a FSBO if they want. No one forces anyone to use a RE Agent.
by Mack Knife.....Am I against buying a house? Heck no and in fact I've bought them and was happy to do it. That isn't the issue, the issue is that real estate industry media is hyping house price increases. So house prices are going up faster than incomes. Incomes aren't going to catch up unless they go to double digit pay check raises by this time next year, Double digit people, not single digits. Who thinks you are going to get a double digit pay increase by next year? A few of you will. So while you might get a 10% pay raise, do you think everyone else will too? That isn't going to happen and not even the most optimistic forecasts call for that.
Homeowners want their homes to increase in value, both as a hedge against inflation, and hopefully to make a profit.
You appear to have two issues;
one is you object to real estate commissions,
and the other seems to me that you would like a socialistic society where home prices, sales commissions, rents, etc are controlled by the government and stay static.
I don't think that's going to happen in this country, and that's why so many people, including our forefathers immigrated to this great country. Naturally there are expenses involved in selling a home, which includes preparing the home for sale, the sale expense, and the escrow expenses. As Rakin stated, the sale expense can be avoided by selling FSBO. And they don't have to prepare their home. They can sell it as is. But they cannot get rid of the escrow costs.
Housing prices are controlled by supply and demand. Some don't understand that but it is a demonstrable fact. The last big example was in 2005 when supply began increasing with sales declining, and prices were still increasing, up until April 2006 when the bottom dropped out. It was greed of many buyers who thought they could get rich quick by buying and flipping that fed the surge.
Then in 2011, supply was low, price was low, and demand began picking up. In Sept 2011 the Phoenix area "annual median" price was 110k. Today the "annual median" price is $140k. The astute investors took advantage of those very low prices (pre year 2000), and today, even though the prices are at the January 2003 level, some people living in the Phoenix area are complaining that prices are too high.
But the astute buyer, who understands real estate market dynamics, knows that these prices will continue to rise due to "Supply and Demand". They will probably rise slower than last year's pace (in the Phoenix market) because as prices increase, more sellers will put their homes for sale which will increase supply, which will tend to slow price increases. But there is still a pent up demand with buyers waiting for houses to come on the market. So unless there is a national disaster, or the demand all of a sudden ceases and the inventory increases, prices will increase. This is not Realtor hype; this is statistical data which is available for the Phoenix market to anyone by subscription.
Buyers who make an offers on a FSBO will take at least 6% right off the asking price.
This is simply not true... a comp is a comp. You of all people should know that!
I agree that NAR and "facts" in the same sentence is oxymoronic. As a lobby group, NAR may do things like "protect our interest tax deduction", but by and large the association is a bloated dinosaur that needs to step into the next century and completely overhaul the entire process. Their "portal" (realtor.com) is a complete and utter joke. This overhaul should include commissions... when the primary costs of "marketing a home" and "running the business" for a realtor are MLS and NAR related - there is a serious disconnect from technologies that are available to these companies today. They simply rely on that old archaic ideal of "well, this is how we always did it".
...
Nothing I've said is meant to disparage what real estate agents make. I do however have serious concerns about how they make it and the way they fight to insure no one rocks the boat....
What contributed to the price increase more than anything else? Can you say commissions paid? That owner has to price their house a minimum of 6% higher just to break even. Who sells to break even?
There's a lot of bs in what you just posted. It's too long to bother responding to the whole thing so I'll focus on:
1-Give me evidence that the agents are fighting to rock the boat? I know myself and at least one other on here offer flexible commission schedules. I have a feeling you don't even know what kind of margins agents work on.
2-You say commissions drive up prices every year? That's the dumbest thing I've read today. Supply and demand fuels pricing, whether it's up or down. Demand up/supply down= appreciation. Demand down/supply up=Depreciation. If agents really controlled prices I can assure you the last 6 years would have been different. I know you're here with an agenda trolling against agents. I generally try to avoid the trolls but I couldn't let your ignorant comments pass.
This is simply not true... a comp is a comp. You of all people should know that!
I agree that NAR and "facts" in the same sentence is oxymoronic. As a lobby group, NAR may do things like "protect our interest tax deduction", but by and large the association is a bloated dinosaur that needs to step into the next century and completely overhaul the entire process. Their "portal" (realtor.com) is a complete and utter joke. This overhaul should include commissions... when the primary costs of "marketing a home" and "running the business" for a realtor are MLS and NAR related - there is a serious disconnect from technologies that are available to these companies today. They simply rely on that old archaic ideal of "well, this is how we always did it".
Sorry to insult your sensibilities with the truth about FSBO buyers deducting the commission; but you're all wet.
This is simply not true... a comp is a comp. You of all people should know that!...
This overhaul should include commissions... when the primary costs of "marketing a home" and "running the business" for a realtor are MLS and NAR related - there is a serious disconnect from technologies that are available to these companies today. They simply rely on that old archaic ideal of "well, this is how we always did it".
True- a comp is a comp. That being said when their isn't an agent the seller expects to make more money because they aren't paying a commission. The buyer expects to get the savings since the seller isn't having to pay a commission. In my anecdotal evidence the seller usually comes off more and the buyer gets more of the savings than the seller.
Actually the MLS and NAR expenses equate to less than 2% of my overall cost of running a business. You make good points sometimes but since you've never been an agent you aren't qualified to speak about the costs or challenges of running a real estate business. This post was made in a factual tone, I say that in hopes it doesn't come across as anything but that.
This is simply not true... a comp is a comp. You of all people should know that!
I agree that NAR and "facts" in the same sentence is oxymoronic. As a lobby group, NAR may do things like "protect our interest tax deduction", but by and large the association is a bloated dinosaur that needs to step into the next century and completely overhaul the entire process. Their "portal" (realtor.com) is a complete and utter joke. This overhaul should include commissions... when the primary costs of "marketing a home" and "running the business" for a realtor are MLS and NAR related - there is a serious disconnect from technologies that are available to these companies today. They simply rely on that old archaic ideal of "well, this is how we always did it".
Here is a piece of advice for you. If you ever consider becoming a real estate agent find a couple of real estate classes that deal with how to set up and run the independent sales agent business. Dig into detail of all the equipment, software, web sites, blogging sites, subscriptions for web sites, IDX sites, etc., that will be required, plus the cost of marketing yourself to get clients, and marketing sellers homes.
I'm trying to prepare you for sticker shock that so many have when they come out of the "license" course thinking they're going to get rich, and end up dropping out of the business in a year because they had no clue as to the expense and knowledge required to run an independent contractor real estate sales business.
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