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Are Existing Home Prices Overrepresented By Up To 40%?

Tyler Durden's picture




 

A reader writes in with some troubling observations on what could potentially be a pretty substantial scheme to artificially "boost" existing home prices by up to 40%, putting all the NAR data, and all other relevant public housing data materially into question. Since trick is painfully simplistic, and all too easy to spot, we wish to open it up to our readers for verification, as this could be a huge hit to the credibility of all existing home price metrics, and put into question all transitory upticks in home prices, such as the backward looking Case-Shiller index indicated yesterday.

From the email:

Realtors are not reporting the true sold prices on homes.  Here are 2 examples.  If a home is listed on the MLS and then sells at a auction like Hudson & Marshal or RealtyBid, you can see the sold price online or if you attend the live auctions, see the house sell at open outcry auction.  The next day the houses are reported sold on the MLS but always at full price.

The example below sold for $115,000 at Realtybid but is listed as sold for $159,500 on the MLS.

Also, homes are listed on the MLS and sold on the HUD site.  You can see the sold area on HUD and the Bid Stats.  The house listed below sold on the Hud site for $90,061 but again was listed as sold for full price on the MLS $113,400.

These are only 2 examples, I have seen over 100 and assume it is occurring everywhere.  I understand that foreclosures are not included in the sales stats from the Realtor Assoc. but the stats they use are taken from the sold prices listed on the MLS.  They are all false.

Simply said, this means that any pricing data coming off Multiple Listing Services is fatally flawed, and if this observation is verified, could potentially be a simplistic means to misrepresent the true home price by up to 40% higher.

As for the examples, here is property 1 as represented by the MLS: note the price of $159,500

And below is the actual final auction price on the exact same property taken from RealtyBid:

The MLS certainly pulled all the correct information on the property... all except for the price.

Another example: 5572 Goodhue Ave, Rockford IL 61109. The house was sold in auction for a purchase price of $90,061 as the below screenshot from the HUD auction indicates:

Yet the very same property was listed on foreclosure.com, and subsequently pulled by Zillow, as having a value of $113,400

These are merely two examples.

We have a simple question: which price is the NAR, Case-Shiler, and every other resi real estate index service pulling: the higher or the lower. For the ongoing credibility of the suddenly green shoot free recoveryless recovery, we at least hope it is the correct one. Which is why we ask readers to advise us of any comparable bifurcations between paid and listed price on properties they may be aware of.

Suddenly David Rosenberg's claim that no properties over $750,000 sold in the past month doesn't seem all that outlandish...

 

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Wed, 09/01/2010 - 23:06 | 558901 trav7777
trav7777's picture

40%, bitchez

Thu, 09/02/2010 - 01:47 | 559097 Howard_Beale
Howard_Beale's picture

Having been here for over a year--every time I see the bitchez crap at the top of the post I want to personally beat the crap of the poster. It is getting so damn old. STFU!

Thu, 09/02/2010 - 03:31 | 559141 VeloSpade
VeloSpade's picture

Hey Howard,

How about every time you see it 3rd from the top?

Biiaaattcccheezzzzz!

Thu, 09/02/2010 - 07:33 | 559208 Rick64
Rick64's picture

LOL

Thu, 09/02/2010 - 08:06 | 559229 Thomas
Thomas's picture

Makes me chuckle. Reminds me of what a fever swamp this is.

Fri, 09/03/2010 - 18:44 | 563093 suckapump
suckapump's picture

I have a brilliant idea! Let's all respond to the "bitchez" post so that we all have to scroll waaay down to see on-topic comments! Yay!

Thu, 09/02/2010 - 05:46 | 559172 goldfish1
goldfish1's picture

I'm  jealous I didn't post it.

Thu, 09/02/2010 - 06:20 | 559180 digitalhermit
digitalhermit's picture

Wouldn't-be-zerohedge-without-it, bitchez!

Thu, 09/02/2010 - 07:32 | 559206 Hungry For Knowledge
Hungry For Knowledge's picture

Howard, go away.

It's part of "who we are."

Thu, 09/02/2010 - 07:58 | 559223 Max Hunter
Max Hunter's picture

Yeah Howard.

Deal Bitchez!!

Fri, 09/03/2010 - 12:15 | 559841 Village Idiot
Village Idiot's picture

"Howard, go away."

"It's part of "who we are."

 

For better or worse, it's who we are, right now.  Not to sound self righteous here, but the average ZH age of the commenter's who align with the above post on this thread, is about 12 weeks.  ZH has been many things along the way, not all good.  One constant, though, is Howard Beale's contribution. Show the avatar some respect, bitches.  You sound like children.  And most are not here to listen to children.  Poor humorists, maybe.  Children, no.

Yes, I know, there are no rules in fight club.

Thu, 09/02/2010 - 06:33 | 559185 reading
reading's picture

Howard, 

you have to learn to ignore and just be amazed that they are always first.  I still can't figure out how they do that...

Thu, 09/02/2010 - 08:47 | 559291 tmosley
tmosley's picture

So, you're saying you're mad as hell, and you aren't going to take it anymore?

Thu, 09/02/2010 - 21:59 | 561071 Everyman
Everyman's picture

Assault and Battery, Bitchez!!!

Wed, 09/01/2010 - 23:11 | 558910 CashCowEquity
CashCowEquity's picture

Make the World a Better Place...Punch a Real Estate Agent in the Face.

Wed, 09/01/2010 - 23:32 | 558954 Village Idiot
Village Idiot's picture

what rhymes with attorney?

Wed, 09/01/2010 - 23:35 | 558965 drwells
drwells's picture

Put one in a gurney.

Thu, 09/02/2010 - 02:12 | 559111 Frankie Carbone
Frankie Carbone's picture

You mean send him into attornety?

Say, who junked you??? Is there a lawyer on the boards? Lighten up. Everyone loves a good dead lawyer joke. Come on kids, gather round'. I've got a good one for you. 

Did you hear the one about Pinochet, Pol Pot, and the lawyer....

 

Thu, 09/02/2010 - 10:25 | 559516 sodbuster
sodbuster's picture

My favorite lawyer joke.

Q:If you were in a room with Hitler, Stalin, and a lawyer, and you had a gun but only had two bullets- who would you shoot? A: You shoot the lawyer twice.

Thu, 09/02/2010 - 12:40 | 559843 Buzz Fuzzel
Buzz Fuzzel's picture

Q. What do you call 1,000 lawyers chained together on the bottom of the ocean?  A. A good start.

Thu, 09/02/2010 - 22:00 | 561074 Everyman
Everyman's picture

BEST LAWYER JOKE OF ALL TIME!!!

 

Q:  Why do Lawyers wear ties?

A:  To hold down the foreskin!

Thu, 09/02/2010 - 00:50 | 559048 DoctoRx
DoctoRx's picture

Blarney?

Baloney?

Thu, 09/02/2010 - 00:54 | 559051 PiratePiggy
PiratePiggy's picture

Is it Burt, or is it Ernie?

Thu, 09/02/2010 - 01:54 | 559101 Eternal Student
Eternal Student's picture

We're in a handbasket, on a journey, going to visit our attorney.

