September 27. 2007 05:52

This is the best time we have had in years to buy a new home. I couldn't agree more.

Tom Keyes

September 27. 2007 18:29

Now is the perfect time for first time buyers to get into the market. Plenty of homes to choose from and low interest rates. Good information for anyone looking to buy a home in the Twin Cities today.

Teri Eckholm

September 27. 2007 21:24

Exactly correct. We just purchased a standing inventory home from a builder. After 3 months of having our existing home on the market, we had to decide how much we wanted to reduce the price to try and get it sold. If we could sell our house for what we originaly listed it for, we planned on buying a home in the $450-$475K range. We went out to some of the new communities that we had previousely visited and liked. We told the sales agents that we needed a home soon were non-contingent (just a small white lie) in an attempt to see how much we could save on the buy side. It worked! We could see the excitement in the sales agents' eyes the moment they heard "quick sale" and "non-contingent". If the agent didn't just come right out with what the builder was willing to do, we would make comments like "Gee, we really like this home, but $450 is just too much. We can only afford to about $400". This usually brought 1 of 2 responses, "We can't go that low, BUT, I think we could go as low as $4XX" or "We can probably make that work". After looking at several developements and builders, we decided we were confident we could lower the price of our existing home by $30,000 and make up that much or more on the buy side. After the reduction, our house sold in 2 weeks and we had a double close about a month later. On the buy side, we were able to negotiate a purchase price of $415K on a home listed at $449,900. We also got them to swap out their "standard" appliance with upgraded stainless appliances at no charge.

DNeumann

September 27. 2007 21:25

We just singed a contract to buy an existing model from a builder. We sold our house a week ago after 6 months on the market. YEAH!!! Like you, DNeumann, we did some investigating to see what kind deal we could get on the purchase of a new home. We decided that we could lower the asking price of our home by $25,000 and be able to make it up when we purchased the new home. We did pay the full asking price to the builder, but they are finishing the basement, a little over 900 sq ft with 2 bedrooms, a full bath, a huge family room with a fireplace and built-in entertainment center, for FREE! We figure we saved about $35,000. I've told all my freinds to not be afraid to make a move. A person can most definately come out ahead right now.

Free Thinker

September 29. 2007 12:41

I agree it is definately a buyers market in every way BUT where are all the buyers? The media is scaring people more than they need to. I am trying to sell my home so I can purchase one level townhome for medical reasons. So spread the word it is a GREAT time to buy new and old(but updated) homes. Tell them to check out my home at 3517 Park Ave, So Mpls Convienent location to 35W, downtown and lakes.

Sharon

October 9. 2007 22:43

"so a Minneapolis-St. Paul homebuyer can negotiate a new, high-quality home for a good value that will only appreciate over time."

Statements like this are misleading. This year is proof that they will not ONLY appreciate over time.

RJ

October 11. 2007 02:30

Not sure what RJ means? Homes may not appreciate this year (depends where you buy and at what price) but over the long run they will appreciate.

JS

October 11. 2007 07:54

While this website is informative; it seems to be presenting one sided opinions. I am a home buyer who has been looking to buy for the last year. I understand that there are some good deals around- but unless you get a "good deal" I would suggest not buying at this time. Last thing you want is to buy a home which you wont be able to break-even in the next 5 years. According to economy.com the MSP market will bottom out in Q209 (then again estimates are always convervative). Also the MSP market has had a 2.5% drop from last year. Please be cautious about the opinions and suggestions on this website.

AbP

October 11. 2007 21:45

AbP, you hit the nail on the head - "opinions and suggestions". As far as I can tell this is a site run by realtors or those in the RE industry.

Anyone in an industry, speaking or writing on the same industry, is bound to have some bias. Very often they read industry publications which do not offer them a big picture view. And let's face it - realtors are little more than used car salesman on a different kind of lot.

UsedCarSalesman

October 13. 2007 15:26

The buyers in this market are scared because of the media. The media, if you havent noticed, has been a large reason for the Twin City slump.

Will a new home appreciate every year? No, but will your mutual funds or stocks? Also, can you deduct the payments on a home? Yes.
Will a new home appreciate over time? Well, look at the stats and history. Unless you are saying that inflation will remain zero forever, a home has to appreciate over time.

Bottom line is you should not buy a home as an investment or an asset. It is a liability with tremendous tax advantages for average people that has a large probability of appreciating.
You buy a home because you enjoy it, have fun in it, raise a family in it, take pride in it. It is meant to improve the enjoyment of your life. People buy $30,000 cars everyday that will never appreciate and rent each month. Not the best way to get ahead in life.

