‘Homeowners Are Thrilled, But Can’t Justify It’
Some readers think homeowners may be fooling themselves about their windfall. “I’d like a poll of homeowners (not the ones on this blog - but your neighbors, co-workers, families, etc.). I’d like to know how many of those who own homes (particularly those who didn’t buy during the bubble years) really, honestly, truly believe their homes are suddenly worth 2, 3, 4, 5, etc. times what it was worth in 2000 or so.”
“My findings are that all homeowners are thrilled about it, but not one can really and truly justify it.”
A reply, “I can justify why my house worth 50%-75% more than in 1999. In 1999, it was a 2-2, 8 room, 2000sf 1935 English Tudor brick with a 1980s remodel. In 2000, it was redone to a 4-3-2 half bath, 12 room, 3200 sf with a 2000 restoration to 1935 style, and modernized where appropriate.”
Another said, “Yes, they can justify it! ‘It’s the market, stupid! And housing is the only one that only goes up!’”
And another, “At least in my hood, I don’t think they care how much it is worth…Why ? They are not sellers….Its only important when you want or need to sell.”
To which was replied, “Or brag, show off, and one-up loser renters like myself. Yes, I’ve been exposed to this.”
From the previous post:
‘The numbers are just staggering,’ Skiera said of the recent run-up in prices. ‘This has become the new California.’
I’ve also heard Katrina costs, the old shortage myth, etc.
It’s not at all like California, this guy is trying to justify his ridiculous price. In Southern Palm Beach County, you can buy a beautiful 3,000 sq ft (under air) house, in a really nice neighborhood, less than 2 miles from the ocean, for way less than $800K. Still a lot of money, but what would a place like that cost in San Diego?
That story’s just bullshit. There’s no way that guy built that place for 300K.
In 2001, 3000 sq foot houses by major builders were going for around 150 - 175k in Boynton Beach.
here is a crazy comment. some guy in the sun-sentinel claimed to have build a house for 300,000 in 2001 and now wants to sell it for 3.2 million. in west boynton beach. are these people sick?
this is the mind set of florida, out of their mind.
In Elko, NV where there is currently a gold mining boom going on, overpriced homes are being sold to desperate mining family who had 1) no place to live; 2) living in cramped quarters such as a hotel room with kids; 3) suddenly making $75,000 a year driving haulpak truck at a mine and can finally afford to move into a home that fits ….they are all saying, “gee, I know when the gold boom is over in 20 years, I could get screwed but I will worry about it when it happens - last gold crash was around 1997 …tons of foreclosures on the market for several years.
Then there are my Reno neighbors who own homes, some wanting 2 - 3 times the reasonable value - “the market here is what it is so I can make lotsa money off my POS home …it’s an investment” …at least that is what they said 3 months ago …story is now changing to “how can YOU justify renting when there are so many great homes on the market in Reno/Sparks area?”
I hear the wailing and gnashing of teeth in the future in all points of population in Nevada!
We are in this position. We live in Las Vegas and have been offered jobs in Ely. We want to move there desperately, but we can’t find a house to rent. An apartment either. There is nothing. Our only choice would be to rent a room in the hotel where my husband will work…which is obviously not a viable option with three kids. I’ve been watching the market in Ely for three years, and I know that the houses are overpriced there. We don’t know what to do. We can afford a house there, a nice one, for about half what a crapbox here in Vegas would cost. By afford, I mean, easily make the payments on a traditional 30-year fixed-interest rate loan. But…will it lose value? Likely. Buying is our only option. What to do??? Advice is more than welcome.
If you’re in a hurry, lease some land and put a double-wide on it.
There should be no shortage of empty land around Ely. You might even find some property that already has electricity and water brought in. If there is really nothing available for rent, I would be surprised if there isn’t someone setting up to host manufactured housing.
In my experience they don’t care about justifying it. They just know in their hearts they are entitled to it. Their eyes glaze over and their lips twist into a sneer of superiority when you try to talk about economic trends or market ups and downs or anything like that. Their house, in their minds, is now worth a ton of money so shut-up and fork over the cash.
Bingo, Binko.
well said, in the Netherlands this applies just as well.
1000% appreciation in 15 years, why not? The last housing crash is one generation ago here, of course it can only go up. And of course, they understand that someone who did NOT buy in the last 10 years or so is a little bit envious about their deserved gains. Being priced out forever is the price to pay for being stupid and not taking the maximum mortgage, isn’t it?
This is the essence of “magical thinking”
“My findings are that all homeowners are thrilled about it, but not one can really and truly justify it.”
Well, I’m not! I *own* a home (no mortgage) in Sunnyvale, CA, and have 20 acres of land in Orange County FL (that we’ve had in the family for a long time.)
I hate this bubble. I would love it it values come down to earth. It just drives up my property taxes, and will cause a great deal of problems when the bubble bursts.
Since I like to actually live in my house, instead of using it as an ATM, I don’t care what it’s worth.
Binko is just typical bitter guy in this blog. I’m for one think price have gone crazy. I’m expecting many haircuts before this is over. This is true for all my neighbors that I talk to. No one think they are entitle to it but they will sell what ever market will fetch when the time comes. Wouldn’t you do the same thing? For those sellers think they can get last year price will soon realize those days are over. Not all owners gloat about their lucky timing.
Amen, brother.
I want houses to be like any other commodity…..the cheaper the better. If inflation of autos was running at the same pace as houses, just about everybody would be driving a moped.
“My findings are that all homeowners are thrilled about it”
They are, but at least here in the 5-cities area of the central coast, there is a twinge of wonderment and, yes, worry, that prices seem to have hit a steel cieling, and appear to be coming down a bit. Inventory is still piling up, slowly but surely (it’s currently about 50% more than it was in March of this year).
Is it going similar in SLO and the north county areas?
Yep, pretty much the same here in Santa Maria. Everything, including new homes, is about 10% below last summers peak price and moving very very slow.
The trouble with paper wealth is that city services are dwindling because the new royalty can’t pay servants or even afford to build servants quarters close enough to the McCastles.
the new royalty can’t pay servants or even afford to build servants quarters close enough to the McCastles.
You don’t know how close to the truth you are. I read a housing article which stated that the maximum square footage which can be maintained without help is 3000SF.
People can barely afford to put gaz in their SUV’s never mind pay for a groundskeeper and maid.
Lottsa idiot owners of McMansions losing the maintenance wars.
arroyogrande:
Our inventory in SLO has gone up as compared to North and South county, but our inventory (as measured by months-of-supply) is still the lowest on the Central Coast. I don’t have data to back this up, but I would guess that this may be typical, as building constraints are stricter here, and CalPoly provides a solid job base. I do think that prices will decline here, too, but that it will be driven less by an excess of supply in San Luis itself than by an excess in nearby communites that have had a lot of building (Santa Maria to the south, Atascadero and Paso to the north). As prices decline in these areas, I do not see how prices in San Luis can help but decline as well. And, according to SLO_bear’s posting of a few days ago, it sounds like price declines of 10-15% are already here in San Luis.
IMHO they think that the huge runup was better than the traditional 3-4% escalation per year and even if we are in a bubble I am better off than I would have been otherwise.
Of course the downside is known to all who post here. It is like seeing a skier swishing back and forth on the top of the mountain and saying,” man that is so cool.” Then you see the snow cracking around the skier and then the avalanche is coming to get you and you didn’t even get the thrill of the ride.
But rest assured, the ride is comin’.
The lady across the street says “of course its worth twice as much, you will just have a hard time selling”
With few exceptions, I really don’t know anyone (in AZ) who doesn’t believe their house is their golden egg. Even the most mild-mannered, honest, financially neutral, and not particularly greedy homeowner here believes this. They’ve been fed an endless stream of propaganda for years about the limited supply of land, that “everyone” wants to live here, that homes are the biggest and best investment they could ever make, that ownership makes you smart and better, etc. They’ve been TOLD their home is worth 5X what they paid…they don’t have any math or inclination to even debate that…it just….”is” to them. Renting seems like failure to many of them. Even with this market, I’ve heard (as we all have, in various areas) that AZ is “different”…that people are going to move here anyway, and well, heck, they might buy my house!
