The Housing Bubble

I like this thread. I can say for myself that we had our, “holy $hit” moment in the summer of 2005. Both my wife and I agreed that prices were really out of whack but we decided to check things out for ourselves. We didn’t really look in Manhattan. That was completely ridiculous to contemplate. We could qualify for a lot of mortgage but we had no desire to do a $1 million plus mortgage just to say, “we own” something.

We decided to check out all of the new condos and lofts they were building in Williamsburg, Brooklyn. We took the subway to Brooklyn and got out in Williamsburg. We noticed the neighborhood was a little scary but we figured the new buildings must be in better spots, after all Williamsburg was “hot”. We finally got to some of the buildings we had seen on the websites. We knew the lowest prices were about $500,000 but realistically it would take $700,000 or so to get a decent unit. We noticed that the new “luxury” condos and lofts were in neighborhoods that had not been fully gentrified. Our epiphany came when we realized that a building that would be asking $800,000 or so required you to walk through a housing project just to get to the subway. That amazed me. I couldn’t imagine my little wife walking through there on a snowy January night, at 6 p.m. when she comes home from work. That was the moment when we said, “they have lost their f#cking minds”. We never looked back.

The building in Brooklyn has intensified. The tear downs in Queens are so numerous as to be mind-boggling. Jersey City is getting glutted on the Waterfront. Manhattan is being glutted in places like Hell’s Kitchen and the Meat Packing District (my #1 pick for a complete meltdown in 2 to 3 years). The Bronx, is well, the Bronx. Westchester is completely out of control. It is all madness. That day in Williamsburg was the final straw to completely convincing us that there is no way we will buy before 2010, if ever.

My wife and I almost jumped in last winter during the height of the bubble in the Boise market. We lived in the apartment complex my wife managed and she was considering taking a new job. Rather than get a new apartment, we considered buying a home. Part of the reason for looking at a home was that the market was electric. Homes were selling quickly and stories of instant equity with the purchase of a new home were common. At the time, the though was “get on the band wagon or forget about owning a home because prices will keep going up.” We took a step back when we found that a basic new home around Boise was going to cost at least $180k and because of our place in life, would need an exotic mortgage to finance. The irrationality of the market also made me pause. The Boise market was like the tulip panic or the dot com bubble. Californians were buying homes like they were stocks and locals were rushing to upgrade their homes because the 3/2 $hitbox they bought for $95k a few years ago could be sold to an “investor” for $170k and they could dive into $220k McMansion with money left over for a new Chevy Tahoe, a boat, snowmobiles, etc.

My eyes were opened wide when we were looking at a house on the market for about $180k. The RE agent said rents on the floor plans around the same size had dropped from $1200 a month down to about $900 a month. So home prices were going up and rents going down—I knew the market was screwed up. To make a long story short, I discovered the housing blog and we now rent a new house for $895 a month that is owned by a lady in LA who is get to pay the HOA dues and the property management fee.

You have to be out of your mind to pay those prices, if you are return back from Europe. Take Hollywood blv. the ugliest and dirtiest place in a world and this is Hollywooooood. The third world country and prices $700000 and up. You can buy a great civilised place for $350000 near by Mediteranian sea and have another half for your life expences. You have to consider that democrats won and they are going to legalize all the illegals in a world that live in L.A.

This is how I remember it:

I started looking at places to buy in 2004 when my rent went up to $720, which I thought was a lot of money to be “throwing away” each month. But when I started looking at homes, I was very surprised to see how high the prices were. I ran some calculations comparing rent vs buy inside Excel and the financial advantages of renting were so obvious that I started to wonder why anyone would choose to buy instead of rent. The Excel results were what convinced me to keep renting, but my curiosity was stirred. I remembered from many years before, friends who had bought homes telling me about how their mortgage payment was *less* than their rent. But it was obvious that that was no longer the case in 2004. I could have afforded to buy a home at those inflated prices, but renewing my lease at $720/month suddenly felt like a good deal.

Our decision to sit and wait was some combination of a lot of research into the national housing market, with an anxious eye at our local market (NYC, specifically Brooklyn). Full disclosure, though, the market helped make our decision for us. We’ve owned several houses in NY and then in DC but we suddenly felt like paupers in Brooklyn. $1.5 million dollar rowhouses in dodgey neighborhoods and the like.
We are not buying for an investment, per se. We intend to buy to live and we don’t want to carry an incapacitating mortgage for the next 30 years, thereby limiting our enjoyment of all the good parts of city living.
At the same time, as convinced as I was (and am) that there is a national housing bubble, we often grow anxious at the fact that NYC itself has certainly slowed but also certainly not slipped. So there is the frequent second-guessing about whether to get in now if something is vaguely reasonable, or hold on for another six months or a year … And take the risk that the market never really gives way.
Our tale of woe

In 2002 we sold our townhouse in N. VA to take a job overseas. We pocketed a hefty profit (bought in ‘99, went up 50% in 3 years). When we came back to the US in 2004, I looked at the houses for sale and was not impressed. Initially we rented because of an uncertain job situation and a desire to not rush into a home purchase until we could scout out the local area. More importantly, I’d been convinced for a long time that the housing market was a classic bubble, and the run-up in prices was due to a dangerous cocktail of greed, easy credit, and rampant speculation. Not wanting to buy at the top of the market, I decided to bubble-sit until sanity returned. So here I am, smug and happy.

Persuading my better half has taken some effort. She definitely has the “nesting instinct” and wants our own place, like all of our friends. Women also tend to listen to their friends, and most of hers, and ours, until recently had bought into the local NAR fiction that “it’s different here” and that prices only go up. Now that things are playing out exactly as I’d anticipated, she’s OK with renting — for now — but definitely wants to buy when our lease ends next Summer. I’d like to stall further, for another year or so, since we’re both happy with our rental house. But, I promised we’d buy after our lease is up, so unless I can pursaude her otherwise, we’ll probably pull the trigger even though the best is yet to come.

Another factor in my decision to wait is the loathing I have for the collection of shills and swindlers known as the RE industry. I hate the idea of lining the pockets of some RE harpy, slimey mortage broker, or greedy seller, and am eagerly waiting for the tables to turn when buyers can name their own terms.

I built a McMansion in ‘02/’03 in North Hollwood 91601. It was supposed to be the dream home of my mom, my son and i. I hired my cousin as my contractor and he took me to the cleaners. I almost went broke. By July ‘05, I couldn’t believe the speculation in my neighborhood and how much my home was then worth. I realized that i could turn my once dream home turned nightmare home back into a cash windfall. there were no comps in my area…i had the largest house in the neighborhood. I listed at 1.3 (no calls or lookers), dropped to 1.2 the next week (couple of calls and lookers with no offers). the next week i dropped to 1.1 and sold it at full price. when the offers and interest weren’t coming in and the higher lists, i was petrified. today, i’m renting and waiting….i don’t have alot of pity for folks out there dropping their list prices by 2% and sitting for months.

Readers want to hear your story. “How did the fence-sitters (waiting to buy) on this blog arrive at their decision?

Job relocation caused me to arrive in this western city in late ‘03. By that time, we were already mid-bubble: prices were already well beyond incomes and rising monthly. People were scrambling to buy up homes as fast as they could. Time on market was measured in days (sometimes hours), not weeks.

A coworker who relocated with me jumped on two homes (earlier this month he sold the rental property he bought in ‘03 for $299K for $279K - and he’s thrilled to have gotten rid of it).

After a month here and after careful consideration I decided I would wait. Prices were insane and I was just fine with renting an apartment.

For two years I questioned my decision to wait. I watched as prices kept rising. Builders kept buidling. Homes kept selling. Did I miss the boat? Maybe the leapers were right, maybe it was the dawn of a new economy and in that new economy the cost of home ownership would forever be 5-6 times annual income, not 2-3 times, as in the past.

Anyway, here we are now, 3 years later and the collpase is well underway. Sales volume is through the floor. Builders are offering huge incentives on new homes.

Foreclosures are up … way up. Listing prices are still relatively stable but I’m confident that they’ll begin to plunge next spring when optimistic sellers see that ‘07 is not going to be better than ‘06.

I expect to jump back into home ownership once I feel that prices have come back down to Earth. It looks to me like that will be late ‘08 or early ‘09 for my area.

For us it was real simple: with a lower 6-figure income, if we purchased a home (i.e.: dump), we would not be able to save any money or contribute to our retirement accounts. I cannot understand how most people responsibly manage a home purchase, salaries bing what they are.

Now, when I want to feel good about being a renter, I just log-in to my accounts and look at all my positions

~Misstrial

NOTE to Dan: I responded to your query on NM 2 threads down. Again, sorry for all the bad news.

My wife and I are newlyweds. Before the wedding is even over you start hearing the questions of when will you start reproducing. In my wife’s mind, and in mine to start, before you have kids you should own a house. It is part of ‘becoming an adult’ in our society. Not to mention, in Vancouver, we’re different. Two weeks of the (winter) Olympics showcasing our (horrible winter rain) beautiful locale means real estate only goes up.

After enough pressure from the wife and in-laws, I started researching the local housing market. I had just rid myself of credit card debts and started making a pretty good living and I didn’t have any strong desire to jump right back into debt. The rental life in downtown Vancouver is pretty sweet; by this time in 2004-2005, renting a new condo was already half the price of the mortgage, nevermind taxes and fees (no tax breaks up here). Friends of ours were still buying like crazy just to get in the door. Most had significant down payment help as the only way they could get in so late.

My HS! moment came with van-housing.blogger’s graph showing the true story on the housing market that the real estate funded local media only sugar coats… the prices to buy are so out of whack with the fundamentals of the local economy that buying didn’t make any sense. We could move an hour to outlying areas, or risk buying a $350k shack on the eastside. Why should where we live somewhere that we don’t want to, in a much more dangerous area, just for the priviledge of going into debt?

After enough reading and convincing that we can save money and invest it just as well as a mortgage, the wife came aboard. I was convinced and so was she that mortgage is just another word for debt. To most people in our generation, mortgage has somehow come to be another word for security. We’re now both happy renters secure in the fact that we’ve saved thousands in the time that we could’ve saddled ourselves with debt and paid that same money to the bank in interest. We can invest how we want and move where we want when we want. We have a slice of the good life, on the water, while an out of country investor pays for half of it. Thanks to the wonderful information that the internet tubes presented me with via blogs like Ben’s and Van-Housing.

IN 2005, as two college graduates, both with regular ole’ entry positions with the County and school system, we looked for a home with 15%-20% down, mortgage no more than 25% of our combined monthly income. We relized something was wrong when all the searches landed in “barrio” in Delhi! And when the mortgage company told us to get the “1% product” and keep the 20% down for to upgrade the house, so we can sell it next year for profit. I probally would of done it, nut my girlfriend was raised with the idea that you actually need to pay off debt.

We did the math.

For the past 16 years, I have been a full time RE investor. I have seen this cycle before, and it sucks to get caught on the wrong side of it. In mid 2004, I got completely 100% out of residential RE including selling my primary residence (which was free & clear). Since then, I offloaded some underperforming commercial RE as well.

