July 22, 2006

"I can wait you out. I'm not buying your overpriced place on some silly discount"


I just loved this transcript from a chat at the Washington Post with their real estate editor last night. It speaks for itself

Your worst nightmare: I'm a very well paid professional, who just crossed into a six figure income last year. I have basically no debt beyond my student loans. I rent. I'd be interested in buying.

But you see, I spent the past five years listening to all of you blather on about RE. The smug attitude. The snotty "oh you rent" comments. We warned you that this was a bubble. We told you that ARMs, or worse yet interest-only ARMs were amazingly stupid on historical low interest rates (which can only go up). We told you energy prices were skyrocketing, driving up inflation (and eventually interest rates).

But still you bought the condo for a half mil on $80,000 income. And were condescending about it.

So now I'm sitting back, putting a grand or two a month away. I have no pressure. I'm ahead of the game. I just have more downpayment. Rates going up? Who cares? NOW is when you use ARM loans, when rates are higher and going up ... by the time it resets rates are going back DOWN.

You on the other hand have an albatross. Those low, low payments die when your ARM (or god help your interest-only ARM, or worse yet your teaser) resets. Maybe you can afford it. Maybe you can't. A lot of you can't. Or you get a job elsewhere. Or whatever. The point being you are competing with desperate builders of new construction, and have a timeline. Or didn't you notice the backlog of properties?

I can wait you out.

I'm not buying your overpriced place on some silly discount. I'm buying at 2002 or earlier prices. If not from you, then from your bank when you foreclose. So keep dreaming about "soft landings." All the greater fools already bought ... the rest of us are those who could afford it, but weren't willing to mortgage our futures on crazy loans and overpricing.

Maryann Haggerty: Who is sounding a little, well, smug and condescending now?

28 comments:

Anonymous said...

Quote: "I'm buying at 2002 or earlier prices."

I come to think about a guy who jumped off the game just in time before the 1929 crash. Two years later he finally concluded that things couldnt get any worse so he got on the train again. What happened? Well, he lost everything.

The morale: Be smart - but not too smart, I guess. Listen to this: www.financialsense.com/Experts/2006/Brussee.html

Anonymous said...

We're sounding smug and condescending, all of us who waited and are now vindicated.

That said, we should start putting a lid on the gloating, because this shitstorm is going to cause a lot of pain, and not just to flippers.

Anonymous said...

To I can wait you out!

Well said. We sold in 2004 and are renting for the first time in 23 years. Yes, we'd like a house too...but like you we clear well over the middle 6 six figures and are just socking money away every month with NO worries.

Boulder, CO

Natural Eyebrows said...

I agree that gloating is not good. I'm a true bubblehead, just like most HP readers,but bubbleheads need to avoid the hubris that the flippers were exhibiting only a little while ago.

While it's not "different this time," it's never perfectly the same either. There will be some surprises for everybody as this market deflates.

One thing to watch out for: as flippers and over-leveraged investors walk away from rented properties, their tenants will suddenly find themselves without a landlord after the foreclosure sale. Gloating tenants will be forced to move under adverse circumstances when the high bidder at the foreclosure sale (usually the bank) evicts them. It could get chaotic.

Anonymous said...

Here. Here. My man. I love people who think outside the box. When you do not let any inner herd mentality rule your world, you usually end up on top. I think you might be a lucky person who had great parents or mentors in your youth who showed you step cautiously when the herd starts to stampeed.

Beware of new housing my friend. Corporate homebuilders have invented new lows in the quality of their material selection and construction practices.

BubbleShanker said...

Remember 2.7 Trillion in bs arms adjusting soon, the party is just getting started, I will be buying one of these overpriced condos in the next 3-5 years, after full pain has been reached. I want to pay the very minimum toward putting a roof over my head, because remember, housing is not an investment, it's just a garbage expense, no different than a cable bill, facts are facts!

trailer trash said...

Natural Eyebrows said...

"One thing to watch out for: as flippers and over-leveraged investors walk away from rented properties, their tenants will suddenly find themselves without a landlord after the foreclosure sale. Gloating tenants will be forced to move under adverse circumstances when the high bidder at the foreclosure sale (usually the bank) evicts them. It could get chaotic."


Just when you think that you have heard all of the arguments, a totally new angle appears. I had never thought about the fate of those who are renting from flippers. But after all, flippers rent out their properties in an effort to subsidize their investment until the hoped-for payoff comes in. And abandoned flipper rentals will eventually change hands, to the detriment of many displaced renters.

Anonymous said...

Buyers must honor the flippers' contracts with renters, so they can't throw them up before their leases are up.

Anonymous said...

BUBBLEHEADS TAKE NOTE

If we have been gifted enough to see this crash coming, then lets not be stupid enough to buy until there is a clear bottom. Iknow many of us are licking our chops right now, with a shit eating grin. But wait until we see the true signs. Such signs will be so apparent we will not miss them. Remember patience is a virgin.

Anonymous said...

I agree there is a housing bubble, but the gloating poster's logic is a little twisted.

They are proud to be a renter for 5 years feeling bad about owners talking about their properties going up, and now will wait until the 2002 prices. Well, if they just bought in 2001, they could sell for today's prices.

I agree there is a bubble, but it could take 2-3 years or more to get back to 2002 prices, if we do. This means they are a renter for 8 years just to get even with the prices they could have bought for.

It really sounds to me like sour grapes from someone who either did not have a downpayment, regretting missing the boat, and using hindsight to say how smart they are.

