Clay Kime

Why There's No Such Thing As a Housing Bubble

Dear t ton:

As mentioned in resposes to other comments above, this is just a report. All the things you mentioned are valid factors and theories, but how would you quantify them for objective analysis? Consumer confidence is also a significant factor. It's real, it has an impact, but how do you measure it? Rent vs. Buy decisions are not universal.

This report is focused on the common denominators which surfaced from the data. It is not a "topical" report; That is that we did not set out to assemble arguements to support a pre-conceived notion. We went in searh of facts not similarities of trend lines and bell-curves with events in 1952 or other historical periods.

I am in complete agreement with your observation that there was a significant amount of irresponsibility with some borrowers and their lenders. The bank's substitute trustee will likely visit them. But again, I ask, how can one identify good loans from bad loans? Some will still be able to pay heir mortgage from a bad loan and others may not be able to meet their obligations from a good loan. Unfortunately, the measure of this factor will have to wait until the forclosures unfold.

Lastly, and again, The title for this report was concocted by Seeking Alpha, not me.

Sorry you didn't otherwise like the report.

Best of good fortune.

Clay

Why There's No Such Thing As a Housing Bubble

Thomas:

I'm sorry Alex convined you that there was or is some conflict of interest. This is just a report, not a recommendation to buy, sell, stay, wait, rent, or do something or do nothing.

I have no idea in what region you are, but your reasoning is sound and I hope it works affirmatively for you.

We also recommend lenders from time to time. But, we always recommend "direct lenders" for precisely the reasons you outlined. With loan origination and underwriting done under the same roof, their stricter and supervised lending guidelines should well protect you as they protect their institution. While there are rational uses of ARMs, interest only and other derivitave products, I agree with you that this is a sector of products that has been abused for longer term financing requirements. If one knows that they are going to move in 4-5 years, a 5-year ARM may be a good choice. I think interest only loans are terrible for the buyer from just about every angle.

Regards,

Clay

Why There's No Such Thing As a Housing Bubble

Alex, Alex, Alex:

This was and is a "report" (please excuse the quotation marks, it's my style not an attempt at subtrifuge). It is a report from the foxholes on the front lines of the real estate market, not an ivory tower. It reports the conditions as we see them and makes no recommendations whatsoever. Your left-handed comments that there is an undisclosed conflict of interest and that I deliberately mis-lead the readers is unfounded, and quite frankly, offensive (as I'm sure it was intended to be.)

Bizarrely, we are in agreement about the effects of interest rates on the housing market. Interest rates have a direct correlation to "affordability." This was the focus of the report. Please read it again.

The report's conclusion that equalibrium in our market will likely be realized when prices retreat to Q1-05 levels may be wrong. We'll just have to see. But the conclusion about affordability converging on Q1-05 prices was set forth with the methodology used to reach that conclusion, namely our affordability index. Again, that "affordability index" is based on "interest rates." You are welcome to disagree with that conclusion, but you are not welcome to be nasty about it. Try some professionalism.

It also seems to have offended you that we noted that the vast majority of the sources quoted by the media are stock market analysts in connection with the housing market. But sometimes the truth hurts. It has been this way since the late 1990's so eventually they had to be right. I could forecast that a blizzard is going to hit Atlanta and, given enough time, I would eventually be able to say "see I told you so." I could forecast a major price correction in the stock market when record earnings are no longer sustainable and, given enough time, I would be right.

You did reach the pinnacle of offensiveness though, in your closing, by accusing me of putting people into houses that they could not afford, a thing I have never done nor would ever do. Where in the banana peels did you get that? What darkness lies within you to make such an unfounded and scurrilous charge? Isn't that "libel?"

Perhaps you should be banned from this blog. There are published rules of conduct.

In closing, please consider Prozac. I understand it has helped many.

Clay Kime, REALTOR(R)
RE/MAX Preferred Properties
380 Maple Ave. W.
Vienna, VA 22180
PlanToMove.com

Why There's No Such Thing As a Housing Bubble

Paul:

Thanks for your comments. This report was prepared for the Northern Virginia (DC Metro) Area at the very end of 2006.

You are absolutely correct, that conditions elsewhere in the country may well be different now as likely they have been during the first half of the 2000's. Even prior to the housing slow-down in Virginia, we had a number of clients relocating from other states where the level of activity in their home states never approached that of our area, Ohio being one of those. Recovery will certainly look different in different markets but I believe it will resemble market balance of supply and affordability-driven demand on a local or regional basis.

I also agree that at some point, hopefully not at the same point, we will see the withdrawn properties re-introduced as active listings. Additionally, some of these are the residences of those who cancelled their "new construction" contracts, so they are no longer under any pressure to sell. Many also were converted to rentals which puts those properties out of market reach for 1 to 3 years, depending on the lease term.

I would also like to note that the title "Why There's No Such Thing as a Housing Bubble" was unilaterally authored by the editors of Seeking Alpha. It was not my title. But the horse is out of the gate now. C'est la Vie!

Regards,

Clay