October 01, 2007

Is there enough blood in the streets and failed flipper desperation to begin making insulting 50% off offers on unwanted homes?


When everyone's buying, it's time to be selling.

When everyone's selling, it's time to be buying.

So is it time?

I don't think so (look to Japan) but if I were back in the States I'd be making some crazy low-ball offers to see if any of 'em stuck. As long as the home would be cash-flow positive from day one, with a yield of at least 8%, and the selling price was based on 2001 or prior comp.

Plus it would just be fun to see the reaction as people come to understand that the fundamentals DO matter, that homes DO have a P/E ratio that must be respected, and that incomes DO relate to prices.

So, anyone itching to low-ball? Anyone doing foreclosures?


Or is buying now, even at a low-ball price, still catching a falling knife?

CHICAGO - Home sellers are not automatically turning up their noses at offers that come in far below their asking price these days as prices stagnate and the inventory of homes for sale remains elevated in many markets.

But buyers who do ask for deep discounts still risk offending sellers to the point where they quash any deal. So before making an aggressive offer, some homework is in order, real estate professionals say. Further, buyers need to effectively explain why the price of a home should be lower.

That's what Pat O'Heron did recently when buying a home in Ann Arbor, Mich. He was able to negotiate a steep discount with a seller who relocated for a job, in a neighborhood that had two years' worth of inventory on the market.

Before he even made an offer, the asking price had already dropped by about $80,000, he said. After O'Heron made his case why the cost should be even lower, he eventually bought the home for $270,400, with about $11,000 in other credits. The net price ended up being $115,000 below the initial asking price.

72 comments:

Anonymous said...

Yep. 50% asking price. I'll start making this kind of offer over the next year or two and see what happens. The only real problem is that once the neighbors find out what you paid for the house, they may not like you very much...

cobra2411 said...

50% is too high... I'm making 35% cash offers on anything that's on the market over a year. I'll negotiate up from there, but 50% is too high. REMEMBER: If you're not embarrassed by the offer, it's not low enough...

Anonymous said...

I've done nothing but low-ball for the last year - probably a bit early, since none have worked (but I did have it work in 2001.
We are in suburban DC/Northern Virginia (known as NoVA to us locals)
I lowballed a Realtor owned Spec at 700K when princess wanted 1.1.
Last I looked she was now trying to rent it for 3K Monthly. BTW, she's been "selling/messing" with this house now for 2 YEARS.

I will continue to wait & watch & lowball.
Always look for the "Famous 3-D's of Real Estate!!!

DIRTY- fixer upper
DESPERATE- we are seeing these now & will be seeing tons more in the future - they MUST sell.
DIVORCING - want the hell out of their miserable marriage/house! (I got 100K of a lovely home in Fairfax Co (2002) from a snarley "D"ivorcing couple!

Anonymous said...

Low Ball offers including the math to justify will help these home sellers realize how unrealistic their prices are for todays market

concerned said...

I don't low-ball as of yet. I simply chuckle when they quote me a price. I then tell them that I am an investor, and I don't take any less than 8% yield.

They quickly do the math in their head, and realise that my price is at least 50% lower than their asking.

Some get pissed off.....others laugh back at me.......either way I don't care. It's just a metter of time.

Greyhound said...

I'm actually looking in a very upscale town. I have targeted 3 houses all on 2 acre wooded lots, all circa 2300sf. All asking circa 550K down from low 600's and high 5's. I'm letting each of them know that there are 3 offers of 479K being made and the first one wins.

The plan is to live the remainder of my life in one of them. The problem is that I've been perusing this and other blogs for years and sold 6 months ago to get out. On the upside I sold 980sf for 325K so it's a pretty sweet trade. Still paranoid though!

Anonymous said...

This weekend I was at a wedding. Got to talking housing. One of the guests is areal estate agent. She tells me she has a house for sale that has been and I quote "drastically reduced". I ask some details, turns out the "drastric" reduction was $30K from a starting price of $650K.

We have a LOOOOOOOOOONG way to go folks.

concerned said...

oWhen you make offers.....make sure you tell them that the offer lasts a couple of months. Make sure to tell them that if they accept you're offer in 6 months, that you will make a lower offer by then.

They will soon get the drift.

Anonymous said...

buyers need to effectively explain why the price of a home should be lower.

More nonsense from a Realtwhore. It's an adverserial relationship to begin with so being cozy is not part of the picture.

Anonymous said...

Here's a nice statistical analysis which shows no recovery until 2011 or 2012. Hard to argue with the stats of the last 50 Plus years.

http://arxiv.org/PS_cache/physics/pdf/0605/0605133v1.pdf

If one want's to lowball why care about offending the seller? What a stupid REIC comment. In Phoenix you could offend 10 sellers a day for over 15 years without covering just todays inventory.

keith said...

* "drastic" is 50% off. "drastic" is not 10% off

* this is war between buyers and sellers - and from the sales numbers it looks like the buyers aren't budging, so if homes are gonna sell, it'll be the sellers who have to move. But by the time they move, the buyers will be moving even lower (those that can still get a loan)

* If you buy today, unless the property is cash flow positive if you rent it out, and unless you can get a 8%+ yield, you'd still be overpaying and you'd still suffer depreciation

It's too early. But it sure would be fun to start making sick offers

Today's sick is tomorrow's accepted

Anonymous said...

Let's see. Bubble area. $100,000 Homes went up $100,000 a year for 5 stinkin years. You are offering 50% off asking. Seller is still making 150% or more profit.
How low can you go on a lowball, not low enough.

Anonymous said...

J A P A N



We will follow the pattern of JAPAN

Anonymous said...

I'd make an offer but I'm afraid it might actually be accepted and I'd be stuck with a house.

Veronica Lodge said...

RE: Has the real estate fire sale begun?

