November 24, 2006

Idiot Phoenix realtor says housing was not a bubble because it'll only drop 10%

I say wrong-o! Why? One word: Leverage.

People were out buying houses with infinite leverage. This was much different from stocks.

If you have no savings, and went out and bought a $500,000 apartment in Phoenix with $0 down, and it drops 20%, you're out $100,000 plus the fees and carrying costs. In other words, one mistake (listening to an idiot realtor) and poof, you're bankrupt.

Now if you took out an advance on your credit card and bought pets.com for $10,000 and it dropped 100%, you lost $10,000. There's no way you'd have gotten access to $100,000 or $500,000 to buy pets.com stock (thank god!).

And that's why this bubble and its resulting crash will be the biggest in recorded human history.

Here's the dolt's quote. Also note he has a BUY rating on Phoenix real estate right now. Feel free to respond to that lunacy here.

What is a "bubble"

When a technology stock loses 90%, 95% or even 100% of it's value that's a bubble, a bursting bubble.

When a housing market loses 5% or 10% of it's value, that is not a bubble.

15 comments:

Anonymous said...

Real estate and stock - Its a 0 sum game. Someone gains, someone else loses, and the agents make out like bandits with the 6% commission.
The standard agent schpeel is - "Real estate is not like stock" it has intrinsic value - Yea it does, except when it doesn't. The run down POS'es in over saturated markets, worthless cos they cant be sold for what they cost and the bank wont take to being shorted, its costing interest (people usually dont buy stock with borrowed money BTW) maintenance, property taxes and utilities to name just a couple. Real estate isn't like stock, its much much much worse. It does have intrinsic value if you're living in it, but if its sitting its costing $$$ - a lot more than stock is. Relatively ... stock is a safer bet, options is a even better bet if you know what you're doing. Yes you can lose your shirt in stock, but ironically that limits what you can lose. You can lose your shirt, plus your whole future with houses.
And the kicker is ... here is why we dont have cheerleaders for stock (as much as for RE) - the transaction costs for a individual investor is pitifully low. $10 per trade or under. RE is outrageous. 6% - daylight robbery. Real estate isn't like stock, its actually much much worse.
Cool.
Cow_tipping.

Paul E. Math said...

That realtors concept of a bubble is typical. So many people have no idea of the magnitude of house price maladjustments. They continue to believe that house prices are only slightly out of line and that a 'correction' of a few percent will be like hitting the reset button and we can all go back to our double-digit yearly gains.

I look forward to the day when the cold, hard reality of the situation can no longer be denied.

REM said...

ONLY 10%!!!!!! Wake the F%ck up! Only 10%.....if that is the best that you can do, you are either stupid or lazy. The sad part is, you're probably both. Let's think about this for a second. Anywhere between 30-50% of all new loans are ARM's with 0 down. Now if people buying homes had the 10% to put down so that they could either:
1) Get a better intrest rate (points)
2) Bargain down the full price of the house itself
don't you think they would have????? The FACT is that many homedebtors DONT have the 10-20% for a down payment. So let's see.....if I don't have the 10% to put down on a $300K 2000sq/ft house in PHX.....THAN LOSING 30K ON MY INVESTMENT PUTS ME IN ALOT OF DEBT!!!! Only 10%.....idiot.....I agree with the other poster.....show me the properties that you are in the process of "buying" and then we will talk......but only at 3%.....hahahahahaha

Anonymous said...

Houses are already down more than 10% so they need to try again

BubbleShanker said...

Real Simple

Houses, no buyer, you sit on unwanted payments for months or years, job transfer? Divorce? Rising payments?
Rising taxes? Tough crap, you eat it, you bought the debt, crap, tax box.

Stocks, always a buyer, called a specialist, required by law to buy your security, in 1987 specialists had to keep buying, even when there were no buy orders, it's the law. However if you are stupid, you could watch your stock go to zero.

The market has been interesting, not following economic fundamentals, when the time is right I will sell and buy PSQ, DOG, QID, and Bearx, and help smash the crap out of this market, the US companies deserve it for outsourcing our jobs and paying idiot CEO's millions of dollars.

Anonymous said...

-Anywhere between 30-50% of all new loans are ARM's with 0 down.-


Can anymore provide a link which verifies the above? Or is speculation based on antidotal evidence?

uknowwhoiyam said...

Real Simple
Houses, no buyer,
...
Stocks, always a buyer, called a specialist, required by law to buy your security
...


Pure twaddle! Either you don't understand markets or you're trolling.

There's always a buyer for stocks ... AT THE MARKET PRICE.