Here’s a question….does anybody foresee and expect that our highly mobile society will stop moving to the next better place, and hunker down and stay put? Moving is a way of life for many, and I thnk it has definitely had an effect.
What choice will most have but to stick or walk?
“Moving is a way of life for many”
In the past, the best move for the highly mobile was to rent…appreciation wasn’t high enough to cover Realtor commissions and closing costs, so someone who moved a lot would actually lose money by buying.
I foresee this happening again in the future.
I agree with that. I planned to settle down in the 90s but found that by fixing up the houses I was living in and reselling them (Va.) that I could make a living (even in just a normal housing market) and thus give up other work that I had grown tired of, plus hang out in Florida or California or travel outside the country in the fall and winter many years.
The tailwind got really nice from about 2002-2005. But now it looks like a headwind again so even though I have a little packet stashed away the conclusion is that I will have to build back up income from other sources and give up the idea of even buying again until income=expenses, because if I buy now I know I lose my mobility. And I’m OK with that, just trying to stay away from that ole’ bucket of stupid.
“just trying to stay away from that ole’ bucket of stupid.”
Love that line.
It’s a *box* of stupid and a bucket of money.
That’s what I thought, too. Thanks for researching this, Suzanne!
“Does anybody foresee and expect that our highly mobile society will stop moving to the next better place, and hunker down and stay put? Moving is a way of life for many, and I thnk it has definitely had an effect.”
OF COURSE IT IS! The congress has given married homeowners a $500,000 TAX FREE GIFT on capital gains every 2 years, not to mention subsidizing interest payments with the interest deduction!
I am so pissed at myself. I spent the last 7 years working hard on my business, and because of that blind obsession, didn’t really notice the immense nature of the housing bubble until 2005, even though I thought we were in a bubble in 2000.
I am a saver, an entrepreneur, a renter in the TOP tax bracket, and a LOSER!!! F***!!! What really pisses me off is listening to some friggin smug moron genius that sold his house in CA 2-1/2 years ago and pocketed $400K tax free, then purchased in Arizona and is now looking to do it again. &*@^%##! Gawd I’m pissed right now.
Look at it this way. People who make money that easily through luck rarely hold onto it. In the spring of 1999, I kid you not, I was making 10-15K per day every day daytrading that ridiculous bubble market. I’d do stupid s**t like buy 5000 shares of CNET and get 150 points on it. It didn’t seem like real money so I gave a lot of it away and pissed away the rest. Now, 7 years later, I wish I had it back, at least the part I pissed away.
You’re right tx. Some of the people I know refi’d, levered up, and bought even more homes, thinking in a couple yrs they’d retire on their winnings. Poor smug bastards!
I walked away from this mrkt screaming bloody bubble but none of my peers listened. Instead, they cashed out their 201-ks, signed up for RE courses, and jumped into the mrkt w/out any parachute to stop the fall, innocent and naked as the day they were born.
Amen, sister! I wish I had just a penny for every damn dime I thought I earned trading in my pajamas.
I am a saver, an entrepreneur, a renter in the TOP tax bracket, and a LOSER!!!
Nonsense.
The first time I took the entrepreneur route, I thought I would make a ton of money. Along the way, I found that I really really liked building a business.
When I left my first business, a woman who was an accountant came over to hug me and thank me for creating jobs for about 60 people to put food on the table, if only for a few years.
I cannot tell you how much that hug meant to me. It also helped me to hear a calling.
So now I’m building a business, and all that money-by-way-of-housing stuff seems like a waste of time and energy. Life is just too short.
Wonderful attitude. Thank you for your insight. I am very thankful for what I have, good health most importantly, and I have always been somewhat of a minimalist. I just don’t want to be eating cat food in my old age. I have many, many happy customers that appreciate what I do.
Damn it, Fred! First off, you’re not a LOSER! Everything you said about how you approach your life says you’re a good guy and you’ve done very well. And I bet you sleep at night. What are the chances that “moron/genius” eats Rolaids and Ambian like candy?
Really, life is too short to compare another’s chance and random fortune/success to your own unique way of living your life.
Gratitude, my friend, gratitude. You’re luckier than most.
good health most importantly
That’s all that matters, man.
I lost my house, kids, biz, and $400k in my divorce.
While I was an athlete in my early years, I had let myself go. So I went back to the gym.
5 years in the weight room and I’m ripped.
Still broke, but I feel great.
I look at the frazzled 50YO fatf*cks in their 3-piece suits honking on a cell with their guts hanging down over their belts and I just laugh.
Some things in this life can’t be bought.
As another poster noted-Life is WAY TOO SHORT.
Fred –
You have really nailed the reason all these homeowner giveaway programs are screwing up our national economy. Anyone who invested in something of productive value over the last several years is probably kicking themselves that they did not just join the home investing bandwagon and spend the balance of their time surfing the Calfifornia waves.
Really, though, the waves aren’t even that great out here.
Cortez Bank…bring a jetski to tow you, though.
http://tinyurl.com/msxdo
Virtually everyone who makes money through luck, as opposed to skill, pisses it away.
Why?
Because they don’t have any perspective on how hard it was to make that kind of money in the first place, and what it took to get there.
I’m in exactly the same boat as you, and it hurts, but you’re in the TOP bracket (to use your terminology.) You really can’t be “hurting” that much.
“I am a saver, an entrepreneur, a renter in the TOP tax bracket, and a LOSER!”
Yeah, I *can* see how that can be frustrating…36% (federal) + 9% (state) + FICA + Medicare + CA SDI = almost not worth making that extra buck when you could be goofing off with family and friends. Talk about a disincentive to work!
I predict in the next few years you will be a little more pleased that you haven’t leveraged yourself to the hilt in order to buy toys.
Except if the government does any kind of bailout…*then* I expect you will be *really* mad…as will I.
Fred, don’t be too hard on yourself. There’s three kinds of people in situations like this. Those that don’t know any better, think it’s going to go of forever and wind up losing most, if not all, of the gains. The second group knows better, but thinks it’s smart enough to ride the wave and sell everything just before the fall. This group, too, usually gets nailed.
You, my friend, are in the last group, those who plug away and inevitably do well over time. Don’t worry about the other guy, worry about yourself. And from what I hear the “smug moron” in Arizona is getting spanked as we speak.
Thank you all for your comments! I appreciate them very much. Pitty party over. Thanks again. Peace to all of you.
Take a look at this Fred; I bet it makes your day; it did mine.
http://shopping.news-journalonline.com/ROP/ads.aspx?advid=405282
That’s a 30% drop in price or 90k! Plus Horton covers closing costs, they include washer, dryer, and a bloody refrigerator. Its a sign of things to come; builders are getting desperate.
Fred, a.k.a. Nancy,
Sounds like the hand-holders in here have had their say, now it’s time for a Sammy-style swift kick in the ass. Yep, we’ve just gone through a long period of lunacy where it seemed like the old wisdom got turned upside down and the most undeserving idiots reveled in their effortless gains. That, my friend, was untenable. Now the other shoe is about to drop, much like it did during the Bubble.com implosion. For those of us who didn’t let our sense depart from us, or play in a rigged game, or buy into the mass popular deslusions going on around us, our time is coming around at last. So kindly spare me the pissing and moaning over your Princess-and-a-pea size problems.
Yeah. Today has been a good day, closing a chapter in the ole book-of-life lessons. No more pissing and moaning.
Fred,
Sorry for all the unsolicited advice (perhaps undeserved, after yesterday’s “dogpile” slam), but I seriously suggest you read “Fooled by Randomness” by Nicholas Nassim Taleb, in order to gain valuable perspective on the situation in which you find yourself. Therein you will discover an anecdote about a well-heeled New Yorker who is blind to his own success because he incessantly compares his own successes his even-more-successful neighbors, which makes him feel like a failure.
Above all, have faith in yourself — if you are doing something of productive value for yourself and your fellow men, then you eventually will not merely reap the intrinsic rewards of your efforts, but you will likely also realize financial rewards. Good luck!
I will be taking your advice. Thank you.
BTW, hopefully you noticed the dogpile thing was my attempt at some humor, not a slam. No disrespect here.
They’ve been fed an endless stream of propaganda
In the finest tradition of Joseph Gobbels BTW.
Just plug in the NAR as the Nazi’s and Dave Lereah as Joe.