I am not against renting when you are unsure of how long you will stay in an area, or type of house. I did this myself for a 5 year period. But if someone wants to own a house long term, it is hard to time the market. I am not denying though that now is a really bad time to buy in many area's.

novasold said...

The tension in this area regarding the real estate market is so thick you really could cut it with a knife.

I know a couple of veteran REAs who are ethical and have been in the business for years: no sales, at all for the past three months.

Someone on this blog said that the reporting on the bubble lags by a quarter to what is actually happening on the ground.

Next quarter's news should be really interesting.

I agree about the gloating. It's kind of scarey what I see happening in the future and in this area it could be very ugly.

Anonymous said...

Feeling smart about your decisions is better than feeding the desire for payback and gloating. Hubris is a bad thing, for bubble riders on the way up and happy renters on the way down.

I'm trying to be a better person and not succumb to schadenfreude when I am out of harms way.

http://www.answers.com/topic/schadenfreude

Anonymous said...

Just left a gun store, man it was busy in there! Lot more people in there then most open house I would guess. Not a gun nut, just buying some items for a gift.

Anonymous said...

Here's my situation... my parents lost everything during the late 80s run up, followed by a burst, and periods of joblessness. And realize, age discrimination was in effect during the early 90s for them which it probably wasn't for folks like you and me.

I'm renting because if periods of joblessness hits, it shouldn't effect me and that's what I'm looking at. My savings are there for this reason. The gloating or "I'm better than the bubble cultish ballyhoos" was fun for a few party gags but it wears thin. The truth is that this effects the whole economy and our respective careers which need a customer base (see consumer confidence/spending) to keep going.

Anonymous said...

FLIPPER TURNED RENTER

I Had my fun flipping, but now is not the time to buy.

BUYERS=SUCKERS

Natural Eyebrows said...

Anonymous said...

"Buyers must honor the flippers' contracts with renters, so they can't throw them up before their leases are up."

It depends what you mean by "buyers." The lease is subordinate to the mortgage. The lease is wiped out in a foreclosure sale. There are exceptions to this rule, but they won't pertain to 99.999% of house foreclosures.

Disgorge! said...

Great WSJ article on Saturday:

Inflated Appraisals May Cause Headaches
A housing slowdown is forcing Americans to confront inflated home-appraisal values that went unquestioned during the boom.

Anonymous said...

Here's my situation. I live in a very bubblu-licious city , Riverside, CA. Idiots are still snapping up houses for way more their worth. A neighbor just sold his. I have about 200k equity. Since these a-holes are still buying, I know I can unload my home on one of them. If I do I can pay off all my debt (car and student loans) and still walk away with about 150k. Rent until the bottom drops out. Good Idea? Remember, I already this is a home I bought at a pre-bubble price with an interest rate below 6. I would be giving that up. BUT I see this as a once in a life time opp to walk away with this kind of cash! @ cents appreciated.

Anonymous said...

Quote: "If I do I can pay off all my debt (car and student loans) and still walk away with about 150k."

Dont hesitate. Sell and pay of these debts. By that your transfer your spending power from "forced upon expenses" to "volontary expenses", in order to get economic flexibility and reaction-time. And that cannot possibly be bad new options in these uncertain times.

Anonymous said...

I left NOVA in 2002 as the bubble was just begining. A friend has been flipping and has all his savings tied up in two house out there for about 675K each. he has them both on the market now b/c he wants to sell and take a job in the midwest. Only problem now is the houses are not moving. Someone made one offer on one but for 25K less than he is asking price. He refused. I told him, take it and run otherwise you will be here forever. He thinks I am an idiot but then again I thought he was an idiot for putting all his investment money in one place. If you were in his place what would you do? Even though the bubble has popped he remains as arrogant today as he was while he was flipping.

Anonymous said...

He has not learned yet, when it goes down another 75K, he will be pissing his pants.

autofx in Phx said...

That said, we should start putting a lid on the gloating, because this shitstorm is going to cause a lot of pain, and not just to flippers.
~
This is true. When people start getting smug, they start getting overconfident, and then a few years later it's them who have made some monumental financial error.

autofx in Phx said...

I know I can unload my home on one of them. If I do I can pay off all my debt (car and student loans) and still walk away with about 150k. Rent until the bottom drops out. Good Idea?

Yes, I think so. If you can afford to price your home to sell (no HUGE discount, but whatever it takes to sell it in a reasonable amount of time), and walk away with a good profit, you bet it's a good idea to do so and then rent until all of this shakes out. It could end up being the single best financial move you ever make.

Anonymous said...

>I know I can unload my home...and still walk away with about 150k. Rent until the bottom drops out. Good Idea?

There are other aspects to consider, such as tax exemptions. Some areas cap property tax increases for primary residences. If you sell and buy again in the same neighborhood, your taxes go up based on the sale price.

stardust

Anonymous said...

"If you sell and buy again in the same neighborhood, your taxes go up based on the sale price."

I think you are assuming I would soon buy back in. Not in my plans. I plan to rent for at least 2-3 years. WHen prices fall about 30-40% then I buy back in with a huge downpayment and debt free. By then property taxes should be about the same. Rates may be higher but I would also have a low mortgage lown. Did I mention being debt free? I love the thought.

Anonymous said...

Another Q in that transcript shows local intelligence:
"Woodbridge Va.: As the BRAC process moves forward and more defense jobs move from Crystal City to Dale City, do you see an opportunity for me to sell high in Woodbridge and buy low in Alexandria?"

Yes! I want to sell cheap in ultra desirable Alexandria and buy HIGH in off-the-grid Woodbridge!

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