The Housing Bubble

No interest in selling. I am just making an observation for the benefit of the HBB crowd…

And hours later, I am still wondering how this observation benefits anyone…

It doesn’t benefit anyone except for the Housing Crime Syndicate.

Notice our resident housing inflationista trolls haven’t discussed construction related issues?

Why is that?

It only benefits those willing to see with an open mind. You can lead a horse to water, but……

Hi Warren! Did you know there’s a famous investor with the same name as you?

Sure I can prove you wrong. Google 3441 & 3461 Monteverde, Lincoln, CA. You will see both those houses and they went pending in less than a week for above the asking prices. Nearly $200/SF

“…for above the asking prices.”

I find this irrelevant, as asking prices can be set above market value, resulting in (eventual) sales below asking price, or they can be set below market value, resulting in sales above asking price.

The last time we sold a home, we deliberately priced for $20K below the most recent comp; sold for $29K above asking.

CIBT, you are absolutely correct. The stat that is important is the final sale price. I think that will prove out in these two cases. Still, going above asking price is some indicator of market strength, as it goes against the grain of a typical buyer….or at least for me, when I buy.

“Still, going above asking price is some indicator of market strength, as it goes against the grain of a typical buyer….or at least for me, when I buy.”

I think you are reading too much into this ‘indicator,’ as the market is currently very unstable, making it difficult to judge how to price a home. Hence you will find cases where the price is set too low relative to market conditions, spawning bid wars and multiple offers above list, and other cases where the seller is hoping to get a 2006 price, where there may be no offers whatever, due to market value lying far below the wishing price.

Agreed in principle and principal. It is a very confusing and dicey market and hard to know where “values” prove out.

I have a theory, and keep in mind that it’s just a theory:

During the past few years, there have been quite a few houses listed for sale that just plumb didn’t sell. So, the owners are either still in them, waiting for house prices to go back up again. Or they’re renting the places out until that much hoped-for double-digit annual appreciation returns. (Good luck with that one, accidental landlords.)

Then there are the “let it go back to the bank” houses. I’d say that quite a few of them were originally listed for sale, that didn’t work out, so, here, bank, take the dang house back. You can have it. Those places are now in some stage of foreclosure, and who knows when they’ll be sporting “for sale” signs in the front yard.

So, in short, what we have is quite the decline in inventory listed for sale as compared to, say, 2008 or 2009. Hence, we’re seeing the bidding wars in more desirable areas.

Look them up. 3441 & 3461 Monteverde, Lincoln, CA

3441 went pending for over $800,000. Zillow is listed at $492,000.

I don’t know what 3461 went under contract for, but it will certainly be over $600,000. Zillow has it listed at $545,000.

So Zillow Value is under the market by quite a bit. No surprise, because Zillow bases prices off historical comps, not current activity. That is why we all laughed at Zillow these last 5 years, as prices fell, and Zillow values were above the market.

South Placer County, 3,000 SF 1/2 acre.

Polly, the interest deduction comes off my marginal rate…or the highest avoided tax rate. My effective tax rate was 13.7%, if you want to use that rate.

Either way, we file married joint w me as HOH. The standard deduction would be $11,600. Our itemized deductions were $35,812. We claimed ourselves as exemptions for another $7,400.

No, it doesn’t. Not for most people. Now, it looks like you have almost $15,000 of itemized deductions other than mortgage interest and property taxes which is huge. It means you get the full benefit of the deduction because you would itemize even without the new deductions. This is very, very, very unusual.

Why the heck is your marginal tax rate so low with itemized deductions so high? Aren’t they mostly state income taxes? How can your income be high enough to generate that much state income tax and your marginal rate be only 15%?

Oh, and there is no such thing as a “head of household” for federal taxes if you are married. That designation is for people who have dependents and aren’t married. Exemptions are completely irrelevant. You have to realize that your posts are extremely imprecise about financial issues and it makes it very easy to doubt what you say.

OK. It looks like the transition from the 15% rate to the 25% rate for married filing jointly is around $69,000 taxable income.

$69,000 + $35,812 + $7400 = total maximum income of $112,212 unless you have other deductions that don’t go on the schedule (tax credits don’t effect your marginal rate).

Where are you getting almost $15,000 of tax credits other than mortgage interest and property taxes on an income that is less than $120K? And your claimed effective rate of 13.7% makes no sense at all. For your marginal rate and your effective rate to be that close, you have to have very, very low deductions in comparison to your income. 13.7/15 is over 91%.

For your deductions and exemptions to be as reported, your income would have to be

($35,812 + $7400) / 8.6667% = $498,600, nearly half a million dollars.

You are making no sense at all unless you are in some sort of carried interest situation. And in that case, what are you doing worrying about $3000 of savings from mortgage interest deductions.

I don’t believe you.

I don’t believe you.

what does it matter? Why do you feel the need to try to pick apart someone’s personal financial/tax situation?

I love this blog, but I am getting no work done today. I feel compelled to answer Polly. First, I have no idea how the tax code works. So we compile “fictituous” tax returns 3 times a year, so we can tailor our income/expenses to be as efficient as possible. We do this with the previous years Turbo Tax, yet when we complete our returns for the IRS, we use an accountant. It is a stupid tax system and takes way too much time. (In Sweden, they complete your tax return for you, then send it to you for approval!)

That being said, in 2011 we maxed out our two 401(k)s to reduce our effective gross to about $110,000 (the forms are at home, I am at work). We also own 10 properties, so we got substantial depreciation losses, in spite of substantial positive cash flow. As outlined in a post above, our depriciation was limited to 80% of actual, because we exceed $100,000 in gross income, and for every $2 over $100,000, you lose $1 of the $25,000 depreciation loss limit.

So Polly, you are correct, our adjusted gross for Fed was about $69,000 and the tax rate at that level is 15%. I am guessing the tax rate on the first $20,000 might be 10% or so, to get me to an effective rate of 13.7%.

I don’t cheat on taxes, never will and never have. I report people who do, like mortgage fraudsters who do not declare their fraudulent proceeds to the IRS! I do buy efficient used vehicles to drive, then use the mileage deduction, because the IRS $.49/mile allowance exceeds my cost of ownership. I do manage my own properties. I do maintain my own properties. We do not cut a fat hog or showboat anything. We are comfortable and happy and willing to accept the housing bubble is running its course and a recovery is in effect.

