Have You Convinced Anyone The ‘Freak Show’ Is Over?
One reader wants to know what you’ve done to warn others about the housing bubble. “I’d like to see what others are doing/saying to convince family/friends that the real estate freak show is over! I’ve pissed off any number of people by trying to help, and I’d like to read about other’s efforts and how it worked out.”
Another said, “It was a little tricky in my case because my wife and I moved away from San Diego a little while ago, and we kept our house in SD in case things didn’t work out in our new town. This meant that when we decided to put the house on the market, my in-laws assumed it meant we weren’t coming back to SD. When I tried to explain that this was our best opportunity to buy into a better neighborhood in SD (sell high now, buy low in a better neighborhood later on), it was met with the ‘you’ll never be able to buy back in’ argument.”
“I found it helpful, however, to walk my mother-in-law through the numbers (how much a $400-500K mortgage payment is, how much you’d really have to earn to support that, etc.) and to point out that the high numbers of speculators and tightening credit requirements are really threatening to bring everything to a devastating end. So, now we’re in escrow (please cross your fingers for me and pray that we successfully close), and my mother-in-law still sometimes frets about our decision, but as my wife put it, ‘Mom, this has no effect on your finances. You have no reason to worry.’”
“Granted, this was only to provide the rationale for our decision to sell our own place. I wasn’t about to try to convince my in-laws that they should be selling. That, I must concede, is a much more hazardous undertaking.”
I’ve found that talking to current homeowners about the bubble popping is tantamount to discussing religion or politics - people are going to get angry and no one is going to convince anyone of anything.
I’ve resorted to simply laying out the facts and saying “Only time will tell…” and moving on to a less divisive topic. Only time I’ll really get going is if someone won’t drop it and keeps needling me about still renting…then the gloves are off!
Yes, EXACTLY like discussing religion. People get very angry on both sides!
You are right…people’s eyes just glaze over and they don’t want to listen (try and understand) what you are talking about. The problem is most of them are vested in the issue and with all the 2nd mortgages, HELOC’s refis, etc. they have to believe (keep the faith) that real estate only goes up. THEY HAVE BET THE BANK OR THE FUTURE ON IT!. Even educated people don’t want to listen to any housing fundamentals, so I usually shut my mouth and just let them babble on about how desireable CA or FL is and how everyone want’s to live there, etc. etc. That is why I read/post on this bubble because I think most of you are rational thinkers.
I talked a former co-worker out of purchasing a SW DC condo the middle of last year - the only way he was going to be able to afford it was interest only loan, but he felt as though he was “missing out” by not buying.
I haven’t spoken to him for a while now, but I hope he’s feeling really good about the advice I gave him then; he didn’t take it quite as well at the time (though he did listen!)
I work with very high paid late 20 / early 30 somethings in a major film studio. MANY of my collegues have purchased real estate in the past year, and all but one are using 10 year fixed interest-only loans, because they could not afford otherwise. Keep in mind, they make very good salaries.
Even though the disposable portion (which is all) of their interest-only mortgages is probably the better half of their paycheck, they believe that they are on the road to riches.
These 10 year I/O arms really worry me as a bear. Anyone have any insight as to how those loans will effect a bubble burst? Unfortunately, I can’t/won’t wait 10 years to buy, unless a depression comes along.
The people who take out 10 year loans won’t face any payment shock.
What they will face is making gut wrench payments for 10 years on a depreciating asset.
Many will walk away before the payment recasts.
There are relatively few 10 year I/Os if I remember correctly from another fucked borrower.
Just point them to Ben’s blog.
As I mentioned in an earlier post, the only person I need to convince is my wife. I’ve brough the softeneing RE market up to others, but I get the feeling they think I’m just being pessimistic, or perhaps disgruntled because I didn’t buy 5 years ago in the Los Angeles area.
The reason I didn’t buy 5 years ago is pretty simple..I financially couldn’t afford to. Now things have changed dramatically, and I could afford to buy something in the $1M - $1.2M range, but these homes were roughly $600K 5 or 6 years ago. No thanks, I’ll continue on with my very affordable rent and keep my thoughts to myself. At least I can vent a little here and read all the interesting views others have…thanks Ben.
“At least I can vent a little here and read all the interesting views others have…thanks Ben.”
Yes, exactly how I feel.
I share my opinions with a few select people, but I don’t try to convince anyone to do anything. As much as I feel confident that the market in Los Angeles has topped out, I don’t want to be responsible for other’s decisions. I could be wrong.
It never ceases to amaze me how people around here have forgotten what happened in the early 90’s. I was working as an agent, so I guess I really lived it everyday. The market is dramatically more over-extended now, with not much room for falling rates to save us. The risks seem 10x what they were in ‘90, but everyone’s got their blinders on!
Folks used to scoff or laugh at me last spring when I tried to convince them that market was topping out and it was time to sell. Some even got angry when I mentioned the word ‘bubble.’ They thought I was either crazy or had ulterior motives. I learned to keep my mouth shut. I sold my SF house then and profited handsomely. Let them feed squirrels, I thought.
What a difference a year makes- Now the same foks are coming to me for RE advice, dearly wishing they had sold when I suggested it.
I split up w/ girlfriend because she refused to think there was a problem in real estate prices. I left sacramento because I was disgusted w/ the prices. Bought a new home in az in 2004 but ex got homesick. Sold home in az in 2005. Went back to sacramento and she bought 400000 condo. I roughed it for summer at dads and squirreled money away to come back to az to rent for winter. I would rather be castrated than become a f@ucked borrower!!!!!
I know how you feel. Yes, Sacramento is way overpriced. We purchased a home in Oroville, CA as an investment a couple few years ago. It is much cheaper there. It will probably fall in value also, but at least it won’t have so far to drop.
dump that bitch
Failed to talk my brother out of buying a newly renovated home in one of the worst neighborhoods in San Diego in Summer, 2004. Cost was 508k. Even showed him the SDPD crime maps of the past 60 days, to no avail. Explaining the TRUE & TOTAL cost of owning vs. renting didn’t get through the fog, either. Said things like: “You want to get in on this?” and “We’ll sell within five years and split the profit.”
Fast forward to Fall of ‘05 - convinced him to look into fixed loans, but he said he was only able to change one of them (loan for the down payment?).
Last month, he mentioned that he’d likely not be able to move for the next ten years - it seems he may have taken my advice and checked Zillow. Very downbeated attitude, compared to last summer. I think it’ll be long after 2015 that prices will even BEGIN to go up again, let alone get close enough to today’s prices to let him off the hook.
Thing is, we’re talking a highly educated person (master’s deg.) who didn’t see beyond the agent’s BS about tax advantages and appreciation. Maybe that’s because the agent is our aunt.
We’ve had about four conversations about housing in the past 1.5 years - all but the last have been almost-fights.