A co-worker asked me “If you KNEW that house prices were going to drip 40%, would you do anything, and what would you do?”

I looked into it, and talked to my wife for several months.
We listed our house and sold it about 7% less than what I thought it was worth.

Now, we rent in the same area.

I actually sold my home, in part due to this blog. Locally prices have fallen 6% since then and market conditions (inventory, sales) continue to deteriorate.

In 2-3 years I plan on buying a much nicer home.

We’re fence sitters right now because 2006 is the first year where I feel that we both have the job stability to really consider settling down. But we don’t want to buy until we get a nice house (where we’ll be for 10+ years) for a price that we can afford (what a concept!). When we buy, we’re looking to get in with a 30yr fixed, but then pay at a rate of a 15yr except for emergencies. We could presently do that with a $250,000 loan, which doesn’t buy much yet in Sacramento.

For the time being, we’re content to continue to pay down debt (student loans and a small car loan) and save. We’ve got a nice apartment for a reasonable rent ($900/month) and we’re able to put about 50% of our net income to paying down debt and save. When we do buy (probably sometime in the next 18-30 months) we’ll do so free and clear from other debt and with a sizable downpayment. After we completely discharge our debt (probably sometime in mid/late 2007), we’ll be saving over $2800/month (presently at about $1500/month).

If we bought today the house would be either in a high-risk flood zone or gangland central. In another 1.5-2.5 years, prices will come down and our savings will have accumulated to a point where we can realistically be looking in a nice, safe area of Elk Grove or maybe even Davis.

I live in the San Francisco Bay Area (Dublin, CA 94568). From 1988-2003 I lived in El Sobrante (94803) and commuted to my job in Emeryville (about 25 minutes depending on if you take surface streets or Hwy 80…which is a nightmare at any time of the day). Employer relocated our offices to Dublin in 2002, the same year my youngest daughter graduated from HS and moved into the college dorm (in San Francisco). Ok….so with my daughter in college, there was nothing keeping me in El Sobrante so I started looking in Dublin area to buy or rent…my main objective was to be closer to work and cut my commute time and wear and tear on my car. As I looked around in Dublin, San Ramon, Walnut Creek, Concord, etc, I could hear myself say, “What?!”….”Huh?!”…. What’s going on with these prices?? The formula in “my” head did not work out with the numbers I was seeing attached to houses, as well as condos. I’m a SW eng so I make a good salary. I couldn’t believe my eyes. Hmmm (I said to myself)….I’d better step back a moment. So I hit the internet and did my due diligence (I do this with everything…I always do my homework.) I found my way to Patrick.net and ultimately to Ben’s blog. I’ve been a happy renter ever since.

I did move to Dublin (2003) to a beautiful rental community, 10 minutes (surface streets) away from work. I’ve riden my bike to work, it’s 6 miles so it’s easy to walk (if I choose to), there is public transportation just outside the community (an easy bus schedule), and my rent is half what it would cost to rent a similar sized unit in the area.

What I also did in 2003 was refinance a rental townhouse that I bought in 1999 (Newport News, VA). The interest rate was at 11% (fixed) but I got it down to 6.7% (fixed)with the refi. A total no-brainer for me. I was in the black before the refi, and even more positive cash flow after.

In the meantime, renting, saving money, driving my 1998 Honda (no car note), planning a vacation to Costa Rica for next year (will be paid off BEFORE the trip, and will not be finance by a HELOC loan. …just waiting for the fire sale.

LG…Life’s Good.

BayQT~

[divorced Boomer, 55, Afr-Am...not all single women make stupid mistakes regardless of what the media says. ]

We realized we could rent for half the price 40 miles closer to work. And math helps.

Sanpoint, Idaho—Moved to area in Spring–2005.
We were so excited to be close to mountains, Lake Pend Oreille and snow skiing at Schweitzer mountain. This is in an beautiful vacation area that is devoid of jobs except medical professionals and realtors. It was a nice place so I bought into the “they aren’t building more land” and Californians coming and paying $1 mill plus for 800sq feet dumps on the lake.
What I really found out is that the big price run up was due to the usual cheap credit and folks from Spokane, WA–11/2 hours away buying up as much land and housing they could get from their home equity. I have met middle to upper middle income folks from Spokane owning 3-4 homes a piece and with the usual bragging about their multi-millionaire status. Sure–some equity locusts were coming from Cali–but my god—-a housing shortage caused by sheer greed of the Spokanites grabbing up as much property as they could?

Well, as of Fall 2005 and Fall 2006—Nothing selling! Prices have not dropped but, I think they will. In the meantime, I rent and everyone in our families question this because we have professional incomes and large amount of equity from previous homes. The greed sickens me——people buying a house for $300,000 3 years ago and ask $1.3 now. Crazy!

Thought I was doing good, pulling down around 100k and saving for a down payment. So we went looking for a $350k house. None to be had in our area.

I’m a fence sitter because I make more than 80% of the people in this area, and cannot afford a house without a suicide loan. I’m on the fence because I can’t afford a house. Simple as that. Hell, I’m not even on the fence…I’m cavorting in the pasture on the other side…the one with the green grass.

I moved to the DC area in 2001 while in residency training and did not make enough to buy a house. Around 2003-2004, everyone started telling me that if I didn’t by soon, I would be PRICED OUT FOREVER. I believed them. But I truly couldn’t afford anything. I thought to myself, I’ll just buy when I’m done and have paid of my credit cards. I finished training June, 2005 and took a year to improve my debt to income ratio’s (for some reason, I believed in the 2-3 times salary to qualify for a mortgage). My salary had quadrupled and I was ready to buy my first home in DC in July of 2006. I started looking and could’nt believe what I was seeing. 1 bedroom condos selling for more than 450k. 2 bedroom townhomes starting at 800k. Crappy little rowhouses repainted, turned into 2 “condos” and selling for 550k each. I was so in shock, that I took a month off and started looking again in August, 2006. That’s when I noticed something shocking - prices had started to come down. Realators that used to look at me with disdain were now calling and offering closing help. I even had one realtor knock 50,000 of the price before I walked out of the door of a 600k condo.

Something wasn’t right. So I went home and did the math. I was renting for 75% less than what I could buy comparably and I live in the city close to my job. I also googled “housing bust”. And found this blog.

This blog had been the reason I decided to continue renting. It has given me wonderful arguments and replies to all of the “you must buy now” masses. Even my financial planner suggested I buy a house just last month and I used information that I learned on this blog to logically lay out why I should not. And he understood.

So thank you Ben and to everyone who contributes tirelessly to this blog. Don’t feel like you are repeating anything too often - there are always new people like me who you wander in here accidently and become converted. Thanks again.

Moved to San Fran from NYC thinking I could finally buy a place without taking too much of my income and plowing it into a house. Spent 5 months lookng for houses and evaluating the market. Made 5 offers on 5 houses and was outbid on all of them. I make 200k base plus bonus of 20-40% and was putting pretty competitive, above asking price offers. I finally stopped and realized that this was getting totally insane and that I wasn’t prepared to exhause my personal, hard earned savings, and cut deep into my monthly cashflow to buy a place in the city. So I rented out a place at a fraction of what I would have been paying in morgatge, taxes and maintenance. I wish I could go and thank those people that outbid me on those other properties. They got nice houses, but I hope they don’t have to sell in the next 36-48 months. Otherwise they can kiss any downpayment and equity goodbuy. Check out Paulson’s comments on the market and the bubble on Fortune via cnn.com. Thanks Ben and all the other bubble bloggers out there. See you in late 2008 when it should be a pretty good time to get back in the market.

As a recent college grad, I got my first good-paying job in summer 2005. I noticed that a lot of people my age were guying houses, so I began looking into it. I was startled at the high cost of housing. For awhile, I was content with the explanation that Montana is just more expensive because it’s pretty, but finally it dawned on my that high appreciation can’t last forever. That’s when I looked into the “bubble” idea and found this blog.

The bottom line for me now is that, barring high appreciation from here to forever, renting is just much cheaper. It’s great to be able to pay off student loans quickly and save money.

I recently send a friend an e-mail about my buy-rent equation. Here’s how it works out on a monthly basis. Of course, this ignores appreciation.

Current cost of renting: $225 (sharing a small house with a roommate)

Cost to buy a $100,000 house: (assume no down payment and seller paying closing costs to make it simple)
(-) Mortgage payment: $632/mo (6.5%, 30-yr)
(-) Property Tax: $83/mo
(-) Insurance: $50/mo (really guessing on this one!)
(-) Maintenance: $83/mo (assume 1% of house value per year)
(+) Rent from roommate: $250/mo
(+) Tax savings: $80/mo (rough estimate for single person)
(+) Money I “keep” in form of equity: $90/mo
——
Total outflow: $419/mo

Note that a $100,000 house works out to be the 5th percentile of all houses for sale where I live (Billings), so that would be a pretty crappy one!

I can now claim that I sold off close to the peak of the bubble.
I sold my home in march, 2005, and closed escrow in may, 2005 in elk grove, sacramento. we have rented ever since.
me and my wife came to the conclusion together that -

real estate is put of whack, prices cannot be justified based on rents or incomes. I worked at Intel in a pretty good position, and know for sure that for most people, except maybe a few dozen executive staff, no-one can buy their own home at these prices.

not be too greedy, leave some money on the table for the next guy, Our buyer thanked us a lot, I felt sorry for him. take your money and run.

we decided to take our profits (hate to say that, since it was our home, and making profit was not a motive), put in CD, treasury, which pays enough interest to cover the rents, so we are living for free.

Some of my friends were paying excess of 100% of their income on mortgage payments on multiple homes.

Expectation of ridiculous inflation may not materialize.

I found this blog in late 2004, so I concluded there were some more crazy, nutty people around too.

Obviously, most of my friends hated me for suggesting that real-estate was a bubble, and that I would never be able to buy back again. It was expected to be the worst mistake of my life, and me and my family will pay for it.

I got caught with three spec homes in 1987-89 in a very high end market. Winter Park, fl. The homes were 375k-500k or top 5% of the then market.

I laid awake many nights trying figure a way out. The last one sold 2 yrs after completion to the tenant as a lease option. I took $5K to the closing as the seller and it was the happiest day of my life.

From that day forward I have never spec’d anything. Contracts only.