Thu, 09/02/2010 - 03:33 | 559142 VeloSpade
VeloSpade's picture

Make the World a Better Place... beat off on a bitch's face.

Wed, 09/01/2010 - 23:13 | 558913 tip e. canoe
tip e. canoe's picture

damn those pesky kids with a modem

Wed, 09/01/2010 - 23:28 | 558948 Sausagemaker
Sausagemaker's picture

"...and I'd have gotten away with it if it wasn't for those pesky kids..."

Wed, 09/01/2010 - 23:13 | 558914 Species8472
Species8472's picture

I have on occasion called our local town assessor for information about the sale price of local properties. Would be interesting to know where they get the info from and is it an honest price.

Wed, 09/01/2010 - 23:15 | 558915 Fred Hayek
Fred Hayek's picture

You know what's another scam going?  I'm experiencing this now.  I'm selling my condo.  The closing's in a couple weeks.  Knock on wood.  I've agreed to a price with the buyer but she's buying with some ridiculous negligible amount down and phrased her first offer as $XXX,000 with $5,000 back for closing costs. 

I was totally thrown at first.  "WTF is that?" I asked my agent.  He said it's pretty common with these FHA buyers.  We eventually negotiated a price but the official price that'll end up in the recorded deed is going to be $5,000 more than I actually get out of it.  Ridiculous.  And it inflates the official price a couple percent.

 

Wed, 09/01/2010 - 23:18 | 558923 Dixie Normous
Dixie Normous's picture

And she gets to pay taxes on the higher, false price.  Hahaha.

Wed, 09/01/2010 - 23:34 | 558961 Fred Hayek
Fred Hayek's picture

Well, I feel okay about that part.  And I feel okay that my neighbors get a slightly higher number as a reference point should they sell some time in the future.  But, christ, save some freaking money then buy.  It's not rocket science. 

Actually I think it's also a way for whoever's doing her mortgage to rip off her and me.  She doesn't care what the closing costs are.  The "seller" is paying that.  It's just a number we negotiated around. 

Thu, 09/02/2010 - 01:53 | 559100 Howard_Beale
Howard_Beale's picture

Not really--it's just the buyer couldn't really afford the closing costs and asked the seller to pay XX amount and it could also help with moving costs. It has been a method in buyer's markets for years for the buyer to get a better deal. And the taxes on $5000 more are negligible. The realtor makes a tiny amount more and the bank/mortgage banker still has to pass that 5K back through. Nothing here. Move along.

Thu, 09/02/2010 - 09:31 | 559393 DonnieD
DonnieD's picture

This is fairly significant from the standpoint that rolling 5k of closing costs into a 200k sale price increases the sale price by 2.5%. My County Property Appraiser books the $205,000 as the price the house was sold at which is an inflated value. It's not much but it definitely skews the numbers higher.

Wed, 09/01/2010 - 23:36 | 558966 BobWatNorCal
BobWatNorCal's picture

And you both get to pay yr agents a bigger commish.

Wed, 09/01/2010 - 23:40 | 558969 Fred Hayek
Fred Hayek's picture

Ehh.  5% of $5,000 is only $250 not that big of a deal.

Wed, 09/01/2010 - 23:45 | 558976 JLee2027
JLee2027's picture

If I ripped my customers 5% on a deal, they would be ex-customers.

Your agents are unethical, imo.

Wed, 09/01/2010 - 23:55 | 558987 Village Idiot
Village Idiot's picture

Easy now.  "seller paid" closing costs have been around since the beginning of time.  In most transactions, the seller and buyer agree on price, and then the closing costs are added on top.  The seller still gets their net of fees price and the buyer is able to finance some closing costs.  This tactic has helped facilitate many a sale.  In a lot of cases the seller wouldn't have a buyer without it.  Nothing sinister.

Thu, 09/02/2010 - 00:24 | 559014 Village Idiot
Village Idiot's picture

Just curious - what part of that statement was junk IYO?

Thu, 09/02/2010 - 08:01 | 559225 DarkAgeAhead
DarkAgeAhead's picture

Nothing I can see. Maybe somebody's philosophically opposed to this and they junked the messenger!?

Note: I didn't junk it.  I think it's a good post.

Double note:  I post this at a clear risk of being junked myself.  Bitchez!

Thu, 09/02/2010 - 08:08 | 559234 Max Hunter
Max Hunter's picture

It's not sinister but it adds in allowing people to buy houses that shouldn't be buying houses and therefore raising prices with artificial demand. I paid all my closing costs (more than 5k) and 10% down.. I can't help thinking that if everyone had to do that, (actually 25% down should be law) we would never have had the bubble.

I didn't junk you.. Just had to add my 2 cents that I think there are many flaws in this system and allowing people not to put money down and finance what they should be paying out of pocket keeps more buyers and higher prices.

Thu, 09/02/2010 - 10:32 | 559532 Commander Cody
Commander Cody's picture

Inflating the mortgage to pay for "seller" paid closing costs is fraud.  If it comes out of the sellers pocket, its OK.  Its sad to see that we have learned nothing from the practice of selling homes to people who cannot afford them and who have no skin in the game.  The can walk debt and loss free at any time.  Does that make sense to anyone?

Thu, 09/02/2010 - 12:19 | 559607 Village Idiot
Village Idiot's picture

Not having sufficient capital to close (or not wanting to use capital) has nothing to do with ability to qualify.  In a normal market, down payment is primarily used to meet certain lending guideline thresholds, or affect payment.  And in many cases smaller down payment is preferred (leverage).

Did low/no down payments have an impact on this last go around?  Sure.  Did loose qualifying standards have an impact?  Yes, definitely.  However, down payment has nothing to do with ability to qualify.

Look at the numbers regarding default when there was a 20% + down payment - even on a full doc loan.  The numbers are horrible.  Job losses, wage cuts, value drops - they all fell into the same hole as people who should never have bought a home in the first place. I do understand your frustration, though.

Thu, 09/02/2010 - 19:52 | 560874 JLee2027
JLee2027's picture

I didn't do it.

Thu, 09/02/2010 - 00:32 | 559025 Fred Hayek
Fred Hayek's picture

I agree that it's not unethical.  (and I didn't junk you) But I paid the damn costs myself when I bought.  As you say, it is helping to facilitate the sale because she's not putting much money down either so she's going to have very little "skin in the game".  I guess I sort of naively thought that that was going to be a thing of the past after the notoriously bad mortgages issued in the making of the bubble.

Thu, 09/02/2010 - 00:41 | 559036 Village Idiot
Village Idiot's picture

I hear you.  Congratulations on getting your property sold.

Thu, 09/02/2010 - 07:58 | 559224 jomama
jomama's picture

^ this

Thu, 09/02/2010 - 01:16 | 559070 Hang The Fed
Hang The Fed's picture

Big plus.  Ripping is still ripping, with no regard for the amount, and I don't give a flying fuck if you're selling hotdogs from a van or building palm-shaped islands in a gulf.  Of course, in the specific context of the article, I think we're all being fleeced of our sanity.  No small wonder that I pass upwards of fifty houses for sale in a given day, and none of them move for months at a clip, save for the shuffle of which agency's sign is out front or when they come on the market, go off for a time, then pop back up again.

