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Wall St. Journal on the housing market:

A very interesting piece, and quite different from the articles we were seeing a year ago at this time, with all quoted sources insisting that at worst the market was in for a "soft landing", but most arguing for continued 8% to 12% annual appreciation. Especially interesting is Bob Toll of homebuilder Toll Brothers stating that we are in a "hard landing." Toll raised eyebrows last July by selling tens of millions of dollars of his stock (noted here) while still insisting that he believed in his company's prospects. At the time, Toll shares were selling for around (a split-adjusted) $50 a share; they are now down to under $25. I reported on this blog last July that Toll, in what I think were unprepared remarks at a real estate summit, predicted a 20% correction at the high end, and I advised that "It's time to run for the hills." Toll now says that the market is much worse than he envisioned.

Advantage: Volokh Conspiracy!

anonassociate:
Your friendly neighborhood Lyon Village resident here, only looking to add one potentially pertinant piece of information, which is that it appears that rents in NoVa, or at least my corner of it, are rising fairly rapidly. A partner at my firm who still owns every house he ever bought (in order, Ashton Heights, Yorktown, and Chesterwoods (he now lives in Great Falls) tells me he was able to raise rates by between 6 and 8% this year, and that his starter, 3/2 in Ashton Heights now rents for more than $3,000 a month)). Just some more info...
8.23.2006 10:39pm
JoshL (mail):
Kind of the same thing here in NYC- prices ceratinly don't seem to be falling, and even Harlem is going up. Prices might be going down across most of the country, but they certainly don't seem to be in the strong markets...
8.23.2006 11:27pm
DavidBernstein (mail):
We had an odd situation for several years where purchase prices were skyrocketing while rents were almost stagnant, and now we have the reverse. Rising rents, if they continue, will create a cushion under prices.
8.23.2006 11:37pm
John Thacker (mail):
JoshL:

Actually, prices aren't going down across most of the country. Prices are going down in a handful of particular markets that saw amazing purchase price increases (and near stagnant rents, as Prof. Bernstein mentions) over the last five years-- primarily Florida, Boston, Northern VA, and parts of California.

Most of the rest of the country, including fast-growing areas like Dallas, Houston, Austin, Raleigh-Durham, Charlotte, and Atlanta, never saw the dizzying rise in home prices and aren't seeing the falls now.

So a "stagnant" nationwide market really reflects an incredibly hard landing-- with prices actually decreasing-- in those key markets, and pretty much business as usual in the areas that didn't have a bubble.
8.23.2006 11:50pm
PaulV (mail):
Housing price rose fast because people expected above market appreciation in housing to continue. In most markets housing prices will not decline because it is expensive to add new supply to market and people resist lowering prices. Once it became more expensive to buy the demand for good quality rentals increased rents. Many rental units were taken off market by conversions to condo or gentrification of older neighborhoods. All very predictable. In a few years prices will start going up again but for now money will go into stock marker.
8.24.2006 12:57am
Perseus (mail):
I'm just amazed that people continue to believe that this credit-led housing bubble is simply going to pause at roughly current price levels and then continue upward in a couple of years.
8.24.2006 1:21am
Truth Seeker:
After a year on the market I had to drop my price by $100,000 to finally sell my old house. But still it is double what I paid in 2001! A 100% appreciation in 5 years isn't bad, even't if it what I had fantasied at one point.
8.24.2006 1:29am
Tim DeRoche (mail) (www):
At Starbucks the other day (in Silver Lake, Los Angeles) I overheard a 45-minute conversation between a sellers' agent and a prospective buyer. It wasn't pretty. Sounded like his seller had already been forced to lower the asking price by 5%, and this guy was admitting that he'd probably accept an offer an additional 5% lower. And it sounds like the agent was urging the dude to reduce even further.

