January 26, 2007

HousingPANIC Stupid Question of the Day


Doesn't it kinda suck that home prices are going to plummet for years and years to come, so anyone who wants to buy now can't, unless they want to commit financial suicide?

Damn, I just want this housing crash over with already. But alas, look to Japan, this sucker is going to take quite some time. Quite some time.

What do you think - 2012 by the time we see bottom?

56 comments:

Mort said...

2007-2008 should be fun for spectators, not so much for the stuck speculators though... I expect one crisis after another starting about...

Butch said...

Hmmmm, let's see who might be affected by the continuing housing bust over the next five years or so:

1. Ten million homedebting sheeple, who will be displaced from the Mc Mansion on which they can't make the payments

2. The mortgage servicers, who won't be collecting the payments on said McMansions, and will have to lay off workers

3. The bagholders of the multiple trillion dollars of MBS, who won't be gettng the payments they thought were safe (and this list includes banks, mutual funds, money market funds and pension funds!!!)

4. The banks, who will see roughly one trillion dollars (of the three trillion dollars held) in their real estate portfolio

5. Fannie and Freddie, who (while ALREADY technically insolvent) will take about a trillion dollar hit to their portfolios of mortgages held, PLUS the multiple trillion dollars of guarantees they will owe to the afore-mentioned MBS bagholders

6. The REIC, including real estate clerks, their shyster mortgage broker bosses, the title companies, private mortgage insurers, construction industry, furniture industry, home improvement stores, and retailers in general as the home-ATM is shut down

7. The entire U.S economy as the housing bust pulls down all other sectors

8. The U.S. Federal Reserve and federal government, as they try every desperate measure to stave off the ensuing economic nightmare by dropping Fed funds rates (killing the dollar) creating "RTC II The Sequel" and absorbing ten million homes dumped back on the market and pushing through emergency legislation (such as "The Homeland Security-Anti Terrorist Sheeple Bailout Act of 2009) to penalize the taxpayer to pay for mopping up the mess.

And the above is the BEST scenario I can envision...

Anonymous said...

You are right on,Japan's deflation is going on its 17th year.There stock market went from 40,000 to 4500 in a year and a half in 1990 to 1992.We will face close to the same thing.Stay out of debt and get out of all stocks.NOW!!!!!!!!

Anonymous said...

Please all you good people,study and read all you can on the word DEFLATION.Inflation is much easier to understand,deflation is the other side of the coin.Prepare ahead and make your life much eaiser.

Dragasoni said...

I'm hoping for a bottom in 2009, but I don't think it will come that quickly. It might take as long as 2019, if we get into a deflation scenario like Japan.

In your honest opinion, Keith, when do you think we'll hit rock bottom?

-Dragasoni-

Anonymous said...

Won't take that long (IMHO) since Americans will more readilly default on contract agreements than the Japanese and because builders here will continue to go balls to the wall building and discounting and building and discounting undermining the values of existing housing stock. If the declines continue (no one here has a crystal ball and can say for sure that they will continue to decline) the discounts will become more and more dramatic on the new house side thus driving down the price of exisiting stock or inventory. Think about the 10 cylinder Ford Excursion as an example. When they first came out, people borrowed enormous sums to drive those behemoths and Ford continued to build them in spite of increasing gasoline prices. Prices flattened as sales declined and then dealers gave sharp discounts to move new inventory off the lot. Existing Excursion prices came under heavy fire and collapsed. They were still worth money (it is a well made SUV with tons of power) but no where close to what they were expected to be worth long term. The last used one I dealt with selling was 5 years old, mint condition and had 53xxx miles on it (nothing for a well cared for 10 cylinder - that's just broken in) and I couldn't get any consumer bids on it. I finally wholesaled it to a dealer for the sum of $9,000 - I damned near bought it for myself since I only live a few miles from where I work, I can afford to drive just about whatever I want. Anyway, think of this as an example and the unravelling of the "value" came about in five short years.

Anonymous said...

