Booms Have Unintended Consequences
The San Francisco Chronicle reports from California. “After getting outbid on three houses, Shura Kelly decided not to mess around with 117 De Montfort St. True, it was in Ingleside Heights - not the Sunset District where she and her firefighter partner, James Quirke, grew up and would have preferred to stay. But the Sunset had become too expensive. Kelly, who runs a doggy day-care business, and her partner ‘came in strong’ with an offer of $810,000, 35 percent over the asking price of $599,000. The good news was that they beat out 46 other offers. The bad news was that someone else offered more than 50 percent over asking.”
“‘I thought for sure we had it but someone went bananas and offered $910,000 for a house in the Ingleside,’ Kelly said.”
“‘Housing affordability is the biggest single issue facing the Bay Area economy,’ said Ken Rosen, chairman of the Fisher Center for Real Estate at UC Berkeley. ‘Booms have unintended consequences.’”
From KTVU. “The strengthening U.S. economy has transformed the Bay Area’s already strong housing market into the juggernaut of the nation. Employment agent Debra Monroe said the 20 and sometimes 30-somethings she places tell her they’re are not thinking homes. ‘It’s not even on our bucket list of ideas anymore of what they want to do,’ said Monroe.”
“Home ownership will have to come somewhere else according to what they tell Monroe saying things like, ‘I’d be happy to move somewhere else where I could probably afford a house,’ and so it does affect peoples’ planning,’ she said. In fact, many of the folks who sell their Bay Area homes usually exercise one of three options. ‘When they see the houses that they’re gonna get for that price, that’s when the shock really sets in,’ said Pacific Union Realtor Kathee Shatter ‘They often move out of state or move north to a different county or something like that or downsize.’”
The Signal. “Local Santa Clarita Valley realtors noted some trends occurring in the market today. There are fewer multiple offers than a year ago when buyers were willing to write an offer on anything and as investors have mostly left the market. But the number of homes listed for sale has increased, taking pressure off of prospective buyers to find a home – any home. ‘In the Santa Clarita Valley cities there are anywhere between 10 to 20 new listings entering the resale market in a 24-hour period,’ said Connor MacIvor with Re/Max.”
“With that steady inflow of new listings, chances are good a buyer will find something in a relatively short period of time, he said. Buyers, however, are not ‘rushing’ into the market today as they were last year when inventory was slim. MacIvor points to the increase in the number of days a home is on the market compared to last year. ‘Real estate hinges on jobs,’ said Nancy Starczyk, president of the Santa Clarita Valley Division of SRAR. ‘The younger generation is finding it difficult to get employment; hence, they’re not looking at real estate investment early on, it’s being put on the back burner.’”
The Union Tribune. “Nearly five years after the Great Recession, more than 55,000 San Diego County homeowners are still underwater on their mortgages, says Zillow. The report found that in the first quarter of the year, 12.6 percent of homeowners with mortgages in San Diego County owed more on their properties than they were worth, down from 21 percent a year earlier. The drop in those underwater was aided by big home price appreciation in 2013. Still, the annual gains slowed in the second half of the year, and weren’t enough to get everyone’s value to recover to a point that they could sell their home for a profit or at least break even to get out of their loan.”
“Many of the areas with the most negative equity contain tract homes, built during the housing boom that led to the recession. These include eastern Oceanside, Otay Mesa, and Chula Vista, where many overpaid for tract homes, aided by loans that required little to no down payment.”
“‘Those houses got bid up the farthest, the fastest. They’re the ones who were the most vulnerable to swings of the market’ said Mark Goldman, a loan officer and real-estate lecturer at San Diego State University. ‘A lot of the people who bought there bought way beyond their means to repay and they were using the nothing down, stated-income loans and those were the markets that got hit the hardest.’”
The Daily Bulletin. “When John Bulgin bought his house in a Fontana neighborhood eight years ago, he didn’t think he would find himself living with his mortgage worth more than the house. But despite reports of an improving housing market around the country, that’s the situation he and 9.8 million households in the U.S. find themselves in: He bought his home for around $450,000, and the last time he checked, it was valued at about $270,000.”
“‘We refinanced, so the mortgage is a lot less than it used to be, but most all of these houses here, I’m sure, are upside down,’ Bulgin said. ‘We bought the wrong house at the wrong time.’”
