Bubble-Sitting: ‘Roulette Or Sound Reasoning?’
Readers suggested this article as a weekend topic. “Convinced home prices will fall? So are a lot of other Americans. Some, known as bubble sitters, are acting on their conviction. They’re cashing out by selling their homes and renting, figuring they’ll return to the market after prices have fallen.”
“Bubble sitters also include those people who have never owned a home and are waiting to take the plunge, along with folks who are relocating and holding on to their cash until the market in their new hometown softens.”
“Many experts have labeled the majority of U.S. housing markets either overvalued or severely overvalued, but is it wise to count on prices falling?”
One reader says, “There is a first time for everything, and I believe this will be the first time postwar prices go down. It’s also true that home prices in San Diego have fallen during the period since this time last year.”
“If the Feds stop raising rates, the bond market could anticipate a lack of resolve to fight inflation, resulting in runaway long-term interest rates and a need for Bernanke or his successor to crash the economy into a wall in order to prevent a total meltdown. It happened in 1980-1982, but I realize this time is different.”
“Real estate always goes up in the long run, blah, blah, blah… But so do stocks, right? What happened, then, from 1929 through 1945? Lots of folks learned what Keynes meant when he said, ‘In the long run, we are all dead,’ as the protracted market downturn outlasted their staying power.”
“Something similar happened in the Japanese real estate market between 1990 and 2006, a sixteen year period of bubble unraveling. So the question is not whether housing prices go up *eventually*, but soon enough for it to make sense for an owner (especially a new buyer) to endure a protracted period of falling prices.”
Another replied, “16 years and the last of the baby boomers are retired or ‘dead.’ The ones who rented and SAVED the extra median $800.00 a month (difference between median rent and mortgage) will retire o.k. The ones whose houses finally get up to the price that they paid will be wishing they had not thrown that money away.”
I think that this is an interesting topic.
If a homeowner bought at a reasonable valuation, with a sustainable mortgage and did not excessively cash-out refi, they should not sell their primary residence to time the housing market.
If they have spare RE, they should definitely sell in my book.
I am not in that boat. I sold to support my career with mobility. In the process of the moves, there came a time when I decided that we just couldn’t pull the trigger on another So Cal purchase.
So I am sitting on some cash and renting for 29% of the cost of owning.
I am also hopeful that I will buy at least 2 pieces of RE during the downturn. 1 for a primary residence, the second a small multi-unit rental nearby. That will allow me to sell the spare RE at the top of the next CA bubble, which we have experienced periodically for the last 40 years.
Somebody has got to do the shearing of the sheeple and it might as well be me at the top of the next cycle.
One note, I failed to make was the rental must be cashflow positive and the primary residence must be no more than 10-15% of an equivalent rental.
Oops again 10-15% of a premium over an equivalent rental.
Sunsetbeach guy:
I sold a 4-unit in 2002 because I thought prices had peaked. The rent multiplier was crazy, the buyer had a huge negative. Of course they made out great because of the appreciation. This property is in coastal Los Angeles county. Prices would have to drop below 2001 levels for you to find positive cash flow in an area you would want to buy. My suggestion is to forget the investment property and concentrate on a house to live in. BYW, the funds put into a REIT fund since 2002 have done as well, with dividends (positive cash flow), no management (I could spend hours telling about tenant problems), no repairs (again, big headaches), and no liability (I had $2 million liability insurance and still worried about tenants targeting several hundred thousand in equity– there are so many ways to get sued) If you have never been a landlord, do not do it, please.
SL,
In my efforts to save the clueless around me these past few that is exactly what I suggested. Sell your real estate. And if you find you miss it, buy some reits
I was a landlord and it’s not fun . It’s true that your always afraid of being sued . I remember one time bee’s attacked my peach tree and my tenant had a bee allergy.In fact ,he told me later that he would of died had he got a bee sting . Than I thought of my long standing wasps nest near the back door of the same rental.
When the water heater goes out ,you have to be there within hours to fix it ,(not I will get to it in a week ).
You have to treat renters better than you would treat yourself and perform faster than you would for yourself .As least that’s the way I always felt ,maybe in part because I didn’t want to be sued .
I had a three unit in Las Vegas once and I found out later that one tenant moved in a big snake and another tenant right next door to him moved in a pit bull ,(can you imagine ).Those units were so strange in that you would have to replace the toilets every six month to a year .
If a tenant moves out expect that you have to repaint ,clean the carpet etc. ,sometimes replace window treatments .
I had a tenant destroy the closets once as well as my back landscaping on a house rental.
Maybe the bloggers are good renters ,but not all renters are a day at the beach .You have to have money for repairs etc. How many of the flippers are going to be good landlords ?
Why buy into RIETS now? In 2002, yes, but not now.
If you own your house free and clear, don’t want the hassle of moving and are otherwise not encumbered financially, then it may be more prudent to just hang on.
