“Who Is Left To Buy Now?”
Readers suggested a topic about who is buying houses these days. “Flippers, move-up and subprime buyers would appear to all have been recently knocked out of the demand queue by flat or falling prices. And anyone who was ridiculed for sitting on their hands while all the financial geniuses were cashing in on an ever-rising market certainly has little reason to change his mind at the moment. So who is left to buy now?”
“Let’s at least agree there is less move-up demand when prices are flat or falling than when they are going up 23% per year. Especially when cashout home equity ATM loans were such a big source of consumption spending money in the past three years.”
One replied, “People who change jobs or extend their families and haven’t educated themselves about the housing bubble. They think the market is what it is and it is now necessary to put 50% of their income into housing, because renting is not an approved way of life.”
“If you count them in the move-up category, many of them have not yet been knocked out of the demand queue by flat or falling prices. I have one extended family relation in DC and one coworker here in MN who belong in this category, but it’s their money they throw away by buying. The appearance that you are talking about is still different where I live, but, and there I concur, it appears the appearance is changing slowly towards less demand.”
Another said, “In L.A., there are reams of affluent Asian buyers, especially in the San Gabriel Valley. Whether they realize the pot has gone off the boil, is another question, altogether.”
“David Lereah, chief economist for the National Association of Realtors, said 2006 was a different market because past declines were associated with the traditional factors of employment losses and rapidly increasing interest rates.”
“‘The 2006 declines came from affordability problems because prices were too high, forcing consumers to borrow too much,’ Lereah said. ‘We also experienced investors leaving the market, the perception that real estate was no longer a favorable investment, and the scare provided by some members of the media that a national bubble was bursting.’”
“The percentage of first-time buyers in California able to afford a median-priced home stood at 24 percent in the third quarter of 2006, compared with 28 percent for the same period a year ago, according to a report released today by the California Association of Realtors.”
“The deeper freeze scenario? There’s less hard evidence in the latest federal statistics, but there certainly are some sobering trends under way in two categories of real estate markets: First, those areas where the regional economy has been struggling, corporate layoffs and plant closings have pushed unemployment higher, and there is little in the way of immediate relief in sight.”
“In the second category are the boom-era shooting stars where excess appreciation has burned itself out and prices are now flat at best.”
The New York Times. “In the last five months, single women spent more than $30 million out of the $100 million or so in sales in the 299-unit condominium. In fact, single women bought 72 of the first 165 apartments sold. Spending by these women far surpassed that of single men, who accounted for $19 million. Married couples accounted for about $45 million in sales, and investors $5 million.”
“The impact of female buyers may be most pronounced in the Brooklyn condominium market. Brooklyn developers are beginning to see the same troubling market conditions that are hitting Manhattan and the rest of the country. Brooklyn has 5,888 condominiums under construction and another 11,634 units planned, according to data gathered by Halstead Property.”
“Apartments are taking far longer to sell. Apartments in Dumbo, Williamsburg and Brooklyn Heights sat on the market for an average of 111 days last quarter, compared with 62 days in the corresponding period in 2005.”
“Erica Besikof said that her husband would have been happy to postpone buying an apartment. But she convinced him that they could stop paying a lot in rent and live closer to their favorite beer bar, and their favorite restaurant.”
“‘He’s more nervous about the market and if we’re going to make a profit,’ she said. If the couple hadn’t found an apartment at 110 Livingston, ‘he would have been fine renting,’ she added.”
At the end of the day, there really is no one who “must:” buy, although there are some people who always do, i.e. the legion of people in the corporate world who get moved around or otherwise travel from one area to another because of a job change. Other than that, the more discretionary aspects of the market, i.e. move ups and first timers are about it, because any speculators who haven’t moved to the sidelines are too stupid to breath. I guess the fraudsters share of overall activity has grown.
In the Northeast and California the first-timers are all but priced out, so in those markets the declines should be even greater. There certainly are a good number of people who have the equity in hand if they wish, but they would have to be rather uninformed about market conditions to pursue that.
Spring 07 is going to be a sight to behold.
Don’t forget the Pacific Northwest. In Seattle metro the only way that most first timers get into a house is with an option arm that starts at 1.3%
I live in a small town in the Yakima valley where a new house is still on the market because a lady in Seattle cannot sell her home. The builder has extended her two times and she has dropped her asking price by 50K.
“In the Northeast and California the first-timers are all but priced out, so in those markets the declines should be even greater.”
Buh-buh the CAR told me that 24 percent of first-time buyers could afford to buy a California starter home…
Under prior measure of fixed rate loan the % is really around 10… very close to the prior bubble of 1991.
Only 10% of todays homeowners can afford their own home. The 24% is based on “new exotic lending standards”….
Interest only loan with say 100% financing…
You are preaching to the choir, Louie. Please check out my lengthy diatribe on this subject posted to the Local Housing Market Observations thread.
10% … is the affordability percentage really that high? 10% have 100-120K available for a down payment?
“Buh-buh the CAR told me that 24 percent of first-time buyers could afford to buy a California starter home… ”
Here in Humboldt County Ca. it’s 17%
Wages are low here but some are asking Bay Area or Sac area prices.
“Erica Besikof said that her husband would have been happy to postpone buying an apartment. But she convinced him that they could stop paying a lot in rent and live closer to their favorite beer bar, and their favorite restaurant.”
Assuming they are spending at a minimum $3K a month for a 1BR typical NYC apartment to rent, they bought into 110 Livingston, lets assume around $700K for a 1BR which is probably low.
With 10% down that’s a $630K mortgage. With a 6% fixed thats $3777 a month for just the mortgage. Add in maintenance, taxes and insurance. this particular building has very high taxes by the way.
How are they saving money again? They are now not paying a lot in rent, they are paying 150% TO 200% MORE TO OWN.
yea, but they are closer to their favorite pub. will save tons on gas.
I cant imagine what their favorite beer bar is in that neighborhood? They are on the outskirts of Bklyn heights, in more of a commerical strip adjacent to the downtown Bklyn courthouses. Maybe on Atlantic Ave, but to drop more to live near that? Cmon. Im guessing its this
http://brazenheadbrooklyn.com/
this is where they overpaid for their condo (note obligatory flashy misrepresentative website) check out the tiny floor plans
http://www.110livingston.com/
and DUI’s.
I’m one of the priced out people. I make just above the median salary in Sacramento and have a 20% down, closing costs, et. al, IF I were to buy a home with the PITI at 30% to 40% of my salary.
Sure I’d like to buy, even willing to buy, but I won’t do so using a voodoo loan and I’m my idea of a starter home isn’t a 2 bdr SFR in the heart of Oak Park. If there was anything reasonable, I’d be looking at it.
Lindsey wrote ‘At the end of the day, there really is no one who “must:” buy,…’
True. But I did see posters on the AOL real estate board as soon as summer of 2005 that they need to buy a house. At kept replying to posters like those that they are nuts.
Now on a related topic, Yahoo Finance columnist/resident shill Laura Rowly rattled on marveling how many single women these days are getting into real estate, even more so than men! I laugh because maybe men are knowing better about to stay away from overpriced houses: http://finance.yahoo.com/columnist/article/moneyhappy/17039
Laura names names in the column of women who are into home ownership. How embarrasing for those she names, because they will be in hot water in a few years when their $700,000 palaces turn into $250,000 anchors.
“maybe men are knowing better about to stay away from overpriced houses: ”
Are you for real?
P.S. I’m a dude.
“maybe men are knowing better about to stay away from overpriced houses”
Actually I would agree with that statement!
I agree with the statement also. Men overspend on the overpriced shiny sport cars!
Men overspend on the overpriced shiny sport cars!
Just a little bit of a difference between a $45k easily marketable Corvette, and a “boat-anchor” illiquid $700k condo.
Suspicious 2, I hear ya. But it does beg the question, what IS the New York Times trying to say here? On this thread on poster reminded us that in the past, the Times ran an article on how people ‘afraid’ to buy had psychological fears of commitment.
Is this a similar attack? ‘Come on guys, these women are making you look like gut-less fraidy-cats.’
Thanks loads Ben ….I know I will get attacked if I say anything . Here goes ….Men look at real estate more from a investment standpoint while with women its more of the nesting thing . I just really think that this thought of being priced out forever on the home purchase really spooked alot of women .OK I’m ready to take the blows .