So, while I may enjoy reading and posting to this site in thinking about my own status as a renter (Did another “We rent!” dance with the wife this morning), I can’t help but worry about the day I let slip an “I told you so” that effectively cancels my relationship with my only brother.
“downbeaten attitude”
I hate it when that happens. Why don’t I note SP/grammar items right before I click “Add comment” instead of right after?!
Well - and this is a lame excuse, but - the relatively small window given to write makes it a pain to scroll up on longer posts, no? That still doesn’t excuse the “you’re/your” issue, though.
LOL!
I receive email from a person who has the “you’re/your” issue consistently. The odd thing is, this person has a net worth well over $200M…boggles my mind.
What can one expect when the president fractures the language on a daily basis?
“Very downbeated attitude”
Looks like “your” not so perfect either!!!!!!!!
Again, one type of error is an oversight, the other is a problem with literacy. Yes?
Get a life!
You are right, I should stop with the badgering. You were only replying to someone’s (namely, my) offensive remarks. Of course, you’ll recall that my initial correction was of some “moron” comment on a previous post. I think we’d all agree that the aggressive words should be directed mainly at our enemies… the evil INDUSTRY! Come on, everyone, let’s get ‘em!
So are you saying that your brother’s house is worth less now then in the Summer of 2004? You can’t really rely on those Zillow numbers. Do the comps support that?
Not less. Actually, Zillow shows about 50k on top of what he bought for. However, with transaction costs (6% of 550k is 33k), moving costs, and the fact that if he were to put it on the market TODAY, he wouldn’t come close to comps from last week… We all know that he’ll never get enough to bail him out of a 508k loan. Now he knows, too. I say do it and take whatever loss you must - he refuses.
Did my taxes today - if I shaved another $3000 off my taxes seems I would get hit by the AMT. $10,000 or so isn’t that much mortgage interest and property tax. Always been dubious about the “tax advantages” for the average taxpayer but the AMT likely makes them even less.
I think a lot of this has to do with what I have come to see as Enron psycology. I remember hearing how folks lost hundreds of thousands when Enron went bust, when in reality all they were in was a few thousand. When home prices escalate, the owner sees their gain as “money in the bank”, so any loss or price reduction is “costing” them money and they are then “losing” money. I see tremendous inventory on the market all over right now, but would love to see what percentage of that market do not have to sell and are just attempting to reap profit based on a bright line price they will either take or not sell based on, and what percentage are in hot water or for what ever reason have to sell. We had a neighbour many years ago who put his house on the market for about 30% over what he paid the day he moved in, and it stayed on the market for years. His reasoning - maybe some rich idiot will come along and buy it, but he really had no intention of selling for less, or really at all. Bottom line - prices will not fall substantially until the market is glutted with needy sellers, rather than as I suspect right now greedy ones.
As a potential buyer with a CS in the high 700’s and a decent job as a programmer, we rent in San Diego for $1900. There has been talk of selling here as conversions for $500K. My wife and I drew a bright line of $275K based on the fundamentals (rent etc) so clearly they will need to find another buyer. Besides, at my income thats all I can really afford, and what in the hell is wrong with just saying honestly $500K? Sorry, I cannot afford that?
You make an interesting point about needing to sell rather than trying to make a buck. I feel that there are a lot of people just testing the waters with their homes but no way to really no for sure.
I agree it’s sometimes hard to tell motivation for sure until the reduced signs start piling up. One element that gets overlooked in these discussions is the so-called wealth effect. Most on the board share the view that people need house appreciation to offset falling incomes and I’ve been saying for a long time that even flat housing would bankrupt many. Then we’ll see what real motivation is. It’s undisputable that incomes are significantly down from 2001:
http://tinyurl.com/ke9qr
Duh! This is what we’ve been saying on the board for quite some time. Now that there is clear income deflation (the Fed’s own numbers) we can dispense with the talk about incomes rising to meet housing. This was a ruse by the RE machine, anyway. IMHO, too much credence is given to the concept of people “testing the waters”. Most people must have this appreciation to survive and low volume/flat prices will kill them. I don’t believe this large influx of inventory that we’ve been seeing is people testing the waters (its necessary income for them!!). This also won’t be a 15 year house deflation ala Japan (no savings buffer). No, a big and fast fall for housing is in the cards and the sooner we get it over with the better.
“…and what in the hell is wrong with just saying honestly $500K? Sorry, I cannot afford that?”
Here’s what’s wrong: the pricks will come right back at you with an explanation about how you CAN afford it.
I think it’d be best to preemptively slam the door on any reply by saying something like: “$500k? Sorry, do I look stupid?”
Just say “no thank you.” No explaination needed.
I have the benefit of having a genuine reason rather than just an excuse :). Due to an anomaly in my pension scheme, I will not be working past mid-2010, and I am unlikely to stay here (Canberra, Australia) in retirement.
When you take transaction costs into account, even the bulls can’t make a case for me to buy at $300K rather than rent at $675. One did suggest I buy and then let the property when I leave, but rather half-heartedly.
Your point is correct (needing to sell vice testing the waters), but there are always some people that need to sell. Once they lower their price to get out (job transfer, can’t afford the payments, death, divorce, etc) then that starts lowering the appraisals on the entire neighborhood. I see things free falling a bit once prices start dropping.
I’ve been renting for two and a half years. At the office, my bearishness has been the butt of good natured joking. People were always asking for my opinion on realestate news and lauging that I would be waiting a long time. There is no humor anymore. No one talks real-estate with me anymore. The few times I brought it up with individuals they became aggitated/annoyed. The topic of realestate is now like politics and religion; it is not to be dicussed in polite company.
I get made fun of all the time.
…recently, one of my collegues has changed his mind and agrees with me. He is putting his condo on the market.
“I’ve been renting for two and a half years. At the office, my bearishness has been the butt of good natured joking. People were always asking for my opinion on realestate news and lauging that I would be waiting a long time. There is no humor anymore. No one talks real-estate with me anymore. The few times I brought it up with individuals they became aggitated/annoyed. The topic of realestate is now like politics and religion; it is not to be dicussed in polite company.”
For the past five years in San Jose, CA this has been the case at the Thanksgiving dinner table with friends and family telling me that I have to get a grip on reality, modern times ‘ya know. Remember the dotcom run-up where profit was no longer an issue in the business model? Well this year RE was no longer a topic open to discussion; icy stares were greeted with my warm smile.
You should have told them you had a reasonable deposit saved, and asked them where they thought it would be a good place to buy :twisted:.
payback time!