Yes, sellers are beginning to go from motivated to desperate. But, the real fire sale prices will be found in houses which are priced below short sale and foreclosure prices. Distressed owners of these houses will be willing to settle for whatever they can get.

If you are paying all cash, you must be assured that you are buying at what will be the lowest price when the market hits bottom in the next few years.

The cash you use for today's house purchase will be worth far less in the future if it is left in the bank. On the other hand, rents will probably continue to go up, providing a more favorable P/E ratio.

The use of financing requires some careful consideration:

If you are financing, you must evaluate the cost of borrowing money now against borrowing money in the future, when home prices are at their lowest. The difficult part will be in predicting the scenario which will provides the lowest monthly payment.

In spite of the latest interest cut, interest rates will eventually go up and loans will become even more difficult to obtain.

Borrowers will need to weigh the total cost of the house purchase when deciding how long to wait. As house prices drop, home loan costs will increase.

V.L.

Happy Homedebtor said...

Re: 50% off. You guys are hallucinating as always, put down the Keith-provided crazy-glue you're sniffing.

Picking a random year for your benchmark is silly, especially one which was close to the bottom of the last cycle. Two words for you: Inflation Adjusted.

There's always the chance you'll find someone dumb enough - the world is full of suckers - to take a rediculous offer like this. However, most likely you'll end up trying for years and in the meantime, things will have bottomed out @ 10-20% down on average and be going back up and interest rates will be higher.

So in essence, you'll screw yourselves out of the market yet again. :) Word to the wise from experience: trying to time the market is a fool's game - you'll lose alot more often than you win if you do it regularly.

Now, time to finish putting up the sexy new curtains so we can finish our family room.

keith said...

soon-to-be-unhappy homedebtor:

you might want to read Manias, Panics and Crashes. All epic bubbles end with asset prices plummeting BELOW their pre-bubble prices.

this bubble was built on fraud, speculation and loose credit. those elements have been destroyed, and what's left are millions of unwanted homes, millions about to be unemployed, and the coming destruction of all of the bubble "wealth"

Ask yourself - when the nasdaq popped, it didn't go down 10% and call it a day. It fell 70% and wipted out all of the prior wealth created and even more.

Enjoy the home. You'll come to hate it soon

Anonymous said...

In July we put a bid on a house in Chicago. They were asking $430,000 last year and had came down to $340,000. It need a new garage ($10,000), all new electrical ($12,000), & a kitchen (there was none $10,000).

We offered $300,000. The next day they told my agent that the offer "offened" them!

Anonymous said...

When we talk about whether or not it is the right time to make an insultingly low offer, we like to make that specific to an Individual.

We ask that they talk to their local real estate professional, because all insults are local. It's like asking "how's the weather?' -
you have to be more specific.

There are many, many places where insultingly low offers are appropriate; where if a purchaser or a consumer might find entertainment in making such an
insulting offer, it's a wonderful time and it's a wonderful idea.

B

Anonymous said...

That's OK Chicago Buyer!
Go ahead & offend the Sellers with your lowball offers- :)

Look up that house in January when the cold winds are blown' & no ones STILL looking at that house -

They may take your offer or wish to hell they had!!!

THIS IS A WAITING GAME & TAKES TIME-
watch 4 or 5 houses at a time, don't just concentrate on 1!

tangelo mozilo said...

Does anyone else get the feeling that Crappy Homedebtor is a 12-year-old girl? I mean with the randomly placed emoticons in every post and the "rediculous" spelling? ;) amirite?

Anonymous said...

I was stupid enough to reject a low-ball offer myself. I was asking $499K. Offer came in at $450K. I was insulted. Fast forward 4 months I sold for $421K after lowering my asking to $449K.

I bought for $189K so wtf, I was still popping the champagne cork. But I lost $30K purely for ego reasons and the "I'm not giving it away" mentality.

To his credit my realtor did tell me to take the 1st offer.

Anonymous said...

why the idiot still paid 150,000 too much //at least he thinks he got a "deal"

Happy Homedebtor said...

Keith,
You're cute - lets go over your statement:

1. Falling below pre-bubble peaks: Yes, this is correct, as people panic and over-react. However, things quickly stablize normally and end up somewhere between the peak and the bottom, stagnate for awhile, and then go above their original peaks in terms of REAL dollars. Since we're here for 5-10 years at least before we leave for the midwest, and this is a HOME and not an attempted flip (which, have you realized, most of you rip into yet talk about housing in terms of it?) The Nasdaq was insanity - most of the companies on it that drove the index so high don't even exist anymore. Add in the S&P500 and the Dow Jones - oh look, they're back above their bubble-peaks already in *actual* dollars. :) So, your selective argument fails.

2. Millions of unwanted homes: Odd, they can't build them fast enough in my neighborhood/area. Jump across the county border and they're offering free fellatio for life - but the schools here are all new and top-notch. Anywhere else there are good schools, the prices are 20-50% higher. As you've said, fundamentals matter, am I right? ;) So using your views and logic, I'm sittin' pretty good, no? ;) Another failed argument, this one by your own beliefs/views/admissions.

3. Re: Nasdaq popping. How many times have you and the other tinfoil'ers said 'Houses are not stocks!'? Ok, good - so lets remember that, and not try to contradict yourself so much in the future, eh? :D Another failed argument, this one by your own beliefs/views/admissions.

Damn Keith, you shot yourself in the foot 3 for 3 there, eh?