If there was evidence of this in the general market, I think we would have heard about it. IMO, the Times found a sub-market where the stats fit a story they wanted to run and used it.
Men are men, and women are women, but that’s a long way from what the Times is inferring here. I still can’t exactly understand their point, unless it’s just a rah-rah RE piece.
“‘Come on guys, these woman are making you look like gut-less fraidy-cats.’ ”
You know I hadn’t thought of it that way Ben. But based on the histroy of the media’s cheerleading and always trying to manipulate the masses about something. I would say you’re absolutly right!
Wow! Are they getting desperate or what? And the real pain is yet to come. Man we are going to be hurt’n!
Nah, I’m not going to bash you, HW
With women, I think its not *just* a nesting thing, but a security issue: fear of ending up a baglady in their later years. And, women are more sensitive, I think, to societal pressures, which in this case would be achieving homeowner status and not a renter - sort of like carrying Louis Vuitton as opposed to a bag from Target.
I would *somewhat* disagree with men & the investment thing - I think that they simply want a place of their own whether its a double-wide, condo, or SFH (this assertion would not include Trump, et al).
~Misstrial
“With women, I think its not *just* a nesting thing, but a security issue: fear of ending up a baglady in their later years.”
But wouldn’t getting foreclosed after buying a home you can’t afford increase, not decrease, baglady-hood risk?
Interesting Misstrial , I didn’t know this “baglady fear “came into play .
Spurred into action by Ben’s challenge, I will share some insights which may prove to be, shall we say, controversial.
I think Jack Nickolson (his character, rather) hit the nail on the head with his characterization of women in AS GOOD AS IT GETS: Asked by an adoring doe-eyed bimbo how he got inside the head of his female characters so well, he responded, with typical vitriol: “I take a man…and take away reason and accountability!” Well said, sir! I would also add that women tend to judge themselves by the envy and approval of their peers, rather than more substantial measures like, say, good financial judgement. As far as ‘deferred gratification’ most females, in my experience, exhibit all the restraint of monkees at a salad bar.
I remember the classic Calvin (of Calvin & Hobbes) observation to Suzie: “Girls are like insects — they have a dim perception that nature has played a cruel joke on them, but they lack the intelligence to grasp the magnitude of it.” Some of these single-female buyers certainly fit that description, though I hasten to add that my own wife is a very smart cookie [she married me, after all].
I will now calmly await a massive retalitory attack from our weaker vessels….
Come on guys, these women are making you look like gut-less fraidy-cats.’
These “women are the greatest” cheerleading articles are nothing more than insidious Oprah inspired male bashing.
Note the Yahoo reference to a “record” number of female purchases in 2005-the absolute top of the market!~
We’ll see who has the last laugh.
Hi HW: Yeah, the bag lady thing is a big fear. And yes, GS, we agree that winding up in foreclosure is not the best long-term event to be in. Unfortunately, the RE Industry knows which buttons to push when it comes to inspiring people to buy (for the wrong reasons).
~Misstrial
Ben,
You were quick enough to hit the delete key when some posters started getting antisemitic a few weeks ago. Why is it that you don’t use the delete key on sexists? When people start calling women ‘weaker vessels’ I think that’s more than a little over the line.
Ask any social scientist and they’ll tell you that it is very hard to untangle truly biologically-determined behavior from the acculturation process.
I love reading Sammy’s stuff. He cracks me up. The “weaker vessels” comment might be a little over the top. Unless, of course, it simply pertains to physical strength, in which case it is an undeniable fact. But, as a guy raised by a single mother, with three beautiful sisters, I have noticed some sexist, derogatory comments towards women on this blog that I have found foolish and tasteless to say the least. The men that make them are just ignorant and insecure. I venture to guess that their luck and skill has not been so good when it comes to their relations with the opposite sex. Spurned by beautiful women, they are resentful and bitter. Such is the life of these homely men. I, on the other hand, love women for who they are, and thanks to my mom and sisters, find myself in their good graces most of the time. I admire their advances in our society, and love to see them achieve not only home-ownership in record numbers, but esteemed positions within the workforce. To me, it would be an honor to have a wife who was more “successful” than me in societies mind. But again, I have never felt “threatened” by women. Here’s to you ladies!
Yes thank you BanteringBear. I agreee with you.
I too was raised by a single Mom. I don’t mind having a little fun but comments like “weaker vessels” .. you’ve got to be kidding me. Who can make these blanketing generalizations (and other comments above) with a straight face and believe it.
Get over yourselves!
Bantering, I was raised by strong parents. And I have three older sisters, no brothers. None of my sisters knows how to manage money. The best of the three does not buy what she does not need, yet she has a 30 year old do nothing son she supports with “economic out-patient care,” as Stanley and Danko would say. The next oldest spends whatever she gets, but does not buy a lot of dust collectors. Her indulgences are expensive hairdos in San Francisco. She has had to undergo credit counseling once, in her late 40s. The youngest of the three is now 49. She has historically bought all sorts of things (not knick Knacks, but $500 bicycles, $1000 computers, exercise equipment, and in one example a Yamaha keyboard she probably used once) and she would give them away, having used them sparingly. I have been forced to adopt her habit (kind of) of using something expensive I bought so few of times. I live with her and have a very nice mountain bike I paid $1200 for. I rode on it 5 times in 15 months. The problem is it is a hassle to take the bike out. I have little space where to put it and have to carry it over a lot of stuff. Some of my sister’s belongings are in my bedroom. The studio I rented in Torrance, California had 3 times the space that I currently have here in Phoenix! But now my sister is moving to another state, taking a $20,000 pay cut so that she can avoid a hot Phoenix summer (another rant of mine how ridiculous she is being). I will then get this 2 bedroom 2 bath luxury apartment to myself. I don’t make sexist remarks about how I see women handling money. I have first hand observation. Call me insecure, but that does not change the fact I can live 6 years without a job and invest $2,000 per month those 6 years in whatever I want.
Lighten up, Francis. The “weaker vessels” comment was purely tongue-in-check. Some good-natured ribbing between the sexes in here isn’t anything to get on your high horse about. Political correctness isn’t something I feel a need to adhere to in here or anyplace else.
Just as an observation, but I’ve noticed that guys who loudly proclaim their devotion to women’s rights are never actually popular with the ladies. Why is that?
Ask any social scientist and they’ll tell you that it is very hard to untangle truly biologically-determined behavior from the acculturation process.
Fiat Lux,
I get my opinions and knowledge from personal experience and observation, not ’social scientists.’ I’ve never in my life seen a sorrier collection of nose-pickers and bed-wetters than the sociology majors I went to school with. Most of them are probably still living with their mothers, or should be. Society may give such clowns and their quack “studies” unwarranted credence, but I can’t see turning to them for “advice.”
As far as your demands to Ben to delete my “sexist” posts, one reason this Blog is as popular as it is, is the latitude posters have to engage in the free exchange of ideas and opinions, unfettered by the slavish adherence to political correctness you seem to demand. Do people, including me, sometimes step over the line? Yes. And Ben has had to squelsh some of the more extreme or obnoxious posts and posters in here. But some of the most “offensive” posts are also the most colorful, entertaining, and enlightening, which is a big reason for people to come here in the first place.
I would respectfully suggest, “If you can’t stand the heat, stay out of the kitchen.” But don’t try to yank my kitchen privileges.
Ben, you are right when you detected something a bit strange.
Anything like this from the NY Times is clearly a social commentary on top of a real estate report. It’s supposed to be some kind of empowered women crossed with a tinge of feminist promotion.
Funny the article clearly states single women outspent single men at this condo by a 2 to 1 margin.
I would love to see how the apartments are furnished by the occupants, but I can guess.
The single men: Big leather couchs or club chairs from Crate & Barrel, huge flat screen and enterainment area. Minimal decoration. Some framed posters.
The single women: Fluffy furniture w/ pillows, lots of knick knacks, candles etc , 20 pillows ona giant fluffy comforter white bed. A superorganzied kitchen counter, Some kind of a light green paint. Tons of stuff(junk) from bed Bath & Beyond.
This is single life in NYC, and probably most US cities.
Right on the money Ben - (and I swear I won’t post this a billion times) - this is the same twaddle from the paper that actually tried to guilt readers into buying at the peak last summer.
How pathetic that they’re now playing the gender card. OK so this week’s shame roundup:
Bloomberg, Reuters (for trumpeting without question REBNY’s rosy yet completely unverifiable and illogical NYC market data), of course, the RE syncophants at the NY Times for trying to flatter women into buying.