Thu, 09/02/2010 - 01:36 | 559087 Village Idiot
Village Idiot's picture

I'm all for putting sanity back in the Real Estate market - pull all life support.  Let price discovery take it's course.  The sooner this happens the sooner the market will recover. Albeit on a slower healthier price trajectory.

Thu, 09/02/2010 - 01:50 | 559099 Spalding_Smailes
Spalding_Smailes's picture

But then the banks go boom.

MBS can't allow the "price discovery".

Thu, 09/02/2010 - 02:21 | 559115 Village Idiot
Village Idiot's picture

A girl can still dream...

Thu, 09/02/2010 - 02:56 | 559129 Hang The Fed
Hang The Fed's picture

Exactly.  By the time things stabilize, however, it'll be in quantities of heads-of-cattle and boxes of ammunition that'll seal the deal.  These dumb fucks are never going to learn that it's infinitely better to take your medicine and just get it over with.

Thu, 09/02/2010 - 02:03 | 559105 Eternal Student
Eternal Student's picture

And when you thought it couldn't get any worse, it's deja vu all over again. Zero down loans are back:

 

http://sfbay.craigslist.org/sfc/reb/1932235134.html

"Downpayment Waiver Program

  • True Zero Down Financing! Borrow 100% of Purchase Price!
  • Buyers can Borrow MORE THAN PURCHASE Price!

..."

This reminds me of a bad horror movie.

Thu, 09/02/2010 - 05:04 | 559164 StychoKiller
StychoKiller's picture

Who coulda knowed that Jason was a Realtor?

Thu, 09/02/2010 - 02:45 | 559126 Lux Fiat
Lux Fiat's picture

This is not uncommon.  When I went to sell a townhouse a number of years ago, buyer was using VA, had very little money for a downpayment, closing costs, etc.  Price was bumped up $10k over initial agreed to price, and then I turned around an contributed $10k to buyer's closing costs.  And it throws a few extra bucks into the pockets of the realtor and county tax office (although all my costs were fixed at the initial sales price - the buyer picked up the diff).

However, the treatment of foreclosure sales is distressing news, no pun intended.  Am going to be at a meeting with a couple of realtors, including a guy who has been buying foreclosures at auction for a couple of decades.  Will have to ask them if the same thing is happening here in central TX.  Suspect it is.

Thu, 09/02/2010 - 05:03 | 559163 Pondmaster
Pondmaster's picture

And YOU will pay the State real estate tax on the 5K . But ... is it worth it to be out of the condo ? Just let Benny and the Debts bebase the dollar 40% more and we will all defecicating in high cotton . House , to the moon , damn the fudged figures, They are meaningless except to the statisicians ( figures lie and liars figure always holds true) , good or bad market ) . Yes realtors are lower than a snakes belly in a wagon rut ) 

Thu, 09/02/2010 - 10:44 | 559560 RockyRacoon
RockyRacoon's picture

Yes realtors are lower than a snakes belly in a wagon rut

I presume you know every single one of them in order to make a blanket statement about the ethics of every real estate agent.  The term "Realtor" is trademarked, and all real estate agents/brokers are not Realtors.  Shows how much you know.  You probably think that there are two distinct political parties as well -- and that one of them is better than the other.

Yes, that junk is mine.

Thu, 09/02/2010 - 11:50 | 559703 LauraB
LauraB's picture

When we sold our townhouse a few years ago, our neighbors did this.  They made the price higher but then gave the buyer several thousand dollars in concessions.  If you watch any of the home sale shows on HGTV, it seems like some buyers are afraid that the sellers won't accept their offer if it is too low.  So, to appease the seller with a higher price, the Realtor encourages the buyers to make a higher offer, but ask for concessions. 

As a buyer, I'd rather get a lower price than a "concession" because I'll be paying higher real estate taxes based on the higher sales price.  Also, the seller doesn't really have too much incentive to do this because he's not getting much of the extra money.  This practice was prevelant even before the bubble burst.  Realtors would tell buyers that they didn't want to "insult" the seller.  Also, sellers wanted to win the pissing match over who sold their house for the higher price.   The only person who really benefits from this practice is the Realtor who will get a higher commission based on the higher sales price.  Also, it keeps the market artifically propped.  This allows them to keep their commissions up when they present the comparables to other clients marks buying houses.

The only other reason I can think of for this is that the buyer doesn't have any cash and needs it to buy furniture or make fixes to the house; but if that is the case, they shouldn't be buying the house in the first place.

Sun, 09/05/2010 - 15:12 | 564908 masterinchancery
masterinchancery's picture

In our area, which is pretty pricey, I have noticed a couple of Zillow misreports to the high side--never the low side.  I am starting to wonder whether the whole system isn't a scam.

Thu, 09/02/2010 - 00:51 | 558916 Village Idiot
Village Idiot's picture

deleted

Thu, 09/02/2010 - 01:19 | 559073 Votewithabullet
Votewithabullet's picture

"Buddy says lay off". Dont fuck around man buddy says lay off man. He's gonna go crazy man.

Thu, 09/02/2010 - 01:40 | 559090 Village Idiot
Village Idiot's picture

you caught it - funny.  I deleted the post because the question appears to have been answered.  He is going crazy, though.  Just bought a bunch of deflating air.

Wed, 09/01/2010 - 23:16 | 558920 Rusty_Shackleford
Rusty_Shackleford's picture

All part of the rich tapestry that is our fraud based economy.

Wed, 09/01/2010 - 23:21 | 558932 AccreditedEYE
AccreditedEYE's picture

Here's another gem... not sure if you saw it already today. Stripping the middle class of wealth continues at full steam ahead! We absolutely MUST keep those bankers income streams intact at all costs... makes me sick.

 http://noir.bloomberg.com/apps/news?pid=20601087&sid=akaWLU8P7c_Q&pos=4

Wed, 09/01/2010 - 23:46 | 558980 JLee2027
JLee2027's picture

Something is really wrong with that rug on her head, lol.

Thu, 09/02/2010 - 00:57 | 559039 Rusty_Shackleford
Rusty_Shackleford's picture

Are all female bureaucrats actually angry lesbians, or just styled by angry lesbians?

Thu, 09/02/2010 - 02:16 | 559113 pitz
pitz's picture

Bitter divorcees, usually.  Usually alcoholics too, or smokers.

The government where I live is so above their own laws that all their office complexes still have smoking rooms. 

Thu, 09/02/2010 - 01:37 | 559089 Eternal Student
Eternal Student's picture

That article really symbolizes the nutcakes running the show. Rent out foreclosed homes!?! Yeah, that's just brilliant. There are a lot of people who are refusing to sell at a lower price, so they put their houses up for rent. Now, here's the question for the Econ PhD's: what's this intervention going to do to the rental market?

This Government Intervention mentality is almost as bad as the widespread corruption going on.

Thu, 09/02/2010 - 02:20 | 559114 Gargoyle
Gargoyle's picture

Essentially, I think, this makes the government the country's largest landlord, which is a good thing to bureaucratic freaks like this one.