As for hating it soon...why would I? We're loving life, are +/- $200/mo compared to renting, and according to *you*, over the next few years, my ratio will only get better as my property taxes /fall/, and rents *increase*...which are running 8-12%/year increase around here lately. So I'll be hating the fact I'm already about even on renting, and in 2 years I'll be significantly ahead compared to renting? Oh wait - you assumed I bought 5-10x income, didn't you? Awe Keith - there are some of us who bought with common sense and are around 3x, which is the low-end for traditional ratios (the ones you guys use are pipe-dreams - like my mothers' 1x net. Sure, we'll be able to do that too when we're her age, but combined we're only as old as her)

You should sell some of that gold and go take a speech/debate/logic (IE philosophy) class. You've got more self-contradictions than a presidential candidate. :) Also, please, for the love of God, to be more credible to anyone who can count past 10 without using their toes, pick a side: Inflation adjusted or non-inflation-adjusted. Because you spin each argument to your favor by switching between the 2 at will.

Please try again - I always welcome a good argument...especially since most people get frustrated when they lose due to their own mistakes. :D

Anonymous said...

ditto to..."they treated the housing like a wall street stock", let them take wall st stock type losses...80 percents to 90 percents down....

Anonymous said...

all other holders will break even in the same amount of time it took 800 dollar gold to break even....25 or so...plus years... same as housing always was... a place one spent 50 or 60 years in and workrd to keep it above environmental degradation and mechanicaly updated..

smitty said...

why would it be insulting since there's a supply and demand curve? no economist ever labels one end insulting and the other end gravy. if a buyer bought 15 years a go, and that buyer didn't "take out equity," then a lot of prices might make sense.

I wonder if the Japenese took out a lot of home equity before housing prices plunged? will the outstanding "home equity loans" keep the "must sell" price up?

one of the reasons why I stay in an apartment is becuase my landlord doesn't take out equity loans and pass on those costs to me. I hope that landlords continue to be thrifty around where I live.

area 51 said...

NO, We're not there yet because the buyer has to "prove" his case as to what he thinks the price should be.
In reality the sellers should have to prove why their POS should rake in several hundred thousand $$.

Arlene said...

"Catch a falling knife" -- a perfect description.

Please look around before you get too excited about the "bargains." A street or neighborhood full of foreclosures is a heartbreak at any price.

I think the cutlery's still in free fall.

See this Washington Post article:

http://tinyurl.com/2d84qc

area 51 said...

Anon 4:04,
LMAO!

Now is a great time to make an insulting low offer.......

We can make an insulting low offer, Suzanne researched it......

Make an insulting offer to your Realtor today......

They're not making any more above-asking-price offers.....

Make insulting low offers now or be priced in forever......

Insulting low offers are bouncing along the bottom.......

Coffee is for people who make insulting low offers....

We predict insulting low offers will peak in 2007.....

We predict insulting low offers will peak in 2008.....

We predict insulting low offers will peak in 2009.....

We predict.......(you get the picture)

Ron said...

I would think that we have quite a ways to go, we haven't even gotten into the recession yet with the job losses. That is coming and we still have more resets, people I do not think we are in the second inning yet. Not to mention the HUGE debt burden most people are under currently as well. Here is an awesome blog showing that the majority of the last growth was done basically on people going into debt.

http://tinyurl.com/25homr

Hard times are ahead that is for sure.

not so happy renter said...

happy homey makes a lot of sense....Keefer you do conradict yourself quite often....do switch between inflation adjusted and non-adjusted and you have said a million times homes and stock markets can'tbbecompared only to compare them 5 minutes later

fact is **SOME** people were stupid and bought too much house at the peak. Many of them will foreclose.

**MOST** didn't and won't.

As for 50% offers, make them all you want. I can make an offer to buy a Ferarri for $20K too. Doesn't mean I'll be owning a Ferarri any time soon.

I am almost at the point of buying back in myself. When I add up the costs of moving twice, selling, buying I will end up not all that much better off than having ridden out the downturn....maybe $50K net profit for selling and renting.

$50K is some decent change, but would I do it again? Probably not. Given the time, effort and stress spent on moving twice, finding a rental and then finding a home again, I don't think it will have been worth $50K to be quite honest.

devestment sheeple said...

I have only lost money 3 times on real estate.

Once I sold to move in a falling market.

Once I lost my income and had to sell in a falling market because jobs were scarce and I could not make my payment.

Once I owned in a town that relied on government spending. The government cut back to ballance the budget. I walked away because I could suddenly buy at half price or less.

It's different this time. The dollar is weak and it has been good for my business with international trade. However, things change and the unexpected happens. Society forgets the lean years easily and assumes things are all better now.

Things change.

Anonymous said...

Owners face selling at a loss now that the housing bubble has burst

A year and a half ago, Saverio Bellomo and his wife, Amy Robinson Bellomo, thought about selling their house. A real estate agent urged them to list it at $930,000. They decided to hold off for a while.

Big mistake.

Today, their two-story stucco house in American Canyon is on the market for $868,000. "Obviously, we'd love to sell high but we have to be realistic," said Robinson Bellomo, who grew up in the East Bay and has lived in the house since it was built five years ago.

http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2007/09/30/RE8CSD9SM.DTL

V egasBallBuster said...

I bit my pride pissed off the neighbors and dropped my price by 30K last year in Phoenix. Funny thing is that the idiot realtor did not take these people to the builder, he was selling the same place for 65K less than my 30K drop, plus a 10% commision. Funny how the morons still there are just getting to the builders price now.
Las Vegas is the place for insulting offers fucked HD with multiple liar loans are crapping in their pants these days. You see black jack dealers and valet parkers can not afford 5-6 homes. How about that folks.

Frank@NeverColdCall.com said...

Who cares about "offending" the seller? What, has political correctness overrun into selling a house now? We can't "offend" anyone the dems say?

Sorry but this is business. If they feel offended, too f*****g bad.

You'll see people taking those offers soon because it's either that or bankruptcy.

TAngelo mozilo said...

Crappy Homedebtor:

The Dow and the S&P are still below their 2000 levels.

http://www.itulip.com/realdow.htm

"New and top-notch schrools " are not what is meant by "fundamentals". Fundamentals are things like P/E, annual income/debt, and monthly income/PITI.

