Buy now or be priced out forever (3%, investment, commission)
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I'm going to fire a real estate agent for this. Mysteriously, she has found an excuse to not go with me to look at a house I'm interested in because she feels her share of commission a $75K house isn't worth her time. I informed her of what I'm interested in, with one of the criteria being cost around $100K or lower. I don't think she has notified me of a listing for less than $99,999. However, she has sent me quite a few listings near $150,000 thinking doing so is going to persuade me to spend more. I'm paying cash. I want money left over to do a few things to the house I do end up buying. I don't think what I'm looking for in the overall housing market, especially here in Sacramento, is unreasonable.
And the second major annoyance is her constantly telling me ANYTHING is a good INVESTMENT because BY THIS TIME NEXT YEAR I will not be able to find a house for under $200,000. She misses the point that I'm looking for a place to live, not an investment. Conversing with her on the facts about the current state of the economy, unemployment, income and how it WILL relate to loan qualification in the future is pointless. She insists the government is going to dream up some program which will magically motivate the banks to hand out $500,000 loans to people with $40,000 a year incomes again. And again, every time I talk to her she makes a point of telling me how house prices are going to spike in the near future, or the cheap inventory is going to dry up in a few months.
Strike three, I suspected she intentionally delayed in responding to me on a house which would have been a good deal that went on the market. I knew it would sell quick. After repeated messages and emails she responded to me that it had a sale pending. It happened again on another house. And she wasn't interested in showing me a third house, but really wanted me to look at another house that day which was $37,000 more than the one was interested in.
The rhetoric gets old. The games are obvious and unprofessional. The economy is pickled. Income isn't near 1/3 of housing prices in most markets yet. So why put more effort in attempting to BSing buyers into believing something contrary to every news report on housing?
From reading the real estate forums I can see there are a few agents on here who are realistic and understand what is going on. However, the majority, yes, the majority of agents are so full of BS is it coming out of ears, nostrils, and the pores of their skin to the point they stink so bad that buyers are having a hard time finding good agents.
I've lost count on how many houses I've called about. If you call the listing agent or broker they will tell you there are multiple offers. I'm sure there has been on a few of the houses I've inquired about. However, being told there is multiple offers after the seventh subsequent house you've inquired about keys in buyers that there is a game being played by a little more than a few unethical seller's agents out there. Also, there appears to be a game, at least locally, wherein when price reductions show up in the MLS, that MLS is also updated with a contingency or pending sale notation at the same time. A week later it is back on the market.
The most recent seller's agent I called about was a real winner. I was told the house wasn't available for viewing because the seller is out of town (he isn't, I talked to a neighbour before calling the seller's agent), then he tells me it such a good deal that eight people have made offers on it without seeing it and I "better put my BID in now." I can see possibly one, maybe two low-ball offers for a sight-unseen property, but eight? If you are going to make up BS, at least attempt to make it halfway believable.
People are finding and buying what I'm interested in. I just need to find a real estate agent who is willing to get in the game and assist me with it.
I suppose if the housing market stays where it is at these agents will figure out that they will have no other choice but to sell three or four houses to make the same commission they did on one house in 2006, and that is the way it is going to be.
I'm going to fire a real estate agent for this. Mysteriously, she has found an excuse to not go with me to look at a house I'm interested in because she feels her share of commission a $75K house isn't worth her time. I informed her of what I'm interested in, with one of the criteria being cost around $100K or lower. I don't think she has notified me of a listing for less than $99,999. However, she has sent me quite a few listings near $150,000 thinking doing so is going to persuade me to spend more. I'm paying cash. I want money left over to do a few things to the house I do end up buying. I don't think what I'm looking for in the overall housing market, especially here in Sacramento, is unreasonable.
And the second major annoyance is her constantly telling me ANYTHING is a good INVESTMENT because BY THIS TIME NEXT YEAR I will not be able to find a house for under $200,000. She misses the point that I'm looking for a place to live, not an investment. Conversing with her on the facts about the current state of the economy, unemployment, income and how it WILL relate to loan qualification in the future is pointless. She insists the government is going to dream up some program which will magically motivate the banks to hand out $500,000 loans to people with $40,000 a year incomes again. And again, every time I talk to her she makes a point of telling me how house prices are going to spike in the near future, or the cheap inventory is going to dry up in a few months.