Wed, 09/01/2010 - 23:44 | 558974 Shameful
Shameful's picture

Well said sir, well said.

Just think what the American economy would look like if fraud was removed overnight...I kinda imagine it would be a huge crater...

Thu, 09/02/2010 - 00:03 | 558993 Johnny Bravo
Johnny Bravo's picture

I think that the S&P would fall to -450 and gold would skyrocket to 540000.

Overnight.

LOL

Thu, 09/02/2010 - 03:55 | 559148 doggings
doggings's picture

you really are such a twat.

Thu, 09/02/2010 - 07:43 | 559213 ColonelCooper
ColonelCooper's picture

Thought you were looking for some intelligent conversation.  Yet you keep REPEATING the same tired obnoxious shit over and over.  The true irony is that you can't seem to understand why I do it.

I'm just your echo, you douche.

http://www.youtube.com/watch?v=VLnWf1sQkjY

Thu, 09/02/2010 - 10:48 | 559566 RockyRacoon
RockyRacoon's picture

The Coop strikes as quick as an adder.

Thu, 09/02/2010 - 00:58 | 559055 Caviar Emptor
Caviar Emptor's picture

Scary shit....without the fraud we'd have no Wall Street, no sleaze! We'd be losing our #1 export!

Thu, 09/02/2010 - 00:54 | 559053 Caviar Emptor
Caviar Emptor's picture

+1. 

Thu, 09/02/2010 - 01:44 | 559096 Village Idiot
Village Idiot's picture

Pat on the back - I like it.

Wed, 09/01/2010 - 23:17 | 558921 youALREADYknow
youALREADYknow's picture

Quote from the methodology behind the S&P CS Index:

Home price data are gathered after that information becomes publicly available at local deed recording offices across the country.

Wed, 09/01/2010 - 23:22 | 558935 Dixie Normous
Dixie Normous's picture

My town in CT used to produce that shit in a couple of weeks and they have a great Geographic Info System on line.  Now it takes months, and it's not a lay off issue. Hmmmm

Fri, 09/03/2010 - 08:50 | 561533 moneymutt
moneymutt's picture

when home prices were going up (read:tax base going up) towns would get great return on the investment to quickly show the newest, highest prices. If the town was your "business" you'd do the same. Now that prices are dropping, they do not rush to acknowledge new lower prices. Just the city manager or whowever doing their best to balance the budget, but really, their job should be serving their people.

Wed, 09/01/2010 - 23:19 | 558929 Charley
Charley's picture

This is news -- big news -- if true. After watching how the continuing loss of industrial capacity was "revised away" this spring, I would not be surprised if this didn't turn out to be true. (Not to mention the notorious "birth/death model" in employment stats -- no credit available, but new companies are still hiring like crazy.)

Wed, 09/01/2010 - 23:20 | 558930 Ataraxia
Ataraxia's picture

I short sold my home in Denver in April. During the closing, the actual amount the bank received for the home was $215,000. All of the associated fees and expenses brought the note for the borrower to $254,000. I'm assuming the sold price was closer to 215, but the home was listed as sold for 254... If that was the case, we wouldn't have had to short sell the home because that's more than we owed! This is definitely happening across the country and the county assessor isn't going to be honest either. They're bleeding as it is.

Thu, 09/02/2010 - 00:05 | 558994 Johnny Bravo
Johnny Bravo's picture

Yay Denver!

Colorado Buffaloes reprezent!

Thu, 09/02/2010 - 07:23 | 559201 hedgeless_horseman
hedgeless_horseman's picture

Heeerrrrreeee coooommmmmeeeessss  Rrrraaaaalllllppphhiiieeee!!!!!!!!!!!!!!!!!!!!!!!

Thu, 09/02/2010 - 09:49 | 559420 DonnieD
DonnieD's picture

The Property Appraiser wants to keep the sales price up for tax purposes, the Realtor wants to report the higher sale price, the title company wants the higher price for higher fees and the government wants to tell the citizens that there programs are working and housing is recovering. And it's all bullshit.

I feel sorry for those people that are getting suckered into buying this market. Fudging of the data is ultimately going to cost homeowners and banks more losses. If the government was going to support housing they should have waited until prices corrected below their historical trend lines. They are still a ways away where I live.

Wed, 09/01/2010 - 23:33 | 558939 Getagrip
Getagrip's picture

If This is true, prices are being manipulated for property tax assessment and damage control. This would be CCCP stuff...nahhh, not in Amerika 

Wed, 09/01/2010 - 23:50 | 558985 JLee2027
JLee2027's picture

I can imagine the state government budget modeling if you reduce property tax revenue by 40%. Yup, they'd do anything to avoid it. 

Thu, 09/02/2010 - 06:52 | 559191 reading
reading's picture

While I am sure there is a significant amount of manipulation, I am not sure that reporting of sales to the county could happen that way.  The actual price paid has to be reported to the county based on the paperwork that is submitted to them.  Of course, the adding in of closing costs does artificially increase "values" and for many of these homes and pricepoints it can do so by a significant percent.  However, for existing homes, the county does not have to bring down "values" as quickly as they should (nor do they) unless homeowners challenge their value.  We do it every year and are often the only ones who show up on the days the assesor sets aside for this on our side of town.  People are reticent to challenge as I think they feel it will make their house "worth" less if the county thinks it's worth less...crazy to me.

Thu, 09/02/2010 - 10:54 | 559579 RockyRacoon
RockyRacoon's picture

I know of several cases where a sales agent has hand carried a deed to the recording office and bought the tax stamps personally to have the clerk apply to the deed.  He buys more stamps than is needed to represent the sales price.   There is no law saying how many tax stamps one can buy.  The clerk reports the total tax stamps bought for the property -- which is assumed to be the sales price.  That's obviously not always the case.  So, reported valuations from the county clerks is not always commensurate with the actual sales price. 

Wed, 09/01/2010 - 23:32 | 558955 Mark4124
Mark4124's picture

Yes... I agree with the reader who posted the Case-Shiller methodology... unfortunately drawing from county records precludes the idea that pulling from MLS could screw up the data series as it is not pulled from the MLS. Taxable transactions would not be misreported to county authorities, it would not serve the interests of the seller. http://www.standardandpoors.com/servlet/BlobServer?blobheadername3=MDT-Type&blobcol=urldata&blobtable=MungoBlobs&blobheadervalue2=inline%3B+filename%3DMethdology_SP_CS_Home_Price_Indices_Web.pdf&blobheadername2=Content-Disposition&blobheadervalue1=application%2Fpdf&blobkey=id&blobheadername1=content-type&blobwhere=1243624745188&blobheadervalue3=UTF-8

Wed, 09/01/2010 - 23:57 | 558972 Village Idiot
Village Idiot's picture


@Mark4124

Is this what you were referring to?  Sounds like data is pulled from county tax assesors office, not MLS (for case shiller).  This doesn't mean that the general public isn't regularly being fooled, however.  Most agents represent sales price from MLS, not county records.

Anothere reason to question your Realtor when buying or selling.  Ask to see county records.