Notice how actual fundamentals resemble ratios, whereas the things that you think are fundamentals are more akin to soft-headed, intangible, subjective bullsh*t. amirite? :D

In addition, stocks are not real estate, but they are related through the overall economy. Imaginary real estate money filled in the void left by the dissapearence of the imaginary tech money by boosting consumer spending and the demand for all things construction.

I advise you to eschew the curtains, and place your money into Ramen. (RMNX)

Anonymous said...

Most people that bought these homes have never really experienced a meaningful recession. I am 37 and have really only experienced the one in the early 90's from the standpoint of having to support myself. All the indicators point toward a 1980-1982 style recession. I believe people are severely underestimating the effect that this upcomong recession/depression is going to have on the housing market. How great is the housing market going to be when unemployment goes over 10%? Oh and by the way, don't we already have the highest inventory of all time.
I think you'll see more than 50% off on a lot of homes (even adjusted for inflation). Also rents are going to severely drop in real dollar terms because the only option for banks will be to rent these houses that they are stuck with. McMansions will be subdivided and rented out. All of these extra rental properties on the market will drive down the cost of renting overall. Eventually it will make sense to buy again. My bet is that it will be when "Flip This House" has been off the air for a few years. No bottom until 2011 or 2012.

Frank@NeverColdCall.com said...

Look up that house in January when the cold winds are blown' & no ones STILL looking at that house -

THIS IS A WAITING GAME & TAKES TIME-
watch 4 or 5 houses at a time, don't just concentrate on 1!


Ha - here's a true story: When I moved here to Newport Beach CA I came in February of this year to find a rental. Our #1 pick decided not to rent it to us because they wanted to sell it. They were asking $1.2M, what it was worth at the peak. Now it's October, 7 months later, and the idiots are down to $1.0M and having open houses every single weekend, while comps in this community are selling for around $800k and dropping. Idiots.

I read an interesting article yesterday on Yahoo! Finance about how the mortgage burden is just the beginning, and how the current generation is so overburdened with student loans from the scam-ass ripoff schools that they will have zero disposable income even with great jobs and careers.

Hmm..........

Frank@NeverColdCall.com said...

From USA Today:

http://tinyurl.com/yv273l

"The near doubling in the cost of a college degree the past decade has produced an explosion in high-priced student loans that could haunt the U.S. economy for years."

Combine that with our mortgage and other credit woes and this economy is done.

Anonymous said...

Nope, most failed flippers and other investors will file bankruptcy and walk away before they accept a loss that is upwards of 50%. It's just the simple fact, just ask my buddy in Florida who did just that- filed bankruptcy and walked away- at least he can sleep at night now. And too bad because he is actually a real salt of the earth kind of guy- he didn't want to F someone over by flipping, but just wanted to rent out a place for additional income- unfortunately for him, that market sh*t the bed.

Jambu said...

No.

Happy Homedebtor said...

TAngelo mozilo said...

I advise you to eschew the curtains, and place your money into Ramen. (RMNX)

October 01, 2007 6:40 PM
-------------------------------
Oh, my poor sweet confused bitter uneducated poor friend...you just don't get it. You're another armchair quarterback - which is Keith's core audience, those who don't understand what they're reading/hearing. Let me break up your argument for you:

Re: Y2K highs: You do realize that those are inflation-adjusted, not actual raw-dollars? You know that inflation adjusted is just used for comparing investment-returns or how much better/worse off standard-of-living-wise you are compared to a specific point in history? Please go do some reading, you're using Keithian logic by stating facts without stating full facts...but at least Keith /knows/ he's spinning it.

Re: fundamentals. Again, another armchair quarterback. When it comes to real-estatate values the fundamentals are: location, schools, crime, commute, and then the house itself. Please do more research - a house is not a stock. ;) Everyone likes to pull out P/E ratios as if it's an investment: a HOME is an investment if you're an idiot. Real estate - that is, the stuff you buy but isn't your primary residence - /is/ an investment.

Re: Stocks and housing tied together. Funny how your argument eats itself: During the late 90s through 2000, when the stock market was exploding and setting records both actual and inflation-adjusted, home prices were stagnant/rising at a normal level. You kinda missed that point, so I'd highly advise you to take any money you may have - which is most likely $0 since you can't afford to buy, hence you're bitter - and give it to a financial advisor. At least that way, you can blame him when it's all lost - because clearly, you're a danger to yourself financially.

As for ramen - whereas I may have lived on it during my first undergrad due to convenience factor, these days I prefer to cook thai, chinese, indian, and grill in my sexy backyard - which is getting the patio of doom in a month! (Happy dance)

But, I do still enjoy the occasional top ramen picante beef or spicy chicken, with some extra "cock sauce" (for those of you who frequent asian establishments, you know what I refer to) for more spice.

Ron said...

So... not so happy renter, you are saying that people didn't pull out their equity to live the high life drive the hummer, have the salt water swimming pool, get the big boat, invest in RE outside their area?

If you think so then welcome to denial.

David said...

If you really want a deal, check the sports pages of the LA Times today. 600 (six hundred) houses being sold out of foreclosure.

Sample: a 4+2 1/2 in Downey (not the best neighborhood, but not the worst), sold for a $950,000 valuation.

Opening bid: $350,000.

Ooohhh... that's gotta hurt. Hate to be the loan manager that wrote the paper on that turkey. Worse would be the dingbat flipper that figured that they could sell said house for more than $950K. That's a $600,000 bath.

On average, the houses that had been going for $500-$600K are now being auctioned for 250-300. Which is still not cheap, but about in line with 2003-4 prices.

Anyone want to step up to the line and throw down at those prices? Think there are still suckers in the market that will pay that? Or is it all just catching falling knives right now?

