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The Housing Bubble
Examining the home price boom and its effect on owners, lenders, regulators, realtors and the economy as a whole.
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Will the Lay / Skilling Verdicts
create a “Fear of Jesus” in Real Estate?
As most know, yesterday former Enron
executives Ken Lay and Jeff Skilling
were convicted of fraud.
Regular readers of this blog know
about reports of illegal activity in
the world of Real Estate, such as
appraisal and lender fraud.
Also, based on a OFHEO report released
earlier this week, governance at Fannie
Mae appears to be a bit shaky.
My question to my fellow bloggers is:
Will such a high profile conviction
put the ‘Fear of Jesus’ into unethical /
dishonest appraisers, loan officers
and other officials involved in the
real estate / industrial complex?
Or, will business continue as usual?
One very interesting quote from a Enron
observer:
“Lay and Skilling thought they were above
the law and still do even after the verdict.
This type of sociopathy is more common than
the public thinks, especially in the world
of corporate executives who implicitly get
a shadow immunity from the lawmakers they
buy off with their lobby tactics.”
— Rocky Boschert, portfolio manager
at Arrowhead Asset Management of Austin, Texas.
Is the real estate / industrial complex so
large and powerful that they too, feel that
they are larger than the rule of law?
Could we substitute well known Real Estate
names for Lay and Skilling (ie. Franklin Raines)
and come to the same conclusion?
Very interesting, as Fannie pressured congress into investigating OFHEO through their purchased reps. If they pressed that hard, I do not want to imagine what OFHEO dared not investigate!
It WOULD be interesting to know more about the background/history of the FNM fiasco. Pretty nervy to want OFHEO investigated.
I’m wondering which side different congressmen have fallen on over this issue in the past several years.
GW will pardon both Lay and Skilling in Jan 09 on his way out the door. I would be surprised if he doesn’t. He may even pardon them right after the elections in 08 so they can be with their families for the holidays.
That would be unfortunate,given I worked at Enron and witnessed it first hand.
Unfortunately, it is likely with the professed conservative Christian ethics of the current administration.
I have a little Enron connection of my own. Email me at gymnastgal32@yahoo.com if you’d like to hear it.
“Regular readers of this blog know
about reports of illegal activity in
the world of Real Estate, such as
appraisal and lender fraud.”
Don’t forget borrower fraud, e.g., stated income? The mortgage insurance companies are going to lobby government for the FB’s to be dragged before a judge for their greedy ways.
Stated income loans are not fraud. They have been around for years and known in the industry as liars loans. The decrease in rates just made them highly affordable.
Regardless, at the time I remember my 85-year old mother in North County San Diego calling me in tears about her $400 utility bill when she made less than $1,000 from Social Security. True story. They should rot in hell!!
Let’s celebrate their demise now and deal with real estate tomorrow. Or today, because I’m as much an addict to this blog as the rest of you are.
1989 RE emplyment as % of total and gdp
vs. 2005 ???
the 80’s was a decline spread through several markets over several years, oil patch86, NE 89, 1990-92 most others
2006 is every market in one year !
how big is this ?
marketing techniques:
on MSN homepage marquee you have a panorama of vegas w $650k for furnished lux condos
WOW that’s one expensive ad spot boyz !
Will The RE Fraud Eclipse Enron and Worldcom?
I have a feeling that there is a lot of fraud by the FBs, lenders, realtors, appraisers, title companies, hedge funds, and organized crime.
How much fraud is out there?
Of course there is a lot of it. When you combine “easy” money with low intelligence, greed and the Master of the Universe Syndrome, the only question is, will there be enough room in the prison system for all of them :D)
LOL Hi Txchick57 ….Don’t know if your in Arizona or Texas .
Wait until some of these borrowers start turning on the loan officers/agents/realtors that advised them how to get a loan by fraud .I have actually seen this happen in prior turndowns where the pissed try to get even . Any of you people out there that could only see green , fraud has a 10 year statue .
Oh yeah, a veteran of the FDIC/RTC 1980s-1990s fiasco here. Been there, seen that, done it all, but something tells me that we’re going to see new and improved scams this time involving foreigners, illegal aliens, 20 people in a house and god only knows what else. Should make for very entertaining Congressional hearings, magazine articles, etc. not to mention beaucoup bargain for the patient down the line.