 

Index Calculations


To calculate the indices, data are collected on transactions of all residential properties during the months in question. The main variable used for index calculation is the price change between two arms-length sales of the same single-family home. Home price data are gathered after that information becomes publicly available at local recording offices across the country. Available data usually consist of the address for a particular property, the sale date, the sale price, the type of property, and in some cases, the name of the seller, the name of the purchaser, and the mortgage amount.

For each home sale transaction, a search is conducted to find information regarding any previous sale for the same home. If an earlier transaction is found, the two transactions are paired and are considered a "repeat sale." Sales pairs are designed to yield the price change for the same house, while holding the quality and size of each house constant.

Thu, 09/02/2010 - 02:23 | 559116 fajensen
fajensen's picture

Here in Denmark the goverenment solve that problem by basing the property tax on the Valuation* of the property, not the sale price.

In the "good times" people complained about the valuation being too low - because the maximum you can borrow on the property is 80% of the valuation. Now, nobody wants to borrow, so instead they complain about the valuation being too high because they want a lower tax bill. Sometimes it even works, but not often.

*) The IRS does the valuation - to ensure the proper result...

Wed, 09/01/2010 - 23:32 | 558957 DarkMath
DarkMath's picture

Doing a quick Google search I found this:

http://www.caseshiller.fiserv.com/about-fiserv-case-shiller-indexes.aspx

but it's ambiguous as to where they get the sale price from: "For each sales transaction, a search is conducted to acquire information on any previous sale of the same property."

You could probably email them and they'd tell you.

Wed, 09/01/2010 - 23:33 | 558959 drwells
drwells's picture

Realtwhores lie? Well, I'll be.

Wed, 09/01/2010 - 23:47 | 558981 bankonzhongguo
bankonzhongguo's picture

With a shout out from the true ground-zero of the foreclosure fiasco - Merced County, CA. (Not Clark County NV).  The single biggest impact in the market is the shadow inventory.  There are OREO out here unsold after 3 years.  Now this is all an aberation of an abomination, but it demostrates the model the banks have to affect the market.  Now the OCC lets these banks hold those "assets" far longer than standard practice - the new normal.  But the unholy cabal that is the local RE brokers and the banks holding the foreclosures means a fake 30 day inventory.  They are keeping it all at 30 days.  Only the normal transient family or retirement are the true buyers.  Its different in Vegas becasue of all the intenational money, but in Anytown USA - jobs drive the market.  Face it.  If you want to know what something is worth, look at the local rents, find the NOI and golly what cap rate to use now?  The 10 year note?  Funny how that equation used to work in the 90's.

"Dogs and cats living together.  Total anarchy!"

- Ghostbusters

Thu, 09/02/2010 - 00:30 | 559023 Village Idiot
Village Idiot's picture

Merced, didn't know that.  At least you can call it paradise, as compared to Riverside County, CA., which is another tragic figure. 

Thu, 09/02/2010 - 00:00 | 558986 bob_dabolina
bob_dabolina's picture

I work with realtors all day long (I know lucky me)

I have the daunting tasks at looking at all these bullshit sites to include the MLS. I will confirm first hand that there is a vast majority of information on these sites that is complete flat-out-wrong. It is in my opinion that Trulia and Zillow are the absolute worst. If you spend enough time as I do on these sites you will find things like homes sold two years ago that are still listed as "active" I would say the MLS is the most accurate but I get real-estate agents by the bushel that bitch how innacurate information on the MLS is (like I really care)

The NAR which owns realtor.com is run by tub of crooks. The NAR gets paid by the realtors and as such go out of their way to make things look better than they are. It's kind of like the rating agencies saying junk paper was AAA because they got paid to say they were AAA. If realtors retire, or, don't feel safe enough to upgrade their realtor.com accounts guess who losses out on those fees?

Enough of my bullshit. I will tell you that housing prices are way overvalued everywhere. Don't take my word for it, it's not like I do this day in and day out, just drink the koolaid that the self-serving interest parties are feeding you. They wouldn't lie.

Thu, 09/02/2010 - 01:05 | 559061 Caviar Emptor
Caviar Emptor's picture

Agreed. Trend will continue as the economy squeezes.

Thu, 09/02/2010 - 02:28 | 559118 fajensen
fajensen's picture

Same in Scandinavia - I see houses for sale for 6-9 months then suddently they are "Sold" but they remain empty. I suspect that the banks are backing a holding company (buyers ar not public here) to take over the defaulted properties at full value, thus getting the banks out of trouble, and accumulating the losses in one place where it can be sold to some sucker and detonated from a safe distance.

Thu, 09/02/2010 - 06:27 | 559182 aheady
aheady's picture

No bullshit at all, Mr. Dabolina. I work with realtors all day every day as well and can vouch for your observations. Here in a resort area, it's ALL about maintaining the holy Million Dollar Producer status... which is a skewed representation to begin with. Appearance is everything in this game.

Thu, 09/02/2010 - 11:23 | 559641 Spigot
Spigot's picture

A rational economic agent is not a moral economic agent: as a rational economic agent his profit of maximized by lying to you. I guess we know that these days there are very few moral economic agents.

Thu, 09/02/2010 - 00:01 | 558989 Yoleven
Yoleven's picture

SoCal here. Last year, I contacted a realtor on one of his company's listings. I was moving out of a rental in a very prime zip code, and we were chatting about the market in that city and overall. I had bought and sold several homes over some years living in that zip, and stated that I was now priced out. He said, "well, there is a lot of manipulation going on in [that town] with sales prices." I did not question him further, but have thought about it many times since. The local realtors here are completely entrenched, not to mention own half the residential RE.

I thought about contacting a local blogger about this issue, but he is now one of them.

If this is true, I want it out in the open.

 

 

Thu, 09/02/2010 - 00:15 | 559002 bob_dabolina
bob_dabolina's picture

I'm in SD. What zip?

Thu, 09/02/2010 - 00:59 | 559057 SoCalBusted
SoCalBusted's picture

Rental price to purchase price ratios are out of whack here in LA area.

Either rents are too cheap or houses are over priced.  BTW I negotiated a 20% reduction in my rent (5 bedroom house) last year after paying the same amount for the prior 8 years.

Thu, 09/02/2010 - 01:49 | 559098 Village Idiot
Village Idiot's picture

Well, if this is any indication, we are living in a home that is legitimately valued at 1.4m.  PITI with a 20% down payment around 10K.  We are renting for 5K.

Thu, 09/02/2010 - 02:14 | 559112 pitz
pitz's picture

How can that property possibly be 'legitimately valued' at 1.4M, when the cashflow only supports a valuation of $300-$400k?

 

 

Thu, 09/02/2010 - 02:39 | 559123 Village Idiot
Village Idiot's picture

Hey, I'm just the renter.  And there are three solid comps that have closed in the last six months. Oh, and since we moved here 3 months ago, five more have come on the market, none sold, and our neighbors to the the immediate right just left in a moving van. Cash for keys. Legitimacy=timing in this case. 

San Diego market.