Chris said...

agree with this article. Seller's still have high expectations and Buyer's are reading the national publications referencing a real estate bust. We have a stale mate. I believe it to be the job of the real estate agent to stand firm when educating Seller's on the current housing market conditions. Columbus, Ohio has seen a lot of properties that have expired do to the fact that they were priced too high according to the market.

On another note it frustrates me when we let clients get offended by an offer. At some level selling/buying real estate is a business transaction. You either accept the offer, reject the offer or counter....

Chris Testa
Residential Real estate agent
Columbus, Ohio
www.buynsellohio.com


Posted by: Chris Testa

RiperDurian said...

"So is it time?"

Ahahahahahahaha, Keith you're killing me! Hahahaha, oh what a fine jester you are!

Hey Happy LoanOwner you sound pretty nervous, who are you trying convince, HPers or YourOwnSelf? :D

"Since we're here for 5-10 years..."

Ooo make it 5, That might just perfectly time the bottom!

Anonymous said...

REMEMBER: If you're not embarrassed by the offer, it's not low enough...

No, you got it wrong. If the Realtor (TM) doesn't say "Excuse me?", it's not low enough...

Anonymous said...

I may be off the mark but did anyone notice houses were in trouble even while crap loans were still available? Now that they are not available and demographics going forward suck where are we going. Japan was a hell of a lot better off in the 90s. They had stable lifetime employment, SAVINGS, less land to build on. We have a free market layoffs, weak dollar, no savings, plenty of land. 90% off if we are lucky.

Happy Homedebtor said...

Re RiperDurian: You're a trip man, true blast. :) You keep renting for 5 years and get back to me, lets compare notes and situations. :D You guys provide endless amusement - but I'm out for the day now, I've got to finish an assignment for one of my grad courses.

Hey Keith - you should do a poll on the education status of all your readers for cross-referencing. :) It'd be fun to see what % have more than a BA/BS, if that. :D

Agent #777 said...

Everyone likes to pull out P/E ratios as if it's an investment: a HOME is an investment if you're an idiot. Real estate - that is, the stuff you buy but isn't your primary residence - /is/ an investment.

I WAS going to give HHD points for the hilarious portrayal of builders incentives made previously, but from my standpoint, someone could crack a dictionary(.com):
in·vest·ment /ɪnˈvɛstmənt/ –noun
1. the investing of money or capital in order to gain profitable returns, as interest, income, or appreciation in value.
9. investiture with an office, dignity, or right.

I assume that even if you are only expecting to break even, you invested for the "right" to live in the house, correct? It sounds like you are insisting that you will gain money by holding for 5 years too, so it seems to me you are definitely "investing".

I wanted to conclude with this comment:
***********************************
I understand and agree with you HHD - I won't be buying your home in a few years. I will be buying one down the street (sans the "patio of doom") for 40-60% less.
***********************************

However, I realized that I do not even know where HHD lives, so I really can't make a fair estimate. Instead of adding to the hyperbole, lets just make it "quite a bit less".

Anonymous said...

Ron said...
So... not so happy renter, you are saying that people didn't pull out their equity to live the high life drive the hummer, have the salt water swimming pool, get the big boat, invest in RE outside their area?

If you think so then welcome to denial.


============

yeah everyone did just what you say...my what a tool you are. Are all you renters as stupid as this guy?

Anonymous said...

happy home debtor if you dont mind me asking what are you taking in school. MBA? PHD? Im curious

Also, what is your age? Im guessing your in your late 20 early thirties right?

Single or Married? Its not easy to tell with a name like home debtor.

Children?

Feel free not to answer any of these question you feel uncomfortable about. I understand but If you were married, had kids, in graduate school and such it might make logical sense for you to own.

Anonymous said...

This is not too hard... first, determine the average rent in your area and its relative rate of accrual during the past five years. If that rental inflation rate's around 0.5 to 1.5% per annum, then you live in either the rust belt (i.e. Buffalo) or a bubble zone (i.e. Boston).

Then, determine the mortgage based upon a 1.25 loan (a.k.a. mortgage) to monthly rental price ratio and then, using the various calculators, determine what that price of a home should be with a 25 or 30 year term. Most likely, outside of the rust belt (i.e. Erie, Cincinnati, Buffalo) and midwest (i.e. Omaha, Wichita, Des Moines, etc), the price is anywhere from 25 to 50% overvalued [sans former oil patch bust (think mid-80s) regions like Austin or Dallas]. Then, ask the seller if he believes that the housing bubble is a myth and if the response is no then make an offer based upon these calculations while telling the seller the entire essay as explained above. If this offends them then show them the bird and move on.

Killer Realty Reality Sheeple devestement said...

Happy Homedebtor said...
Re: 50% off. You guys are hallucinating as always, put down the Keith-provided crazy-glue you're sniffing.


50% off is old news in some markets with forclosure auctions.

Bank failure is old news.

High inflation is old news.

Your entitlement attitude along with the fact that you are surfing a blog you combatively contradict gives you away.

Are you a realtor or just angry and afraid?

Sheeple PhD

Ron said...

Here donkey, check out the latest:

http://tinyurl.com/25homr

What do you have....oh your opinion that is super special I bet you think your opinions are facts also hunh tool? Friggen waste of air moronic simpleton getting into financial discussion to showcase his moronic dimwitted view with his oh so special....opinions. Not to mention an anon coward, you are the packge deal douche. I think I value that turd swirling down the toilet more than your uninformed nitwit opinion based on what you believe rather than the facts....go read The Secret again this will be all better donkey.

Anonymous said...

I think all my offers will be served a la Hobson's choice - take it or leave it, hence to be known as

TIOLI.

Anonymous said...

