Sell your house and rent?
Keep renting?
Hold on and ride this sucker down?
Sell your investment property / 2nd home?
Nothing - 'cause you don't think the bubble's popping?
December 09, 2005
Readers: So what's your post-bubble game plan?
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26 comments:
rent while the renting's good
can't beat it right now - I pity homeowners who are going to lose value every month, while i rent for 50% of their monthly costs
I'm doing the same. I sold my house for a 125% gain over 6 years in April. I am renting and using some of the proceeds to go back to school. I'm going to rent for a while once I start working again in the spring, and hopefully buy somewhere in 2007 or 2008, which is when I think prices will be reasonable again.
My only concern is what to do with my cash until then. I think there is a fair chance that the Fed will reward all the irresponsible fools by cranking up the printing presses. Right now I've got it in a MMA that is making about inflation. Any suggestions for what to do (other than gold)? Stocks, bonds, real estate (duh) - nothing looks very good to me at this point.
Come my way, friends. Rent a 850k house on an exclusive golf course for $1850. I'm not kidding.
Short homebuilding stocks.
Tol, Kbh, Ctx, bzh, phm
CTX has 14 billion in debt and 200 million in cash.
BZH has 1 billion in debt and 8 million in cash.
This is after a several year boom!
Not after a severe downturn.
Open up a brokerage account and sell short (you make money when the stock drops) these stocks as they fall to 0.
I sold our lakehome here in minnesota on 8/7/5 for $380k. We were going to buy somewhere else in town before I stumbled across this website (and others). We are renting a bigger house than we sold, and the rent is $600 cheaper than our old house payment. I,ve been paycheck to paycheck my entire life and now have over $125k in the bank.I'm not bragging, I'm stunned at how well I'm sitting for not knowing there was a bubble. now I read all these bubble websites everyday and decide what to do. I had to sign a one year lease so I've got ten more months to make up my mind. I do'nt think I'll be buying anytime soon.
Be careful what you wish for...
Please understand that the entire U.S. financial system is inexorably intertwined with the housing bubble:
-Banks hold almost $3 trillion in real estate loans
-Fannie Mae/Freddie Mac/Ginnie Mae/FHLB/Private MBS issuers have created roughly $5 trillion in MBS
-There is approx. $11 trillion in outstanding mortgage debt, much of it now in ARM/IO to risky borrowers
The point of listing the above is that it would be naive to think that as the housing bubble bursts you will just saunter down to your now-destroyed bank and pull out your money and buy these properties for ten-cents on the dollar.
Rather, you will be facing a tier-one financial panic and your bank will be on a "bank holiday" for extended periods (much like Argentina in late 2001).
Besides, will you REALLY be of the mind to purchase properties as the whole world is falling apart?
Example: How many people bought Cisco at $9 in 2002? Or Amazon a $8 during the same period?
Indeed, the BEST strategy would be to get assets out of the system NOW, before the deluge. Buy physical gold and silver and keep at least $10k in actual cash--not in the bank safe deposit box.
Now, I understand that most people will NEVER do this (and besides if you DO actually try to get your assets out of the system in any large amount, you will be branded a "terrorist", proving just how much your financial freedom has eroded!, but at least you can't say you weren't warned.
Butch
The bubble is a figment of your imagination. It's been said that one person who fails will inevitably want others to fail with them.
Why fail alone?
The housing bubble argument has been "created" by those angry that they missed the run-up. So, they're working to break the string of unending increases in the value of the American Dream.
I will keep my 30 rental properties, and will even encourage many of those renters to buy their home from me.
I will keep my first, second, third homes and will sell on tax free exchange as each continues to increase.
I will buy builder stocks in February after the market gets done beating them down to levels below book value or asset value.
It is interesting how the two comments above represent both the "doom and gloom" end-of-the-world approach and the "Things have never been better" approach.
I guess people just see what they want to see. I would expect a natural market correction, but the U.S. economy is very resilient, we will be fine.