We’re en route at the moment btw.
Stockbrokers are legally prevented from putting investors into “unsuitable” investments for their particular situation, e.g. excessively risky. I wonder if the class-action ambulance chasers go after the neg-am brokers for selling unsuitable loans.
They can try but my guess is they won’t get far unless actual fraud was committed.
We should start a Pool for what month/year we’ll see the national median home price down 10% from the peak (formally a correction).
December 2007
(locally a lot faster, but it will take awhile for the national number to come down)
10% will only be the start, and I think it will come sooner because I think the stock market is beginning to tank and by October or November it will be recognised as a major bear market. So that will have more negative effect on the RE market, and all markets because the last few years they have all been going up with the liquidity surplus. I vote for December 2006 at the latest for a 10% national drop in the median.
4 months ago I said a 15% National price drop by the end of the year . I’m going to stay with that number .
I think that is a good estimate. Not all markets are as bubbly as the coast, but as Txchick57 so ably (and hilariously!)said,”combine “easy” money with low intelligence, greed and the Master of the Universe Syndrome” and you have a big problem.
I think a 15% coast to coast haircut might be just the ticket to begin to bring housing back into the realm of sanity.
Topic suggestion:
Predicted real estate sales distribution for 1Q2007. In other words, sales rates in Boston, DC, Florida, Cali, Texas, etc. Now onto this sub-topic:
I’m trying to get a good feel for this myself on when the market will plunge. For a 10% drop in the national median…
November 2007.
Assumptions:
1. Sales will plumet in the largest “bubble” markets. Because of this, non-bubble sales will dominate the median purely by sales volume. Since non-bubble sales are by their nature more affordable (less expensive) than bubble markets, this drives down the median rapidly.
2a. Mortgage rates start driving sales prices. What you say? Its simple, most people have little down payment. Thus a 1% increase in mortgage rate means the sales price must drop about 11%. I truly believe sales prices are being driven by monthly payments.
2b. Enough people wise up “a little” and decide 41%+ of income going towards a house isn’t worth it to continue to the inventory growth.
3. Recommendations come out to tighten mortgage loan practices. However, I’m betting these do no come into effect for 12 to 18 months.
Bummer… I have the down payment ready so it looks like I buy in 24 months+.
4. Carrying costs bite the flippers forcing them to discount far more than we’ve seen so far.
5. Enough press is out to slow down entry of new flippers.
Locally, I have bets that it happens by Oct 15th.
2nd topic:
Sigh… we now have *multiple* coworkers here rushing out to buy San Diego properties this weekend. I’ve given up. If they’ll listen, I show them graphs from various blogs that tell the tale of how bad the market is. Most won’t listen.
I don’t get it… these are sensible people. There “estabilished” with large “nest eggs” that they are about to retire on. And here they are about to swing small fortunes into the peak of a bubble. Sigh… So maybe an article on this phenomenon.
Sigh… How can someone be sensible enough to build up a million dollar+ retirement fund and then scramble to piss the money into the wind into one of the top 10 bubble markets? Seriously, some of these people are those quiet multi-millionairs your read about who sensibly invested… up until now! And they’re rushing to get HELOCs on nearly paid off homes to add to their purchasing power so that they can buy in bulk!
Topic 3: What markets will be estimated buys in 3 years?
Why this topic? I am forming a small *family only* real estate purchasing group for the purpose of aquiring vacation condos/home for the family to share. Every generation of my family has done this and its worked out well. We’re currently arguing over a 2008 decision or 2009/2010. The one family member who suggested late 2006/2007 was beat severly with pillows for shear stupidity.
Neil
The siren song of the housing bubble is strong and pervasive.
I am waiting for all the HGTV and other cable shows advertisers to wise up and start looking more like the science fiction (downmarket) advertisers.
November 2006.
10% down nationally in June 2007.
Prices will plateau for at least this long, IMHO, unless credit standards are drastically tightened. I expect a fairly significant bounce in May 2006 numbers (esp. M-O-M), unfortunately.
What was your favorite post/topic this week?
Which comment/reply scared you the most?