“‘There’s a lot of happy talk about rising housing prices,’ said Peter Dreier, a professor of politics and chair of the urban and environmental policy department at Occidental College in Eagle Rock. Dreier said the report disputes the theory that rising home prices in an improving economy will rescue people from the recession and from the epidemic of underwater mortgages around the country.”
“‘It is true that the number of homeowners who are underwater has declined across the country,’ Dreier said. ‘But there are still many parts of the country where the recovery is bypassing entire cities and many neighborhoods, and there are so many underwater homeowners that the housing market alone will not rescue them. The Inland Empire is one of those areas.’”
From Bloomberg. “The golf courses and beaches of Los Cabos are luring Americans who are able to get home-equity loans to buy in Mexico as U.S. housing prices rise. Buyers, mostly from California, are purchasing condominiums, villas and estates ranging from $200,000 to more than $7 million following a plunge in prices, according to Deloitte & Touche LLP.”
“‘What I really wanted to do was take advantage of the market,’ said Joy Gipson of Lake County, California, who this year financed a 1,600 square-foot Los Cabos condo with a home-equity loan. ‘Real estate is starting to revive and I didn’t want to get priced out again.’”
“The 31 percent gain in U.S. home prices since January 2012 has given property owners more equity. That’s made it easier for them to get home equity lines of credit, or Helocs, for as much as $500,000. American buyers in Mexico are benefiting from the decline in the costs of credit lines, which have adjustable rates tied to the prime rate.”
“Gipson, 57, a marketer for the public transit program in Santa Rosa, California, bought her two-bedroom, two-bathroom condo in Los Cabos as a place to possibly retire. The $193,000 home is a six-minute walk to the beach. Gipson said the addition of more elite golf courses in Los Cabos will make it even more appealing to Americans. ‘It’s going to turn into San Diego South,’ she said. ‘I leveraged the equity in my house and spent my savings.’”
‘I have personally benefited in two direct ways from the insane multi-trillion dollar credit-creation that we’ve seen happen over the past half decade: one, a private investment I made in a startup has been blossoming very nicely, and two, the house in which I live is worth nine times what I paid for it.’
‘Below is a simple chart showing the median sales price of Palo Alto houses and – helpfully – the percentage of the list price received. It’s a pretty interesting litte chart. At first, it gently descends, as the Valley dipped from the Internet bubble bursting. Next, it began a steady ascent, as interest rates plunged (thanks to Greenspan) and the housing bubble went into full swing. The financial crisis took the froth out (although Palo Alto didn’t suffer the 50%+ drops of less attractive areas, like Stockton) and, most recently, we have soared into unchartered territory, both in terms of median sales price and price received (as you can see, the price being paid is actually averaging 11.6% above the already lofty asking price).’
‘Personally, I think the poor souls buying at today’s prices are going to find themselves underwater in a big hurry and, just to add salt to the wound, will be paying 1.1% property taxes on the purchase price every year until they manage to sell the house, irrespective of the mark-to-market value (my own taxes, thanks to Prop 13, are pegged at a value 80% less than the actual present value).’
‘For those of you who figure I’m just being a pessimist and are eager to jump on board this gravy train, I can bring to your attention a couple of plum properties. Here’s one in Los Altos – not quite as expensive as Palo Alto, but still a nice town – for $2 million (probably more like $2.1 million+, given the bidding wars). Just look at that curb appeal, ladies and gentlemen! Ever see such a sweet garage? And, yes, this is the actual color newspaper ad. This is the very best “face” they could put on the property.’
“I think the poor souls buying at today’s prices are going to find themselves underwater in a big hurry”
No question. Paying 300%+ premiums over long term trend or construction cost is going to end in tears, not just for the current round of suckers but anyone who bought a house in the the last 14 years.
It’s always good practice to revisit the imput costs of a new SFR. Remember, We build SFR’s profitably for $50-60/square foot regardless of location.
‘A study from home mortgage tracker HSH.com indicates the average worker in the San Francisco Bay Area needs to earn $137,129 a year to buy the median-priced home in the region, more than four times the salary required in the five cheapest metropolitan areas: Cleveland ($29k), Pittsburgh ($30k), St. Louis ($31), Cincinnati ($31) and Detroit ($32k).’
