This week a lot of time was spent discussing rising rents, the bounceback, forclosures and discussion of new brokerage models, that ignited some great contributions. I was pounced on for being a little cavalier about a thorough research paper. (But there is no pouncing allowed in a deadcat bounce.) Read it on the Matrix Zeppelin:
I think that I make a reasonably good case that brokers offering new rate structures are being illegally discriminated against in many ways, and as the Wall Street Journal editorial page complained in 2005, sanctions against brokers have not been forthcoming.
Commissions based on the % system of compensation will always be criticized as unfair for the same reason a waiter serving one $200 meal gets a $40 tip while one serving five $20 meals gets only $20.
Also the bounceback you talk about, could also be a DEADCAT BOUNCE.
You say, “See you in six months” when a buyer says they don’t want to buy now. I say, “See you next Tuesday.”
What all of you have neglected to realize is that this process virtually assures that the borrower ends up with the best offer. If you are worried about losing the referal business that you have worked so hard to cultivate, maybe you need to make sure that you have the best offer available on the table for your customers (instead of being greedy). You should also be sure that it is your customer’s best interests that you are concerned with (fiduciary responsibility??), and not your own. If you don’t do these thing, I am going to be there to take your business and your referal business will forever and after be mine.
If half say prices are going up is that a good thing? I don’t think you can say. If they already think houses are overpriced, the belief they will rise further would not lead me to believe they are happy about the prospect of overpaying some more. And how many of those who answered the poll Yes going up, were in the market to buy? If most of these YES votes were homeowners who just bought I think they would rationalize they made a good investment, thereby rendering the stat worthless in my opinion. Also, the other half sees prices as going down or neutral (you don’t state in your post for comparison). I don’t see that as positive news since if you believe housing prices will drop you will WAIT until they do before you buy, wouldn’t you? I guess, in the final analysis, it’s just a half a glass of water.
The important metric is how many homes out of the total inventory are currently in foreclosure. Why? Because homes in any stage of the process are under pressure to be sold quickly. In a market with 7+months of inventory, that means even Notice of Default homes (not yet foreclosed) will have to be discounted to sell before the Notice of Foreclosure goes out. By the way, when I said the homes have, “entered the foreclosure process” in my previous post, I meant that they have received a notice of default or are at auction/REO.
Lets say rents have gone up 30% this year. Explain to us how landlords would be able to continue to raise rents 30% per year for the next 3 years, if people’s income did not increase at that rate as well? I think Skep-tic’s point is, that people could use many different types of loan products to buy apts in Manhattan, i.e. interest only neg. amortizing, to name a few, and thus leverage their income to pay more and more to buy an apt. But you can’t do this when you rent an apt.
This sounds an awful lot like surveys of individual investors in late 2000, who still had starry-eyed expectations of 10% annual gains in their equity portfolios, in spite of all evidence to the contrary. A population with no basic understanding of economics and a vested interest in the status quo is going to take longer than would seem rational to come around to reality.