‘Now Is Not The Time To Get Overly Emotional’
Inman News reports that the slower housing market is a ‘boon’ for some buyers. “Growth in home prices slowed across the country in the first quarter of 2006, Freddie Mac announced today. And pending real estate sales fell nationally for the third consecutive month in April. While these reports and stories of growing inventory in a number of markets are not good news for sellers, first-time buyers like Rebecca Nathenson and Eric Kline may have an easier time of it as the market slows.”
“‘We can afford more house now,’ Nathenson, a product manager in San Jose, CA. said. Back in August, when Nathenson and Kline signed the lease on their apartment, ‘Buying wasn’t an option for us. We knew that trying to find a place within our price range where we could win a bidding war wasn’t feasible. It was the slowdown that made us start thinking, ‘Maybe this is really possible now.’”
“Now, Nathenson said, ‘we can stretch a bit more and get a house we want to stay in longer term, whereas before the same amount of stretching would not have gotten us this much.’”
“In a comment that seemed to encapsulate the character of the California real estate market, the product manager said, ‘Our Realtor says he feels very confident he can find us a single-family house in Palo Alto for $900,000.’”
“First-time home buyers definitely have a better chance now in Baltimore, Md., according to Margaret Rome, an agent in the area. Rome said agents in her area are now complaining, ‘There is too much inventory on the market, and where are the buyers? Last year they were complaining that there wasn’t enough inventory and there were too many buyers,’ the agent said.”
“‘I do see sellers starting to panic a bit. If their house is on the market two months, they are taking their house off the market or reducing it right away. They don’t need to reduce it right away. They just need to have some patience,’ Rome said.”
“In Albuquerque, N.M., (realtor) Linda DeVlieg said, ‘first-time home buyers..have to be fully aware of what they are about to get into so they can make their decision quickly and erase some of those romantic notions. Now is not the time to get overly emotional. Just get into a property so you’re not a renter any more.’”
From the Indy Star. “If you rent it out, you could pay. That’s according to the mayor of this middle-class Indy suburb, who tonight will propose what could be one of the first ordinances of its kind in the nation: a ban on the rental of any newly constructed home for a three-year period.”
“Mayor Charles Henderson says his plan, motivated by what he describes as a sour housing development deal, is designed to help maintain property values. ‘I want to send a message that people deserve some protection and that anybody that buys into an addition can feel comfortable it isn’t going to be turned into a rental community,’ said Henderson. ‘It would help protect folks that get crossed up.’”
And the Kansas City Star. “The number of home foreclosures in Kansas has increased over the past year, a new report says. Kirk McClure, associate professor of urban planning at the University of Kansas, said he thinks declining home values in western Kansas contributed to many of the foreclosures. For example, McClure said someone holding a $100,000 mortgage on a home valued at $90,000 has little incentive to keep making payments.”
“‘One of the best tools for our housing market in western Kansas is a big bulldozer,’ he said. ‘We’ve got too many units.’”
“In a comment that seemed to encapsulate the character of the California real estate market, the product manager said, ‘Our Realtor says he feels very confident he can find us a single-family house in Palo Alto for $900,000.’”
Tell me who he works for so I can short the stock…..unbelievable!!
And this moron thinks his realtor is doing him a favor?
No, a Favor®.
thanks. you made me spit dr. pepper on my keyboard.
I think that statement says it all. You know the economy is in trouble when someone spends $900K on an asset that does nothing more than shelter your head from rain. It isn’t like houses earn significant revenue. All it would take is a significant sell off in the tech sector and that house would be worth $250K. Then what ? Talk about FBs !
900 to 250k? You think so? I hope that’s true but I’m trying not to get my hopes up. I think a 40% drop is in the bag…no question about that. But a 70% drop? The tough part is going to calling the bottom. Fortuantely if history is any indicator (and it almost always is), the bottom will last several years so we’ll all have ample opportunity to get what we want. I also see a problem not much different than when my wife finds a clearance sale at Kohls: there’s so much decent merchandise at ridiculously low prices, it’s tough to decide. Before you know it, you’re buying stuff you really don’t need but then again, it’s 85% off!
Yeah my wife loves a sale, if they were 70% off we would end up with a couple of homes. Just, because they were on sale
I better watch what I say though, I showed her this blog.
Lets say there was a big slow down in the tech sector. What would that house rent for ? Think about it. Massive foreclosures, 15% unemployment. Lots of people underwater. Banks not lending to just anyone. Fed rate at 8%, mortgages at 10%.
$250 isn’t unthinkable.