Your an idiot Keith, that's why you'll never be wealthy, hide while everybody else makes the money, theirs always opportunity's out their in housing, I don't give a damn where you live, you just need to be smart enough to figure out how to make it work. I guarantee your not and unwilling to take any risk in your life. The real winners in wealth take calculated risks and they know how to find the deals because their always looking, not hiding and waiting for the right time to buy. FYI Your fear is costing you money everyday.

Anonymous said...

I noticed that the article stated that the Japanese foreclosure rate was very low, and that the drying up of money to LOAN TO BUSINESS was the main culprit in Japan. The Japanese have that honor thing about fulfilling an obligation (you know, paying your debt)


Unfortunately not here in the U.S. of A. baby!

Spoiled Americans will walk away in droves. The sound of the jingle mail will drown out Big Ben.

I like the way even this article drops in the good old "of course, it will be different here" (in the U.S.)

Its never different, it's always the same

The Thinker said...

Anon makes a good point, there are always opportunities for turning a profit, even in a down market, however, it is just that much harder, more risky, and less up-side potential. If Anon wants to buy some real estate investment let him go ahead, but the smart money is long gone from that sector, even Honest Dave will tell you that.

Mark in San Diego said...

Boomers financing retirement with equity - - -

I was at a Coronado CA coffee shop yesterday and overheard some 60 something seniors talking about selling their houses to buy a cheaper retirement home - conversation went like this. . ."We just can't make it on pension and social security, we are going to sell our million dollar house (in Coronado, a shack is one million) and buy a retirment home inland for 350K . . .this will give us plenty of money for retirement and travel."

The problem - when all those boomers with no retirement savings start doing the same thing. . .there goes the housing market for another 10 years. . .I hear this over and over again. . ."cash in the equity to fund retirement." . . .of course there may be NO equity in 5 years.

Detachable Cletus said...

Keith, please check into Casey's ongoing travails.

He is a special kind of stupid.

devestment said...

The bottom will hit when people are terrified of real estate as an investment. This will happen after trillions of dollars are extracted from paper wealth in real estate and all those fancy home gadgets are for sale on eBay at pennies on the dollar.

Anonymous said...

Based on the skewed nature of the housing graphs and the fact that baby boomers will begin retiring in 2009 (and selling their homes), we are not going to see a bottom in housing until AT LEAST 2012. Perhaps even longer.

Anonymous said...

By the way, anybody notice that Casey Serin's blog site seems to have been de-activated. (It says 'suspended' when attempting to access it)

The last thing I read there was Casey having a temper tantrum over being taken for a ride by some bitches who bought the rights to his story. Was quite funny. :-)

Anonymous said...

Japan didn't allow the banks to fail after it was discovered that they had made bad loans to the mafia and were technically insolvent.

Who knows, maybe their way was better. They went into a long, slow recession, but people kept their jobs.

If you want pointers for this crash, look at the S&L debacle. Major failures, and then gov't bailout. That's the American way of dealing with it. (Just like the bailout of US Airways after 9/11, etc.)

marinite said...

What do you think - 2012 by the time we see bottom?

Isn't 2012 when the Inca or whoever said the world was going to end? Oooo

Anonymous said...

."We just can't make it on pension and social security, we are going to sell our million dollar house (in Coronado, a shack is one million) and buy a retirment home inland for 350K . . .this will give us plenty of money for retirement and travel."
--------------

As usuall the Boomers live in a bubble. No clue that *they* are the reason for all the problems. They just figure they can dump on the next Gen.

Anonymous said...

Can you buy property in Japan? What would the int rate be like?

nofiresaleyet said...

Yep, it seems that realtors are are telling sellers to hold the rip-off prices forever:

S. Florida home sales lowest in years, but prices up

http://www.miami.com/mld/miamiherald/16548641.htm

Mark in San Diego said...

Former Fed official out of touch. .