‘Essentially, you could buy a home in the San Diego and a home in the Great Lakes area and still have money left over if you forgo buying in the Bay Area.’
‘San Francisco Federal Reserve President John Williams says the Bay Area’s social media and other fast-growing tech startups are moving on their own fundamentals and not being driven by the Fed’s low-interest-rate policy. “Fundamental forces are driving what’s happening in the Bay Area. Historically, the tech sector says interest rates are irrelevant to their decisions. They’re driven by growth,” Williams said. “I’m not taking the credit or the blame for the Bay Area economy.”
‘Rates are compressed on everything from certificates of deposits to junk bonds, sparking an insatiable appetite among pension funds and endowments for the prospect of higher returns offered by the Bay Area’s private equity investors and venture capitalists. Several Bay Area investment firms in recent weeks have raised funds that exceeded initial targets, including Thoma Bravo and GI Partners.’
‘Banks are also aggressively lending to private equity firms to finance deals, often involving more debt than bank regulators want to see. The Wall Street Journal reported this week that 40 percent of the nation’s private-equity deals relied on leverage exceeding what regulators consider acceptable.’
‘The Bay Area economy is also getting a huge lift from low rates on real estate financing. “The housing market is on fire here, as well as Seattle and parts of Los Angeles,” Williams said in his remarks. The New York Times published a front-page story Thursday showing that the calculations on whether it’s better to rent or buy a house has shifted in favor of renting after home-price runups in California and elsewhere.’
‘Williams made it clear how much the world has changed as major economies cope with low inflation or outright deflation. “One key problem with very low inflation or even deflation — that is, falling prices — is that it increases the debt burden on borrowers by forcing them to repay loans using money that is worth more than they planned when they took out the loan,” Williams said. “The resulting debt overhang damps the willingness and ability of people and businesses to spend, putting a drag on economic growth.”
‘Still, one audience member asked Williams what could be learned from the high inflation of the 1970s to avoid repeating that mistake. “One lesson we learned is not to go there again,” Williams responded. “We’ve learned the cost of high inflation.”
‘But he said most people aren’t concerned about high inflation. And that’s after the central bank has built a $4 trillion balance by purchasing U.S. Treasuries and mortgage-backed bonds and kept a key interest rate near zero since the financial crisis.’
“Our challenge is to get inflation higher,” Williams said.’
‘In the U.S. equity market, the worse a company’s finances, the better it’s doing.’
‘Stocks with the weakest balance sheets have climbed more than 8 percent in 2014 and 94 percent since the end of 2011, generating almost twice the gain in the Standard & Poor’s 500 Index over that period, according to data compiled by Bloomberg and Goldman Sachs Group Inc. Shares in the category this year are beating those that most investors consider the bull market’s leaders.’
‘Helped by rising bond issuance and falling defaults, stocks from Tenet Healthcare Corp. to Frontier Communications Corp. are advancing even as Federal Reserve policy makers take steps to end unprecedented economic stimulus.’
‘Shares with weaker finances have benefited as the Federal Reserve held interest rates near zero for the past six years and bought $3.6 trillion of bonds to stimulate the economy, spurring an unprecedented wave of debt financing.’
‘Junk-rated borrowers from Oklahoma City-based Chesapeake Energy Corp. to Netflix Inc. in Los Gatos, California, issued a record $380 billion of speculative-grade bonds in the U.S. last year, data compiled by Bloomberg show. While the pace has slowed in 2014, a monthly average of $29.5 billion is still 13 percent higher than during the previous four years.’
“There’s insatiable demand for high-yielding, lower-quality instruments, and companies are taking advantage of that to get money,” John Carey, a Boston-based fund manager at Pioneer Investment Management Inc., which oversees $220 billion worldwide, said. “The market is rewarding the kind of short-term behavior and earnings enhancement that this kind of financial strategy can provide in a low-interest-rate environment.”
Wasn’t someone saying the fraud was only back in 2007 and before?
‘Greed got the best of Steven Pitchersky, 65, of Rancho Mirage, a federal investigator in Philadelphia said on the day a 51-month prison sentence was imposed against him for committing wire fraud in a mortgage refinancing scheme.’