I don’t think many folks truly grasp the gravity of what we are facing. Just today in class a professor was explaining what an Estate at WIll is and he used an illustration. His brother in law is a builder in Utah and, as the professor said, since builders go bankrupt every ten years or so, when his brother in law comes to live with him for free, it’s an Estate at Will. It’s a very rare nonfreehold. The class is filled with twenty-somethings and nobody understood the irony of his illustration. But anybody who can remember the 70s, 80s and early 90s know exactly what he was talking about concerning builders.
the professor said, since builders go bankrupt every ten years or so,
The 10 year memory span also applies to the jerk-off bankers who lend the money.
Think you guys will be disappointed. Max drop in Bay Area will be 15-20%, nominal, over the next few years. Real decline over the intermediate term may be greater as prices stagnate for several years.
I’m an appraiser in the Bay Area, and I for one think you under estimate the just how far prices could drop. Since 1998 many properties have doubled or tripled in value, with very little increase in median income and interest rates now on the rise. These prices cannot be sustained! Borrowers have uses every trick/loan in the book to get into the market. Too many risky loans out there, that will haunt many a borrower in the years to come. Try a 30% or greater drop and you may be in the ballpark (potential is there for even a greater drop IMHO).
Wow, quite bold - considering the last 25% of the way UP happened in less than one year. You’re talking superglue sticky if you think SF/Oak is not toast. Remember, My pop-in-law’s house fell from 1.2 million to 200 THOUSAND outside of Tokyo (a city in Japan, an island nation, where making more land is REALLY hard - though they still do it). What happened? Two words: CREDIT BUBBLE.
Next, you’ll try to tell me it’s different here.
Oh, and this is NOMINAL. Of course, no real inflation going on - what, with DEFLATION rearing its little head.
BTW, 1.2 million to 200k is, what, 85% off?
skipintro: you better review the macro economics of the area before you tell me how far it will drop. I way we are going to see 20% before the end of summer and that will just be a warm up. Once job loss and higher interest rates kick in, the price drops are going to get massive.
A lot of people sitting on the sidelines are thinking that if prices drop by 85% we will definitely jump in and buy. But there has to be a catch somehow. Obviously the Japanese were not buying regardless of the great deals to be had. Why not?
I mean wouldn’t everyone here agree that if a house near you dropps from 1.2mil. to 200k today that you would skip work tomorrow and run not walk to the bank to see the mortgage loan officer?
After the stock market crash, a person that I now have a lot more respect for, said to me, “housing is next in 5 years, just like what happened in Japan.”
If people are loosing their jobs and stagflation is occuring, there just might not be very many buyers even at 200K. Also, banks would have very strict lending standards (yeah, I can’t believe I said standards and banks in the same sentence) if things were that drastic.
Simple: Jobs were paying 18k/year for starting GRADUATE DEGREES. No one was left who COULD buy.
BTW, not much better now. Wife has a MS in law - started at 24k three years ago. Doing much better since we came (back) to San Diego.
“Remember, My pop-in-law’s house fell from 1.2 million to 200 THOUSAND outside of Tokyo (a city in Japan, an island nation, where making more land is REALLY hard - though they still do it). What happened? Two words: CREDIT BUBBLE.”
At least the Japanese had deflation to shield the real value of their homes from the nominal price decline. Ben Bernanke has promised to protect us from the ravages of deflation, which implies that a reversion to historic nominal prices (relative to rents or incomes) will be exacerbated by the corrosive effect of inflation on the real value.
As someone who personally experienced a 30% drop in the last (early 90’s) CA RE “downturn” I can say with certainty that this one will be MUCH worse. The early 90’s bubble in CA pales in comparison to this “global” bubble
I predict 40 to 60 percent reductions in CA depending on area and amount of runup.
Remember that with globalization under way pressure on American wages is down while pressure on Chindia wages is up. Global dynamics will have much more impact on the outcome than they did in the early 90’s. American wages are never going to “catch up” with American RE prices. And that means after summer comes “fall”.
Ignore Skipinto
Never presents any real backing for arguments, simply enjoys stoking the fire.
A lot of people sitting on the sidelines are thinking that if prices drop by 85% we will definitely jump in and buy. But there has to be a catch somehow. Obviously the Japanese were not buying regardless of the great deals to be had. Why not?
JanniFL, Check out the latest homeownership rate. I think it’s a record high. That means so many will have their net worth crushed. My father always says what happens is “nobody has any money and everything’s for sale”. The ones who benefit are the ones in cash. (In whatever currency, not going to go there).
I was thinking on my drive home this morning about the dotcom stocks. The current thing people are saying about Real Estate is that “sure, it might dip for a few years but buying and holding always works”. Except if and where there is a true bubble. I used to believe that buying and holding stocks was the right thing over the long term. http://finance.yahoo.com/q/bc?s=GLW&t=my&l=on&z=m&q=l&c= Corning is a decent company. It might take years for them to go back to $100 a share. Sure, I “dollar cost average” every month, steadily into a small diversified basket of Vanguard funds. But Real Estate doesn’t even have that advantage.