Thu, 09/02/2010 - 09:06 | 559341 bronzie
bronzie's picture

'legitimately valued' in SoCal means 'whatever some idiot will pay for it'

in San Diego you can rent for far less than you can own at all price levels

a $600K house rents for $2300-2800/month - property taxes (1.1%) alone are $550/mo - then we add insurance and maintenance costs - if the house is relatively new it probably has Mello Roos taxes in addition to the property taxes and it is likely to be in some kind of planned development that will have an HOA fee - once you get done servicing those expenses you can then think about paying the mortgage

or just rent and let the owner keep eating his losses

Thu, 09/02/2010 - 10:06 | 559467 Village Idiot
Village Idiot's picture

Unless one is in the sweet spot of ownership (low tax base, low/no mortgage, etc.) there are few reasons to own right now.  I wish this weren't the case as renting does have a downside as well (no tax incentive, landlord, perception of neighbors, etc.).  Bottom line - big mess.

Thu, 09/02/2010 - 00:05 | 558995 SoloSilo
SoloSilo's picture

I see stuff like this:

http://www.redfin.com/CA/Martinez/2210-Pacheco-Blvd-94553/home/1475408

and I wonder. Did the April buyer pay double what they should have, or was the reported sale price inflated? Did they trash the house and now it's a dump?

In any case this house has now reverted to early-90s prices, which I actually think is fair.

Thu, 09/02/2010 - 00:19 | 559009 Yoleven
Yoleven's picture

Solo, the April price represents the loan(s) the bank took the property back for. Redfin (a great RE site btw) has just added the line that states bank owned/foreclosure, if applicable -- you can (somewhat) determine what the buyer paid, then what they took out in heloc's.

Thu, 09/02/2010 - 00:11 | 559000 traderjoe
traderjoe's picture

TD - nice catch. Also, best financial news site on the web. 

I too think the Ponzi will end someday soon, but this will go down with geometric weightings in the CPI, the Clinton re-defining of unemployment, the Birth/Death model, etc., etc. as the lies, damn lies, and government statistics the market trades billions of dollars every day on. Absurd. New home sales typically have 30% +/- statistical significance levels. When was that last discussed anywhere? The players in the Ponzi know their stats are made up. Even the sheeple know, subconsciously, that the stats are lies. They just hope another fool will come along and pay a higher price after them...

Thu, 09/02/2010 - 00:46 | 559044 Village Idiot
Village Idiot's picture

"They just hope another fool will come along and pay a higher price after them..."

 

usually an out-of-towner...

Thu, 09/02/2010 - 00:15 | 559003 Payne
Payne's picture

The whole premise is Bullshit.  Cash buyers at the courthouse are not included and never have been.  They only use the data from the Multiple Listing systems.  Cash buyers at any auction are not included never have been.  The MLS is representative of 70% of all sales and 35% of those are FHA and 30% are cash transactions.  So the NAR data is not misrepresenting home prices it is just a reflection of the MLS data input.  I buy at the courthouse steps and must know what the property will sell for in the MLS or with some other marketing source.  Inventory has been successfully restricted and temporarily home prices are static.  They will be going down again, don't worry.

Thu, 09/02/2010 - 01:00 | 559059 traderjoe
traderjoe's picture

How is the foreclosure flipping business these days? What state?

Thu, 09/02/2010 - 01:06 | 559062 redpill
redpill's picture

Whatever percentage you think MLS covers is irrelevant, because NAR does not use all of it for their statistics.  From their website:

"Each month, the Research Division of the NATIONAL ASSOCIATION OF REALTORS® receives data on existing-home sales (single-family, condos and co-ops) from local associations/boards and multiple listing services (MLS) nationwide. NAR captures 30-40% of all existing-home sale transactions with its monthly survey. The data provide the total number of closed existing-home sales in each association/board/MLS and also total sales within price categories ranging from less than $30,000 to more than $600,000."


Thu, 09/02/2010 - 00:24 | 559015 LostWages
LostWages's picture

Don't trust sites like Zillow as they take averages of similar sales in the area to determine the "value" of a property and can be off considerably.

Most of the other sites set up to entice buyers are not frequently updated.

If you have access to the MLS, you should be able to see the county tax records which should be the most accurate as the numbers are taken from the closing statement from the title/escrow company.

As a real estate agent in Las Vegas, I perform hundreds of Broker Price Opinions for banks every month.  Sadly, I've seen the level of professionalism in my industry decline along with the prices of the homes in the area.  As one who works in the MLS daily for hours on end, I report many lazy ass agents who don't get the information correct in the MLS.  They get fined for errors.

As for the auction websites, I wouldn't trust that data either.  They love to show what a "steal" these properties are to encourage more bidding.  Always look who has the incentive to deceive. 

As for closing costs, Village has it right.  People have been wrapping closing costs for a long time.  They are limited to 3%, and yes, the buyer is financing these costs and paying interest for 30 years on them.  Just like wrapping the sales tax on a car into the auto loan, not the smartest thing to do, but it keeps more cash in your pocket.

While the real estate industry does have its share of land sharks, I'm sure every industry does.  Remember what your mommy told you about stereotyping.

Thu, 09/02/2010 - 00:27 | 559019 eatthebanksters
eatthebanksters's picture

Tyler, its a good article but remember one thing, distressed conditions are not representative of a market.  When a bank makes money by foreclosing on a property (Ie. Chase buys Wamu's assets at a big discount at the request of the FDIC...additionally the FDIC gives Chase some type of loss guarantee...Chase can actually foreclose on the property annd auction it or shortsale it at a firesale price which is still more than they paid for it...and the FDIC covers all or a large protion opf the difference in the selling price to the original not price) they want to sell the properties as fast as possible and they don't give shit about how it affects values in the normal market.  So, at the end of the day, any property sold under distress situations WITH motivation for profit by the bank should be excluded from surveys as to what normal market conditions...and this is not the new normal. 

Thu, 09/02/2010 - 01:23 | 559065 Village Idiot
Village Idiot's picture

So, at the end of the day, any property sold under distress situations WITH motivation for profit by the bank should be excluded from surveys as to what normal market conditions...and this is not the new normal. 

Not disputing your comments.  If I hear you correctly, though, what you are saying is that "those" properties shouldn't be included when determining value for a sale. In my world, mortgage finance, it's all about the lowest common denominator on the block.  No adjustment made for distress sale, period. 

In fact, this could be construed as somewhat of a new normal as compared to the last downturn in my region of the country. At almost every point in the last downturn, appraisers were able to differentiate between a "distressed sale" and a "market sale."  If there were sufficient non-distressed sales to draw from, the appraiser could essentially ignore the distressed sale.  Not this time.  At least not in my region.  Lowest common denominator, period.  Does fly in the face of "what a buyer is willing to pay." But I guess that's part of what got this market in trouble.

Thu, 09/02/2010 - 01:32 | 559086 LostWages
LostWages's picture

I agree VI.  In my city (Las Vegas), 28% of our closed sales this year are Short Sales and 45% are REO's.  With 73% of the closed sales distressed, this is our new normal.

While sellers of properties not distressed can argue their property should be worth a little more, the banks who are financing the loans (or rather FHA) need to look at the sale price as a potential future distressed property as in a worst case scenario, it will be.