I mentioned this in a post to another thread: I was in a grocery checkout, gazing at a Money magazine that had a story title about the housing market. The customer behind me made a comment (can’t recall his exact words now) about where HIS money was (real estate…puffing his chest up). I said to him that he might want to rethink his position because “things they are a-changin’”; housing prices going down, I stated what’s going on in LV, Boston, San Diego…gave him a number of things to look into. Yes, all in the grocery line. He had this look of a deer caught in the headlights as he was saying, “really?”, “Oh, yeah?” It was priceless. I left with *my* chest puffed up because I felt good that I at least shared what I knew and that I *may* help him down the road.
I also talk to friends, co-workers, sending them Ben’s and Patrick’s blog URLs. And the last person I gave the URLs to was just Thursday. He’s working 2 jobs to support his family and lives in Patterson. Those of you familiar with the area knows that it is off highway 5 on the way to L.A. and he works in the Bay Area. He told me that he bought 2 years ago and his mortgage payment has already increased by $600.
He wants to sell and move closer in, but I told him of the changing times and suggested that he wait…at least a couple of years if he his not in a hurry to sell. My fingers are crossed for him and his family.
BayQT~
Nobody who is “invested” listens, its called denial. Really, almost all of the new land barons I know have not one clue about what they are signing, their paper profits, carrying costs, cash flow, or really any of it. Their investment decisions are emotional, their rationalizing is emotional, their feeling of wealth is emotional, there is no room for “reasoning.” When\if it all falls, their reaction to that will be emotional to (blame and anger toward some scapegoat I am sure). Recently, a friend “bought” a 1.2 mill home and I tried to convince them and their family it was a mistake..they have small child.etc. Everyone said “Hey, they make $14,000 per month, they can afford it…” I said, really that sounds like a lot but it is not enough to “afford” this home, pay taxes, save for retirement and other expenses, and have a decent life. I was told, things are different since 9-11 and that there will “always be a new program” to let them refinance, etc. Things are different..as if the lenders never want to be paid back..the money is free..the tooth fairy will provide..uh huh.
YessireeBob, a whole BUNCH of people need a RealityCheck!
My sister just bought a house in a bubble area. I talked to her for the last year about the bubble and pointed her to this site, but she still bought a house.
I think for her its a stature thing…she just really dosn’t want to be a renter. Its very fustrating.
No offense intended whatsoever, but, does she drive an SUV? My brother (see above) finally got rid of the Tacoma and bought a Civic. Nothing wrong with trucks, mind you - it’s just that he spends 99.99% of his driving time on the highway. However, calling this a good idea gets more difficult when you take into account the fact that the truck was in fine condition - and already paid off…
Luckily my boss and my wife pretty much see things my way. As for the rest of the world, why cast pearls among swine? They can choose to read what we have to say here and ponder it, or they can take BusiWeek’s word for it that this blog is nothing but a bunch of extreme bears venting their wacked-out views and ignore it.
Herd mentality is comforting… going against the grain is profitable.
The herd chases rising prices, not value.
The intelligent ignore the herd.
Those who wait will be rewarded.
…the smart money always wins
A close family friend in Las Vegas was already planning to sell. I believe I convinced her to plant the sign now and not in June, to price aggressively, and to be ready to negotiate. Still, she was already in the selling mindset.
I’m torn as to what to do about other family members. I feel an obligation to say something; it would be better to be able to say “I tried” even if I failed. Yes, it’s like telling someone you can predict the future, but promoting fiscal responsibility in troubled times shouldn’t be that much of a stretch, should it?
I’m living in a strange world. EVERYBODY at work believes real estate is insanely overvalued in the Bay Area. Only ONE person has bought a place in the past couple of years, and he moved from a townhouse in Mountain View and cashed that out in the process.
EVERYBODY I talk to in my apartment complex things the condo-conversion prices are VASTLY overpriced.
ICSI is not representative.
I work for a government development office. My 06-07 budget revenue projections were, shall we say, less than optimistic- for which I was reprimanded by my supervisor. I was told revenue from permits and licenses would keep increasing for the foreseeable future due to increased building. I was happy to provide her with a report showing an $18,000 decrease in revenue for January compared to January last year. Small change for some development offices, but big money for my little tiny one. I’m already seeing a drop in new home permits. Look out below.
Maybe this is worthwhile to tell again with new readers.
I bought a precon in 2000 with expectations of modest increases. By early 2004, things surpassed expectations and I was still gun-ho about RE. I convinced my coworker to buy. By mid 2005, things started to look shaky with affordability. I planned to sell and also told my coworker (who is now my boss) to get out. We both did around October, and very happy about it.
Other homeowners that I regularly talk to at work know prices are going down, but they have their reasons for not selling. They don’t care too much about the paper gains. They got their house to live in it. One guy has a granny unit. The rent on that almost pays his mortgage.
Another guy is one of those highly intellectual, but physically lazy (I kind of fit this category myself) people. He believes everything will crazy and burn, but he says he’s too lazy to move.
An ex-coworker left my company because he wanted to buy a house, but didn’t want to overpay in CA. He moved to Utah because he liked the area and had family. He didn’t research the market unit he got there and found out they are still in 2003 boom mode phase with everything sold out. He kept looking and finally found a semi-distressed seller with a nice house. 3400 sqft for less than $102/sqft. He is also able to rent out the basement that will cover his mortgage payment.
My place that I sold in CA went for roughly $419/sqft. Granted it’s CA vs. UT, but he actually likes it better in Utah as he’s explained to me that it’s way more kid friendly/family friendly. His wife is a stay at home mom, and she wanted to mingle with other stay at home moms. There are very few in CA by contrast.
I’m constantly talking my clients out of making terrible real estate investments here in San Diego. I’m amazed at how people perceive the current real estate situation. It’s as if no one pays attention to the important details. I think I have successfully saved a lot of people from following the herd.
I finally convinced my father-in-law last night. I printed out a couple dozen articles from around the country from Ben’s blog. I think what convinced him finally was getting him to understand all the funny money NegAm loans were the driver of this and that Wamu laying off 2500 employees is a sign the easy money cycle is ending.
I convinced my mother late in 2004 to sell both her investment property in Australia, and an inheritance in England. I talked it over with my brothers, and we all agreed that RE was peaking in both countries, although I was the only one to go as far as to sell their principal residence.
The whole family is very comfortable with the decisions made, and even mum now accepts they were correct (although now she’s starting to look at RE again :().
I think that unfortunately, this bubble will ultimately increase the gap between the rich and the poor in this country with a big shakeout effect. Just as in the Great Depression, a lot of wealthy people with cash made a killing by feeding on the carrion, those with staying power in this market will buy out the poor schmucks upside-down on their spec condos for pennies on the dollar.
My battle (entertainment mostly) is with the longs on the DR Horton Yahoo Message Board( http://finance.yahoo.com/q?s=dhi ).
The two principal bulls are Alex and Stefaith. They are both bright people and have many facts, statistics, etc at hand.
