It’s a Mad, Mad Real Estate World

Posted on March 2, 2009 by Jim Duncan

Ed note: I’m very please to welcome Karen Pape to RealCentralVA again. She wrote in October about (then) new appraisal issues facing Realtors.

The real estate market is becoming more and more segmented and unpredictable, and appraisers are going batty right now trying to draw meaningful conclusions from very scarce data. One can categorize the residential real estate market into the following three segments. First, there are those doing well, with “well” being a relative term. This includes property worth at least (ouch!) what it was worth in 2007.

The second category includes most area properties. These have declined slightly, up to about 15% (double ouch!) in the last two years. Historically, this would be considered a large drop in value, but not today. People should assume that their property has declined somewhat in value since 2006.

The third category includes those properties with “significant” decline or free fall, and yes, they do exist in this market. These would be neighborhoods where most of the sales are foreclosures. In our market, these are generally confined to outlying geographic areas.

Lots of Realtors want to know why appraisers are using foreclosures or short sales in their appraisals. There are valid reasons for using them in specific circumstances. We use the following guidelines in deciding if a foreclosure sale is appropriate.

First, if there is a foreclosure or short sale in the neighborhood that appears to have sold for market value, i.e. it is in line with other normal sales in the neighborhood, we may use it for additional support. Surprisingly, this may indicate a pretty strong neighborhood if the only foreclosure in a neighborhood with several sales sold at a price that doesn’t appear to be a discount from the other sales. This may indicate that the lender didn’t have to negotiate too hard because there was ample demand for these properties at market value.

Second, there may be instances where a lender may be looking for two values – both “market value” and “liquidation value.” Foreclosures and short sales are usually the best indicators of “liquidation value.” The underwriter may ask for this second value if the property is quite unique or the borrower has credit issues, or for reasons unbeknownst to the appraiser. In this instance, the appraiser is likely to be asked to provide two values based on different sets of comparables.

The third reason we would use foreclosures would be in neighborhoods where they are abundant enough to create or influence price. Common sense dictates that if a house is in a neighborhood where most of the listings are foreclosures, a smart purchaser is not going to pay the homeowner more than he could pay the bank for a similar property. So, a good rule of thumb is that if foreclosure activity becomes the market in a neighborhood, those sales should be used by the appraiser.

A final reason that foreclosure sales are used is, in my opinion, not necessarily a valid reason. I have heard of situations where an overzealous underwriter requires sales of foreclosures, probably because he saw that some appraiser in Arizona or California used them. The underwriter may insist that foreclosures bear merit. The appraiser has to decide on the best course of action. She can either capitulate and provide the sales, or she can enter into an angry standoff with the underwriter.

Either way, she’ll be stopping at the store on the way home to further enrich Novartis Corporation. I hear they make Maalox.

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About Jim Duncan

A Charlottesville Realtor who tries to stay on the bleeding/cutting/functional edge of technology and real estate trends. I have been selling real estate for the past 10 years, lived in C'Ville for twenty+ and am married to one of few Charlottesville natives left.
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  • Cville Buyer

    Hello? Context? What’s my takeaway here as a buyer? FWIW, I’m not going to change my perception that this area’s asking prices are far beyond reality at this point based upon what an appraiser or lender says. What a buyer is willing to offer is “market value” at this point, isn’t it?

  • Scott Pershing

    Cville Buyer,

    “What a buyer is willing to offer is market value at this point, isn’t it?”

    In a word, NO. Buyers can offer anything they want, but a seller still needs to accept the purchase order. When a transaction is done that sets the market price.

    The stock market is a good example. Stocks trade all the time between a bid-ask spread. Sellers may want $100 for a share (the ask price) but Buyers may only be willing to pay $97 for a share (the bid price). The last transaction may have occurred anywhere between those prices. As the transaction prices move up and down the bid-ask spread adjusts.

    Since the stock market is much more liquid than the real estate market frozen markets like we see here would clean itself up rather quickly. In real estate since the transaction time is much longer it takes the market longer to adjust.

    I don’t think Jim was trying to justify that prices should be where they are, but rather shed some light on that there are a lot of parameters that are effecting the appraisals. I thought Jim brings up a great point, a buyer may feel that the price they are buying at is fair, but if the underwriter doesn’t like the appraisal they can kill the deal.

    My rule of thumb is that I look pre-2006 for the appraisals and use that as a baseline for the house value. I also depreciate the value of the house based upon a 30 year depreciation schedule.

    The takeaway is that many things are impacting housing sales. Just look at the last deal done by Westhall Investors LLC. They purchased 17 properties (2.1 acre in the Rocks, 2.7 acre in Lambert Point, and 13 townhouses in Westhall) for $1,729,026. To give you some perspective the total ASSESSED value for all those properties was $2,703,400. They did that deal at a 36% discount to assessed value! I would argue that part of this discount is that Church Hill is finding it harder to be a builder in this market than they would have liked.

    Bottom line I would make sure that if you are buying a house in this market, you pay a price for it that you are comfortable that you won’t have to sell it again for at least 8 years.

  • Serious Buyer

    Huh?!?!?!?

    The Encyclopedia of Real Estate Appraising defines market value generally as “the price that a willing buyer will justifiably pay a willing seller with each being well informed, typically motivated, free of undue influence, financially capable, and allowed a reasonable time to compare the market.”

    Eliminating short sales and foreclosures from market data to come up with a more favorable valuation of a home conceivably creates liability issues for all parties involved in the transaction. This is just the type of activity that new government policies are designed to discourage and eliminate.

    http://money.cnn.com/2009/01/14/real_estate/appraisal_reform/index.htm

  • Anslem Gentle

    I have to agree with Cville Buyer. I have been monitoring the prices for a year now and it seems as if all these sellers are in denial. The house prices in Cville are simply too high for what people are offering. Its a type of bunker mentality. And the only problem with this is that the people in the bunker don’t know they’re in it. The question is, who blinks first?

  • Scott Pershing

    Serious Buyer,

    According to Wikipedia
    http://en.wikipedia.org/wiki/Real_estate_appraisal

    Market Value is the estimated amount for which a property should exchange on the date of valuation between a willing buyer and a willing seller in an arms-length transaction after proper marketing wherein the parties had each acted knowledgably, prudently, and without compulsion.[2]

    Liquidation value — may be analyzed as either a forced liquidation or an orderly liquidation and is a commonly sought standard of value in bankruptcy proceedings. It assumes a seller who is compelled to sell after an exposure period which is less than the market-normal timeframe.

    Liquidation value isn’t the same thing as Market value. Notice the key reference to compulsion in the definition. Just because a Seller lost their job, is getting a divorce, took a huge hit in the stock market, etc, etc doesn’t mean that his house value is worth less. The Seller is just in a bad situation. That shouldn’t necessarily impact the entire neighborhood.