I don’t know if any of this will play out this way, but it seems within the realm of possibility.
Right now the Detroit area has many nice homes in forclosure and boy, they sure are tempting. Great real estate auctions in fancy neighborhoods. We do have some cash saved up. Are we going to invest in another home ? Heck no. This area is dying, and if we want to pick over the carcass, we will wait until homes are 75 - 80 percent of what they cost now. Things like that happened in the 80’s, during the last big downturn here. I don’t think we will be buying anything in the way of real estate except maybe a retirement home in AZ in the next few years, when prices are down, down, down in Scottsdale or Sedona. We just got back from AZ last weekend after a quickie trip, and gee the ads in the Arizona Republic are funny. The word “desperate” crept into at least 3 — either homes to buy or rent. We’re waiting it out. I don’t know how much homes are gonna drop — I’m not that educated in the nuances of this yield curve or that. However, I know they’re gonna drop a LOT !! I’m not worrying about an exact percentage — am just waiting until husband is through pharmacy school, and then we’ll be looking around for that retirement home ( hopefully a new build spec home that’s never been lived in ), and possibly some more rentals. But, we will have great cash flow, and good savings to back us up.
The ‘tech sector’ slow down is coming, may already be starting. I work for a major chip distributor and our sales goals are not being met. Things are definitely sluggish. As consumer spending slows (a self feeding spiral from the inability to refi and cash out) the ripple effect will run up the food chain and hit every segment of the economy. The law of unintended consequences will be on full display as the dominoes fall.
“Just get into a property so you’re not a renter any more”
I’m speechless. things are darker then I thought.
He has a lease payment due on his Lexus and his neg-am loan is about to reset. Gotta make the sale or no $$$$.
When he said “renter” he said it with a negative connotation. I hate that, when you own a house you are renting the house from the bank for a higher cost. Owning a home is such a status symbol nowadays, just like everything else.
This guy must be a new realtor, because it seems that the ones that have gone through this cycle before are much more humble.
Speaking of renting, I’m in Los Angeles, and the local news reported that rents were “skyrocketing” because so many apartments had been converted to “condos”. Do you suppose these rises in rents will be a temporary effect of over-condoizing? I hope so. To illustrate their news story they told of families becoming homeless due to sudden rent increases. This trend could hurt many people who never even considered jumping onto this property ownership bandwagon.
sudden rent increases
Doesn’t LA still have rent stabilization? The rent shouldn’t be going up by more than 3% per year, if the landlord is obeying the law.
Anything built after 1979 doesn’t have rent control unless it has some form of affordable housing sticker on it.
mrincomestream, I never did hear back from that Craigslist joke from the other day, just thought you should know.
If rent is being raised by more than 10%, the landlord has to give you 65 days notice.
http://www.dca.ca.gov/legal/landlordbook/living-in.htm
Geez I just knew you were going to get a response LOL
New slogan / bumpersticker?
“Buying is Throwing Money Away”
Yea, like we’re going to fall for that old bit. WHAT incentive is there to buy at this point??? So I can pay twice what the rent would be on that same unit!? So I can risk being caught upside-down in it for the next decade!? OH I KNOW! So I can paint the walls any color I want. WHERE DO I SIGN?
wait, don’t forget about the “pride of ownership!” - a favorite phrase on the mlsli (long island) listings that i cannot stand.
Paint the fu–ing walls and let the landlord keep the deposit. Then lie to your “friends” and family and tell them you bought the house or condo your renting. It will be less of a loss than buying a 900,000 shack.
Right on target with the “Paint the fu–ing walls and let the landlord keep the deposit”. With the money I’m saving per month renting, they can have it. I’ll choose the walls I want. Besides, the landlord was just happy to get someone in the place to stop the bleeding. If I wanted pink walls, I’m pretty sure he’d say go for it.
I was laughing with a friend this weekend over the fact that me, the renter, is the only one with a hired gardner that comes weekly, and a detailer that does our cars. You know the homeowner got to be thinking “this is messed up!”
My landlord is the gardner. He or his son cut the grass every week, and they just replanted the front yard with new grass, trees and shrubs. I enjoy watching him out the window as I drink my tea.
Not that I want to stick up for a realtor, but the realtor quoted was in Albuquerque where prices are still going up. Also, it’s still possible to buy (if you put down what used to be a reasonable deposit) and pay less than renting here.
Not if your not calculating what you could have been making on the money you used for the down-payment, or deposit as you call it. If your dumping a bunch of cash down just to get it to pencil, your losing big time.
A hungry stomach has no conscience.
Who needs to worry about paying $900K for a house when your realtor feels “confident”?
Heck I’ll bet the listing was even “special” and the realtor “researched” this.
I have a friend who bought a 1400 sq ft house in Palo Alto a few months ago for $1m. She assures me it is a bargain because Palo Alto “operates under a different economic system”.