If women are likelier to ignore market realities, a responsible newspaper, out to serve its female readers, ought to be warning them of the pitfalls of purchasing, instead of glamorizing poor decision making.
But of course, poor decision-making is what’s stoking the Times’ RE ad sales. So we can expect the Times to keep the deceptive and patronizing spinformation flowing.
The NYT article is less about real estate than it is about feminism — though in this case readers of this blog all agree that these women who run with the real estate wolves are about to get a lesson in real world finance.
Which of course will lead to another article, in the post boom canon, about how women are bonding in credit counseling groups.
And dear god, there will be books about all this — confessionals, apologies, navel-gazing tripe! How I found my womanly power after getting foreclosed on!
Sammy your so right about reason and accountability…
just look at HPs Patrica Dunn … perfect fit to your comment.
“Thanks loads Ben ….I know I will get attacked if I say anything . Here goes ….Men look at real estate more from a investment standpoint while with women its more of the nesting thing . I just really think that this thought of being priced out forever on the home purchase really spooked alot of women .OK I’m ready to take the blows .”
Not from me HW. I will absolutely agree that women nest and men invest - a very stereotypical view but there is some truth to most (all?) stereotypes. The problem begins however, when you take a stereotype and apply it to an entire population with no distinctions of grades. Anyone can come up with a story that “proves” all women are illogical, spendthrifts, and buy for emotional instead of practical reasons. Heck, we all know someone like that.
The problem with that stereotype is that the vast majority of women ON THIS BLOG do not fit it. We have not rushed out to purchase homes that would destroy our finances. Many of us are in the financial fields and are very good at our jobs. Many of us had to talk significant others (or are still trying) out of poor purchases and have tried to reason with our families and friends about not purchasing. Of course, since women are “bad at money” and “too illogical to understand complex financial transactions” we were ignored and are only now having the last laugh.
I think if the men on this blog kept hearing how stupid ALL men were because of the Casey’, David’s, Donald’s, Alan’s, and Gary’s, they would not appreciate it. Yes, we can explore the differences between men and women, and I will admit they exist, but when posters want to blame the entire bubble on a single factor like “women have to nest no matter what” it only proves how poorly SOME men are at logic analysis. There are many reasons for the recent extreme bubble and both men and women bought into the NAR’s and other’s lies. If most flippers were male and most home buyers were female (or female influenced) it still begs the question which did more damage?
dunno about that, but men dont have that ‘nesting’ drive. The women in this article clearly are the single Sex and the City pathetic types
To chime in. When we talk with friends about waiting to buy because of the bubble, it is the women who talk about the psychological benefits of owning a home and disregard the very real possibility of losing hundreds of thousands of dollars on a home in the current market.
They just don’t seem to weigh the financial factors as much.
Just for the record, I’m a woman and I’m not offended. I’m not that type, but I can certainly recognize this crazy behavior in some of my fellow women. I think some of that princess stuff has got too deep into their heads. It’s all a matter of how you’ve been raised. Also, the housing bubble is more prone to turn women’s heads because we all want a house, in the same way that the stock bubble turned men’s heads because deep down many of them want to be tycoons. This is a female-oriented bubble, while the stock bubble was mostly male-oriented. Does that make any sense?
Cassiopeia,
Thanks for coming through, as always, with insightful and honest comments.
Sammy,
I think you’re funny!
That being said, I think the whole point of women buying RE is due to women being older when (IF) they get married. Up until *right now*, buying RE was THE way for middle-class people to move up, socially and economically. That’s why there’s the whole “renter stigma”. Renters, historically, have fared much worse than homeowners.
As more women realize they are on their own, and will likely not be getting married (or will do so later in life), they are moving on with their lives, without men. It used to be “get married, buy a house, have kids” = success. Women are having to bypass the “get married” part.
Given a normal market, women would be very wise to purchase homes when single. Unfortunately, IMHO, we are moving away from a society that is centered around the nuclear family.
>> Asians compare prices to Asia…any US RE is cheaper especially when there is not much RE between LA and Hong Kong. Another consideration is that RE investments bring other benefits..business, hiding ill-gotten gains, schooling, citizenship etc.
lets not forget aside from Japan RE prices falling HK prices fell as well.
David Lereah will get his traditional job loss factor soon enough, including from his membership.
I actually think there are quite a few buyers out there on the sidelines. The smart money is waiting for prices to correct and then buy. There are a lot of smart folks out there who could see this whole mess playing out.Prices will have to fall further to entice smart money back in the game.
Agreed, but for boomers like me who are renting, there really is no hurry to buy SFHs. I would rather invest my money in real income property. For me, an SFH would be a luxury purchase, not an investment.
As I have pointed out before, people who are counting on their “investment” in their houses to pay for their retirement may be seriously disappointed when the time comes to get their equity out to pay for living expenses.
‘I actually think there are quite a few buyers out there on the sidelines.’
But are they qualified and on the sidelines? I think not. Isn’t the ownership rate just under 70%? Judging from numbers of citizens without health insurance, I’m thinking the other 30% has few numbers that can afford current prices.
I’m qualified and on the sidelines - just not stupid enough to pay 50% of my income a month on a house. I can wait and keep saving.
exactly my thoughts… its even worse if you paying in cash. Think about that one… no appreciation for 10 years. My rent is 30% of owning and I doing really well
on investments.
I’m qualified and on the sidelines and I can afford the “median” priced home. But, I don’t want to buy enough to toss money out the window.
I’m qualified and on the sidelines. And I actually think there are some bargains out there if you know what you are looking for, have a strong hand, and plan to stay put for a long, long time.
My wife and I came pretty close to making the jump this fall, but an awesome little house three blocks from the beach came up for rent at little more than a third of what our mortgage would have been, not counting taxes and HOAs. We did the math and laughed hysterically.
That settled it. We’ll just stay put and sock away more cash until my oldest son finishes elementary in four and a half years.
“My wife and I came pretty close to making the jump this fall, but an awesome little house three blocks from the beach came up for rent at little more than a third of what our mortgage would have been, not counting taxes and HOAs.”
If homes by the beach are renting for a little more of a third of what your mortgage would have been before taxes and HOAs, wouldn’t you say that is a fairly substantial hint that prices are nowhere near bottoming out yet?
“wouldn’t you say that is a fairly substantial hint that prices are nowhere near bottoming out yet?”
Yes indeed, and if it weren’t for you meddling kids we would have done it, too!
The house we thought about buying was in Del Sur in RB. The mortgage on the house we rented in LJ would probably be more like 4x rent.
Once I sat down and really thought about just how much cash I would be tying up each month in buying, I just gave up on the whole idea. I want to take my family on vacations, and save for college and retirement a WHOLE lot more than I want to own.
I’m a qualified buyer and need/want to buy. But, I’m not gonna get caught in the upcoming financial storm with both hands tied behind my back and a huge anchor on my wallet!
I think I’ll be waiting for a couple of years and then we’ll see.
I agree with you Ben. I don’t buy into the whole “pent up demand” thing. Those who were really itching to buy, already have. Sure, a smart few are waiting, but few being the key word. IMO, only the rich and the stupid are purchasing right now.
There is no pent up demand. Whats done is done. There is only a long road of housing pain ahead. It really will get ugly this Spring.
Personally I am going to laugh my ass off.
Me too buddy — what pent up demand? With all the sellers and realtors waiting for the market to turn next Spring, it’s more like pent up supply!
You’re right, Ben… that remaining 30% is made of people who will never be able to buy a home -or- have never wanted to buy a home (regardless of means).
Can’t count those on this board, too — we’re obviously some kind of freak human anomaly (i.e., independent thinkers).
sm_landlord wrote “As I have pointed out before, people who are counting on their “investment” in their houses to pay for their retirement may be seriously disappointed when the time comes to get their equity out to pay for living expenses.”
Roth IRAs are a far better way to build up retirement savings than real estate. New tax law means high income earners can switch their traditional IRAs to Roth’s starting in 2010. Too bad many boomers missed the boat on that one and bought second homes at double or triple their real value.
http://finance.yahoo.com/columnist/article/moneymatters/16201
“New tax law means high income earners can switch their traditional IRAs to Roth’s starting in 2010.”
Yes but you’re betting the tax rate is better when you take the money out than it is now.
