What will happen to the housing market if...

[ShiftyBob]

Spoken like a true real estate broker. Now is definitely NOT the time to buy around here. Prices are still far too high and I suspect will continue to drop for at least the next year at a minimum. I could be wrong, but saying 'now is the time to buy' like you're certain that prices are going back up tomorrow is misleading at best.

I disagree... I see the market bottoming out in the next 6 mos. So right now is the best time to buy. Great for investors, horrible for sellers, and really... great for anyone looking to buy. Even if it does continue to drop over the next year or so, it won't be substantial. Any huge hits have hapened in the last year or so, so now it's just a matter of the market balancing itself out.

As an example...

I bought a house a couple of years ago for $875k (high end rental). Less than a year later it appraised at $1.2m. Beginning of this year it was down to below $790k, and now current value is at a round $750k . So it took it a year to drop more than $400k... then another year to drop an additional $40k. It's not going to get much lower than that. SO I'll just hold onto it for another year or so, wait for the market to pick back up then resell it at (hopefully) close to what I bought it for. :redface:

 

[Ryanmcd2]

Equity does me no good if I don't use it. Sure I could live mortgage free (taxes would still kill me though), but that money is better spent invested.

Let's just say my house was $500k, but I had payed it off. Now I'm living mortgage free... but, I also have a liability. Why a liability? Heaven forbid I get in an accident, or something and somebody sues me, the house will be the first thing they come after since it's paid off and they see an easy $500k. But, I could take that money, reinvest it and turn $500k into several millions in a matter of a 3-6 months. :wink:

Ya I guess it depends on what why you want to play it. I pay so much in taxes saving 10-20k a year really does not do anything for me, even 50k. I just pay everything off and use a business for my trading account. Also could you not put your home in a business name? Also they can always sue all of them if they wanted. Years ago there was a person who sold me a POS car, I sued them, the owner of the place, and the land lord. Ya I did not win, did not care about winning I just wanted to be a pain in the ass and that's what I did. People can sue for anything and any business.

 

[HTN]

Great example Shifty Bob. Spoken like a true Investor.:biggrin:
I will be in Corona next week to visit family.

 

[Ryanmcd2]

I disagree... I see the market bottoming out in the next 6 mos. So right now is the best time to buy. Great for investors, horrible for sellers, and really... great for anyone looking to buy. Even if it does continue to drop over the next year or so, it won't be substantial. Any huge hits have hapened in the last year or so, so now it's just a matter of the market balancing itself out.

As an example...

I bought a house a couple of years ago for $875k (high end rental). Less than a year later it appraised at $1.2m. Beginning of this year it was down to below $790k, and now current value is at a round $750k . So it took it a year to drop more than $400k... then another year to drop an additional $40k. It's not going to get much lower than that. SO I'll just hold onto it for another year or so, wait for the market to pick back up then resell it at (hopefully) close to what I bought it for. :redface:

Save this post. I am going to say 12-16 month to work this out, so much trash sub-prime out there. Even if the fed cuts a few more times there are still going to be problems. The "Pros" right now are still buying crap once they run out of money it will bottom, or when the general public thinks it's not a good time to buy


"The data suggest that financial suffering is likely to persist in many parts of the U.S. where subprime lending had surged. Many loans at risk of going bad have not yet done so. As much as $600 billion of adjustable-rate subprime loans, for example, are due to adjust to higher rates by the end of 2008, which means that more and more borrowers are likely to fall behind."

http://finance.yahoo.com/loans/article/103704/The-United-States-of-Subprime-Loans

 

[steveny]

I disagree... I see the market bottoming out in the next 6 mos. So right now is the best time to buy. Great for investors, horrible for sellers, and really... great for anyone looking to buy. Even if it does continue to drop over the next year or so, it won't be substantial. Any huge hits have hapened in the last year or so, so now it's just a matter of the market balancing itself out.

As an example...