Hey Keith - you should do a poll on the education status of all your readers for cross-referencing. :) It'd be fun to see what % have more than a BA/BS, if that. :D

JD here, with $700 per month in student loans to prove it. Only 25 years to go. Let me be the first to confirm that the recent stories about high student loans being a burden are true.

Anonymous said...

NUMBERS ARE KEY IN REAL ESTATE BUT DO NOT FORGET LOCATION. LOOK FOR THE TOP SCHOOLS IN YOUR CITY AND MUST BE A GOOD NEIGHBORHHOOD. THE BEST PLACE WOULD BE IN MATURE NEIGHBORHOODS. LOOK AT HISTORICAL NUMBERS DURING LAST RECESSIONS AND SEE HOW S.F. PRICE COMPARED TO OTHERS IN CITY. HOUSE SHOULD BE IN AN AREA WHERE ANYONE WOULD WANT TO LIVE, NOT A GREAT DEAL IN A BAD AREA OR BY A TRAIN. IF YOU EVER WANT TO RENT IT OUT, IT SHOULD BE EASY TO FIND A RENTER. ALSO IMPORTANT TO SEE HOW THE LOCAL ECONOMY IS AND WHAT ARE ITS POSITIVE AND NEGATIVE POINTS.IF YOU WANT A CERTAIN PRICE MAKE IT EASY ON YOURSELF, DONT LISTEN TO SOME OF THESE SKEPTICAL PEOPLE ON HERE, JUST PUT AN AD IN THE PAPER THAT STATES WHAT YOUR LOOKING FOR.
YOU WOULD BE VERY SURPRISED DURING A DEEP RECESSION WHAT CAN PICK UP. WAIT TILL NEXT NOVEMBER TO TRY THIS, IT WILL PAYOFF. AFTERALL, IMAGINE IF ALL OVER THE NEWS YOU HEAR OF THOUSANDS OF JOB LOSSES ACROSS THE COUNTRY, HOMES BEING LOST BY THE MINUTE, HIGH DEFICITS, MAJOR BANK CLOSURES, MAJOR CORPORATE CLOSURES, DO YOU THINK THERE WILL ONLY BE A 20% DROP IN PRICES. I BELIEVE HERE IN RIVERSIDE CA. WE HAVE ALREADY DROPPED 15% AND THIS JUST STARTED. DON'T BE FOOLED, USE COMMON SENSE
WHEN YOU PURCHASE. YOU HAVE TO BE ABLE TO CASHFLOW YOUR HOUSE ON A 30 YEAR FIXED. DONT PAY A DIME MORE. REAL ESTATE IS ONLY WORTH WHAT PEOPLE ARE WILLING TO PAY NOT WHAT YOU THINK IT MIGHT BE WORTH. SOME PEOPLE ARE DUMB TO BELIEVE OTHERWISE THATS WHY THEY ARE NOT REAL ESTATE INVESTORS. IN A GREAT DEPRESSION PEOPLE ARE GOING TO BE SCARED TO BUY PROPERTY AND THATS WHY IT WILL FALL WORSE THAN PEOPLE THINK, ITS ALREADY BAD ENOUGH THAT LOAN STANDARDS HAVE TIGHTENED. DO YOU THINK THAT THESE SUBPRIME LOANS ARE GOING TO BE OFFERED AGAIN IN 3 YEARS TO ATTRACT MORE BUYERS. SOME IDIOTS STILL BELIEVE THIS THEORY. ASSET DEFLATION IS IN FULL AFFECT AND WILL CONTINUE FOR SOME TIME. FOR THOSE WHO DONT BELIEVE ITS POSSIBLE (SEE JAPAN)

BEN BERNANKE

Happy Homedebtor said...

Re anonymous @ October 01, 2007 11:00 PM:

MS & MBA dual degree program
Age is right
Married
No kids yet.

Re Killer Realty Reality Sheeple devestement said... :

Foreclosure is tricky, not your fantasy where you're getting a house for 30-75% off and it's ready to live in. The bigger the deal, the more work needs to be done. But, you go with that! :D

No, I'm not a realtor - I prefer to stack the deck in my favor, rather than follow the herd. ;) Scared of living well? Yeah man, frightens the crap out of me...

Back on the ranch - time to head into the office! :D

Redshoes said...

Re: fundamentals. Again, another armchair quarterback. When it comes to real-estatate values the fundamentals are: location, schools, crime, commute, and then the house itself. Please do more research -


Obviously you are not aware these "new communities" have the highest rate of forclosure because 85% of those homes have toxic mortgages.

It will be interesting when the "new school" has to shut down, and the remaining kids have to be bussed to that poor school on the other side of the tracks...thats what will happen, when 85% of the community isnt paying property taxes because they were forclosured...

Nothing adds to a neighborhood more than empty "for sale" homes with dead lawn....watch, then suddenly bars go up on the remaining occupied homes....

Watch and learn.

Anonymous said...

Renter, BS-only in chemistry/applied math.

Will be getting a JD (Law) for patent work in a few years.

Hint for all... education doesn't matter anymore. Those were the 70s/80s when having specialized skills meant a top R&D job at an IBM or Merck. Today, there are a few so-called "educationally" elite jobs (i.e. Google/Yahoo w/options) but those so-called engineers are actually stooges for advertising executives a/o computational quants for hedge fund traders. None of them add value like the inventor of the semiconductor (at TI), biodegradable polymers, etc.

I regret to say that down the road, the best and brightest Americans will only want to be patent attorneys or surgeons.

LauraVella said...

We went to two open homes in Alameda this past Sunday.

When I asked the realtor why the owner was selling, she told me the owner had bought two other homes and had to sell all of them because they couldnt make the payments due to having toxic mortgages and bad judgement! Yes, she really said it!