Thu, 09/02/2010 - 01:57 | 559103 Village Idiot
Village Idiot's picture

@LostWages

Is that "burning man" on the avatar? If so, ever been?

Thu, 09/02/2010 - 03:02 | 559132 TwitFilter
TwitFilter's picture

If what you are saying were true, then a few people could pool money and make a deal with BofA, Wells, and Chase to buy all of Riverside.  The fact of the matter is that banks have an interest to keep property values in shit hole distressed areas as high as possible.  Do you know how CDOs are engineered and priced?  There are hundreds of billions of dollars in CDOs with slices of Riverside, Merced, Los Vegas, and Miami mortgages.  When the value of a shit hole area declines, a contagion occurs.  This is how we got into this mess.

Thu, 09/02/2010 - 09:54 | 559413 Village Idiot
Village Idiot's picture

I'm not sure if you are referring to my post, but if so, I am simply commenting on the reality of value assessment for the purpose of securing RE financing.  Appraisers are required to use the lowest comparable sale, distressed, or otherwise.  As to the comment about what got us in to this mess, I was repeating the old adage "A property is worth what someone is willing to pay for it."  And that is, in part, what got the US RE market in trouble.  People paid too much. 

As far as the need/desire to prop up home prices? You could make a list, two pages long. 

Thu, 09/02/2010 - 00:37 | 559033 Implicit simplicit
Implicit simplicit's picture

It is not just the brokers. I have never witnessed such a propped up market. It is ironic that the goverment's and the Fed's "categorical imperitive" is to keep the RE market up with any and every tool possible. They know that if the truth be told, it would be game over. Yet Kant's categorical imperitive was meant to be

Everything has either a price or a dignity. Whatever has a price can be replaced by something else as its equivalent; on the other hand, whatever is above all price, and therefore admits of no equivalent, has a dignity. But that which constitutes the condition under which alone something can be an end in itself does not have mere relative worth, i.e., price, but an intrinsic worth, i.e., a dignity. (p. 53, italics in original).

A phrase quoted by Kant, which is used to summarize the counter-utilitarian nature of his moral philosophy, is Fiat justitia, pereat mundus, ("Let justice be done, though the world perish"), which he translates loosely as "Let justice reign even if all the rascals in the world should perish from it". This appears in his 1795 Perpetual Peace (Zum ewigen Frieden. Ein philosophischer Entwurf.), Appendix 1.[44][45][46]moral.

The great scientist/philospher would have been disgusted with our goverment.

 

 

Thu, 09/02/2010 - 03:15 | 559138 TwitFilter
TwitFilter's picture

The situation reminds me of a Wiley Cayote and RoadRunner cartoon.  Wiley is addicted to RoadRunner and, with zero dignity, will do anything to get a bite.  Wiley is torn-up and finds himself suspended in mid-air after running off a cliff trying to catch RoadRunner.  He then holds up a sign which says "Genius" before he falls to the earth.

This is the state of the world now - suspended in mid-air.

Thu, 09/02/2010 - 00:46 | 559043 Defenestrate
Defenestrate's picture

In the suburbs of Chicago, I know of a house that listed as sold for $675k. An agent told me it sold for $650. I'm assuming there was some seller-lends-the-buyer thing going on.

The other part of this scam that works for the realtors is that it inflates the local list-to-sale ratio, giving prospective buyers the impression that houses are selling closer to asking price than they actually are. (Never mind that the final list price is reached after two years of  even though the MLS will report the market time as 90 days.)

Thu, 09/02/2010 - 00:47 | 559046 azengrcat
azengrcat's picture

Realtors Lying?  What has the world come too...

Thu, 09/02/2010 - 11:11 | 559611 RockyRacoon
RockyRacoon's picture

A real estate agent is a REALTOR® when he or she becomes a member of the NATIONAL ASSOCIATION OF REALTORS®

All real estate agents and brokers do NOT belong to the NAR.  Since you misused the term, I'll assume you don't know a lot about the real estate business.  I'll also assume that you are not a real estate agent or broker.  Cute comment but your asinine is showing.


Thu, 09/02/2010 - 00:49 | 559047 The Professor
The Professor's picture

There are many ways that the data are manipulated. Entering MLS sales prices is done by the listing agent (the one with the sign in the yard, or the foreclosure listing office). It definitely benefits realtors to have higher prices in this field, and it's possible that some forclosure offices would have their agents do this.

Appraisers also typically have MLS access, and definitely use this data to form new appraisals. Most appraisers use the sales price of comparable properties ("comps"), proximity to the subject house, and square footage as the only inputs.

I know that inflating the sales price in MLS is not done on most traditional sales. I don't have as much experience with foreclosures, but it may occur on an agent-by-agent or office-by-office basis.

During my condo flipping experiences, we would have it written into the contract that the other agent would omit the sales price completely from MLS after the sale, so that the next buyer would not see how much less we paid for it and have a better negotiating position. If counted as a zero by a poorly coded data scraping program, this practice would skew the numbers the other way. 

During the closing, the contract sales price is recorded with the county. It then becomes public record. It looks like this value is what Case-Shiller uses.

As other posters have mentioned, this actual contract price can be manipulated. A higher sales price can mask that a seller gives cash to the buyer for "downpayment". 

So all of the numbers are manipulated, but it isn't some huge behind the scenes conspiracy in my experience.

Thu, 09/02/2010 - 00:59 | 559058 Spalding_Smailes
Spalding_Smailes's picture

Is this Angelo Mozilo ?

Thu, 09/02/2010 - 01:17 | 559072 Village Idiot
Village Idiot's picture

Look at that avatars skin color.  What do you think?

Thu, 09/02/2010 - 08:56 | 559308 Gromit
Gromit's picture

Thanks for sharing.

You claim to have  conspired with a realtor with the intent to suppress information in order to deceive your buyer.

I agree it's not particularly unusual - just unusual to see a confession.

But perhaps it's all in your imagination anyway.

Thu, 09/02/2010 - 10:52 | 559575 The Professor
The Professor's picture

A field was left blank in a private database (along with a lot of other fields). This would  require a buyer to type in an entire URL into order to look up prices with county filings. This was openly agreed upon by all parties. Dramatize much?

If it makes you feel better, at lunch we would go plant base charges on Building 7 and then send our submersible to open that second super-secret leaking well in the gulf.

Thu, 09/02/2010 - 12:58 | 559907 Gromit
Gromit's picture

Exactly. You conspired with the realtor to violate his agreement with his local MLS to report full and truthful information for your stated purpose of defrauding the buyer by intentionally concealing information.

Slimy dealing like this leads to public mistrust of realtors as many have posted here.

Thu, 09/02/2010 - 00:55 | 559049 Spalding_Smailes
Spalding_Smailes's picture
Canada's Housing Bubble ??An Accident Waiting to Happen

Today, all major cities in Canada are experiencing housing price increases that are beyond their historic $50K–$80K range. They are all over $100,000 in inflation-adjusted dollars. Canada is experiencing, for the first time in the last 30 years, a synchronized housing bubble across the six largest residential real estate markets in Canada.