A bird in the hand …
Tell me how it can be worse converting to a Roth IRA and paying taxes on the gains during conversion than not? And since at 2010, I will have on record legally paying taxes on my gains at conversion time, there will be no grounds to tax me (and other convertors) after that. Just my 2 cents.
“Yes but you’re betting the tax rate is better when you take the money out than it is now.”
Do you really expect tax rates to drop in the future with the demographic trends seen today? Are you betting on people to suddenly take responsibility for their lifestyle choices? How are savers rewarded today? The traditional IRA(s) have a built-in tax future liability; I’d rather take my caning right now.
And of course the government would NEVER change the rules and break a promise, such as their promise not to tax people on the profits in those Roth IRA’s. Right?
The ROTH conversion rules that go into effect in 2010 will be very handy for higher income individuals who were phased out of both Traditional and ROTH IRA contributions. Many people would still make non-deductible IRA contributions (no instant tax savings) in order to have the growth on the account tax deferred. Now, even though they make over $100,000/year, they can convert these non-deductible IRA’s to ROTHS. They will have to pay income taxes on the gains at conversion, but the original contributions were with post-tax money and will not be taxed again. A great way to turn future growth into tax free income.
As for the feasibility of the ROTH’s being taxed in the future - I don’t know. It does seem someone plausible that Congress could declare the gains taxable in the future because of huge national debt/expenses. However, I think that would finally trigger a (violent) tax payers revolt.
“New tax law means high income earners can switch their traditional IRAs to Roth’s starting in 2010.”
Bill - why would i want to do this?
Traditional IRAs are funded with pre-tax money and compound tax-deferred until retirement, when you must make withdrawals which are then taxable. Roth IRAs are funded with after tax money, and thus withdrawals in retirement are tax-free. If you choose to convert from a tradional IRA to a Roth ,you are betting that tax rates will be higher in the future, and you are better off paying the taxes due on the pretax money in your IRA now and enjoying tax-free withdrawals from your Roth in retirement.
i think keeping the tax-deferral of the traditional IRA is a much better deal. hence, my question.
The deal is not as great as it is set out to be. Only the after tax money can be converted to Roth’s starting in 2010. That means 401ks can be converted first to trad IRAS only if the converted part is after tax money. All my 401ks were funded with pre-tax money. So I can only work with my IRA contributions. I contributed $4000 to IRAs 2 years in the 90s and every year since 2000. All the contributions I made were after tax except for two years when I had Roth’s. So…I have about 7 years of IRA contributions through the 2006 tax year that I can roll over to the Roth in 2010. Then there will be my contributions in 2007 through 2010. I figure I can convert a (drumroll please) whopping total of $30,000 to Roths in 2010 (the whoopee award is in my hands at that time. Still better than nothing).The nice thing about it, Gekko, is that in 2010, the tax rate may be 35% on your income, but 20 years later, we will be deep down the road to serfdom and the maximum tax rates may be back to the 1979 year levels when they were 70%. I prefer the 35% tax in 2010 to the 70% Swedish style tax I expect in 2030.
Gekko, the tax rate in 20 years could be 70% to pay for the entitlements that are building up. Medicare crisis is the next crisis. Prescription Medicine benefit cost is $560 billion. Future wars will have to be paid for, and they will be fierce, but necessary, since we are about to wave the white flag in a certain region of the world soon. That enemy won’t rest until either they are destroyed or western civilization is destroyed.
Once again, I think this spring’s IRA ruling will allow you to convert all your 401ks (pretax contributions + gains) to Roth’s after you get taxed at ordinary rates. Let’s say you have $100,000 (for simplicity of illustration) in a traditional 401k all pretax and gains by 2010. In 2010, hopefully you will live in a state where there is zero income tax. That year you will declare $50,000 of that amount as if it’s ordinary income, pay the taxes on it, then move the remainder to a Roth IRA. You do the same with the other $50,000 the following year. You only pay th federal tax at the time. I’m going to check with an accountant around that time and figure out which state will be the best to live in so that I won’t have to pay state taxes on the gains. I have one traditional IRA that I rolled over from a 401k in 2000, so the amount I have in it in 2010 will be taxed at the ordinary rate that year.
This is contingent on if the Demothefts don’t drastically raise taxes for the 2010 and 2011 tax year. That is possible. But what is more likely is that taxes will creep up in 2015 to 2030 to the pre-Reagan confiscatory times.
regarding my post at the time 2006-12-10 20:55:06: I studied a web site which seemed to imply only after tax contributions can be moved to the Roth in 2010. I take that back. It is not necessarily so. You will be taxed on any amount of pre-tax contributions, as well as their gains. So I think you will be able to do a 2 step conversion: Move 401ks to traditional IRAs. then get taxed on the money as ordinary income over 2 years and then they are converted to Roths. I am actually looking forward to 2010 when I will be 51! Not many people say things like that! LOL!
“I actually think there are quite a few buyers out there on the sidelines.”
And I actually think you are right, except for some important qualifications:
1) Anyone who could breath could have qualified to buy in recent years.
2) Those who did not buy during the mania runup are also likely to have the common sense to wait until prices fall back down to historic norms of affordability before entering the demand queue. We are nowhere near that point just yet…
Get Stucco, you are right. I’m betting that those who have money for 20% downpayment, good credit and want to buy a house will be in hot demand in about six months or a year. That’s my kind of market, and since I’ve waited so long, I can afford to wait some more.
Last week I mentioned to an MLS realtor that we would be first-time home buyers and he shot back an e-mail inviting us to lunch or dinner….
“1) Anyone who could breath could have qualified to buy in recent years.”
And the mania of the last 3 years has wrung the market dry of GF’s. What there is a heavy supply of at the current moment is a lot of people trying there hardest to not look stupid while concealing the decision that will ultimately be their financial undoing.
“Women Unafraid of Condo Commitment”–NY Times article.
Last year the NY Times ran an article titled “Fear of Commitment”. Now this. The implication is that it is a lack of maturity keeps folks from buying. Sheees.
Well, yes, of course. Didn’t you know that you’re not really a grown-up until you have a mortgage, preferably a really big one?
*rolls eyes*
I have a friend who just took out a $2M mortage plus a $300K loan for a $3.8M dollar prewar condo, thats over $1500/sf. They still have to unload their 1BR coop which has been drooped in price from $1.5M to $1.35M.
I dont get it.
Appearently, neither do they!
These women are driven by the hormonal and biological need to nest. They are looking for a “safe” place to bring up kids (even if they don’t have kids the biological drive still exists in them). They believe that owning makes a place more secure. Don’t try to convince them otherwise because hormones always win out over reason.
screw those stupid bitches!
That was a truly ignorant comment.
“screw those stupid bitches!”
And I’m guessing its been awhile since you were.
Why blame the women? If these women have a man in their lives, then it is the man’s fault as well. Why? Because these men don’t have enough reasoning power to convince the women that buying an overpriced POS is not rationale. That only means that women are more powerful than men because they control the pocketbook. My wife has been itching to buy a house but a little discussion and review of a spreadsheet are all it takes.
Wasn’t the article talking about single women ?
But isn’t it true that women in general like to build a nest ,even if that women has a career ?
I think its a wonderful thing that women are buying homes and are independent,(but I think it’s a bad market to buy in .) I’m just wondering if the motive to buy isn’t more based on the nesting instinct than the investment motive regarding females ? It’s just a general question to try to get to the heart of why more women are buying right now in this inflated market verses men .
I think sometimes the “nesting instinct” urge is a bit overstated. Probably the stronger urge is “all my friends have their own houses, and I want mine, too - preferably at least nice, and ideally, nicer, than theirs.” Also I think women are more receptive to reason and common sense than we sometimes give them credit for. My wife definitely wanted, and still wants, our own place, but after I laid out the bear case, very patiently and supporting it with irrefutable evidence, she agreed - reluctantly - that renting was the way to go for now. Also she is seeing the insecurity and anxiety of some of her girlfriends who “own” their house but are in a bind because of poor financial decisions. Our kids are safe and happy in our rented home, and the lack of financial stress and worries has definitely helped our quality of life.
You really think the peer pressure thing is a stronger urge than the nesting instinct/security instinct ?
All I know is women like houses and they like to make them all cozy .My observation when I was in the business was that the women was the driving force in buying the house and the man just seems to be pulled along . When the payment was mentioned the man would get a contorted face while the women would just smile .
Maybe people should be polled on this issue to find out what the motives are for buying real estate .