People who rent are generally:
1. Scared
2. Uneducated
3. Are people who never commit to anything in their life
4. Are young such as students
5. Are broke
6. Spend their money unwisely
7. Move around all the time

If you dont fall into one of those and still will not buy, I would love to hear from you and hear an argument. Chances are you know you fit into one of these but are either too ignorant or too proud to realize it or admit it.

Eric

October 13. 2007 15:28

This is only a good time for first time homebuyers because of the inventory not because of lending that is available. FTHB's need to have a down payment, now of 5%. Sure that seems like common sense but the housing market we did have was due to people with a 580 mid score getting 100% financing. They are the ones that drove the previous market. SubPrime dies in March which allows less buyers, credit guidelines tighten, lenders pull the 580 100%, people try to sell their houses and the houses just sit there, they start to freak out and there wants exceed their needs. Sellers lower their prices due to market and the relitter(realtor) is in their ear telling them they need to reduce price. A year and $20,000 later they sell but because of the reduction in sales price it affects all other houses in the neighborhood. Now we see depreciation because sellers can't sell their house and think reducing the price is what's best. Spread the word!!! do not reduce the price of your house unless you really must sell your house because of foreclosure. Stay in your house for a year or two, try to wait out the market and then sell.

Roloff

October 13. 2007 15:37

"FTHB's need to have a down payment, now of 5%"

Obviously you hae no idea what you are talking about. There are still plenty of 100% programs that do not require 5% down. The State of MN did make it much more difficult for buyers to qualify however. In fact, the goverment shut down close to 70% of the Mom and Pop mortgage broker shops. How American, way to support small business Minnesota. That will really solve our housing market problems.

Eric

October 13. 2007 15:41

"Sellers lower their prices due to market and the relitter(realtor) is in their ear telling them they need to reduce price. A year and $20,000 later they sell but because of the reduction in sales price it affects all other houses in the neighborhood."

You have something here but again you are not 100% accuarate Roloff. Remember, the market determines the price of a home. If the media pushes buyers to pay less, then in order to sell, the lowest seller wins. Do not blame a realtor for essentially doing their job.

Maybe take an economics course. If you do not have your MBA yet (which I assume you do not) I would try Carlson, they are excellent. Once you have an education, then come back and talk to us ok?

Eric

October 13. 2007 15:47

"Anyone in an industry, speaking or writing on the same industry, is bound to have some bias. Very often they read industry publications which do not offer them a big picture view. And let's face it - realtors are little more than used car salesman on a different kind of lot.

UsedCarSalesman "

Another ignorant post. How many used car salesmen do you know who have MBAs and make 300k a year? Do some homework on that because 4 of the top 10 (thats 40% for the slow ones) realtors in MN have MBAs...just some food for thought. I am actually an executive headhunter and I have more info if you need it.

Eric

October 13. 2007 20:12

Eric:

"How many used car salesman do you know who have MBAs and make 300k a year?"

Are realtors still making 300k/yr? Looks like we've still got a way to fall, then...
So, people get an MBA and then become a realtor? Looks like an MBA is worthless, when you can become a realtor with a few weeks' training...

And please, leave the outside-the-box thinking to people who are capable. Of course used car salesmen do not make 300k a year. Can you read between the lines? Can you make a correlation between two types of people who will say anything to make a sale? Can you do anything for yourself other than regurgitate the realtor and builders' tired lines about being "priced out of the market forever" and other such nonsense?

If anything, you have helped make my point with your attitude...

UsedCarSalesman

October 13. 2007 20:48

Again, Im an executive headhunter. All I am saying is that many top realtors are very educated and have MBAs and are professionals. Comparing that to a car salesman is a joke. Realtors have way more strict state regulations and ethics by law and the NAR. Did I say all realtors are perfect, no. I am talking about the top producing ones, the ones people should be using...not the ones in it for a quick buck with no education or skills.

Good luck in your car sales and dead end career.

Eric

October 13. 2007 22:46

Eric:

It seems you are changing your statements as you go along. "Show me how many realtors", then "I am talking about the top producing realtors"..."Ethics" LOL...do you actually buy that crap? Anyone can write a code of ethics and say it applies to all members of a group, then not do a thing to enforce it. I stand by my statements...good luck in your sales job, yourself...headhunters are about as greasy as used car salesmen and realtors. What does it take to be a headhunter, anyway? Experience in used car sales? LOL

UsedCarSalesman

October 14. 2007 00:47

"I can't find anything about the 40% of realtors in MN having their MBA. Can anyone give me a link to that or a way to otherwise view the data? I like to see things for myself. Thanks!