Oh and I also gave up developing anything other than new business for my company.

i have been in los angeles since ‘99. i’ve used my sister’s condo as a benchmark for the local market. it was a co-op on the westside, 2/2 + den, about 1,200 sf. a nice but older place in west la (mar vista) w/ a nice pool, but nothing special. she and my bro-in-law purchased it in ‘97 for about $110k, moved in the summer of 2000 and sold it for $155k. that already seemed like a big bump up to me, but what did i know? i probably could have afforded it at the time, but i was single and not sure if i’d stay in la, so i didn’t really pursue it. as of last spring similar units in the complex were selling for $400k+. i know what people make here, and there is no way that people are making anywhere near what they’d need to to support the prices in la. even before doing the math i knew that there was no way that houses could really be worth 300-400% more than they were just 8 years ago.

i’ve basically been calling the bubble here for years, and watched it go from “over-priced” to “crazy” to “f***ing insane.” i’ve never really questioned my decision to not jump in, but rather every time prices would go up even further i just figured that they had that much further to fall.

i was in business school full-time from 2002-04, so i didn’t even consider buying during that time. now i’m out w/ a decent job making low six-figs, and couldn’t reasonably afford a crackhouse in compton. luckily when we got married my wife had a rent-control apt on the westside near century city (we’re now up to $1,200/mo for a 2/1), so i’m just biding my time. if they had converted my apt to condos it probably would have sold for $600k last year, so my rent is about 1/3 of what i’d have to pay to buy.

socal has to be the epicenter of this bubble. so many otherwise sane people here are idiots. they don’t realize what a bubble does to a place. companies are having a horrendous time attracting talent from out of the area, because no one wants to move somewhere where you have to make at least $300k to have a nice lifestyle. at current prices first-time buyers can forget about it. i’ve tried to have the bubble discussion w/ others but until recently anyone that owned a property could not wrap their minds around the possibility that prices are too high and could actually drop. i swear 90% of the people think that down here the only thing that could possibly hurt prices is the pullout of the defense industry, and since that already happened and can’t happen again, there’s zero chance of a price drop. i’ve known some people who’ve bought in the past few years and zillowed their properties to see the purchase price, and since i have a pretty good idea of what they make i know that they’re all on interest-only or option-arm’s, which is probably why they’re in denial. if prices fall at all they’re screwed. i’ve actually heard of people pulling thinking they’re geniuses because they could heloc money to pay the mortgage.

so anyway, i’m just renting, trying to save for a downpayment, and biding my time. i’m confident that real values will come down significantly, but know that after what’s happened during the past few years that most people won’t give up their phantom-equity w/o a fight. i’m realistically giving it until mid-2008 or 2009 before i jump in; i imagine by then most of the damage will be done. if prices are still insane i may just pack up and leave. it’s frustrating though, because i’m finally in a place where i have a decent income, and i now have a 2 yr old and really want to move, but w/ prices where they’re at and my cheap rent i fell kind of trapped. but it could be worse, i guess i could be trapped in a house i bought for $700k now worth $640k and an arm about to reset and property taxes coming due.

I guess I am not alone on this problem in regards to family members and friends that make stupid financial decisions. For instance, watching someone you love, bury themselves further and further into debt because they could not control themselves from spending all the equity in their home. Why do they think this is free money? I can’t say anything because it just causes problems. I have reached the point of just distancing myself from certain people. Sad.

My brother and I shared a house (1950s 3/2 rambler) in Fairfax, VA, a Washington DC suburb. Brother gets married in 2005. Do I want to buy him out. NOT at the prices that same houses on the our street were getting. I make pretty good money, almost 100K, have good savings, but thought it a stretch to buy a $425K house - (less my 1/2 of accumulated equity)
While owning a house is nice, I don’t want a house to own me. Getting ready to go for a nice steak dinner. Could not have such treats if I had a mortage big as the grand caynon.

I agree with Ben in that it started with the Californians. I was born and raised in the San Francisco Bay Area and moved to Portland, Oregon in 2001. Coming from California, there is a huge shock of how far the California Dollar goes in other states. The inflated incomes that are necessary in California in order to assure that workers have food and shelter (at the very least) appear exorbitant almost everywhere else in the country. The dirty little secret (well, not that secret) is that if you can work in California and put a little away each month for 4-8 years, you will be able to live like a king in many other states. This is what I am doing as I have moved back to San Francisco just a couple months ago for a job opportunity. I miss Portland but know that when I move back in a few years, it will be to buy not rent and I will know exactly where to buy. The house I will be able to purchase will far exceed anything I would be capable of in California. Is all of this fair? Of course not. But toiling in a high income state and then buying in a lower income state is the only loophole I have found that can be exploited on a continual basis.

I live in a Rocky mountain resort town associated with world class skiing. I bought a townhome in 1998 that I paid off. I am a single, mid 40’s male professional with commensurate pay.
I have been studying the insanity that is the debt markets for 5-6 years. I have been watching RE boom. I could tell what was coming. I don’t think it will be limited to RE. I think the stock market is also headed over the precipice. I think we are approaching the opportunity and economic calamity of our lifetimes. In the next 5 years many fortunes will be lost and a few will be made. Get prepared.
One month ago I closed on the sale of my home. I pocketed 400k in cash. I have no debt. My 2 cars are 10 and 15 yrs old and run great. My rental costs me $1500/mo for a 3bed/3bath/1loft/2car garage palace. I sleep at night like a sac of potatoes. I love it.
My friends and family were watching my sale progress and shaking their heads. They would ask “Where are you moving to? Where are you going to buy?” I would reply “Nowhere. I’m going to rent.”
I would and still do get the most dumbfounded looks. THE LOOK as I call it is part of what keeps me going. Its the deer-the-headlights involuntary response to the idea that someone who can buy a big home has chosen to rent. Its hilarious to watch people try and get their minds around the concept. Sometimes they even twitch.
Let me close by saying that this road of rental is not for the feint of heart. Those of us who have the courage to risk it all to be a Bubble Sitter, and I mean specifically the ones who got up off the butts and sold their home, are definitely taking the “road less traveled…”.
I salute all of you who have the guts to go down this path. You have done it inspite of all the media hoopla and friends and family. It shows great bravery and intelligence and most of all, incredible independence.

Stay strong, fellow renters.

Stay strong.

Living in so cal, it has always been much cheaper to rent than buy. I have always rented from small landlords who prefer good tenants over high rents (now living in a 3-story townhouse for $1300 per month that would have sold at the top for $500k+). Buying only made sense to me if I were to sell later and pocket the money (and then rent) or extract equity. I had no desire to risk getting stuck in a down market and needing to sell.

One look at the low class, uneducated, sleazy type of people who are real estate ‘gurus,’ ‘investors,’ ‘flippers,’ etc. told me to stay as far away as possible from the rest of the real estate racket.

Renting, saving cash, sending my daughter to a top prep school and then on to Stanford (with no student loans and tuition paid in cash), was and is more important to me than ‘owning’ real estate.

Stucco be sure and look at this

http://www.risk.net/public/showPage.html?page=351397

I am not what you call a fence-sitter for the simple reason that I have NOT been able to buy, even if I wanted to. If prices were in line with fundamentals, well, just maybe, but they haven’t been even close since the time I graduated from college. (which, BTW, was seven years ago… but we managed to move from place to place that we couldn’t afford.)

I, too, wanted a house before kids (and we still haven’t gone for the second part yet). However, I never quite bought into the mindset of “if you don’t buy now, you’ll be priced out forever.” Except when I was depressed by the whole situation. So my husband asked me to figure out this whole confusing process of buying a house, including the bit about knowing when to buy. The books at the bookstore were no help, because they started from the assumption that you were buying a house, so I turned to the internet to find out calculations that would show when you could actually afford a house.

To my surprise, they were exactly what the books said— no more than 30% of income and so on— but that didn’t make sense with the prices all around. How much *did* you have to make to buy a house? And how is it that all of these people our age and younger have those kinds of salaries?

It was tracking down the answers to those questions that found me the bubble sites. And quite honestly, I wasn’t going to enter into a bad loan since I know what those look like. However, finding the reasons behind the bubble has done wonderful things for my peace of mind.

It’s nice to know that they’re insane, not me.

Three years ago we decided to rent after a suboptimal owning experience. Spouse was grumbling after first year of renting; spiteful after second year. Starting third year of renting, marriage counselor decided that buying would solve all of our issues. Noted that cautious people like me always have trouble with big decisions. Advised that buying a house has always been the best investment anyone can make.

I started reading Ben’s blog about a year and a half ago. I probably wouldn’t have made it to the moderating-growth-in-prices-stage without it.

This spring, all of our fence-sitter friends bought at 5% discount. However, reading about Suzanne-did-the-research had an envigorating effect on me. During summer, we twice had lowish bids accepted on houses, but somehow the deals fell apart.
This fall, I discovered that Zillow.com graphs had positive effect on spouse. The steep upward trend in prices are reminiscent of NASDAQ charts before crash. Enjoying autumn weather by taking strolls with spouse.

My wife and I moved here to Miami from New Orleans about 2 1/2 years ago. At the time I was wrapping up the end of my bohemian journey having left my job as a sales exec. in Los
Angeles for a dot-com. I was bartending at a strip club on Bourbon street and she was in nursing school so buying a house seemed to be on the back burner.

When we got to Miami I returned to my professional life and she took on a full time as an RN. With a combined income in the low six figures and having the option to get a V.A. loan (My wife was in the Army)it seemed like a no brainer, Miami condos were on fire. You could really be in the mix.

We went shopping and when I heard the prices I asked the RE agent if they were on crack. 550K for a 1/1 w/a bay view pluse $750 HOA? Helllllll NO!

So I read the papers and saw the stories, people camping out and flipping their contracts in 20 minutes. Ya know, as a kid I grew up in Las Vegas and my father was an adult night club owner. He is retired now…it was the government’s idea. It gave me rare insight into the shaddy side of business. In particular the use of the SHILL. Which for those unfamiliar with the term is a person working for you that pretends to be a customer and goes around singing your praises and talks about the GREAT deal, experience, resale opportunity, etc…. Other custmers believe the hype because the shill is quite talented. They rush in to buy when likely they would not have done so.

What does it cost to pay someone to camp out for a night in nice clothes, get into a rented Bentley and dance around saying they just made 80K in 20 minutes? It costs about $350-$500, that is if you hire professionals. Amatuers can be got for $100-$250, but you get what you pay for.

For those that call my example “Bullshit!” and say “conspiracy theory!” well let me tell you that you are naive.

Add to that while I college I studied abroad in Tokyo and saw their bubble pop first hand. In other words I have been to the puppet show and I have seen the strings. This market could not sustain these prices when the average income for a family of 4 is less then 60K.

The RE establishment argued “local incomes don’t matter.” When I heard that I knew the fix was in…what an absolute flawed argument. Miami is a major city not a resort so local incomes do indeed matter.

Also CNN.com reported Miami and Ft. Lauderdale are among the top 5 cities in foreclosure increases.

We may buy in ‘07 but most likely ‘08. By then the market should have shaken out and we can pick up an REO or a dump and fix it up presuming the foundation, floors and walls and plumbing aren’t shot. You can fix a roof much easier then the you can a foundation.

Oh by the way we are moving to Portland, Oregon this summer. Miami has too many hurricanes, too many rednecks, too many posers and too many obnoxious people from New York.

It was pretty simple for us - we make more than most people we know and still couldn’t afford to buy a house here in LA without a suicide loan. We’ll just keep renting until the math makes sense.

“How Did You Arrive At Your Decision?”

There was no decision, the housing market rose faster than my wife and I could save up a down payment over the past six years.