Posted this above, but will repost here. I think this is the reason so many single women are buying right now (and they don’t want to be priced out forever!). I think you guys overestimate the “nesting instinct” and underestimate a woman’s need for FINANCIAL security…
Sammy,
I think you’re funny!
That being said, I think the whole point of women buying RE is due to women being older when (IF) they get married. Up until *right now*, buying RE was THE way for middle-class people to move up, socially and economically. That’s why there’s the whole “renter stigma”. Renters, historically, have fared much worse than homeowners.
As more women realize they are on their own, and will likely not be getting married (or will do so later in life), they are moving on with their lives, without men. It used to be “get married, buy a house, have kids” = success. Women are having to bypass the “get married” part.
Given a normal market, women would be very wise to purchase homes when single. Unfortunately, IMHO, we are moving away from a society that is centered around the nuclear family.
Although sales continue to drop in Sacramento, there were still over 3,000 transactions in October…
I’ve got two coworkers who recently bought townhomes and another who is looking, primarily because they were frustrated at being unable to find some place fit for human habitation to rent for less than $1,000/month. Prices I’ve heard discussed are in the $118-$158K range, and they’re using conventional fixed rate mortgages with a little to in one case, a significant down payment. If you can find a decent insurance policy, the rent/buy numbers make sense in their cases.
The low end of the market here is pretty healthy, primarily because rents went up after Ivan and have never come close to pre-hurricane levels. The high end and beach market, on the other hand, is still a toxic mess.
Here in Southeastern Virginia / Hampton Roads / Virginia Beach - Norfolk and surrounding areas, there are still buyers. I heard a lady talking the other day about how her husband was going to get into flipping houses like they do on TV (seriously). She actually said she was going to talk him out of it.
There are people trying to sell their homes, and there are people buying them. Navy transfers, new people arriving because we have jobs, who knows the reason.
In regards to women buying condos, there was an article some time ago in the local paper (Virginian Pilot) that quoted some lady who tells all women to buy a condo or other property as soon as possible, and not to wait until getting hooked up. Because you can always sell it, and it is better than renting. The absolute *best* part was the quote from the same lady that said that even if the market crashes, the condos will slow down to appreciating at only 10% per year.
In other news there is a meeting tommorow where some builder is going to talk to the public about some new project. They are getting an exception to build more homes on a piece of land than is normally allowed. It will look like monopoly houses, with only a few feet inbetween. They are going to be priced so that teachers, firefighters, police and the working class can actually afford to buy a home. The way the article was written, and the backlash, was great. So I’m going to go in person, to see if there is any throw down.
The guy I mention below is also a big fan of those flipping shows.
The absolute *best* part was the quote from the same lady that said that even if the market crashes, the condos will slow down to appreciating at only 10% per year.”
Amazing! Some of us recall how condos were the worse RE investments many people made in 1988-91. I kept hear from many people about their bad investment up to 1998-99…nearly 10 years long…
“David Lereah, chief economist for the National Association of Realtors, said 2006 was a different market because past declines were associated with the traditional factors of employment losses and rapidly increasing interest rates.”
Well David, the employment losses you associate as a traditional factor seem to be happening now. If you don’t believe me, go to:
http://goldismoney.info/forums/showthread.php?t=90522
If prices fell while the job market was at near-record-low unemployment levels, just wait for the fallout when real-estate-dependent jobs revert to their historical share of the labor market.
Very little is selling in my neck of the woods, but here are some sales and potential buyers I am familiar with. The one sale/purchase I know of was a 1031 tax exchange. Owners are wealthy and wanted acreage for horses.
I know of two engaged couples that were/are actively looking for a home. The first was mainly driven by the female. She asked me, ‘don’t you think renting is throwing your money away?’ Their combined income doesn’t come anywhere near the recommended $60/hr to buy the local median. Last time I saw her, she told me ‘prices are just too crazy’ and she has given up for now.
The second I have mentioned here before. The male told me, ‘we are looking to buy a second home as an investment.’ (The female already owns a house.) I told him, just make sure the cash flow is positive’, knowing full well nothing around here does right now. He replied, ‘Well the bank wouldn’t make the loan if it didn’t, would they?’
“He replied, ‘Well the bank wouldn’t make the loan if it didn’t, would they?’ ”
Where do these people come from?
It used to be true that the bank wouldn’t make the loan if the buyer couldn’t afford it. I read a book some time ago called “Credit Card Nation” and it mentioned that senior citizens are racking up debt after getting credit card offers. They have a similiar sentiment, because in their times the banks would not overextend to a borrower because the bank doesn’t want to loose money.
It seems these days owning debt is is like owning a brand. Companies want to own people’s debt, as it’s profitable in the long run. They sell the debt as well. If you have unpaid debt, there is a chance another company may purchase it, and then use their own methods of collection. I’ve never had this happen, but I’ve seen the notices come and had phone calls for past tennants at a commercial space I rented.
“used to be true that the bank wouldn’t make the loan if the buyer couldn’t afford it.’
USED TO is the key phrase there. Anybody keeping track of the changes in their environment should be aware of the pervasiveness of easy credit (and of course the pitfalls) in the last … ohh I don’t know… 15 years!
I suppose that’s too much to ask for… people actually paying attention.
Well to be fair there are a lot of distractions and resources spent to divert peoples attention away. And as we have discussed above the media misleading people is a big part of that.
However, when push comes to shove… Buyer beware!
“He replied, ‘Well the bank wouldn’t make the loan if it didn’t, would they?’ ”
Where do these people come from?
They must be crack-babies or something. These types of idiots are as much accountable for the bubble as the lenders, realtors, and appraisers. Without these GF’s, prices could never have reached the levels seen today.
People who don’t pay attention and then get ripped off start crying we should do something….
Thats when the politicians jump in and make things worse. While I agree that fair lending practices must be adhered to and there are abuses that good people fall for. The ultiamte responsibility lies with ourselves and our decsion making process.
Suspicious 2:
Where do these people come from?
These people come form Mars. The whole lot of them. We are surrounded by them. Rational human beings from planet Earth simply do not talk, think, or act this way.
The Marsian conquest of Planet Earth is on schedule. First, they land and assimiliate themselves to the popular culture so you can not tell who they really are. Then they buy all of our RE. And then…???
Now the people from Venus are an entirely different story…
Ben, your response to “don’t you think renting is throwing your money away,” should have been “don’t you think paying property taxes and high mortgage interest payments on a house worth half the purchase price is throwing your money away?”
I usually don’t even bother trying to talk about this with people, but she asked me directly. I just gave her the quick rent versus buy speech and let it go. There is no way they could qualify anyway, at these prices.
Ben, I know the material down cold, but I’m not good at memorizing speeches. Do you have a quick 5-paragraph smackdown that I can give to them on paper rather than lecture them? They tend not to like that, even when I’m right…
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Ben - do they know about the blog???
“The minimum household income first-time buyers needed to purchase a home at $478,710 in California in the third quarter of 2006 was $98,890, based on an adjustable interest rate of 6.58 percent and assuming a 10 percent down payment. First-time buyers typically purchase a home equal to 85 percent of the prevailing median price. The monthly payment including taxes and insurance was $3,300 for the third quarter of 2006″
The criteria for this 24% affordability number is pure and utter nonsense. I’d be amazed if the true affordability number, based on the more realistic guidlines that CAR abandoned last year, is more than 10%.
Nobody grossing $98,890 could afford $3k payments a month. How about netting $98k a month. Who makes that kind of money? Not 24% of California. How about 10%?
Ugh.. Not to be crude, but I net over 100K, and 3K a month still would not be a blast for me. I had to think long and hard if I wanted to move from my condo (which I am renting) at 1250/mo to a SFH at 2K a month. 3K a month would just be insane in my eyes, I would never want to spend that much of my income on housing. 3K would be an albatross on my neck; now I can do pretty much whatever I want to do (within reason) without worrying about money. At 3K, I would have to worry, and I don’t want to live like that anymore.
Well said.
Ditto.
We also earn over $100K (gross), but I’d like our payments to be no more than $1800, PITI — max.
In my part of Los Angeles, mid Wilshire, I still see buying by extended Korean families. I’m not in Koreatown, but it seems to have been annexed the past couple of years.
I see lots of families move into my building who are gone in less than a year. In every case I can think of, they had purchased a house together in LA.
Multiple immigrant families buying and cohabitating in SFRs will be one of many factors that will screw up the comps over the next few years.
