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I was on Editor’s Roundtable Friday talking about home prices and the sluggish economy among other things. One of the callers we talked to was a man who had purchased a home right about at the peak of prices for local houses. He said he did it as part of a frenzy, an unbearable pressure to get in on the market before it was too late.
Now he’s making his payments but not in the best of shape.
What created that feeling that you just had to buy? What was it that led so many people to feel like they were missing out on this supposed chance of a lifetime? It was ever-present. Between 2002 and 2006 San Diegans were teeming with angst to purchase properties. There were a lot of factors, no doubt.
Watching friends make more money on their homes than they did with their jobs was certainly one.
Watching friends in the industry make more money than they ever had was certainly another.
But a big factor was the memes — the simple statements by people speaking authoritatively that became facts in the public consciousness. They were the platitudes of reality. And you could supposedly count on them.
You might have heard a few: Home prices here will never go down because there’s a shortage of homes. Buying a home is always a good decision. If you can buy, you should.
That last one should have lost a little of its meaning when it became clear that everyone could buy a home for virtually however much they wanted.
As the housing boom started to peter out, two years ago, in 2006, many were still pushing the greatness of purchasing a home — whether you listened to your Realtor, who was undoubtedly stocked with factoids sent down from the National Association of Realtors about why buying a house was still a good idea, or read most of the papers, where the same NAR economists were quoted with authoritative and comforting validation of a decision to buy. Then there were government officials like the county assessor, who pulled statistics from everywhere he could to provide Realtors with memes about why the climate was clearly favorable to homebuyers.
And, also in media. You could turn on even sober discussions like Editor’s Roundtable, and find some of the effort to sustain the frenzy. There was an Editor’s Roundtable, in fact, two years ago that featured my colleague, Andrew Donohue, Bob Kittle, the editorial page editor of the Union-Tribune and Carl Larsen, that paper’s real estate editor.
The host that week, Dwane Brown, asked what a person should do if they’re thinking of buying a home. Remember this was April 2006. Looking back, it’s pretty clear the bubble was bursting. But then, there was still uncertainty for some. It was the point when the evidence was pretty clear that things were changing but some heavy persuading could close a sale.
Each of the editors had a chance to answer the question: What would you advise someone to do who is trying to decide about buying a home?
Larsen went with real estate fundamentals, a safe choice:
Larsen: Being familiar with the comps, trying to make an offer that’s ah…being pre-approved for a loan would be a way of going. Knowing what the price is and keeping abreast of the prices because they are rapidly changing and they are easily checked on the internet now then come in with a valid offer with a professional real estate agent.
Donohue went with an informed opinion based the evidence that was coming out every day that this market was in for a change:
Donohue: I certainly wouldn’t buy. I would sort of wait it out. I think there’s still resounding questions on whether or not we have hit sort of that soft landing that everybody’s sort of hoping for and watching or whether there is a bubble.
And Kittle, well, Kittle went with what he knew:
Kittle: The sooner you buy the better. Real estate in San Diego is a tremendous asset and the longer you wait, Andrew, the more it’s going to cost you. That’s just the way it is here.
Yes, Andrew, that’s just the way it is here.
The truth is, like the homeowner who called the show Friday, if you bought in 2006 and can still make the payments on your mortgage, you can make it through just fine. That doesn’t mean it is a tremendous asset. But throngs of people who were buying in 2006 shouldn’t have been. They could neither afford the agreements they were signing, nor were they aware of the risks they were taking should their home decline in value.
People like Kittle told them, authoritatively, not to worry. That, in fact, the more they waited, the more it was going to cost them.
And the best thing to avoid costs, of course, is to take on massive debt. Right?