Has anyone else noticed that "officials" are always months behind in reality - they look at December and think things are great. . .if they would read blogs or look at current statistics, they would not be saying the same things. . .and these are supposed to be smart people. . .here is a quote from DowJones Marketwatch from a former Fed Gov. . .

"Gramley: "I don't think the drag from housing is over yet. I think we're getting closer to the bottom. Sales have basically been going sideways for five months. Inventories are no longer rising. Applications for loans to purchase houses are going back up again now. And I think the most important conclusion to draw from that is that concerns that home prices would fall out of bed have largely been alleviated."


COMMENT - loan applications are
DOWN in the most recent week because fixed rates are up up up. . .Inventory which WAS down in December is soaring again in Las Vegas, Phoenix, San Diego, Riverside CO, etc. . .people simply pulled their houses off the market for Christmas. . .AND inventory is in many cases 40% above January of last year - Where DO these people get their information???

Mark in San Diego said...

Inventory comparisons. . .

Last January Phoenix had 32,000 MLS listings . . .currently Phoenix 52,000 MLS listings. . .and some officals think this means inventory is down????? (see ziprealty.com)

Anonymous said...

Children, way back when in the 1960's, teens simply opted out of The System. So, there's at least one way to avoid letting the Baby Boomers (who were themselves some of those affluent dropouts) "dump on the next generation".
In any case, many of the ideas from that time of living a little more in tune with nature are looking more inevitable. The System is not sustainable, so why claw to be a part of it. Disclaimer - I'm one of those "on the cusp" boomers - I was only a kid, so don't blame moi. Not only is there an out, but it just might prove to be an Easy Rider-style adventure. First Life 1.0, groovy kids! Flower Power!

strat3go said...

Don't forget that boomers will be cashing in on stocks also, which will be another mess.

strat3go said...

Talking about politicians, it seems that no one is paying attention to the fact that if the millions of illegal immigrants who work on construction get their amnesty, right when the housing boom is the crapper, there will be an enormous pressure on social welfare. And we, the taxpayer, will pick up the tab for all those welfare checks, unemployment benefits, etc. Since illegals are not very good in family planning, all that free time will translate into millions of babies for us to take care of.

Anonymous said...

It really sucks to know this will be a low grade slide.
I have a family with 3 kids.
Can't afford a home here in California now, and financially, it'd be retarded to try to buy one via these ARM or IO loans.
It would be the only way for me to get "in the club" of home "ownership".

I'm essentially relegated to renting or buying a shitbox condo for $450K or more. What a joke.

tlhouse said...

I bought the house I live in (in Kobe Japan) for $20,000 US about four years ago. It has been a long and slow decline in Japan.

Anonymous said...

"Your an idiot Keith, that's why you'll never be wealthy, hide while everybody else makes the money, blah blah blah [misspelled rant]"

Hilarious, another Mickey D's night manager just discovered "Rich Dad, Poor Dad" for the first time.

Anonymous said...

Have you guys seen this article
http://news.com.com/2061-11204_3-6153114.html

This is going to kill prices of houses

Anonymous said...

"Your an idiot Keith, that's why you'll never be wealthy, hide while everybody else makes the money, theirs always opportunity's out their in housing, I don't give a damn where you live, you just need to be smart enough to figure out how to make it work. I guarantee your not and unwilling to take any risk in your life. The real winners in wealth take calculated risks and they know how to find the deals because their always looking, not hiding and waiting for the right time to buy. FYI Your fear is costing you money everyday."

Fortune favors the bold.

Let us know how it turns out Alexander the Great

Anonymous said...

"We just can't make it on pension and social security, we are going to sell our million dollar house (in Coronado, a shack is one million) and buy a retirment home inland for 350K . . .this will give us plenty of money for retirement and travel."
--------------

As usuall the Boomers live in a bubble. No clue that *they* are the reason for all the problems. They just figure they can dump on the next Gen.

Their parents were the Greatest Generation??? My ass.

Anonymous said...

>> Isn't 2012 when the Inca or whoever said the world was going to end?