Maybe there are areas where it does make financial sense to own rather than rent. Can’t think of any of those off the top of my head though.
“…but soon enough for it to make sense for an owner (especially a new buyer) to endure a protracted period of falling prices.”
To me, this line of thinking assumes that the re-setting of all the ARMs and HELOCs out there will not have much effect. I think the opposite, that the rate adjustments will precipate a relative collapse in prices both directly and because the panicky sales will screw the comps.
I live in a custom home neighborhood in Phx. Last summer most homes in our neighborhood were selling anywhere from $750K on up. A house on the street behind us recently went into foreclosure, the owners dropped the price to $500K and sold. I agree with Chip that the fire sales from foreclosures and strapped homeowners is going to screw the comps. What now happens to the guy on the next street over that paid $825?
What now happens to the guy on the next street over that paid $825?
Nothing, until he goes to sell. At that point, he prepares to take a bath.
I think every area is going to get some foreclosures . The appraiser needs more than one comp usually ,so if you have other higher sales it might not bring it down. If you have alot of foreclosures in one neighborhood ,than your toast .Sometimes lenders won’t lend in tracts that have to many foreclosures .
‘Bubble sitting has contributed to softening in housing markets, especially in new homes. Builders have reported slowing sales and they’re offering numerous incentives, rebates and discounts in order to move inventory. Just this week, builder Toll Brothers announced they expected sales to decline substantially for the year. ‘With many potential buyers on the sidelines right now, we believe there is growing pent-up demand that will come into the market once buyer sentiment improves,’ said CEO Robert Toll.’
So it’s the hesitant buyers that are responsible, not the massive over-building? I wish CNN would ask why has buying a home become a crapshoot in so many cities. It’s is a gamble enough to sign up for decades of interest payments without having speculators running around making markets unstable.
I guess we have to factor in the agendas for each “publisher”. While I have no factual knowledge of CNN’s agenda, I can take a guess that like most mainstream media “publishers” they are in the bull camp on housing. Most of us here on this blog are admitted bears on housing and so as “publishers” (or would that be you Ben?) our agenda is based on what we see as the points that support being a bubble sitter. To me those points are:
1. The rent to own costs favor renting right now and will until PITI for owning revert to levels equal to rent + 10% or so.
2. Affordability using fixed 30 year mortgages is at all time lows and fiscally conservative borrowers will be risk averse and not buy/borrow at these prices.
3. Housing appreciation has turned the corner and is heading down. Seasoned buyers will avoid trying to catch a falling knife and wait until the asset in question is out of favor.
4. The sheer number of recent buyers who used “sophisticated loans” in the marketplace coupled with the looming rate resets for those loans is a reasonable predictor of future foreclosures and discounts for the patient buyer.
5. The track record for supporting many of the RE “buy now” points is so poor that any data or arguments coming from that camp must be diligently questioned and never ever taken at face value.
There are more, but this is a start.
Well spoken! With terms like “bubble sitters” they are just calling us names and framing it like we are just being stubborn. Which is fine because we call them names all the time, but “bubble sitters” in the title makes be doubt I’m about to read a piece of worthwhile journalism.
It does get on my nerves though if a buyer is ever faulted for not buying, as the worth of individual decision making in the free market has been discredited.
Likewise I try to avoid calling people idiots when they do buy at the market peak, because maybe they really really really want to own vs. rent. But that it is a questionable investment decision I think can be logically argued.
I think bubble sitters is kind of cute. I’m proud to be a bubble sitter, I am sitting out the bubble, so it is a good description, and maybe in later years bubble sitter will come to mean a person with good financial sense who can accurately predict how the economy will go.
ditto! What everyone doesn’t like is those of us prudent people who have the patience and common sense not to jump off the bridge with everyone else.
“Bubble sitter” is a great term and we should embrace it just because it begins with the word “bubble”.
‘With many potential buyers on the sidelines right now, we believe there is growing pent-up demand that will come into the market once buyer sentiment improves,’
There is no pent up demand. The buyers who would otherwise be purchasing now, already preponed their purchases and bought a house in the last 2-3 years.
homeownership rates are still close to historic highs. i agree, there is not a high level of pent up demand.
we’re still in a phase where recent homebuyers were “borrowed from the future”… IE, a lot of people bought during the past few years who otherwise would have waited if not for the fear of “being priced out forever.”
There was a typo in the article. What it should have said was “spent up demand.”
Here in Seattle I have noticed many shiny new subdivisions full of 650K “luxury homes” in what are otherwise “bad areas of town”. I became curious and started driving around.
When I drove thru I became aware that I was the only Caucasian and I started wondering if these folks were all just well off (I make a 6 figure income over twice what the average Seattlite makes and I COULD NOT afford to buy a 650K house) or had been “conned” into buying a house.
My conclusion was these people had been conned. In front of each house was an older “junkie” car. The lawns were starting to get scruffy and things were lying around. There were still a lot of units “for sale” and it was kind of dead. But all remaining inventory was in the mid-600K range.