Their basic contention primarily concerns DR Horton as the biggest most successful builder and that they will grow earnings at about 20% per year from now on. Period. They will site their history of record earnings each quarter and contend nothing will stop this.
Macro economics effect other builders. RE trends effect other builders.
You guys should visit and read/opine. You would simply be amazed at their level of denial.
I think the main thing for them is they are “long term investors” in the tradition of Ben Graham and have been riding the builders for about 5 years and have hundreds of posts and arguments “invested” as well. They consider themselves “contrarians” these last 5 years and focus on the historical earnings and growth. MARKET SHARE is their holy mantra.
It is simply amazing!
I’m usually greeted with the “it’s different here” response. It’s weird, because most of the people I work with were active participants in the dot com boom/bust so you would think they could see that there just might be a potential for a bust in real estate.
There is one big difference between the dot-com and the housing burst. If you lost money in dot-com, yes it hurt but the bank did not come after you for your home and they did not 1099 you for the bad business debt write-off. You had a paper loss (and in a lot of cases real $$$ loses) but at the end of the day you still had a home to come home to. Unfortunately there are many “investors” in today’s market who do not see the distinction.
Luckily, I will be living and sleeping soundly in my rented home while all of this plays out.
My sister was going to refi her OC McMansion that she bought in ‘02 last spring to pay for AMT, and I told her to sell it. She did, made ALOT, moved to Portland and bought a house outright. She wins!
Finally, a feel good story! Too bad, so sad, for the poor bastard who took the OC home off her hands.
I’m thinking Zillow will be a major tool in my arsenal. I’ll simply turn my family members on to it, and then when they notice their property is depreciating and that all their neighbors are selling they might just catch on. At the very least, they’ll ride it down a little while until they can’t stand it any more and sell while they can.
I’m thinking that Zillow’s the main reason my brother has changed his tune. I doubt that his RE-agent-slash-our-aunt had anything to do with it.
“I doubt that his RE-agent-slash-our-aunt had anything to do with it.”
This sort of relationship can compound the problems!
I no longer argue- I bet
wow, does that shut em up
I consider myself lucky that my spouse can see what’s going on.
I’ve had some limited success in getting a few people to pay more attention to what’s going on in housing. Two friends were visiting and were curious about the cost of homes in my area. I pulled out a local RE magazine and showed them some real winners, which had them laughing at the prices. The ads from the brokers with the 1mo. IO ARMs made them stop and think. When I explained the staggering number of people using adjustable exotic loans to purchase homes like those in recent years, they began to ‘get it.’ They realized that we weren’t really throwing away money on our rent in comparison to owning, and that watching the market for awhile was a good idea.
Friends that recently bought are the most blind. One couple in LA I am the most worried about. They now concede that the market in SD is a mess, but honestly think that LA is immune and that their home’s value won’t drop. If NOTHING else, what I have told them has made them stop and think a little bit. They are slightly more aware of what’s going on with RE and occasionally try to weakly refute the information I give them concerning their area. They don’t see a problem with funky financing, and think that it’s just the new standard for buying. Large numbers of people speculating and creating artificial demand don’t register with them. They only see what’s going on in the few blocks of their neighborhood as being representative of the whole market’s stability. The ONE thing that they are now watching, based on what I tell them, is the rapidly increasing inventory of homes coming onto the market.
I have not suggested renting, but do I wish that I could even make them see some importance to getting out of their soon to adjust ARM and adjustable second while they still have equity to refinance into a fixed!
Start with what you can.
“They now concede that the market in SD is a mess, but honestly think that LA is immune and that their home’s value won’t drop.”
Does anyone have an idea why this is a common opinion of homeowners in LA?
I don’t know but SD, IE, OC and LA are all one big suburb. All they have to do is drive it to see.
Just like life all of our fates are linked some more closely than others.
In the case of my friends, they think that people really want to move there if they can and will pay for the ‘lifestyle’ at any cost. They see LA as the epicenter of ‘California dreaming.’
As I see it, it’s another case of the Too Big To Fail defense coupled with Everyone Wants to Live Here. Few realize that the insanity started in SD before LA. LA still looks somewhat unscathed in comparison, right??
Here is another LA Manhattan Beach - the land of “keeping up w/ the Jones”. My very good friend, wife and baby just moved back from NY. He used to live in Manhattan Beach prior to moving to NY. He’s is currently in corporate housing. He’s been bidding on several newly built, “custom home” in MB. Most are within a few blocks but are not anything special - 3/4 beds, 3 bath, 2500 sq ft, no yard,etc. Last week he was in a bidding war with 3 other buyers - asking price $2.2m and moving up due to the bidding war. Now my friend has a nice balance sheet - makes $600k/yr plus brings $750k in equity from his NY home. But damn, he pulled out. He knows of my opinion and even agrees. But he’s in a pretty good situation compared to most. I told him as long as he is going to stay in it for 8-10 yrs and is ok having most of his net worth in a depreciating asset, then buy now. Of course, I added the disclaimer:”That’s just my opinion - I’ve been wrong about this stuff before.” We’ll see…
Around last April or May, I started to forward bubble news to coworkers and friends in CA, Boston, and NJ. The first news I sent was about Sydney’s 40% price drop during the 9 months before March 2005. Unfortunately the home owners in them remained unmoved and only renters were seeing the light and decided to wait.
Some of home owners needed an upgrade even jumped at the chance to buy new homes from builders when they finally got the calls they had been waiting for years from builders . Now they have been paying two mortgages for months with no hope of selling their first homes at the prices they expected.
Too bad most home owners just can not conceive the idea that there is a bubble until their money is draining away.
I am always stunned when I talk to very intelligent people who are convinced that the price of realestate never goes down. My response is always that realestate is nothing more than an asset like stocks or bonds and that anyone who tells you that the price of an asset can’t go down doesn’t know what they are talking about.
I have seen more awareness among people that market conditions are changing. There is not the unbridled enthusiasm that there was two years ago. Some people are beginning to question the herd.
They’ll say that real estate is a “limited” asset; only so much of it to go around. Well, gold is a limited asset too, and we’ve all seen what happened when people speculated in gold. They fail to realize that real estate has become more and more of a commodity than it used to be.
I think it might be worthwhile to print out the best blog articles and conveniently leave a copy or two every time you go to starbucks. Haven’t done this yet… so many ignorant sheep…so little time
Oh… new stats on the Sonoma Freak Show:
Stats: Sonoma 95476 including Glen Ellen and Boyes Hot Springs has hit a listing # above 200. The GMAC MLS will show only the first 200.
Last night’s number for the same search was 193
2005 Total Units Sold 1/01-2/27: 89
2006 Total Units Sold 1/01-2/26: 70
2006 Unit volume: Down 21.3%
————————————————–
2005 Total Sales 1/01-2/27: $61,813,000.00
2006 Total Sales 1/01-2/26: $58,920,500.00
2006 Total Sales Volume: Down 4.68%
In North San Diego County where I live I have two really close friends, one of which sold his house to the other two months ago. I’m afraid it’s not going to end well for one of them.