Jesus H. Christ - read the fucking Good Book - the world will NEVER end! However, it doesn't say anything about the world economy going down in a death spiral...

Anonymous said...

Look, the main reason speculators end up loosing is because they attempt to time the cycles, it is impossible to predict the exact peak or bottom of a cycle, what is clear is that this past RE cycle peaked at the end of 05, was flat in 06, and is beginning its downturn, no one knows how steep this year will be, it may have a sharp slide, or a more gradual multi year one. either way the few people still buying are people who don’t have the discipline to wait yet another year (and will fall by the argument that prices are coming down and its finally a good time to buy)
1) there will be much sweeter times to buy in the near future (1 or 2 years)
2) the basic fundamentals still remain
a) for your own home -> 'mortgage, RE taxes, and homeowners insurance should add up to no more than 30% of your gross income’.
b) investment/ income properties- > should have more monthly rent money coming in, then monthly expenses..

the rest of the numbers/ hoopla doesn’t really matter..

so the best way to figure when we the bottom is, is when 30% of the average persons income in your area = the cost of mortgage, RE taxes, and homeowners insurance.

If the average person earns $40K year / 12 (months) = $3,333.33 / 30% = $1,111.111..

if this persons monthly Mortgage and escrow is more than $1,100.00
You’ll be buying his house for cheap within the next 2 years

$150K home – 20% down payment = $130K
$130K at 6% 30 year fixed = $779.42 + $500 (taxes and Insurance) = $1,279.42

This means that the average house in the US should cost approx. $150K
I believe average us income is approx $40K (not 100% sure though, can someone please verify)

There ya go..

sinis said...

Anyone care to respond to this fuctard?

http://www.barbaralasky.com/tucson-real-estate-blog/tucson-real-estate-news/tucson-housing-bust/

Richard said...

bwahahaha - 2012???!!!!!!

you heard it here first

GREAT GLOBAL DEPRESSION OF 2012!!!

Anonymous said...

Yes, you can buy real estate in Japan, but your talking about top 5 most expensive real estate on the planet.

You'll get a great interest rate going through a japanese bank, but you better have massive deep pockets if your looking to buy anything in any of the major cities. Even after a 10 year recession, the prices of real estate on that island are mindblowing.

Anonymous said...

nofiresaleyet said...
Yep, it seems that realtors are are telling sellers to hold the rip-off prices forever:

S. Florida home sales lowest in years, but prices up

-----

Same here in Seattle. Supply v.s. demand has been thrown right out the window. Home sales are sucking, inventory is building, but prices keep going up.

Anonymous said...

There shouldn't be trillions of dollars in losses. After all, if a trillion worth of mortgages are foreclosed on, the properties still have value, so the loss will be a few hundred billions at most, probably a mere couple of hundred. The Fed can crank out that little bit in a few seconds. Also, the Fed may be getting ready to drop that money from helicoptors that has been treatened...M3, the most important money statistic is no longer being published by the Fed and some experts estimate it has increased almost a trillion dollars since last March when it was last published. The Fed may drop this on the banks so they can refinance some of those loans and avoid many foreclosures. This will devalue the dollar, of course, but we're used to that. Of course, dropping money on existing mortgages won't keep house prices up too long, as few can afford to purchase housing at the price it's at. But it would keep some houses out of foreclosure and reduce the supply somewhat from what it would naturally be.

Anonymous said...

Anonymous said...
Have you guys seen this article
http://news.com.com/2061-11204_3-6153114.html

This is going to kill prices of houses

Friday, January 26, 2007 8:09:49 PM



AAAAAAAA HAHAHHAHAAHHAHAA

YA ok

Anonymous said...

This means that the average house in the US should cost approx. $150K
--------

Again: AAAA HAHAHAHAHAH

ya right.

Anonymous said...

Keith

And the Mayan calendar ends in 2012?

Anonymous said...

I'm paying $680,000 for a 2/2 in East LA. I will sell it for a cool mil next year. Who needs to work when you can sell houses?

Anonymous said...