We also own 10 properties,

Ten properties??? You have been on the HBB for quite a while IIRC—why didn’t you sell some of those puppies at the peak??

You could be buying rentals now with a better ROI if you had…

Two are free and clear, one I was living in, one I inherited and the rest I bought recently as REO and short sales.

Well, Paladin, I salute you for putting your money where your mouth is. That takes stones.

Where I currently live, I still feel like my rental is a great deal. I’m paying $1350 for a place that Zillow seems to think would sell for $450K. I don’t have to do a lot of math to know that it is cheaper to rent, even if prices seem to be taking their spring bounce in the wrong direction at the moment. I expect them to trend the other when the selling season is over.

But I guess all bottoms are local. Yours could be real.

Personally, I would be more open to the suggestion that the bottom might possibly be in if the market didn’t seem so manipulated, if inventory wasn’t being withheld, etc etc.

It still looks like a manufactured recovery to me. And millions of jobs will be required before people will be capable of buying in significant numbers.

“Why do you feel the need to try to pick apart someone’s personal financial/tax situation?”

It goes with the territory that if you post here, somebody might pick apart your post.

Sounds like your analysis was correct, since you quoted total deductions of $35,812 in response to polly.

So the $14,812 you had from other sources would have met the standard deduction even as a renter…

Thanks Prime. This is the case, though what Polly is saying is true for many people and completely ignored by the real estate community.

The other tax reality the real estate community ignores is that for investment real estate, all depreciation is recaptured at a 25% tax rate upon sale. Ironically, if your income is high enough to be in the 25% tax rate, your ability to claim depreciation is phase out ($1 for each $2 of income above $110k, so $0 of deprication over $150k, since the max passive loss is $25k).

The tax “benefits” for investment real estate can acutally be “punative” in many situations, unless you hold for a very long time.

oops “….($1 for each $2 of income above $110k,….

I meant above $100k. Once you get to $150k, you do not get to claim ANY depreciation deductions.

The other tax reality the real estate community ignores is that for investment real estate, all depreciation is recaptured at a 25% tax rate upon sale.

Wasn’t there an approach around that: move back into the house for two years before selling it so that you would meet the “two-of-five standard” and not have to pay any capital gains? Or did you still have to pay depreciation recapture in that case?

The old rule got you around that after living there two years. The rule changed in 2009, I think, which now says you only get the owner exemption if you lived there all 5 years. Anything less is prorated (2 years, then 2/5ths of the gain is exempted. I am not sure on depreciation recapture in that event.

If you assume about $14K down payment, then your profit calc is $67,200 - ($6K + $10K + $30K) = $21,200. Mine was $17500 b/c I included $33K selling cost instead of $30K. So we’re still not close to JM’s $35K profit.

However, the bottom line is that JM would have made ~$18K final profit on $30K of initial outlay, not including opportunity cost from saved rent. That’s better than the mob.

And where is the buyer at the grossly inflated $462k fantasy price ??

There is no buyer because JingleMale does not want to sell so its an opinion, an estimate based on zillows data RAL…Your negative spin really sucks some times…

ANSWER the question. You won’t because you know damn well there is no buyer at $462k.

And aren’t you the guy that said building costs are some inflated fantasy number like $300/sq? Yep. That was you.

Your a fool RAL…I have forgotten more about residential construction then you know…

Put up or shut up my friend. Show me your work… right now.

Then tell me what you’re paying for work… All of it.

Site package
Flatwork
Formed surfaces
Framing labor
IFS/sq
EFS/sq
Mech package
E-package

Lets hear it. Right now.

Thank you scdave.

RAL is proving to be quite obstreporous with is attitude. It is funny RAL, how you call people liars, yet you lie for your own benefit.

“….And aren’t you the guy that said building costs are some inflated fantasy number like $300/sq? Yep. That was you….”

I said construction costs are $70/SF for a SF house.

I’ll buy it for $462,000 AND pay all closing costs. My name is George Soros.

Here’s some of my work… occurring TODAY right now.

http://picpaste.com/03f841e326940ebbe14a97d9fb850fdd.JPG

12,000sqft of structural steel, concrete, CMU and gypboard walls, fully adhered rubber roof.

$166/sq to the owner

Put up or shut up. Where is it.

George, you are very smart man….

‘I’ll buy it for $462,000 AND pay all closing costs’

I’ll go $475k, closing costs, AND I’ll write a letter praising your decor and promise to feed the squirrels.

and promise to feed the squirrels.

LOL… Thanks a lot, Ben—now people are looking at me funny on the bus.

I make light of this stuff cuz I don’t think what any one person does means much. I’ve mentioned my friend here who bought a house about a year and a half ago, and is seriously bummed now. I don’t even care that much about that. Why? Because it’s just money and he’ll get over it. What I do think is important is the effect on all of us of maybe millions of people paying too much and defaulting down the road. If our govt is leading us toward a Japan like scenario, the last thing that matters is one house in Sacramento.

I mentioned a few days ago that I’ve come to the conclusion that when a person gets in in his/her head to buy a house, and they can get a loan, they almost always do it.

“I make light of this stuff cuz I don’t think what any one person does means much.”

Bingo.

Furthermore, it seems foolish to try to assess the market based on one individual’s recent home purchase experience, or local sales results.

And the Zillow price trends offer a far more convincing indicator of where the market is headed than the value Zillow places on any one home. In Sacramento and surrounding communities, the recent trend is down.

I started to point this out too but decided I didn’t want to pop this guy’s bubble but since its out there. I just can’t fathom why anyone would celebrate FHA. You’re paying interest on almost the entire portion of the house price. Even at low interest rates, over 30 years that’s substantial. So you are paying so much more on that house than someone w/a substantial downpayment would pay. They’ve maximized the extraction on that property from you. You pay interest on the interest usually compounded monthly. (Is it possible for mortgage interest to be compounded in other terms than monthly?)

You’re paying interest on almost the entire portion of the house price. Even at low interest rates, over 30 years that’s substantial.

Rule of thumb I’ve heard: On a 30-year FRM, you’ll be paying a total of three times the price of the house. That’s what paying 30 years of interest will do for ya.

