Wow! Unheard of stuff.

I appreciate the candor or the post and the relative dummying-down of the standard Realtor speak. With that in mind, i would like Mr. Yerman to give me his take an post i made last week- republished below.

Elweedz is both a buyer and a seller. We are looking to trade up to a bigger home and, much to the puzzlement of my neighbors, is cheering every decline.

It makes no sense for anyone in my same situation to buy right now.
If housing falls another 20% (and it will) then my 250k home is now 200k. If the home Elweedz wants to buy is 500k and falls 20% then it loses 100k. Ill trade my 50k loss for their 100k loss every day. i could even argue that those the higher price ranges will suffer a higher percentage loss than the "working man" price range.

1. Would Mr. Yerman agree that for someone like me in MY situation, that it makes sense to sit on the sidelines?

2. I think i already know what you are going to say so, let’s pretend that a 20% drop in the market was guaranteed- written in stone, no ifs ands or butts. Under that assumption, would you agree that my strategy is the most appropriate?

3. Lastly, would you agree that home equity really doesn’t benefit the majority of people? The only people it benefits are your heirs when they sell your home or homeowners who wish to sell and rent or move into a less desirable area with lower home prices? All home equity does is raise the bar for new homeowners to gain access to the market thru higher purchasing costs. If equity is so great, why don’t i see commercials for borrowing against my paid off car? Actually, we do, they're called pawn shop loans. Doesn’t sound as sexy as home equity loan now, does it?

"The only numbers that matter are your own".
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This is just not true. And Yerman runs too good of a business to believe this. Prices will continue to fall and, while you can't time the market exactly, it's pretty safe to say that you should absolutely not feel under pressure to overpay right now, because the ball is in the buyers' court. The housing bubble is still not deflated and won't be until the fundamentals line up. By fundamentals, I mean median house price-to-income ratio, months of inventory on the market, and foreclosures returning to a small percentage of the market (under 5% or less).

So... did Billy write the Realtor press release or is he reading it?

Yerman's comments are boilerplate advice and nothing new insofar as you're actually buying a home to live in and not primarily as investment.

Some of the above posters ignore the fact that cars alway depreciate because of wear and tear, but land does not. And land scarcity complicates the argument that chappy10 makes. However, I would not expect prices to improve anytime soon for most locations.

Nate- Whether or not the assett depreciates is not relevant to the point i was making. Equity is not found money. I have 100k in 'equity in my home but, i cant spend it without selling my home. If i sell my home and want to stay in the same community then i will need it to buy the next home. Now, if both my current home and my next home were worth 100k less then it wouldnt make a difference to me. Since i would end up with the same mortgage amount in either case. Rising home values lead to higher taxes and higher commisions during home transactions- and that's about it.

There are other reasons why trying to time the bottom of the market may be a risky strategy. These historically low interest rates are the most important factor in deciding how much home is affordable. For every $100,000 of borrowing capacity, a 1% rise in the interest rate increases the payment by $60/month. Despite predictions that rates would begin rising at the beginning of 2011, they have actually gone down. Trying to time the decline in value-which varies not only by region but often by zip code and often further by street- you are also trying to time the very complex factors that cause interest rates to move.

So what would an increase in interest rates do to housing prices? Up, down, or no effect?

I think you would agree that rates can only fall in terms of fractional amounts but, have the capacity and high probability of increasing by multiple whole digits in the near term future. The disingenuous insinuation that this would require higher mortgage payments is ludicrous. People will only pay what they can afford and with the return of rational lending by banks, the sanity of questionable borrows have a much needed governor plate on the throttle.

So tell me, what would happen to values if rates go up to 10%? Does that mean everyone will pay an additional $800 for the same house that is available today?

Please directly answer some questions posed here without some Lawrence Yun spun gibberish. When sales come in below estimates the NAR blames the weather, gas prices, the super bowl, and any number of unrelated events. When sales beat estimates the NAR portends that it was the result of "savvy investors taking advantage of market conditions". If the previous was true, why don’t they ever credit good weather as a reason for improved numbers? Because it would imply that those conditions were created by an anomaly. So bad news is always an anomaly and good never is?

Thank you for making this important statement that timing isn't the point!. People are so worried about timing in the market to take advantage of the lowest interest rate and the lowest price. There is no guaranty that these factors align systematically! Real estate investment is about long-term appreciation and, more importantly, satisfying about an individual or family's housing needs. If buying is right for you - then get out and look at your options!

I do think agree that knowing your basic financial status and needs is the first thing to do before entering the housing market. However, as many other commenters have stated, there's a lot more to consider after that -- especially if you are thinking of real estate as an investment or income property and not just as a home.

elweedz, I think there are some important pieces missing for evaluating your statements. First is how long your 20% price drop will take. Second, are there any factors that may force the timing of your move, like children starting school. Third would be how much you owe on your house.

If you're convinced that there will be a 20% drop in the next 12 months, the most rational thing would be to sell your house now, move into a rental, and buy your new house when the prices have dropped. The extra $50,000 will more than cover the extra cost of moving twice instead of once.

That makes less sense if the 20% drop is over the next 5 years. In that case, you are trading the change in price differential for the non-financial cost of living in a house that no longer meets your needs for 5 years, or however long this 20% drop takes.

Of course, if the 20% drop would completely wipe out your equity, you might not be able to move up even if your trade up house dropped 30% to your 20%.

Elweedz: Take a look at the following article. http://www.dsnews.com/articles/homes-at-low-end-of-market-remain-most-vulnerable-to-price-drops-2011-06-27

Our market looks different from every angle. Shadow inventory, months-to-absorb in a specific price range and all the lifestyle factors relative to where you presently live and where you would like to move are part of the decision. There is now competition for 'good' rentals with some proposed leases having esculation clauses like we saw in the home buying market in the middle of the last decade. Population continues to grow and it will be housed. Pricing is not what is depressing the market but unemployment and the general malaise of the economy. The investment aspect of where you live is actually further down the list of motivators than many of you recognize.

Bmore-

Unlike the various realtors (fern sounds like one). I will answer your questions directly.

Hopefully its not hard to see where i am responding in the text of your post...

First is how long your 20% price drop will take. My Guess is 18 months but I believe that there are a lot of potentially catastrophic economic events that could accelerate that time line- debt ceiling default, PIGS, stock market crash, capitulation)Second, are there any factors that may force the timing of your move, like children starting school. No- just desire for more room/land but, not so much desire I would overspend for it. . Third would be how much you owe on your house. 70k vs last sale in hood was 220k but I am not bound by equity constraints. I can buy the next home without selling my current.
If you're convinced that there will be a 20% drop in the next 12 months, the most rational thing would be to sell your house now, move into a rental, and buy your new house when the prices have dropped. The extra $50,000 will more than cover the extra cost of moving twice instead of once. 100% agree and have tried to get Mrs. Elweedz on board since 2007 but, cant get her passed the emotional label of “renter”. So I live vicariously thru this blog, trying to convince the masses.
That makes less sense if the 20% drop is over the next 5 years. In that case, you are trading the change in price differential for the non-financial cost of living in a house that no longer meets your needs for 5 years, or however long this 20% drop takes.
Of course, if the 20% drop would completely wipe out your equity, you might not be able to move up even if your trade up house dropped 30% to your 20%. Non-issue see above.

The most important numbers you should look at are your own. That is what was actually said. I think this is a well written article, and contains some solid advice.