It’s the perfect analogy.
I live in the the BayArea in an old, stable neighborhood; people have grown up here. It’s common to borrow against a home’s equity to upgrade the home or add an inlaw unit in theback, pay down debt, and upgrade lifestyle: HDTV and Truck/SUV. IN one case, help pay for the long-term heatlh care of an ill spouse.
We opened a home equity line of credit with our home “just in case”. The bank (BOA) sent us a charge card. The credit is that loose.
I’ve been renting in the Northern Virginia/Washington DC area since 2002 when I moved out here for my first job out of graduate school. I’ve been sitting on the sidelines and watching crappy homes skyrocket from ~200K to > ~500K in 3 years or so. All the while I’ve had colleagues smugly say I better buy now before it goes even higher. I’ve declined with the arguement homes are decoupled from average salaries - if incomes have not grown ~2x in 3 years, then who is buying up these homes? And how can they afford them? I’ve watched colleagues and friends stretch more and more to buy places they can’t really afford - even on combined >$150K salaries. They’re in debt up to their heads, eating peanut butter and jelly sandwiches every day.
Me? I am happy renting a 1000 sq ft apartment for ~1500 in an excellent area literally right next to a blue line metro station. I’m 5 minutes away from Washington DC, and a 20 min reverse commute to work (the traffic into DC is at a standstill while I am driving 70 mph laughing at the idiots who purchased overpriced McMansions 40 miles out of town). I take all the money I would have needed for a downpayment, commission, taxes, etc and are investing it with an average 7% return year after year. I take 3 weeks of vacation every year abroad.
I do want to own a home for the privacy and opportunity to make it my own - but I’ll wait till the market returns to sanity. At this point I’ll probably end up buy it cash without needed a mortgage.
Nice post, but what do you have against PB&J? I happen to really like it with good bread and preserves.
Just don’t buy them at Panera Bread. Pretty pricey way to get PB&J.
How about PB&S? I just love having my peanut butter and sausage links on an english muffin. Gives me something to look forward to on the weekends.
Hey, I still eat Kraft Macaroni & Cheese, grilled cheese sandwiches, and even cornbread & beans. Even some of those little cans of Vienna Sausages on occasion. And no, I don’t live with my gap-toothed, cousin-marryin’ kinfolk in a doublewide on a Superfund site. I’ve also been out of college for a few years. I just happen to like simple, tasty meals.
I’m with ya. Red beans and rice, baby. With some sausage thrown in.
Spam sandwiches rock!
Amen, cut quarter-inch thick.
“Spam”
What, do y’all live in Hawaii or something?
Not many college students I knew ate mac and cheese. Starbucks, Paneras, and Jambas on the credit card.
* The Original Tommy’s Chili-Cheese Burgers
* Pizza
* Beer
* Elbow macaroni + Denison’s Chili con carne + shredded cheese
* Beer
* Beer
Official Original Tommy’s fanatic here. Gosh, I love that chili goo.
Where are investing your money to get an average 7% return year after year?
Amaranth
How many years-worth of gains do you need to average in to cancel last week’s 65% loss?
LOL. Funny funny funny.
Its certainly not real estate.
One guy I know bought at the top with an ARM but he should have the resources to get over it. The rest think of their homes as a place to live. One guy moved for school reasons and is renting now and trying to sell the old place.
Folks I work with make a pretty good income for the housing prices in the area that we live in.
Don’t sell their smug self agrandizing opions of their situation short. Residential Properties: 83.465m
Mortgaged Properties: 50.570m
w/Fixed Rate Instrument: 37.541m
More at: http://www.census.gov/hhes/www/r…es/ tab1_1a.html
Median Value of non-mortgaged properties: $96,038
http://www.census.gov/hhes/www/r…es/ tab2_11.html
Median Value of mortgaged properties: $139,102
http://www.census.gov/hhes/www/r…es/ tab2_10.html
The distribution seems to put disproportionate mortgage exposure in the properties most likely to see the largest declines. The people who saw 3x, 4x or in my case 5x “appreciation” aren’t gloating. Some bought in the freakin’ 70’s before inflation. Some bought in the 90’s at the bottom of the last market cycle. These people are not the enemy. 30 million have no mortgage. 40 million are fixed rate HOMEowners. They didn’t bubble prices, they didn’t pop the bubble and yet they are still going to suffer. I’m not “thrilled.” Don’t mistake these people showing the same disbelief for some kind of self congratulation. These are the people who are going to be asked to fix the problem and they are not going to be in a giving mood when somebody tells them they are merely lucky and undeserving and the solution is to make them less wealthy. This is not a segment of the population to piss off especially when they’ll already be a tad miffed at their golden years turned to lead.
Yes, but many I talk to are truly homeowners. My folks, for example, who’ve had their house paid off for years (bought in the late 70s). Regardless of when someone bought, the current value tag is too high.
My parents can’t really justify the madness, but they are of the “thrilled” camp because - well I guess who the hell wouldn’t be? I’m sure they have no inkling that they may be asked to help clean up this mess at some point.
So, no, they had nothing to do with creating the bubble. But, yes, they are fairly happy about it and feel values will sustain themselves at current levels and beyond.
I am one of those who have a 30 year FIXED and paid 20% down in Mar 04. I knew when I bought that prices were too high but I also have paid down my HELOC (originally at 4.5% now 8.0%) to where it will be paid off by end of year. All my “RE” friends thought I was crazy for using my own money. I am now in a solid position to rent the home and cover my costs should I need to move to another location. I also take comfort in knowing every month an extra $580 per month of the house is mine. Over the long term my house will provide me a profit but during the whole time I live in it I take great pleasure in planting trees, bushes and watching my yard grow. It is only 8 minutes to work and wouldn’t move out to cash out and have to go back to renting a place I do not care about. For some that is great but for me I take comfort in the work I do to make it nice. I will plan on keeping this house for at least 15 more years which should be long enough to ride out any cycles. Maybe I will sell near the peak of the next bubble.
Robert - If I am left holding the bag for this lunacy, I will start a revolt. Seriously. Anyone else here for it?
Revolt!
To clarify, they won’t suffer because they had unrealized gains, and their house price declines to a reasonable value. We’ll (I bought in ‘99) suffer through the wrenching readjustment that the economy will go through. Just look at all of the misallocation of resources caused by the bubble: a gazillion new real estate agents, lots of “luxury condos” that will either sit empty or be sold at a loss, and all that granite for countertops. Everyone will wish that they sold last year, but at least I’ve got a fixed rate mortgage that I can afford.
One sibling believes that their residence will only continue to appreciate in value even though the price has almost tripled since it was purchased a few years ago.
My other sibling thinks that there is no freaking way that prices can sustain themselves.
Spouse’s siblings all believe that they have won the lottery with their newly found equity increases. One just recently purchased a place with no thought or research into the local (sinking) market and sees no reason to believe that their home won’t create some equity for them.
One friend has finally started to notice that there are lots of places for sale and that prices have stalled. They think that their house has twice the equity that it really has, based on something stated to them by a realtor about a year ago. They think that they could ride things out even though their mortgage will be adjusting sometime soon and the credit cards are maxed out. Renting is out of the question.
Parents are laughing about the ‘paper gain’, but are spending more liberally as though it might be there to stay.
I’m hearing more people mentioning when RE comes up that they ‘bought in a good neighborhood, so prices will hold steady.” Even in the face of all the negative y-o-y news here in SD, many still think they will be immune to a downturn because of buying in a newer or popular development.
Very few people I know are starting to clue in, but it is slowly happening compared to 2 years ago.
And I’ve got 200K shares of a stock that has doubled in the past month. Big deal. The average daily volume is less than a quarter of my position and I can’t monetize it even if I wanted to. I just can’t stand this BS that you’re some kind of genius for buying some shitshack and being in the right place at the right time.
Hear hear!
In the past I tried to discuss the AZ housing market with some co-workers, but have had to give it up recently. To a person, those that are homeowners believe they are entitled to the ‘100-400% plus’ appreciation in 3 years and anyone who tries to tell them different is either a moron or a cheat and a thief. When you try to bring up fundamentals they don’t care or they’ll throw out comments like “Arizona housing was very undervalued prior to this big runup so we’re just now getting to fair value” or start reciting the “thousands of people are moving here daily and they have to live somewhere so the prices will hold until next summer then take off again” mantra. Heck, sometimes it almost seems like a joke for these folks to ask me about my thoughts on the housing market so they can deride my responses. I gave up and just smile and move along nowadays.