Anonymous said...
>> Isn't 2012 when the Inca or whoever said the world was going to end?

I read an article where the ancient Sumerians, the oldest known civilization found to date, 6000 years ago had one more additional planet observed in the solar system than the 9 we do today.6000 years ago, and we didn't re-discover the earth wasn’t the center of the solar system till the 1400's. Kinda makes you wonder what we have forgotten down thru history

Anyway, according to translations of Sumerian records, this rogue planet, I forget the name, had an elliptical orbit like a comet, which brought it close to the sun, then shot it far out into space, completing one orbit every 3600 years, give or take.

The author did some calculations based on ancient Sumerian calendars, and came up with the year 2012 as the next closest year to possibly expect this planet to come in close contact with the other 9.

According to Sumerian texts, which covered several 3600-year returns, the proximity of this apparently large planet caused violent weather fluctuations, earthquakes, and typical Armageddon scenarios. The author didn't bring up the Aztec end of world at 2012 thing at all in his article.

Just coincidence, kinda makes you wonder.

Or maybe the author just mistranslated the ancient sports page. You know, Alexandria 8, Mesopotamia 5. Thebes beat Carthage 5-0 to go to the playoffs?

BuyBonds said...

I think nominal prices should have bottomed out (and just started to rise) by 2012.
Nominal prices will have recovered to thier 2005 highs by 2015 or 2016.
Real prices will have recovered by 2021. That should be a new peak.
Then, it could happen again.

belchorama said...

If it takes 10 years, so what! As a member of the potential-first-homebuyer demographic, I have to say that I've come around. Since it doesn't make financial sense, I've given it enough thought to realize I don't give a rat's ass whether I own or rent. In fact, I rather like not doing yardwork, and not being on the hook for 10k when the roof needs repair. I much prefer taking the net money I'm not burning on carrying costs and investing it. I may just rent my whole life, and work until I capitalize my cost of existence in the form of liquid investments, rather than in the illiquid American dream stucco box in somewhere like Phoenix. Let the Caseys have the RE! They'll get what they deserve.

Anonymous said...

Ok, my link got screwed up. Anyway check out what this douche is telling people (link is long so you'll have to cut and paste):

http://www.barbaralasky.com/
tucson-real-estate-blog/
tucson-real-estate-news/
tucson-housing-bust/

FlyingMonkeyWarrior said...

Isn't 2012 when the Inca or whoever said the world was going to end? Oooo
))))))))))))
The Mayan Calander ends in 2012

a.creampuff said...

Here, I tiny-url'd it for ya, Buddy:

http://tinyurl.com/yvqa84

What a hoot - he's extrapolating a nosedive into a plateau. Could happen, but what if it continues to nosedive? How does his plateau relate to the fundamentals? Too much!

foxwoodlief said...

Read the article, you'll see that we are not were near the absurdity as the bubble in Japan. Aren't most of the readers here getting a little tired of Keith's hype?

Just returned from Phoenix, the so called ground zero of our bubble. Assesment, not as bad as everyone thinks. Some areas seeing adjustments but no bargains. Those who bought prior to 2005 are still not in a "negative" position. Those who want to rent can find some bargains but in Central Phoenix you still pay on average at least $1 a sq ft so no bargain.

I'm still annoyed my wife is returning to her position there and I decided to rent a 1200 sq ft 2/1 in central Phoenix while we get settled and reassess the market there and am paying $1245 a month plus utilities. Hard to swallow when my semi-custom 3250 sq ft home on a 1/2 acre with every bell and whistle costs me $1650 a month here in Austin, or .50 cents a sq ft to own vs $1 to rent and doesn't even begin to compare quality differences!

Still, the money is very good there for both of us and for our professional fields better there than Austin. Austin is still a small town and limited professional openings (and people don't leave their jobs) but plenty of working class jobs here and growing.