I Like Facts
"

Read before you write. It does not say that 40% of realtors have an MBA, it says "4 of the top 10 " ...Just 4 of the top 10 agents....thats all it said. I know three of them personally.

Eric

October 14. 2007 00:49

"...headhunters are about as greasy as used car salesmen and realtors. What does it take to be a headhunter, anyway? Experience in used car sales? LOL"

Thats awesome! No I hire CEOs, Production Managers, CFOs, etc for companies like Target, Best Buy, General Mills, and Cargill. I have not sold cars, but I did attend Oxford. :)

Eric

October 14. 2007 01:17

I can't find anything about the 40% of realtors in MN having their MBA. Can anyone give me a link to that or a way to otherwise view the data? I like to see things for myself. Thanks!

I Like Facts

October 14. 2007 03:06

Here are 3 of the top agents who have MBAs and are Realtors in MN:

http://myfreehomesearch.com/ContactUs.htm
http://maryaliceshort.com/about_me.asp
http://www.sandygreenrealty.com/about.html

Eric

October 14. 2007 06:15

Read before you write, indeed! I am looking for data. You gave me links to realtor web sites. I don't see anything on those sites indicating those people are the top 10% in MN. Certainly you don't think anyone is naive enough to take what you write at face value.

I will keep looking. If anyone comes up with data on the top realtors by sales or volume, please post it here.

Here are examples of data, as a reference:
www.housedata.info/MN
www2.standardandpoors.com/portal/site/sp/en/us/page.topic/indices_csmahp/0,0,0,0,0,0,0,0,0,1,1,0,0,0,0,0.html
www.census.gov/hhes/www/housing/census/historic/values.html

I Like Facts

October 14. 2007 20:01

"Obviously you hae no idea what you are talking about. There are still plenty of 100% programs that do not require 5% down. The State of MN did make it much more difficult for buyers to qualify however. In fact, the goverment shut down close to 70% of the Mom and Pop mortgage broker shops. How American, way to support small business Minnesota. That will really solve our housing market problems"

I didn't there aren't 100% loans out there to be had. I say FTHB's will need a down pamyent more now than they did before. Besides all of that....you are referring to the conforming market. Sub Prime borrowers mostly need 10% down.

Roloff

October 14. 2007 20:02

Please input "say" inbetween didn't and there. thanks

Roloff

October 14. 2007 20:08

"You have something here but again you are not 100% accuarate Roloff. Remember, the market determines the price of a home. If the media pushes buyers to pay less, then in order to sell, the lowest seller wins. Do not blame a realtor for essentially doing their job.

Maybe take an economics course. If you do not have your MBA yet (which I assume you do not) I would try Carlson, they are excellent. Once you have an education, then come back and talk to us ok?

Eric"

You are saying the media is telling people to lower the prices of their homes because of the market crucnch? In my opinion you don't have a clue. The market determines the price of homes? who are the ones that sell homes? the cunsumer, right? There for if the consumer (homeowner) lowers the price of their homes due to the realtors advice because the realtor wants the house off the market ASAP they are the ones that determine home values in the area.

Do you know what an appraisal is?

It is a form used by appraisers to determine a homes worth !!!BASED!!! on sales of similar homes in the area. I hope you get my point here Eric I don't want to break it down into a A) Consumer and B)consumer for you.

Roloff

October 17. 2007 06:50

Eric,

You're a dumba$$.

I have an MBA in finance and a JD from a school out east that we've all heard of. I have decent self-esteem, so I don't feel the need to drop its name. When I was at Oxford in the 1980s, I did not hear them dropping your name so I'm guessing this self-aggrandizing is a one way street. In other words, if it's true, Oxford would likely say, "Shhhhh. Don't tell anyone. It'll be our little secret."

In a bad year I will make $300k. In incentives. As a member of Mensa, I know that having an MBA, being smart, making a lot of money, etc... gets you nowhere. eing successful in one venture doesn't make you successful in another. I know an executive headhunter who works mornings at UPS so he can have health insurance and I know a guy from Mankato who is a billionaire because he's a paper salesman and another in Winona who is worth hundreds of millions selling nails and screws and other fasteners. As John William Gardner once wrote, "The society which scorns excellence in plumbing because plumbing is a humble activity, and tolerates shoddiness in philosophy because philosophy is an exalted activity, will have neither good plumbing nor good philosophy. Neither its pipes nor its theories will hold water."