That’s a good rule of thumb, but you can actually use the rule of 72 to determine how many times over you are paying for your house.

The rule of 72 shows how many years it will take for your investment to double at a defined rate.

For example, at 4% interest, you pay 72/4 = 18. So at 4%, it will take 18 years for your investment to double.

Since the standard mortgage is 30 years, you will pay approximately 1.4X the price of your house in interest alone if you make the regular payments.

At 5%, 72/5 = 14.4, so you will pay 2X in interest.
At 6%, 72/6 = 12, so you will pay 2.5X in interest.
At 10%, 72/10 = 7.2, so you will pay more than 4X in interest.

So 72/X = 10 so the “3X in interest over a 30 year loan” rule of thumb assumes your interest rate will be about 7%.

The beauty of interest rate rises is that it drives the price of housing down for the how-much-a-month buyers. A rise in interest rates from 4% to 7% would drop the price how much, 30%?

A rise in interest rates from 4% to 7% would drop the price how much, 30%?

Seems the Fed is banking on twenty years of near-ZIRP, ala Japan.

We’ll see if they can pull it off. Personally, I think rock meets hard place is only a few years off. Not that I am holding my breath or putting my life on hold for such a time. Staying out of the way though.

“Seems the Fed is banking on twenty years of near-ZIRP, ala Japan.”

Yeahbut what happened to Japanese housing prices over the past twenty years of near-ZIRP? (Hint: They didn’t go up.)

“Personally, I think rock meets hard place is only a few years off.”

Maybe it’s different this time, but last time rates were this low, during the early-1960s, it took two decades for rates to boil up, in the early-1980s. The precursor to the interest rate blowout was a protracted period of double-digit annual inflation during the 1970s.

its merely the QE confidence game reflected in the numbers. It’s temporary ??

Yeah, well so is “life”….

“QE confidence game reflected in the numbers.”

It goes way beyond QE. I believe the aftermath of this housing bust may have been met with more interference to soften the aftermath than any other economic bust in history. But I don’t believe the intervention has done anything to correct fundamental imbalances; rather, as Ben often points out, attempting to put a floor under housing prices simply encourages more overbuilding.

In short, I don’t think it is possible to conclude at this point that we are out of the woods, either with respect to the Fall 2008 financial collapse or to correcting imbalances in the housing market. A more plausible guess would be that it will take decades to restore balance. I refer any doubters to the recent experience in Japan.

Jingle Male, if you don’t mind me asking, what part of Sac is this? I’m in midtown and it and East Sac are two of the few areas of town that would command that sort of price. Just curious.

South Placer County

Jingle answered the question above…

Yeah…I saw that. I hadn’t refreshed the page when he answered, sorry JM.

None the less I don`t care what Zillow or the NAR says the laws of physics have ceased to exist in this housing market.

So long as you don’t take the information too literally, I think Zillow has much to offer; for instance:

Compare Cities Near Sacramento

Zillow Home Value Index Y-o-Y
Sacramento $149,200 -9.0%
Parkway-South Sacramento $76,900 -12.0%
Arden-Arcade $185,800 -10.8%
Florin $102,700 -7.2%
La Riviera $152,300 -10.0%
Rosemont $138,600 -6.0%

You got suckered into paying a grossly inflated price for a depreciating house.

Housing Prices are Falling, FACT

Inventory is rising, FACT

Sales are at 14 year lows, FACT

The market is “healing” huh? You wouldn’t have happened to be reading marketwatch headlines today were you?

“A slowly healing housing market”

http://www.marketwatch.com/story/a-slowly-healing-housing-market-2012-04-11

The truth is, you paid too much. Far too much.

“I am just telling you what I see in my market. It is healing.”

Or it is undergoing a ginormous dead cat bounce, driven by soon-to-disappear Chinese and Canadian investors…

RAL, you seem so unwilling to see the facts. I track this market very closely. Inventory is down 50% form 2009 & 2010. Forclosures are down 60% from last year.

I don’t care about a national market or condos in Florida. All I know is I am boots on the ground here, reporting back to all of you that the market is healing and showing you the signs. Take what you want and leave the rest. But don’t call me a liar or a fool. I will admit the first foreclosure I purchased in 2007 is worth less than I paid. But it also cash flows and if the residents ever move out, it will rent for $300/mon more than I get now.

“Inventory is down 50% form 2009 & 2010. Forclosures are down 60% from last year.”

Yet we keep reading about how the foreclosures slowdown is temporary and foreclosures will eventually pick up again. And then there is the shadow inventory question, which remains unanswered, particularly in light of reports that inventory is shrinking.

Wouldn’t a recovering market feature rising, not shrinking, inventories, as discouraged sellers who have been holding their homes off the market until prices start increasing again would be encouraged to finally try again?

“I don’t care about a national market or condos in Florida. All I know is I am boots on the ground here, reporting back to all of you that the market is healing and showing you the signs.”

Sorry — I somehow forgot that All Real Estate is Local.

CIBT, the declining inventory is the first sign of a healing market. Supply and demand. In my area, over 85% of the foreclosures and short sales have moved thru the system. I did the calcs by hand for specific neighborhoods!

I think we will get to a more normalized market as the remaining distressed inventory sells, then owner occupant sellers will be able to reenter the market without competing against the bank owned product.

“Supply and demand.”

On the supply side, I have seen plenty of recent articles indicating that lenders and discouraged sellers are withholding inventory from the market until ‘prices come back.’ With so much top-down coordination in force to manipulate markets, I don’t trust low inventory as a reliable indicator of where the market is or where it is heading. I can say that I bought a home at the end of the previous bust, a full five years after the early-1990s recession, and there was ample supply at that point in time. The comparable point in this recovery, based on the recession ending in 2009, would be 2015. But since this housing boom-and-bust cycle was so much bigger than the early-1990s version, it may take longer to reach the trough, when ample inventory hits the market to give buyers reasonable choices — much longer!

Now on to the demand side. How do sales volumes in your area now compare to their long-term average? If they are much lower, then I submit that demand is nowhere near recovered.

CIBT, you will probably still get a good deal in 2015. I am not saying housing is going to jump up at 20% a year. I am just saying there are great deals out there if you look carefully and are patient. I am proof.

..wait…Paladin! we were wondering what happened to you…welcome back.