The market there seems to be picking up. Met lots of people who just bought new homes because of the incentives. Also saw lots of "SOLD" signs and not as many "For sale" signs. Still I did see (while looking to rent) lots of negotiating room to rent, but only on condo-conversions or some homes but not the regular apartment market where almost all the places had 96% or higher occupancy rates and few to no incentives and charged at least a dollar per sq ft for a crappy quality apartment in central Phoenix.

If you asked the question, "Are you better off today renting than having bought four years ago." in Phoenix I'd have to confirm the answer would be NO.

Still waiting!

Anonymous said...

foxwoodlief said...
Read the article, you'll see that we are not were near the absurdity as the bubble in Japan. Aren't most of the readers here getting a little tired of Keith's hype?
-----------------------------------
so you think its 'diferent' here ?
ok .. lets see..
proprties in Japan went up 100% in a short period of 4 years. 'absurd'.
look up any home on zillow.com and compare price from 2001 to 2005. 'absurd'.
guess its not really different.

foxwoodlief said...
I'm still annoyed my wife is returning to her position there and I decided to rent a 1200 sq ft 2/1 in central Phoenix while we get settled and reassess the market there and am paying $1245 a month plus utilities. Hard to swallow when my semi-custom 3250 sq ft home on a 1/2 acre with every bell and whistle costs me $1650 a month here in Austin, or .50 cents a sq ft to own vs $1 to rent and doesn't even begin to compare quality differences!
----------------------------------

lets do a real cost compare
for $1,245 month plus all utilities (assuming utilities not included)
you’re just about done with housing expenses.
No Tax , No Insurance, No maintenance cost. (all the landlords problem, approx savings = $700 –$800 month)
And with almost 3 times the size house, heating and cooling / energy costs must be a
third the cost in this comfortable 1200 sq ft. apt..
what about cleaning? How many hours of labor do you save by cleaning a 1200 sq ft. apt vs. a 3250 sq ft home? Or do you pay for a maid?
who manicures that ½ acre lawn ?..

I’m a home owner and agree that owning is generally a better financial decision then renting, however between the years of 2001 and today renting made more sense.
Do the math !

Anonymous said...

"between the years of 2001 and today renting made more sense"

In a lot of bubble towns, which now include the northeast corridor, Cali, Phoenix, Chicago, Florida (a.k.a. half the nation's population), many new homeowners (post '01) are a few months (typically <4) from foreclosure with a single layoff whereas the prudent renter is years from living on the street and given the difficulties of eviction in a lot of states, via local housing authorities, it's probably easy to get away w/o paying for one's final three months anyways.

foxwoodlief said...

Thanks annonymous, I have done the math. I do recognize that the guy I'm renting from has to be losing money. The house was on the market for $385,000, he bought it in 12/06 for $360,000 (I checked the records). Apparently he thought he got a good buy with a mere $15,000 discount. Now he is renting it to me for $1245 a month. Not sure how he makes those numbers work. I personally think he overpaid by $100,000 for the house on the low end. The house sold in 1999 for $100,000 and in 2002 for $155,000 and in 12/06 for $360,000...oh, which means homes are STILL selling in Phoenix!

My point was I owned four homes in Phoenix and my mortgage payments never were $1245 a month so I should have kept them, not sold them, cause now I rent and pay more. Sure, it is still better at the moment to rent that house than to buy. I'd rather pay 10% of my income in rent than pay 20% and feel like I overpaid for a house. I'm sure if you've tracked my posts I've never paid more than 20% of my income for a house (until now, in Austin, and that is only because we took a year off so have no income so I guess you can say we are paying a very high percentage technically).

Also, the point in Japan is that today, not at the height of their bubble, the average home is $360,000. I'm sorry but that is for a small house, maybe 600 sq ft. Even in Phoenix right now you can get, depending on location of course, a 1200-3200 sq ft house for that price and that is at our current bubble levels. How can you say that you can compare Japan, japanese homes, with our current homes and bubble. There are similarities but they are not the same. That isn't to deny I think PE ratios to own vs rent are not out of whack.

