Asking Price vs. Offer Price vs. Sale Price - how much? (real estate market, mortgage broker)

[sholden]

Originally Posted by mcf17

You mean "real wages", as in, wages already adjusted for inflation?

You're basically saying that housing prices should remain flat over time, without any adjustment for inflation, wages, etc. Okay, but why? And why 30 years? Why not 10, or 50, or 100? I mean, based on historical averages over the last 100 years, I'm guessing prices should drop by something like 90%. Sure, why not?

No he's saying they should be proportional to wages. Since wages have increased at less than the inflation, house prices should have also increased at less than inflation.

Note: I don't agree with the claims made, I'm just translating

My opinion is that 1999 was the last non-bubble year, so 2009 prices should be 1999 prices plus ten years of inflation plus some extra because interests rates are a bit lower now. They won't be though, they'll be higher but trending down.

[Lusitan]

Originally Posted by Scott99999

I could see these houses being in the high $400s when you take common incomes for the area into account.

Then that's what you bid, and not a penny more. Don't ruin your financial future to pad someone else's retirement. Prices will adjust soon enough.

[halfoffpeak]

Originally Posted by mcf17

And why 30 years? Why not 10, or 50, or 100? I mean, based on historical averages over the last 100 years, I'm guessing prices should drop by something like 90%. Sure, why not?

30 years because this is the period that CS had the numbers to calculate their index. If they could look further back they would. What is the index that does NOT justify a 50% off the peak? Hmm maybe a NAR one.

**********Bid half off peak******************************

[mcf17]

Originally Posted by sholden

No he's saying they should be proportional to wages. Since wages have increased at less than the inflation, house prices should have also increased at less than inflation.

That's my point, though - the Case-Shiller numbers are not adjusted AT ALL. I don't disagree that housing prices should correlate with core inflation, wages, or a similar index, but his premise is based on what I believe to be a faulty interpretation of the data.

[halfoffpeak]

Originally Posted by sholden

No he's saying they should be proportional to wages. Since wages have increased at less than the inflation, house prices should have also increased at less than inflation.

Note: I don't agree with the claims made, I'm just translating

Well, I have my own issues with way inflation is calculated. But his point is mute as inflation (or rather variables thereof) is embedded in the CS index. So if the index is currently 200 then half of the current price would reflect a historical 100.

**********Bid half off peak******************************

[halfoffpeak]

Originally Posted by mcf17

the Case-Shiller numbers are not adjusted AT ALL.

The housing prices CS index is inflation adjusted.
This is from his book



One needs a ballpark measure to value a future purchase. I think 50% is a good one. If one deviates above there is a high risk of not recovering their investment.

**********Bid half off peak******************************

[mcf17]

Originally Posted by halfoffpeak

Well, I have my own issues with way inflation is calculated. But his point is mute as inflation (or rather variables thereof) is embedded in the CS index. So if the index is currently 200 then half of the current price would reflect a historical 100.

**********Bid half off peak******************************

My point is neither "mute" nor moot. The data you referenced is not adjusted for inflation.

[mcf17]

Originally Posted by halfoffpeak

The housing prices CS index is inflation adjusted.
This is from his book



One needs a ballpark measure to value a future purchase. I think 50% is a good one. If one deviates above there is a high risk of not recovering their investment.

**********Bid half off peak******************************

Did you notice on that graph that the base period (t=100) is 1890?

[halfoffpeak]

Originally Posted by mcf17

Did you notice on that graph that the base period (t=100) is 1890?

Right and so is 2000. So?

According to the index in 2006 we were 100% above the 1890/2000 price. We now need a 50%
correction and this is without taking into account a relative downturn to NY economy that
required higher premiums. SO:

**********Bid half off peak******************************

[halfoffpeak]

Originally Posted by Older&Wiser

I think that with all your postings about
you are adding to the housing woes of a lot a of folks. If this is your opinion could you please tone it down; the country is in bad enough shape. It is almost like you are taking pleasure in it by repeating that phrase.

I am not sure how my opinion adds to the housing woes of the country. It is of the interest of all that we return back to fair valuations. I feel sorry for those who bought in this bubble as for those who were priced out of this market for so long because they were prudent enough to avoid risky purchases.