What made you laugh out loud?
The “don’t poke at his cage” comment you made about you know who.
At the risk of immodesty the hookers and strippers comments were pretty good.
I liked the “this looks like the bottom” with David Lereah pointing at his bottom. And May is better (meaning Mae West’s (?) bottom is better. That was brilliant!
I agree! Thanks to Thomas for that one!
I would like interviews with sellers that won’t come down in price and find out what the logic is . How about people who have had their house on the market for over 6 months : what are they thinking ? What are the realtors telling these people . I talked to one lady who has a listing and she told me her realtor just said “it will take time to get your price “.
Don’t ignore the fact that many sellers don’t have the option of reducing the price. If they have bought or refinanced recently, they may not have the money to bring to the closing. I think that is what mrincomestream was trying to say when he said that prices won’t go down until the inventory of forclosures starts to rise. The owners will just sit as long as they can and hope for a buyer to save them. Eventually the impass is broken when they lose the house and the bank cuts the price.
I would like to know how many sellers out there could aford to cut prices more than 5%.
See my comment below about a bailout and tapping into retirement funds. Also, what about allowing people to borrow against future SS payments?
When people see their retirement going off a cliff… they’ll panic sell into the “falling knife.” Or… they’ll walk away and let the bank deal with the issue as you alluded to.
I would also love to know how many buyers go underwater at:
5%
10%
20%
The afford question is going to be very tough to answer.
Neil
Steve in Flyover Land-
That’s exactly what I meant. I’m sure most here got it. I just didn’t feel like connecting the dots for some whack job that took five years to get his certificate in web design. What would be the point.
As long as Tweedle Dee’s control the market with new, weak, and desperate Realtors and there are Tweedle Dum’s who refuse to inform themselves. We will not see a true correction. A “soft landing” will occur and David Lereah will be looked upon as a god to the masses much to the chagrin of many here.
A normalized market in my region at least, it takes 3-6 mo’s to sell a property. California really doesn’t have a “buying season”. Property moves here all year long. Most Tweedle Dums will just switch Realtors blaming them as being lazy or incompetent as the reason for their “must die for” piece of property not selling. No matter the interest rates, economy whatever. They will never admit their price is too high. As long as the most recent comps show those high prices a decline is not coming because a bail out is available to most sellers in trouble. Especially with the lending products available. Just when I think I have seen it all my inbox tells me differently. I recieved an email yesterday where no matter your other credit if you can show making a house note on time for the past 12 mo’s with no more than 1×30 you’ll get the loan. It went down to the mid 500’s as far as fico score with an LTV of 75% up to 90% depending on your fico. Well, with that kind of financing even if your arm is resetting if you bought before 2005 you’re ok that wipes out a whole lot of potential forclosures. Especially if you’re willing to take a second job or home business to make up the difference if your payment are higher.
That’s why I say the Y.O.Y declining, inventory numbers or any other numbers one chooses to spout off really do not matter at this stage of the game. Not because I don’t understand Econ 101. I have a real good grasp of that. For the basic principles of Econ 101 to work you have to have real and true data behind it. EX: In the case of Enron for all intents and purposes before it went belly up, if you applied basic principles to the numbers the P/E ratios and all other ratios used to evaluate their stocks came out positive. But it was a false positive Why, because the books were cooked. It’s like using manwich to make prime rib. It may taste good but prime rib it’s not.
It’s the same thing with all the Real Estate numbers. Garbage in Garbage out. They mean nothing. Especially in a market that has been manipulated and artificially inflated by cheap money.
From this point forward the only numbers that are important to me that give a true indication of the market are the foreclosure numbers. Not the NOD’s, Not the NOT’s, but the R.E.O.’s.. How many bricks are hitting the books of the lenders daily. Telling me that foreclosure’s have risen 79% in my area means nothing. What I want to know is how many actually made it back to the lender. How far are the lenders books in the red, How many lenders are bleeding red, How many R.E.O.’s are currently on the market. That’s when a real conversation about the correction and how far it will correct begins IMHO. The rest is mindless dribble by the naive and truly uninformed of what the real estate market is all about and the mechanics of how it truly performs.
Totally agree, Mrincomestream!