And it does wonders for the neighborhood as well.
Imange spending 750K for a 3,000 sq/ft home and having the home next door have 5 cars (junk) in the driveway and 10 people live in it. That’s my little piece of paradise for sure!
Asians parking junked cars??? LOL..talk about losing face.
I wrote this comment on another housing blog as a reply to a poster who was saying that buying a house is always better than renting.
“To the anon that is making the case for buying.
You will find that most of the people on this blog are people who
A) Started looking for houses in 2004/2005 and realized how much houses went up in last 4-5 years and determined that it was very similar to the stock bubble
B) People who already owned a house, made nice gains, realized that these prices can’t last, sold and are waiting for prices to drop to buy a house again.
I am renting for 1/2 of the total carrying costs of an average house in my county (1400 vs 2800).
If I pocket the 1400/month (16,800/year) and buy an average house next year by putting extra 16800 down, assuming that house prices and mortgages stay flat, I would be able to pay off my loan 5 years sooner, than if I bought a year earlier before I put the extra 16800 down. 5 years of no mortgage payments just because I delayed my purchse by 1 year.
On top of this, my county median price also dropped 50k yoy, so that would mean that by keeping the same payments as in 2005, I could pay off the house in 16 years, in half the time than I could if I bought at the peak of the bubble. 14 years of extra mortgage freedom, but delaying the purchase by 1 year.
This is why I and other visitors of this blog are delaying our house purchase.”
Nicely put. I won’t run the numbers myself - I’ll just savour this as-is.
Some thoughts on Asian buyers from the San Gabriel Valley.
There aren’t really that many wealthy Asian buyers. The wave of expats from Hong Kong and Taiwan ended about 10 years ago. A few wealthy people from the PRC have come to the US, but there is just a trickle of these folks.
IMO Asian buyers can be roughly categorized as follows:
1. Hard-working people who are willing to sacrifice a great deal in order to buy a house. Because they come from places with a lower standard of living, they are willing to devote a much higher percentage of their income to housing. Unfortunately, most of these people are sacrificing far more than is necessary, and when the bubble bursts their sacrifices will be for naught.
2. Financially naive people. If you buy into the stereotype that all Asians are shrewed businessmen, you are mistaken. If you come to the US from Vietnam with a sixth grade education and work as a cook in a Chinese restaurant, you don’t know who Alan Greenspan is or what the LIBOR rate is. Consequently, you have no idea that an Option ARM isn’t a good a idea. What does this make you? Prey. Prey for unscrupulous RE and mortgage brokers — mostly people from your same ethnic group — who sell you a townhouse/condo/ghetto shotgun shack at outrageously inflated prices with the most toxic of loans.
3. Speculators. There are plenty of Asian speculators. Asia has had to financial manias for centuries, and there is a well-established culture of speculation and risk-taking there. Therefore, some Asian speculators are very smart people who were successful businesspeople in in HK/Taiwan who instantly saw the US RE market for what it was when they arrived here. Some of these people will time the market successfully and get out in time, others will get greedy and be sucked out to sea when the tide goes out.
Then there are plenty of Asian flippers who are no different than the folks on Flip That House, i.e. completely clueless fools who are convinced they are the next Donald Trump.
So for all of these reasons, I don’t see Asian buyers saving the market. But perhaps the best evidence for this is that they didn’t save it last time. Koreatown and the SG Valley fell every bit as hard in the early 90’s as they will this time.
In fact, the SG Valley community I live in, Alhambra, (roughly 55% Asian, the rest Hispanic) is LEADING the decline here in the SG valley. The median SFH resale price is down around 10% Y-O-Y. So I don’t see Alhambra being immune to the trend, not at all.
Thanks for the accurate categorizations which dispel some of the generalizations commonly made about Asian buyers. My wife is Chinese (mainland/PRC) and has said many times that the rich Hong Kong buyers of a decade ago are nothing like the poorer Chinese niw emigrating from the PRC, who tend buy only after many years of scrimping and saving - and who, as you said, are all too often taken advantage of by their own fellow countrymen, whom they implicitly and erroneously trust.
Further, many PRC Chinese are returning to mainland China, where they can make much more money in the boom and live a better life there than they could here.
The ‘Asian investors who will save the market’, though much touted by realtors, is just another myth used to hoodwink the populace and keep the Ponzi scheme going. The mania is fueled by pure speculation, nothing more, but interested parties will of course manufacture ‘facts’ in an attempt to justify the unjustifiable.
“niw” = “now”
doh.
Living in New York City I have seen something amazing. The guy you should trust least is the guy that looks just like you. That is the guy that will really stick it to you because he knows you will inherently trust him. It’s sad. I see it with white, black, Asian, Hispanic. It just doesn’t matter.
Really? The guy I trust least is the one who has lots of religious symbols around telling me to trust him because his beliefs make him a superior moral person. Yeah, right.
“Erica Besikof said that her husband would have been happy to postpone buying an apartment. But she convinced him that they could stop paying a lot in rent and live closer to their favorite beer bar, and their favorite restaurant.”
Erica better get real creative when she thinks of all the things she’s going to have to do as penance to her husband for dragging him into FB serfdom.
Maby they should have bought stock in the bar or restaurant!
Five bucks says they divorce within five years because she says he spends too much time at the bar, to which he’ll reply “yeah, but it’s your fault I’m here.”
“The percentage of first-time buyers in California able to afford a median-priced home stood at 24 percent in the third quarter of 2006, compared with 28 percent for the same period a year ago, according to a report released today by the California Association of Realtors.”
I wonder what percentage of would-be first-time buyers can afford a house where they actually live! I bet it’s far far lower.
It does me no good living in the Bay Area, making a Bay Area salary, knowing that I can afford to buy a house “somewhere” in California, when I know damn well it’s nowhere within 2 hours’ commute of where I earn that salary! And if I move somewhere cheaper, voila, my salary drops right along with the costs.
Gadzooks that is an excellent point. I wonder what the numbers look like if you tried to find the percent who can afford the median home price within 20 miles of work?
Outstanding point jbunniii! We have to keep in mind that CAR is publishing this drivel soley in an attempt to lure more GFs into the market.
“In the last five months, single women spent more than $30 million out of the $100 million or so in sales in the 299-unit condominium. In fact, single women bought 72 of the first 165 apartments sold. Spending by these women far surpassed that of single men, who accounted for $19 million.
Fast forward to 2008/2009. How many of these empty-headed single females, who pattern their superficial, angst-ridden lives after that of their heroines on “Sex and the City,” are going to end up as concubines to fat, balding, middle-aged men with comb-overs and halotosis as the price of shelter after financial insolvency?
I am embarrassed to admit I had a similar thought. I also recalled txchick’s comment several months ago that “broke is the new black.” And is there a part of Brooklyn really called “Dumbo”?
Now, why would you be embarrassed to admit you had similar thought to mine? You should be congratulating yourself on this flash of brilliance
DUMBO = down under the manhattan bridge overpass
the place in the article is not even DUMBO, its probably a better hood as its closer to Bklyn heights, very close to Metrotech, Bklyns downtown.
Sammy - your statement says much more about your low view of both women and yourself than it does about the women referred to in this article - the great majority of whom will likely be doing just fine in two years.
I don’t have a low view of women. I have a low view of people who make major decisions in a flippant or ill-advised manner, take on obligations far in excess of their ability to honor, and get caught up in hype and a sense of entitlement rather than doing a rational, objective analysis of where they want to be and how they intend to get there. Unfortunately, I’d say women are overrepresented in that category, as they tend to act on emotion and short-term “needs” rather than logic and a long-term coherent plan. Not all by any means, but a lot of them. Especially the babes in the cited article.
Agreed! I too see many pattern their lives after the TV shows. Its all Ophraholics…. Its worse when they are in corporate management.
“In L.A., there are reams of affluent Asian buyers, especially in the San Gabriel Valley. Whether they realize the pot has gone off the boil, is another question, altogether.”
True. I have a colleague who is a U.S. citizen who originated from Hong Kong. He said the Asians are smart about real estate in LA. They don’t do mortgages. They buy with cash on the table, but they wait for when the real estate prices are good values. My friend did not say this, but could easily: Non-Asians tend to be emotional about where they put their money. Many have the herd instinct and tend to buy high.