I think “the industry” ran out of buyers and is trying desperately to sell their remaining inventory of unsold homes with suicide loans to people who can’t really afford them. Of course these folks are probably given the smooth as silk sale pitch and jump at the opportunity.
So…pent up demand…I don’t think so. Everyone who could buy did so already. Everyone who couldn’t buy but were too naive to realize it…were recruited and promptly saddled with a mortgage they could never hope to repay.’
BUT “THE SALE” WAS MADE!!
This is the biggest shark feeding frenzy….ever.
I like driving through a neighborhood like the one you describe and seeing the bed sheets over the windows, instead of window coverings, because the new homeowner can’t afford the window coverings that go with his/her fancy new house.
Same thing happened in Greenfield, Ca. Entire subdivision sold to Mexicans. Closing helpers had to explain about paying property taxes and insurance to these people in Spanish because they couldn’t speak English and had only snuck into Ca within the last year. Lender was loaning money for taxes and insurance. Suicide loans.Some signed with an X. This tract should start coming back in about a year.
Another reason to learn the English language!
A great point, worth repeating. These exotic loans have stolen future buyers from the marketplace, and instead of waiting until they can actually afford to buy, they have entered the market early with massive debt but a “lower monthly payment” thanks to exotic loans.
There will be fewer buyers in the next few years, not more.
Also keep in mind that for those folks who buy now and wait for their houses to return to their purchase value could have used that money to invest in different and more profitable ways during that waiting time.
One common argument by new homeowners goes something like
“I worry a lot more about paying my mortgage than how much my house is worth.”
Take that logic to a car dealership and see what kind of deal you get.
A penny saved:
I’m a 60 yr old man, just finished building my own house…took 3 yrs, here in Eagle River, Wi. I built a 1400 sq ft retirement home..log interior and exterior. I bought an acre with water acess, for 10k in 2003, been on the market for 4 yrs at 20 k. I spent 45k on materials and all the rest was my labor, except fot the septic system, which had to be installed by a code compliant plumber. So, I tied up 50k, all in cash…its paid for. Got my final assesment last week…178,700. Its the only way to go. Ya, it took 3 yrs part time, but its paid for and no matter where the market goes..all I can loose is my labor. As a note, I havent purchased a new car since 1972. I have all the toys, but buy them because of other people selling what they can’t afford at give away prices. If you take the jones’ out of the living equation and are prepared to work hard, you can retire easily at 62…..I’m not cheap, I just make better buying decisions.
I love the way you think, terry. Most things you can buy second-hand at a song. There will be tons of crap for sale real soon. I’m waiting to get a bigger screen LCD TV for chump change once the turds hit the fan housing!
Sorry Death_spiral - NO ONE is going to give up their sacred TV. They spend over 40 hours per week with that puppy absorbing much wisdom and ’soft landing - we’re different’ crap. Even the Bedouins in the desert have a tv!
I just cancelled cable last month. Haven’t missed it. Haven’t turned on the TV for at least the last five months. Been doing a lot of reading, and youtube.com when I need some lowbrow humor.
I get my internet from my cable company. Until I got roommates, I didn’t even have cable, even though I work for the cable company!!! My roommates bring the TV; I bring the employee-discount. Win-win.
I am 57 years old, sold my home last year, have over $1 million in T-bills, no debt, and have never owned a television in my life.
I hope to copy your success (adjusted for inflation, of course). I have 29years to go. When did you start?
Words of wisdom! Thanks for the input!!!
Terrfic story! Enjoy, Enjoy, Enjoy.
Bravo Terry! I am 51 and hope to be able to do what you have shown is possible. Thank you for showing that patience is rewarded. 50% off the land price is a big win!
I also think that a lot more than toys will fall in price as this housing/credit bubble pops. I agree that there are/will be a lot of folks parting with their toys at a discount. I also think that much of the current retail pricing of new goods has been driven by the oversupply of cash from all of the housing ATM/HELOC activities over the last 5+ years. As that dries up prices overall will come down. IMHO.
Excellent, terry.
I’ve thought for a while now the affordable way to “buy” a home is to purchase some land and build the home yourself. Land prices might be in a little bit of a bubble, but much less so than completed homes. The amount of money people are currently willing to buy a completed structure for (wood, drywall, shingles, pipes, wires, nails, foundation, labor, etc.) is far more than what the structure cost to put up. Condos in various markets are a case in point; in those cases you are buying pretty much structure alone, yet their prices are currently very high.
I think “building your own home”, as some of my family members have done, is a natural safety valve against excessive home valuations, at least in areas where there is still land to build on. Some areas, say San Francisco or Orange County, have much less buildable land and so are prone to more extreme fluctuations in land valuations. This doesn’t validate the fluctuations - still they’re disconnected with affordability and rental equivalent fundamentals - but it causes the fluctuations to be more extreme.