    Believe me I still think the prices are too high in Charlottesville and that Sellers are being provided a disservice by realtors who are more than willing to help prop up these ridiculous prices. Realtors need to practice some tough love with their clients and get them to reduce their prices. Problem is a lot of the grossly inflated properties on the market are properties OWNED BY REALTORS!!! Clients aren’t going to lower their price when they see realtors pricing high. If prices were significantly lowered more transactions would be done and more realtors would collect more commissions rather than waiting for these over-inflated prices to close.

    —

    Anslem Gentle,

    The question is, who blinks first?

    The answer to your question is the person who runs out of money first. Usually that is the seller… not the buyer.

  • Serious Buyer

    Scott,
    I understand the difference between Market , Orderly Liquidation, and Forced Liquidation values. However, liquidation normally implies a Seller is compelled to sell in an immediate or short time span and at extremely discounted values (25-50%) on the market dollar. I don’t believe we are seeing anything like this in the few residential foreclosures in C’ville. The short sales/foreclosures appear to be changing hands at a discount to inflated list price — not at a discount to what the world outside of C’ville would deem fair market value. Please correct me if I am wrong about this.

  • Scott Pershing

    Ok Jim, here is an example that I hope you can explain. It is one of your company’s listings.

    2430 River Ridge Road – MLS#462644
    Built in 1999 on 14.65 acres
    5 Bedroom/4 full/2 half
    6,246 Finished/1,022 Unfinished

    Seller purchased the lot for $115K on 6/18/98 and built a $723K house in 1999.

    House is appraised for $1.315M, but it is on the market for $1.795M!

    Comps.. 2385 RIVER RIDGE RD sold 2/17/09 in trustee sale for $900K. Built in 1991 it is a 5 acre 4 bed/4 full/1 half with 6170 sq ft finished.

    I don’t mean to pick on the listing, but walk us through how that price can be justified in this market?

    I am assuming this must be seller directed pricing, and they are willing to wait a long time?

  • Scott Pershing

    Serious Buyer,

    I agree with you, in some cases the liquidation and foreclosures are not selling at realistic prices. I base this on two things.. One the bank is holding the note and two, it is unwilling to let it go that cheaply.

    Look what happened at 3800 Dick Woods. It went into a foreclosure sale and it looks like the bank bought its own note for $991,536. It is appraised by the county for $1,358,000 and they now have it back on the market for $1,285,000! MLS# 462543. If you look at the pictures it looks like the foreclosed owner even ripped out the stove and sold it, I hate to imagine what other damage they did to the property.

    That’s why I don’t stress about including foreclosure properties into my calculation model. Most of the time they come out as outliers that I have to remove in any case.

  • Serious Buyer

    757 Belvedere Blvd is a ChurchHill model that sold at auction before Christmas to the bank for $350K (from the newspaper). Priced at $479,900 til 9/17/08; $459,900 til 10/30/08; $449,900 til 12/30/08; #424,900 til 2/20/09; $399,900 as of 2/20/09. Long term plan for community development is 10 years. When viewed in December there were only 5 residents in the subdivision; no plan for completion or paying/caring for the common areas; homeowners association TBD . . . .

  • http://www.realcentralva.com Jim Duncan

    First, I updated the post to clarify that it was written by Karen Pape, one of the most respected appraisers in the area.

    Second, I apologize for being away for this fantastic discussion. I was out of town and sadly the meeting room at the hotel did not have wireless. Darn it.

    That said … wow. Thank you all for your comments. My goal in requesting Karen to write this post was to educate buyers (and Realtors) on some of the challenges with appraisals in this market. Also, I wanted to dispel some myths about foreclosures in this market.

    Particularly this –

    That’s why I don’t stress about including foreclosure properties into my calculation model. Most of the time they come out as outliers that I have to remove in any case.

    As of yet, foreclosures do not comprise a significant portion of our market. If and until they do, they will remain:

    1) Possible great deals for buyers
    2) Outliers
    3) Drains on neighborhoods.

    I’ll respond in more detail later today.

  • http://www.nestrealtygroup.com Jonathan Kauffmann

    Scott-

    Thanks for the comments on 2430 River Ridge Road – I am the listing agent and an associate of Jim’s. This is not the platform to promote listings or prove value, but I’ll throw a few comments out there about pricing strategies, assessments, etc.

    First of all, I’ll go on the record and state that, personally, I think people put too much stock in assessments and how they relate to market value. Assessments are very, very broad stroke attempts by our local gov’t to assign a tax value to a property. Assessors rarely look at an individual property’s detailed features when assessing. Instead, they look at sales from a high level and base assessments on broad data as opposed to individual property specific information. A property’s uniqueness and specific details are not taken into account.

    That being said, there are some instances in which assessments are more likely to be in direct correlation to market value. The best example of this is in a ‘homogeneous’ subdivision in which a handful of builders built specific plans with similar interior finishes. In these cases (even if the homes are 10 years old and even if someone did a lot of ‘upgrades’), it’s fairly easy to tie assessments to some sort of ratio as compared to market value.

    However, in many other situations, there is no rhyme-or-reason when comparing market value to assessed value.

    Without getting into too much detail on this home, a few other notes about determining a listing price:

    1. Just because a home is located in the same neighborhood does not mean that it is a good ‘comp.’ i.e the property at 2385 River Ridge Road is not a true comp for this property (for many reasons). It’s important to take more than just square footage into the equation.

    2. It is impossible for any of us to know exactly what an owner paid their builder on a custom home. In cases where an owner purchases land and contracts with the builder, that final contract price is between the purchaser and the builder. I have worked with several clients who have custom-built and not once has the ‘improved value’ of the property been the same as purchase price. So, you can’t assume that the contract price of the home was $723k just because the County assessed that as the improved value after it was built.

    3. Referring back to point 2: Even if it could be determined exactly what was paid for a property, what someone paid for a property (whether it was 10 years ago or 10 days ago) has no bearing on what the current market value is.

    My overall point is this: assessments are difficult to use as a true indicator of market value. It’s always interesting to note that whenever someone buys a property for under assessed value, they talk about how great of a deal they got. But whenever a property is purchased over assessed value, no one ever talks about it. I firmly believe that assessments are an easy way to TRY to determine market value…but if ‘value’ (maybe I should call it perceived value) is derived from assessed value, it is most likely not accurate.

    There is much, much more detail, research, thought, and experience that goes into pricing than simply looking at tax assessment and saying, ‘that’s the true market value.’

    Great thread and great discussion…

  • Scott Pershing

    Jonathan,

    Thank you for your response. I don’t mean to be rude, but your vague price justification for your listing is exactly the problem that most of the buyers are complaining about.