And I do like smaller homes. The only reason I bought my large house in Austin was value. If I was going to pay the price here, why would I buy a 1200 sq ft house for the same price as my high-end home that is almost three times the size? Now if it were a matter of driving an hour into the city I can see the benefit (gas savings, time savings, lifestyle) but since I live in SW central Austin, it made no sense.

All my friends in Phoenix think I should buy. I told them I won't buy a falling knife. Until I know where the market is going, when it is near the bottom, and that the house I buy is near the historical mean per sq ft, I'll rent. I'm just not happy moving back and paying more to rent. At least I sold and have the cash and will wait it out.

I told my wife I'd rather live low for now (renting at 10% of our income) and own a home somewhere else for retirment and tax purposes than overpay for a Phoenix home. It just seems the market is still all over the map everywhere. Bargains, no bargains, low rent costs vs buying, high cost of renting and going up, homes sitting for a long time, others selling quickly or for 98% of list. On and on.

I was discouraged going back to Phoenix and not seeing the implosion so many here think is going on. Maybe later this year....but I've been waiting for three years now! I was a true believer, that is why I sold, but now I wonder if I should have just kept my properties and rented them out with the way rents are going up as I'd be making a good residual income from those houses and someone else would be paying them off! Of course now isn't the time to buy to try and be a landlord. I just see that I was wrong in timing and not sure I'll see the prices return to 2000 levels or even find great prices to snap up and rent out.

Anonymous said...

You guys are fools. Japanese are just as likely to default on debt as Americans... only there is a twist to the Japan story you rarely hear about from the news articles.

In the USA, there are predatory lenders that sucker you into taking high interest debt to "consolidate" your loans, then harrass you with phone calls to pay up.

In Japan, there is the same thing, except when you get to the bottom level of these companies, they are owned by Yakuza and other gangsters. What happens is that you go through a few cycles of these lenders, and eventually, you get a Yakuza company lender who offers you loans.

The person who is usually at the end of his rope will take these loans, and then is expected to make payment. The person pays every last dollar he has, and sometimes signs over his business to the lender. If you are slow in making payments, you get a visit from a flashy dressed guy. If you went into the deal ignorant, this meeting opens your eyes to who owns your loan.

My father got into this situation 10 years ago. He had to go explain to the boss why he could not make payment on time. A deal was worked out where his debt was significantly reduced. The boss respected the fact that my father was honest about the situation, and did not try to hide.

But my father went into the meeting expecting a beating or worse.

Anonymous said...

foxwoodlief said...
Thanks annonymous, I have done the math. I do recognize that the guy I'm renting from has to be losing money. The house was on the market for $385,000, he bought it in 12/06 for $360,000 (I checked the records). Apparently he thought he got a good buy with a mere $15,000 discount. Now he is renting it to me for $1245 a month. Not sure how he makes those numbers work. I personally think he overpaid by $100,000 for the house on the low end. The house sold in 1999 for $100,000 and in 2002 for $155,000 and in 12/06 for $360,000...oh, which means homes are STILL selling in Phoenix!

Thank you for pointing out the real problem.
What could have possibly caused the value of this house to go from $100k in ’99 to $360K in 06 ?
Has our population gone up 300% since ‘99?
Have our incomes gone up 300%
Have mortgage rates gone down 300%
Was there some natural disaster that destroyed millions of homes across the country hence increasing demand for the remaining homes ?
No.
The answer is that during the .com boom many young people got good paying jobs and qualified to buy a home that drove up the price between ’99 and 2001.
After 9/11 housing prices should have leveled out, cause not only did the good paying IT job market die out but Global outsourcing began in full swing.
Therefore, the only reason for this continued price escalation was simple human herd mentality, yup just like the Pac Man craze or the Rubix Cube craze etc.
The only math folks did was = I can always sell for a higher price, even if RE goes back to its normal levels of about 5% annual appreciation, I’ll still be OK.
The problem is that prices first need to back down to normal levels before an increase can occur.