So that means that their est. mortgage payment is around $5,000/month…not counting prop taxes, insurance, maintenance? Perhaps she’s *assuring* herself that it’s a bargain. That’s a lottalotta (intentional stutter) out-go per month.
BayQT~
Oh, it’s “a different economic system” all right. It blows!
I have a friend who bought a 1400 sq ft house in Palo Alto a few months ago for $1m. She assures me it is a bargain because Palo Alto “operates under a different economic system”.
You mean…they’re Communists?
Wow. We paid $ 174,900 for a nice 1450 sq ft home less than 10 years old 4 years ago. I think the price was a little steep now. I guess Detroit area operates under a different economic system too. LOL.
This person has an MBA as well. Maybe this person should try doing some research on there own, instead of relying on someone who’s only objective is to make money off of the transaction. This is common sense.
When you go to buy a car do you believe everything the car salesman says, or do you do some research beforehand. When you go buy anything do you do any amount of independant research?
Way to be an independent thinker.
Hopefully they are smart enough to negotiate a lower price. Then that way their existence will be somewhat beneficial for the rest of us.
Good call on the car example. I really like to check the numbers when I hit a car lot. Of course, whenever I drop over half a million on something, I prefer to just put my balls out there and go on blind faith.
Letter to ‘Becca– catch a friggin clue, will ya! Zip search says there are 5 count em 5 SFR’s in Palo Alto
I doubt this bozo makes much more income than i do, and I would consider $300k barely affordable. $900k is utterly ludicrous.
When I read this it sounded ridiculous but wait…I used to live in a town just a few towns over from Palo Alto. If a tiny ranch unrenovated ranch house in Campbell costs $700K it’s “reasonable” that something similar would be $900K in Palo Alto. CA has truly gone CRAZY.
We rent in San Mateo. We have a spacious 2BR apartment with a terrace just steps away from shops, restaurants, and not too far from CalTrain. And we pay $1600 a month for the place, including parking. I cannot fathom what is so fabulous about paying 3x that for the “privilege” of owning.
What gets me is that most people here in the Bay Area utterly believe that real estate will never go down in price, except maybe in the 6 months immediately after a major quake. Not just people in the RE business who could be forgiven for the self-delusion, but I’ve heard those words coming out of the mouths of otherwise intelligent normal people. It’s crazy.
I grew up in New York City with family in the RE biz there and I saw at least 2 price declines during those years. What goes up, comes down. It’s a law of Nature. It’s just a question of when.
Although I think 250K is a bit low for that 900k place in Palo Alto. My call for the bottom on a place like that is 500k. But that’s because Palo Alto is one of the hottest towns in the area and has top of the line schools. The less desireable towns could go lower.
That $700k house in Campbell rents for $2k (3br/2ba sfr). Do the math on that one, eh?
One of the best tools for our housing market in western Kansas is a big bulldozer,’ he said. ‘We’ve got too many units.’”
Thank the stars SCOTUS [Kelo vs New London] now allows imminent domain to be decided by the whims of the local governments [majority rules, ya know]!
Pretty soon, I’m guessing a lot of flippers in FL, CA, AZ, etc. are going to want to borrow that Kansas ‘dozer. We have enough houses in my neck of the woods (south FL) to last us a good long time. Might as well knock down some of them and make some more parks … if the hurricanes don’t do it for us!
Thanks to the readers who sent in these links.
“Now is not the time to get overly emotional. Just get into a property so you’re not a renter any more.’”
Linda should be chained up in the ole town square…this is like yelling fire in a crowded theater.
Linda and Suzanne should be forced to fight a gladiator match in a stadium full of FBs (if you could find one that’ll hold them all).
Yeah, Linda - make that decision quickly - don’t think about it, research it or any of that other junk. Just buy the damn place. Afterall, it’s only money, and the Fed is making plenty of it.
Or bent over the proverbial barrel in a stadium full of FB’s.
Okay so if I take the emotion out of it and only look at the numbers, it makes even LESS sense to own!
An old-fashioned carnival “dunk tank” would be a nice harmless diversion for those two puppet spokesmodels. But I think FBs will be after more…
“If you rent it out, you could pay. That’s according to the mayor of this middle-class Indy suburb, who tonight will propose what could be one of the first ordinances of its kind in the nation: a ban on the rental of any newly constructed home for a three-year period.”
Nice try but who is a gonna pay when it ends up in the courts? Why do we have to keep trying to protect Darwinian rejects from financial extinction?
just like Government - (Indy Mayor )coming up with a solution that makes the problem worse!
Indy having the highest foreclosure problems in the country {1-69 households in some stage of foreclosure}, is going to eleviate their problem with the ellimination of a R. E. investment owners on new properties….. Despite their excess supply / under demand im balances, they propose a reduction in the demand side to solve their foreclosure issues.