    You argue that real estate pricing is based upon ethereal qualities that are so complex that it is impossible to quantify the unique value of a home. I disagree to me it is a rather simple investment equation.

    Here’s my approach:

    The house was built in 1999. It has 6,246 sq ft and at $732K that is assuming about $115/sq ft. Not entirely unrealistic for 1999 pricing and what the surrounding houses were built for.

    Lets be generous and assume that the land was purchased with cash for $115K and the construction was financed with 20% down ($154.6K) at 6.5%. Based on payments the seller has probably paid down the loan to $508K remaining principal balance. ($322K in interest and $77.6K in principal or $399.6K total)

    Selling at $1.315 yields 39% return
    Selling at assessed value $1.315M with 7% transaction costs, commission plus closing, would yield to the seller $1.223M. Seller’s total investment into the property is $115K + 399.6K = $514.6K.

    Proceeds to Seller after paying off the bank and removing the investment is $1.223M – $508K – $514.6K = $200.4K. Which is a 39% return on investment over 10 years.

    Selling at $1.795 yields 126% return
    Selling at $1.795M yields to Seller $1.6694M.

    Proceeds to Seller after paying off the bank and removing the investment is $1.6694M – $508K – $514.6K = $646.8K. Which is a 126% return on investment over 10 years.

    Note that this return would be much greater in both cases if the Seller did not pay for the land in cash.

    Can you see why buyers are annoyed?

    126% return on investment seems a bit greedy in this market. Granted that doesn’t take into account that during the run up in 2005 that the Seller may have taken a large home equity loan and run that up. But to most Buyers that is called spending your profits before you have even sold your house!

    Tax Assessments are more consistent than Realtors
    I also disagree with you regarding the accuracy of the tax assessments. I have found that the assessments made in Albemarle county take much more into consideration about a house all the way down to the grade of the land and the condition of the house.

    The variation in their assessments is much smaller than the wide variations that I have seen by realtors. I still believe that the assessments in Albemarle county are too high based upon current economic conditions, but their consistency is much better than the wide and erratic brush used by Realtors, to use your phrase.

  • Scott Pershing

    Doh! I forgot to include $154.6K (20% down payment on the loan) in the Seller’s investment which would change Seller’s total investment from $514.6K to $669.2K.

    That changes the ROI for the prices as follows:

    Sold at $1.315M – 30% Return on investment over 10 years
    Sold at $1.795 M – 97% Return on investment over 10 years

  • Wes Kent

    Scott
    Have you gone out to see this property?

    If not, your assumptions could mean nothing.

  • Scott Pershing

    Wes,

    Yes I have seen both 2430 River Ridge and 2385 River Ridge.

    Unless I was missing a pot of gold on 2430 River Ridge, I think my assumptions are good.

  • ANOTHER CVILLE BUYER

    I totally agree with Scott Pershing. I have been looking for the last several months and virtually every home I have my agent go to, is a situation where the owners purchased in 2003-2005, and want nearly double what they paid. Makes you wonder what’s in the drinking water here that sellers are so delusional as to the value of their homes. I must add that in all cases, there were improvements, but not to the extent of several hundred thousand dollars worth. Being as we’re in an asset devaluation of historic proportions now, and quite probably entering a depression, what must these sellers be thinking? Or is it the sellers agents who do the overpricing to get the listing?

  • http://www.nestrealtygroup.com Jonathan Kauffmann

    Scott-

    First let me say that I am not being evasive to avoid the issue of ‘price justification’. You have to understand my position and the agency relationship that I have: I am the listing agent of the property and the sellers are my clients. They hired me as a consultant to help them to sell their home – my allegiance is to them and the work that I have done for them (pricing strategy, included) is essentially their intellectual property. My brokerage, Nest Realty, does not and will not practice dual agency. Therefore, I will not share any confidential client conversations that I have had with anyone. If you are interested in learning more about the property or would like someone to do an independent pricing analysis, I recommend that you speak with Jim Duncan or another competent Realtor as a buyer’s agent.

    As for your analysis: I understand where you are coming from, but disagree with the strategy.

    I guess there a few points overall where we seem to be on opposite ends of the fence.

    1.I think our biggest point of difference is whether or not previous purchase price has any bearing on current value. You are basically arguing that what someone paid for a property and how long they have owned it has a bearing on the current market value. I don’t think that someone’s ‘yield’ on a property has anything to do with what’s it’s worth. Here’s my example:

    Let’s say Joe Buyer purchases a house in 2005 for $300,000 or ($100/sf). Within the last month, 3 ‘comparable’ properties sold around $200/sf. Based on those comparables, Joe’s house would now be worth $600,000. But, based on your post above, you are saying that the fact that Joe Buyer’s house is worth double what he paid for just a few years earlier makes him ‘greedy’ if he wants to sell it for $600,000.

    OR, on the flip side:

    Let’s say he paid $300,000 and comparable houses are now selling for $150,000. The fact that he paid $300k doesn’t make a difference…it’s only worth $150k now.

    No matter what the ‘product’ – whether it’s a piece of property, a rare coin, or a baseball card – the current market value is never determined by what a person paid for that product. It’s determined by supply and demand and what other comparable products have sold for within a recent period of time.

    2. I think it is absolutely necessary to take into account property specifics and the uniqueness of a property in trying to determine value. However, you are right in that there is much more involved. Location and comparables always are extremely important in determining value (I think we’d both agree on this). Yet characteristics like grade of land, quality of finishes, outdoor space, character, materials, etc are factors (though not as high on the priority list, but still important).

    Based on your argument, you are essentially saying that a home is a commodity and that the unique characteristics of each house are irrelevant. While I can see how you perceive this and have worked with some buyer clients who see their home as more of a commodity than a ‘reflection of themselves’, the majority of buyers out there definitely take pride in owning a home that is special to them. Therefore, the market reflects this desire. I can assure you that the housing market in Charlottesville and Albemarle County is not a commodities market and, therefore, certain unique qualities of a home do help to drive price.

    And because a home is not a commodity, certain properties are worth different amounts to different people.

    3. You make a lot of assumptions in your analysis and have essentially tried to price a home based on assumptions. My last comment about pricing is that I use true, recent comparables for each property that I help price. This hard data is the same data used by local appraisers, like Pape and Co.

    Finally, I’d agree with Wes Kent’s last comment: if you haven’t seen a property (or the comparables for that matter), it’s impossible to make a judgement on whether it is priced accurately. But since you say that you have seen both properties mentioned, I find it hard to believe you don’t see the difference in the two.

    Great debate, Scott. Maybe we should just agree to disagree. I definitely like the fact that you are challenging the status quo and asking tough questions.