The same is true for homes. Don't believe me, price that $400K home at $200K and you'll be beating them off with sticks.

Arguing that there is always a buyer for stocks but not for homes is fallacious.

Anonymous said...

"Stocks, always a buyer, called a specialist, required by law to buy your security, in 1987 specialists had to keep buying, even when there were no buy orders, it's the law."

What horse$hit. Prove it. You're a freaking idiot.

"Required by law to buy your security"

Jeepers man, if you're going to lie through your teeth, at least make it somewhat believable!!

real estate 101 said...

Again with the blame the realtor bit. 99% of people who sell real estate have little or no knowledge of real estate as an investment.

99.9% of flippers have 0 knowledge of real estate investments.

That equals two dumbasses doing business. Don't blame the realtor for "taking an order" from an idiot buyer that should know better. Real estate investing is all about finding the deal. There havent' been many deals in the last 2 years. Too many fools out there paying too much.

Anonymous said...

Stocks have a market maker. In a sense he is required to buy - make a market - whether its a person wanting to buy or someone wanting to sell, and its insanely regulated, he has to be within certain parameters and he has to buy and retain price integrity in lots of 1000 lets say and cannot drop or raise the price at random. Say he publishes 10 bucks and he'll run lots of 1000. Someone drops in 100,000 he gets to control the first 1000, fill that order, adjust his price, fill the next 1000 and so on. You send in a 100,000 order with a fill or kill and he's empowered to drop the price more (just an example and I worked options not equity several years ago, so no hate mail).
So He has the corpus to control the pricing over a short period of time after which it expires. So stocks always have someone wanting to buy - Like monopoly where the bank is required to buy or give your $$ on the crap you're mortgaging - kinda like now ... Stocks are saleable at market price, yes, and houses aren't. Stock sales are in seconds, transaction times in houses are months. Which itself is a great way to back yourself into a corner IMHO. If you can let that $$$ sit idle for months or years ... you're good with RE, and heck you're good with stock as well.
Cool.
Cow_tipping

Anonymous said...

$500k in Pets.com can go to $0, where you borrowed up to $250k on margin. If you can't write a check for $250k to the brokerage, you declare bankruptcy when the margin call comes in. In reality, the brokerage won't let you hold the stock until it hits $0 - they'll call you for more collateral on the way down. If you can't come up with another asset, they'll sell all the shares and pay themselves back.

If you borrow $500k for a home with $0 down, it's a different story. Regardless of the prevailing price you can continue to make the payments and live in it. A house can never go to $0, like pets.com. However, HP's reasonable worst case seems to be that they could slide back to $250,000. If a significant number of people (perhaps greater than 5% of homeowners) chose bankruptcy (the equivalent of financial leoprosy in America) over sticking out their 30 year commitment, Congress would need to intervene and bail out the banks or make the bankruptcy penalties stiffer and longer than 7 years.

Maybe recent and future buyers need to accept the new "norm": housing now an expense like a car rather than an investment or a cash cow. If it's still worth what you paid for it at the end of the loan, be thankful. If it's worth what you paid in interest and principal, then you made out (don't hold your breath).

Anonymous said...

Good point, anon. Can banks do margin calls on homes and condos? I'm not sure how mortgage contracts are written? Can they take back the house at any time?

Todd Tarson said...

>>Maybe recent and future buyers need to accept the new "norm": housing now an expense like a car rather than an investment or a cash cow. If it's still worth what you paid for it at the end of the loan, be thankful. If it's worth what you paid in interest and principal, then you made out (don't hold your breath).

I'm sorry, but this has always been the case or the norm for owner occupied residents. I've never put my home on the 'asset' side of the balance sheet... it never has belonged there.

Who framed this otherwise?? The REIC?? Nope. To think so is simply wrong.

Hell, even the beloved Keith used his famous condo in Phoenix as an 'asset' for his reason to sell... it wasn't some realtor that put that thought in his head... so it is the same for the masses. Keith wanted to make money on his sale (the same thing he accuses the REIC of), so is he a hypocrite??

I realize that an owner occupied can look like an 'asset' when all is done and said. After time has passed and a buyer comes along to offer the owner more than the owner paid for the home... the owner can put proceeds of the sale into his checking or savings account (or roll the proceeds into a different dwelling), whatever. There are also tax advantages to owning a home and paying interest on a loan.

But all that is not a reason to buy a home alone. It should never be the sole reason to become a home owner... it is merely a side affect... if one is so lucky (like Keith).

See, IMO, Keith has a warped sense of reality. He seems to think that if an owner can't make 6 figures on a home then there is simply zero reasons to own a home. Home ownership is much more than that.

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