5944 replies to this topic

[jklymak]

It's important for people like me that are deciding whether to buy now or buy in a year or two.

If you can afford to buy now, how does guessing what will happen in 1 year help you make a decision? Sure, you'll come back and say "if prices drop by $35k, I'll have saved a lot of money", but thats exactly like saying "if I buy a lottery ticket I might have $10 million Thursday AM". No one here has any idea what the market will be like in 1 year; a lot of people on HHV have been claiming for almost 6 years they can tell the market will drop. It hasn't helped any of them. Its market timing, and in my opinion its a poor way to make financial decisions.

[true blue oak]

In the poll question for this thread is the part which reads "Aug 2012 = $53" supposed to be "Aug 2012 = $530,000" ?

Hi Dylan - yes - you have it correct - for some reason the text was cut - likely over character limit or something.

[true blue oak]

Wow - we are getting some good action on the graph - especially recently on the upper end.

[true blue oak]

If you can afford to buy now, how does guessing what will happen in 1 year help you make a decision? Sure, you'll come back and say "if prices drop by $35k, I'll have saved a lot of money", but thats exactly like saying "if I buy a lottery ticket I might have $10 million Thursday AM". No one here has any idea what the market will be like in 1 year; a lot of people on HHV have been claiming for almost 6 years they can tell the market will drop. It hasn't helped any of them. Its market timing, and in my opinion its a poor way to make financial decisions.

The probability that the market will now drop is ridiculously higher than winning it big on the lottery.

yes, a lot of people on HHV have been saying there would be a crash for 6 years, but not all. If it were not for the govt's extraordinary measures after 2008 the market likely would have tanked and the prognosticators would have been right.

This time the govt is mostly out of ammo to stop the drop that may happen (opinion).

[Szeven]

The thing I dont get about HHV people, and some of the cheerleaders against housing, is that there is a whole set of beliefs that go along with the anti housing vibe that I dont think make sense. One of the ideas being that we should all build bunkers and buy gold, guns, farms etc, the other being that they take pleasure in watching these 'debt lovers' get crushed if/when their loans get too big and they declare bankruptcy. On the one hand they preach how government measures will run out and things will deflate, but on the other hand preach how inflation runs wild and we need gold. (check the ad/links on whispers blog to see what I mean)

The reason I dont get it, is because I think a correction over a certain %age (im not sure how much) will destroy social fabric. The same debt lovers are the ones keeping things together!! No one wants your favorite restaurant to close, or downtown to be boarded up, or your kids friends to move to Nanaimo, but I think that could happen if housing goes down a lot. I also dont get how if you actually thought inflation was going to happen, why loading up on long term debt wouldnt be the best thing in the world.

The anti housing people here seem a bit more moderate though, so maybe my rant is pointless.

[Szeven]

The probability that the market will now drop is ridiculously higher than winning it big on the lottery.

yes, a lot of people on HHV have been saying there would be a crash for 6 years, but not all. If it were not for the govt's extraordinary measures after 2008 the market likely would have tanked and the prognosticators would have been right.

This time the govt is mostly out of ammo to stop the drop that may happen (opinion).

The problem you have I think is Ben Bernanke. He will not allow deflation as long as he is in the hot seat. Obama is going to win and hes going to be there a lot longer. He will continue to ease and ease into oblivion, at which point arent you better off being loaded up on long term debt?

[jklymak]

The probability that the market will now drop is ridiculously higher than winning it big on the lottery.

Sure, but the validity of the statements are the same. You are letting an event you have no control over affect your financial planning.

Anyway, my analogy can be criticized from many fronts: the disruption to my life would be ridiculously higher than buying a lottery ticket should I sell my home, rent, and wait out the financial apocalypse that has been predicted.

[pherthyl]

If you can afford to buy now, how does guessing what will happen in 1 year help you make a decision? Sure, you'll come back and say "if prices drop by $35k, I'll have saved a lot of money", but thats exactly like saying "if I buy a lottery ticket I might have $10 million Thursday AM". No one here has any idea what the market will be like in 1 year; a lot of people on HHV have been claiming for almost 6 years they can tell the market will drop. It hasn't helped any of them. Its market timing, and in my opinion its a poor way to make financial decisions.

That's a really bad analogy. Inventory is at 12 months. We can be almost completely certain that prices aren't going up at those levels. Rent VS Buy says that for what we are looking to rent and buy, we break even if prices stay flat. So any drop is money saved. Does that mean we'll wait? Not necessarily, in fact we have an accepted offer subject to inspection right now which we are going back and forth on, but you have to go into these things with eyes wide open. Throwing away all the data as "gambling" is not a good idea.

[pherthyl]

Sure, but the validity of the statements are the same. You are letting an event you have no control over affect your financial planning.

I don't really understand this argument. When you buy an investment, do you look at the valuation of that investment before deciding whether to buy it, or do you just blindly buy anything because it is inherently unpredictable? Nothing is completely predictable, but you can make weigh the risks, rewards, and opportunity costs and make an informed decision based on several potential scenarios.

Anyway, my analogy can be criticized from many fronts: the disruption to my life would be ridiculously higher than buying a lottery ticket should I sell my home, rent, and wait out the financial apocalypse that has been predicted.

Well I agree with you there. I predict a ~10% correction from here. That is not enough to justify selling a house, waiting, and buying back in. However for those people who currently don't have a house, it's a different story.

