Monday, April 14, 2008

Hey, it's the new REMAX bubble!

jasper pointed out the advertisement, thinly disguised as a news story:

" MAX EQUITY ROUNDTABLE SUGGESTS POSSIBLE “NEW REAL ESTATE BUBBLE” THEORY"

Here's an excerpt. Warning: Please put down anything you might be drinking, or else you might end up spiting it all over your PC due to spontaneous laughter.

"BEAVERTON, Ore. — Is a new real estate bubble forming? Executives at RE/MAX equity group think so. Gary Taylor, principal broker at the firm’s Sunset Corridor office and head of the company’s panel who studied recent market data and the prevailing theory, recently released the panel’s findings.

Local brokers are seeing steady sales through this “new market”. Last month the Portland Metropolitan area had 1,384 closed sales, up 27.6 percent from January 2008 (1). What the brokers are hearing is a real demand from individuals with a sincere desire to buy, but limiting factors are hindering their ability to execute a transaction."

Ah yes, the old monthly sales increase ruse. What they forgot to mention was that sales in Portland were DOWN 29% year over year. The February bump is seasonality, it happens every year. Yawn.

"Some of the factors that the panel identified in the current market:

Contingencies. Brokers are seeing a higher than normal amount of contingent offers, relative to total sales. These contingencies usually include the potential buyer’s ability to sell their primary residence."

Ah I see, this is a "wishful thinking" bubble. I wish I could sell my house, so I could buy a bigger house. The reality is, with no entry level buyers thanks to the elimination of funny money and zero down loans, others can't trade up.

"Deals, Deals, Deals. Brokers are hearing from their clients that are confident that the market may have hit bottom and is on the way back up. This has resulted in buyers acting on aggressive marketing tactics from local builders, as well as sellers trying to market their property. "

This would be the "hearsay" bubble. We hear there are buyers out there! Of course people are acting on builder incentives, I might be tempted by 50% off too!

"Financing Woes. The tightening of the ability for many to get mortgages may be true, but that has not affected the desire of buyers. In the last two years, there have been nearly 2 million new households formed (3), and it’s likely they will soon be in the home buying market. "
More wishful thinking. Those new households now need real savings to buy a house, and most people don't know the meaning of savings.

Gary Taylor and his team must be real geniuses to spot this bubble before the rest of us, I'd like to thank him for bringing it to our attention!

2 comments:

Kirk Coburn said...

What bullsh*t!

Leo said...

“Brokers are hearing from their clients that are confident that the market may have hit bottom and is on the way back up.”

This is clearly a case of survivorship bias. The only clients that brokers will have at this point are die-hard housing perma-bulls. From a broker’s biased sample, it will appear as if buyers have become more confident, although it’s actually just a case of self-selection.