Bill in Phx,
Hong Kong is just now rebounding from a severe crash (~60% decline)
“Erica Besikof said that her husband would have been happy to postpone buying an apartment. But she convinced him that they could stop paying a lot in rent and live closer to their favorite beer bar, and their favorite restaurant.”
Well I can pay $970 per month rent surrounded by houses with $3,000 (and up) monthly mortgages in the same neighborhood and still be 1 mile from Hooters. Fine with me. Renting is a winner. Women have the nesting instinct and a guy should do himself a favor and filter out his wife’s nagging about buying RE for at least the next 5 years.
please tell me you don’t go to Hooters.
Whats wrong with Hooters!
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the food is terrible, the waitresses are trashy, and the clientele is comprised of truck drivers, motorheads, and nerdy middle-aged perverts.
How do you know?
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because i’ve been there before (about 10 years ago). i even dated a hooters waitress once! (again about 10 years ago). She was 19 and I was 27. I’ve grown up since and my tastes have become more refined.
I’ve grown up since and my tastes have become more refined.
Let me guess. You like your big boobs covered now?
Well, I’m not a truck driver or motorhead, but I’m a middle aged pervert, and proud. After my mom died, my dad, in his 70s, dated women 20 years younger, and one much younger than that. Nothing wrong in my book.
LOL. Very true though - the food sucks. Where I am, you can get much better food at better prices with better waitresses (looks and waitress skills) at many decent pubs and restaurants.
Bill,
Aren’t you the one who complains about women being after your money?
Realize everything has a cost. You want younger, prettier women, you have to pay. They aren’t dating you because they love you.
Dumb people are still buying houses. You’d be amazed how many people are completely clueless about the value of things. $300,000 for a house sounds like a bunch of money to them. But $700,000 also sounds like a bunch of money. To the dumb and incurious the two prices are not really that much different.
That’s why the RE industry has had such success selling houses based on teaser rates that generate low initial monthly payments. Even the dumb can understand that they can afford $1500 a month. Nobody explains that the monthly could double in 2 years. And they don’t ask, because they are dumb and don’t read anything beyond the news blurbs flashed on the TV screen.
The other thing about dumb people is that they generally consider themselves pretty clever. They generate this sense of cleverness by seizing upon isolated “facts” that they pick up from other people’s idle chatter or from TV. They use these “facts” to validate their behavior no matter how stupid. So the dumb are very susceptible to the “it’s a great time to buy now” mantra from the RE shills.
There masses of dumb people may still be buying or thinking about buying unless they have already been hit over the head with financial disaster.
But $700,000 also sounds like a bunch of money. To the dumb and incurious the two prices are not really that much different.
Sadly correct, which explains why people are paying ludicrous amounts (more correctly, assuming ludicrous amounts of debt) for housing.
Also, assumed perpetual double-digit appreciation makes current prices immaterial, as whatever they but will supposedly always be worth much more later.
So “it’s all good”, “don’t sweat the small stuff”, and “Jesus, take the wheel.”
“they but” = “they cost”
I’m using my new tiny laptop w/ 12″ screen and have to look more closely to see mistakes…
“$300,000 for a house sounds like a bunch of money to them. But $700,000 also sounds like a bunch of money. To the dumb and incurious the two prices are not really that much different.”
Excellent point! There really is not that much difference, once the price tag exceeds a full lifetime’s worth of your household’s earnings, is there?
They really do not get it until their house is being sold in foreclosure. Years ago the clueless just could not get a loan, now subprime tells them they can and that they can afford a home. I think they have no sense at all of their financial worth or station in life. It is sad really that they will buy into the moment, becuase others tell them they should. The realtor tells them they better buy now, the loan officer tells them they can afford it, they tell their friends we just bought a house and were so happy now. Then a year goes by and the bills are stacked up and now they have no cash, worst credit than they had before, and nobody is telling them anything anymore, other debt collectors and they are not very nice at all are they FB.
“I think they have no sense at all of their financial worth or station in life.”
This is one of the many wonderful aspects of Alan Greenspan’s legacy — a whole generation of GFs with no sense of their financial station in life.
It is easier to be a peasant / serf if you do not know you are indeed a peasant / serf. I guess that debt-slave is just as good a term.
“Broke is the new Black” - I love it.
As I type this I’m juggling 4 offers on my house, and I hope none of them are reading this!
Buyer 1- active realtor, Caucasion, got me into a “reverse auction” with another seller a few weeks ago and bought neither property
Buyer 2- inactive realtor (has license, doesn’t practice), Korean
Buyer 3- contractor, Caucasion I think
Buyer 4- profession unknown (supposidly could pay cash, draw your own conclusion), Chinese, low ball offer
Other data- So Cal location, I started at $1.25m in late July (it was competitive then, honest!), regular spaced large reductions to present, now at $1m (this is below last 2 months closed sales by about 16%), with offers coming in just below current list price. We have had tons of traffic and interest all alone, but no offers until we hit the $1M mark, then boom! Now I’m fighting with all of them to come up a few thousand. Especially aggravating as I’m taking a $100K loss, and that’s real money folks, not paper profits. Yea, yea, I know. Get over it and move on. Still sucks though.
Interesting I’ll admit and would like to hear how that turns out. However, expect no sympathy here for your losses.
No problem, not looking for any sympathy. Dad used to say if you were looking for sympathy you could find it in the dictionary between s**t and syphillus!
This will hardly ruin me. I’m sorry to think what is going to happen to others though.
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that’s a hell of a way to lose $100k. why are you moving?
Relocation.
I’ve been in the Texas since mid Summer. Renting of course!
Sorry for your loss, but your clear-headed perspective on the situation you face is rare and admirable.
Yep , good luck to you and I agree with Getstucco that you are admirable in facing this loss early rather than later .
I agree, although not many people are going to be so level headed when reality sets in…
After reading this, I am sorry, but to ask a question. We have already read about realtors, lenders and appraisers being not on the up and up. Not in your case, but maybe in some seller circumstances, what are the likelihoods that a potential buyer would collude others to lowball shill bid on a house to get the pricing down? Is earnest money ever fronted for offers on a house? It would not take a whole lot of $$ to convince a few participants to gang up on a seller and lowball them until they decide maybe they can not get a higher price and will have to go with the one bidder who just happens to offer a few dollars more than the others. The then-buyer would kick back a few bucks to the shill lowballers as a fee to bring the price down. I know it sounds crazy, but I would be curious to see if it is going on.
As a seller you certainly should insist, and it is usually the norm to have earnest money put up front, typically paid to an escrow company. The amount, terms of release, etc. should all be carefully crafted to ensure the buyers performance to the contract. This is important, because even though you might try to get back up offers “just in case”, once in escrow you are essentially off the market and buyers will not give you a second glance. Escrow is like a marriage, easy to get into, expensive to get out of.
Collusion is not likely due to to something called “The Prisoners Dilemma”. Even though it is clearly in everyone’s best interest to cooperate, if only one individual defects his payoff will be maximized over the others. The only way to reach equillibrium is for all players to defect. The fear of being “ratted out” overcomes all players.
That’s not to say that other “games” are not possible. I had a buddy who was interested in buying this collector car that he saw advertised. The price was too high, so over the course of several months he has various people call the owner and set up appointments to see the car, and then never show up. Just waste a lot of his time and grind the guys spirits down so he would be a more reasonable negotiator. It worked, and he got the car for a much more favorable price. Applied to real estate I would imagine that if you could get a couple of your friends to send low ball offers in over a period of time it might have a similar affect on a sellers spirits. The risk there of course is that if an was accepted they would find themselves in a difficult to get out of situation.
Especially aggravating as I’m taking a $100K loss, and that’s real money folks
Always interesting how the $$$ numbers never really matter to people on the way in and up.
But when it comes time to have to bail and get out -all of a sudden it’s amazing how fookin’ huge that six-figure hit is.
Flippers, move-up and subprime buyers would appear to all have been recently knocked out of the demand queue
Not so sure I agree with respect to “move-ups”. We always seem to characterize market participants as falling into one of two categories; “unrealistic sellers” who refuse to believe the party is over and “fed-up” or “priced out buyers”.
A “move-up” is both a buyer and a seller. So what do they think? I think many often fall on the “unrealistic seller” camp. I have seen many who think the market is still hot, they throw caution to the wind and buy a new house, only to find that they can’t sell their own house later. I have been to a substantial number of open houses (just gauging the market), where the agent has admitted that the seller is getting nervous because they already bought another house.