Homes are worth more now because you can bribe some loser to buy your house if the value goes down. The mortgage companies will be glad to help you do it too. You can’t lose.
Everyone I’ve “polled” in the last few years would answer a resounding “yes” they truly feel their house is worth (!!!) the “2, 3, 4, 5, etc. times what it was worth in 2000 or so.” Which of course makes them real estate moguls, and me (a renter) an idiot.
What is hilarious is the sound of crickets you hear when you poll the same audience as to wheter they could afford their home at todays prices with a tradtional 30y fixed loan. The silence becomes really deafening when you ask them if they personally know of *anyone* who could afford such prices.
What is hilarious is the sound of crickets you hear when you poll the same audience as to wheter they could afford their home at todays prices with a tradtional 30y fixed loan. The silence becomes really deafening when you ask them if they personally know of *anyone* who could afford such prices.
Yeah, I get that, too. Then it prompts me to re-ask the question about how these prices can be justified. To which many then reply, “Dunno…I’m just glad my house is worth so much.”
I’ve had an ongoing debate with a woman at work about house prices. She totally justifies them (though simply by saying “that’s what the market value is!”). I cited her an example recently of a home that sold for $88,000 in 2002 and is now up for sale for $225,000 (only improvements being windows and some flooring in the entryway and dining room). I asked her to please explain that to me. All she could say is that she couldn’t believe it sold for $88,000 in 2002. Doesn’t even touch on the current whacked price (because she thinks it’s legit).
She then goes on to give me information on an upcoming seminar at a local Holiday Inn on buying real estate on any salary. She says, “It’s a free seminar - this guy says that ANYone can buy - you should go so you can finally get a house!” I felt like slapping her. I just said, “Thanks, but I’ll wait until prices drop.” Her reply, “They’re not going to drop, you’re kidding yourself.”
We’ll see…
Even with all my ongoing talk about the RE market, my younger sister and her boyfriend have teamed up with a buddy to buy a $500,000 McMansion in Corona, CA, just outside the OC in the inland empire. They are planning to “fix it up” and resell for some huge imaginary profit. My sister is a bartender two nights a week and goes to college - her boyfriend does construction and they both live almost rent free at my family’s house. We aren’t talking suave investors here - $1000 is a big chunk of change to my sister. I just listened to her go on and on about Travertine and granite countertops with my mouth literally hanging open. Luckily I had had a few beers and really love my sister - so I decided to risk making her mad and gave her the truth about the current market and what a stupid trap they have gotten themselves into. I made her promise not to sink a dime or any of her credit into her boyfriend’s sham deal. Hopefully she’ll listen.
You need to do an intervention on your sister. Seriously.
She could get hosed, big time. Particularly since boyfriends tend to become ex-boyfriends and she could be holding on to a bag of stupid.
My sister is actually pretty street smart - it sounds like it is all her boyfriend’s money and credit going into this. She’s just along for the ride - or the long plunge into debt anyway.
It actually gets worse - I just went over to their house to visit. He was going on and on about the new house, which it turns out they bought for $575,000 way out in Corona near the I-15 freeway - the worst traffic nightmare in the world. He kept telling me how the house would be worth $750,000 by next year and how they were going to be quitting construction on other people’s houses (his livlihood btw) to put in a pool, stone work, granite, etc. in their own house. He kept bragging about the huge garage where he could keep his “toys” and then let slip that they signed an agreement not to sell for a year. So basically they have to hold onto this monstrosity for at least one summer in an area that gets over 100 degrees frequently. Of course no one thought about utility costs for a 3500 square foot house and apparently they plan to fund their new lifestyles and improvements on loans against the $750,000 that the house will be worth next year. I’am sure they are in the ugliest of suicide loans or else they would have bought long before. I’am totally dumbfounded. I remember just a couple months ago, my sister complaining about paying his part of the rent ($250) to my grandmother all the time because he never had any money and was constantly blowing any money he had as soon as he got it. This is going to be ugly. Thank god my sister doesn’t have her life on the line and I will be sure to keep it that way. It’s a waste of breath to convince him how stupid this is.
Do you know for SURE that she hasn’t signed anything?
I’am pretty certain. When I finished with my long rant about what a bad idea this house was and made her promise not to sink her money and credit into it - she said “well his money is my money”. Ummm…no its not. They aren’t married. She didn’t argue my points very hard either. I’ve talked about the RE market with her so ofter (my husband and I dodged a $500,000 anchor over the summer that my dumbass uncle RE agent was trying to sell us on) that she knows. I’am sure she hopes it works out for them. But I know her - she’s protected herself and will walk when it gets ugly. I told my husband earlier today that I would call this week to confirm - and if I find out she is involved - the boyfriend is going to get a special delivery kick in the cojones (literally) from me.
I know many 20-something deadbeats who are listening to 18-month old advice and are thinking there’s still money to be made in RE. Blissful ignorance will turn into deep sorrow without intervention from rational people. At any rate, make sure you have a nice pair of steel-toed boots for a good kicking.
Tell me about it. Unfortunately my sister is the twenty something and he is in his early thirties, old enough to know better in my book. But he is an idiot based on his track record - ie. holding on and investing in a crappy mobile home his family owed that he was certain would be a gold mine. Yeah maybe if you cleaned it. Sorry - a little bitter tonight. He’s a moron with a decent looking face that my totally cute, smart sister is going to be sunk by.
Oh, I get angry too when my friends are involved with dumb people. A good friend of my wife and I left a “boring” man with a stable job for a late RE dreamer who also happens to be moronic with a decent looking face. What really got me was that he was a meth user - therefore, irresponsible with money, but also irresponsible with his health, his choices, and every other aspect of life that drugs impact, including his relationship with my friend. And one more thing, he’s the type that refers to himself as being from “the OC” when he really just lives in a crappy part of Fullerton.
As long as your sister doesn’t have a lot of money or her credit on the line here, it might be a good experience:
* Experience with fixing up houses, budgeting, running tradesmen, etc. is always beneficial (if frustrating).
* She will learn that nothing is a sure thing, and that real estate doesn’t “always go up” (a very valuable lesson IMHO).
* She will learn if this guy is a keeper or not by how he handles the stress…and learn if they are a good match by how she handles the stress.
Again, assuming she doesn’t have anything in her name and has no big chunk of change on the line, I only see good in the situation.
Talk about ignorance and denial!
should’ve slapped her
> poll the same audience as to wheter they could afford their home at todays prices with a tradtional 30y fixed loan
Thank you for that question. I’ll use when appropriate.
During the internet bubble in the “silicon valley” long term renters like myself, even in rent controlled SF, where I lived suffered. Renters on low or fixed incomes were evicted or faced unaffordable rent increases. That’s when I decided to buy a home: To have stable housing costs as I age and eventually retire on a fixed income.
There will always be boom and bust cycles and it’s along way to retirement. Odds are a bubble will happen again before I retire. Owning a home reduces risk and uncertainty when planning for retirement.
BTW, rents went down but the overall rates are still high and growth companies like Google and Yahoo have taken over from Netscape which replaced SGI which replaced Apple which replaced HP and etc and etc.
I don’t know anyone who is worried about price declines. Yes, it sucks to some extent, but no one I know is in jeopardy of being out on the street. This huge debacle befalling FB’s is way overblown. The relatives and friends I talk to don’t even mention housing prices. Maybe it is demographic(?).
Your insight is astounding. You must be correct. Within weeks this temporary glitch will revert back to the new paradigm of constantly skyrocketing real estate values which will never end. In light of your unique and intimate knowledge of the market you should immediately invest in more real estate. Lots of it. ALL of it. At any price and in any location, because it will only go up in value. Sshhhh! Don’t tell anyone else about your special secret. You are a genius.
Just because you find housing “so expensive” doesn’t mean most people do. Perhaps you are running with the wrong crowd. Some people in my circle own multiple homes.
Is that a$$ clown Casey in your circle of friends.