  • Scott Pershing

    Hi Jonathan,

    Thank you for responding. As I mentioned earlier I wasn’t meaning to pick on your listing I was just trying to understand the pricing strategy. To me a convincing pricing strategy is one that you can easily tell to others because it is such a good deal the facts support the price. When sellers get secretive on their pricing justification I view it in the same light as when buyers try to lowball a property without justification; they are doing it just because they think they can get away with it!

    I respect your needs in representing your client, and I believe in this case this has to be a case of seller directed pricing. They need that price to cover their situation and are willing to have a LONG wait in order to get the transaction done. With that said, I’ll stop picking on your listing! (smile)

    As I have stated in previous posts, I am not a big believer in BUYER agents. Most of the time all they do is show me property that I can already see myself, and try to give me a warm and fuzzy on why I should be overpaying the market. I don’t need somebody to fill out a purchase order for me; and I don’t need somebody to negotiate on my behalf… but that’s me. There are a lot of other buyers out there that want the hand-holding… and they can pay for it! I prefer to deal straight with the seller and/or listing agent.

    In regards to your thoughts on pricing those run ups and downs happen in all markets. The problem with an illiquid market like real estate is that transaction time is too long. In the stock market stock bubbles run up and blow up. They often oversell and then correct.

    However in the real estate market it appears to me the true problem is that the market pricing justification is being kept secret. And many realtors in this market seem to think it is smart to keep their pricing secret. The only reason I can think of is if they were able to lay down the facts the logic may fall apart.

    Since banks are getting tougher on loans, I think it is good that Buyers are being more demanding on Sellers to prove their price. The tougher the buyer is, the easier it will be to get a loan from the bank, and the easier to get a deal done.

    That is why you are seeing more and more buyers getting more and more irritated with unrealistic selling prices and real estate agents that are wasting their time telling people “Well ya know, Charlottesville is really a recession-proof market….”. Those types of agents should be steered to the nearest used-car parking lot.

    There is always going to be a uneducated buyer that will over buy in a rising or falling market, and there will sometimes be a seller in a bad situation who needs to unload a property.

    While we can argue about what constitutes true value for a house I find that the major components are:

    1. Schools – Even for people without kids this is a critical piece in the buying decision.
    2. Location – Is it convenient to work and what you like to do? Is it away from highways, power-lines, trains, land-fills, etc?
    3. Lifestyle – Does the house fit your needs in regards to your lifestyle, family, etc.
    4. Price – Can you really afford this house without breaking your back. If the market continues to be flat, can you make the payments. What if you lose your job, can you afford to keep it or sell above what you bought it for?

    At the end of the day 1-3 help you identify where you want to live, #4 filters it down fast.

    The biggest issue for Charlottesville is that it is a victim of its own success. Everybody came out here in droves when the economy was still churning, they ran up the market because for many coming from higher-priced markets this seemed to be a steal. Now with the economy falling apart, businesses laying people off, and foreclosures (yes it is happening here) happening more often than not real estate values will decline sharply.

  • Mark

    “126% return on investment seems a bit greedy in this market.”
    Completely irrelevant. If it sells, it sells. A lot of posters here and on the Bubble Blog are overboard, and represent Newton’s “equal and opposite reaction” to the early 2000s hype. They’re just slinging negative hype.
    Whether bubbly or gloomy, nobody’s opinion is worth a dime. The market decides: If the place sells, it was priced well. If it doesn’t, it isn’t. The longer a place stays on the market, the more likely it is that it is overpriced. Greedy doesn’t matter. Neither does the city’s ignorant blanket opinion on what a place is worth. The assessment on every house on my C-ville street changed by the same amount this year. Assessments are nowhere near “what a person is willing to pay,” which is the true measure of value. The only people that currently use them as a benchmark are ignorant buyers and sellers whose asking price is lower than the assessment (PRICED $25k below assessment!). Oh, and let’s not forget the main users of assessments: greedy localities who would die before they make significant budget cuts.
    Where I’m coming from: I write for the Hook. Every other week I tour a house for sale and write about it in the “On the Block” column. I consider myself pretty neutral in all this. I bought a house a year ago, with Jim as the buyer’s agent. I am used to high prices, having moved from (the hellhole known as) Northern VA.
    While I see plenty of houses that are a good deal for the money, I also see a lot that I consider overpriced. It is discouraging to be scouring MyCAAR for a place to tour (as I do every other week) and see what I consider ridiculous asking prices. A lot of such places have sellers who are “just fishing,” sort of like Zillow’s “Make me Move” price but actually going through with a listing. Others can’t afford to take less than that price. whatever the reason, overpricing listings contributes to our area’s horribly high amount of inventory.
    That said, it is fine to question the logic of sellers and the realtors who represent them. But they have the right to do what they want. So let the market will decide if a place is properly priced.

  • Anslem Gentle

    Hello all,
    First I would like to say thanks to everyone for a very informative and lively debate. I really appreciate all the different views from everyone and the purpose of this post is to offer another view that seems to be missing. I am one of those much talked about future home buyers looking to buy in Charlottesville in the near future. So I guess you could call me one of the Sideliners. As a first time buyer, I think it’s important that you guys look at the market as a whole through eyes like mine.

    In the previous post I totally agree with the 4 major components that make up the value of the house, but I believe that the most important value is missing. And that is simply “Common Sense”. I believe the majority of first time buyers today fall into two groups. The first are like me and are only recently, for various reasons, able to afford a house. The second group was able to buy for the last few years but realized that we were in the middle of a bubble and decided to hold off. Although we haven’t been on the playing field, that does not mean we were not watching the game being played. We have all seen the bubble and the burst, and are bound and determined NOT to fall into that trap.