I posted under the name Paladin for a couple of years and worked with the FBI and the IRS to bust mortgage fraudster pools.”

I remember you yes the bottom may be in for housing

I’m glad its working out for you. Time will tell as in any investment your cash is at risk no matter what you do.

I’m looking to buy now as well after 6 years as a carefree renter I think the worm maybe turning.

“I am not saying housing is going to jump up at 20% a year.”

I would go so far as to suggest the more likely outcome is further price declines (at least in real terms) before the market finishes correcting. Inflation is a wild card which could result in a stable nominal price with real price declines masked by general price inflation.

“I am just saying there are great deals out there if you look carefully and are patient. I am proof.”

I believe this, though I don’t find your appeal to Zillow’s estimate of the value of your home convincing. I am more convinced by their trend analysis for Sacramento and surrounding areas. The trend is not your friend.

I posted under the name Paladin for a couple of years and worked with the FBI and the IRS to bust mortgage fraudster pools.

As your HBB Librarian, I’m pleased to report that Paladin’s experience in the fraud-busting field was described in Alyssa Katz’s book, Our Lot: How Real Estate Came to Own Us.

Any-hoo, welcome back, Paladin. And please don’t shout in the library, even if the rest of the HBB-ers are.

CIBT, the “Trend is your Friend” is very important to me, but I tend to be ahead of the game. I sold 50% of my stocks in Dec 2006 at $11,800. I sold the other half at the end of 2007 at $12,800. I watched the “trend” take the market to $14,000 and felt a little left out. But in the end, I watched it fall to $6,500 and got back in for 50% at $8,000 and another 50% at $9,000.

Zillow offers some good knowledge we never had before, but remember, it is a lagging indicator operating off history. I know my markets and nothing around here has sold for less than I paid in 2009. Yes, some properties have sold for LESS in SURFACE VALUE, but they were wrecked properties, needing $50,000 of rehab. Zillow makes no distinction for this factor. Neither do other indices.

“I know my markets and nothing around here has sold for less than I paid in 2009.”

I simply disagree with your suggestion that short-term price movements in your local area against the backdrop of top-down, nation-wide, extend-and-pretend market interventions are whatsoever informative of the long-term outcome of the housing bubble collapse. The future is far more uncertain than your recent observations may suggest.

But at the same time, you are suggesting that top-down, nation-wide, extend-and-pretend market interventions will informn and affect the house prices of any one area. Well, I didn’t buy the national market. I bought one house in one area based on one specific situation. I can’t do more than that.

Will I be underwater at some point? Possibly. Will I be underwater when I retire? Probably not. In fact I hope to have a paid-off house when I retire.

Ya know….. I think our buddy JingleBalls is lying realtor. How else does one explain the delusional stupidity?

“Well, I didn’t buy the national market. I bought one house in one area based on one specific situation. I can’t do more than that.”

The residual effect of national-level extend-and-pretend measures most likely was padded into your purchase price.

I posted under the name Paladin for a couple of years and worked with the FBI and the IRS to bust mortgage fraudster pools.

Paladin??? Welcome back, man!

I thought of you recently, and was hoping that you would drop by to visit again at some point. Glad to see you.

Speaking of which, you are one of my heroes for not just ranting about the bubble (like I did), but trying to do something about it on the ground. At some point, I’d love to hear more of your experience in that effort.

Thanks Prime. I have some stories roughed out and have to finish them. Trying to get the authorities to bust a 25 house mortgage fraud ring was really interesting. Keystone cop stupidity, until I finally got the director of the Sacramento FBI to pay attention. It took four calls and two trips to his office!

I was working on stuff so widespread and outrageous, then posting some of it here, I began to get paraniod and thought gansters were tailing me. It’a like Mel Gibson says to Julia Roberts in Conspiracy Theory, “You not being paraniod if they are really after you!”.

I could not believe where reality ended and fantasy began. I would call the loan surveillance department at New Century to report these $750,000 loans they funded on houses that sold for $500,000 and they would say “Thank you, we will look into it”, then a month later they funded 4 more! WTF? It was crazy.

“Keystone cop stupidity, until I finally got the director of the Sacramento FBI to pay attention.”

I’m saddened though unsurprised to hear your efforts to nail Countryfried were dismissed.

A colleague of mine has a long-term significant other who was pretty high up in their ranks, up until the moment they folded. So about two months ago, she quit her full-time position out of the blue and left the country. I couldn’t help myself from hoping her beau’s situation had something to do with the quick exit, but will have to wait until news trickles down through the grapevine to find out.

I don’t get it. When I bought near DC, you praised me, but you’re are not praising jinglemale in CA. I guess it is more evidence that real estate is local?

Praise and congratulation are two different things.

Jingle is to be *congratulated* on his happiness at finding a home. (Yay, Jingle. It’s a lovely area with nice neighbors.)

I *praise* him for his contributions to exposing fraud in the real estate industry. (Yay, Paladin, way to right those wrongs!)

And yes, when it comes to Zillow’s estimates, real estate is indeed, local. (Though highly subjective.)

probably Price Per Square Foot

Yes, price per square foot. I have no problem with “jingle male” buying houses. What I do have a problem with is his misportrayal of the market. The proof is in the pudding, and price per square foot has been dropping like a rock in that area. There has been no recovery.

http://www.dqnews.com/Charts/Monthly-Charts/Sac-Bee-Charts/ZIPSACB.aspx

GrizzlyBear,

I am not familiar with DQ News and their data. I suspect it is historical, perhaps 2011 over 2010.

Check out this site: http://sacrealstats.blogspot.com/ and you will see that all four counties have increases in the sales prices on a $/SF level for the last few months. This is current data.

I will also say that in my area, some house have sold for maybe 10% less than I paid. Say $75/SF instead of the $85/SF I paid. But when you consider these are the torn up POS that don’t have open space lots and you can kiss your neighbor thru the bathroom windows, does their low price impact on the stats reflect you have to put $15/$20/SF into them to make them livable. NO! and the junk is the last to sell and It gets a lower price and rents for less.

Again, I have no agenda here other then to report what I see in the market. I have always done that, in good, bad, up, down, fraud, and legal.

Uhh, this data is from LAST MONTH. Price per square foot has been falling for the past two years. The reason I posted the link is that it shows the year over year decline from 2011 to 2012. The idea that you bought in 2010, and now it’s worth more in 2012 is pure fantasy.