Once case I don’t get is Florida. There’s actually quite a bit of buildable land in Florida. Take a look at what the homebuilders have done lately in Florida - bought huge tracts of land and built large housing developments on them. Despite the abundance of land in Florida, prices went to excessive levels. The same is true in places like Idaho and Arizona, and likely many other areas.
Around here land prices are in a worse bubble than housing, and the housing is bad enough, but I expect land will fall harder than housing.
I live in S. Fl, and I have heard the “we are out of land” or “they are not making any more land” speech so many times from crazy RE agents so many times I just have to laugh.
I live in the “hottest” neighborhood of West Palm that is not waterfront, and 2 blocks from my very much overpriced front door… Guess what? An EMPTY city block. An entire block, empty. This is about 10 blocks from the intercostal, and in a great location.
Out of land? Not in S. FL, at least not once your more then 2-3 blocks off the water.
Mike
Land prices are also way out of proportion. I Purchased a 1/3 acre beautiful lot in Sedona Arizona 4 years ago and the asking price for the lot next to mine is now up over 135% and the cost to build by three contractors different contractors has come in between $250.00 per SQ FT and $300.00 per SQ FT.
This is totally out of line when 3 years ago I was quoted $140.00 per SQ. Ft. I hope this industry gets a real dose of reality when they have to beg for business and we can dictate the fee we offer.
Great story Terry…I am waiting for the global economies to implode, so I can purchase a Russian bride at 50%-60%…Right now
they are in some what of a bubble.
You would buy a pre-owned 50% off Russian bride on Craigslist? Will she appreciate over the long term?
It all depends on what you can rent her for!
Of course your Russian mail-order bride will “appreciate” in the long term. When she gets her citizenship in five years, she’ll appreciate you handing over 50% of your assets in the divorce settlement.
No way…She said she loves me!!..She appreciates me.
She completes me.
All right…Im done…Sorry everyone
lol. Thanks for the laugh, you economist you.
Make sure you have her inspected for mold first!
Congratulations, Terry. How did you go about electrical? Was it already accessible from the lot?
I think he only gets electricity during lightning storms, but WTH!
Terry… great story. Makes me want to give that a try sometime.
i vacationed in eagle river as a child and loved it dearly. the lakes in the summer are fantastic. my parents have always wanted a lakeside house there.
Very Well Said !
I am renting 3 storage units and paying $500 total per month rent on two apartments (roommates in each). I do not “need” a house. My lifestyle is more conducive to owning a 24/hr guarded gated luxury condominium because I travel a lot (sometimes a year at a time, sometimes away for 3 years) as an engineering consultant. So I wait and save more money. I’ve been averse to putting all my investments in one area (inflation hedge or deflation hedge) since I learned from the previous real estate bubble in the 80s. is gold the next bubble? Platinum? Andy Warhol paintings? I don’t know, but I would not put more than 10% in metals and no more than 30% in government bonds (short term is better than long term for now). It always amazes me how greedy and ignorant (regarding market cycles) the general populace is. Someone’s loss on real estate the next 5 years is going to be my gain.
Greed and ignorance run rampant in all societies, but this last run up in real estate and the stubborn refusal to believe that there will be no fall out from it is simply stunning.
“Something similar happened in the Japanese real estate market between 1990 and 2006, a sixteen year period of bubble unraveling. So the question is not whether housing prices go up *eventually*, but soon enough for it to make sense for an owner (especially a new buyer) to endure a protracted period of falling prices.”
I don’t understand why Japanese are often used as an example in these types of discussions. We are talking about two completely different mind-sets when it comes to spending. We spend like crazy and they save. Also there were a lot of additional factors in play when the housing market crashed in Japan. A lot of questionable business ethics were taking place in both the construction and lending industry. This caused the housing market literally crashed in less than six months when some construction companies and lenders went bankrupt. Yet even with zero percent interest rate for the past few years the Japanese consumer has not returned in force. I spend a lot of time in both countries and it is ridiculous to compare what happened in Japan with our current bubble situation.
I disagree. There was a real estate mania there just like the one here in the US for the last several years. The 0% didn’t arrive in Japan until well after the RE bubble had started to burst. There’s no guarantee that we won’t be reducing rates dramatically here (again) in the coming years, in response to strong deflationary pressures. (Though MHO is inflation is at least as great a risk.)
It’s certainly not “ridiculous” to compare the RE bubbles in the two cultures. I know someone who made a ton of money in the years leading up to the bursting bubble in Japan, and lost it all in the ensuing downturn. In Japan, the same fundamental disconnects occured that eventually asserted itself in the form of falling real estate prices.