This goes off on a tangent, but it helps to illustrate your point. Earlier this week I posted an add on Craigslist to sell a used car. I did my research, and priced it at what I felt was a fair price. I was shocked when the ad drew 10 replies in 2 hours, and I made a deal to sell the car 6 hours after I posted the ad.
The point here is that when you price something at (or slightly below) the market price, it sells and it sells quickly.
That is true with cars and most other things that people count on depreciating. The housing market is different IMHO. Once people figure out that double digit depreciation is gone, and will not be seen again for some time they lose interest. When houses currently are priced below market value they do not sell. I have seen many price reductions in my area, and still nothing is selling. The lower prices are scaring potential buyers even more. The only people that are looking to buy right now are people that are looking to upgrade or downgrade. Once those people find suitable homes, demand will lower even more.
It would be great that if everyone that was even considering buying a home browsed this site before making a decision. If they did, I believe that 90% of those prospecite buyers would change their mind IMO.
Comparison of the dotcom bubble and the real estate bubble times. One thought that occurred to me the other day after hearing about governments across the country flush with tax revenue. Not only are people making easy money, but the government (CA for example) is doing well also. We have surpluses again! What shall we spend it on? Last time I remember these sorts of thing occurring in Sacramento was around the late 90’s when all the dotcom revenue was flowing in. Fast forward eight years and now the state has all the property tax revenue surging in. After the dotcom popped CA and many other states started running deficits. What will happen to state governments post 2006?
I think we can count on seeing quite a few defaults on municiple bonds over the next 5-7 years that will surprise many people. This happened in the 30’s and I think it is coming again. The local governments get used to spending a lot of money and they can’t adjust when the income dries up.
Definitely. I know some people in muni govt, and it seems nobody is aware of the bubble and its consequences. I’m trying to warn indirectly (since I do not work for the cities and get my info second-hand), but denial is deep.
Flat is wrong, IMHO. The govt will be one of the hardest hit during the bubble collapse. I see lots of layoffs and reductions for govt workers coming down the road.
Don’t say it’s a good thing. Your employer has to compete with them. When the govt pays less, so will your (private) employer. The govt unions are the only things holding up the middle class at this point, and there is a lot of pressure on those right now.
Will there be a fullscale migration to Vermont in hopes of getting a chance to interact with the Lingus?
Oh yes. Since the Lingus has made it clear how much enjoys the company of his fellow humans, I think we should all find out where he lives and move in real close.
LOL. I hate Vermont. Pretty but too damn cold. This is one NY native that will never sully Lingus’ pristine hills and vales although being a certified tree hugger and leave em as you found em advocate, he probably wouldn’t mind. Plus I don’t have a moustache
Lingus doesn’t mind humans. He just hates the “Massholes” and materialistic gluttons. Having dealt with their ilk, I tend to agree with him.
He probably has a basement. Hmmmmm….
Pawlet….. Come see me boy….
Doesn’t VT have an unusually high number of unsolved murders?
Hmmm, maybe we just make sure Der Lingus is invited to the party.
We can crowd him there for just a short while, then let him go so he can make us laugh again.
BAILOUT suggestion
IF there is going to be a government BAILOUT, what about allowing sellers to tap into their 401Ks and retirement funds with no penalty in order to “bring money to the table.” It seems to me that this will 1) allow sellers to lower the price and get the market moving and 2) place more of the burden of the bailout on the fools themselves.
I’m not in favor of a bailout, but I suspect one is coming, and I don’t want to pay for others’ mistakes.
This is the best idea with a bailout. Use your own ‘trapped’ savings that you have available. In fact, I wouldn’t even mind allowing a one time amnesty and letting people take out all that money and pay ordinary income taxes w/o penalty for early withdrawl. In fact, the government could even force brokers to make the check out to the mortgage company (to pay down debt) or whatever. Force folks to use their own money, let them cry about their retirement money in a decade or so.
Couldn’t agree more. I will be incensed if people are bailed out of their own stupidity with money other than their own.
Using 401k to bring money for closing does not appear that good of an idea for seller’s point of view.
Lender gets the money and seller looses.
I would like to see the lender loose money in the process as well!
And to think about it, if lots of people are without 401K savings, the problem of bailing them out is merely shifted to the Future, IMHO.