I bought a house a couple of years ago for $875k (high end rental). Less than a year later it appraised at $1.2m. Beginning of this year it was down to below $790k, and now current value is at a round $750k . So it took it a year to drop more than $400k... then another year to drop an additional $40k. It's not going to get much lower than that. SO I'll just hold onto it for another year or so, wait for the market to pick back up then resell it at (hopefully) close to what I bought it for. :redface:

So whats the point of owning it for a few years and selling for what you paid? Much like my apple stock, I would have sold that 875k house for 975k way before it ever went to 1.2m. I tend to sell everything way to soon and leave a lot of money on the table but I hardly ever have to sell anything at a loss, everything but cars that is.

One other thing too. you paid 875k and one year later it appraised for 1.2m, thats not selling price that is greedy banks wanting to loan out money. A lot of the gains, unrealistic gains in RE were just that, ultra high appraisals that the property would never actually sell for. I have done the same thing on more properties than I can even begin to count. I only seen one appraiser give what I thought was a true market value on a property in the last 4 or so years. When that appraisal didn't work for the bank they just sent out another appraiser and got the number they needed.

 

[steveny]

Save this post. I am going to say 12-16 month to work this out, so much trash sub-prime out there. Even if the fed cuts a few more times there are still going to be problems. The "Pros" right now are still buying crap once they run out of money it will bottom, or when the general public thinks it's not a good time to buy


"The data suggest that financial suffering is likely to persist in many parts of the U.S. where subprime lending had surged. Many loans at risk of going bad have not yet done so. As much as $600 billion of adjustable-rate subprime loans, for example, are due to adjust to higher rates by the end of 2008, which means that more and more borrowers are likely to fall behind."

http://finance.yahoo.com/loans/article/103704/The-United-States-of-Subprime-Loans

March should be the worst month for adjustments, so I have heard. I would expect your end of 2008 to be right on target.

 

[Ryanmcd2]

So whats the point of owning it for a few years and selling for what you paid? Much like my apple stock, I would have sold that 875k house for 975k way before it ever went to 1.2m. I tend to sell everything way to soon and leave a lot of money on the table but I hardly ever have to sell anything at a loss, everything but cars that is.

One other thing too. you paid 875k and one year later it appraised for 1.2m, thats not selling price that is greedy banks wanting to loan out money. A lot of the gains, unrealistic gains in RE were just that, ultra high appraisals that the property would never actually sell for. I have done the same thing on more properties than I can even begin to count. I only seen one appraiser give what I thought was a true market value on a property in the last 4 or so years. When that appraisal didn't work for the bank they just sent out another appraiser and got the number they needed.

Great post and true, Hell you can get a loan WAY over the value of a house that's why we are in this crap right now. It's funny I live in my little 150k$ house and Just screw around all day and dont have to work ever again. Then see people in 100,000$ cars buying lottery tickets , Also why not try to get a profit out of it when it was up? I don't mess with RE but I do trade the market and have for over 7 years and NEVER let a winner become a loser EVER and I would think that about anything. Also who paid for it at that time and taxes up keep etc. A house to me is not a investment it's a place to sleep. After all the money you spend on taxes, up keep, payments etc it's not a investment. I like not knowing what day of the week it is because it does not matter lol. :biggrin:

 

[Ski_Banker]

Not to be smug, but do a search for the real estate/investing/stock market threads in the last few *years* and see what certain people were saying back then.

We have a long long way to go with this mess. Certainly not "bottoming" in 2008. Why? Because many/most people aren't going to get booted from underperforming subprime houses. Even at the height of 2005, only around 10% of mortgages were exotic. So... for the normal folks with normal mortgages, they simply way overpaid on their properties. If they aren't selling, which they won't need to do, the market comps won't go down very quickly.

Like I said in 2005 or beg of 2006 - maybe 5 years or so for a bottom, and then many more years of zero gains. R/E shouldn't go up quickly, and it WON'T go down quickly.

 

[robr]

I have NEVER heard a real estate broker say "Don't buy now, it's a bad time". Throughout this most recent fiasco, real estate people are still saying "buy buy buy, we've hit bottom". Like if they keep telling people to buy, it will turn things around and they can get back to making money.