Rents would have to increase by quite a lot to cushion these prices, I think.
8.24.2006 1:31am
zooba:
The real problem isn't the correction of prices, a not so unusual event. The hard landing is going to be from the foreclosures on houses bought with the ridiculous new types of mortgages when the rates on these jumbo hybrid ARMS suddenly jump from their ultra low but still barely affordable rate to a rate with a monthly that few can afford. The sudden glut of foreclosed homes on the market, even if they are primarily at first in the narrow category of such homes will have cast ripples throughout the market.
8.24.2006 3:20am
lemonade (mail):
How to make money in real estate. An approved, improved lot is worth 1/3 the selling price of the house. Do your own math.

Small town governments are realizing that growth benefits landholders, but not voters.

'Good schools' is PC for something else.

Demand is constant. Supply is being constrained.
8.24.2006 3:42am
Xrayspec:
I find these real estate posts only slightly less tedious than the song lyrics.
8.24.2006 5:02am
Ted Frank (www):
I think even within NoVa, it varies by type of unit. There's a huge glut of <1000-sq.ft. condos, where there are more attractive rental apartment options. But when I seriously considered doing a private sale of my 1550-sq.ft. place at an above-market price to find a rental to ride out any market volatility, I couldn't find an equivalent rental apartment at the right price without greatly increasing my commute.

I'll regret if I have to sell at the bottom of the market, but so long as prices return to where they were before I sell, I'm better off owning between quality of life and financial investment.
8.24.2006 8:22am
tefta2 (mail):
Xrayspec. I'm with you on song lyrics, but I 'spect you'll find real estate strings more interesting when you become a homeowner. Around here on the eastern coast of central Florida, housing went into a cosmic orbit for a year or two, so now asking prices are falling. Yes, prices are still out of this world, but falling somewhat closer to reality.

Many, if not most, of these unsold houses fall into two categories: 1. They were put on the market on spec. The thinking being, if I get a mil for the house I built five years ago for under a hundred thou, I'll sell, if not, no sweat, I'll stay here; and 2. They were purchased by speculators looking for a quick turnover and a huge profit. If they don't have funds pay the lump sum mtge when it comes due, these guys are in serious financial trouble.
8.24.2006 8:34am
anonassociate:
Ted, I think you are correct. For example, even at last year's inflated prices, a junior associate here bought a house in Lyon Park (not on an ARM) and his payments, giving effect to the tax breaks and including real estate taxes, are the same as he had previously paid to rent a nearby townhouse. On the other hand, as you say, there are a zillion crappy condos in Clarendon and Courthouse and more on the way (what are those huge ones on 50 and 10th st? Who will want to live there?).
8.24.2006 10:16am
Aultimer:
zooba - don't the foreclosing banks have every incentive, like any seller, to sell at a high price?

I think foreclosed interest-only loans and the like (with low/no downpayments) are different than an "old-fashioned" 20% down where the lender could afford a "below-market" sale and still come out whole after transaction costs.

As for tiresome subjects:
1. "Above market". No such thing.
2. Whining about VC post topics. Don't read if you aren't interested.
8.24.2006 10:21am
David Sucher (mail) (www):
Whjy assume that lenders will foreclose on the 'no money down ARMS'? How does that benefit the lender?

It's possible that many will simply extend the low-interest deals on the theory that a performing loan at a rate lower-than-expected is better than Real Estate Owned.
8.24.2006 10:30am
Tommy Esq (mail):
Can we assume that Toll will get the Martha Stewart treatment for publicly pumping the value of the market, and therefore his stock, while dumping millions onto poor suckers?
8.24.2006 10:36am
jgalak:
IMHO, stagnant rents combined with rising prices are a sure sign of an artificial "bubble" waiting to burst. Here, in NY, prices are starting to slow down, hard, and some are falling quite a bit.