Yeah stupid, always hang with rich people, they have such great personalities. (snickers)
Wealthy people don’t really care about “house prices”. It is a minor part of their economic picture. I know all bubbleheads are just dreaming of people crying about house prices, but the fact is that most homeowners don’t give it much thought.
Not dreaming of people crying. Just wondering what the general public really thinks. Why do you always have to add things like, “wealthy people” and “people in my circle” etc.? You must have very low self-esteem to go with alleged very high net worth.
What’s wrong, cupcake- Did I touch a nerve? You are just another ‘ten-dollar millionaire’ who needs to masturbate your ego to reassure yourself what a genius you are. If you were really that sure of yourself or that wealthy you wouldn’t be posting here, you ass-pilot. As for me, I do have a little money, but that doesn’t mean that I have to be stupid with it.
“Just because you find housing “so expensive” doesn’t mean most people do.” If you can, pull your head out of your anus and don’t quote me for things that I didn’t write. The next house that I buy (I’ve owned and sold several) won’t be in the upswing or peak of an obvious bubble. It sounds like you’re a little sensitive on that topic too, hmmmm genius?!? In response to your misquote, I’ve got a news flash for you Einstein- most people DO find housing too expensive and thats why inventories are soaring as sales decrease across the country. You really ought to get out more often if this is news to you. Why don’t YOU try running with a different crowd- or is that what you are trying to do by posting here? Is this the extent of your socialization? Your stunted world-view tends to indicate that this might be the case. Go buy a few more houses, Brainiac. Soon you will own the world.
Sounds like I hit a nerve, beer guy. You should get out more and you will find, much to your disappointment, that most people are not hand-wringing over house prices.
Wow. Good come-back. Now I’m all traumatized. How much has your net worth increased in the last 20 minutes? Buy anymore property in a downward-trending market lately?
There is always money to be made. You wouldn’t know it though from all the whining crybabies in this echo-chamber. Keep renting. Who cares? You people endlessly debate and discuss the same s#@t, day after day, month after month. Big yawn. Just make sure the rent check arrives by the 5th.
Vain (appropriate) said:
“Thanks jackass. Just because you find housing “so expensive” doesn’t mean most people do.”
Um, just because YOU find housing “NOT so expensive” doesn’t mean most people do. This should be fairly obvious to anyone with any sense whatsoever. You seem like you’d fit in well with the antagonist group of rich snobs at the polo grounds in Pretty Woman. Mind you, “most people” liked that movie - and “most people” found those characters to be revolting human beings bound for hell.
“Most people” cannot afford a 200k house, let alone the 500k ones in SoCal.
70% of the population owns.
70% of all statistics are made up on the spot.
The funny thing is most wealthy people I know with multiple properties have been selling not buying. Most are left with only one or two now (home and a *real* vacation one).
Posted By Va
70% of the population owns.
Hey Mr. BlueBlood of that 70% how many are “owned” by the Bank?
From your past post’s I cannot decide if you are really rich or a Hobo? Since your pals do not talk about home prices…. on a Home Price Board!
Rich or Poor you are equally disconceted from the Topic!
Most people don’t find housing prices too expensive. That must be why they are taking out neg-am, option ARM, 110% loans. I’m sure the average person in Florida can afford a $1.5 million condo with $20K/yr HOA
Suzanne, I researched this!! You are right on. Wealthy people who understand economic principals have been net sellers of property!! to add to this stat. Non Wealthy people who understand economic principals are net sellers of property. It seems what they share is a basic understanding of supply and demand, Rent VS Own, Return on investment, mortgage lending practices and other non-hype driven statistics
‘Wealthy people don’t really care about “house prices”. It is a minor part of their economic picture. ‘
I walked past a 3+3 vacant house in my nieghborhood that has recently been “reduced” to 989K. The median income in my zip code is 81K. It’s true, I don’t care about the price alone but that ratio indicates the house is extremely overpriced and recent data shows prices are now dropping .5% per month in most of California. I interact with wealthy people (not hokey paper wealth from the recent bubble but actual assets spread around the world) regularly and they are quite aware of these details. In fact, most of them are quite modest in their behavior, not mouthing off about their “years of real estate investment” experience on blogs. This sort of behavior is a bit more in line with those who need flashy cars and probably have more debt than bonafide wealth. You are clearly a troll, probably a FB or realtor facing the end of his career. “Wealthy people” don’t catch a falling knife and virtually all investors stopped buying real estate in the coastal US within the last year. The wealthiest and most successful of real estate investors have completely liquidated most US holdings in the past 18 months, as have I. This has been well documented, even by the mainstream media. We all know this. Grow up.
…most successful of real estate investors have completely liquidated most US holdings in the past 18 months…
abr, I’ve noticed that many long time owners around here seem to be trying to liquidate their rentals. In some cases 10-20 properties at a time. I rarely see this, clearly the top of the market.
Thanks for the wonderful comments. BAHAAHAHHAHA!
I’m sure there are plenty of people who don’t worry about price declines - they’re called bad investors, or poor.
“The relatives and friends I talk to don’t even mention housing prices.”
What pray tell, do they talk about?
“Some people in my circle own multiple homes.”
Sounds like a circle of hell. Complete with monogrammed button downs, pomegranate martinis, and a copy of “A Million Little Pieces” in a Prada backpack.
Let’s ask va_investor about his/her money, they love that, it is their favorite subject. No wait, I’ll do it. Hey va_investor, how much are you worth? Let’s talk about you, your money, and your stuff for awhile, okay? While we’re at it, let’s talk about your favorite subject, you. Do tell, I’m so interested.
LMAO. So true!!!
Mort, you must be a successful guy. Why don’t YOU enlighten me? I’d hate to bore everyone with my story. I just sit back and collect rent. Very boring.
Sincerely hope you’re not a christian.
va_investor, okay, not much to tell really. I’ll try to put it your language. My father is Bill Gates, my mother is Warren Buffet, I have more money than God and I own 870 houses, three islands, and half of downtown NYC. Don’t you admire me? I really, really, hope you believe me because all my self worth is tied up in my possessions and what other people think of me.
Glad to hear you are not just another jealous, bitter renter!
Va Investor, your comments about weathy people is completely wrong about how they do not care about their house prices. A wealthy person is intimately familiar with their home price, their net worth what allocation they have in various instruments, commodities and other forms of value. It seems that the circle you run with have stumbled into some money and the wealth was formed through real estate. I am an owner of several properties both commercial and residential and I would not sink another dime into real estate today due to its disconnect from fundamentals. Macro-economic forces will take over and return housing back to proper rent vs ownership prices. I have recently reduced my RE holdings in properties that are less desirable in order to have the cash to buy in a few years when cash is king and credit is crap. Your circle of friends will be singing a different tune come 08 that is unless they actually have an understanding of their wealth.
You know nothing, but you flap your gums a great deal. Keep it up spongy, it feels good.
Wow shakes! You and mort should team up on some weekend seminars for the less savvy among us. Just how much cash does it take to be a King?
Cash will be king - not the holder of it. You slipped again you are equating ones image with money. Money is a tool that should be used wisely no matter how much or how little you have. Education of financial matters brings understanding and through understanding comes vision of the future ahead. The future for housing points down not up. For those who have made alot of money in RE and belive the short term future is up reminds me of the saying “Even a blind squirril can find a nut once!!
Hey va_investor, I, for one, AM interested in hearing your story. I got lucky on a job, and have been saving some money and think that I will be able to do so for some time. I like hearing all these stories, the good and the bad, so that I can live and learn and incorporate it all into a life-long strategy for a comfortable, wealthy, worry-free retirement. I am a jealous and bitter renter, but only because I thought I was too young to even think of owning when some great opportunities passed me by in Aug 2004 and Dec 2004. That’s the story of my life: missed opportunities. I want to learn your story so that I miss less opportunities in the future.
Mort is the guy you need to talk to. He is a very smart and successful renter.
I know it’s all fun, and we are all bored and have nothing better to do, but how about when a real estate bull posts, reply with facts an opinions on why you think he/she is wrong, instead of “you are a doody head, so there, nyah!”.
Sorry, the kids were really whiney today, and I have little tollerance for it right now.