The move-up market is broken. Speaking broadly, unless you have been in your house for ten years or so, everything you can move up to is just as ridiculously overpriced as your own home.
Using SD prices, let’s say that in 2000, you bought a 2000 sq. ft. place for $350K with $70K down, and now you want to move up.
Nice neighborhoods in SD go for about $300/sq.ft. so you can fetch about $600K for your place now, minus 6% so call it $284K net profit. A comparably outfitted 2500 sq. ft. place will run you about $750K. After closing and moving costs, you are looking at a $500K mortgage.
Congratulations, you just doubled your mortgage payment for an additional 500 sq. ft.
The property ladder is broken for first-timers, and for move-ups. This spring is going to be fun to watch.
Yes and location will mean something again. Here in Sacramento homes located in worst areas were fetching $250k and up. This situiation enabled low income indivduals to buy in better areas where in past they had no chance. This situiation in Sacramento is now in reverse and people are once again seeing Northighlands, Oak Park, the Florin area as terrible crap holes invested with vagrants, drug addicts, gangs, drug dealers, robbery, and prostitutes.
The hood areas of cities that for some reason actually rose in value should be knocked down rather quickly. When I pass through these areas I see that the for sales stay put as if they are now a permanent structure.
However I am sure the Spring rebound will change everything for the better. NOT!
I agree that the move up market is breaking-up. However, there are still transactions taking place, so someone (or some market segment) is buying. I think the move-up segment is probably the “least weak” right now, when compared with first time buyers and speculators, where the action has all but stopped.
I agree with your logical analysis, but I think many “move-uppers” are in denial about their homes value and how quickly they can sell it. I’ve been to a number of open houses here in NJ where the seller already bought a bigger house and now they are literally dumbfounded that their house isn’t selling. “I thought the market was still hot”. They can’t afford two mortgages, but can’t afford to lower their price. They are
iamoutahere, Definitely smart to just keep dropping the price ’till you hit the demand pool and worry about wounds later. Don’t accept one offer, accept 2 and make sure you put a firm closing date on the sale. Tell them that whoever closes first gets it. Otherwise the one you accept will start playing games when he knows that the others have gone.
Renting here and frustrated, but we got caught in the 1980’s bubble and although our losses were small in the end (sold in 2002), we suffered years of being stuck in an apt that was too small for us (small 2 bed but now with 2 kids in) and the banks/savings and loans just ripped us off every chance they got because they knew they had us by the b*lls. They would see negative equity and charge max everything (fees everything) because they knew you couldn’t move to another bank.This was in London so and mortgage market is less regulated there. When interest rates dropped and we tried to refi, no dice even though we were never late or missed a payment. Luckily we wised up. When we bought we got an interest only mortgage with an insurance policy. You paid interest and the insurance premium and then when the policy matured, you use the proceeds to pay down the mortgage. We ate the fees and swapped to a repayment mortgage 2 years in (still lost on that of course but better than nothing) and we kept the insurance policy to avoid cancellation fees etc. In 2000, these same insurance companies were sending out leaflets saying how its was likely that the insurance policy would not hit the mortgage amount and we should consider increasing our payments. Then in 2002, they were saying that the rate would almost certainly not pay enough. What a rip off. We sold for 2.5x our original asking price but I suspect that if I add together the excess fees paid to banks and insurance companies, the interest paid and the maintenance fees I probably made 25% in 15 years. Never ever again!!!
From Business Week
League of Cities:
“Specifically, 91 percent reported a significant increase in home values while 7 percent said the values were about the same and 2 percent reported declines. In rental rates, 80 percent reported increases, 17 percent said rates were about the same, 2 percent said they declined and 1 percent did not know, the league said.”
“Other findings include:
– 31 percent reported predatory lending on the increase
– 41 percent reported more foreclosures
– 36 reported an increase in absentee landlords”
Long thread, this may be repetitious, but as a female, I felt compelled to include some information.
Females:”In 2005, they bought 20 percent of all U.S. homes sold — about 1.5 million properties, or more than double the 9 percent purchased by single males. Changes in the mortgage lending industry have contributed largely to the shift in home buying demographics.”
http://www.realtor.org/RMODaily.nsf/pages/News2006021504?OpenDocument
Your government’s opinion on females:”Take a look at the chart marked Figure 1 in this document. “Individuals that were determined to need comprehensive financial education covering all basic topics (cash flow, savings and investments) were more likely to be single females…”
http://www.fdic.gov/bank/analytical/fyi/2004/092204fyi.html
So Uncle Sam thinks they’re vulnerable, and statistically, there should NOT be such a marked difference in purchasing by single men vs. single women, right?
Who’s going to be more hurt over the next few years?
I’m NOT going for female-bashing, just honest evaluation of at-risk groups.
“So who is left to buy now?”
From what I am seeing in areas in SD that I’m keeping an eye on, I’d vote for the contractor/speculator as one of the few who are still buying. What little has actually sold among places I’ve watched has been quickly gutted and is being redecorated with the usual granite and travertine. The garages are full of what used to be walls. Currently, trucks bearing shiny mediocre wood product cabinet units are sitting in the driveways as the new kitchens are being snapped into place.
It will be interesting to see if anyone is interested in these places when they mark them up $70-100K over the current comps when no one was interested in buying there at all during the previous year.
Only 8 more weeks until the Superbowl! Oh No! Hurry!
Get the designer-like paint and the berbered carpet ready!
I guess to get back answering the question:
Currently living in the Boston area.
I think the only buyers left are the young professionals. As a 26 year old engineer, I don’t make enough money to buy a decent home, all I can do is rent and save that little extra for a downpayment. And whats even scarier is that I know most of my friends (20-30 people) are doing the same thing, sitting by the sidelines.
Rents are surprising dirt cheap but with starter home around $350k-400k, we will rent till it we spend 2-3x our salary, not the current 6-10x levels. And the way things are going in Boston (13% YOY price decrease), its going to take a while and you know what, we are ok with that.
With every real estate bubble, you see generations driving that market. The 80s it was the baby boomers (like my parents), making good money and spending it on housing. The 2000s it was generation x, spending everything just for a piece of the American dream (and make some money on the side). And now my generation, the late 70’s and early 80’s kids, the last batch before the “catered generation”. Trust me, I can’t stand that generation but maybe because im getting old. Alot of my friends are getting married soon and starting to have families but honestly they cant afford to raise a family here and probably move somewhere more affordable.
Here is some information from the Boston Globe that im talking about:
“Between 2003 and 2005, Massachusetts was the only state to lose workers for three consecutive years, according to the report. During that period, the nation’s workforce grew 3.1 percent, while the state’s declined by 1.7 percent.”
“In addition to the struggles of low-skilled workers, the report found that Massachusetts lost 3.6 percent of its population — 233,000 people — to other states between 2000 and 2005. Only New York lost more of its population to other states during that period. Workers with bachelor’s degrees constituted the largest group of those leaving Massachusetts. In 2003 and 2004, their top destination was Florida, followed by New Hampshire, Texas, Connecticut, Rhode Island, and North Carolina.
“You can already make the argument that New England and the region is in decline demographically,” Grogan said. “If we can’t solve this problem, then Boston and Eastern Massachusetts, which is the economic engine of New England, is going to go into a long slow decline. We will simply not be keeping up with other regions in the country.”"
They can go and build all these active senior communities to take care of the baby bommers but when are they going to start building “young professional” communities?
I hope that after this correction takes place they will start meeting the first time buyer demand in a affordable way .
Ben, you left out the BEST quote from the NY Times story about women buyers:
Asked if she was buying at the wrong time, Ms. Lee said she was more excited that she had bought at all. “I wanted to invest in something, and that’s what I’ve done,” she said. “It will always be mine.”
This excerpt is a doosy, too:
On Wednesday, Ms. Dib gave birth to a baby girl named Leyli. She believes that even if prices drop, she and Tiffany will be better off because they will have more space than in Manhattan and a support network too.
I’m not even a feminist but I hate it when NYT packages materialistic claptrap as feminism. I remember a while back when 16 year olds thought that getting daddy to buy them a big V8 truck was feminism too. Now all of a sudden it’s good that women let their desperation to “own” overwhelm their future financial security.
NYT’s lifestyle sections are just yuppie porn - I like the eye candy too, but it’s impossible to take their articles seriously.
http://www.morganstanley.com/views/gef/archive/2006/20061208-Fri.html#anchor4064