‘The scheme bilked Ally Financial Inc. of Detroit out of about $5.3 million, U.S. Attorney Zane Memeger said.’
‘Pitchersky operated Nationwide Mortgage Concepts from an address linked to a home in the tony section of Clancy Lane in Rancho Mirage. When Ally required the company to disburse mortgage funds for refinancing through a third party, Pitchersky created his own title company in Pennsylvania – Hanover Settlement – to serve as that independent go-between.’
‘From December 2010 and January 2011, Ally advanced $5.3 million to pay off 23 first mortgages for Nationwide Mortgage Concepts customers, but Pitchersky used the money instead to pay off first mortgages of other customers.’
‘Christy Romero, special inspector general for the U.S. Department of Treasury Troubled Asset Relief Program, said Pitchersky didn’t only use fraudulent means to draw down millions of dollars on a warehouse line of credit. “He used the money, in part, to fund his luxurious lifestyle and extravagant art collection,” she said.’
I think the greed and fraud is as bad now as ever. Just look at all these stories. The mania is back with a vengeance.
‘Soaring home prices slowed in April as greater inventory, less investor interest and fewer affordable homes lifted some of the pressure off the Coachella Valley housing market, a new housing report shows.’
‘In Palm Springs, quickly inflating home prices lost steam in April, dipping to $311,000 in the north part of the city and $300,000 in the south — but still a 31 percent increase from a year ago.’
‘The housing supply of single-family homes crept up in April. There were 2,811 homes for sale, compared to 2,799 in March, according to the California Desert Association of Realtors. That’s about a four-month supply of homes. New home developments have added properties to the supply. Some of those home sales were leftover inventory at once-abandoned development projects. For instance, Schmett said he is closing escrow on a $1.2 million home, his ninth sale of standing inventory at Lennar’s Griffin Ranch.’
‘Fewer Canadian purchasers hampered by a weaker Canadian dollar gave way recently to more American buyers in the Coachella Valley, Schmett said. “The Canadians are still a big part of our market,” Schmett said. “But I don’t feel they’re as big a part as the past two years.”
‘As peak tourist season ends, agents look forward to more serious buyers willing to stand the 100-degree heat in the summer. Many come from Los Angeles, Orange and San Diego counties. “The number of potential buyers diminishes, but the quality increases,” Banks said.’
Here’s the house from the first post. Lol:
http://www.californiamoves.com/property/details/3618607/MLS-417871/117-De-Montfort-Ave-San-Francisco-Ingleside-CA-94112.aspx
And a firefighter and a dogwalker? These people do not sound like the rich techies that are supposed to be driving the SF housing market to a permanently high plateau with their stock option millions.
‘While making your way through this Traditional Marina Style 1920’s home,be sure to notice the period specific finishes; like original gumwood throughout, softwood in the sunny bright kitchen and French style double doors to the living room. Refinished hardwood floors throughout. The two bedrooms are private with no adjoining wall. The generous bathroom is across the hall from the formal dining room with beveled glass doors.’
‘Bathroom Features: Tile,Shower Over Tub’
‘Garage Description: Detached, Garage’
‘Laundry: Hookups Only, In Garage’
No problem here:
‘Sold Price: 4/14/2014 $910,000′
‘Original List Price: 3/6/2014 $588,000′
Lol, yes perfectly sane and rational purchase. Those people are going to thank their lucky stars they won that bidding war.
Yet here is an apartment in ultra-prime Pacific Heights with the same square footage (and same number of bathrooms, ie 1), for almost the same price:
http://www.californiamoves.com/property/details/3608343/MLS-417758/2170-Vallejo-St-San-Francisco-Pacific-Heights-CA-94123.aspx?SearchID=35094996&RowNum=29&StateID=9&RegionID=5&IsRegularPS=True&IsSold=False
I seem to remember this from the last bubble, where wretched outlying areas (like South San Francisco by the freeway) were selling for comparable prices to bona-fide top neighborhoods (like Nob Hill and Pacific Heights). It was not a good sign.
And a firefighter and a dogwalker? These people do not sound like the rich techies that are supposed to be driving the SF housing market to a permanently high plateau with their stock option millions.
I’ll bet that firefighter is better paid than most techies.
Plus, the firefighter’s 100k+ pension when he retires comes with a taxpayer guarantee. And actually, I know of a dogwalker who makes more money now caring for dogs than he did as an investment banker, so I guess you just never know.