Must be a new method of supply side economics.
Heh, nicely put. Might not one of the variables in Indy also be white flight? The suburban mayor, after all, has a constituency that historically had fled the city in order to enjoy all the Wonder Bread values of mass conformity. By threatening artificially-sustained racial and economic homogeneity, rentals do what many, many Americans seek to avoid: introduce them to their fellow Americans. Which is why I say, Go-o-o-o-o, rentals!
they propose a reduction in the demand side Sounds like that’s aimed squarely at the out of town investors….in an attempt to protect the locals.
if this ordinance passes, the first question becomes who will enforce it. secondly, that will torpedo many “investors”. no way they can regulate stuff like this. as with most things that government gets involved in, this one will have unintended consequences that come as a detriment to the people it’s trying to help.
“No way can they regulate this”
In NYC they introduced rent control after WW II - so “they” can regulate whatever they want - but of course you are correct about the unintended consequences, since no one built any residential property in NYC for fifty years (until the current boom of overpriced condos) - and landlords walked away from their buildings or burned them - which led to a dichotomy market of the elderly and poor locked into (and illegally passing down & subletting) controlled apartments in burned out neighborhoods - and the super rich in their co-ops and condos.
The free market will sort out this mess - and many will get hurt.
Actually many “luxury” rentals were buitl in the 90s in NYC. Quite a boom until they overbuilt and the Stock Market collapsed.
Right now there are three rental properties being built on my block in Queens.
Ah, the free market myths about NY’s rent control.
Now I’ve done it. Hey Ben can you turn off the italics as I’m not really sure how and don’t want to mess this thread up further. Thanks/Sorry
I thought that deed restrictions / covenants that run with the land were intended to deal with this, not governments.
Sounds like Mayor Chuckie made some pretty stupid investments, and now wants EVERYONE to pay their fair share for his idiocy. Who is the bigger fool, the Mayor, or the voters who voted for such a short sighted fiscal moron?
Wow. Three consecutive posterity-worthy examples of sheer idiocy in one post –from three different idiots/crooks. This has to be a record.
“‘I do see sellers starting to panic a bit. If their house is on the market two months, they are taking their house off the market or reducing it right away. They don’t need to reduce it right away. They just need to have some patience,’ Rome said.”
“In Albuquerque, N.M., (realtor) Linda DeVlieg said, ‘first-time home buyers..have to be fully aware of what they are about to get into so they can make their decision quickly and erase some of those romantic notions. Now is not the time to get overly emotional. Just get into a property so you’re not a renter any more.’”
From the Indy Star. “If you rent it out, you could pay. That’s according to the mayor of this middle-class Indy suburb, who tonight will propose what could be one of the first ordinances of its kind in the nation: a ban on the rental of any newly constructed home for a three-year period.”
You forgot “Now is not the time to get overly emotional. Just get into a property so you’re not a renter any more.’”
Probably the most idiotic advice I’ve ever heard.
LOL, just say a ReMax commercial today that boasted, “We have more listings than EVER to show you”!
gotta give ‘em a little credit–at least they’re being honest now
“In a comment that seemed to encapsulate the character of the California real estate market, the product manager said, ‘Our Realtor says he feels very confident he can find us a single-family house in Palo Alto for $900,000.’”
If they moved to the midwestern states they could buy a house cash. And then retire if they lived with frugality. My God! What are these a$$ clowns thinking!
“If they moved to the midwestern states they could buy a house cash. And then retire if they lived with frugality. My God! What are these a$$ clowns thinking! ”
What makes you think they have cash? Probably looking to buy zero down and interest only.
Ha ha. Believe it or not but Californians (myself included) have already migrated to the midwest and raised the prices (myself not included since I am renting). A bunch of us moved out here en masse and several of my relatives already bought gorgeous homes at asking prices because it was so unbelievably cheap compared to CA. Even in the most rinky dink midwestern rural towns prices have risen as the bubble percolated from CA thru AZ and TX.
I am looking to buy and I dumped the first realtor I was working with since his attitude was “Californian’s will buy anything — price is no object”. I have yet to have a realtor show me any comps. They just assume price isn’t an issue even when I clearly state what I am willing to pay. And the builders are working overtime here…renovating and building mini-McMansions…target market seems to be equity refugees from out-of-state since none of the locals, who typically earn minimum wage, could buy the new stuff.
Sounds like 1992 all over again in the Midwest…
I didn’t think realtors showed comps anymore.
I’m sure they drool here in Ann Arbor MI over transferees from the coasts.
You could probably painfully click through Zillow for last sales price of houses in areas of interest. Their zestimate (based on comps) isn’t too bad either just to get a feel for things.