    So I believe a lot of buyers are going back to the tried and true and asking themselves the basic question first. “Is this house worth the price they are asking?” What does that mean to all the Real Estate people out there? It means that while knowing the appraisal value is nice, we really don’t care. What we DO care about is the price of the house pre-bubble and what value has been added since then. If the 4 bed house was selling for 210K in 02-03 (around the median avg) and you are asking 450K for it now, you better be prepared to show us 240k worth of value that has been added since then. So there is our starting point. PRE-BUBBLE! From there we start to factor in things like school district, location and lifestyle. We are able and willing to pay well for all those things, but what we absolutely will NOT do is buy into YOUR Bubble problem. The followings are some ugly truths, but it must be said:
    1. We don’t care what the other houses are selling for in the neighborhood. The country is awash with over-priced developments where every single house is not worth the original asking price. We know the high priced areas, and we know we have to pay a premium to live there. But please remember that we would LIKE to live there, we don’t NEED to live there.
    2. There are no “up and coming” neighborhoods in Cville, or maybe in the whole country for that matter. When agents start saying stuff like that, we drop our offer price by 20K, because to us, they come off as selling the Bubble.
    3. Charlottesville has a median family income level of a little below 50k and very few businesses that pay 6 figures or above. We KNOW this. We KNOW Cville is NOT recession-proof and sooner or later the sellers that really have to sell will start blinking. We have waited this long, we can wait longer.
    4. We realize that a lot of the things that attract people to Cville (cafe’s, Resto’s, wineries etc) are being affected by the downturn just like the rest of the country. So we see a reduction of services and nice things to do for the foreseeable future. Which means the amount of people coming from more expensive Markets have a few less reasons to relocate at the moment? They were a part of the Boom.
    5. Examples of properties many bought 3 years ago that will be really hard sells today.
    a) 2 Bed condo’s for 300K plus. This is a college town for crying out loud.
    b) 4 bed houses for 600K with 10 feet of space on either side and NO parking. For that kinda scratch, we don’t want to be forced to drive around the block to park when are neighbor is having friends over for a BBQ.
    c) That 75 year old house in a trendy neighborhood that will hit its stride any day now. It USED to be up and coming!
    d) Townhouses built in the boom with paper thin walls and matchbox size rooms. You ALL know of the places of which I speak.
    e) Half finished developments with little or non-existent services. Yes, we will buy a house there, but we want a great deal on these houses because we know we will have to wait YEARS before all the original plans come to fruition if ever.

    So basically, we are looking for good VALUE above all else. If we are going to dive into THIS market, we want every dollar to count. EVERY DOLLAR. So don’t be surprised if we are kicking the tires and low-balling prices. Its nothing personal, it’s just business. The old fashioned way.

  • http://www.cvilleHoods.com Pavel

    One of my clients was out-bid on a property earlier this year and another client had a winning contract out of 10 offers on a single property. Sometimes it’s pretty clear what is selling… and sometimes not so clear. I’ve only had one property I picked not sell yet…. everything else goes pretty quick. The “informed consumer” is rapidly becoming the new norm and this is the way it should be.

    (side note) Jonathan – when you write “My brokerage, Nest Realty, does not and will not practice dual agency” but at the same time recommend Jim Duncan to act as buyer’s agent, you know that you are recommending a form of dual agency. It’s my understanding your brokerage does not allow single-agent dual agency, but permits another form of dual agency. I don’t get it… I keep hearing: “no dual agency” yet a form of dual agency is being advocated…. which is it?

  • Scott Pershing

    Anslem Gentle – Excellent post!

    Mark – You write for On the Block? I love that section of the Hook! Sounds like you are frustrated by the pricing like the rest of us. Don’t mistake trying to understand someone’s pricing strategy as negative hype, if a seller can’t justify their pricing you know it is all smoke! Transparency is the key to a well functioning market…. Charlottesville and many other areas of the country aren’t there yet.

  • ox

    Scott — don’t give up too quickly on your claim that 125% yield on a 10-year investment is greedy. Jonathan and Mark want to argue that yield has nothing to do with pricing, either because homes aren’t commodities or because claims about fairness aren’t relevant to market outcomes. But, at least to some extent, both of those claims are wrong.

    Jonathan’s claim that homes aren’t commodities is true only in the sense that homes are not purely fungible. But buyers have many choices. Sellers can hope for the idiosyncratic buyer who only wants their house, but the reality is that most sellers still have to compete in a down market. Houses may not be absolutely fungible like commodities, but they also aren’t absolutely unique, especially not with this much inventory out there. And evidence of this: buyers’ realtors are also looking at factors such as assessment, $/sq. ft., purchasing price, etc., to help determine price.

    Mark is wrong because buyers care that they aren’t being treated unfairly. They don’t want to pay sellers more than they think sellers can reasonably expect — where “reasonably” is fairly elastic, but runs into some marginal limits. One of those limits is annual rate of return as compared to all other sectors in the midst of a dramatic recession. When the stock market is returning a 10-year average of 7-10+%, people can understand paying 15+% annual return on a home over the same duration. But when the S&P has a negative 10-year annual return, it’s hard to see how sellers can justify prices that assume underlying market values far in excess of those annual returns.

    To forestall an objection: my claim isn’t that housing returns are (or should be) correlated with the stock market. A far cruder relationship will work here: in the midst of a great recession, if not a depression, when stock prices have fallen 40+% in a year, turning 10-year annualized returns negative, it takes some chutzpah to expect buyers to pay housing prices that amount to 15% annualized returns over the same period.

    Of course there may be buyers who are willing to pay those rates for specific homes. But if we’re taking the larger view here, and looking at pricing practices more generally, those rates are not sustainable, and, to continue Scott’s line from above, they look unrealistic and a little (understatement?) greedy.

    Of course the claim about sustainability is contestable — if someone can show data indicating that many sellers are getting prices with yields over 10% annualized return (over more than, say, five years), that would show that Cville/Albemarle is highly insulated. But that data doesn’t seem to be out there, except perhaps anecdotally (i.e., no data). Most sellers asking for those prices aren’t getting them.

    The point about fairness is a normative claim, namely, that sellers should not get those prices. If you think that’s spiteful, I suppose we would have been better off with a little more spite over the last ten years. A little less confidence in the simple supply & demand story, and little more suspicion (not spite, but caution) about price justification would have done everyone some good.

  • http://www.realcentralva.com Jim Duncan

    Pavel –

    Point of clarification:

    No single-agent dual agency.

    As I said in my announcement post and in my follow-up video discussing single agent dual agency – single agent dual agency, whereby the same Realtor “represents” both sides is, in short terms, a “bad” thing. Designated dual agency, whereby the same company yet two different agents, is fine in my book – we’re all independent contractors and competitive. Besides, there’s no way a campaign against all forms of Dual Agency would pass muster – the large companies necessarily depend on it due to their respective sizes and market shares.

    On the topic of the comments, (and not necessarily the post :) ) –

    In many cases, the data simply do not support many of the asking prices, and buyers are far more focused on data, yields, rates of appreciation, etc. whereas sellers are often more focused on what they “need” or “want” to make.

    Frequently these two goals don’t meet.

    Bridging the gap is going to remain a challenge for a while.

  • Wes Kent

    Scott

    Did you have your agent that showed you 2430 River Ridge Road do a market analysis for you and show you comparable sales?

    If so how did it compare to the comparable sales you used in your analysis of this property?

  • Scott Pershing

    Wes,

    I just asked Jonathan (the listing agent) for a market analysis to justify his price and he wasn’t able to provide me with one. Which leads me to conclude that this is a price set by the seller, probably even after much counseling from the listing agent.