(PS va_investor, the ‘jealous, bitter renter’ schtick is cute, but it’s old and cliche’, and you’ve been here long enough to know that it isn’t representative of the bubblista population. Nice try, though, you did push some people’s buttons.)
Posted ““The relatives and friends I talk to don’t even mention housing prices.”
What pray tell, do they talk about? ”
The latest case of in-breeding.
Oh hello there, VA Investor! Now that LV Landlord has skulked out of town and off this board under cover of darkness, I’m delighted to have a fellow spirit grace us with your presence.
I do feel obligated to correct you in one minor detail. You assure us that many of your circle own more than one house. Actually, I’m guessing the bank owns them. As far as your friends “not being worried over house prices,” it might be fair to say they are also unaware of the full magnitude of the “perfect storm” bearing down on them. Time will tell. Just promise us that you won’t pull an LV Landlord and leave without saying goodbye.
Check the census stats referred to by Robert Cote above. Many people own their home and second home free and clear. Some even own three or more homes free and clear.
I know, it is enough to make a homeless renter cry. I’d be bitter and depressed too if I were in my 30’s or 40’s and renting. I haven’t rented since I was 22. After 25 yrs of investing, I’ll let you guess my level of financial success.
You no doubt have loads of cash. Much more than me and mine. That makes you wealthier than me.
Last spring, the head janitor at my school was going through both colon cancer and a divorce. He couldn’t afford to miss all the days he was missing for surgeries and treatment. He has a little girl who my mother (a retired elementary teacher) tutors for free. Aside from the fact that my mother knows his daughter, I never really got to know him over the two years I had been at the site. The faculty and staff took up an offering to help out. The AP’s and Principal pledged to come up with $250 bucks among the five of them. My wife and I gave our 2006 tax refund.
All of it.
No one knew but the secretary (who did the collecting), the boss (who she informed against my wishes), and the janitor in trouble (gotta fire that secretary).
That makes me better than you.
You should watch My Name is Earl.
You gonna be karma’s bitch someday.
Know what’s really sad? Right now, at this very moment, you’re thinking of some dipshit retort to type up to make yourself feel better - and haven’t given ONE THOUGHT about our janitor. Doctors think the last operation should do it. We’re all keeping our fingers crossed for him.
Do the world a favor - have a few drinks and then drive home, will ya?
We won’t know who’s swimming naked until the tide goes out. I think you only understood the half of my post you wanted to hear. Should 20% declines actually arrive and persist or worsen tens of millions will be underwater. That was never a big problem in past reversions. This time however it isn’t treading water. The credit they’ve been extended will not even hold constant. These people have to much debt and no assets and new laws that prevent a clean exit strategy. You didn’t poop in the [credit] pool. Yuo may not even swim but your country club membership is about to see one hunkin’ huge cleaning charge assesment.
I think my post didn’t pass the screeners b/c I called vain a bitch. Oh, well.
sticks and stones….
Maybe it’ll pop up sometime soon, maybe it won’t. Sometimes the posts just disappear into nothingness. The jist of it was that vain’ll end up karma’s bitch - and the more indecency demonstrated, the more karma takes notice…
“After 25 yrs of investing, I’ll let you guess my level of financial success.”
This is the part where the psychologist begins to talk about your mother.
Just popped up. The post about my good friend at school.
va_investor, Medusa prettier than yo momma.
Where, oh, where is txchick when you need her?
Why do you come here day after day (usually to David’s pro-Va blog)?
I see that David’s comments are off so you have come here to pick a fight. He lets you do that there and censors those who attack you. Not here! Many here have some wealth (not as much as you of course) we just don’t brag about in every post.
I think you are seeing things again crispy. What brag was it that offended you?
Why do you blog on this subject daily? Are you afraid of something? Or are you the Yoda of the blogosphere? Yes teach us o’ great master!! I spend my days managing money for some very wealthy people and NONE of them brag the way you do. NONE!
What brag crispy?
There you are. va_investor, yo momma look like she got hit with an ugly stick.
Va_Speculator -
Is your real name Dave Lie-reah?
Oh Crispy,
It’s just some dude that’s all hat, no cattle.
Really, this has been very amusing. I love it when people anonymously yap about how rich and successful they are…LMAO
I feel so stupid renting a house my landlord bought for 330k and rents out for 1250. The home is 80k overpriced, is depreciating and has negative cashflow. I could buy it for 2100 a month and get that mortgage interest tax deduction though.
What brags people? Some of you just took offense to some of my remarks and are firing with both barrels. Knock yourself out. You insult people for sport but can’t take it yourself. I think the term “homeless renter” is particularly annoying to some of you. Well, get over it. Remember, you are the smart ones. Unless you aren’t so sure about that…..hmmm.
See above, karma’s bitch.
You make some interesting and enlightening comments,
Sybil, but you seem to have problems keeping your story straight and you publicly obsess about your net worth. If your posts are taken at face value then you are an insanely wealthy and successful land baron who hates and despises the renters who actually generate your massive fortune?
“There is always money to be made. You wouldn’t know it though from all the whining crybabies in this echo-chamber. Keep renting. Who cares? You people endlessly debate and discuss the same s#@t, day after day, month after month. Big yawn. Just make sure the rent check arrives by the 5th.”
“I know, it is enough to make a homeless renter cry. I’d be bitter and depressed too if I were in my 30’s or 40’s and renting. I haven’t rented since I was 22. After 25 yrs of investing, I’ll let you guess my level of financial success.
“… I just sit back and collect rent. Very boring.”
“Glad to hear you are not just another jealous, bitter renter! ”
See, none of this adds up. Truly wealthy people (with the exception of megalomaniacs, which is a mental illness you may suffer from) don’t feel the need to constantly reassure others of their wealth on a public forum. Good, savvy businesspeople who truly make their living from a particular product or demographic group rarely go around disparaging that group or telling the world at large how lousy their product is- that tends to be bad for business. You’re so smart- haven’t you ever considered if any of your hordes of stupid, oafish, bitter renters might be reading your insulting comments about them? Yet, you continuously come back to this blog and do both- it simply doesn’t make sense.
What is obvious is that you are miserable, and everybody knows that ‘Misery LOVES company’. You sound like you made some really stupid buys as the bubble inflated and now you are staring at the abyss, praying that the FED doesn’t raise rates again and wondering if you can hold on when your next ARM resets. It sounds like you need constant reaffirmation that you make good business decisions and that you have serious concerns about your financial situation. It also sounds like you harbor a lot of anger towards renters- the very people who supposedly made you rich. Are you losing your ass on a number of vacant properties (who wouldn’t want to rent from someone with your condescending, caustic attitude)?
Maybe I’m full of shit on this and you actually are some kind of mythical, real-estate Yoda. How about posting a short list of some of the property addresses from your empire so that we can be even more impressed with your phenomenal success? With people here from all over the country I’m sure some of us could even take a few pics. I fly up to the DC area on business every once in a while, maybe I could stop by and cheer up some of your “jealous, bitter renters”. Whaddya say? Are you going to put up, shut up or prove me right?
”
“
> I don’t know anyone who is worried about price declines.
What about those who matter most in this market, the potential buyers? If they worry about depreciation, they have less incentive to buy now. If they delay buying, they don’t worry about depreciation anymore but are looking forward to it. The people on the other hand who want to sell either decrease their price or won’t sell. What the many people outside the two groups think is of less interest, because house prices are not voted upon.
“…house prices are not voted upon.”
This is an excellent point. “Everyone” is not required to move the market. Markets are moved by the buyer and seller at the margin. As volume dries up in some neighborhoods an agent with a new listing may have only one or two comps in the last several weeks to base the price on. In an illiquid market such as residential real estate sometimes a single buyer and a single seller can establish a new comp that serves as the foundation for prices for weeks or months to follow.
I guess the “I’m facing forclosure” blog guy came to his senses and shut down his site.
Really?
He did. I hope he was for real!
Wow.That was fast!
I hope the internet wayback machine , or Google cached it?
Everyone cached it, don’t worry.
Google cached it. I told a friend about it this morning and he emailed me later to tell me it had been shut down. I then found the google cache and sent him the link.
http://tinyurl.com/hq75w
Maybe he talked to a lawyer who told him not to admit his fraud to the world.
Here’s the new homepage:
What I did was Stupid!
September 24, 2006.
