12 Responses to “What do 20% of the buyers know (and what about the other 80%)?” »»

1. anon
   Comment by anon | 11/27/07 at 7:57 pm

   > It does make you wonder, though. Why was the number higher last year?

   Was credit still easy last year?

   Yes. The subprime fiasco (aka ARMageddon) didn’t hit

   until a few months ago. Lenders were still making loans to people who really weren’t in good

   enough financial shape to have been buying.

2. confused
   Comment by confused | 11/27/07 at 8:57 pm

   “Now, an optimist might think, well, the drop in sales volume is because a lot of people can’t

   get mortgage loans any longer, either because they have bad or no credit, no down payments, or

   sketchy work history. Or, just out of bad luck.”

   I may be wrong but aren’t you primarily a

   buyers agent? Isn’t it in your clients best interest for you to obtain a low price? If so, how

   can an optimist believe that a reduction in prices or a decreased demand is “just out of bad

   luck”? All these things are great news for buyers.

3. Hello Confused
   Comment by Hello Confused | 11/27/07 at 9:06 pm

   Mr. Confused - No it’s not in his best interest to get a low price for his clients. His clients

   best interests are not HIS best. It’s his his best interest to get the HIGHEST price for his

   clients because his commission will be that much higher! Hello?? Why do you think he keeps shilling

   the major high price developments like 45 Province etc? The higher real estate prices rise, the

   fatter his wallet gets.

4. John A Keith
   Comment by John A Keith | 11/27/07 at 9:34 pm

   Confused, by “optimist” I meant someone who is hoping (praying?) that the housing

   market problems are not that widespread, data be damned. An optimist would hope (pray) that the US

   economy isn’t at risk of entering into a recession (has it, already?). Others would consider this

   view to be “myopic”.

   The reality, of course, is that the general real estate market, not

   just the “subprime” buyers, is frozen.

   Or, at least, sort of.

   Sales volume has

   dropped in the city of Boston, although I don’t have the data right in front of me. I’d guess

   between 10-20%. However, there are still strong sales happening in all price ranges, from low

   ($200’s) to high (over $1 million). As mentioned by me and later by the Herald, the $2 million+

   market is on fire, in the city.

   Yes, my best interests are served by finding my clients

   homes that they want to buy, which almost always translates into a property which has “good value”

   (however you wish to define it).

   Do I want lower prices? Hell, ya! Lower prices means more

   buyers, right?

   In reality, what I want is a stable market. I think most people interested

   in owning real estate would agree. Even sellers would be satisfied with appreciation in prices at

   the rate of inflation, right? I mean, my parents bought their home in 1972 for $30,000 and we sold

   it 30 years later for $372,000. Most of that was inflation plus renovations, etc., they had

   performed over the 30 years.

   I didn’t “shill” 45 Province, I mentioned it since I was out

   with a client who was looking at properties in that price range, in that location.

   My goal

   was to provide information to the general public. If people weren’t interested in it, they

   wouldn’t read it. But, apparently they were interested in it, because I saw at least 45 people

   click through on my link to the 45 Province website.

   The goal of writing that entry was to

   provide information. It is also a good way to generate leads. If someone has heard about 45

   Province and types that term into Google, my blog comes up in the results. They click through to

   my site and they may contact me to find out more, if they are looking to work with a buyer’s agent

   instead of going directly through the developer.

   A win-win all around. I get a client, my

   client gets representation, the developer gets a sale.

   To say that I want my clients to buy

   the most expensive homes is incorrect. That’s just not practical. Not only does this insult my

   integrity, it insults the intelligence of my clients. They can’t decide for themselves whether or

   not they think a property has value and is a good investment? You don’t give them enough credit,

   Mr Hello Confused.

   I worked with clients buying homes from $250,000 to $1,675,000. Each

   and every one of them would tell you they saw multiple properties within their set price range.

   They decided which property to buy (or whether or not to buy at all … of course, there were

   plenty of clients who chose not to buy at all, or at least, not right now, which is a hazard of the

   business).