My point was more that it is supposedly techies with millions in cash driving the market and justifying the price increases, yet how many of those 46 offers were from twitter and google engineers? This sounds more like middle class non-tech people with credit fighting it out with investors with cash.
It’s basically a 90 year old town house. Who would pay close to a million for something that you had to get dressed to do the laundry? Oh, that’s right; when this dump was built, they washed clothes in a tub.
Anyway, facebook, airbnb and twitter aren’t tech companies.
No rational investor would touch that dump at that price. There is no return.
they have things called “pensions” might be a french word
join your local
They would be better off renting until the public union goon retires. With a generous pension, it’s not so urgent to have a paid-off house when they turn 65. So they don’t really need to buy. They could rent forever on the pension.
And if I were the lady, I’d insist on getting legally married instead being “partners.” There is no knowing if/when one partner will decide to dump the other and it’s best to lock in a piece of the pension now.
So would you. The question is, why didn’t you?
Becauses houses in my nabe do not cost $910K, or $533K. The prices are low enough to be comparable to rent. I guess a more relevant question is why I didn’t snag a firefighter to mooch off of. To smart and proud, I guess.
“The prices are low enough to be comparable to rent.”
With the way you understate your own losses to carrying costs, I’m sure you’re right.
Good move (not snagging a firefighter). In NYC, their MO was to buy a house upstate, install the wifey, go in with their “brothers” on an apartment in Manhattan, hit on every woman in sight.
Here’s a comparable house for rent a few streets away: http://www.apartmenthunterz.com/details/138372633
Potential rental income: $2900 per month
Cost of owning bidding war house: $4584 per month
Loss: -$1684 per month
Some investment, eh?
[30 yr mortgage at 3.75% with 20% down (as if!): $3,371 per month
($182,000 down, $728,000 mortgage)
Taxes: (910,000 x .0125 approx) / 12: $948 per month
Insurance (from online formula estimated by dividing the value of the home by 1,000, then multiplying the result by $3.50 and dividing by 12): per month $265
= $4584 per month]
And depreciation????? You forgot depreciation.
What depreciation????? Somebody just paid almost a million bucks for this “depreciated” POS. If that’s depreciation, gimme more please.
Those losses to depreciation you’re paying but can’t seem to bring yourself to admit.
Alright, alright, if you want to get technical…
Assuming structure value of $500k, 27.5 year recovery period, depreciation expense is about $18,000 per year.
I didn’t include transaction costs, mortgage interest tax deduction, maintenance expenses or rental listing fees either. Regardless of all that though, I find in general that if the basic calculation above results in a loss, it isn’t a good investment.
No no. The losses to depreciation. What it costs you every year to offset the depreciation of a structure.
“27.5 year recovery period, depreciation expense is about $18,000 per year. ”
That is tax depreciation. It has little to do with FMV.
“That is tax depreciation.”
Since I’m talking about rental income, tax depreciation is relevant. And the only rational reason an investor would buy this loss-maker is as a tax write-off.
Not saying that whoever paid $910k for that shack is rational or an investor, btw, just extrapolating for fun!
Losses to depreciation?
I know every housing market is different so you have to do the math yourself.
We are looking at homes for $130-$150K for a 3-4 bedroom 1500-2000 sq foot homes . With property tax and insurance we are looking at $700-$842 a month (20% down) Now we wont be renting anything below 1500 sq foot so to rent we are looking at 1200-1400 a month and that includes 50% yard maintenance (the back yard is your responsibility) and power is not included.
So lets see the price difference we will use a new home and a new home renal. $842 payment too the $1400 payment and rent never went up.
year one
Buy: $10104
Renting: $16800
Year two
Buy: $20208
Renting: $33600
Year Three
Buy: $30312
Renting: $50400
Year four
Buy: $40416
Rent: $67200
Year Five
Buy: $50520
Rent: $84000
Year six
Buy: $60624
Rent: $100800
Now are you telling me with a new home you will have $40,000 in maintenance costs? That is for where we are moving and that is a house to same rental comparison. If you move will your closing be $40,000?
Don’t be silly. $1500/month rentals dont sell for $130k.