I was pissed off for a long time, wondering why the hell I had even gone to college, if I couldn’t even buy some shit condo…

In searching around, I stumbled on Ben’s site back in 2004, and have felt a lot better. (But am still bummed I can’t afford a place)

In 2004:

- My daughter was in kindergarten at a poor school. Pretty well ranked, but not a fit.
- Our house was new in 1994, and was build poorly. I saw lots of problems coming in the next few years.
- Our neighborhood was not kid friendly. Had to get in the car to go anywhere, and not a lot of other kids.
- Neighbor sold in 2000 for about 5% profit in 3 years. Another neighbor sold in 2002 for 35% profit. Next door neighbor sold in 2003 for 65% profit in . Something was way out of whack.
- We wanted to move to another area with better neighborhoods and schools, but hated the prices.

Renting allowed us the opportunity to get in and after a year we would be able to move quickly to purchase when the time came (it has not come). Plus the prices for renting were great, much more house for the same price.

We sold in late summer 2004. Our reasons for moving were only partly motivated by the expanding bubble, mostly by other things.

Our decision to wait to buy is completely motivated by the bubble.

I moved from Denver, CO to SF Bay Area in summer of 2004. Let’s just say that California has killed my inner child, and leave it at that.

I do my own research on markets. As the NASDAQ bubble crashed in 2000, I watched the national numbers on median home price, total value of all residential homes in the US, total mortgage debt in the US, total personal income, etc. The numbers didn’t add up. Home prices were rising much faster than incomes. Mortgage debt was rising much faster than home prices. Housing starts ran at their highest level in years. And new mortgages were bundled, split up as derivatives, and sold of to unsuspecting investors.

The numbers suggested that a very large percentage of the US popluation were doing a combination of several things…. Buying homes with little or no down payments, cashing-out equity to give them extra spending money, engaging in speculative purchases of homes as an alternative to investing in stocks, living for today and deferring payments until a later time, buying because of the belief that homes prices will always rise by 10% or more every year, etc.

These are all the elements of a bubble. The difference between this and the NASDAQ bubble is that’s the housing bubble is more widespread. The NASDAQ crash may have only directly affected 5% to 10% of the US population. Based on the nation debt numbers, the housing bubble crash is going to affect about 40% of the US population. (About 80% of the US population owns a home, and about 50% of those owners are overextended.)

After living in Tahoe for a few years and seeing the rapidly escalating prices we figured Washington was sure to follow. We saw what happened in Reno from the eastward migration of Californians and figured the same would happen as they flocked north to the Pacific Northwest.

We locked into a 6.375/6.875 30-yr fixed and made an offer in Bellingham, Washington in mid-May. Although the Washington prices doubled in the past four years, they were still about half of what we would have paid in Lake Tahoe. And when the much lower property taxes were calculated into the payment, it was only a bit more than we were paying on our mortgage in Cincinnati for a comparable home a few years earlier.

We bought near the market top up here, but don’t really care. 1,200 square feet is plenty for us, as we plan on staying for the next ten or twenty years and downsized our lives quite dramatically. Our house is a home, not an investment or ATM, and will contribute to our nest egg when we retire in a few decades.

A funny aside: Our real estate agents were telling me that they’d love to have me join their team if they had an opening; unfortunately they didn’t. For sale signs have been sprouting like mushrooms here after a fall rain.

Due to my visa situation,never looked at buying a house till 2003 june.
Though there were many in my situation buying home, which I thought was too risky.

“Consultant.No green card.get fired.You are upside down immediately.”

Got green card during that time.
I want to buy a house where i can put 20% down.
I thought,20% down proves one thing implicitly, it’s one of the check point for affording a house.
I live in bay area. that sums up , why I haven’t bought.

Checked out 3 condos in east bay. for my range 300-350k, it’s not big enough to
fit even my current 1 bedroom furniture and location was not desirable.
In other words, I fixed my range 300-350 +/- 25k. In that range it’s just not reasonable.

Checked a condo conversion in fremont near bart-220k in 2004.
it was very small for that money. It doesn’t even have a garage.
my friend bought for 200k and sold in 05 for 340k.good for him.
with his new found wisdom, bought he one in victorville,ca for 350k to flip.
now he’s renting that new house. I beleive he’s not making money in that(i m trying to
read between lines on this)

Checked a 3b2b condo in walnutcreek border. it was 400k opposite to a warehouse.
we didn’t care to checkinside the condo.

checked another one in concord(galindo woods).condo conversion. it looked decent.but who would buy 300k condo in concord. shady location.

Went to a realtor’s seminar (coldwell’s seminar in pleasant hill downtown).
had breakfast and coffee. listened to realtor’s (old lady) blah and their team of suckers
(title insurance guys,mortgage consultant and all those needed to buy a condo).
I just couldn’t trust these guys.Besides in that seminar, we were the only one’s with decent credit.I don’t want to be arrogant,but those who atteneded the seminar want to know, how to get financing with bad credit. And they are eager to buy asap.
Realtor said, she got 2 or 3 in my range and she wasn’t willing to show it to me.
As if the homes were precious, she will email the listings and I have to choose before she show a couple of them to me..
I thought too much restrictions for ME paying money.

Illogical cost
————–
300 Hoa
roughly 400-450/month on taxes+insurance.
so it’s 700$/month even if own the apt outright.
for 1000$ I can rent without any such things and still be in a decent commute location.
If rents go up too much in bayarea, i have to look for employment in some other state.
It just doesn’t make sense.

We bought in Sarasota in 2002, after semi-retiring and moving from the D.C. area. I must admit we never realized the bubble that was growing, despite the evidence all around us. I just thought Florida prices were catching up to what we were used to paying in our old area. But the 80% gross appreciation we got in 3 years is, without question, a bubble.

It was only the two rough hurricane seasons that convinced us to move. We checked out a number of areas and were amazed to discover how cheap things are in much of the Carolinas. Once we had a firm contract (cash, no contingencies) on our Sarasota house, we jumped on a foreclosed property here, paying less than half the selling price of our Sarasota house. Putting in the necessary repairs and TLC has our real cost somewhat above half.

BTW, we went from a nice but nothing special tract house in Sarasota to a slightly larger home in a gated community on a large lake. There’s a private marina, golf club (one fairway’s behind our back yard), tennis, fitness, and both indoor and outdoor pools.

There was no initiation/entrance fee, and monthly community and club charges are under $350/month. That includes a quarterly food/beverage minimum at the club, but not golf. Here’s where they getcha. A round of golf costs the exorbitant sum of $17 per person, including cart!

Homeowner insurance is WAY less. For equal-priced homes, I’d say property taxes here are around 80% what they would be in Sarasota. But you can be happy in a much cheaper house, so you can have a much lower property tax bill.

Without a doubt we were extremely lucky. But I strongly recommend to folks who are in bubble areas and who don’t have strong attachments there: Look elsewhere. Let your fingers do the initial walking, at places like realtor.com. There are still some wonderful, relatively inexpensive places to live in this country. We found one. So can you.

SE PA. A long-time, single workaholic with bad home-maintenance memories, I rented. Got married, and we decided to take the home-buying plunge in 2002, as long we would share the pain.

Lots of friends had purchased homes in the area in the late 90’s. I knew what they paid. We searched. The stuff out there was stinky, compared to what others had purchased. I began to keep a huge white binder in 2003. Even became a HUD buying expert. We pulled the baby out of the crib at 10 p.m. to go to a RE office to to bid. We lost. We argued. We resented. Repeated this process until mid-2005, before we called it quits (on home buying). Something just wasn’t right. It was the gut.

I began to track sales, and picked ten flipper homes, and watched them every week. Every detail. When metasearching one day on a term, I found the bubble blogs. I never read blogs so I was extremely suspicious. Just lurked for a long time, then finally began to see that many posters were just like me. Only more ticked off.

The blogs weren’t what kept us from buying, but the information sharing is truly helpful in decision-making. We will buy soon, if price trends continue downward, because we are almost at our person BE point financially on the Rent/Buy.

I wanted to buy a house back in 2003. I was fully aware that the housing price was going up much faster than our income but I also felt anxious about the talk of “being priced out forever.” I was not very happy because I thought by moving out of the Bay Area in 2001, we “can” afford a house in Orange County which was still reasonable compare to the BA from 1990 - 2002. My husband explained to me about the bubble many times then. I knew his logical analysis made sense but … Seeing that I was still anxious, he suggested that I do some housing bubble research myself; especially during the period of 1990. He also reminded me of the housing down cycle in the 1990 in the BA that we experienced back then. The first 10 minutes of my research, I typed “housing bubble” in Google. Found Ben’s website at the first click. We have been sleeping very well at night and happy renting ever since. A big thanks and hurray to Ben. We have been donating to his website and will continue to do so. Your website keeps us sane!

We considered buying in 1991. After talking to a client who was a bank president about the the requirements and documentation post-S&L implosion, I was repelled by the intrusiveness of it. It was also way more commitment than I’m comfortable with, to own something in DFW, where it was close to impossible to resell. I have severe commitmentphobia and claustrophobia. I have to know that I can get up and walk away at any time. That precludes being stuck in a house. As we get older, I might moderate that stance but I’d say the chances are still only 50-50. We have enough money to pay for housing until we’re 100 even if we don’t buy and pay something off.

I first started reading here in june this past summer. It’s kind of funny how I found this site.

A “friend” asked me if I would like to go to a meeting about real estate. She said that this company would give you a job and you could make lots of money. I immediately suspected a rat. If it sounds too good to be true it is. But I went along just to see what kind of chicanery was going to be sold as a bill of goods.

To make a long story very short I went to this Ponzi scheme meeting by this business called World Leadership Group. http/wlgweb.com

This was the biggest scam I have ever seen. WLG wanted you to pay them $ 700 to “train ” with them so that you can be a mortgage broker and use their license.

They tell people to get interest only loans, and refinance as often as possible and to get as many HELOCS as you can. They also say that real estate only goes up. They give you a percentage of the mortgages you sell. They also have an Amway pyramid thing set up where you get more money from the people under you etc.

In short they just about have every ponzi scheme all rolled into one business and the housing bubble to boot. Talk about super scams.

I hope some of Bens loyal readers check out this site or let me know if you have heard of it before. As I say It’s the biggest scam I ever saw in my life. These people are so corrupt and have no regard for financially non- savvy people.

Anyway, I didnt have too much knowledge about the subject so I started looking in bookstores and the internet trying to learn about this subject.

I wound up here on this site. I love reading posts by Txchick, auger-inn, imploder, crispy & cole, Get stucco, and all the gang.

I think I may have learned more here in the past few months than I did in high school and college combined. Im sure I learned more about how to protect my financial future than I have during the rest of my life.

I really think if they taught what we talk about here in school, many more people would be financially literate instead of lemmings.

Thanks to all of you who are a part of this blog. I have just recently started to post here as I didnt feel “Saavy” enough until I had a few months to learn from all of you. Again, Thanks to all of you and to Ben. I feel like im a member of a really fun club or group.