I am also smart enough to know that having a formal education does not necessarily mean you've cornered the market on knowledge. I know enough idiots with an MBA from Carlson and better colleges that I don't think its a free pass to intelligence. In fact, I hear people with MBAs can even grow up to be...head hunters. And I've "attended" many Vikings games. That doesn't make me a football player.


Now, on to the facts of the issue at hand.

First, this site is sponsored by an organization of members of the shelter (building, remodeling, developers) industry. That's an important piece of information as consumers (lower case) make decisions about its bias and reliability. Other than an innocuous copyright disclaimer at the bottom, they are not killing themselves to give that proper context.

Second, the discussion of housing prices in the long run deserves better treatment than it has received here. If the claim is that housing prices can only go up, it is noteworthy if the expectation is they will go up as a statement of fact, if they will go up relative to other markets (such as the Dow Jones), if their growth rate will exceed inflation, etc... The correct frame of reference varies by consumer. So in RJ's defense, his experience is that housing is not a fool-proof, safe investment. I don't care about the long run if a) my kids are 17, b) I am 84 years old, c) I get transfered n my job, etc...

Along those lines, JS counters that "over the long run" housing will appreciate. Without getting too deep into formal logic, just because something has happened in the past, it does not necessarily follow that it will happen in the future. In fact, as foreclosures increase and people look for housing alternatives at a rate greater than the increase in population, it stands to reason that housing prices will not increase for quite some time. With a 100+ year supply of condos in Minneapolis, it'll certainly outlive our lives. As supply exceeds demand, prices will fall. Perhaps that taught you that in your MBA program from Lucky Strike University.

In fact, I argued for years that the best way to affordable housing was to issue an obscene amount of permits for new houses at the $500k+ level. When supply exceeds demand, downward pressure is placed on pricing. People with houses will need to sell them. People needing a place to live will buy them. As the equilibrium is met, the overall market will drop. Consumers will win and the draconian developers and finance companies - the ones that enjoyed the benefit of the hey-day - will fund the market fallout with their greed. (Yes, I'm a Republican, but come on.)

Third, your premise that renters have one or more of the seven deadly afflictions you identified is as ignorant and it is mean-spirited. You claim that you should not buy a house as an investment and then go on to claim that paying rent is paramount to spending your money unwisely. (I hope you never have a stroke as you will only be able to talk out of one side of your mouth at a time.) There are other, very sophisticated reasons to rent. For example, if you see this market coming in early 2006, sell your $3.4M estate in Orono, rent until the market corrects and then repurchase that same parcel in 2009 for $1.8M. I will have made $1.6M (less transactional fees and taxes) because I chose to rent for three years. How will your house have done in that time?

Fourth, Roloff started down the right path with first time home-buyers. This also applies to people trading up. The problem with buying in this market is that homeowners also have to sell in this market. The bigger the price, the greater the decrease. So if you are moving into or up in this market, you win! You only lose by moving down or out.

Fifth, Eric you are simply deceitful and misleading. Your statement "four of the top ten" implies that this specific result has more broad implications. It also implies a cause and effect that does not necessarily follow. I'm sure there are several MBAs that are lazy and lack self-discipline so they went into real estate and as a result failed. A sample size of 10 that are admittedly at the top of an overall population of 24,000 is not a fair representation. Perhaps 4 of the top 10 Realtors also have blue eyes. (I know this because I know 7 of them and somehow that makes me important and an authority on eye color and its relationship to real estate professional performance. OK, no I don't.) Additionally, does this mean that I am statistically more likely (60% v. 40$%) to become a top ten producing agent by NOT obtaining an MBA? As 10 realtors (top or bottom) are not relevant, there's no reason to point them out unless you are trying to point out a broader statement. If not, then your comment was simply random.

Sixth, the government did not shut anyone down Rules and regulations changed as the industry needed to be tightened. Money was no longer gong to be cheap/free, foreclosures were going to go up and it was time to reign the chaos in. (Very uncomfortable for a Goldwater Republican like me to write those words.) The moms and pops went away because it was no longer raining free money. They changed professions because market conditions changed.