 

[HTN]

I have NEVER heard a real estate broker say "Don't buy now, it's a bad time". Throughout this most recent fiasco, real estate people are still saying "buy buy buy, we've hit bottom". Like if they keep telling people to buy, it will turn things around and they can get back to making money.

I see your point robr. This thread is a very broad and at the same time very insightful to me. I get to see what consumers are thinking and feeling. These and other factors help me shape my company.
It is a very broad statement when anyone refer to as "the time to buy". For instance, this is a great time to buy an NSX and other luxury items. Since the market is soft, individuals that can afford these items will save tremendously at this time. Thus, taking advantage of the soft market.
Now at the same time, one must evaluate their own budget and finance to do so. Bob may have a different cash flow than Sara.
This does not mean that everyone who wants an NSX should go out and buy one.
Perhaps you never had the chance to deal with a true professional in R.E.
Great Brokers will help you look at every angle and yes they will also tell you not to buy/sell, if it is not the right time.
Sorry to hear that you have had such dealings in the past.
Hopefully you will find this posting to be informative and not negative in anyway.
:smile:

Oh for the record... THIS IS NOT THE TIME TO SELL...

 

[steveny]

I see your point robr. This thread is a very broad and at the same time very insightful to me. I get to see what consumers are thinking and feeling. These and other factors help me shape my company.
It is a very broad statement when anyone refer to as "the time to buy". For instance, this is a great time to buy an NSX and other luxury items. Since the market is soft, individuals that can afford these items will save tremendously at this time. Thus, taking advantage of the soft market.
Now at the same time, one must evaluate their own budget and finance to do so. Bob may have a different cash flow than Sara.
This does not mean that everyone who wants an NSX should go out and buy one.
Perhaps you never had the chance to deal with a true professional in R.E.
Great Brokers will help you look at every angle and yes they will also tell you not to buy/sell, if it is not the right time.
Sorry to hear that you have had such dealings in the past.
Hopefully you will find this posting to be informative and not negative in anyway.
:smile:

Oh for the record... THIS IS NOT THE TIME TO SELL...

Defiantly not the time to sell out west or in the south where the market is flooded with inventory that has been on the shelves for months at last years inflated prices. That inventory.. if not off the shelves in the next 6-12 months... will be heavily discounted to compete with incoming inventory that will need to leave the banks/lenders hands quickly so they can stay above water.

In the NE there is no longer any cheap property because smart investors have parked their money in the NE to get the steady gains that we have enjoyed here since the beginning of time.

EDIT. on the road I live on in Florida, in a very affluent area the exact same houses are for sale that were for sale when I was there last winter, at the same prices. Just like the stock market, we won't see a bottom until there is capitulation.

 

[ShiftyBob]

I sued them, the owner of the place, and the land lord... People can sue for anything and any business.

Spoken like a true American! :biggrin:

So whats the point of owning it for a few years and selling for what you paid?

I tend to sell everything way to soon and leave a lot of money on the table but I hardly ever have to sell anything at a loss...

I agree... but when you personally buy 180+ home in a few years, not every one of them is going to work out. But, this one was also a different case. I bought the property at 10% below FMV, rented it out to a doctor for a few months, and 6 months into it he decided he wanted to do a 12 mos lease option and lock in the price at the signing of the lease. At that time prices were still going up, so when he bought it I thought I'd be losing a couple hundred K, but I was locking it in at just over $1m with a $50k deposit. All he needed was a year to get his credit fixed (doctors ), and it was a win/win for both of us. Well, when the market started dropping, he said he still wanted it, but we couldn't sell for the agreed upon price because nobody would lend at 120% of a homes value (shees, fickle lendlers ). The property is still renting out, and he is still paying WAAAAAAAAAYYYYY more than my ARM (even when it comes up in 2 years :biggrin: ), but I don't see him buying it before or even after that, so I haven't really lost much. :smile:

I too tend to leave a TON of money on the table. As most on here know... I specialize in the high end housing market (i.e. mansions). I literally bought a property last year for $1.4m (it was worth $2.4m) and sold it to another investor for $1.7m. Yes... I left $700k on the table. But, I turned the property in 90 days and made $300k with NO CARRYING COSTS. So, I know exactly what you mean. We are on the same wavelength when it comes to the term "don't be greedy, or you just might get what you ask for!"