A long time ago, I was told that a rental property was good investment if the rent was enough to cover an 80% mortgage. That hasn't been possible in this area for years - mortgage payments have been 2-3 times the possible rent. Lateley, I've been seeing the ration get better - recently, I saw a small building (3 commercial tenants + 6 apartments) where the rent would cover 90% of the monthly mortgage payment. That's still not great, but much better than anything in years.
8.24.2006 10:55am
Medis:
In my market in "flyover country", overall we never saw the astronomical increases in prices, but we did see some above-average appreciation in gentrifying neighborhoods. And as far as I can tell, all that is continuing without a great disruption.
8.24.2006 11:13am
jallgor (mail):
It still amuses me that Bernstein claims a victory in predicting this downturn. For those of you who are new to the VC, Bernstein's first post on real estate appeared about 3 years ago (maybe even more but I am not sure). He announced that he refused to buy a house in Northern VA because the market was ridiculous and the bubble would soon pop. I live in NYC but I am guessing those 3 years have seen housing prices double in NOVA.
It is no great feat to say the housing market will drop someday. The key is when and how much. As for the when part, Bernstein has proven woefully wrong, probably much to his financial detriment. David is the guy who never invests his money and feels satisfied everytime the market drops. It never occurs to him that he sat out during the boom. Face it David, you screwed up not buying a house 3 years ago and no 20% hard landing is going to change that. I am totally with you on Israel though.
8.24.2006 11:19am
DavidBernstein (mail):
Jailgor, there is no such post from three years ago, I didn't even begin thinking about buying a house until I was about to get engaged in Spring 2004, stop making stuff up.
8.24.2006 11:41am
DavidBernstein (mail):
P.S. If I had bought a house then, or if I would buy one now, it wouldn't be as an "investment," but as a place to live. If I were inclined to invest in real estate, and I thought housing in an area was going to boom, I'd buy stock in a regional builder, or a call option on that stock, or perhaps land, or land options. If I thought it was going to crash, I'd buy puts on regional builders, (or nationally as the case may be, as I recommended to readers last August). Short-term investing in an illiquid asset with extremely high transaction costs is generally quite foolish, though in the recent bubble there were, or so I've read opportunities to buy a "spec" house witv as little as a $5K deposit, which wasn't actually a bad idea--price keeps going up, you go through with transaction and sell. Price goes down, you lose $5k. Essentially, an option on rising housing prices in a rising market for $5K, not a bad deal.

BTW, in real (inflation-adjusted) terms, the decline is already 20% at the high end in many markets.
8.24.2006 11:50am
jallgor (mail):
Here's part of a post from about 2 1/2 years ago:

[David Bernstein, April 21, 2004 at 8:06am] 2 Trackbacks / Possibly More Trackbacks
METRO: FIXED RAIL VERSUS BUSES: Against my better judgment (given what I think is an overheated real estate market), I am househunting in Arlington, Virginia.


Here's your post from about 2 years ago:

[David Bernstein, November 8, 2004 at 5:27pm] 0 Trackbacks / Possibly More Trackbacks
Home Buying Update: I've run into a bunch of acquaintances and VC readers lately, many of whom have asked me, remembering previous posts on the subject, whether my wife and I have bought a house yet. The answer is no. We made one offer in May on a four-bedroom house a mile from the Ballston metro with a swimming pool, but lost it to a family that was willing to waive the home inspection contingency. Since then, we've been looking off and on, hoping that the market calms down meanwhile. Fortunately, it seems to be doing that. We've noticed that houses are staying on the market longer, and that they are often selling for prices below asking. Agents have told us that the $800,000+ market in Arlington has slowed to a crawl, many more sellers than in the Spring are lowering their asking prices, and an agent yesterday told us that housing prices in Northern Virginia are falling, "I see it every day." Hopefully, this means some sanity is returning to the market.