Comment by jinglemale
2012-04-11 02:58:54

I bought a foreclosed house from BofA in Nov. 2010 for $395,000. Zillow indicated it was then worth $405,000.

Comment by scdave
2012-04-11 07:50:34

Jinglemale…

Where is the general location of your house and if you don’t mind how big is it and what is the lot size…My suspicion is that a $400,000. house bought out of foreclosure in Sacramento is a pretty nice place…

Comment by JingleMale
2012-04-11 08:19:45

South Placer County, 3,000 SF 1/2 acre.

Comment by JingleMale
2012-04-11 20:19:49

I will also say that in my area, some house have sold for maybe 10% less than I paid. Say $75/SF instead of the $85/SF I paid.

Hmmm, let’s see: $395,000/3000 = $131.67 per square foot. You are liar, and a poor one at that. Take your BS to where the stupid people hang. It doesn’t fly here.

Different house. 3070 SF. Paid $260,000 in late 2009. Rents for $2100, and would rent for $2400 today. The one I live in is much higher quality.

A lousy time to rent? Maybe on the coasts, but not in flyover.

His numbers make no sense if their income is from salary or other earned income. None. See my post above, near the deduction discussions.

Polly, I addressed the numbers at your post above. They make sense. I gave you all the facts and figures which is a lot more than many would do here. It is all prepared by an accountant. What does not make sense is your formula for interpolating my income at $400,000. The formula is erroneous.

“We have no interest in selling, but I do find it interesting a lot of people on this blog are unable or unwilling to see the recovery and healing of the housing market. It is undeniable to me. It is almost like 2006, when many poeple were in denial about the bubble. Housing will and is recovering, just like the economy is mending. It is so different from 2009 in 2012, just look around.”

First of all - welcome back Paladin!!! Good to be hearing from our resident wrecking ball buster.

I think your area may be near the bottom, i.e. if your house used to be worth $900k. Other areas, San Diego, DC and New York in particular seem to still be drinking the FlavorAid and still have plenty of room left to fall. So same as how ridiculous some areas increased vs. others some have decreased.

I moved to Kansas. Bubble has just started popping here and believe me the people are sucking down the FlavorAid. But no decline before this so I’m expecting 20% starting from March, 2012.

I don’t know why there’s so much anger at the buyers here. I’m house hunting and I know I’ll be underwater for awhile, but the rentals here are scum. Literally - I have yet to see one decent rental and for the same PITI as my rent I can get into a MUCH better neighborhood. There is a benefit to a better quality of life even if it costs some. Of course, planning to spend $80k makes a 20% loss easier than the $350k I was planning on in San Diego.

But Paladin, I’m on the side of those who don’t think this is a real recovery and the economy is not healing. I’m not sure what you’re seeing, but I see a whole lotta people out of work a long time. And I think something big is coming. I hope you’re right, but at this moment I’m not feeling it.

Anyway, welcome back!

Good for you for moving to flyover! I maintain that the people who are doing best are the ones who have good jobs in flyover. For example, an $80K job in flyover will either buy something pretty nice, or buy a cutie-patootie with a lot left over.

Unfortunately I couldn’t keep a job in flyover. I gotta do what I can with what I got.

$80k will buy a very nice cutie-pie here, but it’s hard to find the decent neighborhoods under $100k. Fortunately no rush and the couple that I have my eye on can just stew in their overpriced glory until I finally put a bid on. Unfortunately, I did lose an almost perfect house because of assumptions. Oh well, more will come.

You couldn’t KEEP a job in flyover? I know finding one that pays decently is hard, but keeping one? A little devil worship we don’t know about? They seem to reject that here for some reason. However, the meth dealers seem to be very welcome!

SD RE Bear, the best thing you can do is be patient and observant. Many of the houses I bought had offers sit for 6-7 months before I finally got the lender to move on the short sale offer. I won’t let my childern put an offer on a house until they have identified three they absolutely love, that way they know if one lowball offer is not accepeted, they can move to properties 2 and 3. There will always be another house to buy…..

“I don’t know why there’s so much anger at the buyers here.”

I certainly hope nobody mistakes my healthy circumskepticism for anger.

I think everyone understands your point, but the house isn’t for sale so there is no mechanism for identifying potential buyers. Unless you’re suggesting it isn’t worth $462k because no one is knocking on the door and offering that amount. If that’s what you’re suggesting, I don’t think that’s a valid conclusion.

For the record, $462k for 3,000 sf in Sacramento seems like a lot of money to me. But implying that it can’t be worth $462k because jinglemale can’t point to a specific person willing to pay that amount isn’t a valid argument. If it had been offered for sale for some reasonable amount of time and no offers of $462k materialized then you’d have a valid point. There’s no way of knowing what the current pool of potential buyers are willing and able to pay for a specific property unless those potential buyers know it is available and submit offers.

There are plenty of sales all around me for similar houses which prove $462,200 solid and perhaps on the low side.

“WHERE is the buyer at $462k?”

Probably hanging out with Obama’s birth certificate. Even if Jingle Male produced a buyer, you still wouldn’t believe it.

Sorry oxy but you got suckered just like JingleBalls.

RAL, I mostly likely DID get suckered. But you know what? I had a life goal and it was this: I want to retire with a paid-off house. I feel that very strongly. I chose to start on the path to that. Will housing in my area drop? Depends on what you mean by “housing in my area.” Condos, yes. Crappy townhomes in the sticks, probably. Quality five miles from the job? Not likely, unless I got REALLY lucky.

So I did what I did and I certainly can’t change it now.

And so did Jingleballs…. He’s not smart enough to know how badly he got gouged.

I am 57. and quite coordinated….

I seem to remember a video shot by bike of burgeoning inventory. Wasn’t that you?

Also I’m sorry. Your house you’re reporting on is one of 10 by your report, so I’m not sure if it’s the house of your dreams or an eventual flip for something else. I just don’t see how you can square the “recovery” rah rah with the fact that the problems that made 2008 come to pass have not been solved and have even exacerbated the problem further. Are you saying all the smoke and mirrors numbers are saving the day? You expect the status quo to be more than temporarily?

This so doesn’t make any sense.