The lapses in ethics that you mention are occuring here, as well. If you believe the anecdotal evidence, you’ll conclude that appraisal fraud is on the rise (driven by competition in the lending industry and also by outright fraud). Among the reports of increases in NODs, are a dramatic rise in the “first-payment defaults”. To me, not even making a first payment on a loan is a sign of fraud. Real estate shills are still madly spinning their distorted stories about how good RE investment is, currently, despite the clear indicatications of a dramatic real estate slowdown across the country. Look at the spin coming from Gary Watts. It’s not unlike the broker/analysts that were madly pushing their tech clients’ stocks, even after the tech bubble had burst. Years later, it was common to look back and label that behavior as “fraud”.
I wouldn’t understate the possible existence of fraud in the US RE business right now. Usually fraud isn’t fully recognized until after the fallout from the fraud becomes widely known. Nobody seems to care about the fraud until they’re clearly losing money from it. As long as lots of people are making tons of money, we turn a blind eye.
I wonder if anyone here knows what the Nikkei Shimbun (newspaper) has been saying about the US bubble for the past couple of years. My wife shows me an article every other week, or so, describing the craziness of what has been going on.
(Nikkei => Nippon Keizai => Japanese Economy)
“We spend like crazy and they save.”
You are right — it is different here. The fact that Japanese households save money while Americans spend money they never earned like a bunch of drunken sailors explains why the popping real estate bubble will have a much more devastating effect on US household standard of living than the 1990s Japanese real estate crash had on the typical Japanese household.
Just one hour ago I heard a story about a friend’s neighbor who spent his equity gains down to $0 through the magic of home-equity cashout financing. Then he and his wife divorced, and he had to short sell his home and has moved into a mobile home.
Which reminds me: Are there any Wall Street real estate sector firms that specialize in trailer sales? Maybe Toll Brothers ought to consider a move into the luxury trailer sale arena, now that McMansions are sitting unoccupied and unsold. Because I think this will be a big growth area in the supply side of the US real estate market for the next several years.
Halliburton bought out that market just before Katrina hit.
Stucco - Warren Buffet made huge investments in “manufactured home” builders two or three years ago. I think you just explained why - I couldn’t figure it out at the time.
“A lot of questionable business ethics were taking place in both the construction and lending industry.”
You either don’t read enough on this blog, or you have a very short memory, because Ben has posted myriad articles on the subject of appraisal fraud and questionable lending practices involving extension of credit to customers who clearly will never be able to repay the loans they are allowed to take. So this is another dimension of the situation in the US real estate market post-2000 which is similar to the Japanese market pre-1990.
And as far as construction companies and lenders going bankrupt, give it another six months before you decide whether that could happen over here…
http://tinyurl.com/euy6g
Comparative Bubblology: Japan Bubble vs. US Bubble. Now that’s a seminar just waiting to happen. Too bad they don’t have a housing bubble blog for Japan, I betcha a lot of people there would be able to say some very informative things.
What will be the same is that real estate in either case will return to fundamentals. But while it happened in Japan in an orderly and slow process over 16 years, will that happen in the US? The difference I feel would be a abandonment of credit in the form of foreclosures and bankruptsies. Did that happen in Japan? What were the percentages of ARMs and other non-fixed loans? Also, was there a building craze in Japan at their bubble peak? Were lending standards as lax? Whereas the Japan central bank was giving money away the whole time, can the Fed do the same thing?
For me to agree the US will follow in Japan’s footsteps (an orderly real estate decline vs. a rapid one), the answers to these questions would have to be similar for both nations. Furthermore, there is now the difference of improved dissemination of information via the Internet today that will only enhance deflationary expectations, and thus the reluctance to buy.
Don’t forget I believe Japan went to 100 yr loans - so they are sort of like our option arms and stuff. But overall it will be worse here.
“Yet even with zero percent interest rate for the past few years the Japanese consumer has not returned in force.”
Don’t forget the demographic factor; the Japanese average age is much higher than ours right now. When you’re retired it doesn’t matter how cheap it is to borrow.
The biggest difference between the US and Japanese
pre-bubble-pop scenes is:
There is no secondary mortgage market in Japan.
People borrow mortgages mainly from the public
Housing Loan Corporation (mortgages subsidized by the government) and banks (i.e. portfolio lenders).
During the bubble, the lending wasn’t lax on the residential side. The Japanese bubble was largely driven by commercial
speculators. It was very easy for corporations to borrow money with land/property as collateral back then.
There was no 100% financing available.
Correct me if I’m wrong, but I don’t think one could
have borrowed even with 3-5% down. Back then it was customary for people to put down 20%, though a piggyback (e.g. an HLC loan with a bank loan) was available.
I don’t think ARMs was common, either.
(ARMs would have helped, though, since the interest rates
went down.)
There was no such thing as no doc or stated income
loans. (I don’t think 2-generational loans were available back then.) Of course, there was no such thing as Option ARM or
interest-only loans!
Foreclosures and b/ks carry a lot more stigma in
Japan than here. These are the very last resort (esp. back then.)