Seventh, the media reports. They do not directly participate in the markets. Naturally, their information will have short-term effects on the marketplace, but at the end of the day they have an obligation to report. If the industry doesn't want to have bad things reported, then bad things shouldn’t exist to be reported. When the media was touting how great things were, we didn't see real estate professionals clamoring to give "the rest of the story." The greatest analogy I can think of is when Chad Johnson (or maybe Terrell Owens) was told his touchdown dances were offensive and taunting. He said, "If you don't like my touchdown dances, keep me out of the end zone." The media influences home prices. Realtors influence home prices. The economy influences home prices. Crime influences home prices. Many, many things influence home prices. But at the end of the day, only buyers and sellers set the prices. If you don't want those negative trends to be published, make them positive.

Eighth, we should all be lemmings. In the world according to Eric, we should all be using the top producing Realtors. There's no support for this so the only thing we are left to believe is they are top producing because they can provide all solutions in all scenarios for all people. Is this the same guy who was just sentences before hiding behind the shield of the little guy - the mom and pop company? The comment "the ones we should all be using" is just silly.

Ninth, Eric has ordained himself the arbiter of all things satisfying in the pursuit of career development. Let's see. If UCS is really a used car salesman he can be promoted to assistant sales manager, sales manager, open his own store, open his own chain, etc... Now Eric, you are a headhunter. If you work real hard and achieve all you can achieve in your career, you will end up...a headhunter. (Or retired or dead.) Help me understand how UCS' career track, while maybe not what you value, is any less valid than yours. And since he has a plae to go and you do not, what gives you the authority to declare his career "dead end"?

Eric, what is the matter with your self-esteem that you need to flaunt your income and education and your friends? And what relevance does that have in this discussion. You are not in the housing industry so your "opinion" carries no more weight than anyone else's. But what part of your soul did you have to sell to attack renters or car salesmen? You imply you make a lot of money and you have friends that impress you. Isn't that enough for you?

Eric, keep the discussion relevant. This discussion is about the virtues of a buyer's market. If you have an MBA you know that if someone is losing money then someone else is gaining a corresponding amount of money. Name-calling and denigrating someone's choice of profession is not helpful to the theoretical issue being debated. (Denny Hecker has probably made more money as a used car salesman than you have as a used person salesman.)

OK. I'll step aside and let you attack me from your position of ignorance.

- Roger

RogerS

October 17. 2007 07:26

Roloff

You are mentally challenged?

I get such a laugh out of your comments, keep it going...the whole office is rolling right now..lolololol

What else you got?

Eric

October 17. 2007 07:31

Golf clap for Roger...

Someone has nothing better to do. Nice book, I didnt read it but I am sure it was very inciteful.

Eric

October 17. 2007 08:02

Eric,

You read it. Don't lie.

Roger

RogerS

October 19. 2007 22:01

Speaking of ignorant. It is like watching children argue.. Neener neener neener. This site is supposed to produce information to help the buyer or seller in this obvious difficult market. You guys arguing is turning most readers off of what could be good information. And Eric using the MBA game to make a point is insulting to those who have spent their life in a genuine job, growing with experience. Education is a must, but today’s education system is producing candidates with MBAs who are not even qualified to work at WallMart. I am a professional working in a high end industry as a manager and although I did not get an MBA, have, with evidence, out managed most of my peers in this industry with recognition by some of the industry giants. It takes experience and commitment. Education is what starts the ball rolling, but does not by any means replace commitment, common sense and years of good and solid experience. Please refrain from insulting the common folk. <BR><BR>
Let us get back to the topic at hand. The media is an obvious blockade for anything a person wishes to do. The media is only interested in making money. Tabloids destroy peoples lives and the general media is one side. EVER American knows that.
<BR><BR>
Individuality. People have all the right in the world to have opinions. The housing market is difficult so biased opinions do not help much. The bottom line is that everyone hard working person should have the opportunity to buy a home. I have bought a sold homes throughout my life time, here and internationally, and its all hit and miss depending on the path you take. THERE IS NO RIGHT PATH that any agent can guarantee you. YOU need to do the research, you need to do the footwork, you need to make the decisions. If you leave it in the hands of someone else, you can not complain if the deal goes sour. Our government stopped taking responsibility for quality information many years ago and the stats you read on a website are biased at best. <BR><BR>

Do what you need to be comfortable in life. Buy a house based on what you can afford. Bottom line. Live in it and be happy and if you need to move, do so. I bought a home 2 years ago in another state and due to business reasons, I needed to move. We took a risk and it took us almost a year to sell it. I could sit here and blame anyone I want. It does not change the fact that I needed to sell the home, rent here in MN, and am now ready to buy a home.
<BR><BR>
All things are negotionable. Buying, selling, you name it. So, it is EXPECTED that you will negotiate when buying a home. You are a fool if you do not. Sellers purposely infact the cost of their homes because they know NO ONE is going to pay full price for it. With the exceptions of those similar to the above comment regarding buying a new home and the builder throwing in the extras.
<BR><BR>
What can you afford? Forget what everyone else is doing. Be yourself and do not be led by the greedy players of the game. Corporate America, car and home sales, medical, insurance...It is all about money to them. They do not care at all about the individual. This is so obvious it embarrasses me to even mention it.