I seem to remember a video shot by bike of burgeoning inventory. Wasn’t that you?

That may have been Lou from near Houston, Texas or Tango in Uniform from Billings, MT.

Carrie Ann says “….I just don’t see how you can square the “recovery” rah rah with the fact that the problems that made 2008 come to pass have not been solved and have even exacerbated the problem further….”

Housing prices down 50%
Credit tightened substantially for buyers
Employment growing

Many of the problems creating the housing bubble are addressed. When you can buy a house for $200,000 which costs $250,000 to build, that is a buying signal. When your cost of ownership is less than rent, that is a buying signal.

If you forecast the “end of the world”, you only get to by right once!

Bubbles always run their course
….tulips…stocks….gold…houses…

Yet I have some nice tulips blooming in my yard for a reasonable price. I own a nice stock portfolio which has increased about 45% since 2009 (VGDIF & DVY) including dividends. I don’t have any gold, because I think it will corrrect. Owning houses is a big part of my portfolio today, because, again, I can by below reproduction cost and when the economy recovers, newly built houses will set the value and pull mine up. In the meantime, they cashflow at a higher return than my dividend stocks and provide tax shelter most of the time.

You paid far far above production costs my friend. You just can’t bring yourself to admit it… yet.

Ben, here is a CL add for a less desirable house in a less desirable location about 2 miles away.

http://sacramento.craigslist.org/apa/2922449412.html

There are no adds with homes for rent in my neighborhood right now, but the last one went for $2,700/mon.

I think we have a long way to go before we reach the “real estate is the worst investment” phase. My colleagues, with their combined six figure incomes (approaching 200k), still believe that real estate “only goes up” and are already McMansion owners, or are planning on joing the “club”. They aren’t interested in Case-Schiller indexes, or anything else that would pop their little bubble.

I suspected you were around Rocklin…Hope you answered my question above…

It doesn’t matter to me what people buy or don’t buy. We used to practice a little skepticism around here, but now we are pressured to cheer for house buyers. So here you go, Hurrah for Jinglemail! Hurrah!

But for the people who own that house you just posted, lets look a little closer:

‘Has not been a prior rental and has only been lived in for less than 1 year.’

From zillow:

04/03/2011 Listing removed $399,900
03/04/2011 Listed for sale $399,900
10/31/2006 Sold $577,000

Looks like an FB owns it.

http://www.zillow.com/homedetails/2025-Letterkenny-Ln-Lincoln-CA-95648/68557175_zpid/

You are spot on Ben. Those people are underwater.

One good reason I am NOT underwater is because of your blog. I started researching the market in 2005 because it just seemed so frothy….and you and all the fellow HBB members helped save my ass from the same fate!

I have often sent in donations of thanks, though not recently, but will do so again. My whistleblower action against Countrywide was dismissed, so the 10% of proceeds I pledged to you and 10% to SacRealStats will never materialize. I do have 4 or 5 other cases pending against mortgage fraudsters….but they take a long way to wind thru the system and in the end, the fraudsters will have no assets anyway.

It’s different in jinglemale’s hood.

Sacramento Home Prices and Home Values

Zillow Home Value Index
What’s this?

$ 149,200
-9.0 %Y-o-Y

“My whistleblower action against Countrywide was dismissed, so the 10% of proceeds I pledged to you and 10% to SacRealStats will never materialize.”

JingleMale = Paladin

Hey Paladin, I remember you and your interesting posts of old.

Some of us here think that the fundamental problems that led to the bubble have not been corrected, despite the passage of a few years, rather covered over and lied about. So it seems impossible that a real recovery is about to unfold. Short term trajectory vs long term trajectory.

Your timing was off in 2009 but now it’s right on? It may be bottoms all the way down.

Thanks Blue.

I have made mistakes, but I am in the game and currently very pleased with the overall strategy and strong results. I do tend to get impatient and move a year or so too soon on many things. I’ve done it all my life.

Time will tell, but when I drill down in this market, the foreclosure pig has moved thru the python, prices are below reproduction costs and rents exceed homeownership costs. These facts seem like good indicators and definative buying signs.

Not to beat a dead horse, but this is actually kind of an interesting case study. So, here is what we have:
Whats-his-spaz bought himself a super-sized McMansion in a gated community that was constructed AT THE HEIGHT of the bubble (2004-2006), in the EPICENTER of the bubble, (Central Valley, California). It would appear that when these palaces hit the market, they were selling for over one million dollars, (the 3461 Monteverde comparative he provided sold for $1.8 m in Sept., 2005–it then resold in 2011 for $600K, and now has a pending offer on a listing price of $585K. The 3441 Monteverde comparative sold for $1.6m in 2005 and has a pending offer on a listing price of $799K). By all outward appearances, Whats-his-spaz has made a good investment. However, since home values, according to Robert Shiller could decrease to prices not seen since 2000, we have no benchmark. This is uncharted territory, one that Whats-his-spaz seems more than eager to chart for us. Let us be grateful for his courage and willingness to invest his hard-earned cash in what could be an amazing learning opportunity for us all! Amen! (I, for one, am bookmarking this conversation to refer back to periodically. It should be interesting…)

JinglePal,

As you can see from all our cynical commentary, your legacy lives on here! I’m annoyed as all poop that your action was dismissed; of all the folks on this board back then, you and Ben are the ones who really put your money where your mouths were.

I’m curious, though, of all the places you could have settled in, why did you choose that particular neighborhood? Seriously asking here. It must have been a very analytical decision, what factors influenced it?

Oh, hey! And if any of you are interested in moving into Whats-his-spaz’s neighborhood, there are loads of affordable properties for sale right here:
http://www.neighborcity.com/CA/95648/

However, since home values, according to Robert Shiller could decrease to prices not seen since 2000, we have no benchmark.

Are Shiller’s prices adjusted for inflation? Because when you adjust for inflation, prices ARE decreasing toward a level from 2000. Adjusting for inflation, my house price is mid-2001.

We ARE nearing a benchmark; decent housing in desireable areas is selling at mid-2003 prices. If you cleanly chop out the past 8-9 years, the housing curve is following inflation. But this applies ONLY to quality houses near job centers. That sector is at the bottom.. OR… it’s near enough to the bottom that it’s not worth paying the rent to wait for the true bottom. Other housing types, and other areas of the country — are still dropping.