This blog was the WRONG kind of exposure. I APOLOGIZE to my friends, family, associates and especially EVERYONE WHO HELPED ME with my real estate transactions.
I DO NOT BLAME ANYBODY for ANYTHING and take full responsibility.
What started as an honest desire to share my experience turned into something dangerous - playing with fire. After talking to a business associate this morning I realized I went TOO far and shared TOO much. I turned something small into a big exaggerated mess. Others were telling me this too, but I wasn’t getting it. Now I crossed the line. I misused my ambition.
I have damaged my reputation and I have damaged many good relationships through this. I never meant to hurt anyone. So to stop any further damage I am shutting down and laying low.
I am sorry.
–
Casey Serin [Email]
I am Facing Foreclosure .com
I love that this guy thinks that he’s ethical because, after getting burned, he decided to “come clean”. This time, he’s decided he’s “misused his ambition” after somebody pointed out to him that what he revealed on this blog could get him arrested. Ah youth! It really is wasted on the young.
One neighbor is selling their house for about $100k too much (another neighbor got no bites on $30k less six months ago, comparables down the street being offerred for $90-$120k less. Mentioned this overpricedness to another neighbor. He said, “I hope he can sell for what he’s asking - more power to us!”
I vomited a little bit, in my mouth, when I heard that.
Scott–what state, region, city do you live in? Such info adds to the value of most postings.
Is he SELLING his house for 100k too much (not possilbe IMHO) or just LISTING his house for 100k too much?
Several people at work know I’m a housing bear. When we’ve talked about housing prices and sustainablility before I always got the same platitudes — real estate always goes up, they don’t make more land, everyone wants to live here, etc. I make my case about affordability and adjusting ARMS etc, and they either glaze over or chuckle. Then I show them the chart of housing prices over the last 50 years or so, complete with historical trends and ast bubbles. Usually that’s enough to take them aback, and almost everyone changes their tune to thinking that appreciation will level off and/or slow to a few percent a year for a while. Usually this is said with a bit of concern in their eyes. Most of them bought condos as a residence in the last few years, with little or no down and I imagine adjustable rates. They’re smart people, and I think they see my point, but don’t want to believe it.
Ah, I forgot the landlord. Nice guy, but a bit of a moneygrubber. I don’t think he even knew about the housing prices until I mentioned them over a year ago. Now I can see the dollar signs in his eyes when we tak about it, but I don’t think he’s going to try to sell this place. As much as he sees money in his “equity” now, he’s more lazy than a moneygrubber. There’s virtually no way he’ll be willling to put the massive amount of work needed into this place to get it ready for the market. The time to sell withot prepwork is over. Plus, I know he has a fixed rate on this place, and I suspect he has an ARM on his new place, so this house is probably his fall-back solution if things tank. Considerin he works at WaMu, I suspect that may happen for sure for him.
Not only that, I think he would have to pay some heavy captial gains tax if he sells a rental house whereas the first $500k of gain for a married couple is not taxed on your primary residence.
“They’re smart people, and I think they see my point, but don’t want to believe it.”
Follow the masses!
You could see it as the wales stranding in mass on the beach. They feel something sucks, but at least they’re together.
“My findings are that all homeowners are thrilled about it”
Here in Brooklyn, most of us are bewildered, and wonder if it means our children won’t be able to live here. I’ll be thrilled when the price gets back to some version of normal.
That’s the rub for me. My parents know I’m priced out (as is my sister currently - though she’ll have a better shot at it after getting married next summer). They also know I wasn’t priced out 5-6 years ago (meaning I have the finances to purchase in a sane market). I understand them being happy that their house is “worth” so much now, but I don’t understand how they can’t be wishing for a correction so that their kids can buy homes. My backup plan is to move to the midwest if I remain priced out of this area in a few years (I truly like the midwest). I’ve mentioned this to them and I think they don’t believe me - but I know that if it came to that, they’d be very unhappy to see me (and my son - their youngest grandchild) go.
On the one hand, you all say that you don’t mind renting. In fact, many here claim it is the smart thing to do. Then you go and say you will move basically ANYWHERE to be able to buy a house. Does not make sense to me.
va_investor, if I had a dog as ugly as you I’d shave his butt and teach him to walk backwards. Bwahaha!!!
Mort,
You should be on TV!
“Does not make sense to me.”
Thanks for the straw man, va_investor. As you well know, not *everyone* here is happy renting, and not *everyone* here would move “just about anyplace just to be able to afford to buy a house”. I myself don’t exactly enjoy renting, but I’d rather rent a nice house here than “throw my money away” paying a bank massive mortgage interest (and that includes taking the tax write-off into account) + taxes + insurance + upkeep in order to buy the same house here.
But then, you already knew that. Keep poking at that anthill, sure looks like fun (yawn).
(pot-kettle-black alert, *I* must be really bored to be even thinking of replying to this)
va-invester, I like your title and I believe you are probably up to your eyebrows in property investments. Your circle of friends should have warned you to get out while the going was good. I don’t post often on this board but the dissertation between you and other posters was hilarious. I am a contractor and I build custom homes in one of the wealthier parts of the US, Southern California Montecito/Santa Barbara, yes where Ophrey lives. I meet extremely wealthy people all the time and they do not talk money. The trend I have noticed is that the super rich are as insecure about money as the lower middle class. Most of our construction presently is funded with cheap money circa 03/04. The pipeline is beginning to dry up and we are laying off some of our illegals. Yes, we employ lots of them! Real money does not brag about what they have but I am sure my customers could buy and sell your circle any day. They are a mix of old money and new mostly Hollywood money. My point is they are no longer building homes in the ten million ranges. Looking forward, things look bleak as the wealthy can no longer find cheap money to finance extravagant houses. Sure some can but not a prolific as 05. Maybe in Virginia they still can? However, I will do fine but most of my illegals will suffer. When you are around real money va-invester spending $200,000 for a 14th century Portuguese fireplace for Joel Schumacher’s house you don’t brag about it. It is considered poor taste. As for me I am happy getting ready soon to retire just purchased a place in Argentina, negotiating on another in Brazil beachfront this time and own a small 2000 sq ft place in Baja. I hope I am not sounding like you did not mean to. I am trying hard to diversify out of the US dollar. My circle of friends like your circle does not talk property but they are all dumping what they can
If you review every single post I’ve ever left on this site, you will not ONCE find me saying I like renting. However what I do like is having the ability to save money. And the only way I can do that presently is to rent - or move to a cheaper area. Moving is my last resort and ONLY an option because I want the best possible home life for my child. In my view, that means having a home of our own - not an apartment, not a rental house. (I’m not disrespecting renting on any level, I’m simply saying it’s not what I prefer for myself and my son.)
I’m not seeking out real estate only as a way to make money. My plan is that when I finally buy something, it’s for good. I will raise my son there and I will move only when I’m too old to live on my own anymore or I’m dead.
We’ve had these discussions before va_investor. Back then you were going on and on about all the perfect choices you made in your life - married the perfect spouse, made perfect investment choices, etc. I responded by saying that’s great for you - but life does not always work out as people plan. It did for you, it didn’t for me. Having you rub my nose in it is pointless as we’re on this forum to discuss the current state of real estate, not whether or not I’m a loser because I don’t own property at age 40 (which, according to you, I am). If you have nothing constructive to say, log off. Please.
I hear “I can just refi again” way to much
Tell me about it! None of these people (they all wave the back of their hand when they say it, right?) can possibly have ever seen a bear market in which the banks slam the vault shut. Money will be danged hard to find before long…
The only money you will be able to find will be the money in your pocket!! Too many Americans will reach in and find nothing unfortunately. It will be sad to see this but I think unfortunatley the cards have already been dealt, bets laid and we all are about to show our hands
This summer we backed out of a purchase because of Zillow.com. We felt the house was priced well for the market and felt like we had gotten a deal. Zillow’s estimate was higher, but Zillow also showed me what the sellers has payed for it 5 years ago. I could not stomach paying them a 70% mark-up. The graphs showed the steep climb in prices for the zip code, state and country. But rather than justifying the price the graph just made it so clear that it was crazy.