As much as I would like to see a major price decline before I buy a house, I don't know that the economy could stand it, so I guess we'd all better hope for a "soft landing." Following the news about the real estate market over the last few months is worrisome, because media reports seem to make it clear that many paople are buying houses they can't really afford; indeed, the family we lost our house put no money down (a 100% mortgage), only had $2,000 in earnest money, and asked for $12K in closing cost help. Quite remarkable for someone in such apparent financial condition to be buying a house in the mid-six figures. Worst of all is that some people are buying houses with no money down, interest-only, adjustable rate mortgages. When the rate adjusts, some of these folks aren't going to be able to afford their payments. Media reports suggest that their plan under those circumstances is to simply "flip" their house and buy a new one with the "profits" serving as a down payment. But what if there aren't any profits? And even if the rate never adjusts up much, or the owners have a fixed rate mortgage, if prices go down say, 15%, who is going to stay in a house that has, e.g., a 90K loss when they put no money down and have paid no principal? Better to just declare bankruptcy and walk away from the loss.

Near as I can tell, banks and mortgage companies wouldn't be making these crazy loans but for the fact that they can immmediately resell them to Fannie Mae, which somehow has persuaded itself that its charter of increasing home ownership allows it the luxury of purchasing and holding loans that no one with common sense, much less a decent actuary, would ever make. As I said, we all better hope for a soft landing, because if interest rate go up too much, or prices fall significantly, there are going to foreclosures everywhere. Already, a record percentage of mortgage or in default or behind on payment, and that's in a low-interest environment with rising prices. Shudder.

So you have thought the housing market was overheated for 2 1/2 years not 3. I apologize but to say I am "making stuff up" is a bit harsh.
As for your second post, I never said your home should be a short term investment. I simply said that you probably would have been better off financially if you had sucked it up and bought in 2004 rather than renting.
8.24.2006 12:31pm
jallgor (mail):
Ok DB, This is the post I was really thinking of but I couldn't find it at first. I'll apologize again for saying 3 years when it was really 2 1/2 but "making stuff up" is a really a bit much. And I reiterate my point which is that it likely would not have been a financial mistake for you to buy in April 2004 (despite your prediction to the contrary below).

[David Bernstein, April 4, 2004 at 9:21am] 0 Trackbacks / Possibly More Trackbacks
Housing Bubble? Matthew Yglesias is staying out of the D.C. housing market. After an abortive bid on one house, so am I. The market seems absolutely insane. Every economic analysis I've read (edit: not sponsored by the housing industry) suggests that housing prices in Northeastern markets are out of whack by every historical measure (compared to apartment rents, compared to housing rents, compared to incomes, you name it), and a brief venture into the market bears that out.

A ten minute walk from the Crystal City metro, folks are paying $400,000 for a 1,000 square foot house (usually built around 1940). I used to live in the Crystal Square apartments, right on top of the Crystal City metro, no walking outdoors in bad weather required. The building has a gym, pool, food court just below, underground parking, etc., and you can also get 1,000 square feet of living space starting at $1,230 a month. I've done the math, and if you are planning to stay put for five years or so, it's a lot cheaper, even with ownership tax breaks, to live in Crystal Square, unless you are expecting housing prices to continue a sharp rise. A market in which people are expecting continued sharp rises in housing prices is a good market to stay out of.

One thing I hear from many people is that "prices can't go down." Maybe they will stabilize, but they can't go down. Why not? Prices in Arlington, Virginia, have more or less doubled in five years. If prices were to go down by, say, 20% over the next two years, that would still amount to a none-too-shabby 60% price increase over seven years. A 10% decrease in prices would leave an 80% seven year increase in prices. And it's not like prices didn't fall in the DC area in late '80s, the last time housing prices were equally out of whack with standard valuation measures (it's hard to believe in today's market, but the house I bought in Annandale when I moved to D.C. in 1995 had been sitting on the market for a year!). The "prices can't go down" mantra sounds very much like the "NASDAQ can't go down" mantra of the late '90s, and listening to people at cocktail parties discussing their successful amateur ventures into real estate ("bought that townhouse in Silver Spring; figure I'll rent it out to some students for two years, then flip it for a bigger property in White Flint") sounds very much like listening to people discussing their stock trades circa Fall 1999, though there are obviously fewer people involved.