One other thing too. you paid 875k and one year later it appraised for 1.2m, thats not selling price that is greedy banks wanting to loan out money. A lot of the gains, unrealistic gains in RE were just that, ultra high appraisals that the property would never actually sell for. I have done the same thing on more properties than I can even begin to count. I only seen one appraiser give what I thought was a true market value on a property in the last 4 or so years. When that appraisal didn't work for the bank they just sent out another appraiser and got the number they needed.

It's all subjective... when the market was skyrocketing, by the time you closed escrow on a property, the equity was already surpassing the "inflated appraisal". So, a lot of times appraisers were trying to "guess" what the property would be worth by the time escrow closed. So, yes the numbers were high at the time of appraisal. But were they on target at COE? Absolutely. That changed drastically by the end of last year when the market was crashing, and people were doing anything and everything to bail on their own personal homes and offload inventory.

March should be the worst month for adjustments, so I have heard. I would expect your end of 2008 to be right on target.

Agreed... There are no absolutes in RE, so everything is mostly opinion. For all we know the government could lock the rates on all these ARM's and everything would settle by mid next year. But, just because there are going to be thousands of foreclosures into next year, doesn't necessarily mean it is going to drastically affect the market. The market can still move upward with foreclosures, especially since MOST of the lenders on these upcoming foreclosures were sub-prime and good percentage of the lenders don't even exist anymore (which was the plan from the beginning).

I do trade the market and have for over 7 years and NEVER let a winner become a loser EVER and I would think that about anything.

See above

A house to me is not a investment it's a place to sleep. After all the money you spend on taxes, up keep, payments etc it's not a investment.

That's why you trade the market, and you're not in RE. Because that could not be further from the truth.

We have a long long way to go with this mess. Certainly not "bottoming" in 2008.

Like I said in 2005 or beg of 2006 - maybe 5 years or so for a bottom, and then many more years of zero gains. R/E shouldn't go up quickly, and it WON'T go down quickly.

Well I certainly hope you're wrong :biggrin: , but nobody knows for sure. I SERIOUSLY doubt it will take 5 years to bottom though. Everybody seems to think foreclosure rates and ARM's are the sole reason for our current market, and that just isn't true. While it may be a HUGE problem, and a BASE for our current conditions, it's certainly not the only reason. There are many other factors. If we could get lending under control (no it's not under control now, it's dead), and make it so people can actually start buying homes again, the market would pick back up. Right now you damn near can't buy a home unless you have a 700+ score with 30%+ down and FULL DOC. I see lending picking back up early next year (Mar/April), the market leveling off, and a VERY slow creep in the upward direction for the next few years.

I have NEVER heard a real estate broker say "Don't buy now, it's a bad time". Throughout this most recent fiasco, real estate people are still saying "buy buy buy, we've hit bottom". Like if they keep telling people to buy, it will turn things around and they can get back to making money.

I am not a broker, nor do I even have my RE license (for liability reasons). And right now IS a good time to buy. Only time will tell if it's the best time. Really, I could care less if others are buying. I deal in a different market which is not adversely affected by the current state of the SFR market. My only concern is that lending becomes stable.

Great example Shifty Bob. Spoken like a true Investor.:biggrin:
I will be in Corona next week to visit family.

If you've got some extra time we should go grab a beer or something...

 

[robr]

Years ago there was a person who sold me a POS car, I sued them, the owner of the place, and the land lord. Ya I did not win, did not care about winning I just wanted to be a pain in the ass and that's what I did. People can sue for anything and any business.