The housing chart that Shiller included in his book, “Irrational Exuberance” is based on existing home sales. Since What-his-Spaz’s house was built during the middle of the boom, it would be a new house, with no sales history prior to the housing bubble. We don’t know what the house would have sold for in 2000 because it was not built. It should be interesting to see what happens. I am particularly curious because my sister just bought a new house, (against my advice, mind you), and was so proud of herself. She said she got a steal, (like most new homeowners do). It was actually a model home, never lived in. So, as I said, I am eager to see how the numbers shake out. I would love to be wrong in this situation, but I have a sinking suspicion that I won’t be.

Interesting website, wittbelle.

I entered the zip for my “neighborhood” and was amused to see that all the foreclosure listings were in the same 300-700K range. Funny thing is that nothing– and I mean nothing– in this zip code has sold for over 100K in the last 12 months.

IF there were a market, they’d be lucky to get 60-140K for these listings. Indeed that’s about what similar properties were going for in 2010, the last time anyone sold one.

One more thing: I haven’t yet heard a single soul suggest that “real estate is the worst investment.” Until I hear these words, or better yet, see them in MSM print, I will remain steadfastly convinced that the popped bubble has not finished losing air.

Wait a minute — stop the presses:

Why Buying a House is the Worst Investment EVER
03-25-2012 11:34 AM - last edited on 03-25-2012 11:34 AM

This is a speech I gave to a standing ovation during Toastmasters on March 24, 2011. It is one of my best speeches ever and made people in the audience that owned their homes realize the flaws in owning one. With people questioning the reason to buy a home, others somewhat surprised that the value of a home can drop, and others just not sure what to do, this speech can help!
===
Buying a house is the worst investment you can ever make in your life. Keep in mind that I say it is the worst ‘investment’ you can ever make, not the worst ‘purchase’. By ‘investment’, I mean something people buy with an expectation of getting a return or something that will increase in value over time.
…

That essay I just posted is a masterpiece.

“In conclusion, people often will favor a home over being a renter because it offers stability and a feeling of ownership. I say the only thing stable about owning a home is how consistent your hard-earned money goes right towards interest, insurance, and repair costs. On top of that, what is this feeling of ownership people are talking about? I own these clothes. I own my TV. I own my computer. Home owners must pay taxes each year even when their mortgage payments are done. I believe home owners never own their homes. Instead, their homes own them.”

A Hansen asks

“…..I’m curious, though, of all the places you could have settled in, why did you choose that particular neighborhood? Seriously asking here. It must have been a very analytical decision, what factors influenced it?……”

Because it was the most bubblicous market! In the areas where I bought homes, 97% have foreclosed, some TWICE. I buy below reproduction costs and rent with positive cash flow.

I also only buy houses which have south facing rear yards on open space lots which in normal times would garner a $75,000 “lot premium”. Zillow, the banks, and the appraisers pay no attention to those factors today. It is all flotsom and jetsam. In good times, they will use these factors as justification for a much higher sale price.

In the meantime, my residents love living in the sun, with no rear neighbors. They talk about how the house is like living at a resort at Tahoe. The geese fly into the lake behind the houses at eye level when you stand on the second floor decks, they watch the fish, beaver, river otter playing….etc.

The last house I purchased, referenced here, and the subject of so much vitriol, was a goal of mine for 15 years. It has a screamning view of the downtown Sacramento skyline, has an open space lot and a premium size. Lot’s in this subdivision sold in 2004 for prices exceeding what I paid for my whole house. In 2006, the house next door to where I now live was listed at $925,000 by a flipper. I wanted to knock on his door and bitch slap him, asking what kind of nerve did he have, after purchasing the house a few months earlier for $700,000. Well, guess what, he sold it to a greater fool, who is walking away and has a short sale offer for $545,000 in front of the lender right now.

I waited patiently since I learned my lesson in 1990 about housing downturns, to take advantage of another cycle. It was hard to be patient and I jumped in a year too soon. However, I think it will play out well.

Time and Wittbelle will tell!

So far, it is working better than I projected. That is not to say there are no risks and challenges, but I do all my own manangement, my occupancy exceeds 99.6% over the last few years and we have good cash flow and strong reserves.

Home owners must pay taxes each year even when their mortgage payments are done.

At some point taxes should be paid off just like your mortgage.

“I waited patiently since I learned my lesson in 1990 about housing downturns, to take advantage of another cycle. It was hard to be patient and I jumped in a year too soon. However, I think it will play out well.”

Haven’t you heard? THIS TIME IS DIFFERENT.

If my detective work is correct the subject property has 2801 square feet. The comps given were 900 and 1000 over that. Those are not good comps.
Here’s a link to all the homes sold in the immediate area of subject property:
http://www.zillow.com/homes/comps/63434617_zpid/

Proposed weekend topic: Evidence the mania is ending.

Evidence would include essays such as the one from The OC posted above.

Good work wittbelle! “…..If my detective work is correct…..”

So take a look at the 5th comp down on Fuente. Very similar to my house in size and it sold for $600,000 or $200/SF about a year after I bought mine. That indicates my house is worth closer to $560,000, not $460,000 as Zillow suggests. I appreciate you pointing this out and making my case for me.

As I stated earlier, by all outside appearances, it would appear that you have made a good investment. Having said that, the value of your house is irrelevant because, as you stated earlier, you are not planning on selling it. If you were, I would tell you what my accounting professor used to tell his students: “Your assets are only worth what someone else is willing to pay for them”. Since there is no crystal ball that can tell us what the future economic horizon might look like, there is no way ANYONE could tell you with 100% certainty that you won’t find yourself with the label, “Knife Catcher” or worse.

One more thing: I haven’t yet heard a single soul suggest that “real estate is the worst investment.”
Until I hear these words, or better yet, see them in MSM print, I will remain steadfastly convinced that the popped bubble has not finished losing air.

I’m holding out for that on the cover of TIME magazine, myself.

That will definitely pinpoint the bottom.

Time and Wittbelle will tell!

Paladin, I hope you will be around in a couple of years so we can revisit the subject!

Prime, I will be here. I haven’t posted much lately as I have been busy with work, but I read here quite often and always enjoy Ben’s collections, particularly on Fridays.