Went to a different open house, It was not kept up...but, it had a brand new redwood deck out back. All the floors were a mess- the kitchen had 1970's harvest gold appliances, with only a clothes washer..an old-fashioned clothes line was outside. Some of the rooms were "staged" The realtor actually asked us what we thought about the price!

Drove past another house in the same area. we visited a cute 1920's Tudor two weeks ago at the open house. It now sits empty. It still has the realtor sign but no sale pending or sold sign displayed...they bought it only a year ago.

Saw another house, (cute 1920's tudor) which sold a year ago for 100k over asking. Within six months two homes on the same street went up for sale, both listed and sold for less than the the previous asking price,before throwing the obsene token 100k.

All these above homes are in established, and well maintained character-home neighborhoods, here in Alameda.

I have been keeping track of home sales here in Alameda for 6 years, and I can tell you (from looking a public records)that anyone who bought a home here over the last 7 years has to pay minium - $6,000 a year in property taxes...many spend $8,000-10,000 dollars a year on property tax.

This is absolutely insane! It's going to get really ugly soon very soon!

Anonymous said...

MS & MBA dual degree program
Age is right
Married
No kids yet.


That explains it.

Did that grad school thing. Soon as you get a good score on the GRE, accepted into the school, people are blowing sunshine up your ass. You're made to feel like your so smart and so special. You probably even tell people on the phone "I'm a graduate student!". Professors telling you all the time how you are in the top % of the population, blah blah. It's all a load of crap. Giving you a hand job on your ego. LTCM and the CDOs were thought up by credentialed math quants and Nobel Lauretes. Kaboom! They all blew up. Global derivatives, another monster created in Dr. Frankenstein's laboratory, is waiting their turn. Thanks to the guys who are sooooo smart. I'll let you in a little secret. Intelligence is compartmentalized. People can be extraordinarily bright in one area but dumb shits in many other areas. What did the quants say about CDOs? Hell would have to freeze over before they started blowing up. Guess what? Hell is freezing over. Truth is most industry builders (not the hacks hired later on to run the companies into the ground) are at most college drop outs. They can integrate vast cross-sections of knowledge,skill and organize it in a practical, robust way (insular quants have problems doing that). They hire PhDs to do the monkey work for them. BTW, the value of your credentials are going down like the U.S. dollar. Cheaper to get the brainpower in India, China, and Eastern Europe. You realize there are PhDs in Russia driving taxi cabs? The point is when (not if) the chickens start coming home to roost in the U.S. economy your paper ain't gonna be worth squat (remember Russia).

Age. Never lived in a time when things were really bad in the USA. "If it's been going good my whole life that will never change since that's all I've ever known".

The smarter person knows that things change AND for the worse. They're also curious how the USA can sustain itself with almost no industry left and titanic levels of debt. What is happening to America's competitive advantages? What will this mean for U.S. standards of living in the future? If you're thinking the U.S. military is going to hold things together (keep the status quo), the Soviet Union tried to play that card. Didn't work.

No kids yet. Good.

Anonymous said...

I have been keeping track of home sales here in Alameda for 6 years, and I can tell you (from looking a public records)that anyone who bought a home here over the last 7 years has to pay minium - $6,000 a year in property taxes...many spend $8,000-10,000 dollars a year on property tax.

Where is the property tax money going? Schools are shit and getting worse every year.

Anonymous said...

"What did the quants say about CDOs?"

Dude, I think you're going overboard in bashing higher education. The problem with quants is that their field, applied mathematics, wasn't designed with stocks in mind but in modeling weather patterns, how a protein folds, the filtering system on a sensor, etc. What's happened is that these applied scientists/engineers are in the wrong profession because places like Applied Materials, Texas Instruments, etc, stopped doing research and these guys had to find work, waving their hands and making up b.s., just to be hired by their associates from the likes of a Wharton school. What's financial engineering (MS/PhD in FE a/o Applied Math) is simply an attempt for those with engineering backgrounds to find work in the trading industries.

America needed to protect its core R&D, keeping the sensitive work stateside, and having the simple stuff built and QA-ed abroad. This way, we'd have stateside IP-heavy competitive industries, like an LG or Samsung but instead, we have well financed advertising companies like eBay or Google, which add little, in terms of the core science/engineering development for future growth. All and all, the problem is that smart American students would rather be patent attorneys, surgeons, a/o work for ad companies like eBay/Googs than in inventing things which could generate jobs in the future (BTW, the automobile, AC generator, and transistor did just that for the American century). Now, the problem is that entrepreneurialism, the Edisons, the Bells, Teslas, etc, need to have a qualified support staff and have that important development work done in the USA than in Uzbekistan or else that so-called American company/industry will be Soviet run and owned within a generation. And unfortunately, keeping only the sales force in the US isn't going to cut it.

RE Investor said...

"Happy Homedebtor said...
Keith,
You're cute - lets go over your statement:"

Happy homedebtor,

Listen, I am a Real Estate investor and own many properties, and I can tell you that you are right. I bought well before all of the insanity, and owned / controlled property in the 90's crash and 80's problems. These people on this blog are living in the reverse bubble right now. Newton's law. This is the inverse of the price hike bubble. Just like the idiots in the NAR kept on saying "Buy now" at the top, these guys all say "sell now" and "the houses are unwanted" at the bottom. I made a lot of money buying houses when they were "unwanted". Flipping is for idiots that like to speculate, purchasing Real Estate for the long term WILL make you money regardless of what these guys say. I bet some of these guys on here are my tenants and will be well in to the future.

Buy low, sell high, very simple. And as far as fundamentals, you are right too. Good schools, good neighborhood, finance right, you will be just fine.

As far as the stock bubble goes, excess is the problem. I can think of many stocks that were COMPLETELY unaffected by the Nasdaq bubble. Again that fundamentals thing. Now Energy and infrastructure are the way to go. Look at the fundamentals. Simple.

LauraV said...