Indeed. I think sellers would be better off to let the bank foreclose, then promptly declare bankruptcy to discharge the deficiency judgement (Not legal advice, just a general observation.) This keeps their retirement savings safe.
Anyone taking liquid assetts that are ERISA-protected to bail out of a housing debt is extremely misguided. Then again, they were quite misguided to buy the house in the first place.
Couple problems w/that scenario, one being that most of these dolts can’t pass the means test for Chapter 7.
OK….I need some help with this….I only know just enough about these computers to make me dangerous….
For the past several days a Agent in Sacramento has been running a ad in the San Jose Mercury News under Income Property for sale 1-4 units”…She’s proclaming that; “”Invest In Sacramento, #1 in Growth”….But, she went over the top today…She now has her mug shot in the ad….This is better than the mug shot of the pimp in Arizona….I think Suzanne moved to Sacramento…..
Can someone retrive the ad and post it ??? It should be worth a few laughs….
I was playing golf last night with a group I have know for several years. One of them told me that KB Homes laid off 45 people this week. He said that the employees were escorted off the property by uniformed police. No severence package.
Queen Creek just went over 2,800 houses for sale!
how many houses are there total in QC? 2,800 homes for sale in that one area!? Inconceivable! Anybody want a peanut?
for the brain trust: how high can inventories actually get in some of the bubble zones? can phoenix really get to 75,000; san diego 30,000? or is there some kind of built-in diminishing return mechanism that will kick in eventually….
Phoenix is 47,000 MLS, plus at least 10,000 FSBO, plus at least 20,000 vacant with no sign, under rehab etc. IMO. So, using my current guestimate, you’d be at 77,000 today, with 6-8 months to go before 100,000 properties are “available”, and this doesn’t include new homes in the pipeling or specs..
isn’t san diego city just about the size of phoenix? the population of the 2 cities are not that much differents. and san diego’s economy is larger than phoenix (?). not to mention that san diego has more desirable features. does the 2x more houses for sale in phoenix means something really out of whack?
May I 2nd cereal’s question…
How high can inventory realistically get?
Quite a few good topics to choose amoung.
Neil
“Can someone retrive the ad and post it ??? It should be worth a few laughs….
When you’re on that ad page, just copy the http… at the top and paste it in here.
I’ll give it a try…..
This is all I could get….No Picture and the picture is priceless…I will try again in the next day or two…
$0.00 2 Days San Jose Mercury News
INVEST In Sacramento No. 1 in Growth I can help you build wealth in Real Estate using the Equity in your home Lynda Evans Investment Specialist 916-983-8980
I’ve seen quite a few people here predicting that come fall (September/October) things are going to become increasingly ugly. Here is my question…
How will all of this impact the holiday shopping season which will begin very shortly after that? If folks have been celebrating the season the past few years on their HELOCs and maxed out credit cards, how will Santa be able to come acalling this Christmas?
Maybe he’ll be visiting the homes of short sellers this year! It’s been awhile!
You’ll know pretty quickly if you watch the retailers stocks during the summer.
Oh, and btw, I am hearing quite frequently now that the homebuilder stocks are “bargains” and “values” now. Yeah, just like JDSU was a “value” at $20/share . . . . right before it tanked to $1.35 a share.
I’m predicting the bleakest Christmas in a decade. Although, I’m not sure about summer stocks… I truely think the crazyness has 3+ months of surge left.
Neil
K-Mart will tank, but Nordstrom’s will do very well IMHO.
I’d like to hear opinions on the relationship between rising interest rates and price decreases — is there a ’sweet spot’? Obviously it’s better to pay less for the house at a higher rate, you can always refinance - and I’m expecting big drops here on long island, but is there a point where things change?
another point I’d like to make is the relative lack of news on long island’s bubble - we all hear about SD, PHX, FL, etc. - but CNN has LI in the top 10 for ’slowest growth areas’ and it’s been rated high for a bust by others as well:
http://tinyurl.com/k9br3
inventory is increasing by 100+ on mlsli.com daily and I feel like the market is very slow…
It is hard to say what the sweet spot is, it would depend on the price of the home and the interest rate. I will give an example
400K in todays market with a 6.5% rate would be $2,528 PI. 300K in 2 years at a rate of 8.5% would be $2,306. Rates do go down though, and within 10 years you might have an opportunity to lock in around 6% again. You can do your own calculating at
http://ray.met.fsu.edu/~bret/amortize.html
Have a great weekend everyone!!!!!
