Realtors in colorado buying houses to keep up demand?

Question

I've recently learned that realtors in southwest colorado are buying houses to keep up demand. I understand that they have been told to do so by their superiors in the real estate business (perhaps NAR?). Isn't this a conflict of interest? If they buy the houses to keep demand high doesn't that violate their fiduciary duty to other buyers? Isn't this the same as a stock broker buying stock in a company just to keep the price up until he (or she) suckers other people to buy the stock? Is this happening in your area? What do you think of this?

Answer 1

fiduciary duty yea right, I am sure only buy if it is a deal and yes this is undercutting the market as with flippers. You want to learn about more lies, Check out this web site it tell how they made the bubble and it was not done honestly.

http://www.breakingbubble.com/index.htm

Answer 2

Don't you think this is a little far-fetched? Where is the money coming from? We all don't make that much. NAR can't tell us what to do. We are independant contractors. Did it occur to you that the market just may be strong? It still is in many places. Personally. I'm tired of hearing how bad the market is. I have doubled my business in the last half of 2006. My projections for the first quarter of 2007 are 12% above last year. Where is all this nonsense coming from? I'm looking at no vacation this year again. Only long weekends.

Answer 3

Lies, Danged Lies, and Housing Numbers
By Seth Jayson
December 19, 2006
To build a house, you need an old saw
What are the three kinds of untruth? Lies, danged lies, and statistics.

I've never liked that bit of folk wisdom, as it implies -- in a kind of Luddite, I-don't-trust-no-funkified-city-cypherin'-nohow fashion -- that statistics are bad. In fact, it's the misuse of statistical evidence and the misinterpretation of it that's the problem.

Here endeth that sermon.

Getting it backwards
Here beginneth the next. It concerns the so-called "housing rebound" that's being widely discussed today based on the Census Bureau's Housing Start, which reportedly shows a 6.7% rise from October to November.

Incredibly, I see some news sources out there trying to spin this as good news. Let's see, prices falling, inventories already at all-time highs, and an uptick in construction is good?

This kind of analysis is puddle-deep -- though unsurprising in today's short-attention-span media space. The newsmakers out there know (because they've trained us) that we Americans like to look at everything as if it's a horse race. "What movie earned the most at the box office?" "What website is getting the most hits on its illegally posted, copyright-violating video clips?"

"Are we building more houses? Yeah? Great. There's your rebound!"

Seems the headline writers out there need to head back to Econ 101 and review the little chapter on supply, demand, and prices. (Hint: Too much supply makes prices plummet like a nail gun dropped from the third story of a new McMansion.)

Then, they might ponder whether or not that would be good for already-beaten building stocks like Centex (NYSE: CTX), Pulte (NYSE: PHM), KB Home (NYSE: KBH), Hovnanian (NYSE: HOV), and D.R. Horton (NYSE: DHI), or related mortgage outfits like Countrywide Financial (NYSE: CFC).

Oh, and keep in mind that we heard the exact same story last year around this time, and that turned out to be a great big nothing.

Much ado about nothing?
And while those biz reporters and editors are reviewing their basic econ -- don't hold your breath, folks -- they might want to review the segment on margins of error. As I've previously discussed in this virtual space, these housing numbers (latest edition here) often come with margins of error that are, in fact, greater than the reported change, meaning that it's actually not possible to say that the change is real. In this case, the 6.7% "increase" is subject to a 10.1% margin of error. That means it's not really an increase at all.

And it gets even worse
Best of all, the increase-that's-not-an-increase already overstates things, because it's not a comparison to last year's November number, but this year's October. To my mind, that makes it much less meaningful -- as it would if I were looking at any company's financials.

What's the alternate truth here? Compared to the November 2005 housing tally, the 2006 shows a 25.5% drop -- and that's subject only to a 5.8% margin of error, so you can bank on at least a 20%-ish pullback.

Foolish bottom line
There are a couple of lessons here, though they're not new to anyone who's read my thoughts on this industry. The first is this: You can't trust the headlines on this space. Our nation has too much invested in the fairy tale of rapidly expanding housing "equity" to let go of it easily, and too many of the business reporters out there in the U.S. -- or their outsourced, foreign-based doppelgangers -- are simply churning out regurgitative fodder.

The truth is out there, but you need to dig, and think, to find it.

The second is this: Housing is still sick, and a lot of us think it will be a long time before it gets better. History shows that bubbles like ours don't always "pop" in easily recognized -- or even discernable -- ways. If, and especially when, people tell you it's safe to jump back into the water, remember the flood of houses still waiting to sell. Keep your hands on your wallets, Fools.

Answer 4

Highly unlikely. Where would the $$$ come from to do this? Just because values are sliding in some parts of the country does NOT mean that the market is collapsing as a whole. Truth is, it's holding up fine in most of the country.