The friend who sold the house bought it in ‘96 for 190K and sold it for 660K. The friend that bought lived in a small two-bedroom condo in La Costa with a wife and two small kids and had been pulling money out of it for the past ten or so years. He took out a really aggressive I/O loan to even swing the deal and was going to sell his condo after the fact and needs to get a certain amount for the condo to even make the deal work retroactively. He put his condo on the market in November (over market IMO) and nada, nothing, no lookers. He blamed it on the holidays and took it off the market until January and lowered the price but still nothing. Next came new carpet, new paint and the like and still nothing. He once had hopes of getting enough to swing the deal and pocket a tidy 30K profit to buy furniture for the new house. Now he’s lowered the price to the edge of just surviving the deal.
My point is this: When he was pursuing the I/O loan he didn’t seem to even remotely grasp the dangers and I was e-mailing him articles about the risks and he pretty much ignored them. I also sent him data to tell him why it might not be a good time to even be buying a house but it’s like he had house fever and wouldn’t listen. It got to the point where I felt I was sticking my nose in his business too much and had to stop. The last I heard, as of yesterday, is that he had a friend that wanted to buy it but his credit and job situation were so dismal that the lender said not a chance.
I normally wouldn’t have been so adamant with him but I am convinced that it is going to end really really bad for him and I went as far as I thought I could to tell him so.. Now I just smile and say encouraging things like hey it’ll work out.
BTW the friend that sold moved to Bend, Oregon and is having a large house built in a development on a river with a detached granny flat and the works…he put a lot down on a 30 year fixed and his monthly payments are ridiculously low.
I forgot to say that part of the reason why my friend thought he’d be ok is that he got his RE license last year and is counting on that extra income…unbelievable
Friends don’t do that to real friends. For you it will be awkward sort of like friends that get a divorce; you try to be friends with both of them, but it’s difficult to manage the information flow between them as you’ve become the conduit.
Back in late 2005 they thought they were doing each other a favor because prices always go up! Probably still do.
would that be the deschutes river very nice place my parents have nice home there.awesome place i catch 5lb browns thereand shoot 5 pt bucks reguraly.dont telll anyone i will retire there.
I would like to share my experience regarding “housing bubble”.
I think that mentality is still “buy buy”. I wonder when it is going really to change.
For example, last week, I went to see a few open houses in San Francisco and around. Of course, the houses are very very expensive, but agents are expecting bidding wars: for 800K PoS, the agent sends e-mail saying that he expects offers over $900,000, since a comparable that is on the market now is $1,078,000. BTW, the house was sold last year in Feb for less than 800K.
When the mentality will change? In 6 months? In two weeks?
Never, as long as you are talking about newly minted agents, and the 6% commission. The procedure is always going to be pump it as much as you can.
I convinced my friend not to buy a condo in Downtown San Diego and convinced my brother to sell his condo in North County San Diego.
I sent both links to this blog and said “Read this for three days and you won’t need any more convincing.” Thanks again Ben.
That’s it. From here on out, I’d like to be officially known as, “We Rent!” That is, for the next 2-15 years, or so.
There, metamorphosis complete.
Dagnabit. Didn’t work. I must be getting bad karma from somewhere.
A friend of mine here in Austin recently mentioned that he convinced his wife that they should start making some “real estate investments”. When I mentioned the risk of falling housing values, it was received that blank zombie stare while he was almost certainly thinking “What are you talking about? Housing only goes up”. Anyway, as I’m getting married in a few months, almost all my friends have been pushing me to get into a house. Fortunately, my fiance saw the Tx 80’s housing crash, so she needs no convincing. I’ve pretty much given up on everyone else though… let them make their mistakes. Point them to this Ben’s blog and maybe patrick.net, and if they’re not convinced after that, you’re on your own baby.
By the way, I noticed when I enter “housing bubble” into Google, Ben’s old HB2 blog used to show up in the first few entries, and it would redirect to this new blog site. However, as of today, I no longer get the HB2 site, and the new thehousingbubbleblog.com doesn’t show up either. NAR Conspiracy to limit new traffic to the site? Or maybe I’m mistaken… still haven’t had my first cup of coffee.
Google owns Blogspot and I think they frown on sites that automatically redirect people off of their sites, probably because of security reasons and because it screws with people clicking the “next blog” link to browse through random blogs.
Out of curiosity I checked that, too. I had to enter Ben Jones housing bubble for Ben’s blog to show up…the 3rd, 4th and 6th listings.
BayQT~
I’ve wondered about getting to Ben’s blog also. I’ve had problems today that I haven’t experienced before.
I talked to a friend in LA yesterday and in conversation she casual mentioned 2 friends of hers that do ‘flips.’ I thought it was interesting that she didn’t even need to say ‘flip houses’ and that I immediately understood. She said the one friend who does flips in Ontario (IE) was starting to get worried about ‘undesireable’ people moving into the area and bringing down prices. I told her to tell her friend to sell.
A bit OT but I can’t get over how hostile people (friends, family, and colleagues) get when they find out that I rent and don’t want to own. My own mother gets really angry and accuses me of being mean to my kids and wife. We can afford to send the kids to a private school and joined a beach club. I work in the money mgt business and friends in the business also get peeved at me. They can do the math and understand that I’m stashing away money but the fact that I’m renting a house seems to piss them off. I don’t get it, why does an unwillingness to buy a house engender such hostility? Any ideas.
Grubner wrote: “Why [...] such hostility?”
People don’t like being shown they’re wrong, and the math is clear. But there’s more than that… and I haven’t quite figured it out either. Home ownership is a fundamental pillar of success in the American psyche. This hostility seems to come from a very primal origin. Nobody gets this upset when disagree on whether stock XYZ will go up or down. Though not too many folks have $500K locked up in one stock.
Oops, my bad, test post to close italics.
Another attempt to close tags. Sorry folks. If this doesn’t work, I’ll leave it to someone else more technically able..
My sister is a realtor and I don’t bother arguing with her, as she’s never going to be convinced it will fall apart until it all falls apart. She has “RE experts” at work telling her that the future is rosy, and she believes them over her little brother. Some people just don’t want to hear it.
“$500K locked up in one stock” …that was bought on margin.
Yes. Very Simple. Misery enjoys company. At some level they know RE doesn’t always go up and that tough times are on the way. If you are giving your kids a good education and being financially frugal, this is something to be lauded not critisized.
I would find some way to mollify them without pressing the points we all realize.
Maybe say something like, “I wish I had bought back when you did but I can’t really afford to now. Besides, my wife and kids come first. I think sending them to private school will give the kids a leg up. I can’t buy a house and do the best for my kids at the same time. ”
Something like that should shut them up.