Here are some numbers from one market:
2000
med price=$125,000, rate=8.5%, monthly mortage=$961
2005
med price=$295,000, rate=5.6%, monthly mortgage=$1,698
You can see that despite a heft drop in rates, the prise rose so much that the mortgage increased tremendously (and this assumes 20% down payment).
What this tells me is that buyers shouldn’t worry too much about increases in the interest rate over the next few years, because price declines can (and probably will) easily lower the monthly payment. Just another reason to wait to buy until the price drops.
helpful comments - thanks…
I want to know if most posters believe there will be a long slow price slide, or there will be some triggering event which will cause sudden drops (gas price shock, raise in rates by .50%, etc.).
when the first nuke is dropped in iran.
I have thought about this topic a lot.
It is a very difficult issue.
The best I have been able to do so far is come up
with a list of possible ‘trigger’ factors based on reading this
blog and other sources..
I can only imagine that several or many factors will work
together in a perfect storm fashion to trigger the slide.
IMHO, the slide will be quite quick since so much mass
psychology is holding up this bubble.
Here is a list (not in any particular order).
1) Gasoline price shock.
2) increase in cost of short and / or
long term money.
3) terrorist event. (especially if it takes
place over a large residential area)
4) mega natural disaster. (Ie. a huge earthquake
here in the Los Angeles area)
5) HELOC ’starvation’. HELOCS shut down because
force sales cause reduced cLTV which triggers
reduced comps which prevents lenders from making
even larger loans. Could become a self-feeding
endless down spiral.
6) signficant holders of US debt (ie China) get cold feet.
Affects 10-year bond and hence mortgage rates.
(ie. China decides it wants Tawian back and refuses
to buy US debt).
7) Unsustainable carry costs. ie. property taxes, insurance,
association dues, utilities, routine maintenance.
In fact, my working theory at the moment is it will be carry
costs exclusive of any mortgage costs that will kill the
bubble simply because mortgage costs can be delayed into
the future with gimmick loans, while carry costs must
be paid with real cash.
In other words if Joe Average had a rich uncle who gave
him free and clear a $2mm house with a stipulation that
he couldn’t sell it, he still couldn’t afford it because the
carry costs would consume all his available cash.
Now, this is sad. What kind of doctor couldn’t make more money doctorin’ than being a realwhore?
http://santafe.craigslist.org/rfs/163982195.html
Judging by many of the doctors I’ve seen over the years, I’m not sure that ad is going to get him too many patients– er, clients. I imagine going into his office, getting about 30 seconds to describe what I’m looking for while he’s half-engaged in some entirely different matter. He shows me a few photos of houses I might like, gives me 15 seconds to choose, writes something illegible on a slip of paper and sends me off to the mortgage broker. The mortgage broker gives me a sheaf of unintelligible papers to sign, sends me home, and tells me to wait for them to call and tell me when the closing date is. When I get the first mortgage statement, I’m struck with dread at the overwhelming sense of my own mortality.
Well-said MsTerra! You just described every doctor visit I’ve ever had. Maybe I’d add one more thing to our doctor-turned-agent experience: Bending over.
Sure that’s a Doctor you will love! Doctor Proctor!
Bend over baby!
I want to know what do I do with my 401K and IRA. They are in ca$h now, may be they should not be? What now? How to do?
Financial preparedness that is required to survive Bird Flu , Terorr Strike.
Is that under anybody’s Radar. PLEASE !
Well, cash is the most conservative, our main money is in Tbills. Next would be a bear market fund such as Grzzx. I have some of that, too. I am also going to buy some puts on the qqqq (Nasdaq 100 trust)as soon as it bounces back up to about 39 or so, myself, but that would be too speculative for most people, and I wouldn’t put more than 10% into options at any one moment, even right now when I believe that the market is starting a very serious phase of the bear market. This sums up my strategy.