    I hesitate to go into more detail on my analysis of that property on this board, because:

    a) I like Jim’s blog, and I feel any further discussion on it would be disrespectful and doing him a disservice by publicly ripping apart one of his company’s listings;
    b) It puts Jim in a bad spot because on one side he wants to further the discussion about activity on the market, but having him tackle the analysis or his blog analyzing it would pit him against his own company. (Which is why I never believe in ANY kind of Dual Agency (single agent or company); and
    c) The property is not appealing to me for many reasons.

    I am considering putting together a blog site to have discussions like these about different listings and what I think they are worth. I will always document what I think the property is worth based upon actual market conditions (sold) and compare that against what the seller is looking to make and what it is probably costing them to hold the property. And if people don’t like my analysis I more than welcome any feedback on where I may be wrong.

    I don’t claim to be the voice of the market, rather I am just a quantitatively oriented person who wants to bring some transparency to this market by sharing my thoughts and getting people’s feedback.

    If people are interested feel free to email me at scott.pershing@gmail.com and I will send you a note when it is up.

    That way I don’t feel like I am abusing anyone’s goodwill when I make comments on other people’s blogs which may interfere with their ability to promote their listings.

    Jim and Jonathan, I hope you have not taken any offense to my comments, and I wish you the very best.

  • http://www.realcentralva.com Jim Duncan

    Scott -

    Thank you sincerely for all the time, effort and knowledge you contributed to this conversation. I have found it enormously enlightening and educational and I hope others have as well.

    For the record, I’ve taken no offense whatsoever to your comments; I’d like to think that I’m more educated for having read them.

    I think that a candid discussion of a property and it’s value is a far more productive, transparent, fair and useful than a “Zestimate” provided by Zillow (or a valuation by Cyberhomes or any of the other “automated valuation” sites out there).

    That said, I respect your decision to refrain from further discussions about this property.

    I’m going to restate my earlier comment,

    “In many cases, the data simply do not support many of the asking prices, and buyers are far more focused on data, yields, rates of appreciation, etc. whereas sellers are often more focused on what they “need” or “want” to make.

    Frequently these two goals don’t meet.”

  • http://www.roywheeler.com michael guthrie

    The interesting missing ingredient to this conversation, is not “what the buyer is willing to pay for it” but instead, “what the lender is going to lend the buyer to buy it”. A seller that prices a home above and not based on comparable properties that have sold in the last 6 months, may (and I emphasize may) find a buyer that will pay cash or make a significant down payment. If not, an appraisal that comes in less than the agreed upon sales price can kill the deal because the buyer doesn’t have enough cash to make up the difference and the seller chooses not to come down any more in their price

  • http://www.realcentralva.com Jim Duncan

    From an email commenter –

    “I’m personally involved in 7 transactions currently…5 of them are in some way related to a foreclosure situation, and none are in the MLS. There are several other instances like this currently in my own small office.

    And yes, things are busier, and not just anecdotally, at my office. We’re having a much better 1st quarter than 4th quarter 08 by any measure.”

    Michael – No kidding (and that was the subject of the original post! :) )

  • Mark

    Ox, I understand some buyers care about “fairness,” but not all buyers care. The ones who don’t care are buying or not buying based on non-emotional factors. The ones who do care about “fairness,” however you define it, it are sitting on the sidelines (and some of them are whining about it in blog comments).

    The people from whom I bought my house lost money (according to the seller’s agent). If I cared about fairness, I suppose I should have offered them whatever they needed to break even, or even clear a profit–but a fair profit, naturally.

    Nice and realistically priced places are selling, regardless of what is “fair.” Places with problems and/or unrealistic prices are sitting on the market, creating this huge inventory glut which is helping to lower prices.

  • Scott Pershing

    Mark,

    I think you are missing Ox’s point. By “fairness” Ox is saying that no Buyer wants to overpay a Seller. He is stressing what is a “FAIR” price, and his point is buyers prefer to underpay than overpay for a property, but acknowledge that a seller should make money on the transaction.

    You must have misunderstood his meaning since you stated using Ox’s definition of fair that in your circumstance you should have overpaid the seller to be fair.

    You use words like ‘Nice’ and ‘realistically’ to describe properties that sell without providing a valid reference point upon which to reference them. If a buyer can’t determine what is “fair” (how much not to overpay) they will try to get a better idea by voicing their concerns. That isn’t whining that is called using their brain.

    And the real reason buyer’s don’t know what fair is, is because real estate agents are being lazy about pricing. I was listening to a realtor the other day justify the pricing on a listing (not her listing) and saying that it was a fair price for the neighborhood. When I brought up the point that the house next door sold 1.5 years ago for 28% less, she gave me the deer in head-lights look of “Damn, he did his research.” I am being generous by describing this as lazy, because others may have harsher words to describe this type of action.

    Houses that are selling right now are in the <$600K category. Out of the 148 properties that transfered since the beginning of this year 109 of them closed under $600K. Some of them are happening as private party to private party transactions, thus saving the 6% in Realtor fees.

  • Mark

    Scott, Ox says himself that the thing (end of post) about fairness is a “normative claim.” He also admits he may be spiteful (he’s right).

    You might be thinking more along the lines of “fair market value” but he is thinking about fairness, as in “it’s not fair that John Casteen makes so much more than…”

    I still say the market can decide fair market value. I don’t live among 600k+ houses and I tour very few for the Hook (I think 2 or 3 in the last six months), so when I’m talking about what is well priced and what is selling, I’m definitely talking about the “under $500k” range.

    Anecdotally, in 2009 my humble city street (~60 houses) has seen 1 foreclosure (rundown rambler, ~$235k assessed value), 1 sale (lovely house, ~$330k, sold in 5 months), 1 contract that fell through due to unmet contingencies (great house, ~$250k ask). Also currently on the market 1 longtime listing (so-so house but overpriced), and 2 new listings.

    Of those new listings
    1. Very nice but overpriced, owner appears to be “fishing.” By overpriced I mean more than comps, although it is also priced higher than its assessment and bubble-peak purchase price.
    2. A crappy AND overpriced rental. Was FSBO for a long time and I bet the agent solicited the seller’s business)

    Based on what I see on my street, plus the updates I do for the Hook (six months later I write the agent to find out if the house we toured sold, is still on the market, or was taken off unsold), I think “nice” houses sell. By nice, I mean I think buyers are focusing more on the quality and utility of the house, location, yard, etc. And that’s a good thing, because as the Bubble Bloggers point out, a house is a place to live and you should like coming home. All that investment garbage is out the window, thank God.

    I have put a couple thousand bucks (and many man-hours) into my house in the last year, and not a dime was spent with resell value in mind. It was all done to make it a nicer place for me and my family. We have a couple thou more on tap for this next year in order to make it an even nicer place to live.