I finally retired, and did a long planned move from Mass to a resort area in Oregon. By the time I sold my McMansion (for a huge profit) in 2004, and moved, I could not afford to buy the house I wanted, and still stay retired. They were $180-220K when I “retired” and now $300-350K. Guess I should have bought because r/e always goes up.

So, I’m renting and don’t particularly like it, after owning a house for 25+ years. But, I’m loving renting for 1/2 of what a fixed 80/20 mortgage would be, with taxes and all.

I figure being a cash buyer in 2007-8 will prove to be a huge win. Just bludgeon the fb’ers or foreclosures with low ball offers until one gives in. I can be very patient, although it’s hard sometimes. Will be fun to sit down at closing with the HUD form and chop 3-4% off a realtor’s fee, while they are hungry as hell. (Of course, the buyer doesn’t pay the realtor fees, but that’s not what it says on the HUD form, ha)

This blog is moral support.

The OMG moment for us happened about 1.5 years ago. About 2 years ago we decided to sell our condo in Salem MA and trade up to a modest SFH. We did this principally to get out of the condo game as there are always neighbor issues in these old ‘garden styde’ condos that were never meant to be subdivided (from a noise-isolation standpoint). Things just got insane with the inmates living upstairs of us. So we put our unit on the market in ~March 2005 after sprucing it up a bit, painting etc. While the unit was on the market, we started looking for a SFH in the area. We expected to make a decent gain on our condo and ran the PITI numbers using a 30 yr fixed at x% with xx down - you know, standard, old-school financially conservative parameters. We determined our acceptable price for a house based on this.

It became immediately clear that any decent towns in our area were out of our reach based on these assumptions. Beverly, Salem, Peabody, etc. just weren’t in the cards. So we focused our search on Lynn and Revere, as they were cheaper. Lynn was either flak-jacket district or overpriced. We finally zeroed in on a place in Revere that was close to the Wonderland T station (end of the line of one of the Boston subway trains). It just barely worked out according to our calculations and needed substantial fixing up. Then the inspection came along and we found that there was a host of minor issues that, considered together, amounted to one big headache. The place had been subjected to a series of weekend warrior joe-handyman operations, some of which were of questionable quality.

Even so, we remained determined to sell the condo and buy this place. Looking back on it, we were insane to be doing this, but we didn’t realize it at the time. It really is amazing how nominally level-headed people can be subject to the intoxication of house-hunting. It all becomes subtly emotionally driven to the point that you don’t even notice how carried away you’re getting.

So anyway, we made an offer on this place and had a general contract prepared that stipulated a sell-my-condo-before-I-buy-this-POS clause. The expiration date by which we were to have sold the condo (or made bridge-loan arrangements) approached and coincidentally I began having misgivings about my job. It didn’t seem to really be going anywhere and I was developing doubts about the future prospects of success of the company I was working for. So that stimulated another thread in my thinking which argued for the sale of our condo and the acquisition of a tenant-at-will arrangement in a modest apartment somewhere until I got my employment situation stabilized. We wanted the option to move on short notice in the event I would find a job in another area.

So with this thread in place in our thinking, we were content to let the offer we had put in on the Revere place simply lapse due to inability to sell our condo in time. As it turned out, many other units in our neighborhood that were similar to ours had flooded the market at about the same time we came on the market. We were finally able to sell it in July, and were surprised that it took so long at the time. We ended up having to knock $13 grand off the price and were slightly disappointed by this even though we were relieved to be out of the market. We made a decent profit, having bought in 2001 before the market started getting out of hand.

We rented a nice little apartment and settled in to see what the market was going to do and what I was going to do about my job. At about this time I discovered this clever little community of naysayers here at HBB; that started a third thread going in my mind, one that has developed into near certainty of a major shift in market dynamics coming up for residential real estate. I have since changed jobs and moved to the Hudson Valley in upstate NY where we quite happily rent a small SFH while we wait and keep watch on the market locally. I see a lot of Toll houses getting ‘thrown up’ (both meanings intended) all over the place and welcome that trend even though I wouldn’t buy one that had been built during the frenzy years due to the recently-discussed workmanship issues, not to mention the bland architecture. For now we will wait, and maybe buy something in a couple of years or maybe more. I feel fortunate that my wife has seen the logic behind waiting and it totally on board with the reasoning. She went from being convinced that we had to ‘own’ a house before having kids to being a happily pregnant renter. As far as I’m concerned, I am amazed at how convinced people can become of the notion that it makes sense to buy no matter what, that you’re incomplete if you rent, that you’re missing out on the investment benefits, etc. etc. I am all the more amazed by it because it happened to me, too, and I feel infinitely grateful that we sold when we did and that we rented. We basically sold at the top, as it turns out by looking at the lagging data. I now feel well equipped to determine when a good time is to buy based on the wealth of knowledge on this site.

it started with rubino’s book, followed by talbott’s then deckers’. their arguments all hold water. It is really whether you believe in a paradigm shift in housing cost or a regression to the mean. My thesis is with the latter. Hyper-inflation is the only thing that can save the bulls in real estate. The war is a strong argument for this situation but imho not enough. I cannot see corporations shelling out 70k as starter income

Bozeman, MT
Not buying was a source of significant strife in our marriage. We moved here in 2002 and started track RE casually. Tried to buy in the summer of 2003, but things were crazy even in 2002, much worse by 2003. Still a lot of pressure to buy in 2004, but by 2005 we had given up.

Two things saved me: (1) I lost about half of the $10,000 I had in mutual funds with the stock market crash, so I was sceptical of rapid appreciation in any asset; and (2) I saw an article on the house price/rent being equivalent to price/earnings for stocks. I quickly did some calculations and saw that purchase prices expressed as monthly payments on a 30-year mortgage were WAY over equivalent rents, and that rents were actually falling as prices soared.

EVERYONE was telling us that we had to buy now, prices were only going to go up, Bozeman is a desirable market, we’d be priced out forever, etc…

In the end, I told my wife that I would be willing to buy if we could find a house that we (i) could afford; (ii) actually wanted to live in, and (iii) located in a nice neighborhood that didn’t require a significant commute. Couldn’t find such a place.

Instead we rented a nice 2-bedroom for $425/mo in the historic district less than a mile from campus. When we had our first child we moved to a 3/2 townhome at $700/mo with a nice yard, still waking distance to campus. So we’ve saved loads of cash over the past 4 years, and have a nice downpayment for a dream home.

I will be starting a new job in a small college town that has seen very little RE appreciation over the past 5 years, so we’ll probably go ahead and buy. The bottom line for us, is that we can comfortably afford to buy (on a 15-year fixed) a nice 4/2 in a great neighborhood with great schools, walking distance to campus. The RE market might flatten over the next five years, but we’re planing on staying for a long time.

Had we bought in Bozeman in 2003, we would (i) probably not be able to sell right now; or (ii) have to lower the price to such an extent that we would be losing money. Now everyone is saying we are lucky not to have to sell a home.

My wife has a great deal more trust in my financial sense given how things have played out.

Misstrial

I am originally from Las Cruces! I miss home.

I was walking down the road headed for Damascus, and all of a sudden there was this blinding light, and a voice said….

No, wait. That wasn’t me. That was Saul. Never mind.

Why does one need to own before havng children? I remember a boyfriend who’s BiL lived in a trailor…BiL was a VP for Wang labs and ended up with plenty in the long run.

Hubbie and I didn’t own till our kids were 1 and 3. They never knew the difference. Son (for all the anti-special ed types here) was top of his class in math last year. Don’t think that being a renter’s kid (or the Asperger’s thing hurt him) Straight A’s this year! Damn good in soccer and lacrosse too. Daughter had one C but otherwise right behind him. IQ 108, TU! Do what you gotta do guys! The kids do well as long as they have love and support!

After a couple of years of 20+% average price increases, I made up a spreadsheet that showed what our place would be worth if prices kept rising by 5,10, 15, 20 and 25 percent per year. When I saw that our humble abode might be “valued” at more than a million dollars in five-seven years, I realized that something was really wrong with the numbers. We looked at some houses in a neighboring county and found that they, too had the same price appreciation - Clue #2. By that time, I told my ready-to-move wife that I would not support buying first and selling second, and we agreed to rent for a year to get the two transactions done. Just before that decision, though, in March ‘05, I discovered Ben’s blog — no recollection how I got there because “bubble” was not in common use at the time. That was “all she wrote.” We were fortunate to sell just as our market peaked.

Now we’ve gone from a one-year lease to a second year and are thinking we should continue renting for one or two more, until the property market seems to be near bottom. And, for the first time, we are seriously considering having a house built. We believe that a year from now, most building supply costs should be well down from 2006 levels, the percentage of English-speaking, non-resentful, legal workers should be higher, and builders will be demanding a far lower profit margin than they did during the boom.

Good post, Carrie Ann. Most kids, given the choice, would doubtless prefer living in a nice rental, and have Mom and Dad be there for them, than have both parents (or just a single one) completely anxious and stressed out by being over their head paying for a house they can’t afford. Personally, I love being debt-free and completely unconcerned (OK, maybe a little gleeful) about falling house prices.

After I retired, I cashed out on my house in the PacNW, just in time. When I started looking at several states and communities to buy our “retirement” house, I learned the downturn was much worse than I realized so I’m playing extreme hardball w/sellers. I guess I’m not “on the fence” but more accurately, a “comp buster”.
I learned of Ben’s Blog through Google and have been learning more and more. Knowledge + Cash rules the day. I’ve got an extra house we are using as a base so there’s no pressure to buy. Since it will probably be my last purchase, timing the bottom is of little concern.

jim puplava and doug noland turned me onto the housing bubble.

this blog helped clue my brother into the housing bubble.

We paid off our place in the 1990s and were looking for more space starting in 1998. Prices just kept going up from there and we didn’t want to pay those prices so we just waited. And we’re still waiting. We went through the real estate downturn in the 1980s and one time was more than enough.

The decision was made for me. My salary is $115k per year, which means I can afford MAYBE a $350k house, and even that would be highly risky, not to mention very bad for my cash flow. I would also then be screwed if I lost my job, so I would need my job more than my employer needed me (exactly the opposite of the situation today). In any case, there’s not a single house or even condo available for $350k in San Francisco. I’m priced out of the market.

NYC bought 1998 studio $29K
Sold last month $260k
Moving to NE FL.

Being a Civil Engineer I’ve always enjoyed steady professional employment, but growth in wages has been poor compared to other fields particularly in California. With the stock options craze, housing in the SF bay area was quickly priced beyond working wage fundamentals, and with rental availability at 3% rents were very high too. In 1998 with $62k/yr in CA and a family to support (one income) I had little choice; it was time to move north to Washington state. I easily found another stable job online before we left, so moving expenses were covered, and we settled into a comfortable family situation in a small rural town. We easily pay our bills and save too, and we’re about 2/3 up on the socio-economic totem pole in our area. The downside has been the winter weather, which is a major issue since I’m the outdoor active type, but cold wet weather is still better than being financially upside down in California. We have many friends who are going to be shattered by the “smooth landing.”