Anonymous said...

foxwoodlief said...
Thanks annonymous, I have done the math. I do recognize that the guy I'm renting from has to be losing money. The house was on the market for $385,000, he bought it in 12/06 for $360,000 (I checked the records). Apparently he thought he got a good buy with a mere $15,000 discount. Now he is renting it to me for $1245 a month. Not sure how he makes those numbers work. I personally think he overpaid by $100,000 for the house on the low end. The house sold in 1999 for $100,000 and in 2002 for $155,000 and in 12/06 for $360,000...oh, which means homes are STILL selling in Phoenix!

Thank you for pointing out the real problem.
What could have possibly caused the value of this house to go from $100k in ’99 to $360K in 06 ?
Has our population gone up 300% since ‘99?
Have our incomes gone up 300%
Have mortgage rates gone down 300%
Was there some natural disaster that destroyed millions of homes across the country hence increasing demand for the remaining homes ?
No.
The answer is that during the .com boom many young people got good paying jobs and qualified to buy a home that drove up the price between ’99 and 2001.
After 9/11 housing prices should have leveled out, cause not only did the good paying IT job market die out but Global outsourcing began in full swing.
Therefore, the only reason for this continued price escalation was simple human herd mentality, yup just like the Pac Man craze or the Rubix Cube craze etc.
The only math folks did was = I can always sell for a higher price, even if RE goes back to its normal levels of about 5% annual appreciation, I’ll still be OK.
The problem is that prices first need to back down to normal levels before an increase can occur.

foxwoodlief said...

Yes, annonymous and I won't be a fool like so many Japanese or Phoenician speculators. The point of Japan isn't that our prices are as high as their got but that speculation is bad. Also the sooner interest rates go up the better to end the madness. Prices will return to the mean when interest rates return to the mean.

Also won't buy a house in Phoenix at those inflated prices. Yes, there may be some long term value to buying one of those spec homes sitting and waiting for a buyer...I think even better six months or more out, but I don't want to live in the fringe burbs and downtown is out of whack. I wouldn't buy a home in the Willow six years ago because they premium for the house was to high when I could live a short distance away or in a neighborhood that wasn't historic (and thus controlled) for 30-40% less.

That is why we will rent while our jobs keep us there. For those who have followed my posts for tha past year they know I always use the mean as my guide and if I can buy at those prices, I buy. If not, I don't have a NEED to own just to own, I'll rent...though not an apartment unless it is short term.

Apartments in Phoenix currently are not a bargain when there are so many homes for rent for the same money. It use to be, rent a 1 bdrm, $500-700, rent a 2 or 3 bedroom house $700-900. Now it is rent a 1 bdrm for $950 and rent a house from 1200-2800 sq ft (depending on how far out you want to go) for $950-1200. Since I mentioned my place I'm renting, my landlord lowered my rent $50 as I asked him to split the water bill since the yard is lush and lots of lawns. He also will pay to take care of the yard, mow the lawns etc included in my rent. He also is putting in a utility room with new washer and dryer, the house has a stove, dishwasher and fridge, all included in the rent that is now $1095 for a home in a neighborhood of $350,000 to 700,000 homes!

Still, I do believe that there are multiple mini-bubbles, not a massive nationwide bubble and that even in local markets there are mini-bubbles so I don't generalize and say the sky is falling, but there are a lot of places that will see some stormy weather. Just like people call me to say, Oh, I hear a tornado hit central Texas are you okay...duh, that was 3 hours west, so too with each sub-market. Some will fair well, others will be a disaster zone, and same with buyers. Those who bought three or more years ago, put enough down, took a fixed mortgage, didn't HELOC themselves to death, will be just fine.

Anonymous said...

RE Squirt-a-house (http://news.com.com/2061-11204_3-6153114.html) killing the housing market:

There are some inherent, umm "technical" or "physical" problems with this technological approach. For example, maybe house squirting only works at relatively stable conditions (like CA)? Guarantee you it won't work under certain extreme conditions (dust, high temperatures or humidity, extreme cold, etc.)