And remember, The expression “every market is different” is a marketing tool to get your target to pay far more than the property is worth.
San Diego South? Sure, Cabo is a fun place to vacation. Living there is another matter, and it ain’t San Diego. She will learn firsthand what it’s like to live in a corrupt 3rd World country, and will also learn first hand that as a foreigner she will have to jump through a lot of hoops to accomplish things that are easy to do in the US.
She will get daily reminders of the fact that she’s a foreigner. And an American.
We are not beloved in other countries. A sad truth that many an American learns the hard way.
But… but… every country has a stock of beautiful furnished or seni-furnished homes which blend into the local community… and are available through the local network of Re-al-TORS all of whom conveniently speak English. I know, I saw it on HouseHunters International.
The key is prices are slower to rise but they are still going up? Sellers look around before listing, if you sell cheap you are now along with the present buyers, in a misery loves company scenario.
Like I said before, many are taking on two jobs to make that mortgage, they are going to resolved themselves saying, somebody has to live somewhere with the kids and dog, renting is not a long option or solution for buyers.
Most sellers are gambling when the present administration (a lackluster no growth DC) gets booted, then today’s home prices and rates will look very favorable and I believe that is what is going to happen.
Sellers, if you can live with a small profit or break even then make a deal, if you are selling at a loss don’t list or sell.
If you don’t list now or sell to cheap but lose the future gamble on a better housing market all you lost was time, you still may walk in 2015 why rush, see what happens. I think you wait it, the buyers have to buy in a country this big.
Auto,eggs,bread,milk.insurance etc. nothing is going in reverse,and the biggest single investment your house isn’t either, 2008 isn’t going to happen again, the powers to be can’t allow 25 to 60% drop.
‘US housing price growth slowed to just 0.2% in the first three months of 2014, latest figures show. “The year-over-year changes suggest that prices are rising more slowly,” said index chairman David M Blitzer in a statement. “Among those markets seeing substantial slowdowns in price gains were some of the leading boom-bust markets including Las Vegas, Los Angeles, Phoenix, San Francisco and Tampa,” he added.’
‘nothing is going in reverse‘
Marin -3.1%
Napa -10.7%
San Mateo -14.1%
Monterey -12.8%
San Luis Obispo -5.3%
‘the powers to be can’t allow 25 to 60% drop’
I think I’ve heard that before!
Down down down we go. Where the bottom is, Housing Analyst knows.
Marin -3.1% month-to-month, + 5.7% year-to-year
Napa -10.7% month-to-month, + 15.3% year-to-year
San Mateo -14.1% month-to-month, + 9.6% year-to-year
Monterey -12.8% month-to-month, + 18.8% year-to-year
San Luis Obispo -5.3% month-to-month, + 7.9% year-to-year
This is the same pattern that I see in DC now. Prices were bubbly last year, and for Feb-March of this year. As a response, more houses were put on market. But now that the mini-frenzy is over, people are looking twice at prices and sayin no. That explains the increase in YtY and drop in MtM.
Does this mean that prices will continue to fall? Not consistently. Those houses that were put up will just be taken down again, which will re-ignite the mini-frenzy again. rinse and repeat. At the end of the day, I suspect that housing will post a net gain comparable to the historical 2-3%/year from inflation, only with a lot more noise. The DOW is behaving the same way.
Prices will continue falling until they reach the long term historic price trend or a percentage of construction costs.
That’s a long way down given current grossly inflated asking prices of resale housing.
30-Year Fixed Mortgage Rates Fall Below 4 Percent for First Time Since October
Mortgage rates for 30-year fixed mortgages fell this week, with the current rate borrowers were quoted on Zillow Mortgage Marketplace at 3.99 percent, down from 4.05 percent at this same time last week.
The 30-year fixed mortgage rate steadily declined last week, dropping to as low as 3.98 percent on Sunday before rising slightly to the current rate Tuesday morning.
Additionally, the 15-year fixed mortgage rate this morning was 2.98 percent, and for 5/1 ARMs, the rate was 2.71 percent.
Yet housing demand continues to collapse to 20 year lows.
What is your thoughts on that?
22151 steady as it goes- flattening out w 5/1 peak
‘U.S. home prices rose in March, with the Dallas-Fort Worth measure reaching a new high, according to the Standard & Poor’s/Case-Shiller index released Tuesday.’