The worst nine bubble cities in the U.S. saw a maximum price increase of 199% between January 1987 and June 2006. In a little under 10 years, housing prices in those cities had nearly tripled. In Canada, Calgary experienced similar growth, with housing prices soaring by 198% between
1997 and 2007.

 

http://www.policyalternatives.ca/publications/reports/canadas-housing-bubble

 

Bwaaahaaaawaaahaa Is this really still going on .....?

http://www.royallepage.ca/jumplisting/listingJumpBack.do?RLPf=0&language=en&brandId=rlp&source=2&feed=3&listingId=176643

Thu, 09/02/2010 - 02:52 | 559127 Howard_Beale
Howard_Beale's picture

Yes it is. Because the CMHC has been easy money. And Toronto and surrounding areas are still "hot". It won't end well but I have a friend that is a realtor in Toronto that can't believe what is happening there. But at least he is making a penny since he is an honest man and generally a pretty lousy salesman.

The CMHC has allowed the ponzi to grow there and it won't end well.....nuff said.

Thu, 09/02/2010 - 03:11 | 559137 pitz
pitz's picture

Yup.  If Canadians think they're being bent over and abused by Canadian banks, wait till they start raising spreads, in competition with each other, due to the deteriorating collateral quality that underlies the Canadian housing market.

Because the CMHC basically will pick up any/all defaulted mortgages (anything that's remotely 'at risk' is CMHC or NHA insured), the banks can basically name their own price for money, without worrying that the bank might suffer a financial loss.

Even if commodities become immensely valuable in the future, and Canadians experience full employment and rising wages, the albatross of these loans will persist, and make gains for most Canadians elusive.  The main beneficiaries:  bank shareholders.

Thu, 09/02/2010 - 01:00 | 559060 been there done that
been there done that's picture

Here is a house near me that was and is listed on zillow as being worth 307,000 but which just sold at 260,000.

Now they do have the sale price listed as just sold, yet the graph shows a bullet at the price of 307,000.

I was wondering what was going on.

http://www.zillow.com/homedetails/9020-Dayton-Ave-N-Seattle-WA-98103/486...

 

Thu, 09/02/2010 - 01:22 | 559074 LostWages
LostWages's picture

Zillow isn't worth a shit.  They take an average of similar size houses in the area without factoring anything.

Thu, 09/02/2010 - 12:32 | 559816 LauraB
LauraB's picture

The $307K is just a made up number of what zillow thinks the house should be worth based on the prices of the surrounding houses.  Don't depend on this number.  In my experience the zestimate is usually inflated. 

 

Thu, 09/02/2010 - 01:23 | 559076 Hang The Fed
Hang The Fed's picture

If the housing bubble was essentially an aneurysm for the economy, then this will, if true, probably be a secondary stroke that renders the patient completely brain-dead.  I will say that I'm not entirely surprised...in the day and age of PPT, algorithmic orgies, printing presses running into oblivion, and every damn person who is ostensibly accountable doing a double-palms-up as a "satisfactory" answer whenever they're asked where the beef is actually located, I wouldn't be surprised if I suddenly began crapping gold bullion on the morning after a night of heavy drinking.

Thu, 09/02/2010 - 01:27 | 559079 ZackLo
ZackLo's picture

+10,000 for getting out at the top...

Thu, 09/02/2010 - 01:49 | 559095 redpill
redpill's picture

It's difficult to conclusively say they are inflating prices, because NAR doesn't entirely explain what all it captures with its survey; they allude that some foreclosure/REO sales are included, but certainly not all of them by any stretch.  The bottom line is that they don't know what they don't know.  If they are missing a substantial number of Foreclosure/REO transactions, those obviously tend to drag down prices anyway, so not having them in the mix will result in a higher median price.  To get the real answer, you need to use a data source that comprehensively provides the transactional deeds for the entire area.

Thu, 09/02/2010 - 02:02 | 559102 cranky-old-geezer
cranky-old-geezer's picture

They're simply not going to let all the real estate paper out there collapse in value.  Underlying home values can collapse, no problem, who cares, but keep the value of the real estate paper up.  That's what's important.

If value of the paper ever drops to reflect real home values, financial sector collapses overnight. So yes they're going to maintain the value of all that paper, and they don't care if it's completely fraudulent. 

As long as the value of that paper stays high the market can't recover.  Value of all that paper has to drop if anyone wants demand for the underlying assets (homes) to pick up.  But banks aren't going to let it drop.  No way.  If they did let it drop they'd be bankrupt.  The whole financial system would be bankrupt. So they'll keep carrying all that paper at arificially high values, ridiculously high values, and  fraudulently high vlaues, not that anyone cares about fraud these days.

This is how they'll keep the game going and act like everything is good when the actual physical market is collapsing.  It's a simple matter of how long they can keep the charade going.

Some Fed governor wants banks to start renting out foreclosed homes just to get someone living in them and hopefully keep values from dropping further so they can keep their paper values up, keep the game going, and avoid bankruptcy ...a little while longer.

And they're doing the same thing with stocks, bonds, every kind of financial paper out there.

 

Thu, 09/02/2010 - 11:13 | 559107 Village Idiot
Village Idiot's picture

It will be interesting to see how all of what you just described, which is completely accurate IMO, meshes with what is supposed to be a normal housing price cycle.

 

Edit: "With what could have been a normal housing market cycle."  rhetorical

Thu, 09/02/2010 - 02:12 | 559110 pitz
pitz's picture

The 'manipulation' is actually causing additional houses to be built, on the basis of false price signals, which further exacerbates the problem, continuing the feedback loop of lower actual prices.

Sooner or later, people who don't own houses, will be able to buy them in the actual cash market, for practically nothing.   

Thu, 09/02/2010 - 04:52 | 559160 dan22
Thu, 09/02/2010 - 05:56 | 559174 chistletoe
chistletoe's picture

I recently bought a house in my neighborhood.

Zillow listed it at $223,000, the county tax assessor agreed,

but they did not say anything about peeling paint, broken furnace

and water heater, dilapidated steps, leaking pipes, frayed wiring, vacant for 8 years.

I paid $70,000 and ten ounces of gold.

They recorded it as $82 and I let them get away with that,

but I immediately got the county assessor to lower the assessment to my price.

It took Zillow six weeks to catch up but when they did,

the whole neighborhood tanked.

Thu, 09/02/2010 - 07:06 | 559195 LeBalance
LeBalance's picture

went for alloidal title, eh? (by using specie as part of the purchase price).

Thu, 09/02/2010 - 07:03 | 559194 Charlie Brown
Charlie Brown's picture

This is such a profoundly important story -- it's a shame we don't have real journalists anymore in the US. The implications here from these kinds of games are horribly bad.

On the other hand, there is an opportunity, here: your local county recorder has the ACTUAL sale prices, and they can (and do) verify those numbers, generally for a small fee. One could, in theory, pay a collection of small fees for a representative sample covering a specific area, and see how badly skewed the "official" numbers actually are.

You could, from this, create absolute havoc in the CDO & swap market...

...among other things.

Thu, 09/02/2010 - 07:07 | 559196 LeBalance
LeBalance's picture

...exactly!

Clothes?

Emperor?

Go for it!

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