For our rentals in the US, we get many applicants
and prospects who have had b/ks and/or foreclosures. They don’t seem to be too ashamed of their financial disasters
and also they tend to blame their lenders or someone
else for losing their homes. (These people hardly put down anything and should have NEVER been given mortgages. They don’t realize that their lender owns the house and they’re RENTING it from the lender!)
What’s identical between the two bubbles is (almost) everybody thought the housing prices would keep going up and it was safe to invest in real estate.
Good info… Thank you.
“These people hardly put down anything and should have NEVER been given mortgages. They don’t realize that their lender owns the house and they’re RENTING it from the lender!”
Now that’s a really good point: no equity = no ownership.
Andy Warhol paintings are somewhat similar to the new housing developments:
Same crap, different color ……
Just kidding …..
I’ve already punished myself for posting this ….
I’m a bubble sitter. I divorced in 2000 after 20 years of trying to satisfy a mate. She didn’t share my vision of not having to work for wages until I dropped dead. I walked away with my state retirement money, $200 cash in my pocket and a truck with 200k miles. She walked away with the house I just finished building with my own hands. I looked at building or buying another house but I couldn’t believe how prices were shooting up. I opted to take over a house a coworker was giving up. The rent I pay makes me feel guilty of stealing. I’m able to put a couple of thousand extra dollars away each month by living here and I’m very comfortable. I can travel whenever I want to. No painting or lawnmowing. I have enough saved now to buy a small house with cash if I wanted to, and I can tell my boss what a dumb a$$ he is without caring if he cares. I’ll sit tight in my rental until the buying vs. renting formula changes. The american dream of owning a home is not all it’s cracked up to be (I’ve owned three).
Its amazing how many divorces stem from the 2 parties having a different take on how to handle/invest money .It sounds like your doing good after your divorce and now your free to live the way you want to .
I’m pleased to say my new mate DOES share my philosophy about money and life in general. I guess you just have to keep trying. I watched Jay Leno last night. They were at the Sturgis motorcycle rally and talked to some of the bikers. One old guy (like me) built a bike out of parts he found on the farm. He said it was a chick magnet. Every time he came around he had a new woman riding with him. He said “women are like basketballs, when they go flat you just get another one”.
I’m glad you picked yourself up, dusted yourself off and found a partner you’re happy with. I’m on my third husband and I must say “third time is a charm”. Life is too short to be unhappy in love. I’m also glad you were able to keep your retirement. I have a coworker that has to pay her x alimony and will also have to pay him part of HER retirement. I think the justice system in this regard is totally out of whack. Why should anyone else be able to take MY retirement? That blows!!!!
I’m on my third husband and I must say “third time is a charm”.
SO glad to hear that, Melody. I just recently went through a second divorce so with any luck, my “charm” is up next…
Maybe y’all should think a little longer about who you’re marrying… BEFORE you get married.
You’ve got my vote on that. To close the circle on post from ‘the econmist’ (above), I married a “Russian” (actually, from one the countries in the FSU). a girl I knew very well from my work. Huge mistake, that I’ve since paid for emotionally and financially. I’ll stay closer to home next time.
“Maybe y’all should think a little longer about who you’re marrying… BEFORE you get married.”
I once proposed, but got cold feet and rescinded the proposal. It was more immaturity on my part and not distrust of her. She’s a sweet woman and I loved her, still think of her. But now my net worth is very high. If I was divorced, I doubt if I would have a net worth as high as I do now. Okay, about $700,000.
“With many potential buyers on the sidelines right now, we believe there is growing pent-up demand that will come into the market once buyer sentiment improves,” said CEO Robert Toll.
He does not, however, think bubble sitting works. “It’s very hard to pick a bottom,” he said.
What a load of crap from the guy who sold at the top. What does he friggin’ care what happens now? This is all just Toll-booth p.r. for the stupid stockholders who will ride this gravy train all the way down the garbage chute. The jumbo-sized reic crap slinging centrifuge has given the whole economy an epic case of inventory constipation, soon to be followed by a heavy crap shellacing. If the masses of people in this country don’t de-head their collective anuses and start thinking for themselves soon we are in for a world of hurt. (rant off)
well said, mort! trouble recognizes talent.
the point of bubble-sitting is not to find the bottom, but to wait until you can find a reasonable value.
Definitely enjoying bubble-sitting. I timed the run-up well and then sold in Dec.
I’ve got $2.5M in inflation-indexed bonds. In 1-2 years, hopefully things will have finished cooling off and I’ll try to pick something up at foreclosre (or other firesale) for cash.
“Many experts have labeled the majority of U.S. housing markets either overvalued or severely overvalued, but is it wise to count on prices falling?”
The answer to this question is self-evident to anyone a few IQ points above “moron.”
First, most “experts” have shown how utterly clueless they are. The rest are bears.
Second, it’s intuitively obvious that any asset class which has grown out of all proportion to affordability and wages, is going to crash back to earth.