I refuse to fund someone’s retirement.

I also worked for a high tech firm in 1999/2000, and I can spot a mania from a mile away now.

Friends from law school bought in Woodland Hills for $500K and I thought, are you kidding??? 105+ degrees for 4 months of the year, terrible smog, terrible traffic/hellish commute. Wife and I move to Europe and didn’t return till 2004.

Friends in woodland hills were smug. “Housing only goes up . . . LA prices are high and here to stay. They aren’t making any more land.” I swear they were smoking the realtor crack and getting stupider every day.

What started as a gut feeling in 2002, became a research problem in the end of 2004. I found Schiller and the bay area housing blog first. I don’t remember when I found Ben, but as I started to get more and more information (hard facts, graphs, historical pricing, rent vs. own caluculators) it was so obvious that there was an immense amount of speculation going on.

Present day: Friends in Woodland Hills in “900K” home tell me “real estate is crashing, but we are protected since we bought so early in the boom.” I laugh inside, on the outside, calm and nod head. Oh yes, you are both geniuses. Glad that you took out all of that “equity” to buy new cars, pay off credit cards, landscape and remodel.

We are accidential bubble sitters. We sold our house in Portland Oregon in June 2005. While we knew our home had increased in equity since we bought it in 2000 , we had no idea it would increase as much as it had, or would continue to. Many of the posters on this blog and others seem to be of the mind that they understood that we were in a bubble and forsaw the inevitable burst. We were not that informed. We had sold our home to finance a trip around the world, which we took from August 2005-June 2006. While we had a wonderful trip, we came back to Portland b/c as Dorothy says “there’s no place like home.” We had put half of the money we made from our sale (about $100k) into a savings account so that we may purchase another home. It is our intent to live here and we want to buy a home not an investment. But two things have made us sit (or bubble sit as you may call it)
1-my husband is working a couple of jobs and we’re bringing in the money but we want more security than his contracting work is providing now. So we are waiting for him to recieve an actual full-time job offer, which hopefully wont be too much longer from now. I am currently working on a couple of books as I’m a writer.
2-Prices continued to skyrocket here. I knew that there would be appreciation and I took it in stride like death and taxes, but another 30% in one year?!? (an interesting note: our home was sold again in Nov 2005 for $30k more and is now for sale again–$80k higher than that price!!) so that the home I had hoped to buy, less formal than our latest home, solid bungalow with only a need for cosmetic updates, does not seem to exist in the neighborhood we want, at the price I thought would be “reasonable” given 10% yoy inflation–around $400k. (though I can’t quote hard numbers when our house sold last year, it seemed that those kind of houses were available then.) Okay, so now we are in a holding pattern. We want to buy, like many people who want a house as a home, but prices still seem high or at least flat at “top of the bubble????” price levels. There have been a few price reductions in our ‘hood but they’ve mostly been 10-20 grand or so. We intend to be the 20% down 30 year buyers and honestly didn’t know or realize that people were getting into homes with any other kind of financing. I thought that most people here made a lot of money or all bought before 2000 when home prices were high but not in the half million-a million range they are today. When I ask friends if they could afford a home today, almost all say no way, not a $500-600k home. But for the updated really nice 3bed 2 bath ones with GRANITE counters, that is the usuall price. So here’s the 100,000,000.00 question-when more inventory hits the streets this spring what’s going to happen? Are prices going to stay flat, get higher (as in we’ve not seen the top of the bubble, there’s no bubble, prices are supposed to get really high each year?) or go down as all the folks on this blog think will happen. I’m not asking for a psychic reading, but sometimes it doesn’t feel like there will be a correction here. Maybe in some nasty subdivision in the central valley of California, but not here. Of course that’s what everyone says don’t they, that they are in a “special” area. So, we are accidential bubble sitters, not happy about it but really hesitant–even if we had a “real” job to be the last “sucker” buyer, before the music stops and we’re holding a stinker. That’s our bubble sitter story. Its too early to tell if we’ve stumbled across an opportune time in history to buy, sell and buy,or if we’ll be forever renters so I can’t gloat.

My spouse and I had been trying to buy a place in San Diego in late ‘03 and in ‘04. We had watched prices take off here suddenly and were afraid that we might never be able to buy if we didn’t buy then. The market was beyond insane and most of the places we looked at had up to 8 other offers within a matter of a couple of days at tens of thousands of dollars above the high end asking range. After all, they figured that they would make back that money in just a few months of appreciation.

My ‘Step Back and Walk Away From the RE’ moment came after a comment from the agent we were using. Agent suggested that we buy a particular place and then rent it out. I knew what rents were for the area, and there was no way that the amount would come close to the mortgage payment necessary to do it. Agent kinda shut up after I mentioned that. I had also asked Agent if people were squeezing into houses using very creative financing. She insisted that wasn’t happening. Something felt wrong.

I also hadn’t yet realized that the frenzy wasn’t just going on in SoCal.
I called a friend one day who lives mid-nowhere in the Central Valley and we started talking about RE. He started bragging about the fact that his home had appreciated quite a bit. I figured that it had gone up by $15K or so in the few years he had owned it. I almost choked when he told me that it had nearly tripled from what he paid for it! I wanted to laugh but I couldn’t. I looked up prices there, and I was stunned. People were obviously throwing dumb money at ANYTHING!

It was loud and clear to me in that moment that there was indeed a Housing Bubble.

I talked with my spouse later and we both came to the conclusion that we didn’t care if we were never able to buy a house. We would rather have financial freedom to be able to choose what to do with our money rather than be forced to sink it all into a depreciating, overpriced living space.

Finding any information about a possible housing crash or bubble at that point was very difficult. I spent hours searching on-line. I eventually found Patrick.net, rgemonitor.com and Piggington.com which gave me the answers I had been looking for. Reading those sites and eventually Ben’s blog helped me keep perspective when everyone else thought we were stupid for not buying.

My thanks to everyone who posts with their observations on how this is all playing out. I’m happily renting and eventually I may consider buying again when the market sorts itself out. When I do, it will be with a very different understanding than the panic and hype that I very nearly bought into 2 years ago.

Thank you Ben.

I ceased being a homeowner and started being a renter after getting my graduate degree in upstate New York. Isn’t it supposed to be the other way around?

When the offers came in for jobs (professorships/consultant), the best offer for my career was a South Florida job. In fact, the offer was fabulous. I’ll be able to put more on my resume out-of-the block than most others in the field for ten to fifteen years. People in my junior position just don’t get these kinds of offers, in fact. It was unreal.

Although I could toot my own horn here, and claim that the reason why I got the job was because of my superior intellectual acumen, it is obvious to me now that that had little to do with it. The fact is that the more senior people who would be more natural candidates refused to come (my guess). Why make the next moderate step in your career be one filled with financial peril? It just wouldn’t make sense, especially if you could go elsewhere. So I was the only fool to take the job.

My first assumption was that I would buy a house. I’ve been in the position before of having bad landlords, homes sold out from under me, etc. I didn’t want that again. So I did VERY simple research - not Ph.D. caliber stuff. First, I went to realtor.com, and looked at average homes like the one I was leaving behind. No Joke - 3 million dollars to live in South Florida the way I lived upstate for well under 100k. I was shocked. I couldn’t imagine that what I was seeing was true. So I looked at median home prices (widely available on the net), and I looked at median income by county (widely available on the net).

HERE IS THE MOMENT: When I looked at this, it was as if I was reading pages of textbooks on collective irrationality. It could not have been more clear. And every one of those textbook chapters, and every empirical case we know of ends up in one simple end - crash. It has literally never been otherwise, not even once. The only uncertain matter is how badly the house of cards falls, and what replaces it.

I only began to look for other people writing about this afterward - after I had decided not to buy. In that search, I found this blog.

I watched condos in my building start going for higher and higher prices and I was ecstatic when they got to a certain level. Then, I whipped out a spreadsheet, calculated the monthly carrying costs with the cheapest form of financing and I discovered that the monthly outlay the new buyers were on the hook for was double what they would rent for. I called a realtor that dealt with my building extensively and asked, “who’s buying?” he said, “investors.” I put it up for sale and sold within 3 days of listing it for $20,000 more than I was asking. It was the highest sale price in the building and an equivalent comp recently sold for 30% less.

My wife and I purchased a house/ guest house on a half acre in YBL, OC, CA. back in 02. A drug addict neighbor and I beat the pulp out of each other, DA prosecuted, went to trial, I testified along with half the police department, he went to jail, we got the hell out. Moved back into our 1100 SF home we bought in 85’
I guess you can say we became flippers because we held the house for 18 months while we fixed it up. We made money but the ordeal was not a pleasant chapter in our lives.

Now we split our time between a little house in CA and a 70’ boat in AZ. If and when the market makes sense, I’ll be hiring a PI to investigate the neighbors during my inspection period. One wingnut neighbor was enough for me.

“How Did You Arrive At Your Decision?”

As a wannabe landlord, the reason I arrived at my decision not to buy properties was simple math. OK, maybe not simple: It was complex, with spreadsheets detailing mortgages, maintenance, rent, taxes, depreciation, etc. The numbers just didn’t work out to profit in short or even medium term.

We already own a pre-bubble house that has a nice, low mortgage payment. So with a pile of extra investment money sitting around, I figured owning rentals could maybe be a good investment to diversify into. Some of my Dad’s friends and my in-laws have done well with that in past years.

Yet even back in 2002, the “yield” on rental properties in the DC suburbs was terrible! You’d be crazy to be a landlord given the then-current low rental rates in relation to house prices. When taking opportunity cost of my down payments into account, and putting only modest appreciation into the equation, each rental would have lost me several hundred dollars a month versus basic treasury bonds. I could set the rent high enough for a profit, but the place would sit empty. No deal.

I decided to wait until the market adjusted before taking the plunge — and it got even worse, even crazier! What are these fools thinking, I ask myself, when I see people sink $100k into a $500k townhouse and then run a huge negative cash-flow every month renting it out? But in talking with some, they completely ignore opportunity cost; they anticipate huge capital gains; they ignore vacancy or non-paying tenant potential; they assume no major repairs needed ever. I can’t compete against people like that!

Now I only look at listings as a spectator, out of interest in the direction of housing prices. House prices would have to drop a whole lot more than 30% here to make landlording a reasonable business, from what I can see, and it’s nowhere near that yet. Some other people obviously differ with my opinion, but I’ll let them put their own money on the line and lose it month by month — as I see some doing right now.

Tracked listings on one subdivision (Grand Oaks) since 2003 when I moved to Houston. New homes were getting sold, but exisiting homes sat for over 2 years. Hence decided to wait, and now plenty of bank owned/foreclosures listed + FSBO, all built in past 3 years.

I am tired of apartment living, need a larger place for my one year old kid. Hence finally decided to take the plunge on one of the bank owned homes. I made an offer for a starter home about 2400sqft nothing fancy, offer is 30% below 05 appraisal, will know on Monday.