Zillow doesn’t cover all areas.
just how rural a place in the midwest are you looking at? I’ve used Zillow for comparisons in the greater Columbus, OH area and have not yet seen anything nearby which Z wouldn’t deal with.
I guess that’s the question of the bubble, isn’t it? I’d kill myself if I had to take on a debt of 1million++++ (depending on the loan terms) to live in one of those Palo Alto dumps. Had I been living in one during the run up, I would have cashed out, parked the money in some CDs and started travelling the world for a few years.
Haven’t these people ever heard of opportunity costs?
CA “investors” ruined the town of Round Top, TX (pop. 77) by putting in the first subdivision. The investors were 20-somethings from LA (she from India) who bought 100 acres and carved 3-5 acre plots. This was in 2002. When I left 9/2005 about half the land was sold (mostly to wealthy Houstonians…oil industry). Just about everyone in town hated the whole thing but you can probably guess who loved it…your friendly local RE office.
Proving once more that RE agents will do ANYTHING to make a sale regardless of how the surrounding community feels about it.
I wonder if the RE office has been burned to the ground yet?
Another heart-warming story of CA influence in the rural midwest.
Believe it or not they are probably thinking that in five years that house will be worth 1.5 million. Unreal.
Can someone please let me know when to get overly emotional because jeez, I’ve really been looking forward to it.
LOL!
You know when I got overly emotional re RE in the past couple years? When I almost got convinced I should buy an overpriced PoS to ‘get into the market’ and ‘just not be a *renter* anymore’, and had to back off my saying yes and hysterically claim that I just can’t do it, I just can’t jump into this craziness. Thank goodness i found this blog and got to feel a little less crazy at least!
Ditto Ditto Ditto here!
“In a comment that seemed to encapsulate the character of the California real estate market, the product manager said, ‘Our Realtor says he feels very confident he can put a hot poker up my butt for $900,000. But at least I won’t be renting the hot poker.’”
LOL, that was a great analogy. Bravo, well done.
Most on this Blog could feel inflation breathing down their necks, but not the Fed’s, BB, Bob Brinker or the news media. For some reason they were in complete denial, not unakin to 30 apartment dwellers looking out of their windows onto a Chicago street below watching a women being knifed to death. All assume that someone else is taking action or just don’t want to get involved.
One way to calculate housing inflation or rampant speculation would be to measure individualized disposable income. Those with a high disposable income have nothing to worry if the mortgage-housing bubble implodes. They represent the core purchasing power. The housing market, mortgage lenders, RE agents, builders, etc may get a bad case of diarrhea but the core will still be able to spend monies on vacations, cars, eating out, etc. It’s this disposable income that helps drive the economy. Large mortgages, high property taxes and large insurance premiums (remove disposable income due to inflating housing prices) on the other hand remove large sums shift monies to government agencies and corporations and does little drive the economy forward after the initial construction and selling period has peaked.
Those with a high disposable income have nothing to worry if the mortgage-housing bubble implodes. They represent the core purchasing power.
Sorry, not enough of them. The economy doesn’t run on many dollars from the few, it runs on a few dollars from the many (with the obvious exception being taxes).
I would love to hear an update from LVlandlord or investor(?) and on those gals out Palm Springs way the were fixing up that house to flip back onto the market….I think some said that she had a blog site, anyone want to add a little humor today?
salinasron,
You know I think about that crowd every now and again. I wonder how their Palm Springs was it? flop is coming along. I can see it now. Flip Gone Bad……. year three.
I found a blog on Palm Springs, looks like it is mainly used by realtors. Pretty entertaining.
http://deserthomestoday.blogs.com/
Wow , it’s a whole different speak by the realtors/advertising on that link .
“Are Desert Home Sellers The Newest Gamblers?
How many people are selling their homes here in the coachella valley? One might think that with the market slowing, there would be fewer. But it appears homeowners are trying to cash out before things slow down even more. In March, 2005, there were 3,140 properties for sale valley-wide (not including new homes!). This March, that number more than doubled to 7,351. This tells us people are trying to sell their homes at what they hope, pray and gamble is the top of the market.
The median price of a home in the Coachella Valley in February 2006 was a record $418,500. Data Quick recently released the March 2006 numbers, and the median priced dropped about 4.5% to $400,000. April’s numbers won’t be released for another 30 days. So who are the winners and losers in the real estate game? Buyers or sellers? Stay tuned…”
Gotta love RE speak. Prices are dropping but the sellers are ‘gambling’ that they could have gotten more?
Here’s Nina Smith’s blog (she was one of the 4 investors in that home):
http://tinyurl.com/ewv6r
An here’s their listing (apparently it’s still on the market):
http://tinyurl.com/nblmy
Oooohhh… carpet and vinyl. Is that better than linoleum? LMAO!
Yep. And notice the comment, “I’ve always been an advocate of the buy and hold strategy with real estate…” Sure you have. Ever since no one wanted to buy it.