Take it from me,
-Anonymous
I sold my house in sacramento, ca in October, and am now renting. Made quite a bit, am sitting on over 250k but I bought a lot about 3 years ago for much less than they go for today. Anyway I will be buidling two half-plex's which I will live in one and rent the other one out. I will at least own my home outright...so I'm not to worried...have some '08 puts on kbh and ctx, hedge the risk a little. I admire the bubble sitters but I don't think my wife would go for that, it's tough to be in a situation were you don't know one month from the next whether your going to be leaving or not. I don't like living out of boxes, but it is a wise decision never the less. Comfort is a priceless thing. Good luck to everybody,
I will stop blowing and start sucking.
You gotta rent and buy a house as a home you can live in for 10 years. If you can do that right now you are safe to buy. That also means getting AT LEAST a 10 year loan you can handle. Buy the hotest stock on the stock market with your money until then. APPLE COMPUTER!!
" rent while the renting's good
can't beat it right now - I pity homeowners who are going to lose value every month, while i rent for 50% of their monthly costs"
WHAT HE SAID!!! My rental costs are less than they were 5 years ago and I live in a nicer place, make 30% more, and spend 20% less.
DALTONS_BRIEF: you fail to account for those who didn't miss anything. I dont' own a house, don't want to, and not sorry I didn't make money. As the greater fool theory plays out, many people will wind up with a 10-year cumulative loss although they were up 50% at a point in time.
I'll bet that 80% of this blog's readers are renters (as evidenced by the comments posted and last week's poll).
OF COURSE renters are rooting for a housing bubble because it will justify them dumping $1500 down the drain every month. As Dalton said - "one person who fails will inevitably want others to fail with them.....Why fail alone?"
Yes housing will slow....which means that the rate of increase will be 5% instead of 50%.
Yes there will be pockets of hugely decreasing home values (eg Phoenix)......
However the other 99% of us homeowers will be just fine.
Our house was sold to the "speculator" we put the money in the bank. I am currently staying in an elegant "suites" type hotel for a VERY CHEAP RATE with hot and cold running maids and an included hot breakfast in the morning! Yes Virginia you can negotiate with a hotel a super rate especially if they have low occupancy. Stuff is stored at a negotiated very low rate.
Just to show how much the bubble has burst.... A property I have been looking at went on the market in March 2005. It was lowered 250,000 in July, than another 250,000 in Septemeber. A person tried to grab it and did put it into escrow with a lot of "creative" financing and then I was contacted just yesterday that it fell out of escrow. And I have not even started to negotiate yet! And DO IT love negotiating especially in a buyer's market!
To the anonymous commenter who said most here were renters soured by the fact they missed out, maybe this will help. I'm a homeowner who bought his home in 2000 for 195k. This summer a conservitive estimate of value would put it in the neighborhood of 525k-575k. One would have to say I've done well. Also, I own a mortgage brokerage and would benefit greatly if this real estate run would just keep on going. If I could have just 5 more years of this, I'm retired good and happy at 46.
But I'm not a wishful thinker, and the handwriting is on the wall. I believe in fundamentals because they're always proven true. We have people screaming "its different this time." My how that sounds familiar. It facinates me how history teaches us nothing, even recent history. I remember so vividly the fundamentalist of the mid to late 90's getting pounded by the majority for their negative thoughts regarding the tech-stock boom, even though they based all of their arguments on fact and evidence. (For the record, my money was betting against those guys and, of course, I lost.)
Now I find myself doing the research before I "bank" anything. To those who find themselves "riding the fence" looking for answers, spend some time looking into whether or not this makes sense. I want to believe there is no bubble. I stand to gain a lot if it doesn't exist. But when I look at the arguments of both sides in an openminded and non-biased way, the evidence is clearly stacked in the direction of a bursting bubble.
I take no pleasure in those who stand to lose in the impending real estate crisis. It does bother me to see some fiendishly standing on the sidelines wanting and hoping to see some "burn". No one wins in this.
