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Posts Tagged ‘Lawrence Yun’

But Buyer Psychology Is Part Of Market Value

July 27, 2007 | 12:01 am | |

The NAR says consumer psychology is to blame.

“Homebuyers have been getting mixed signals about the housing market, which is causing some of them to hesitate”

Lawrence Yun, NAR senior economist, who has taken torch from controversial former chief economist David Lereah, said some consumers are uncertain (yes, 1/3 fewer sales):

“Home buyers have been getting mixed signals about the housing market, which is causing some of them to hesitate,” he said. “Mortgage interest rates have risen recently, and tightening lending standards are continuing to hamper sales, but fewer risky loans will put the market on a healthier path. Although general buying conditions remain favorable for long-term home buyers, it appears some buyers are looking for more signs of stability before they have enough confidence to make an offer.”

Ok. Lun has moved beyond blaming the weather to blaming buyers. This strikes me as odd.

Lets look at the use of the word value.

The most probable price (in terms of money) which a property should bring in a competitive and open market under all conditions requisite to a fair sale, the buyer and seller each acting prudently and knowledgeably, and assuming the price is not affected by undue stimulus. Implicit in this definition is the consummation of a sale as of a specified date and the passing of title from seller to buyer under conditions whereby: the buyer and seller are typically motivated; both parties are well informed or well advised, and acting in what they consider their best interests; a reasonable time is allowed for exposure in the open market; payment is made in terms of cash in United States dollars or in terms of financial arrangements comparable thereto; and the price represents the normal consideration for the property sold unaffected by special or creative financing or sales concessions granted by anyone associated with the sale.

Value is steeped in consumer psychology. Its about perception about a future benefit.

Consumer psychology is the study of how people relate to the products and services that they purchase or use.

So the measurement of how people relate to the housing market, is the value they place on it. So value is part psychology. When someone makes an offer on a house, its the amount they feel is justified and correlated to their perception of the benefit of ownership in the future (phew!).

In other words, Lun is blaming the value buyers place on the housing market as keeping them from buying them. Actually, its also a tired reference to blaming the media for housings’ troubles.

So a buyer won’t buy because the value they see in the property isn’t enough to make them want to buy. Isn’t this a circular reference?

or to put it another way…huh?


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[Getting Graphic] Cost Is The New Rent Vs Buy Decision

October 3, 2006 | 6:43 am | |

Getting Graphic is a semi-sort-of-irregular collection of our favorite BIG real estate-related chart(s).

Click here for large graphic [NYT]

Housing costs (mortgage or rental) have risen sharply over the past five years according to new data by the Census Bureau and presented in the article by Janny Scott and Randal C. Archibald called Across Nation, Housing Costs Rise as Burden [NYT].

The data was collected through 2005 so it does not reflect further rising mortgage costs and rental costs in 2006.

Over the period, there was a large increase in homeowners paying more than 30% of their income on housing. They are not alone. There has been a surge in renters paying more than 30% of their income as well.

Why?

“People want to hang on and stay in the market,” said William H. Frey, a demographer at the Brookings Institution in Washington, “and they are willing to stretch themselves to find or to rent a house that is suitable.”

S. Lawrence Yun, an economist with the National Association of Realtors, said renters in desirable cities might be spending more of their income on housing in hopes of getting a toehold in places with good schools, better homes and a good quality of life. He said, “There is certainly a concern that people are devoting a large portion of their income to housing, and one of the reasons is due to the more limited housing supply.”

Its an interesting dilemma because conventional wisdom says that those priced out of the housing market during the boom, will simply rent and wait for the market to be more affordable, but at the same time rents are rising rapidly as many have the same idea. Here in New York, the rental market is currently doing what the sales market just got through doing.

The most pronounced increases in housing appear to be in urban areas, many of which have been revitalized in recent years but suburbs also showed significant gains in housing costs. In many metro areas, the surrounding suburbs have reached price parity making the move to the suburb one of lifestyle and not of cost savings.

Its possible that certain sales markets may benefit from a rental bounce back as home buyers become discouraged and decide to go to rentals only to suffer further dissappointment when they realize how much rents have gone up at the same time. Either way, its looking more expensive these days.

It certainly makes for the argument of Fed interest rate cuts in 2007 as the economy cools off.


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