The above strategies can all be used in an IRA, you can’t sell short in an IRA, otherwise it is a good strategy right now.
I’d let the qqqqs get a little higher than that. Throw a fibonnaci grid on that sucker for the move from basically 43 to 38 and maybe try a bit at the 50% retracement and a bit more at the 62% retracement. I’m already reading and hearing BS that this move down was due to nothing more than the backdating of options at Juniper and some other companies. BS of course, it’s due to overleveraged bad bets by hedge funds but they gotta throw a bandaid over it for now lest J6P get spooked and take out any more money than he already has (see Trimtabs). Anyway, bottom line, don’t jump back in too soon. I have to keep telling myself that too.
Actually, I meant 40, not 39, it’s already past 39, and I am planning on buying more at each wave up past 40. 40 is just my starting point.
Im sticking to CDs and TBills with the cash we made when we sold the house. The money is destined for buying another home in a year after some correction in RE occurs. This money has a fixed short-term target, so I chose low-risk. My 401k is diversified into US and non-US mutual funds, with a tilt toward conservative investments. I think the game now is to preserve the net egg, rather than grow it. If you read this blog regularly you know that the commenters cant agree on what the Fed will do in a crisis, and they cant agree on whether hyper-inflation or deflation is coming. So Im hedging. US stocks may look risky now, but if the dollar depreciates US stocks might be a better place for foreigners to park their dollars than anywhere else. So US stocks might hedge well. Its too risky to put all your money in them, IMO.
Use them to invest in mutual funds and ETF’s that focus on energy, metals and mining, and foreign currency exposure.
This advice is worth what it cost.
“Unusual Economic Indicators”
For example, SunState in Burbank rents medium to heavy construction equipment. For the past few years their available (i.e., on the lot) equipment has been relatively sparse; however, now they’re packed full. Interesting…
I would love to see a ongoing web POLL of posters here on when the “bottom” will form -
like maybe
2006
2007
2008
2009
2010
2011 or Later
Can someone set this up? Maybe on this site?
we need another thread about what people are investing in- like whether they are short homebuilders and such.
Let’s have a weekend thread of: “Name the dumbest, most illogical, sure-to-fail, what-the-f%#&-were-they-thinking” development in your market. I have mine mentally noted. It’s so bad, even other bloggers have been making fun of it on another non-RE forum. :^)
How about this? I pulled this one off Ben’s foreclosure site. What exactly does this mean, do you suppose? I always heard that “Jesus Saves, Buddha Invests”
Jesus Loves You
Refinance Now The Christian Way. Speak to a Christian Loan Advisor.
http://www.christianlending.net
I’d like to see some discussion about where affordability actually starts changing. With rates increasing and prices going down I think that the “affordability” is remaining the same until rates stabilize and prices continue down. Last week I think LALandlord was trying to make this point when they took a flamage from some of us (yes me too). But I think the point was that property is not going to be more affordable until prices really take a dive and rates stop rising. I’m not a spreadsheet guru, but I know some of you are. How does one set this up to predict where “cost” changes are seen?
Here are several, long-standing measures of affordability:
(a) 33% of gross income on payments.
(b) Total home cost 150x monthy payment
(c) Total home cost no more than 4x yearly gross income.
If your market busts all three nuts, you are in a bubble.
I got a question. I am noticing that in titusville
-palmbay Florida, last month they were talking about the something like 9.8% YOY price increase is still great. This month they said the something like 5% increase is still good. What is going to happen when they get to August? The median last year was around 255k and will probably be near 215K this year. How are they going to spin this one? I think this will be the reality check the housing builders, seller, and realestate agents that they really need. HOW IN THE HELL ARE THEY GOING TO PUT A POSITIVE SPIN ON THIS?
Third try, so far. It has been alleged that a RE transaction in the UK can be conducted for 1.5% total vs. 6% on the US. What is the model and how does it work?
I think flat knows.
yep, typically 1%-2% for “estate agent” commistion. For a start there are no buyers agents in the UK so no 3% to them. Next estate agents in the UK do a lot less than Real Estate Agents in the US. All the legal stuff “conveyancing” (ie escrow etc) is performed by a “solicitor” (attorney) for a flat fee (perhaps $1500).