Scott JohnsonDave, some thoughts for you. I read the page, and it makes some assumptions, such as people having 20 percent down that I am not sure are reasonable assumptions. Another thing is the assumption that home prices follow income, which I am n...ot sure there is a direct correllation. I understand that what I can buy now is based on my current income, but I don't think it follows that as my income increases, that my home value will increase proportionately or even positively. Lastly, as far as I can tell, home prices are approximately in line with normal 3 percent appreciation since 2001 (I should note, this assumption is based on my condo). Based on these few things, I question the accuracy of the article. Do you have any thoughts on this?See More9 hours ago ·
Bob Mcmanus Careful what you read...only go by what you can prove. If you follow that philosophy in Real Estate you can't lose. Most of the articles written today only have the slant that that organization wants you to see. The truth is brutally honest, and very EASY to find.9 hours ago ·- Scott Johnson Another thought, are home prices being bouyed at this point by record low home loan rates? It seems to me that as interest rates rise, home prices will decline further.9 hours ago ·
- Matt Malouf@ Scott I read the "article" as well it's one of those sales pages designed to look and feel like a real news article but nothing more than a sales piece with poor generic advice.
Of course with another huge drop coming and the impossibili...ty to actually get a gov't mortgage now is certainly not the time to buy. See More9 hours ago · · 1 personLoading... 
David Coe OK, some good discussion here. First, Matt, we are or have helped clients buy in Memphis, Cleveland, Kansas City, Indianapolis, Texas and Biloxi.6 hours ago ·- David CoeNext, Scott, some response to your thoughts. When you look at real estate on a macro level, I believe you have to make some assumptions to get any type of apples to apples comparisons. What the article and the research is commenting on is t...he relationship between the median price of a home and the median income. So while buying a home with 20% down isn't necessary (FHA is only 3.5%) they are gauging their data on based on that assumption. You mention that you disagree with the assumption that home prices follow income. That's not what the article says. It says that the VALUE of the home is affected by income. Since prices are dropping at a pace faster than income's are dropping, the VALUE of the house is increasing. Other factors, mostly supply and demand affect the PRICE. If 60% of the people can afford (again, based on the 20% down assumption and average interest rates) the median priced home in a certain market at a certain time, the home has a higher VALUE than if only 45% of the people can afford the median priced home at another time or in another market. You question the validity of the article based on it's assumption of PRICE when the research is referring to value.See More6 hours ago ·
- Bob Mcmanus Most of the articles written are false. Yesterday CAR took out a full page add in the times that stated 3 of 5 short sales are closing. LIES. Only 20% are closing based on FACTS. Why ate they missleading everyone? Its simple...the American public is ASLEEP.6 hours ago ·
- David CoeYour second point about prices bouyed by lower interest rates is absolutely correct. In fact, the lower interest rates have artificially raised or stalled the price of homes when they should be dropping. But once the prices do fall, and I d...o agree they will fall again IN SOME MARKETS once the Fed eliminates the QE2 program, if income doesn't fall proportionately, the VALUE of the home will actually rise. Doesn't mean the price will rise if no one can get a loan to pay for it, but the value of the home will ultimately protect the investor or home buyer with a medium-term time horizon, as the research comments.See More6 hours ago ·
- David CoeAs for this being some fake article to sell something, this is DS News.com and the only thing I can see they are selling is subscriptions and advertising...just like any news publication. They reported on a piece of research by Capital Econ...omics, a macro-economic research firm that again is selling information. Neither are selling real estate. Bob, agree that CAR and NAR are full of sh...BS most of the time. But this isn't the case for this article. You can debate their research premise, but don't jut accuse it of being RE propaganda because it's somewhat positive.See More4 hours ago ·
- David Coe The only person "selling" anything is my company and WE DO think now is a great time to buy rental real estate in certain markets around the country. Bob, you say look at the facts. I have and have clients making 10% + cash on cash right now in real estate. If investors are willing to approach the market with caution, there are generational type of opportunities RIGHT NOW in real estate.4 hours ago ·
- Bob Mcmanus I wad not talking about you or York company I was talking about the information that is all over. As stated yesterdays car add was a bunch of crap.4 hours ago via ·
- Bob McmanusIn further review of the article written in DS News you can see the flaw in there review. They posted "Capital Economics points out a sharp fall in the Mortgage delinquencies at the end of the 4th quarter. This means fewer homes in the fo...reclosure pipeline. This is negligent and misleading...here is why....they said that they amount of foreclosure filings is down....this is so...however, that is not the total view of foreclosures. What they fail the mention is that over 23 % of the people across the nation have not made a mortgage payment in over a year. Now of course, they are not receiving a forclosure notice so they are left out of Capital Economics survey. If they were honest they would put in the full statistic. But if they put in the full statistic, there article would be flawed.See Moreabout an hour ago ·
- David CoeNot only do they not mention shadow inventories, they also say that interest rates are headed down when in fact they are starting to creep up again. But this article is about a moment in time, 4th Q 2010. In 4th Q 2010, when there WAS a sha...rp fall in delinquencies and interest rates WERE continuing to decline. In fact, the opening paragraph states:
"The continuing depreciation of residential property values at the end of last year has made housing LOOK more undervalued relative to income than ever before, according to analysts at the research firm Capital Economics."
If they had reported the shadow inventory levels would they not ALSO have to report on the increase in NET income because 23% of the people aren't making a mortgage or rent payment? How would this affect the VALUE of homes relative to income? Probably too deep of a statistic to track accurately.
Similar to Case/Shiller, this study is more of a compare/contrast market conditions over time. We all know the shadow inventory will eventually hit the streets and how it affects the value of homes at that time will be calculated and reported as it happens. Will the value go up or down? That will depend on what happens to income at the same time. But what this study does, and what I found intriguing about it, is give us a snapshot. What do you think the data looked like in 3Q 2005?
I think the increase in foreclosures once the banks finally bite the bullet and stop suckling of the public teat will continue to positively affect the value of homes. Both unemployment and GDP are moving gradually in the right direction. Inflation? There's the wild card. But assuming there isn't a huge increase, incomes should remain flat...for better or for worse.
As an investor, I LOVE this because I have a few years to continue purchasing real estate below market VALUE at a cheaper price. Once the market does recover, which is still years away, I'm betting the rebound will be more dramatic because there's inherent VALUE in the property relative to stagnant income levels. Now if INCOME takes a dramatic drop, all bets are off, but they've been pretty stable for a long time...maybe too long.
I love this dialogue! This is a much better use of social media than posting updates on your lunch whereabouts. But for the record, I did enjoy 2 tacos today at Jack in the Box for .99c.See More15 minutes ago ·
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