Nina Smith & her brilliant flipper pals paid $475K for this house, if memory serves, then put another $67K into it (as I recall from the LA Times article). Holding costs were something like $2800 a month. They’ve been asking $629K for months with no luck, evidently. Maybe someone local out there can update us?
http://sittingprettyfinancially.blogspot.com/
Here’s the web site of Nina Smith, one of the four flippers. Apparently they haven’t sold the house yet, which likely means they’re getting deeper and deeper underwater on it — Palm Springs in June is hot as hell, which dries up all but the most stupid of buyers.
o/t nice article about the stock market mentions the housing bubble end.
http://finance.yahoo.com/columnist/article/futureinvest/4954
Logical explanation of BB’s conundrum plus one.
The housing bubble has officially reached the lowest common denominator.
Don’t ask how, but I was subjected to the Tom Leykis show this evening.
The topic was Bernanke, inflation, interest rates and the housing bubble.
A direct paraphrase was all you people out there that bought with IO loans, I am waiting licking my chops for you to miss a payment and I will own your home.
He also riffed on when to buy and the 7 buyers lining up to buy homes is a recipe for getting screwed.
Not that I like the messenger but it was an interesting 15 minute riff. It is probably still on right now.
Ha ha I heard it too…I listen to Tom on the ride home for the humor of it. The best part was the guy who kept repeating (I’m paraphrasing), “without great risk comes no great reward” to which Tom replied “you must be in the (real estate) business talking like that and you don’t care about what happens to anyone as long as you get your commission check.”
You may not hold him in high esteem but Tom is one smart mother. You may not like the presentation, but you should consider listening to his message. He’s always right on target. And since he has a large following, maybe him getting the message out to the masses isn’t such a bad thing.
Nothing wrong with the lowest common denominator just admit that you are pandering to it.
It is OK, lots of people got rich that way.
I don’t find there to be anything wrong about supporting a show that shows people how to retain their equity and is presented in a humorous way. Retaining equity: that’s how people stay rich.
Silly bobby
Rich people dont listen to Tom Leykis, Rich people pay Tom Leykis to say things to the masses so they stay rich….by taking YOUR money. Now that the pockets have been picked on they way up..it is time to turn the herd so they can picked again on the way down.
KennyBabes (stupid name BTW)
Your comment makes little sense, have you ever listened to the show? Please enlighten me how a show telling guys they shouldn’t cowtow to or be taken by women can pick my pockets. Like I said, it’s about asset preservation (money, self esteem, time) but aimed at a level you wouldn’t normally think about.
I’ve listened to the show… unfortunately.
Here’s the point, Leykis is only about 2 or 3 years too late bringing this subject to the table. There’s a huge difference between him telling his pathetic audiance that they shouldn’t “kowtow” or “be taken” by women and him jumping onto the “real estate is bad bandwagon” when it’s too many years too late to help the audience that for the most part doesn’t have any resources or motivation to own a house anyway.
Of course I have listend to the show that is why I called you silly.
Now I will call you ignorant. Cause when Tom Leykis tells you the time check your watch.
Hey Bobby I will spell it out for you.
Keeping your money, cash, gold, pick your liquidity. Is how you stay rich…equity aint nothing but an imaginary number or havent you been paying attention.
KennyBabes (giggle) - Thanks for spelling it out for me. I have only one thing to say; What are you talking about?
Disillusioned - Tom’s given me the best financial advice I’ve ever received. I’m at least $100k (and counting) richer because I’ve followed some of the things he’s said. Let me guess, your wife made you write your last post. I think I can guess the reason why you’re disillusioned.
Sort of off topic but funny
Here’s one from the classifieds in Winter Haven, FL; it pertains to rentals in the Four Corners area near Orlando. They severely overbuilt there and most of the properties are owned by absentee flippers. NOW the new trend is pairing random roomates into newly built shitboxes:
THE FINEST HOMES NEAR DISNEY
Classy New Homes/ Vacation Homes from $1800 a month or share a home with other professionals or families on a joint lease. We can match you perfectly with others to share the most luxurious homes $450 & up per share $600 & up privacy bath.
http://namceproperty investments.com
407-891-1250
The fear and desperation are starting to set in.
Hah, that is funny! They are running a glorified flop-house . . .
THis could be a great reality TV show-the conservative Mormon family of six paired with..a foursome of hot males from Key West who are into working out, nightlife, and ???
The fixed link from above is:
http://namcepropertyinvestments.com
For example, McClure said someone holding a $100,000 mortgage on a home valued at $90,000 has little incentive to keep making payments.
How about the unwillingness to trash one’s credit for seven to ten years over a measly $10k? Some people pay that much to REPAIR their credit.