This absolutely infuriates me, taking advantage of the system to sue a landlord who had absolutely nothing to do with your problem is one of the sh****est things anyone can do. Or am I missing something here? You sued an individual who did you absolutely no wrong and had no control over the dealership behavior, forcing him to hire an expensive attorney and possibly screwing up his and his family's financial well being, just because you wanted to be a pain in the ass? I hope I'm missing something.

 

[ShiftyBob]

This absolutely infuriates me, taking advantage of the system to sue a landlord who had absolutely nothing to do with your problem is one of the sh****est things anyone can do. Or am I missing something here? You sued an individual who did you absolutely no wrong and had no control over the dealership behavior, forcing him to hire an expensive attorney and possibly screwing up his and his family's financial well being, just because you wanted to be a pain in the ass? I hope I'm missing something.

Agreed... I was just being nice about it...

Spoken like a true American! :biggrin:

 

[Ryanmcd2]

This absolutely infuriates me, taking advantage of the system to sue a landlord who had absolutely nothing to do with your problem is one of the sh****est things anyone can do. Or am I missing something here? You sued an individual who did you absolutely no wrong and had no control over the dealership behavior, forcing him to hire an expensive attorney and possibly screwing up his and his family's financial well being, just because you wanted to be a pain in the ass? I hope I'm missing something.

They where all involved with the purchase, Yes it was a shit thing to due but at the time nothing else worked. Would I do something like this again prob not unless I was really pissed off. Again just pointing to a fact that people can sue for anything.

 

[Ryanmcd2]

Shiftybob How is 1 home you live in a good investment? Yes it's a small write off and it does go up but so does everyone around you. Now if you are flipping / renting that is a different story but most people just have 1 home where they stay in. I did look into RE a while ago but to me trading and having 100% cash and having trades take 1-3 days and having no expense but a laptop was the way to go.

 

[robr]

They where all involved with the purchase, Yes it was a shit thing to due but at the time nothing else worked. Would I do something like this again prob not unless I was really pissed off. Again just pointing to a fact that people can sue for anything.

How was the landlord involved? Wouldn't he just be leasing space to the dealership? I wouldn't think he has any involvement in the business at all.

 

[Daedalus]

We have a long long way to go with this mess.

I am staunchly in this camp of opinion. I think the term "mess" is an understatement. Most people cannot pay cash for houses. And the financiers of the past several years are flat out reeling. Good investors can find opportunities in any market, but I think average home prices in the hotter markets still have a ways to fall, and I don't think they'll see a bottom until 2010-2012. And the more the government steps in to "help", the longer it will take. It's one thing to keep people in homes they cannot afford. It'll be quite another thing for prospective buyers (mkt demand) to obtain loans for homes they cannot afford.

 

[Mike-san]

I'm not a real estate guy, nor am I much of a financial mind either> Having said that, I don't see much of a quick recovery for California Real Estate in the next few years...here's why:

1) Ca. is no longer the "paradise" it once was. There's simply too much overcrowding. 30 years ago, it didn't matter if you didn't live close to something...gas was cheaper and there was a LOT less traffic. Do you think that these two things will diminish ?

2) A huge segment of our population is poor immigrants......not exactly a home buying demographic....unless several families decide to move into a house together.....Not the type of thing to drive up a neighboorhood's value...(Hey !!! Maybe they can get ARM financing ? )

3) If you look at the big picture, some people will say, "Ca. is so crowded, there will always be a demand for housing" Well, yeah, it's crowded, but it's not crowded w/ millionaires who are willing to spend $ 3/4 million for a single family residense that sits within blocks of a heavily congested, crime riden area. The RE party's over IMO.

 

[NSXGMS]

I'm not a real estate guy, nor am I much of a financial mind either> Having said that, I don't see much of a quick recovery for California Real Estate in the next few years...here's why:

1) Ca. is no longer the "paradise" it once was. There's simply too much overcrowding. 30 years ago, it didn't matter if you didn't live close to something...gas was cheaper and there was a LOT less traffic. Do you think that these two things will diminish ?