Home is in good shape (3yrs old) will know more once I get it inspected professionally. One thing that concerns me is that I could not get any hits when I googled the home builder “Troy Builders” listed on the tax records.

Any advice is welcome.

In April ‘05 I read some book about the coming real estate bust, and found the arguments compelling. This was after I heard one friend after another talk about unaffordability of houses anywhere close to a neighborhood we’d want to live in. I’d owned my house in close-in Capitol Hill of Seattle for 5 years. By May I had a realtor, we finished some renovations in progress and put it on the market in mid-July. Just that month we were seeing a few people do price reductions so I was relieved to sell. I put some of my ‘winnings’ from the sale into two other less expensive properties in Vancouver, Canada and Austin, TX, but saved half of the profit for when prices start to soften here in Seattle–just starting to happen here.

Wife and I bought in 1998, small condo in Costa Mesa, CA.

We did our homework and one of the rules of thumb is that you must live in the RE for 5-7 years if you wish to break even, given normal appreciation and transaction costs.

We bought. I lost my job in 2001. We looked at comps and the bubble had already started. The HOA went to $500/mo and we wanted out.

Sold, banked the money, moved to the beach.

Worked 2 interim crappy jobs. Got tired of waiting.

Got a job offer in Portland, OR. Moved, bought a somewhat of a fixer SFH, Didn’t like Portland. Sold the house at the local peak of the market with very low inventory FSBO.

Got a good offer back in So Cal in early 2005. Renting in So Cal and waiting for the reversion to the mean. Found Ben’s first blog pretty early on with 0-15 posts per thread on Blogger.

In the early days of 2005 there were some articles that were a real stretch to link to the housing bubble. Nowadays Ben probably doesn’t have to search far for the deluge of articles but Ben must be a much better editor to weed through the garden variety RE bust articles to get the real gems.

BTW, we made a nice chunk of change on both RE transactions.

I moved to Livermore, CA in the wake of the dotcom bust in late 2001 after finishing up grad school in West L.A. I had heard of the insane rents and home prices from friends working up in the Bay Area, but figured Livermore would be more modest due to its location (I have family throughout the area, and have been to Livermore many times). Boy was I wrong. When I came to scope out housing, I found prices for similar (1970s tract homes) quality houses at West L.A. prices, which did not compute, but I took that to be a dotcom holdover. I found a modest townhome to rent, as the rental market literally transformed in the final months of 2001, at a decent price, considering the quality of it, but felt lucky at the time to find a match of price and space. I was expecting the job losses to bring affordability back, and for a short while the trend was going that way. There were stories of all sorts of layoffs in construction throughout 2002, then prices and activity rebounded. Fortunately, rents were coming down, and my landlord was just happy to have a paying tenant, so I had no rent increase.

In 2003 I realized the market was not just unbalanced, but in a mania. Prices were increasing monthly, and jobs were still getting cut. they raised my rent by 2% (average of 1%/yr, well below my salary raises), and I took it, because it was still cheap enough for me. I made a buy vs rent spreadsheet, and felt OK with where I was at. There was no rent increase the next year, and that just confirmed the mania. Rents are still at about the same level as they were at the end of 2001. Also, in 2003, I went to Tracy and Manteca to see the new homes and their prices. If ever there was confirmation of a mania, that was it.

I didn’t have a single HS moment, but it came to me from three experiences. 1. I bought a condo in Pasadena in 1999 and watched prices in the nieghborhood soar. I also bought a house in Ventura County in 1999 and converted the condo into a rental. I had been attending RE seminars for a couple of years at that point and had been poised to buy more cash flow real estate but changed my mind when nothing produced cash flow with a 15 yr fixed loan and 20% down. 2. By 2003 I had begun working as an analyst at the corp HQ of a huge mortgage bank and had free access to their portfolio statistics. I was terrified by what I saw and couldn’t believe such loans were being sold, pooled and resold. My condo had more than doubled by then and I sold it to a young single guy who financed 105% of the purchase price. Looking at his background, I couldn’t believe he would qualify so got backup offers in place but closed with him. 3. Then I got divorced and sold my house in Nov, 2004 and couldn’t believe the appraisals in that area. It was in Camarillo, far from most jobs. I had refinanced that one in 2003 and paid off a rental property I still own far away from California. I live in California and still cannot believe people will pay $600K for some of these $240K homes here. I am getting tired of renting but expect prices to go into freefall by the early part of next year so will wait until something cash flows with a 30 year fixed and 20% down before I buy something to live in, and wait for an overcorrection before I buy any investment property. I think an overcorrection is likely, given how far out of whack current prices are.

Dear Ben Jones…

I hope you realize the moment when you’re in it.

This thread has been the most intimately moving and interesting thing any of us have read in a long, long time.

This thread should be forged in Gold and set aside in a time capule for viewing by future generations.

The wisdom contained in the collective stories in this thread could fill entire city libraries.

This is, in short, the greatest thread ever assembled on this blog, and all of you should be darn proud of yourselves.

And I highly doubt even Mr. Ben Jones knew he was going to create something this moving, and this remarkable when he created it- both this thread and this blog.

How do I tell you people enough how amazed I am with you?

You’ve all taught me so much.

I’m really, really freaking proud to know all of you.

Ben Jones for President 2008.

My family was in RE (investors & broker/agents) since the 70s, so grew up around “bubble talk” and knew what traditional fiancing/numbers were supposed to be. Also saw many people lose their homes in the early 90s bust in LA (these were people who actually put 20%+ down and qualified with verified income to buy their houses, BTW).

Bought a house in San Diego County in 1998 for less than $120K. Still worked in LA (did the weekend commute thing) and watched the flipping begin about that time. By 2001, our house price had doubled, and we were shocked by what people were willing to spend on homes in our neighborhood (very basic, starter homes). Around that time, our waitress at Sizzler and her waiter boyfriend (both very young 20s) told us about the new home they bought for $400K (no downpayment). I remember being very worried when buying my $120K home with 20% down on a much higher income, so couldn’t figure out how people living off tips could qualify for such a mortgage. We also knew a couple who didn’t qualify for a bank account (too many NSFs & defaults) in 2000. By 2003, they could suddenly qualify for a $350K+ mortgage.

By 2003, our “starter” home was worth around $300K, and I knew we were in major bubble territory (same stuff was being said as in the 1989 bubble — no more land, priced out forever…blah, blah, blah).

In 2004, we needed to move up (more kids), and could not get just one extra bedroom without having to double mortgage payments (largely because of prop taxes) even when we had a 40% downpayment; so I convinced my husband (much kicking and screaming — only wanted to wait 6 months) to sell and rent. I had to do a lot of research and would print out every “bubble” article I read in order to convince him. At first, I was on UK blogs/sites (not many active in US), then the WSJ board and Piggington’s site. In spring of 2005, found Ben’s blog and have been addicted ever since. THANK YOU, BEN!!!

We live in a nice house in a much nicer neighborhood, closer to work than our sold house. Our payments are less than half of what the payments would be if we bought the same house.

Renting, and will continue to do so until the only buyers we are competing with are those in the same financial position as us (6-figure income, exceptional credit, 20%+ downpayment). It’s foolish to compete with buyers who have nothing to lose.

A note from far-away, seeing the same process repeat.

Background: I live in Russia, work in banking, direct experience with mortgage industry here and with US based experts. I’m a strong believer in home ownership for most people, most of the time. I own a rental property in my home country (good natural hedge in case I move back), nice yield from that even after mgmt expenses, mortgage, vacancies, repairs, etc.

I make a great income by local standards. Probably five-ten times household average. I have savings to buy with very healthy downpayment for a safe-ratio mortgage (at 10-year fixed, 10% interest). That money would barely buy an acceptable place in the center.

Places in Moscow now cost $150k for 50 sq m POS (would barely qualify as a studio in most other places) at the back end of beyond. (The boom is now spreading to places outside the city that are dumps.) You might be able to rent one of these for $400-500, largely because there is so much demand for the small places and no alternative; that’s the only highest yield an investor might get. 2-3 bedroom places worth substantially more can be had for anywhere from $700-2000 (although rents are going up). I rent at probably a third of the (implied, with a lot of fudging) carrying costs for my flat. All of this with few toxic mortgages available.

Same stories repeat as above: spouse wants to buy, everyone trading stories about how well they’ve done. Maybe one in ten people understand there is an issue when perhaps only 5% of the population can afford to buy, when very qualified people with solid incomes can’t afford anything decent. This was my Eureka! moment, realizing how out of whack incomes are with “value.”

A friend lives in a new building, 80% of the units empty and in bare walls condition. Artificial shortage everywhere as builders/speculators hold apartments back - after all, prices are going up 2-5% (and more) a month, why sell? (I read a quote saying prices would go up 20% a year for 20 years!).

Five years ago, the market here was a buy. Now it’s just plain insane.

Every visit to the U.S. I’d have this conversation. Everyone agreed prices here were crazy, but their market in the U.S. was okay, worried about missing the boat.

I’m thinking of relocating to Tennessee, within one hour of Nashville. The question I have is “Do you think that the markets of Tennessee have or will be negatively affected by the bubble or are these areas in the latter stage of bubble expansion?” It seems a lot of people from my area are moving to the deep south because of cheap housing, but I’ve noticed prices going up…Second question is “How do you evaluate the price of a house based on rent or the price of land plus construction” If you use monthly rent, how many months worth do you use or if you use land and construction costs, what price per square foot for an average home , do you use??

I was looking to buy in late 2000. But then my wife left me. As I rebuilt by finances I watched the housing market and was astounded by the appreciation. Hell, I thought it was pricey in 2000, but was willing to take the plunge because I had a toddler and I wanted to nest. I even wrote Lanser (sp?) in 2001 oe 2002 with my concerns that RE in OC was all about investment and no longer about Community. So I made it through the divorce with my FICO intact and a wee bit of savings and am quite clear about what my buy zone is. It is 150 - 200 times the rent I pay today. And prices here have a long way to go south before they are even close to my buy zone. In the meantime, I rent a nice place and am putting as much away as I can.

Bottom line is I cannot afford to buy in southern california. If I can’t afford to pay off the house within a few years, then I can’t afford it…. 500k for a shack in the ghetto isn’t my idea of a starter home.

I did not find my way to this blog until it was too late. Or rather, I couldn’t bear to read it while I was still in real estate hell.

1989: Bought first house (fixer in nice neighborhood) for 60K. Thanks to first-time-buyer tax credit, mortgage was less than rent. Many remodeling bills later, we sold in 2000 as a fsbo for 128K.

2000: Bought second house–another fixer, twice the size, slightly nicer neighborhood. Diagnosed with ovarian cancer in 2001, and that changed everything. Can’t retire early–now we need the health insurance. During treatment I had trouble climbing stairs and doing laundry. I figured the cancer will come back or I’ll get lucky and grow old and fragile. Either way we needed to move. Our neighborhood–early ’60s suburbs–had deteriorated a bit despite terrific schools. The hordes had migrated to the exurbs for the cookie-cutter look and big closets.