And if that’s not enough motivation, how about plain, simple ethics? If you steal $10k (or even $10) worth of goods from a store, you’ll likely spend time in jail. This shouldn’t be any different.
Not to mention they’ll be stuck with a tax bill for any amount forgiven by the lender.
I keep hearing this “debt forgiveness” being taxed. But someone posted before that you’re not going to pay tax because its basically proceeds from the sale of your personal residence, gain excluded up to 500k per couple (loss not deductible) Assuming all the other conditions are met.
You are confusing taxable gains with RE losses.
You cannot write off RE losses.
Check with your tax attorney.
I’d take that problem. Big whoop.
>a product manager for a San Jose, Calif., firm, and her fiancé…
>Our Realtor says he feels very confident he can find us a single-family
>house in Palo Alto for $900,000
Has there been a total disconect in people’s minds about wages vs. house prices? What does a ‘product manager’ and a ‘fiancé’ make in a year? When we bought our *expensive* house in Cali. 5 years ago, it was for quite a bit less than that, and I’ll bet my wife and I were making quite a bit more than than this couple, but even then we thought it was expensive (and with a 5.5% interest rate to boot!)
$900K is 9/10 of A MILLION DOLLARS! Even with inflation (a million doesn’t get you what it used to, yadda yadda yadda), it’s still ALMOST A MILLION DOLLARS!
Oh well, good luck to them.
Product managers at tech companies get anything from $60K to $120K, depending on their level of experience and seniority. Since the fiancee’s job title isn’t mentioned, it’s hard to guess their total annual income.
I know the SoCal r/e market has gotten ugly when my SoCal native friend and his wife considered moving to TN, NC, or AL. That last option is a little sketchy, but I can’t blame them. They make a combined 175k/yr, live in a modest apt. in Redondo Beach ($1100/month) and live fairly frugally. They have enough saved for a decent down payment, but I think they just don’t want to be a slave to their mortgage considering what that gets you out here.
Good thing is that with interest rates continuing upward, I’m seeing more and more price reductions which is good for everyone.
I realize Californians have their preconceived notions, but there’s nothing wrong with the South. My folks have lived in two different parts of AL (they live near Mobile now) and in NC; I lived in NC and went to college there as well, and there is a decent chance I will move back soon. Plenty of jobs and no bubbles as long as you stay away from the coast and a few places in the NC mountains. Who wants to live on the coast anyway; you’re asking for a hurricane.
If the concern is over people proselytizing their religious beliefs, I doubt it’s much worse than all the RE preachers you have in CA.
Yeah, but the real estate nuts in CA are not advocating ignoring the US Supreme Court and other laws they don’t like.
I’ve spent some time in Mobile, and I ran into some of the stupidest people I’ve ever seen. Quality of life counts for something.
“In Albuquerque, N.M., (realtor) Linda DeVlieg said, ‘first-time home buyers..have to be fully aware of what they are about to get into so they can make their decision quickly and erase some of those romantic notions. Now is not the time to get overly emotional. Just get into a property so you’re not a renter any more.’”
Linda must be from California too, they are like a swarm of locusts here in Albuquerque.
Nice rentals abound in this city and rentals are very inexpensive complexs here will bend over backwards to rent to you..
The only real affordable place to buy is the west side, track house five feet apart from one another another KBH f**k job and it is a hellhole and so is the commute into Albuquerque to work. You cannot buy the median priced house in Northeast heights on the median salary here.
Do us all a favor go back to California!
HBs took a hellofa dump today.
LMAO
“We can afford more house now,’ Nathenson, a product manager in San Jose, CA. said.
Did this amuse anyone else?
Here’s the market beginning to head southward, but Mr. N. thinks he’s getting second helpings from the lunch lady. Sir, more overpriced house for the money is still…more overpriced house.
Now, Nathenson said, ‘we can stretch a bit more and get a house we want to stay in longer term, whereas before the same amount of stretching would not have gotten us this much.’
Yep, LOL. They’ll be stretched all right, and they better plan on staying 20 years to break even in real terms.
Watch this guy’s political career. We may have a future POTUS here.
Man of the people, this one.
Now, if people still think that when the $hit hits the fan the Fed won’t [be induced to] print the problems away, please tell my why.
I think they are going to get enough inflation unofficially by relying on “core inflation” metrics. It will just take a few years.
And without getting too political (since we can blame Clinton for Franklin Raines and blame Bush for the last five years of Fed policy), the political outlook is awfully hard to predict at this point, regarding who will win in the fall, and what, if any effect on policy will result.
I am barely old enough to remember stagflation under Carter. Carter was discredited in perpetuity for careless monetary policy… I doubt Bush or the next president will be unaware of that reality.
Even if this law passes, I doubt it would survive a court challenge. Conservatives should be up in arms about government trying to tell you what you can / can’t do with private property you purchase.
“tell me why”