I could go on, but I believe the moral of the story is....Accuracy comes at a price which NO ONE can afford, so do the best you can and that is all anyone can ask of you. If you make a mistake, learn from it and move on. Know that what ever rates and prices are offered, can be negotiated. Otherwise, move on. There are plenty of homes for sale. And it is true that the market is indeed suffering. But it’s not just the housing market. Financial, education, housing, etc...It’s all suffering at the moment due to the lies of our industry leaders...

Get on with life and quit trying to be right. Be an adult for god sake!!!

Educated

October 19. 2007 22:17

Oh, one last thing. Cheers to RogerS.

Your comments were very spot on and although I may have one or 2 differences in "opinion" thats all they are to me.

Good write up sir...

Educated

October 19. 2007 22:40

Eric and friends:

This debate is great because it is largely based in theory and experience and to be honest - I don't have a dog in this hunt, so it's kind of a text book discussion for me. It's good mental stimulation without the taint of a pre-ordained position.

This weekened I spoke to some people - industry members and an two economists, one with the Fed and the other with the IRS - and learned more about the Minnesota housing market and what has happened.

It is the strong opinion of these four individuals that the national builders - Centex and Pulte and Horton and the like - are largely responsible for screwing up the housing market and the real story can probably be found there. It was very interesting how assessing blame for the problem was the only point of consensus for the group. (Where's the media when you need them? Rick Kupchella would love to do a story on this!)

The IRS economist explained that according to the latest industry figures, there is a 4 year supply of homes listed right now, yet nationals keep building. They give away free garages with cars in them and things like that as an incentive for buyers. The secondary housing market (existing homes) can't compete because the market is too fragmented (individual families instead of large, sophisticated builders) and has different motivations and pressures (like eating and paying mortgages and bringing kids to soccer and football). Meanwhile, national builders play on a national playing field and worry about things like market penetration, average costs, etc. A small amount of time is spent by national builders worrying about things like quality and craftsmanship and meeting the customer's needs. As they continue to give the farm away, they become more and more interested in squeezing suppliers. They have that power because they've choked the market to the point that only the nationals are building homes. As suppliers get squeezed, they need to modify their workplaces (i.e. cut pay, cut people, etc...) As market prices fall, everyone suffers and looks out for themselves.

Add to that the efficiencies national builders have in buying materials and land and in building their non-descript cookie cutter homes and before long, consumers have no choice but to turn their back on quality in order to enjoy the substantial savings that comes with using a national home builder.

This is not the first time we've seen such market behavior. In the late 1990s, auto glass retailers were killing themselves to give back huge rebates - sometimes more than the price of the glass - just to keep from going broke. It started with steaks and ended in the $500 cash range. The legislature stepped in to help those poor insurance companies and their lobbyists who really did nothing but pass those costs on to consumers.

Now, the small glass companies - even the steak guy - are out of business. Abra and Harmon and Safelite and other nationals are virtually the only ones remaining. The insurers are happy because prices are depressed. The national glass firms are happy because they can survive with those prices as they enjoy economies of scale a mom and pop shop cannot. Some little guys lost their jobs and had to go work for less for the little company. Everyone lost their right to pursue quality and safety and convenience because those options simply were no longer available in a marketplace where nationals made price the only feature worth considering.

What has happened in this housing market in the last several years is the increased presence and influence of nationals. When I say nationals, I mean nationals in the truest sense of the word AND large regional builders and developers. Basically, anyone who would have a long range benefit by depressing the market in the short term. What's different in this market than the glass market is that the nationals are the ones doing the deep discounting in the housing market.

You may wonder what benefit that would provide them. Well, it creates an environment in which only the large can survive.

Issues related to the housing market started with land acquisition activities several years back. National builders used their access to sources of cash to purchase large tracts of land with long term development opportunities in mind. National builders don't need a short term return on investment, small builders do. This mad land grab caused land to become more scarce - i.e. increase in value and cost. Again, all of this works to the detriment of the little builder. As land prices increased and home prices decreased, the shrinking margin squeezed out most of the small builders.