    Of course, “nice” is also normative but people generally have similar tastes.

  • http://www.cvilleHoods.com Pavel

    So a property was just listed in Albemarle Co. that will sell very quickly and will probably have multiple offers on it. How do I know that? Because like some folks commenting here, before becoming a Realtor I was on mycaar.com religiously until my wife made me an ultimatum: “get your real estate license so you can navigate others through this process or never go to mycaar.com again.” Now I’m still religiously involved in the process, but in the capacity of a vocation. I think some folks just don’t have the time, energy, or desire to go through the kind of vetting process that is required and are happy to work with a buyer’s agent who can help them through the process. Also, Scott, I don’t think it’s fair to assume that one would save 6% in Realtor fees if it’s a private party to private party transaction for a multitude of reasons. Regardless, there are many brilliant comments on this thread and I thank Jim for creating a venue for such informative discussion in our community.

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  • Scott Pershing

    Pavel,

    Congratulations on becoming a real estate agent. Which property are you so excited by?

    My comment regarding the 6% fee is that it is a transaction cost paid for by the Seller but carried by the Buyer. Buyers in private party transactions can save this fee as long as they know what they are doing and don’t overpay for a property. And as you have seen from my constant refrain I would argue that most agents (Jim may be the rare exceptions) are providing little price assistance based on real market data to the buyer which means the buyer is doing it all themselves anyway.

  • http://www.roywheeler.com michael guthrie

    If Pavel is right, and he often times is, this property selling quickly and with multiple offers proves the point I have been trying to make for several months now. We are in a very price sensitive market more than a crummy one. What do I mean? No matter what price range, I continue to see that once a property gets reduced to a certain point, there ARE IN FACT buyers that are ready to respond by submitting an offer. A crummy market on the other hand is when houses don’t sell because there are no buyers to buy. Sellers who are serious about getting their homes sold have to understand this and it is up to us as Realtors to determine that price by saying what needs to be said rather than saying what the seller wants to hear just to get the listing.

  • Pavel

    Ah…. you want to know… but don’t want to pay? Just kidding :) 4 bedrooms, 2.5 baths detached colonial in great location, garage, unfinished basement – well under $200K. Since this is Jim’s blog, ask him the details and I’m sure he will be glad to show it to you.

  • Ox

    A little more charity, Mark, and a little less trust in the idea that the market can do no wrong. I didn’t “admit” to being spiteful. My point was that some people will object (as you seem to) that buyers who don’t want to pay 15% returns (in a market now down over 50%) are being spiteful. And as Scott rightly points out, that’s not spite, but justified suspicion about their asking prices.

    Are houses priced at 15% annualized returns selling? Why not? Because sellers are sitting it out, and “whining” as you put it. Or because sellers are calling BS on ridiculous prices — houses that come onto the market at 35% above their assessments (which, to be clear, are often still pegged to sale prices established at the peak of the market). Those are the homes with prices at 100+% returns over less than 10 years; annualized returns at 15+%. My claim above was that those prices aren’t sustainable and shouldn’t be. It makes no sense for sellers to pay them, and I haven’t heard any argument here to the contrary.

  • Scott Pershing

    Pavel,

    Ha! Nice joke. The property you mentioned isn’t the type I am looking for. Besides Jim knows that I don’t work with buyer agents. I call the listing agent direct and make an appointment to see it myself.

    I was just curious to see what you think is a great deal. Must be something not listed on CAAR, because most of what I see for under $200K is either way out of Charlottesville, a foreclosure, near a railroad/highway, and/or run down.

  • Mark

    Ox, not trying to have a flame war of internet sniping. All I am saying is what “doesn’t make sense” to you, might make sense to someone else. Tjhat house asking 35% over its assessment, or 50% over its 2006 purchase price, probably will NOT sell. But someone might decide its virtues make it worth it to them, and buy it.

    Go ahead and use your logic and rationale for your decision! It makes sense to me. But don’t expect everyone else to follow your logic. We still have the freedom to make our own economic decisions in this country (for now).

    And we need MORE trust in the free market, especially now. All the attempts of government to prop up inflated home prices (tax credits, President Obama’s plan, etc.) is prolonging the pain (ditto its attempts to prop up banks, AIG, and car companies- car companies? huh?). The foreclosures just need to happen, house prices need to drop, and the foreclosed-upon can rent (and yes, on the macro level, the banks and car companies need to be allowed to die.).

  • Scott Pershing

    Mark wrote:

    And we need MORE trust in the free market, especially now.

    ROTF LMAO! Have you not been keeping up with current events over the last 8 years????

    The free market left unchecked allowed banks, builders, insurance companies, realtors, buyers, sellers to do REALLY stupid things! All we saw was the privatization of profits and now the socialization of losses.

    These budget deficits aren’t from Obama, rather it is the balloon payment for the mortgage of stupidity we have had over the last 8 years due to all balls and no brains in the White House.

    Wow we really have steered way off topic! :-)

  • ox

    Mark, I wasn’t expecting everyone to follow my logic. I was just voicing an opinion, which happens to be supported by the data and by some justified suspicion about many sellers’ asking prices. Last time I checked, making an argument doesn’t amount to controlling anyone else’s decisions. If you, or anyone else, wants to pay 15+% annualized returns, go right ahead. Whether anyone should finance a loan on a price inflated that much is, of course, another question entirely.

  • Mark

    Jim, your comments section loses everything written if a commenter clicks “submit” before writing his name and e-mail. Any way you can fix it? I had a great response written, but I was not smart enough to save my text and it’s gone.

    So here’s my abbreviated response to Scott: for how long can President Obama blame Bush for, for example, the 20% drop in the stock market (official definition of a bear market) since he took office?

    We’ve gone from “all balls and no brains” to “all bleeding heart and no brains.” From the perspective of my Roth IRA and my kids’ college funds, I preferred the former.

    Call me heartless, but I don’t care if greedy homeowners lose their homes and have to- gasp!- RENT, or if greedy banks and incompetent car companies go out of business. Why is it worth stealing my kids’ future prosperity to socialize the losses?

  • Agree with Bill

    How do I find a house like the 5 below that are not in MLS?

    “I’m personally involved in 7 transactions currently…5 of them are in some way related to a foreclosure situation, and none are in the MLS. ”

    What Obama has done has actually made me, a relo person who needs to buy, more reluctant to buy. Artificially stopping the bottom scares me more than before. And I NEED to buy a house. Imagine what it has done to the buyers (educated buyers) who have not relocated and don’t NEED to buy!!!