I’ve had the same experiences too. Renters are stereotyped, period. Some of the assumptions I have come across in the years that I have been renting still surprise me. The most common is that you are being irresponsible with your money somehow and lacking in financial sense. Otherwise, you’d own. People are surprised to find out how much I make, and that I still choose to rent. Renting is as good as where you choose to live. Nothing wrong with renting a nice house.
Owning a house is seen to be a big indicator of how well you are doing and demonstrated financial responsibility. My friends can hardly understand my decision not to buy. It does irritate them that I have more free time because I don’t have a house to take care of. I can’t commiserate with replacing a roof or broken water heater.
Financially, I’m better off renting. The numbers don’t make homeownership in the current market attractive to me at all. Most people cannot see this as an option though. Buying a house is beaten into your head as the sensible thing to do from a very young age in this country. I’ll keep socking away the savings.
I tell the persistent ones that I will rent until buying pencils out to be the better thing to do.
I think in the old days, the assumption was that if you were renting it must be because you weren’t careful enough with your money to save up for a down payment. Although fewer and fewer buyers now put much of anything down, I think the mental connection between “renter = poor financial sense” still holds in some folks’ minds.
Take it from me this is nothing compared to the hostility you will get once the bust is fully underway, and owners/homedebtors who are really starting to hurt know you still rent. You’ll be accused of single-handedly causing the bust by your refusal to buy.
There will also be a lot of anger directed towards long-time buyers with low or no mortgage, especially in areas like California where property taxes are a function of original purchase price.
My fiance made me stop talking about the market months ago when our friends stopped inviting us out with them.
It seems every one of our friends is either an RE agent, mortgage broker, or loan officer. I kid you not. These people literally look like they want to throw up when you start confronting them with stats and facts in your “market” conversations. I honestly think they are in a little bubble of denial rather than making a conscience decision to ignore the truth. Also, the nature of these discussions is such that it can’t be explained in sound bites, so I find myself biting my tongue a lot when c-workers say things like “why do you drive an ML350 if you rent, you should buy a house.” I don’t have time to sit down and show them that’s exactly WHY I can afford to drive that kind of car, because I rent a 2,500 sq ft home instead of buying one. And the “tax savings” they all tout doesn’t even come close to making up the differecnce of mortgage/prop tax expenses on this house. So bottom line is I keep my mouth shut and smile now.
An ML350 is a depreciating asset, just like a home bought in the current market. Why do you differentiate?
. When I tried to explain that this was our best opportunity to buy into a better neighborhood in SD (sell high now, buy low in a better neighborhood later on), it was met with the ‘you’ll never be able to buy back in’ argument.”
So far, they were right. At least here in NorCal. For me in NorCal it is prudent to remind myself that we can still be wrong about this bubble.
Yes :(. Based on the last quarter’s numbers, it would appear that Eastern Australia has somehow managed to ‘bottom out’ at a median price of around 5 x median household income and is now starting to rise again.
If this is not just a dead cat bounce, I may truly be renting for the rest of my life since I simply refuse to buy back in at this cap level.
Fortunately it would appear at the moment I can comfortably rent indefinitely, since gains from the proceeds of my 2004 sale is greater (and increasing faster) than my rent :).
I agree with those who have posted and mentioned that you have to be careful in discussing RE lately.
I can’t think of many people I have spoken with who haven’t referred to their house as their retirement fund. The suggestion of prices coming down more than just a little is brushed off, usually with “I bought in a good area and prices won’t go down.” It’s as though you are questioning their intelligence, reasoning and taste.
A relative of mine mostly agrees with me now, and even called me to tell me that he sees houses being bought like stocks on margin. (He nearly choked when I told him about 100%+ funky financing after this remark.) However, the same person won’t listen to me at all when I tell him that RE is heading down in the IE, where he has a property that he will need to sell. I have to be very careful there. More selective blindness.
Yes, discussing Real Estate with family and friends is a really touchy subject these days. I know that my sister gets really mad if I mention the word “Bubble”. I guess a lot of people see their retirement in their homes.
This issue has caused incredible amounts of tension in my relationship…the shit that happens when one (me!) feels this is silly and the other (him!) buys the idea that if you don’t buy yesterday you’ll be locked out forever. There is an incredible amount of fear at work, fear and feelings of regret over not capitalizing on the market in the past (even if it wouldn’t have been possible due to income restrictions or whatever), feeling that one is less than whole unless he owns his home. I am subject to less of that, having grown up in NYC (during the 70s no less, what a lovely time that was…) and not in an ozzieandharriet burb (he grew up in one of them in MA). For him, the fear that one might *die* and never owned a house is honestly a factor. The humiliation that his older siblings own and he doesn’t. I honestly don’t know whether it’s a buy-sign or a ohmygod-the-bubble-is-bursting sign that his oldest sister is now buying condos sight unseen in FL, bought one of them condotels in Chitown that are supposed to be completed by the summer, and says things like “she’s gonna be flipping condos til she dies” on her retirement savings from teaching GED classes and waitressing…
I think that actually might be the only ’stay out’ sign he’s taken to heart lol! My talk is too loaded with relationship ‘issues’ to make much headway. Really sucks. FInally he’s at least buying the idea that we won’t likely be locked out if we wait a little while to buy, but I think he harbors considerable fear that if interest rates go up we will be screwed. I think that might be the final greater-fool pool–that fear that rates will keep going up and prices won’t go down enough to make a difference in monthly payments…
I think he harbors considerable fear that if interest rates go up we will be screwed. I think that might be the final greater-fool pool–that fear that rates will keep going up and prices won’t go down enough to make a difference in monthly payments…
How unfortunate that this is straining your relationship.
While many of us are hoping for a 30-50% downturn in prices, you (and he) are right that if (when) interest rates increase, the monthly payments may not change much for the amount of money you’d need to borrow to buy. You just won’t be able to get as much house/condo/townhouse as that amount of money has gotten recently. But that’s really not a bad thing. Why does one need a huge monstrosity of a house that they will have to heat at the inflated heating costs anyway? People need to start thinking “smaller”, retrain your brain. Perhaps think “starter house”, and that may eventually wind up being *the* house.
Your guy could also think about the money that you will be able to save and all the things you can now do by NOT getting in over your head. He can actually teach his siblings something by thinking outside the box. And pardon me for saying so, but the whole buying-sight-unseen thing is not bright at all. Downright scary, in fact.
Good luck with your future plans.
BayQT~
I have gotten the same looks in CA about having not bought a house. I got blank stares about the housing bubble. Same about my 10 yr old car (runs perfectly). All I can say is, is that I wondered how people making roughly the same money as me can drive BMW (or equivalent), live in $1M homes, etc. I see that many of them are deep in the $HITTER and I have lots of money saved, and can live comfortably and not worry about the debt at night.