Let's consider another example of this behavior. Drive to Worthington some day. You'll see a Wal-Mart, but no Benjamin Franklin anymore. When the national moves in, they depress the market. That's when the little guy loses. The consumer claims to benefit because of the lower prices. What they don't think about is when Edwin's little store that gave him a $52,000 salary is replaced by Jimmy and Suzie at $8/hour. Profits go from their neighbor to institutional investors, and there's no one left to buy the $300,000 houses national builders are building.

The model works for Wal-Mart because they sell staples to life for which there are no suitable alternative. It doesn't work for builders because consumers have alternatives - renting, staying in their existing homes, etc...

This is not the media's fault. It's not the mortgage companies' fault. It's the forces of the marketplace - a marketplace created and dominated by the largest of players.

And THIS is where market erosion comes from.

Your volley.

- Roger

RogerS

October 20. 2007 05:59

The Pats look good this year I agree.

Eric

October 20. 2007 14:59

Eric, are you running out of steam already? How will you keep moving RE at the office on Saturdays if you can't take the heat? I expected more from someone who attended Oxford and knows that anyone with an MBA will be knowledgeable about economics. ;)

Eric_Is_A_Realtor

October 21. 2007 09:24

Roger sure sounds like a douche. I wonder if he's lonely up on his pedistal?

Adam

October 23. 2007 02:30

Adam, that was hardly constructive. Is there something in particular you disagree with Roger about? I wonder if you would call Roger a douche to his face? As with Eric, I cannot help but think these posts are coming from keyboard commandos.

Easy now...

October 25. 2007 13:40

As soon as Eric was challenged, he dropped out of the discussion. Adam, I'm not claiming intellectual superiority over anyone - well, except Eric and maybe you if you don't come up with something better than name calling.

For starters, Adam, let's talk about the impact national builders have had on this market. What is your position of the impact the BIG BOX homebuilders, like Horton, Centex, Lennar, Toll Brothers, Ryland and the like have had on the marketplace? When they held their massive land grab, raising prices beyond affordability and driving out the little guy, what impact do you think that had on the marketplace? And now they are trying to clean up their mess through fire sales and enormous giveaways and the small builder continues to not be able to compete.

Come on, Adam. With a name like Adam you have to be a great economist. (Adam Smith for those of you not scoring along at home.) Let me know your position on the influence of the BIG BOX builders.

(NOTE: If there are any BIG BOX or small, custom builders visiting this site, we'd love to hear from you. Funny how industry members went quiet when the topic started being discussed seriously and not some high level PR campaign masquerding as an informative dialog. I hate it when folks try to leverage the lack of knowledge and sophistication of their audience. It is offensive and disgusting.)

RogerS

October 25. 2007 13:41

And Eric...yes, the Pats do look good this year.

RogerS

October 28. 2007 06:56

RogerS

I am in the new construction industry but not affiliated with any national builder. I'm having some trouble with your analysis.....

1. National builders don't by large tracts of land and then sit on them. I know a couple of people that work in aquisitions for national builders. They buy land and then develop it. It might take a year or so for development to start, but there are no national builders that bought land in the late 90's and are still sitting on them.

2. I am required to research my competitors on a monthly basis. I have not seen a surplus of spec homes being built. The nationals, Centex in particular, got caught with their pants down when the market turned and had huge surpluses of inventory, but that is no longer the case.

3. I don't believe national builders are lowering their prices to drive out their smaller competitors. The reason national builders are giving away the farm is because they are public companies. They need to boost their numbers to keep the investors happy. If the national builders were willing to take a loss on a house in order to drive out competition they would have done so a long time ago.

The reason home prices are falling is simply the laws of supply and demand. This is not being created by national builders but rather the existing market. And foreclosures are leading the way. It's seems like every other home on the MLS is "bank owned". The bank doesn't want the house, they've already written it off as bad debt, so of course they're going to take the short sale. This is a problem.

Also, do you honestly believe that a mom & pop shop keeper in Worthington, MN was making $52K/yr before Walmart came to town? I know of several small town shops that have survived the onslaught of Walmart. They simply adapted. There is most definately a market of people willing to pay the extra $.50 for better service and better quality than Walmart's product.

jer

October 28. 2007 07:07

RogerS

You must be one of those "RINO's" I keep hearing about. You know, like Pawlenty. Republican In Name Only. You sound like a huge Lib to me.

jer

October 28. 2007 09:01

Roloff,

Your home is ONLY worth what someone else is willing to pay for it. Period. It doesn't matter what the appraiser said 2 years ago. This perceived value and perceived "loss" that people use as an excuse not to sell there home is a complete falacy. The ONLY people that have lost money are people who have purchased within the last couple years and HAD to sell. And yes, it sucks to be them.