Third, as a Bubble Sitter, there’s great peace of mind right now to be sitting on a big pile of cash and appreciating investments, rather than be chewing my fingernails every night worrying that my overpriced house could be caught in a severe economic downdraft. When everyone else is tied in knots over their paper losses (for those who have owned for several years or more), and the FBs are having their pre-foreclosure/pre-bankruptcy panic and anxiety attacks, we’ll be biding our time, waiting for the fire sale.
“Bubble sitters also include those people who have never owned a home and are waiting to take the plunge…”
They make it sound like we’re all in this big conspiracy together. How about the fact that some so-called “bubble sitters” just simply can’t afford the ridiculous prices? I didn’t choose to sit this out, I was forced to.
Oh you poor thing… I have a little option-ARM you might be interested in… but better hurry, in September we’ll have to do a background check.
This whole notion of “bubble sitters” reminds me of the brief 2001 recession, when some government twit was whining about people “hoarding cash”. Hoarding? Please. As if it’s our duty to get rid of money that we OWN. I’ll do as I please with my own money, but thanks very much for the sermon, twit.
Apparently, nobody here is very troubled by the term.
They don’t like that, us just “bubble sitting” as we are.
Bubble sitter
Bubble sitter
Bubble sitter
Yeah, that has a nice ring to it I suppose.
Bubble sitter
Bubble sitter
Fear the bubble sitters. hehehehe
I am choosing to sit this one out. I have bought high and sold low before and it sucks big time. I will not buy until I can afford to.(under my means) Interest from my cash is *almost* paying my rent!
I’m sitting this one out as well - saving a lot of cash each month and enjoying my life by not worrying that the biggest purchase I’ll ever make is losing value every day and the 5-figure down payment I made is vanishing into thin air. Each week I’m feeling better and better about not having bought after getting married in ‘05. I’m prepared to wait at least a few more years.
oops - I meant to say 6-figure down payment….and if I had bought in ‘05 I estimate I would have lost at least 100K by now.
“I am choosing to sit this one out. I have bought high and sold low before and it sucks big time. I will not buy until I can afford to.(under my means) Interest from my cash is *almost* paying my rent! ”
Happened to me too. But we both learned from that one and prospered.
Building up houses in all the wrong places.
Looking for profit in too many spaces.
Searching their lies, looking for traces
of what I’m dreaming of .
Well, I was alone then, no appreciation in sight.
And I did everything I could to get me through the night.
Don’t know where it started or where it might end.
I turned to a Realtor®, and just like a friend.
Looking for $ in all the wrong places.
Looking for buyers in too many faces.
Searching their eyes, looking for traces
of what I’m dreaming of.
Hoping to find a GF and a buyer,
I’ll bless the day I discover
Another GF, looking for $!
LOL .Didn’t know you were a songwriter Mort . You must be talking about Texas flippers because I picture a bunch of cowboys singing this song .
I love this site!
I love your nickname!
Yours too. Although, we can’t really call you FV for short… It’s too close to FB. And if someone called me an FB, I’d be uptight for a bit.
I’m a bubble sitter. I sold my only residence for 9 times what I paid. I put all the profit with a financial advisor and I rent. It was a somewhat risky move in that it involves timing the market, but I would never otherwise have a way to have $500,000 free and clear for my retirement. I plan on never touching it until I retire and am saving for a down payment on a new apartment or house in case prices do go down.
I agree that Japan is not comparable to the US. My wife is Japanese and I’ve spent some time in Japan, but I am by no means an expert. One MAJOR difference in Japan is that there is an enormous cultural barrier against buying a “used” residence. They treat houses like we treat cars, it loses half its value as soon as you drive it off the lot, or in the case of a home, as soon as you move in. All homes are considered teardowns, basically. You can see how that would kill the market when the bubble popped. Average homeowners were not buying to invest, they were buying to live and got trapped by huge loans into homes with virtually no resale value.
There’s every chance of something like that happening in the US after the bubble bursts. I’m sure there are still people willing to buy old homes and lots in prime locations. That sort of discrimination against used property is most obvious in outer suburbs and in homes built before stricter construction codes were implemented.
Given that the US has seen a huge boom in houses built in the middle of nowhere and rushed homes with shoddy construction, people may well shy away from a big chunk of that housing stock in the future.
Hey, Thanks for the response on my post.
On the question of electrical, I contacted WPS and ordered temp power during building and at the same time ordered a final underground power and gas. In northren Wisconsin, I was able to do all my electrical work, including a temp power pole. Basic cook book wiring.., also, I did all my own plumbing, except for the septic system. The real work…hard labor, was laying the block and the building of the roof truses. If anyone is interested in building their own home, let me know. In most areas, you can do all the non code work yourself. Ask Ben for my email
P.S To heat and light this place 1400 sq ft, it only costs me about $150.00 per month..
‘Dean Baker, an economist and co-director of the Center for Economic and Policy Research, is a bubble sitter himself, having sold his home a couple of years ago. “It is a very bad time to buy. Prices are heading down,” he said.