2) A huge segment of our population is poor immigrants......not exactly a home buying demographic....unless several families decide to move into a house together.....Not the type of thing to drive up a neighboorhood's value...(Hey !!! Maybe they can get ARM financing ? )

3) If you look at the big picture, some people will say, "Ca. is so crowded, there will always be a demand for housing" Well, yeah, it's crowded, but it's not crowded w/ millionaires who are willing to spend $ 3/4 million for a single family residense that sits within blocks of a heavily congested, crime riden area. The RE party's over IMO.

Sounds exactly like what everyone was saying 50 years ago...:wink:

The population of CA continues to rise. Always has, always will.

 

[Mike-san]

Sounds exactly like what everyone was saying 50 years ago...:wink:

The population of CA continues to rise. Always has, always will.

My points pretain to the current Southern California Real Estate market. 50 years ago, the Ca. population surge was due to the influx of easterners chasing the Sun and getting jobs in the postwar aerospace industry. This was a home buying population. Today's population surge can be attributed to poor immigrants looking for a better life here in the U.S. (although these peak immigration years were the late 80s and early 90's). I guess the point I'm trying to make is that the quality of life in Southern Ca. has declined and that the population, though large and growing, is not made up of a majority of people who are in a position to purchase homes of their own.

 

[NSXGMS]

My points pretain to the current Southern California Real Estate market. 50 years ago, the Ca. population surge was due to the influx of easterners chasing the Sun and getting jobs in the postwar aerospace industry. This was a home buying population. Today's population surge can be attributed to poor immigrants looking for a better life here in the U.S. (although these peak immigration years were the late 80s and early 90's). I guess the point I'm trying to make is that the quality of life in Southern Ca. has declined and that the population, though large and growing, is not made up of a majority of people who are in a position to purchase homes of their own.

I understand. But people have been claiming all those things for the last 50 years. Quality of life in CA is worsening, traffic is worse, crowding is worse, immigration is worse, etc. There was a population surge years ago but the population has increased steadily and there's no indication it will stop. Nor are people moving away in large numbers.

And immigrants do buy homes--lots of them. I think you'd be surprised how many do. They come here to work, they work hard, and they make enough to afford homes in many areas.

Land in CA, especially coastal land, will always be valuable and will always appreciate over the long term because it always has.

 

[Mike-san]

I understand. But people have been claiming all those things for the last 50 years. Quality of life in CA is worsening, traffic is worse, crowding is worse, immigration is worse, etc. There was a population surge years ago but the population has increased steadily and there's no indication it will stop. Nor are people moving away in large numbers.

And immigrants do buy homes--lots of them. I think you'd be surprised how many do. They come here to work, they work hard, and they make enough to afford homes in many areas.

Land in CA, especially coastal land, will always be valuable and will always appreciate over the long term because it always has.

Well, in my experience (what I've seen), there is an immigrant group that does purchase a lot of homes...the Asians. But apart from several pockets of communities here, I don't see their numbers being great enough to reverse the trend of the massive inventory of unsold homes we have around here. Who knows though, if the dollar keeps getting weaker, some investors might come from abroad and start buying up property because it's such a bargain (for them).

 

[Daedalus]

Investors from abroad have the same criteria as domestic investors (not to be confused with speculators). They won't pay $500k for a property that will only fetch $2k/month in rent. This is especially true as the USD weakens, since the asset will be depreciating in real terms to them even if it doesn't lose value here.

 

[Mike-san]

Investors from abroad have the same criteria as domestic investors (not to be confused with speculators). They won't pay $500k for a property that will only fetch $2k/month in rent. This is especially true as the USD weakens, since the asset will be depreciating in real terms to them even if it doesn't lose value here.

But wouldn't they jump at an opportunity if it arose ? For instance, if the dollar became REALLY weak, wouldn't they want to do something now out of fear that the dollar might gain back strength sometime in the future ? Y'Know, I'm arguing here using logic, not professionall experience, so I trust that you guys are better experts at financial trends......fill me in