2005: Looked at lofts/condos downtown, but didn’t like the noise, traffic, crime stats and lack of stores, greenspace and people. And I knew someone who bought a condo in the mid-80s and so I was familiar with the pitfalls. True, no lawn to mow, but big HOAs to pay and plenty of paperwork to do for the lawsuits due to poor construction.

We wanted a well-built, energy-efficient, contemporary home with an open floor plan–almost impossible to find in my conservative soccer-mom-centric city. The neighborhood we really desired (another mature suburb with 1950s ranches) had been taken over by flippers who were destroying the character of the homes and using cheap materials for their flips.

In spring 2005 we ended up with a $290K conract on a (rare) contemporary 20-year-old custom home that backed to a golf course. Our realtor promised to hire the black-balled, deal-killer engineer/inspector she used for her own house (only way she could convince us to write a contract). We closed the same day we put our old house on the market. We let our realtor set the price–great schools, totally redone, blah blah, 269K. Reduced to 259K. Reduced to 249K. Contract for 248K, but guy didn’t qualify. It took 13 months to sell the old house for $232 minus 6 percent commissions. Meanwhile the massive remodeling bills on the new house were tumbling in. I thought cancer was bad, but I’d take another six months of chemo before going through real estate hell again. Thank goodness we accepted the loss on the old house instead of following the market down.

Happy ending. We love our new house–sunny southern view and low energy bills. And despite my horrible stats, five-year cancer checkup last month went without a hitch.

Tampa, Fla., here. After renting for an uncomfortably long time in transient apartment complexes, I was going to buy in 2000, and saved a down payment for that purpose, but then I stuporously fetched the newspaper one morning and read that my company had been sold. Because I suspected–correctly–that I ultimately would be laid off as a result of the sale, I put everything on hold indefinitely.

Fast forward three years, to my new job at 60% of my former salary. I noticed that many of my co-workers, to quote an eager participant, were “obsessed” with real estate. They would gather around their computer screens to look at “properties,” and would talk about how much other houses in their neighborhoods had sold for. Just from my experience in tech, I know what irrational exuberance looks like, so I stayed on the sidelines.

Other than doctors, pro athletes, and developers, few people in Tampa make significant money, and we have no new industries, so it’s obvious that things are wrong both in terms of price and inventory. It is impossible for a thinking person to drive around here and not become profoundly disturbed by the number of exorbitant houses and condominiums for sale, for rent, or under construction. Also, I was born in this country but didn’t grow up here, so the whole “dream house” phenomenon makes no sense to me. You are not your house, and your house is not you, and quite frankly my dreams never involved a house.

Thank God my wife is in my corner on this. We have no idea when we’ll buy, and that’s fine by me. The irony is that in the last two years, moving trucks have become a rarity at my apartment complex. After becoming accustomed to seeing new neighbors annually and even monthly, I now live in a stable community while many others live in neighborhoods of “investments” rather than people.

I have been a homeowner from 1991-2003 and it’s been mostly dumb luck that we didn’t get caught in this mess.

My wife and I moved from Florida to San Diego in June of 2003. We made the move to California without jobs, and I was starting a new business, so having cash was more important than owning a home.

During the next 2 years, almost all of the conversation around restaurants, coffee shops, new friends, wifes co-workers, etc, centered on what properties they owned (mostly condos) in San Diego, and what they’d bought in Vegas and Arizona.

By late 2004 I really felt like we were missing out on the “equity train” and became caught up in the home buying fever!

At this point we had about 100K to work with, but I still wasn’t comfortable with a $3400/mo mortgage and there wasn’t any way I was doing an ARM or interest only… so for mostly financial reasons, I held off.

About this time my wife found professor piggington’s blog http://www.piggington.com, pointing it out to me and soon afterwards found this blog… I felt completely relieved that we hadn’t purchased anything and have been a bubble sitter ever since.

Now we live in Seattle and are in a position to purchase a median priced condo with cash. Of course, that isn’t going to happen as it’s apparent that the housing crash will turn into a recession in 2007 and possibly something much greater.

The wife is on board and we are prepared to wait as long as it takes (3+ years or more) to find the bottom. We’re currently renting a fantastic 12th floor 2bd apartment with views of Puget Sound and Mt. Rainer, for less than 1/2 the cost of a mortgage. Much less.

My assets are now in precious metals and energy and I’m still shorting a few lenders, home builders and high tech - expecting a big bear market in 2007-2009 and wondering how long irrationality will reign in the markets. Not long I imagine…..

For me, my perception of the market was always a little bit baffling. I moved here to the Bay Area 7 years ago from another mostly rural state where “expensive” homes still sell for 150k or less. I arrived right after graduating college.Homes were insanely overpriced in my mind, even then compared to what I was accustomed to.My concern wasn’t about housing as affording one at all was not even a remote possibility for me. The job market was AWFUL. Most everyone was getting laid off, and my biggest concern was finding a job.
For the next several years I barely eeked out a living but was helped by the fact that rent dropped like a rock to obscenely low prices. The economy recovered and I started on a 4 year climb that eventually led to a 6-figure income level. I had been aware of the market and read the headlines of ever-rising price escalation. All along I figured that eventually I would make enough to get into a home.
Instead what happened was the more I made, home prices just skyrocketed that much more. It was really frusturating. What I was making at the time would’ve bought something only a few years back. Once I reached the peak of my income bracket, I did some quick calculations and realized that even with this income, I was still priced out of the market.
This realization was appalling to me for a number of reasons: for one, I knew lots of people who made less, yet bought anyway. After making my own calculations, I could see that these people had NO WAY of affording these things, and better yet, were the cause of what appears to be 2-3 years of additional artificial appreciation.
This last revelation was what got me to feel confident that the market is well underway for a major correction. People that bought in the last few years simply didn’t have the money to pay. People that are waiting likely have a realistic assessment of their money and what price level they can afford, which in my case is around 35% off the current median.
This whole fiasco has been a battle between the uneducated consumer and the financially wise. On the end, the later will win.

South Indian cities real estate bubble:-

I had been living in california for more than 8 years. I Visit my native country (India) once in 2 yrs.
I m from a tier II city in southern India.
tier II - with more than 1 mil population. preferred for IT and IT services after Tier I cities like Bangalore,Chennai, Hyderabad etc.

Real estate prices are red-hot in all the metros and in tier II cities.

Hype is because of
-IT and IT services economic zone starting in the city.(been expected for past 2 yrs)
-General economic boom.Not sure how long it will last.(India’s GDP is well above 7)
-National Highway(kind of interstate is going to passing thru this city).

Real estate (House reselling market and land market) are not regulated.
Any one can buy,sell and broker.

Affordablility is too much out of sync.
If you are middle class in India, you may not be able to buy land
If you are working and earning good, you may be able to buy a condo.
If you are earning in $, then you may be able to buy some land.after saving for
atleast 5-7 yrs.

1 acre land in the above said city costs a million dollars.
it was going for 200k $ last may.
This is with poor roads. very less infrastructure,lots of powercuts..

Not sure, how long it can sustain.
We had a crash in 98 march, when there was a bomb blast in the city.
It was mediocre for next 5-6 yrs. started picking up in past 2 years.

2b/2b condo cost anywhere from 60k$ to 120k$.
Just the condo. no public use space. no pool. mostly no water. bad/worst sewage.

not sure, how long this can go like this..

Affordablity in Ventura County California got down to 10% or less. So I sold out and moved to Phoenix figuring rentals would stay cheap in AZ so I can wait out the bubble. Ventura County rentals are expensive and rental vacancy was less than 2% so I figured renting there would be a big pain and expense, which is why I bought in the first place in the late 80’s. Sky rocking rental increases coupled with real low mortgage rates started the run-up in the late 1990’s in Ventura county, it was truly cheaper to buy than rent for a time. Of course it just kept going after that and spread to AZ as well.

My decision not to buy is rooted in the financial education I got from my
paternal grandmother when I was a kid back in the ’80s. Her father died in the late 1920s when she was in her late teens. For the next ten years she was the sole breadwinner in her family. Necessity made her careful and conservative with money.

50 years later, her grown children mocked her for being so careful. I watched her laugh and play along with their jokes, then quietly and selectively bail them out with ready cash when disaster struck. One year we got a new furnace in the dead of winter on her dime. After that, I paid real close attention to whatever she said or did about money.

My financial BS detector is my grandmother’s handiwork. By 2003 I had an income and a cash position good enough to buy a house in reasonable times. I looked at houses and loans, and my BS detector went off. I could get a mortgage, or keep my peace of mind. Peace of mind won.

I ran second-guess numbers quarterly for a while, but gave that up after reading this front page Washington Post story in early ‘05:

Burned
by the Boom in N. Va. Real Estate

The gist: Habitat for Humanity homeowners in Northern Virginia were gettingm squeezed by spiraling property taxes. Deed restrictions prevent Habitat homeowners from selling for a profit or getting a second before the Habitat mortgage is paid in full. So the owners were stuck with rising house payments they couldn’t handle.

The article wasn’t direct proof of a bubble, but it helped me hang on.

I’m in a bit of a different situation. Before I met him, my husband made out on some stock in a company that went public in the early 1990s, and paid $400K in cash for an old farmhouse on 3+ acres in a nice suburb. Several of his friends from the same company also paid cash for their houses because whatever else happened, they’d have a place to live. (Good move, because the company tanked and everyone got laid off…) The market was just coming back in our area at the time. Two years ago, we could have sold an acre lot for $300K if we’d wanted a huge ugly McMansion next door. (The area has one-acre minimum lot size.) An acre would cost about $250K now but we do not intend to sell.

We have no HELOC and wouldn’t consider one; we realize we are blessed to be semi-retired in our mid-40s, and we live frugally and avoid borrowing. But we’re still getting lender solicitations all the time.

So we’re set, but many of our friends are not. There is something about women wanting to buy a house (not a condo) *before* having a baby; I don’t think it’s very rational. (However, in this area many older apartments have lead paint, and landlords will pull all kinds of sh*t to get tenants who are expecting a child booted out rather than pay for the legally required lead paint abatement. So for some expectant couples, switching from renting to buying is a pre-emptive strike.) But anyone who isn’t willing to take a suicide loan is really limited as to what they can buy.

With the housing market churning like it is, I’ve been advising friends to be very careful and *never* believe a RE agent who says a house will automagically gain value. “Buy your home, not a house.” As buyers, they are very, very picky and won’t compromise.

The only sector of the market around here that’s remained strong is “starter” SFHs at $300 to $400K and even those are coming down a little. Part of the reason these houses stay strong is that they are so rare; *no one* is building homes like this anymore, just cheap condos and McMansions… and after years of apartment living, people know why they don’t want to pay twice as much to own as to rent!

I am also a beneficiary of a family trust that holds a home in Southern California; when it is sold (eventually) it will be the major share of my inheritance. That’s why I started following real estate, which eventually led me to bubble blogs as I realized just how insane housing costs have become. The stuff going on with mortgages now *sickens* me. Just an example of the free market run rampant.