It's possible I'll still decide to buy something. Interest rates seems as low as they are likely to be in the foreseeable future, my lease expires in July and my landlords may be returning from their State Department gig abroad, and it took me months to find a suitable rental last time, and at least with a house you know you get to move on your schedule. But if I do so, I'll be expecting it to be a financial mistake.

UPDATE: Read this excellent survey on surging housing prices from last May's Economist.
8.24.2006 12:44pm
Tracy Coyle (mail) (www):
Foreclosures are up 70% in the first quarter nationwide. Mortgage lenders do not stop foreclosure just because it would be more sensible to do so. We see people with houses under water (worth less than owed) foreclosed on all the time. Foreclosures are still up over 50% in our area so far this year and prices have stagnated or dropped slightly....and we are in Madison, WI...hardly a coast or 'hot area'.
8.24.2006 3:27pm
DavidBernstein (mail):
Well, you said that I posted at least three years ago and that prices have doubled since then; turns out, it was 26 months ago, and prices (if you can sell) are probably now up 10-15% or so (or 5% or so in inflation-adjusted terms) since then, in the markets and price range I was looking. Even 22 months ago, I put a question mark after "bubble," and didn't "refuse" to buy a house then, I merely pointed out that I expected that buying a house then would be a financial error, and given that prices are alread down to 12/04 levels after only a few months of bubble deflation, I expect that I will turn out to be correct. Check back with me in January 2008, to see if prices, in real terms, are not well below Spring 2004 levels.

Now, last year I truly believed we were in a bubble. You will find that I predicted the top of the market somewhere between April and July 2005, and was right on target. Sometime, I will post about why this was all pretty clear.
8.24.2006 3:39pm
Perseus (mail):
It's possible that many will simply extend the low-interest deals on the theory that a performing loan at a rate lower-than-expected is better than Real Estate Owned.

That's a step down the path that Japan took during its long period of stagnation.
8.24.2006 4:33pm
Kevin L. Connors (mail) (www):
David, it's not at all strange that increases in rents haven't tracked increases in home prices. It is typical for rental rates to trail home prices. However, in the current market, rents are trailing far more than usual. I believe this can be principally attributed to the fact that, despite the strong economy, wages and salaries, particularly for the bulk of renters, haven't increased much.
8.24.2006 5:27pm
Sebastian Holsclaw (mail):
Since rental units and owned homes are to some extent rival goods, it isn't shocking that prices for one would be up while the other trailed. (People would go from renting a place to buying a place, thus reducing demand in the rental market). People who lose their homes will still need a place to live--increasing demand on the rental market.

(There are major effects on replacement demand, so this is just a thumbsketch.)
8.24.2006 5:43pm
DavidBernstein (mail):
Oh, and Jail, I withdraw "Making stuff up." Exaggerating is mor like it.
8.24.2006 5:48pm
anonassociate:
I am finding this dicussion somewhat besides the point. It's pretty obvious to me that, financially, I would have been better off selling my house in Lyon Village last spring and stuffing my family into a 2BR in Clarendon 1021 for the next 2-3 years, and then picking up a house in McLean or Great Falls on the cheap in, say, the spring or fall of 2007. But that ignores the realities that my wife and kids would not be too thrilled with that! Althought, as I have said, I have owned my house for a number of years I find the notion that Professor Bernstein would tell Latham associate A married to Kirkland associate B that they were foolish to move from Logan to Cherrydale in the spring of 2005 all well and good on paper, but surprisingly ignorant in real life. These are places we have to live and and enjoy, and not just decisions on paper.