The rhetoric gets old. The games are obvious and unprofessional. The economy is pickled. Income isn't near 1/3 of housing prices in most markets yet. So why put more effort in attempting to BSing buyers into believing something contrary to every news report on housing?
From reading the real estate forums I can see there are a few agents on here who are realistic and understand what is going on. However, the majority, yes, the majority of agents are so full of BS is it coming out of ears, nostrils, and the pores of their skin to the point they stink so bad that buyers are having a hard time finding good agents.
I've lost count on how many houses I've called about. If you call the listing agent or broker they will tell you there are multiple offers. I'm sure there has been on a few of the houses I've inquired about. However, being told there is multiple offers after the seventh subsequent house you've inquired about keys in buyers that there is a game being played by a little more than a few unethical seller's agents out there. Also, there appears to be a game, at least locally, wherein when price reductions show up in the MLS, that MLS is also updated with a contingency or pending sale notation at the same time. A week later it is back on the market.
The most recent seller's agent I called about was a real winner. I was told the house wasn't available for viewing because the seller is out of town (he isn't, I talked to a neighbour before calling the seller's agent), then he tells me it such a good deal that eight people have made offers on it without seeing it and I "better put my BID in now." I can see possibly one, maybe two low-ball offers for a sight-unseen property, but eight? If you are going to make up BS, at least attempt to make it halfway believable.
couldn't have said it any better... every bid i've placed, there was a "miraculous" multiple offer the day after.
[quote=JohnG72;17927773]I still don't get the whole "buy on what you can afford monthly thing".
1)
You buy based on the entire purchase price.
It doesn't matter what the purchase price is if you are financing. If you can't afford the payment, you can't get the loan, no matter how comfortable or not you feel. Roughly, (depending upon the loan and the lender) a PITI (Principle, interest, taxes, insurance) of 30% of your gross monthly pay will be the limit. Sometimes a little bit higher and sometimes a little bit lower. And then around 40% of PITI + other monthly obligations, such as credit card, car payment, student loans, alimony, etc. will be the limit of total debt payments considered in financing, again, sometimes higher, sometimes lower. And then, when you look at credit scores and see that a 640 is going to get a much higher interest rate than an 800. All of these factors are taken into consideration. So, two buyers, each with identical incomes, but different credit scores and levels of debt will not qualify for the same loan. For the 620 credit score buyer, there might be a difference of 1.5% on the interest rate. On a $150,000 loan that is about $143 a month difference, going from about $805/mo to $948/mo principle and interest only. Taxes and insurance will add hundreds more (depending upon the area). If a buyer is only qualified for $1000/mo total payment, that means either more money down or a lower priced home. A cash buyer buys on purchase price. A buyer that needs to finance buys on monthly payments qualified for, or at least that sets a maximum price.
An agent, at least a good one, will not ask what monthly payment you are look at. Why, because it doesn't matter to us. A good agent will ask your price range, high and low. Why, because it matters to the buyer. I will not show a home to a buyer unless I know the qualified price range, doesn't matter whether its cash or financed. Why would I show a home that is out of the price range? It will only make the buyer disappointed in the homes that he or she can afford. Your car salesman analogy is bogus. Its an apples and rutabaga comparison.
Now, you can elect to pay less than what your are qualified for in a monthly payment. That's not a bad idea. But that will lower the price of homes that will be in your range.
2) One more thing...I keep seeing it mentioned that affordability will go down as interest rates rise.
Bullcrap.
What will happen is savings will increase as home prices decrease. While there is not a direct correlation between rising interest rates and decline in home prices, there is an indirect correlation in that prices will fall to meet whatever it is people are willing to spend.
Yes, home prices will fall, or rise, to what people are willing to spend. However, even in times of outrageous interest rates, I am referring to the 12% to 20% or more common in the early 80's, home prices still increased. Even in the 90's home prices went up as interest rates did. Its all related to demand. And, as the economy stabilizes (if, when, ever) and true employment increases (not just the pseudo decrease in unemployment), prices will rise along with interest rates. While you got the part about what people are willing to spend correct, you missed it on interest rates.
I still don't get the whole "buy on what you can afford monthly thing".
You buy based on the entire purchase price.
Simply put, if I make 100K a year, I should be looking for homes in the 200-350K range and nothing more.
I definitely NEVER EVER would buy going into the situation saying, "Well, I can afford $1800/mo" or whatever.
Thats just plain ridiculous, and in the instance of car purchase, the very very first thing you deflect when talking to the salesman.