   As I said, I think most people want a steady, stable market.

   And, most

   of us want the US economy to stay strong.

   My own best interests are similar to everyone

   else’s. We don’t want people stabbing (or shooting) us on our front stoops, we don’t want to

   lose our jobs, and we want people to have enough food to eat and enough clothes to wear.

   As

   a real estate agent, I know a lot and read a lot about the real estate market, I also know a lot

   and read a lot about the economy and a bunch of other stuff that has an effect on housing - the US

   economy is a huge engine, and the real estate market is a cog in that machine (bad analogy).

5. Robert
   Comment by Robert | 11/27/07 at 9:49 pm

   “A win-win all around. I get a

   client, my client gets representation, the developer gets a sale.”

   And why wouldn’t the

   buyer win more by going straight to the developer?

6. John A Keith
   Comment by John A Keith | 11/27/07 at 10:07 pm

   A potential buyer could go directly to the

   developer, and many buyers do.

   But, many times, a buyer may want to see more than one

   property. And, many times, a buyer may see the value in using an agent who has knowledge of the

   local real estate market.

   For the client I brought to 45 Province, The Clarendon, and The

   Bryant, he wanted a buyer’s agent to show him the properties, plus also to give a general overview

   of the Boston real estate market. Also, to provide an analysis of current, past, and future real

   estate trends in Boston and in Massachusetts.

   He was a “foreign” investor, and didn’t know

   the US residential real estate market well enough to be able to make an educated decision without

   the input of a buyer’s agent.

   Is it possible that the data could be skewed to represent the

   market in a favorable light?

   Yes.

   Most buyers, however, are smart enough to tell

   the difference between a sales pitch and an honest appraisal.

   Funny story about what

   happened with this specific client.

   We met and discussed the local real estate market. He

   asked me my opinion of what would happen over the next five years. We talked for about 45 minutes,

   then over the next 4 hours, as we visited the properties.

   Halfway through the tour he turned

   to me and said, “John, I could tell from your emails and your blog that you are an honest

   person.”

   “But,” he continued, “I’ve got to tell you, you’re not too honest, you’re too

   pessimistic!”

   As this client’s buyer’s agent, I had two choices.

   Be overly

   optimistic, painting a glowing picture of the current and future real estate market, have the

   market (and US economy) tank, and have him coming back to me in five years, furious over his lost

   investment and accusing me of lying to him.

   Or, tell the truth, and paint a realistic

   picture of the current and future real estate market, have the market make a surprise recovery and

   him make lots of money, and have him come back to me in five years and say, “I TOLD YOU

   SO!”

   It was an easy decision.

7. Cred
   Comment by Cred | 11/27/07 at 10:59 pm

   I’m always amazed at the number of people who will take the time to write a reply

   accusing brokers of being unscrupulous. Did it ever occur to Confused or Hello Confused that the

   instant your clients go from being “buyers” to “owners” a better price and a stable market are

   immediately in their best interest?

8. confused
   Comment by confused | 11/28/07 at 5:35 am

   i would never

   accuse our host of being unscrupulous. i read many RE related blogs and Mr. Kieth is the most

   strait forward Realtor i’ve found. I would give him my business if i was in his area and i plan

   to ask him to suggest agents when its my time to buy…sorry, if i sounded attacking John, was not

   my intention. I just think this data, other than the crashing economy, is great for buyers.

9. Gus
   Comment by Gus | 11/28/07 at 2:24 pm

   Getting back to the original blog

   posting, it raises THE question about the real estate market, and the answer tells us everything

   about where the market is going.

   The underlying concept is “regression to the mean”, that is

   the idea that things will eventually go back to the way they have been over the long course of

   time. The problem is that while most market and economic situations regress to the mean, many do

   not. Or they do not for a very, very, very, long time, and then they do.