‘The price gains over the past 12 months were the “result of a witch’s brew,” said Stan Humphries, chief economist at Zillow. It was made possible by the lows of the housing bust that began in 2007, the historically low mortgage rates and a limited supply of homes on the market. “These influences are beginning to fade, and we’re already seeing a monthly slowdown in home prices in more recent data,” Humphries said.’
‘The index is not adjusted for seasonal variations, so the gains can reflect the warmer weather after a harsh winter.’
‘Ian Shepherdson, chief economist at Pantheon Macroeconomics, said the monthly gains reported by the Case-Shiller index seem excessive. “Every indicator of housing market activity and prices we know is slowing or falling outright,” Shepherdson said.’
“Every indicator of housing market activity and prices we know is slowing or falling outright,” Shepherdson said.’
BULLSEYE
When the economy finally bottoms, as it surely will, we’ll be at the bottom and not a day sooner.
Correct!
ECONOMIC DEATH — Retail Apocalypse, Record High Derivative Bubble
Read more at http://investmentwatchblog.com/economic-death-retail-apocalypse-record-high-derivative-bubble/#lZ4CKiG28vE5hYy0.99
The mistakes have already been made. The instability is already in the system. We’re just waiting for that catalyst that I call the snowflake that starts the avalanche. You don’t worry about the snowflakes; you worry about the snow and that it’s unstable and it’s just waiting to collapse.
San Diego Housing Hits a Non-Bubble High
By: Rich Toscano
Looks like the same graph as the inflation-adjusted Case Shiller index–nationally, we’ve reached a “non-bubble” cyclical peak as well…it’s not just limited to San Diego.
‘a “non-bubble” cyclical peak’
Heh. What wasn’t present in the previous “cycles”? Ongoing QE’s, 4 trillion on the Fed’s balance sheet and the related 45% cash buyer, HARP/HAMP, countless state/local laws preventing foreclosures, FASB rule changes for bank foreclosures, zombie GSE’s with Mel Watts in charge, FHA in the red - basically no market influence on loans: am I missing anything? Let’s talk cycles when the cycle environments are comparable.
cyclical is just Fraud Watch’s code for “now I’m selling”
The last cycles had their own craziness:
Late 1970’s/early 1980’s had the energy crisis, prime rate going to 20%, inflation peaking at just over 14%.
The early 1990’s peak was on the tail end of the S&L-driven run-up.
The mid-2000’s had NINJA loans, RMBS manipulation through credit rating inflation, massive mortgage fraud, etc.
And this run up was on the back of ZIRP/very little new supply.
None of the cycles look the same.
No R._Fraud. With 25 million excess empty and defaulted houses, there is plenty of supply.
I know every housing market is different so you have to do the math yourself.
We are looking at homes for $130-$150K for a 3-4 bedroom 1500-2000 sq foot homes . With property tax and insurance we are looking at $700-$842 a month (20% down) Now we wont be renting anything below 1500 sq foot so to rent we are looking at 1200-1400 a month and that includes 50% yard maintenance (the back yard is your responsibility) and power is not included.
So lets see the price difference we will use a new home and a new home renal. $842 payment too the $1400 payment and rent never went up.
year one
Buy: $10104
Renting: $16800
Year two
Buy: $20208
Renting: $33600
Year Three
Buy: $30312
Renting: $50400
Year four
Buy: $40416
Rent: $67200
Year Five
Buy: $50520
Rent: $84000
Year six
Buy: $60624
Rent: $100800
Now are you telling me with a new home you will have $40,000 in maintenance costs? That is for where we are moving and that is a house to same rental comparison. If you move will your closing be $40,000? fun stuff??? if you pay what you pay in rent you pay off the house in about 15 years.
Don’t be silly. $1500/month rentals dont sell for $130k.
And remember, the expression “every market is different” is a marketing tool to get your target to pay far more than the property is worth.
“Kelly, who runs a doggy day-care business, and her partner ‘came in strong’ with an offer of $810,000, 35 percent over the asking price of $599,000. The good news was that they beat out 46 other offers. The bad news was that someone else offered more than 50 percent over asking.”
SERIOUSLY - 2008 was only 6 years ago?!?!?? Can’t fix stupid.