12 Comments

1. 

   rich t on April 13, 2009 at 5:09 pm

   Oh, come on!

   😉

2. 

   dejams on April 13, 2009 at 5:43 pm

   Nice Job Rich. Too bad no one called to question Matt on his afford-ability index at 60% in SD.

3. 

   arf on April 13, 2009 at 6:15 pm

   and where were you?

4. 

   tj and the bear on April 13, 2009 at 7:11 pm

   IMHO Rich is still too focused on “affordability” lately, which is more indicative of artificially low rates than truly reasonable housing prices.

   By that argument, SD RRE went from being just about right to undervalued by half when Greenspan dramatically lowered the FFR post dot-bomb/9-11.

   p.s.: That said, he’s still a rock star!

5. 

   rich t on April 13, 2009 at 7:34 pm

   > IMHO Rich is still too focused on “affordability” lately, which is more indicative of artificially low rates than truly reasonable housing prices.

   Not sure what you mean… first, said “affordability” (not my phrase btw — I have called them “reasonable”) is based the fact that purchase prices in aggregate are right in the middle of their historical pre-bubble relationship with rents and incomes. Monthly payment does not enter the equation so it is not impacted by rates at all.

   Second, I mentioned on the show (and many other times as well) that rates are artificially low, and that that is one of the reasons that people should be very cautious about using monthly payments as an indicator of long term sustainable pricing. Hence my focus on prices as opposed to payments mentioned in #1. I also noted that people doing the rent vs. buy calculation (which IS based on monthly pmts) have to take rate risk into consideration.

   I mean, I have written volumes beating to death the concept that low rates do NOT justify higher prices (and btw have had to put up with a lot of argument/criticism for doing so). So I’m kind of surprised to see it implied that I promote these views or, god forbid, would agree with the absurd statement about homes being twice as valuable because Mr. Magoo jacked rates so low.

   Just sayin’.

   Rich

6. 

   Jim the Realtor on April 13, 2009 at 7:55 pm

   Rich,

   I give you credit for having the guts to say it, being who you are in the community.

   Reasonable, affordable, or whatever the label, buyers are active.

   I’ve called this environment a terrible time to buy.

   Terrible because it’s so competitive. I heard today about an REO that has 40 offers on it – in Chula Vista!

7. 

   rich t on April 13, 2009 at 8:37 pm

   Thank you Jim! I certainly won’t argue with your boots-on-the-ground (or, in your case, fashionable-loafers-on-the-ground) assessment of the environment.

   I should add to my last post that in addition to trying to caution people about the double-edged sword that is low rates, I’ve also been very careful two distinguish between prices being “reasonable” (ie middle of the historic range) vs. being at the bottom — two very different things!

   Nevertheless I have heard it repeated back to me that I said the bottom is in (which, trust me, I didn’t).

   So I’m just trying to keep the record straight here, is all.

   I would also like to go on record as commending tj for having a username that references a 70s TV show in which Greg Evigan was out-acted by a chimp.

   Rich

8. 

   tj and the bear on April 13, 2009 at 9:31 pm

   Rich,

   I *VERY* humbly apologize; your recent arguments have NOT been based upon rates. It had been a while since I had reviewed your chart and had obviously confused it with others, which is not a mistake I often make. Again, sorry!

   [I did listen to the show, too, and heard your cautious qualifiers.]

   That said… I still (humbly) disagree. CS is still double the ’96 trough despite arguably worse fundamentals. Incomes and rents? Artificially inflated along with everything else and definitely headed south. There’s much more to it than that, of course, but not here and not now.

   I know, I know… that equates to “I’m sorry but you’re wrong”. Sigh.

   p.s.: Kudos for recognizing my alias’ play on the old TV show name; none have ever commented on that before in over 5 years. Oh, and your “ape” comment was hilariously fitting given my obvious faux pas, too.

9. 

   tj and the bear on April 14, 2009 at 7:12 am

   Rich,

   Okay, went back and listened to the show *again* — paying much closer attention to who said what — and feel even more like an idiot. Yes, I disagree with the “reasonable” assertion (although knowing it’s entirely data-based), but I agreed with pretty much everything else you stated. Again, sorry.

   p.s.: Chimp->ape? Don’t ask.

10. 

    rich t on April 14, 2009 at 11:03 am

    TJ – Well, one thing about the “reasonable” thing is that it is a county average… I think there are plenty of areas that are not yet reasonable. Depending on where people live, the proposition may sound a bit silly.

    As for the idea of incomes/rents heading south, you are not alone in feeling that way. Which is to say that many people have given that same feedback. It’s a valid area for argument, as we are all speculating on what will happen to these things in the future.

    I don’t happen to believe that incomes will fall in nominal terms in any significant way, but that’s got more to do with my belief that inflation will be a big factor than anything else. As for rents, I’ve got it on my to-do list to try to dig a little deeper into their fundamentals at some point, to see if they are indeed out of whack.

    Rich

11. 

    CA renter on April 15, 2009 at 1:13 am

    Thanks for your excellent analysis, as usual, Rich! 🙂

12. 

    Don Q on April 15, 2009 at 9:08 am

    Rich,

    For the sake of simplicity, do you think it would be accurate to say that prices on the low end are now very reasonable, prices for mid-range homes are getting darn close to reasonable and prices for high-end homes aren’t reasonable yet?