‘My wife says I repeat the phrase “I just love living in this house” about 3 times a week.’

There are some things worth more than money…

From Bloomberg: Mid-Incomers Suffer in Polarized U.S. Job Market

“The highest paying jobs, which employ about 15 percent of all workers, have accounted for 20 percent of the gains in employment since February 2010 … Those whose average earnings are lower than 60 percent of all employees have accounted for about 46 percent of job growth in the same period.

The divergence in job gains, which extends a pattern that began decades ago, was concentrated during the recession that lasted from December 2007 to June 2009″

Why does that 15% number sound familiar? Because the squad correctly predicted last week that the future of this country will be the 1%er pigmen on top, only 15% or less will have a middle class standard of living, and the rest will all be Lucky Ducky working poor!

And from lying liar NAR spokesliar Amy Hoak in MarketWatch: Spring housing data is encouraging, but this will be a slow recovery

After several paragraphs of REIC propaganda, blind pig Amy finds an acorn:

“While the employment picture is looking somewhat brighter on a national basis, the numbers don’t account for the people who have jobs but are making less than what they had been, Khater points out. “The issue is not just getting over the housing depression and economic recession. It’s also overcoming the stagnation of incomes that dates back to the 1990’s.”

stagnation of incomes that dates back to the 1990’s

That would be Jack Welch leading the outsourcing parade.

I had orchestra seating for Polaroid watching it implode in slow motion horror. I really think the 80s corporate raiders set the valuation extraction meme in motion.

http://books.google.com/books?id=2wRMVKcA40UC&pg=PA59&lpg=PA59&dq=when+was+Polaroid+taken+over+by+corporate+raiders&source=bl&ots=8e1YNIDOWM&sig=es0tSYkNVN-0W8UJYuMsEidHNDc&hl=en&sa=X&ei=98yFT4GQCuXz0gHGr_TcBw&ved=0CCEQ6AEwAA#v=onepage&q=when%20was%20Polaroid%20taken%20over%20by%20corporate%20raiders&f=false

They got to eat cake…Wait a minute, make that bread….

This great recession is so reminiscent of 1980-82…The real scary part is its so much worse….Many millions of people will go through the remainder of there lives making ends meet…Thats what I saw come out of the Volcker induced recession and its what I expect to see come out of this great recession with a giant X factor…

Yet they will still vote for even more conservatism that is against their best interests.

You can’t fix our kind of stupid.

Food stamps and labor unions are destroying this country!

Interesting observation on there being two economies, quite consistent with the Citigroup Plutonomy memo

The Two Economies
By DAVID BROOKS
Published: April 9, 2012

His work leaves the impression that there are two interrelated American economies. On the one hand, there is the globalized tradable sector — companies that have to compete with everybody everywhere. These companies, with the sword of foreign competition hanging over them, have become relentlessly dynamic and very (sometimes brutally) efficient.

On the other hand, there is a large sector of the economy that does not face this global competition — health care, education and government. Leaders in this economy try to improve productivity and use new technologies, but they are not compelled by do-or-die pressure, and their pace of change is slower.

A rift is opening up. The first, globalized sector is producing a lot of the productivity gains, but it is not producing a lot of the jobs. The second more protected sector is producing more jobs, but not as many productivity gains. The hypercompetitive globalized economy generates enormous profits, while the second, less tradable economy is where more Americans actually live.

http://www.nytimes.com/2012/04/10/opinion/brooks-the-two-economies.html?_r=1

You want those you disagree with to go to hell when they die? Nice.

Always with the class warfare and politics of envy, aren’t we? Right out of the Saul Alinsky playbook…

Those occupiers need to occupy a shower and get a job!

Did you miss the 1980s?

Do the names Reagan and Bush ring any bells?

My favorite recurring one-time offer is from Classmates dot com. You’d think Facebook would have obsoleted them by now, but the one-time offers keep on coming.

Thanks CarrieAnn, Az Slim,and Sleepless.
That fwy noise is the biggest deal breaker,
and after walking the house without the owner following us,and our guy, we walked away soured. It wasn’t our
home. I like the urgency try, and that another cash
buyer has been used like a broken record on us. Not
impressed, and mov’in on. We’ll see if it goes pending soon. Best of luck to the new owners … you’ve got to be deaf.

A perfect REO (knock-out one story) at $439K came on the market that blows this house away, but again another fwy house. This tight inventory is working, darn it. People are buying lipstick on a pig.

While there are ways to mitigate freeway noise, there are few ways to mitigate freeway air pollution.

Many good reasons that freeway-adjacent properties seem cheap and convenient.

“We’ll see if it goes pending soon.”

I asked a realtor why so many properties went pending a few days after listing and then many came back on the market later. He told us some investors fire in an offer “sight(site?) unseen” to get “dibs” on new properties. They do however put contingency clauses in their offers so that once they do further diligence, they can back out of the deal and the house comes back on the market. Anyone else heard of this?

Robin
Your point is well taken. My husband likes to do his R&D thinking in the yard sometimes. Quiet is essential, but I appreciate your input.

Dale
The fwy house was $30K above comps. Investors would stay clear of it. They came down $5K in their counter.Deal over, an overpriced noise box.

It’s a rough time to be president, for sure!

It’s hard work being a socialist, communist, fascist, kenyan, indonesian, muslim, gun-grabbing, nanny-state limosine liberal all at the same time!

“You work three jobs? How uniquely American.” - the Decider, 2005

“the same long and lean build as Abe Lincoln”

…..ohhhh puleeeese. Why he’s the spittin image of abe lincoln…you do like abe lincoln don’t you?

I was just thinking he had the same build as charlie manson.

does it take at least 30 years to grow twin 500’s or is there just some maturity factor involved?

Do the Coasties (Coast Guard) and Custom agents utilize every fast boat they confiscate in a bust? I doubt it. Why don’t you do some research in that direction. Go visit Palmy, the Mugster and the rest of your FL HBB buddies while you’re at it.

Hell yeah, and you can ditch your boat if you feel like it.

http://www.tampabay.com/news/publicsafety/more-questions-than-answers-continue-to-surround-mysterious-yacht/1117612

Oh there are other drugs…painkillers and stuff. Plus I think people will still bootleg pot to avoid all the taxes people want to levy.