[MarkoJ]

The thing I dont get about HHV people, and some of the cheerleaders against housing, is that there is a whole set of beliefs that go along with the anti housing vibe that I dont think make sense. One of the ideas being that we should all build bunkers and buy gold, guns, farms etc, the other being that they take pleasure in watching these 'debt lovers' get crushed if/when their loans get too big and they declare bankruptcy. On the one hand they preach how government measures will run out and things will deflate, but on the other hand preach how inflation runs wild and we need gold. (check the ad/links on whispers blog to see what I mean)

The reason I dont get it, is because I think a correction over a certain %age (im not sure how much) will destroy social fabric. The same debt lovers are the ones keeping things together!! No one wants your favorite restaurant to close, or downtown to be boarded up, or your kids friends to move to Nanaimo, but I think that could happen if housing goes down a lot. I also dont get how if you actually thought inflation was going to happen, why loading up on long term debt wouldnt be the best thing in the world.

The anti housing people here seem a bit more moderate though, so maybe my rant is pointless.

Life will go on if the market drops 10-20%....people will still go out and eat, buy iPhones, etc.

[jklymak]

I don't really understand this argument. When you buy an investment, do you look at the valuation of that investment before deciding whether to buy it, or do you just blindly buy anything because it is inherently unpredictable? Nothing is completely predictable, but you can make weigh the risks, rewards, and opportunity costs and make an informed decision based on several potential scenarios.

I agree with all of that. But you don't sensibly do any of that by predicting next year's price, since that short term prediction will almost certainly be wrong.

[dasmo]

"When you buy an investment, do you look at the valuation of that investment before deciding whether to buy it"
Of course.
The key difference is in Equities you are looking at buying one thing that many are buying and selling so you can see the actual price moments before you buy it. In real estate it's an individual transaction on an individual property that has an arbitrary value established in private between the buyer and the seller. So you can apply your extremely solid investing principle right now. Look at a property, evaluate what it's worth is and make an offer. That's how it's done. Sitting buy and waiting for the stats to shift in your favour is not. you will still be in the same scenario, possibly with better negotiating amo but maybe with more competition by then because stats lag reality.

[true blue oak]

Sept 2012 median price = $517.5K

vreb release.

[pherthyl]

I agree with all of that. But you don't sensibly do any of that by predicting next year's price, since that short term prediction will almost certainly be wrong.

Sure. Predicting an actual number is just for fun on a blog. But you predict market movement in general. It's never exact, you just figure your probabilities and make your choice.

[pherthyl]

"When you buy an investment, do you look at the valuation of that investment before deciding whether to buy it"
Of course.
The key difference is in Equities you are looking at buying one thing that many are buying and selling so you can see the actual price moments before you buy it. In real estate it's an individual transaction on an individual property that has an arbitrary value established in private between the buyer and the seller.

Not even close to an arbitrary value. The value is 95% determined by the market. You can push it maybe 5% down by negotiation and finding flaws, but essentially the price is out of your control.

So you can apply your extremely solid investing principle right now. Look at a property, evaluate what it's worth is and make an offer.

And how do you evaluate what it's worth? That's determined by the market. What is worth $500,000 today might be worth $400,000 in 2 years. Or maybe it'll be worth $800,000. The point is you can only determine what a property is worth in context of the market, and the whole point is that the market may change.

[skeptic]

The anti housing people here seem a bit more moderate though, so maybe my rant is pointless.

They are the same people, but they use different names on HHV and VV.

[dasmo]

@pherthyl
The price is not determined by the market at all. It's determined by a seller and a buyer agreeing on a price. It's a simple as that. The market is a collection of all these individual transactions into a big picture of what's going on. There isn't a marketing board that sets the price of housing...

Both houses I bought I negotiated 12% and 10% less than the asking price so I don't know where you get the notion that prices are fixed +- 5%.

"And how do you evaluate what it's worth?" Look at how the place was built, what era, size, what condition it's in, The location, the direct neighbours, schools, amenities, traffic, market conditions, rents in the area, lot size, neighbourhood gentrifying, decaying? Most important, what are you willing and able to pay for it?

In two years, you don't know what it's worth unless you sell it. You can see what the market is doing, yes so you can have an idea / ball park figure but that's it. It's the sales that make the market figures not the other way around. Sentiment changes, demand changes and other things change which affect the outcome of those transactions between private parties. This is partly why it's been so sticky here, people don't have to sell...

[jklymak]

Sure. Predicting an actual number is just for fun on a blog. But you predict market movement in general. It's never exact, you just figure your probabilities and make your choice.

Right, and I maintain that you cannot hope to predict the market on short timescales. Shiller can say he predicted the housing crash in the US, except he'd been predicting it since the 90s. He is an economist at Harvard.

Better to assume the long-term trend, and build in a factor for risk.

[pherthyl]

They are the same people, but they use different names on HHV and VV.

My name on HHV is Leo S. I have the exact same views on both sites. The only difference is that I post on HHV much more often since there is always new discussion. I also choose my words more carefully here since every statement or joke gets much more scrutiny (this is a good thing, although it does mean I can't be as sarcastic here because people don't pick up on that).

[pherthyl]

@pherthyl
The price is not determined by the market at all. It's determined by a seller and a buyer agreeing on a price. It's a simple as that.

Yeah but where the seller starts is dictated by the market. Like I said, 95% of the price is dictated by the market. The remaining 5% is set by the buyer and seller.

Both houses I bought I negotiated 12% and 10% less than the asking price so I don't know where you get the notion that prices are fixed +- 5%.

Those places were overpriced. You're dreaming if you think your negotiating skills are so far above everyone else's that others would not have gotten a similar (within 5%) price of what you paid.

"And how do you evaluate what it's worth?" Look at how the place was built, what era, size, what condition it's in, The location, the direct neighbours, schools, amenities, traffic, market conditions, rents in the area, lot size, neighbourhood gentrifying, decaying?

Again, you can look at that now and come up with one figure, or you could look at it in 3 years and come up with a completely different one even if nothing about the house or the neighbourhood changes. It's worth what the market will bear.