John, you're using the same logic that we are, but you're using a more crude form. If you're financing the deal and not paying all cash, the purchase price isn't a great indicator of what you can afford and what you can't afford. I.e. What does $270k mean to me in negotiations when compared to $277k? Well, if you know your monthly budgeting techniques, you know exactly what it means.
By calculating your gross or net income (I prefer net as I tend to play my finances conservatively), say I net $6,000 per month and don't wish to pay anything over 1/3rd of my net monthly income on all of collective housing expenses, then I know I need to keep my PITI below $2,000 per month. That's what your max is. It's not difficult to arrive at those numbers, but they become extraordinarily exact. What does rough estimates of 100k - 250k give you? If you're interested in converting that to a purchase price, then simply plug the numbers and give yourself that range.
I sense a great deal of disdain for salesmen and I don't exactly understand why. I work on a referral basis, and I can't tell you how many times I've told a client that, "Listen, I know you want this, but I can't write this offer for you..." and there can be multitudes of reasons why that is, but I really do my best to help people understand the magnitude of these numbers. I learned from a great many of agents why doing such a thing is better in the long run but really, I didn't want a call at 10pm at night, someone sobbing on the phone telling me they're losing their house and it's my fault. No one wants that on their shoulders. I can't speak for all because as we know, some people aren't responsible, reputable people, but I really do my best to understand a person's situation and to educate them on responsible lending and negotiating. That's part of why I love working with buyers.
When looking at the effect of interest rates on housing prices you also have to do some adjustment for inflation and take how easy it was to obtain credit. High interest rates appear to have a stabilizing effect on rising prices. Tight credit reduces housing prices. Housing costs escalate when it is easy to obtain credit.
Historically housing prices have increased within certain boundaries with a few low points along the way up until 2000. Since then housing prices exploded due to the combination of unlimited easy credit and low interest rates and continued to do so until the creative terms exploded on people who spent 6 times more on a house than their income. For the last three years we have had tight credit, very cautious consumers and prices spiraling downwards. I refuse to believe for a second that higher interest rates aren't going to have a negative impact on housing sales. I suppose a few people will find it worthwhile to save some cash if they are going to receive a higher dividend on their savings, but I wouldn't count on it being a major factor. A lot has changed in the last 20 years. I'm 43. I was raised by a generation who thought saving for a rainy day was gospel. I grew up being taught to pay cash first and use credit only when necessary because the truth about credit is it can eat up money rapidly, so I save and pay cash when I can, use credit when I have to, and I usually pay off credit in close to half of the term of the loan because a few less $$ in my pocket now means more later. Americans don't think like this anymore. People in my age group are the last to save anything, and I think most of them really don't have much in savings and they don't see the point in saving money when they can use it to buy something with.
As things are now higher interest rates are only going to have a negative impact.
I think it is perfectly reasonable to figure out how much you can afford a month on housing and then work backwards to a purchase price. How else do you figure out if you can actually afford the payments?
I think it is perfectly reasonable to figure out how much you can afford a month on housing and then work backwards to a purchase price. How else do you figure out if you can actually afford the payments?
Exactly. Unlike the typical vehicle transaction, in which the model (price) is chosen first and financing second, housing is typically purchased by getting the financing aspect first (prequalified), then price second.
Exactly. Unlike the typical vehicle transaction, in which the model (price) is chosen first and financing second, housing is typically purchased by getting the financing aspect first (prequalified), then price second.
Quit being reasonable and using facts! The next thing you know the Germans will be bombing Pearl Harbor.
I think it is perfectly reasonable to figure out how much you can afford a month on housing and then work backwards to a purchase price. How else do you figure out if you can actually afford the payments?
I have no disagreements with this at all.
I do however believe that people stretch a significant amount because the "fall in love" with a house because "well, its only $200 a month more or whatever" which is a total bs response when their actually spending 25K more or whatever which is a totally large sum of money for most people.
And frankly I think REA highly encourage this response. IOW, if I ask a REA for listings at $100K or under, I would expect based on what I get from REA to be lots of stuff actually priced higher than that.
Happens frequently I think and I just went through a series of arguments with a guy on the Los Angeles board who had that exact same thing happen to him.....he presented a max price that was unrealistic to a REA and rather than tell him his price range is not gonna happen, the REA send him a ton of listings that were greater than his max price.
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