    “We still have the freedom to make our own economic decisions in this country (for now). ”

    As long as people like me work 12 to 14 hours a day, buy LESS house than I can afford, and continue to pay more than my fair share of other peoples mortgages.

    “rather it is the balloon payment for the mortgage of stupidity we have had over the last 8 years due to all balls and no brains in the White House.”

    Jimmy Carter, Chris Dodd & Barney Frank had balls? Maybe I can get Tony Resko to help me buy a house in C’Ville.

  • Scott Pershing

    Mark wrote:

    So here’s my abbreviated response to Scott: for how long can President Obama blame Bush for, for example, the 20% drop in the stock market (official definition of a bear market) since he took office?

    We’ve gone from “all balls and no brains” to “all bleeding heart and no brains.” From the perspective of my Roth IRA and my kids’ college funds, I preferred the former.

    Mark you seem like a smart guy, but this sounds like a Rush Limbaugh sound bite. You seriously think the stock market fell apart after Obama took office in January? You sure it had nothing to do with the DOW dropping 3500 points from 11,000 in September 2008 to 7,500 in October 2008? Before Obama was elected? Are you sure that it had nothing to do with the last 8 years of waging wars, alienating nations, enabling companies to export all the jobs, and allowing bankers to run amok?

    If you want to be angry, be angry with the same set of fools that I voted for in 2000, George W. Bush and Dick Cheney. I fell for the same balls versus brains bravado too, and I have taken a serious hit (over $1.5M) for voting for him. If I could get a do-over back in 2000 I would have voted differently… I didn’t make the same mistake of voting for them in 2004, but sadly others did.

    You said:

    Call me heartless, but I don’t care if greedy homeowners lose their homes and have to- gasp!- RENT, or if greedy banks and incompetent car companies go out of business. Why is it worth stealing my kids’ future prosperity to socialize the losses?

    I think you need to spend a little more time reading about what is happening than just being angry. Believe me I was there too, and the more I read the more appreciative I am that we have Obama as president and not someone who couldn’t tell that the fundamentals of our economy are strong.

    As much as I hate the thought of helping the same people that caused the problem (bankers,insurance companies,etc.) not helping them will be even worse. If the entire banking and insurance system shuts down so does the USA. You can already see the impacts to the other countries around the world. Your portfolio would go to _zero_.

    I talk with a lot of sellers that ended up in a bad situation. Many were making good money, living within their means, and then their company went under and so did their jobs. Some of them have lost everything. So don’t be so quick to judge lest you find yourself in a similar situation.

  • Agree with Bill

    Scott,

    Were you reading “The Commuist Manifesto” when you came to that conclusion?

    “Believe me I was there too, and the more I read the more appreciative I am that we have Obama as president and not someone who couldn’t tell that the fundamentals of our economy are strong. “

  • Scott Pershing

    ‘Agree with Bill’ says:

    Were you reading “The Commuist Manifesto” when you came to that conclusion?

    No it was based upon reading the actual spending bills. Perhaps you should review what happened when Herbert Hoover initiated his spending freeze.

    http://en.wikipedia.org/wiki/Herbert_Hoover

    As the economy quickly deteriorated in the early years of the Great Depression, Hoover declined to pursue legislative relief, believing that it would make people dependent on the federal government. Instead, he organized a number of voluntary measures with businesses, encouraged state and local government responses, and accelerated federal building projects. Only toward the end of his term did he support a series of legislative solutions.

    Maybe you should change your handle to Agree with Rush. You obviously don’t have much depth to your arguments other than his inflammatory sound bites.

  • Mark

    What if the cure is worse than the disease?

  • Scott Pershing

    Mark wrote:

    What if the cure is worse than the disease?

    The cure is what is happening now, prices are deflating, people are being forced to save. The disease left office in January, unfortunately it still exists in the senate and the house. We (the whole country) have a massive clean up to do now that the lights are on and we can finally see all the damage that was done by the previous administration.

    Faulting the person telling you what the problems are, doesn’t make them responsible for them. But Obama is now accountable as president to work on fixing the problem regardless of who caused it.

    The consequence of all the saving causes businesses to have an oversupply of products and services, which causes them to cut more costs and consequently employees. Which keeps the downward spiral going.

    Giving money just to banks is not going to get the economy going, because banks are not lending money. They are still floating high interest rates even though their cost of borrowing is much cheaper. Why? One because they can, and two because they still have a pile of toxic assets that they can’t get rid of.

    The only one that can spend money is the federal government. By doing infrastructure and projects that hires real workers who get money and start spending it again. That is not socialism or communism, that is reality.

    The whole country didn’t just fall apart in the last 2 months. It has been falling apart for over 6 years. We were all just happy and drunk on all the free money which seemed to be coming out of nowhere that we failed to notice. But the sad reality was that money wasn’t free and our previous president was just figuratively running up the country’s credit card and putting us more in debt to the Chinese and the Saudis.

    If you don’t like your 401K or your college fund now, imagine what doing nothing will do to it. You will have nothing. No retirement, your children will be forced to work their way through school, and the hopes of getting a job will be minimal.

    Want to know what would have been worse? If we had privatized social security before the collapse like W wanted to do…. then things would have been REALLY REALLY ugly!

  • Mark

    Oh, I see. And Bush is also responsible for my back hair, the traffic on I-29, global warming, and everything else. You are part of a dwindling group who believes Barack Obama is Jesus.
    I think the cure is making the disease worse.

  • Scott Pershing

    Mark said: Oh, I see. And Bush is also responsible for my back hair, the traffic on I-29, global warming, and everything else. You are part of a dwindling group who believes Barack Obama is Jesus.
    I think the cure is making the disease worse.

    Wow, you can really draw a connection from me holding the president Bush accountable for the economy and you can draw a link to your back hair? And to think I thought you were smart. Never did I say that I think Obama is Jesus, rather I appreciate somebody in the White House that has a brain and is not afraid to use it.

    I don’t think the cure is what is worse, I think it is when people like you forget to use their brains and go into reaction mode (remember all balls no brains) that got us into this situation in the first place that makes it worse.

    The best analogy I can make is that it is like a patient going to chemotherapy to kill cancer. Nobody wants the chemo or the side-effects, but they want the cancer to end. The stupidity that was allowed to perpetuate over the last 8 years is the cancer eating this country, and everyone regardless of who you voted for has a stake in fixing it.

    If you want to continue the political discussion feel free to send me an email, otherwise OK with you that we get back to talking about real estate?

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  • Mark

    Mark writes brief comments, Scott writes essays in response. I have long since given up on convincing anyone that zealous of anything political.
    Keep your blind faith comments restricted to Kos, you won’t hear anything further from me about politics in this thread. I’ve learned my lesson! Never argue with a fundamentalist.

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