IMO Zillow is a big contributor to the correction. Zillow was started in 2005. The peak of the house bubble is placed at October 2005. In the past, people just bought the most house they could afford and job recessions caused price corrections. Now Zillow brings some reversion-to-the-mean gravity to the housing market.
Zillow’s raw historical data can be a gold mine. But their analytics for guesstimating current market value are so poor they are almost unusable. Here is a Zillow listing where the ZESTIMATE went up by $258k in one week:
http://www.zillow.com/HomeDetails.htm?city=Menlo%20Park&state=CA&zprop=15583738
Oh god, no kidding! We backed out of a $500,000 home purchase in May. It was a 2 bedroom, 1 bath house from the 1920s in a rural part of the OC, CA (the last rural part). We loved the house, but I couldn’t pay that much for it even though I hadn’t been schooled yet by Ben’s blog on what a bubble we were in. We backed out over some failing retaining walls and my constant fear that the house would slide down the hill it was on (yep it was on a steep hill, severe fire zone, and no earthquake improvements) and we’d be in debt forever. My husband felt so bad that we had gone back on our deal to buy the place “with that nice family”. I got on Zillow and found out that they paid $190,000 for it 5 years ago. Hmmmm….a 310,000 profit on a place they put maybe $50,000 into and they were fighting us tooth and nail over a $10,000 reduction in price? Yeah, they were really nice. Not feeling bad at all that they went on to accept a $30,000 decrease in price from the next buyer a month later….except that person got hosed.
jr…I am exactly like you. I simply refuse to fund someone elses retirement or give them a windfall by overpaying for their house. Zillow, as well as local tax records are a great price point indicator for me. I intend to buy next summer and am already coaching my wife on our strategy. Nr. 1 rule…divulge NO information to ANY realtor, even if they are our buyers agent. I will not let them know, what I am willing to pay, how much I like any particular property, etc. I’m not unreasonable and will allow a certain amount of appreciation (intend to chart out at a normal rate over the last few years) to the sellers, though my last house I bought in 1999 for 15% less than the owner paid new in 1992. I hope to have that kind of luck again and probably could if I waited until 2008 to buy…but, I’ve committed to buy next summer (family reasons).
If it weren’t for main stream media getting bearish on housing, I would have family reasons to buy too… My wife would kill me. But lately she has been easing up. Talking about extending the lease. I guess it will be time to buy when she is dead set against it.
I can’t find anybody who can justify the current prices . Some have said to me that it must be the low interest rates .Nobody questioned it because the media didn’t question it and the lenders were willing to lend . When I think back about all the interviews I saw where the papers gave realtors and flippers prime space to promote the can’t lose in real estate rah rah’s ,I want to puke .
The people are brainwashed . Currently the people are being told that “this is just a little slump ,nothing to worry about ,it’s a buyers market but it’s going back up next year ,just a little inventory problem .”
“The people are brainwashed.”
What a coincidence that TMC has been showing “THE MANCHURIAN CANDIDATE” for the past two days. In this movie an American soldier in Korea is captured and brainwashed at a location in Moscow. He is conditioned to play solitaire when told to do so, and once the queen of diamonds shows up he goes into his spell and seeks instructions from his American Handler and starts doing (assassinations) as told.
After watching this movie I honestly believe that most Americans have been brainwashed by the MSM, Realtors (TM), and everybody else related to RE that RE always goes up, they are not making any more land, it is different here, etc… We as a people have been bombarded by this message for so long, from so many angles, that it has now become an integral part of the American culture.
Eventually, Frank Sinatra deprograms him and that is what is going to happen to everybody once this bubble bursting starts accelerating. It will be a very, very serious let down for so many because the brainwashing has been so complete. People will be stunned once they realize how they have been duped for so long.
Look for massive deprogramming to start in earnest when over $1 trillion in ARMs reset next year in 2007, and the market gets flooded with RE inventory.
Check out “V for Vendetta”. Also reminded me of blog discussions.
…..IMHO well written too.
SF Chronicle is still buttering the downturn as coming back to normal rates. no wonder, they have SAT homes edition and sun real estate section with all the realtor and builder ads.
Even in the academic world, one professor would respond by saying that the price increases were a result of simple supply and demand - that we underbuilt during the 90s and that this was a return to the norm. Another professor said that increasing home prices were the result of increasing land prices. I guess that’s one way to avoid answering the question. Then again, this was back in 2003… maybe they are a bit more enlightened now.
It’s the second statement that is unconsionably stupid IMHO. HOUSE PRICES DICTATE LAND PRICES PEOPLE! Not the other way around. In the simple equation land prices + construction cost + builder profit = house prices, land prices is the big variable. Yes, builder profit varies, but there are enough builders out there to keep margins from exploding. The only way for builders to get big profits is by exercising options for land purchase after house (and therefore land) prices have gone up. You can’t sell the land for more than the price of housing-construction costs-enough profit to make it worth the builders risk, and you’re stupid to sell it for less. Why do people assume that raw developable land is somehow less volatile than house prices?
If you are thinking of buying a home simply impute the rent for similar homes that are rented and capitalize the income stream. That is what it is worth.
It is a long way from what the market is saying. Value and price are not the same.
Easier said than done. SFH rentals are not plentiful. When you find them, there is no information available about the stream of value. They only advertise the rental price. The advertised rental price is the maximum of what the owner is hoping to get, which tends to be the carrying cost of the house at current market prices.
my wife has friends who inherited a 2/1 bungalow in sf,a 100 yards from hwy 101,and one block away from gang territory this spring….they are convinced it was worth $700k when they inherited it and are spending one day a week fixing it up,they are in no hurry because prices only go up in sf…..ah well,i gave them the info i could….like 10 comps the highest being $589k from last year,and nicer,and llinks to patrick.net,but they don’t want to hear it.
tom stone you folks have done enough already for your friends. If they have not listened to you by now they never will. You and your wife must decouple yourselves from this RE situation and understand that when they do find out how much equity they have pissed off with their lackadaisical attitude they will only have themselves to blame and you and your wife must take comfort that none of it was your fault.
Most homeowners couldn’t price a bond if their life depended on it and you want them to justify why the price of their home increased?
I bought my place in the Greater LA area mid-2000. According to current comps I could list it for about 300K more than I paid using my fixed, 20 percent down, 30 year mortgage. To me, this is utter insanity. I spent about 30K to rehab and upgrade and I’d like to get that back when I sell, but NO, I do not believe the house is magically “worth” some lunatic amount more.
Maybe va_investor is that 24-yr old kid? Could be. He claims to “own” lots of properties.
Or maybe 14 yo. Wouldn’t a ‘wealthy’ person have something better to do than troll around on a blog for hours?
va_investor, I need you to come over and clean up the skid marks in my toilet bowl right away. Carpet stains too.
mort, you sound like a discusting person.
sorry “disgusting”..see how low you guys will go when your assumptions, wants, desires are questioned?
Karma’s Bitch.
oooh, sticks and stones. You guys can dish it out but you sure can’t take it!
The question was, can the prices be justified. I think you showed you can’t.
I figure housing prices will correct.
I bought about twenty years ago
so I should be (?) okay.
db
Fixed rate, fully amortizing mortgage, no HELOC spending on toys, no ever increasing revolving credit card debt, live within your means, save for (or have saved for) retirement?
Yes, you should be OK.
However, how has the peoperty tax and insurance situation evloved with the higher housing prices?
I bought a house on Maui, Hawaii in 1997, the bottom it turned out of an 8year price slide.
Prices started to rise soon after (Lucky me). I paid $250, for the house, slightly under value at the time but high compared to local economic fundamentals.
In 2003, I saw prices double, then triple. I sold my house in 04 for $700, and knew it was an insane price. Wages have changed little there in the last decade. How the F*@k does a family pay that kind of mortgage? I talked it over with my wife, we sold and left the islands. Since then the market value of our old house rose to around $900. (I’ve been keeping an eye on the market).
We moved to Northern Europe in 2004 and found the exact same conditions here, only about a year behind the U.S. We built a house that will be complete this month and are getting out. This house is currently valued at over $1,000,000. That’s insane! You don’t have to be a genius to see the chock point we are heading for here. Relative fundamentals are similar. Housing is over priced period.
Sure, I will make out just fine, but only for basic common sense. It doesn’t take a genius to see the calamity we are all heading for.