Baker also predicts that the markets that have run up the most will suffer the worst turndowns. He compares it to the tech bubble when Nasdaq stocks rang up the biggest gains before the pop and fell the farthest from their highs after it.
Even though he did it himself, Baker says most people should not sell in anticipation of getting back into the market at a lower price.’
It strikes me as odd that Dean Baker, Douglas Duncan (chief economist for the Mortgage Bankers Association), and others who study real estate for a living have made the decision to cash out and rent until the bubble pricing is history, but then turn around and advise Joe Sixpack to buy. “Do as I say, not as I do…”
‘The colleague is moving from one New Jersey suburb to another with a more respected school system. He’s selling and renting. That way, he hopes, he can wait out the bubble and scoop up a property from a motivated seller at a big discount next year.
“He’s playing a bit of roulette,” says Jim Gillespie, CEO of Coldwell Banker, who doesn’t think even that scenario justifies bubble sitting. “Look at the history of prices in this country. [Postwar prices] have never gone down.”
“My advice is don’t do it,” Gillespie said. “If the Feds stop raising rates, mortgages will start to go down and prices will recover.”‘
This Realtor (TM) is just like the one in the old joke (Q. How do you know when a Realtor (TM) is telling a lie? A. You check whether his lips are moving.) The risks of renting versus owning are historically skewed in favor of renting at this point in time, as explained by recent articles in both the New York Times and the Financial Times of London. If, as he suggests, the Fed or some other governmental entity manages to somehow manipulate the market in order to drive prices still higher off an unaffordable base, the building industry will respond by continuing to add to the large existing supply glut, and the long-term costs to the US economy of a historical supply-demand imbalance will only increase from a record level. At the end of the day, home prices will have to adjust downwards in order to restore the fundamental balance between supply and demand, and whoever is a homeowner at this point in time loses the game of musical chairs.
Further, in the unlikely scenario offered by the Realtor (TM), a renter could get back in to the market, provided he was willing to pay a 50%+ premium for the pleasures of owning a home versus renting. On the other hand, if this time is like past real estate busts, then a new buyer could watch their net worth sink for five years or more into the future, while renters sit back and enjoy the pleasures of debt-free living.
Lots of bubble-sitting sellers are currently dumping their used homes on the SD market — over 200 listings dated 8/11/06 or later on ZipRealty. It looks like the owners are the ones playing roulette, in the Russian version of the game, hoping they can outlast the negative cash flow on their depreciating homes until a high rate of price inflation makes owning pencil out again. This strategy resulted in a very bad outcome for those in a similar situation in 1980 (the last time runaway inflation forced the Fed to snuff it out through a protracted period of interest rate hikes), but maybe this time is different…
what is the current divorce rate? Next to first time buyers , there must be a good number of divorced people looking for properties and waiting it out. Just a thought but a large enough I imagine..
I’m a bubble sitter since May 05 when I sold my Mission Viejo home in OC, Ca for 4 times what I paid for it in 1995. My wife, 2 kids and I rent a house now on a golf course 2 blocks from their school. We have no debt, $ 500 k in CD’s and waiting for home prices to get back down to reality. I sleep very well at night!
I lived in rentals most of my life (Air Force brat) and I’ve also owned three homes and to be honest, it isn’t all that different.
I’m renting a 1234sf townhone in Tuc AZ for $885/mo. Sale prices keep going up but rents are flat, they say its different here because everyone is moving to Arizona and we dont have that cold of winters! Right?
Coulda bought the unit I live in for $150K in ‘04 but decided against it, now Zillow says its worth $219K, did I miss out or what? I’ve always rented, never owned and was afraid to jump into a toxic ARM loan. Still bubble sitting here….:-(
OT.
Wow, and I thought some people over here could be cruel and callous. Check out SDCIA! They’re having a debate over evicting a single-mother with a 3-year-old child over $46! That’s forty-six dollars! Not hundreds of dollars, or thousands of dollars, nor even hundreds-of-thousands of dollars… FORTY-SIX dollars. Next time they give you any trouble, you take those heartless bastards to task!!!
I see lots of people talk about waiting out the bubble.. One thing to remember. Its not those of us waiting who are bleeding every month. I am living in a great condo, with a shockingly low rent payment (in relation to the “value” of the condo). I can wait a LONG time for this to unwind. How about those people buring 1000’s a month in negative cashflow? Think they can wait as long?
Don’t be in a hurry to buy, let it get as bad as possible, and don’t jump in too early. Yes, there are good deals now. Wait until people start to walk away from homes with 100s of thousands invested. That’s when the really good deals start (ie, bought this home last year for 675, put down 200K, now its worth 400 and you need to sell it).
I have said it before, but it seems worth repeating — one of the sure signs that it is “time to buy” will be when everyone is talking about what a risky investment real estate is, and how only fools would consider buying.