These, otherwise very intelligent people, are so clueless about how finances work. It is scary. They pass up free money from the company (401K match for $.80 on the $), and pay thousands in interest to show off that they are wealthy. Also, the same ones going to expensive restaurants everyday, while I would either bring lunch or go somewhere like McD, or other inexpensive place.
Right on! (Though might I recommend Subway instead of the burger joint - could save on health costs in the distant future!)
When a tsunami is generated, it is barely noticed until it piles up on itself near the shore. People aren’t intimidated by the foot-high ripple passing through the ocean right now, but it’s going to become a 9 story building when it hits the coast, and then people will notice, when it’s way too late.
Wow, some great stories and even better advice of how to deal with the overwhelming denial in friends, family, co-workers. I think (and hear from) some people are more freaked out about several things coming together at once…several have spent their “house atm” money already, and have a helluva hangover when they look at the boat/suv/new kitchen/european vacation bills. Some, as mentioned here, are in the “biz”…either title, loan, re agents, etc., and are very nervous about their paychecks. Some take a quasi-paranoid view that the Middle East situation will be the fuse the lights the economic bomb in this country. Some people nervously admit to having NO savings, No plan if they get hit with even the slightest of financial emergenies. I too tend to believe that one significant national or world event could really tip this already precarious iceberg upside down. The more I delve into the economic fundamentals of energy issues, massive debt, etc., the more I believe that the housing bubble in this country is just one of many things that, collectively, could bring our economy to it’s knees.
So maybe our attempts at trying to overwhelm the denial could be seen as part of a bigger effort to save this country’s ass.
I convinced my fiance last year that we should continue saving bundles of cash, in defiance of her nesting instinct. The pressure was especially high on her, as her roommates were buying condos and houses, and talking about how great it was going to be (they were pre-construction, of course).
Fast forward to today, we’re sitting at a Panera in N. Va, and a couple just sat down near us. I couldn’t hear all the details, but I know that the woman was crying, and kept saying “for all that money…it’s so small”…and her husband/bf was saying “well, that’s the floorplan they showed us…” and “it’s OK, we can get through this”. It looked like trouble on the horizon for them. My fiance looked at me in silent thanks that we had not found ourselves faced with the financial hell they were so obviously entering.
just got off the computer (old dial-up line) and had to offload a voicemail message from a realtor who I met at an openhouse couple weeks ago. he knew i was working with an agent, but he called me about a listing he told me about last week too…saying he’s seen it now and it “shows really nice” and another one for the same price, a new listing. both are under what people were trying to sell these kind of houses for in the very recent past, like maybe 10%-15% under (the asking on these things are in the range of totally reasonable compared to coastal prices…the listings he rang me up about are 260K now, down from like 290 or more summer 2005). A year ago even though I left my phone number all the time I’d *never* get a call…in the last month I’ve gotten calls, emails, cards via snailmail (one had a very amusing print of a person fishing by a lovely italian villa…). I got a call from the mother of a classmate of my kindergartener saying “I’ve heard you want to buy a house. I’d like to sell my house”. FSBOs chasing me down after open houses…
and *STILL* my husband thinks when I point these things out that I’m just showing how my ridiculous anxiety levels are manifesting themselves in a pathological need to confirm my fearbased theories. It’s really hard to convince him that it might be rational, and that his desire to jump in last summer or right now might be fear-based. He just wants to be in a house soooo bad. But even the yellow-and-black housebuying for dummies (albeit the version I bought in 99, before the rules apparently changed) says you shouldn’t buy in a down-trending market, because *you just don’t know where the bottom might be*…that makes sense to me somehow, no?
That you should ride it out and wait til things start trending up again, or at least stop declining. And I see no real sign of an end to decline…
even that doesn’t work with him most of the time. The only thing I can do is promise to save money like mad so that we don”t get priced out in the future. It’s just sooo frustrating!
I’ve tried to ‘warn’ his condo-flipper sister, but she’s convinced she’s fine. She has decided to move on to buying land now, though, so perhaps she’s started to get a little scared…
Our 21 year old daughter is getting married in August. Her fiance wanted to buy a house, but he is graduating this year and our daughter still has one year to go for her 4 year degree, so they will not have much income to begin with. Her fiance thought that if they didn’t get a house right away they would never be able to afford one, but I gave them a talk and explained the whole housing situation and they talked it over and now they are planning to rent for a while and not buy.
I think it is easier to talk someone out of buying than into selling, unless they were already thinking about selling in the first place.
How about that? It looks like August is the month. My 27 year old daughter is getting married then, too.
I have also been talking with them about the housing market, but I haven’t had to do any real convincing…..they can see the handwriting on the wall (we are in the San Francisco Bay Area). So they are renting now….no problem…and are saving their money. They are, however, looking at the open houses and are coming away shaking their heads at the ridiculousness of it all. I KNOW they will be fine, though. They are very level-headed, they actually “listen” and appreciate the information and advice.
Don’t you love it when our young people listen to us? I feel like I am investing in THEIR future, and it’s a great feeling.
BayQT~
Yeah, but she’s 27!! Did she listen to you 12 years ago :D?
Actually, yes. I was fortunate….I didn’t have the teens from hell.
BayQT~
Great topic!
I’ve actually had a great deal of success convincing people I know about what’s coming, and why it’s happening.
My successful assault came from the martial arts.
Use the enemies strength against him.
Thus, I simply carry around the Dataquick numbers published each Sunday in the Orange County Register, and I show them the numbers.
I also refer to the Register’s very own web site for increasing inventory numbers.
It only take a couple of weeks until those I’ve come across begin to see the difference between the numbers, and the articles about the numbers on the front page.
I’ve pretty much got everyone looking at the hard, cold numbers, and it’s all on auto-pilot. Now, every Sunday, it’s hard to find a Register.
I don’t mind a bit.
When people see the numbers themselves, and know what they’re looking at, they have a vested interest in seeing them for themselves when they get the paper.
The enemy throws a roundhouse right…
…and I duck, turn, catch the arm, and throw.
The enemy ends up on the floor every time.
So far I’ve saved three marriages, and helped my mom and dad understand what’s going on so they don’t fold to the investors that are now trotting their way.
Yes, after Austin, the investors are now plotting a takeover of Boise. My mom and dad’s medium sized town is next- I’m pretty darn sure. I told them NOT to sell when initially asked to, hold on to their house as all the investors buy up the surrounding properties- thereby creating an artificial scarcity- and sell just as they begin to unload.
My mom and dad are going to be very, very wealthy in a couple of years due to my understanding of how these ‘investment clubs’ work.
People are now listening to what I say.
Not because I’m some genius…
…but because I ’showed them the numbers’.
Now they find the numbers themselves.
