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Fear, the 8th deadly sin

My friend Geno Petro, Chicago real estate agent and writer extraordinaire crafted another masterpiece, The Eight Deadly Sin ... Fear.

I just checked the Charleston South Carolina real estate market statistics for the month of September in preparation for my monthly market report and sales were dismal. This was not surprising because August offered consumers non stop coverage of the mortgage meltdown and global liquidity crisis. Many people didn't expect to be able to secure a mortgage let alone ever see the sun shine on another day.

Fear ruled and the real estate industry hit bottom. I think that when we look back at the highs and lows of the real estate market, we will be able to point to August 2007 as the bottom of the market when fear ruled the day as sales declined, inventory soared, credit markets were crunched and mortgages were virtually unavailable.

Geno turns a phrase like few others in the real estate blogosphere and it is always a pleasure to read his latest prose. He's been a bit busy buying a house and moving and hasn't been writing very often of late but it doesn't appear he's gotten rusty in any way. You must read The Eight Deadly Sin.

Published Monday, October 08, 2007 12:08 PM by Howard Arnoff

Comments

# re: Fear, the 8th deadly sin

I think the decline in the market has more to do with people actually having to qualify to get a mortgage, than fear.

Now that you actually have to have the money to repay then loan you get, can you guess how many people in Charleston will be able to buy 300k houses?

Monday, October 08, 2007 7:14 PM by Waiting to Buy

# re: Fear, the 8th deadly sin

Thanks for stopping by WTB, but I respectfully disagree with your assertion that very few people can qualify for a mortgage.

If you are buying a house, have a job and a good credit score and a down payment you certainly can qualify to get a mortgage. If you are speculating in real estate (and why anyone would at this time is beyond me) and want to get a stated income loan and you have poor credit and you want to finance 100%, you will have a problem.

It really is that simple, the credit markets seized up in August, that is history. Mortgage loans are being made and funded today.

See this post that I wrote last week:

http://tinyurl.com/2zbulf

I think fear is what is stopping those like yourself who are sitting on the sideline. Fear of what? Losing money.

But think about this, if you rent rather than buy, you will automatically lose money. If you rent for $1500 per month, at the end of the year, you have taken $18,000 and given it away to your landlord. That money will never be yours again. It is lost.

On the other hand, if you buy, are you afraid of losing money on the purchase of your house because home values may decline. That is the essence of my proposition. I post the statistics for the Charleston South Carolina real estate market every month. I'll be posting later today.

So a $300,000 house would have to decline by 6% annually to lose the same amount of money as renting. Prices have not declined in the Charleston area on either an average or median basis for the past year. We have been very fortunate to weather this housing market.

Have a few (if not most) houses declined in value from their peak, of course. So if you are only planning on staying in a house for a short time, then now is not the time to buy because on a short term basis, they may and there are costs associated with selling a house. But if you are planning on staying in your next home for at least 3 years, I think that is a better idea than renting and waiting to buy.

And there are the tax advantages to buying that you should consider as well, check with your accountant regarding deducting mortgage interest expense and property taxes.

I am not a cheerleader like the National Association of Realtors (NAR) suggesting it's a great time to buy now (their previous ad) or it's a good time to buy now (their current ad) or it's a pretty decent time to buy now (their future ad?) but I don't think you can buy at the absolute bottom.

Tuesday, October 09, 2007 6:42 AM by Howard Arnoff

# re: Fear, the 8th deadly sin

I've been looking at homes in the Charleston area for the past 8 months and from the beginning I have had multiple realtors tell me "now is the time to buy".  And every month I don't buy...prices go down even more.  Obviously, prices wont continue to fall forever, but why would we think the bottom is now?  As one realtor told me  "prices aren't going any lower because builders have lowered prices to the point where there is no  more profit".  For anyone that has taken Econ 101,   you know that statement makes no sense.

I almost purchased a house for 809k 4 months ago because I was told..."this house is a bargain and already reduced from 860k".  The builder called me last week and said he would sell it to me for 750k. If I would have purchased that house at 809k it would take me 4 years at 5% just to get back to a break even point.  And thats assuming 750k is the bottom and that prices start to increase.  

Tuesday, October 09, 2007 12:56 PM by Claude Daigle

# Charleston South Carolina real estate market report, September 07

The Charleston South Carolina real estate market statistics for September are very interesting. Quick

Tuesday, October 09, 2007 2:15 PM by Charleston Real Estate Blog

# re: Fear, the 8th deadly sin

Claude, on a case by case basis, many prices have declined but on an average and median basis, they have been stable. Please view my most recent Charleston South Carolina real estate market report, Sept 07.

What I think the problem is with the houses you are looking at is that they are quite simply overpriced. The proper price level for them is year ago pricing, we did not have double digit appreciation in the past year, at best we are flat to up a percentage point or two.

Some sellers (including builders) still don't get it and have priced their homes like the old days and that is too high for today's market. That is why I think you are seeing price declines. The most important thing is the real value of the property, not the listing price.

By the way, if you happen to be looking in Mount Pleasant, I just heard of a new home going on the market at 849k in Rivertowne CC. I'd be happy to show it to you ... and I'd be happy to write an offer for less than list.  

Tuesday, October 09, 2007 2:26 PM by Howard Arnoff

# re: Fear, the 8th deadly sin

Your rent vs. buy equation is wrong in my and in many others situations.  I currently am saving $600 a month over buying if you figure in tax savings, interest on my investment accounts, taxes and insurance, property maintainance, and interest paid in the mortagage.  Your calculation of me throwing away money is wrong.  Why buy the house I am in and pay more plus deal with the risk in this market.  My money is safely invested and waiting until the market corrects itself.  Also the bloated inventory suggests that the Charleston market has not found it's bottom yet.

Tuesday, October 09, 2007 8:50 PM by Waiting to Buy

# re: Fear, the 8th deadly sin

The Band plays on to the end...

Tuesday, October 09, 2007 10:44 PM by Mike

# re: Fear, the 8th deadly sin

WTB, congratulations on saving money and that you are hopefully putting it into investments that will grow in value. I would appreciate knowing how you are calculating a $600 savings however.

The bloated inventory that you are referring to has simply taken the double digit growth out of Charleston area appreciation, it has not yet resulted in any price declines on a year over year basis.

As to Mike, whatever do you mean?

Wednesday, October 10, 2007 10:20 AM by Howard Arnoff

# re: Fear, the 8th deadly sin

The Titanic...The band played right to the very end.

I Have developed a tremendous amount of respect for you in reading this blog. You are well informed, & obviously know this business pretty much inside & out.

I just feel you may be putting just a tad bit more of a positive angle on the challenges this market is  facing. Especially in areas that are bursting at the seams with inventory such as in your area.

Fascinating how fast it all changed.

Friday, October 12, 2007 6:20 PM by Mike

# re: Fear, the 8th deadly sin

Mike thank you for your compliment and explanation, The Titanic was a wonderful movie but perhaps a bit dramatic for today's real estate market.

As to my "spin", well, I call them as I see them. Charleston is not without its problems as far as inventory but we are much better than most of the country, either the formerly super hot markets like Florida, Arizona and Nevada or the midwest where jobs are declining and the weather is horrible.

Prices have held steady and imho, if you are planning on living in your home for a minimum of 3 years, you will do better financially by buying instead of renting.  

Saturday, October 13, 2007 5:21 AM by Howard Arnoff
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