Yes, Realtors are just doing their job when they tell a seller that they need to lower their price if they want to sell their home. If they don't want lower their price then their home won't sell. What was the Realtor hired to do?

If people buying homes are only willing to pay $200K for a home comparible to yours, you can't keep your price at $240K and expect to sell it. You might as well take it off the market.

Don't blame Realtors for depreciation. It makes you sound ignorant.

jer

October 28. 2007 12:40

Everyone says they are going to wait until spring to put their house on the market. First off, I am still making sales RIGHT NOW, rates are great, and who knows if the market will be better in spring. With all the people I talked to I think if you put your home on the market now you have an advantage. I think we will have a higher number of listed homes in spring than now. The market is great now, if you work with it correctly.

Jonah Waalen
Coldwell Banker Burnet
763-792-6418 ext.418

Jonah Waalen

October 30. 2007 09:14

Thank you all for the time you spent making this an interesting read. It turned into a real discussion after all.
My two cents.
The free money did drive up the market. My neighbor should not have qualified for a loan, did, and is now loosing his house. He does not care, he felt like he was renting anyway. i.e. no document loan
The big home builders are squeezing the small builders and home resellers.
I don't know but have been told by my friend who has a small construction business that the big guys can sit on the new house longer than the little guy so they keep building with out the need to sell first.
My ex-wife is trying to sell her home because her 3yr arm adjusted. The developer is still building down the street and selling for about the same price as her house but with upgrades.
The smartest, most successful guy I know dropped out of high school. He told me he learned how to teach himself.
money != success

Bob

November 7. 2007 00:27

jer,

I am a Goldwater Republican, thanks. Not today's Republican, but ack when it stood for fiscal conservatism. And yes. Tim is a former neighor and good friend. No name calling. Calling me a Lib is very offensive. ;)


We have a confusion of cause and affect. I am not saying the national's behavior was intended to drive the small guys out. I am saying that was the consequence - intended or not. If you lose some competitors along the way, that's OK too. It is naive to think that is not a discussion point.

I have lobbied for small auto-aftermarket companies in Greater MN. I have traveled the state and most of North Dakot. I know the impact of the WalMarts on the small moms and pops. These small businesses were their lives and they lost customers and employees. That's the reality of the market, and I'm not tking a position on whether the town is better or worse for it, but I don't have my hed in the sand about its impact on small business owners, just like the Big Box builders have their impact on small home-builders.

Jonah, thank you for your refreshing honesty in identifying yourself. By being upfront, I actually trust your words more. That was a very classy act.

Bob, thanks for returning us to normalcy. If you have any equity tied up in the ex's house, I hope she gets all she can!

Later, guys.

RogerS

November 10. 2007 10:54

I bought my house in 1997 for $139k. A couple of years ago, a market analysis by a realtor indicated a value of $285k. That's a nice appreciation. Unfortunately, I bought a cabin and wrapped it into the primary mortgage.

I am trying to sell this house today and placed it up for sale at $260k. Then the house across the street sold for $245k on a divorce sale.

Since the house has been on the market (Aug 1), I have dropped the price by $20k but not one person has made an offer.

My thoughts about this:

It is not the best time to try to sell a house but I too am pushed into selling the house because of a divorce.

Supply and demand: Boomers are selling, Gen?? can't afford to buy,

If I were looking for a house now, I would be very picky and look for the best interest rate. Is that going to go down again and again and again? I would take whatever price someone has on the market and offer a low-ball....big low ball.

If I had more choices, I would take the house off the market to see if anything is going to stablize. The price of gold, gas, heating oil, are all going up. The dollar is falling through the floor.

As a buyer, I would think the same way...let's wait and see. Maybe even renting for a while.

bill

November 14. 2007 14:04

Unfortunately, and I will be very general in this commentary, most (if not all) of the real estate agents in the twin cities are idiots. They created this mess 2 years ago and now cannot accept responsibility for their mistakes. The collusion which outwardly exists between mortgage companies and real estate companies is sickening.
While trying to buy a house now, these same idiots think that the tricks of anonymous/mysterious multiple buyers still work - guess what? It is a buyer's market and you will all soon be out of jobs -

Trying to get an agent who knows how to buy a house