I agree with all of you guys. Majority simply do not want to listen. Then, why bother?
Hey, some great quotes here. “why cast pearls among swine” Brilliant!
Let me add one more and quote great Livermore:
“I know of only one way to prove that I am right; and that is, with my own money.”
Short away!
I made the dumb mistake of wearing my “housing bubble” T-shirt (the funny one with the soap suds Mr. Bubble version) a few months ago and was surprised by the dirty looks it generated. I think a lot of people are heavily “invested” in real estate and are secretly terrified of the consequences of their decisions.
Back in the stock market hey day of 2000, I fancied myself as a successful day trader - that is until I got caught in a brutal margin call position. Long story short, I ended selling for a considerable loss and always remembered that feeling of “liquid nitrogen” churning in my stomach. The obvious difference with stocks though is you sell out of a position and you have instant reconciliation. With real estate, you have a depreciating, illiquid asset that continues to suck money out of your pocket every month.
http://static.flickr.com/22/33290760_2d5445cdc9.jpg?v=0
Housing bubble T-Shirt
People can not believe that a solidly middle class family with 2.4 dogs and a kid can go bankrupt simply by pursuing the Amercian dream. They also realize that most people they know are in the same boat which means the whole system would collapse if we bubble heads are right. That’s a big, lumpy, bitter pill to swallow.
I have a friend who is 25K in credit card debt but wants to buy a condo so he won’t throw money away. I sent him some housing bubble sites and mentioned the number of condos coming on line here in DC. He thinks the number of gov. jobs coming to the areas will keep prices aloft. Considering the debt load he already has and the fact he is buying a condo (the dot com of the housing bubble) I really worry for him.
This story is quite humorous AND sad. Your friend says he wants to buy a condo so he doesn’t throw money away? Who is he trying to kid? You or himself? He’s BEEN throwing money away for a while…$25K in debt, that he obviously cannot pay off which means he’s paying interest on that amount, and who knows how long this has been going on. AND he’s trying to look smart by analyzing the housing market?
He needs help, and is very lucky that he has you as a friend. Perhaps one day after he decides to read and absorbs the information in the bubble sites that you sent him, he may wake up and smell the coffee.
Tell your friend this: that according to the credit card calulators, at an averagea18% fixed interest rate, and a minimum payment based on 2.5% of the balance, his payment of $625.00 each month will be over his head for the next 40 years. Add to that the cost of carrying a mortgage and housing maintenance, and other monthly responsibilities …..
Yeah…I’d worry for him, too.
BayQT~
I must say hearing these comments makes me worry even more really. 21 year olds saying they want to buy a house?! did 21 year olds feel capable of or hugely needful of buying a house 10 years ago, 15 years ago? People in serious creditcard debt feeling like they need to stop throwing money away and borrow 10 to 25 times more to do that?! This could get so seriously ugly.
Not that I know of. I got married when I was 30 and saved for 10 years until I bought my first home (while enjoying renting in some great places that I could never afford to buy…Coronado, Mission Hills, etc). I still thought that it was outrageously expensive in 1999. I can’t figure out how any one is doing it these days.
I tried to convince friends not to buy three years ago. I also tried to convince people stocks were overpriced in 1998.
Bubbles go on a lot longer than I am capable of imagining they will. What’s the trader’s mantra? “Would you rather be right (in the long run) or make money?”
You guys think it’s hard convincing people? Here in Victoria, we have all of the excuses the sheeple use to justify their irrational exhuberance… You name it:
1.) It’s an island, so “they aren’t making any more land.” (Forget the fact that there are only 2 cities on the whole island with >80 000 people and it takes 8 hours to drive the length of it. There are also only 3 or 4 roads out to the west coast, and most of those are GRAVEL!)
2.) The Olympics are coming! (Well, yes, in 2010, to Vancouver… Forget the stats that no Olympic city has ever shown any real economic benefit and Montreal just paid off their Olympics - from 1976!)
3.) It’s the Florida of Canada! (Yes, it doesn’t dip below freezing much, but we just had 27 straight days of rain this winter. Some Florida!)
4.) The area is so much cheaper than other cosmopolitan cities like San Francisco, London, or Paris… (Sorry, Vancouver isn’t London and Victoria is a $60 ferry ride away from Vancouver.)
5.) “Rich investors from Asia! Rich Americans who hate GWB! Oil rich Albertans!” (Our immigration was orders of magnitude higher back back when Hong Kong was going back to China…)
7.) Economy is booming! (Yeah, if you count construction and real estate!)
6.) All the other excuses apply… A local paper recently published how hot the housing market was, presenting the evidence that new home starts were the highest since 1981. No mention whatsoever of what happened to the housing market that year.
I’ haven’t had much luck steering people from real estate:
Have a friend in Silly Valley who had seen his property go up $300k since his purchase 3 years earlier. I tried to convince him to sell in the fall of 2005 to no avail: “We’ll wait till the market starts to tank and get out then.”
I failed to convince my dad to sell his 2nd condo in Tsawwassen (burb waay outside of Vancouver) that had appreciated 100% in 3 years. He recently built an expensive house in a resort town on the island, but he is cash flow positive on the condo from the renters ($+100/mo) so wants to keep it. He’s lost plenty of dough in the early 80’s in real-estate, so it’s frustrating seeing him not use this new found equity in the condo to retire mortgage free in the house(plenty of his friends are already retired.)
I have convinced a couple of newly married and anxious-to-buy friends to “wait till later this year” knowing that by that time, they should start to see the trend down more clearly and can price that in accordingly (I hope.)
I held my tongue with a friend of my bro’s who just bought a tiny condo in a brand new and poorly built building - another friend had recently bought in there and her parents were trapped in the elevator for 1.5hours - the elevator alarm didn’t work properly so they had to scream until someone heard them. The fire department was supposed to have the keys to the elevator before people moved in, but the builder “neglected” to turn them in and that resulted in the fire department not being any help at all in getting them out. The builder has since been fined $200/day since the move in date for this infraction. Plenty of other problems with that brand new building. For one thing - the trim around the bathroom doors prevents the doors from CLOSING! I’m kinda regretting not pointing him at this site, but I was starting to feel like a black sheep among all my friends for being so bearish.
Plenty of “investors” at my work, too. Good thing is about 50% of the people there are old-time homeowners who know the market might tank but own to live, not invest, but bad thing is that the other 50% are brand new homeowners who are banking on all the future appreciation and are looking forward to getting rich through buying more property. These are smart people too. I’m the new guy (started in Jan.) so I’ve been very delicate to ensure that I don’t make any enemies. Can’t wait till the trend down starts… I won’t have to actively warn people - it’ll be right there in plain sight.
Forgot to mention the last item…
8.) When I point them to the train wreck that is the US housing market at this moment, they can always pull the ol’ “This isn’t the USA - our economy is booming” line.