Where is the property tax money going? Schools are shit and getting worse every year.



I know exactly what you mean...these homes I mentioned are in the edison school district, and buyers were paying a PREMIUM on vintage tudor homes and upwards 100k over asking.... I read in the paper this weekend that the city wants to "realocate" the school districts, but closing down 1 middle school. Also, for the coveted "Edison" school district, they want to have a raffle of sorts to bring in kids from the "east end" of the island...
Homeowers are outraged by this. We'll see who wins this battle...at any rate even if buying a premium home in the best school district doesnt guarantee prices will be solid.

Anonymous said...

Happy HomeDebtor: buying a house is always an investment. Investing is simply the action of trading lump-sum cash for projected future cash stream as income (or offset expense, in this case, rent expense). If what you want is a nice roof over your head in a nice shool district, one can always rent a comparable house. It's a matter of deciding whether the projected rent minus tax, insurance and water bill (that an owner has to pay anyway) is worth the price. That's assuming you have 100% cash down payment. If you have to get a mortgage to buy a house, you are essentially going on margin for our "investment/bet" . . . renting from the bank instead from the landlord.

Some real life numbers: I'm currently renting a house outside Boston, in one of the most expensive towns in the country, with median home sale price over $1million. The rent is $2500/mo, the zillow price on the house is $700k. Property tax, insurance and water bill run close to $10k/yr. So, even at 6.5%, the annual interest payment, tax, insurance and water bill, plus upkeep that is paid by the landlord now, would run close to $60k a year, or $5000/mo, none of which contributes to reducing principle, instead of the current $2500/mo rent. So exactly how would that $30k/year extra expense for renting from the bank and the town instead of renting from the landlord help the financial well being of my family?

By renting from the landlord, I get to sock away $30/year into assets that actually appreciate, and without any leveraging risk. According to NAR, average stay in a home is 6 years. We have enough liquid/marketable asset to pay the next 6 years' rent if we wish, and we make that much every year anyway, but why would we want to exit positions that appreciate double-digit per centages to get into some rapidly shrinking assets such as a house?

Anonymous said...

Happy HomeDebtor: buying a house is always an investment. Investing is simply the action of trading lump-sum cash for projected future cash stream as income (or offset expense, in this case, rent expense). If what you want is a nice roof over your head in a nice shool district, one can always rent a comparable house. It's a matter of deciding whether the projected rent minus tax, insurance and water bill (that an owner has to pay anyway) is worth the price. That's assuming you have 100% cash down payment. If you have to get a mortgage to buy a house, you are essentially going on margin for our "investment/bet" . . . renting from the bank instead from the landlord.

Some real life numbers: I'm currently renting a house outside Boston, in one of the most expensive towns in the country, with median home sale price over $1million. The rent is $2500/mo, the zillow price on the house is $700k. Property tax, insurance and water bill run close to $10k/yr. So, even at 6.5%, the annual interest payment, tax, insurance and water bill, plus upkeep that is paid by the landlord now, would run close to $60k a year, or $5000/mo, none of which contributes to reducing principle, instead of the current $2500/mo rent. So exactly how would that $30k/year extra expense for renting from the bank and the town instead of renting from the landlord help the financial well being of my family?

By renting from the landlord, I get to sock away $30/year into assets that actually appreciate, and without any leveraging risk. According to NAR, average stay in a home is 6 years. We have enough liquid/marketable asset to pay the next 6 years' rent if we wish, and we make that much every year anyway, but why would we want to exit positions that appreciate double-digit per centages to get into some rapidly shrinking assets such as a house?

Anonymous said...

"I'm currently renting a house outside Boston, in one of the most expensive towns in the country, with median home sale price over $1million. The rent is $2500/mo

[ snip for brevity ]

{vs owning}:

or $5000/mo, none of which contributes to reducing principle, instead of the current $2500/mo rent."

--------

Boston is one of the most precarious regions of the northeast at this time in terms of career implosion.

Here's the scoop on State St's near term future:

http://tinyurl.com/298aqn

And the sale of the local stock exchange:

http://tinyurl.com/27fj6g

There's a huge cratering in the region's financial services sector (Fidelity's shipping out 2K jobs, alone) as well as many of the established businesses (demise of Gillette/Polaroid, anyone) outside of the colleges and hospitals.

I don't think this region's going back to the heyday of a Digital-Wang-Raytheon (or later on, Powerbuilder-Genuity-CTP) anytime soon but if you look at the home prices, it's as if the "Massachusetts miracle" of M. Dukakis was back with <1% unemployment and dozens of companies starting offices here.

Boston Anon Renter

p.s. Boston Scientific's also outsourcing now, so please don't say "biotech will save the day". That's very 2004.

Anonymous said...

I just bought a home in the Seattle area for 300k when the asking price was 390k. Additionally, the seller paid all my costs and contributed another 9k in repairs and new carpets.

The ridiculous thing? The seller bought the home as a foreclosure in 2003 for 149 (comparables even then were around the 290 mark) AND THEN TOOK OUT A HUGE HELOC on the property, spent it all (not much was spent on the house except new bathrooms) and now owes 320k on the house they bought for 149 only four years ago.

Oh: this isn't his only home either - he's paying at least one other huge mortgage right now that I know of.

In all honesty, I see no need to be rude about things. Just offer low, explain why (and do it nicely) and people often seem very willing to deal with you.

Oh! I almost forgot! In the home I am buying right now, I noticed some of the plumbing needed replaced. The seller said he had absolutely no money left to do the repairs so I told him I was going to walk away from the deal (this was in the inspection phase).

At the last moment, the sellor's realtor stepped in and said he'd personally pay for all the repairs if we could just get this deal to close. (It had been 3 months on the market already and they had dropped to 390k from 410k originally).

There's one realtor that isn't getting his full 3%.