Of course, anyone who bought that Clarendon condo as an investment, etc. made a very foolish investment, but if you bought it as a life decision, not sure I could say the same thing. In 10 years what will I remember more, the incremental $150K I have for sucessfully timing the Arlington housing market or the three years of great memories in a roomy house with a big yard? Come on, not even close.
8.24.2006 8:14pm
DavidBernstein (mail):
Anon, I'm not sure I'm getting your point, but for the record I think you're right, I'm not telling anyone when they should or should not move anywhere.
8.25.2006 12:42am
anonassociate:
My point was a recurring theme to your posts seems to have been that people should wait to buy a house until prices have come down, which you yourself have apparantly done (to your short-term benefit, clearly). But if the alternative to over-paying 75K for a house in Lyon Village is to spend another 2 years in a cramped Ballston condo, I think you reach the point where the bottom line ceases to be the driver.
8.25.2006 1:15am
Kevin L. Connors (mail) (www):
anonassociate: While I don't know your particular communities, you pretty much have the model of home-as-speculative investment down. Of course, like any other speculation, it requires a omniscience to be successful, you buy at the leading edge of an appreciating market, get out and into a rental (banking the cash), close to the peak, and then ride out the sag - repeating everything on the next cycle.

But, as you mentioned, your wife and kids might have a problem with that. :)
8.25.2006 1:15am
anonassociate:
Kevin, that's right. On paper, it is extremely clear that I should have sold in May (and was clear to me at the time) and I have lost, as of today, perhaps significant dollars by not selling. But until such time as I can afford Great Falls (and I will no longer be anonassociate!) there's nowhere else I'd rather have my family live.
8.25.2006 1:37am
Xrayspec:
zzzzzzzzzzzzzzzzzz
8.25.2006 2:22am
Kevin L. Connors (mail) (www):
*with his boot, pushes the snoozing Xrayspec of the edge of the boat*
8.25.2006 3:08am
Jeek:
David, nice job of lawyering jallgor's comments, but he got you good. Whatever the exact details, his general thesis is correct. Plenty of people have been bleating about a "bubble" since 2001/2002, and they all may feel smug now, but nevertheless I do not respect their financial acumen.

Anyway,

Average sale price in July 2006: $537,731
Average sale price in April 2004: $405,057

That's 33%, not 5-10%.

I merely pointed out that I expected that buying a house then would be a financial error, and given that prices are alread down to 12/04 levels after only a few months of bubble deflation, I expect that I will turn out to be correct.

Nope. It would only have been a financial error to buy in April 2004 if you were forced to sell or wished to sell. Since you presumably would not have bought with the intention of quickly flipping the property, chances are you would not have made a financial error. If you bought with a fixed-rate mortgage, and lived there for ten years, chances are, no financial error!
8.25.2006 4:42am
Jeek:
That is, "It would only have been a financial error to buy in April 2004 if you were forced to sell or wished to sell right now or perhaps the next several years."
8.25.2006 4:43am
tallguyinga:
I just stumbled onto this blog and I totally agree with David Bernstein. I agreed with him in 2004 and agree with him now. I think people put too great of an emphasis on timing a good decision and too little of an emphasis on having the right decision. I remember looking at internet stocks in 1996 and saying that they were overvalued. Of course, they went from overvalued to absurdly overvalued before they ultimately came back down to reality. Was I wrong? Should I have invested in them? For a couple of years it might have appeared that way but I think overall history proves I made the right call.

Toying with bubbles is like playing Russian Roulette. The odds are actually in your favor that you will win the first couple of times but if you play long enough, your going to get slaughtered. Why bother playing that game? And just because the bullet doesn't go off the first time, doesn't mean it isn't in there.
8.25.2006 4:35pm
tallguyinga:
Aultimer:

I read your question:
"don't the foreclosing banks have every incentive, like any seller, to sell at a high price?"

Of course. But they still want to get it off of the books and put the proceeds to better use. That means selling it to the highest bidder at an auction and moving on. Other sellers let the property sit vacant in the hope that magically prices will increase. Most banks don't have that luxury.


"I think foreclosed interest-only loans and the like (with low/no downpayments) are different than an "old-fashioned" 20% down where the lender could afford a "below-market" sale and still come out whole after transaction costs."