   While the number of

   sales has dropped 20% or so over the last year, it is still quite higher than it was a decade ago,

   or two or three or four decades ago. That is true even if you account for such factors as

   population, income, and interest rates.

   The question of whether the “natural” rate of sales

   is what it is now, or what is was two years ago, or what it was 10 years ago, or some other number,

   is complex and will always be aguable.

   We can try to start by asking who are the buyers in

   the market now who would not have been in the market 10 years ago. Who were the buyers of two years

   ago who would not be buyers today.

   When we understand what factors make people (in large

   numbers) choose to buy or not buy, we can then ask whether those factors are

   sustainable.

   Bubble proponents will say a herd mentality had created a buy-no-matter-what

   mentality that eventually must shift once the idea of neverending prices increases dissipates. NAR

   will probably say that the nationwide equation of supply and demand has permanently shifted,

   leaving prices and volumes pretty close to their recent highs.

10. John A Keith
    Comment by John A Keith | 11/28/07 at 6:13 pm

    Thanks for

    that analysis.

    I guess I would say I fall in the middle (does that mean I’ll end up being

    right?). I think the pool of buyers increased due to demographics, low interest rates, new

    construction which allowed people to upgrade, a great economy, and, last but by no means least,

    low, low, low interest rates. Some of those things still exist, so I am believe that the market

    will stabilize at a level higher than what others may forecast. I think NAR would be happy with

    whatever they could get, at this point! LOL!

    The economy is running pretty well, all

    things considered, and there is no consensus that housing problems will drag down the economy

    (actually, lack of available credit caused by the foreclosures may end up being the culprit,

    ironically). But interest rates are still low, plus many of people still make gobs of money. This

    means to me that the “good times” in housing may continue, albeit at lower volumes. Why would

    condos in Boston drop 40% if we continue to have 4.5% unemployment and the highest median income in

    the country (well, close to it)? In some cities, you can see why prices would drop - too much

    product.

    Of course, the question is, will these problems drag the rest of us down? I feel

    it’s a 30-40 % possibility. Economists are all over the place on that. They’ll know for sure

    after it’s all over. They’re worse than meteorologists in making predictions. I fear for our

    general economy more than my own wallet.

    Trust me, my life won’t change very much,

    regardless of what happens to the real estate market. I’ve got it pretty good in that regard. I

    married rich. (Hi Terry!)

11. Ken
    Comment by Ken | 11/28/07 at 8:30 pm

    I don’t know but today’s figures can’t be good

    news…

    ““Sales of existing homes fell further in October even as more homes came on the

    market, driving the supply of homes to the highest level in 22 years, the National Association of

    Realtors reported Wednesday. For single-family homes alone, the inventory of 10.5 months is the

    highest since July 1985. The median sales price fell 5.1% in the past year to $207,800. That’s

    the largest year-over-year price decline ever recorded.�

12. john p
    Comment by john p | 11/29/07 at 7:10 pm

    Take two

    basic segments: first time buyers, and trade-up/ trade down buyers.

    I think you can’t blame

    the first time buyers for being patient right now. We’re getting tons of reports of price drops

    from too many sources for anyone to argue that it is not a buyers market. You’ll see a decent

    percentage waiting the market out for obvious and intelligent reasons.

    Trade up/ trade down

    buyers are in sort of a volatile situation. They fear that if they buy something and it takes too

    long to sell their place, they could carry two mortgages or lose in the price of the house they are

    selling, or their deal falls through etc. Further, if they have owned for even a short while,

    their cost of capital, their interest rate is most likely lower than what they could get right now,

    so that’s not a motivating factor.

    I understand why someone like you wants a balanced

    market; less turbulance, less rock fights, more realistic expectations all around etc. If you’re a

    Red Sox fan and a realtor, this market during October must have been a wild ride. You’ll surely

    remember 06-08.

    I was kind of shocked at your more recent post about half of the

    foreclosures happening BEFORE the rates even reset. That’s a big deal, and this is the first

    place I have heard that.

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