Just an update from the Reno/Tahoe area....everything has come to a screeching halt. As one local realtor described it, it was if we were going 150mph and someone slammed on the brakes. Inventories have tripled to quadrupled in just the last 2 months. My brokerage went from having its best month in August, to halve of August's volume in Sept., halve that agian in Oct., and November was our slowest month since the first month I opened this company. Everyone here in the industry has this weird, semi-freaked-out look. It's a look I would kind of imagine everyone would have if they just found out we were under a nuclear attack, the "it can't be true, can it?" look. Even my ever positive AE's, from the wholesale lenders that I use, walk into my office over the last few weeks looking like they've been through an ordeal. (A well respected AE for one of the largest sub-prime lenders in the nation made the comment to me this week that it was official, "we're cooked." But for the most part no one wants to even utter the "B-word")
very interesting comments today... thanks all... here's some feedback:
1) what to do with housing sale $$$: DO NOT put into stocks (market will be in trouble in '06 as housing falls apart, along with consumer confidence). I recommend $100,000 max in any FDIC insured savings account or 12-mo CD, some GLD, some EWJ, and short anything to do with housing - CTX, PHM, TOL, etc. In England, the retailers are getting killed - worst in 25 years - so look there too.
2) Real estate is local - so is rent. But it sure is fun to rent a $700,000 place for $1500 or so a month! Why own right now? Kinda like buying a 2 year old car - why buy new?
3) Patience, patience, patience. This bubble will take a bit to wind down - maybe 5 years or more. So when houses drop 20% by you, don't swoop in then. Look to Japan for a good example
4) Knowing the coming storm, batten down your hatches, take cover, and sleep peacefully every night knowing you prepared. The bubble popping is a bad thing - not something I wished.. But knowing it is happening, everyone needs to do what's right for them. If that's keeping your home and riding it down, then so be it.
Best of luck
I want to purchase a home in Florida, but it's so expensive. It would be a stretch on the pennies that I have right now to opt to buy. I am renting and rents are so much cheaper than mortgages right now. I don't want to get burnt, so I am not quite sure! Here in South Florida prices have risen so dramatically within the last couple of years. It's hard to say which way I should go.
the naysayers do remind me of folks who can't see many obvious things - like evolution, like the big bang, like the problems with social security and medicaid... democrats and republicans
Some things which are glaringly obvious to me are unseen by others, and I find that fascinating
oh, I also find it obvious that indy will win the superbowl
Gold is up almost $10 today. We had Larry Kudrow screaming the gold market is "being manipulated." Your right Larry, the markets are being manipulated, but it's not the gold market you should be looking at.
To the potential buyer in Florida -It sounds like you can afford to rent, but not to buy. Why is this a hard decision? (Do not feel bad...less than 15% today can actually afford it.)
However the other 99% of us homeowers will be just fine.
You'll be lucky if 50% are fine.
The idiots who believe that nothing bad will happen are ruining it for the rest of us who just want to live within our means and buy houses as places to live based on ECONOMIC FUNDAMENTALS.
there is no such thing as a cookie cutter answer to whether or not there is a bubble because it is different from state to state. We are all aware that the stock market sucked from 2000 to 2003 but that does not mean that all sectors did not perform. I made quite a bot of money in banking and utility stocks during this so called melt down. The same thing goes with the real estate market. Depending on whether your a short term speculator or a long term investor will dictate the degree of pain involved in the coming correction as well as where the property is located.
I just wish all of the people that made some money with real estate that now think they are professional investors would do their homework before spouting off. The correction is coming. Just like with the stock market, amatuers with little knowledge and big mouths will get burnt and people that do their homework and understand the markets will come out fine in the end.
I sold for 80% profit. Now renting for 60% of my old mortgage+tax payment.
My latest blog post covers what I did with the money.
Sold and are renting.
Approximately 99% of our net assets were in real estate. We decided to liquidate, invest conservatively (CD's, T-Bills) and enjoy literally "an extra income" which more than covers the rent. If value returns or we can find a foreclosure we will reinvest.
I'm back and well positioned for a downturn. Just spoke with an architect, she said things were slow and we were smart to sell. However, she couldn't understand how we knew what was going on since 04, when we put the property on the market. Guess we'll be hearing from the builders next. Certainly a disconnect between prices,income and unsold floorspace.
It's official. The bubble has burst A 33% reduction in asking price vs sales price on the socialist republic of Martha's Vineyard, MA.
MSN reports construction of homes in the United States soared in January to the highest in nearly 33 years thanks to mild winter weather, the government said on Thursday in a report showing unexpected strength in housing.
Hurry, more water, more water! The boat is on fire and we must extinguish the blaze, said the captain as the ship slipped silently beneath the waves.
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