I'm not sure I understand this. They would be much less likely to come out whole. If a house sells for $500,000 and has a $400,000 mortgage, the bank can sell it for $450,000 and still come out whole. If it has a $500,000 mortgage, the bank is in trouble at $450,000. Int-only basically means the same thing as low-down. Less equity. Which means more risk for the bank. Isn't this obvious?
8.25.2006 4:47pm
tallguyinga:
David Sucher-

"Whjy assume that lenders will foreclose on the 'no money down ARMS'? How does that benefit the lender?"

I suppose they could offer some incentives, but what kind of message would that send to their non-defaulting customers. If you don't pay your bill, don't worry we'll just cut it by 60%...

They might forgive a little at the margins but there are an awful lot of people out there that wouldn't be able to come close to paying even with a small discount. The banks will have their own fixed expenses and interest to meet and they will be in a much better position to do so by collecting from paying customers and liquidating on defaulting ones.

A small loss is always better than a big one.
8.25.2006 4:55pm
DavidBernstein (mail):
Tallguy has it right. And since I have bought a house yet, there's no way of telling yet how well I didn't or didn't do, and that also has nothing to do with whether I will turn out to be right or wrong that prices were overvalued in Spring 2004, and in bubble territory last year.

And Jeek, your data is way off. I'm not sure what exact area it's from, but I have specific house comparisons. But anyway, if you want to know what prices were in April 2004, you don't look at April 2004 sales data, which reflects Feb. 2004 prices, since houses take over a month to close usually. And for current data, you certainly don't look at July 06 sales, which are now three months out of date price wise, three months in which prices in neighborhoods I'm looking at have gone down almost 10% (and see housingtracker.com, which shows higher priced homes in the DC area going down in ASKING price from a 75th percentile of $679 to $645 in that time), and probably more if you consider that asking is becoming less and less predictive of sale price. The house I mentioned in a post last week that went down from $540 in the Spring to $510 last week is now on the market at $495,000 and still hasn't sold. Similar houses sold for $580 to $630 last Spring and Summer.
8.25.2006 7:10pm
Enoch:
All I know is I wouldn't be smugly congratulating myself on my financial acumen if I had made NO MONEY - $0.00 - in a particular market. Buy at the bottom and sell at the top, that is a victory. Sit on your hands and do nothing, that is the counsel of the timid.
8.25.2006 8:56pm
DavidBernstein (mail):
Enoch, you are making three fallacious assumptions. One is that I made no money on the housing market. It's none of your business why it's wrong, but it is.

Second, and more significant, I wasn't congratulating myself on my financial acumen. I was congratulating myself on providing my readers with better information than they were getting from the MSM, which is why I wrote "Advantage, Volokh Conspiracy," Not "Advantage, David Bernstein's portfolio."

The third is that not losing money when the market is falling is not the equivalent of making money. Someone who refused to get caught up in the NADAQ hype in 1999 made lots of money, in effect, compared to his opposite.

I'm not going to comment anymore on this thread, so will close by saying that I don't begrudge anyone who bought a house TO LIVE IN at any time, including the height of the bubble, at least assuming they had a mortgage they could actually afford and weren't simply counting on refinancing when prices "inevitably" went up because "real estate never goes down.. But lots of people got caught up inthe hype, and not only bought a house they couldn't afford, but leveraged themselves to buy two, three, or even ten houses to flip, and if they didn't do it at least two years ago, they are poised to take quite a fall. It's hopefully people who were considering doing that sort of thing who listened to the warnings, and didn't get in over their head.
8.25.2006 10:38pm
Jeek:
The numbers are from the Northern Virginia Association of Realtors market stats, summary for the northern VA area. I think regional statistics are more valid than your single-point comparisons. However, the point is moot, since you have clearly convinced yourself that you made the right choice not buying in April 2004.
8.26.2006 2:13pm
tallguyinga:
Enoch,

I really think a significant piece of investing is knowing when to avoid catastrophe. Making $0 is a whole lot better than losing $200,000. I think its also important to note that money that isn't invested in housing is invested someplace else. Even if those funds returned only average returns, isn't it much better to have a low risk average return investment than a high risk negative return one??
8.28.2006 11:12am