April 24, 2008

Before you go out and try to catch a falling knife...


5% off - great deals! I'm buying!

10% off - wow, can you believe my luck! I'll buy more! Double down!

20% off - holy crap, this is too good to be true! Load up the truck!

40% off - hmmm... maybe I shouldn't buy, I guess ____ could always go lower

60% off - now we've hit bottom! Buy buy buy!

70% off - OK, NOW is a great time to buy!

80% off - Hello, suicide hotline?


Man, you'd have thought the dot-com crash would have taught people a lesson. Just because it's on sale doesn't make it a good deal. It's the P/E stupid. It will always be the P/E stupid.

Just ask the pets.com shareholders. Or people who listened to idiot realtors on commission and tried to catch a condo knife in Phoenix, Miami, San Diego etc. last year.

26 comments:

Anonymous said...

i'd buy at 50% current prices (in LA) even if there is further likely price decine. that would bring the mortgage payment to about what rent would be. basically it would be getting a 0% return on my down payment, but better then a stock market loss

redondo_beach_dude said...

The bottom won't be a short one, as in a V, but a long, deep, trough. Realistically, 50 to 60%, or 1996 prices here at the Los Angeles South Bay beaches of Manhattan, Hermosa, Redondo would be $300-350 per square foot. And the time to pick and choose...

self-hating white kook said...

That reminds me of pets.com

Anonymous said...

You should come to the Bay Area in California where people are still paying only $5,000 to $10,000 less than the offer price on bank owned homes.

vanilla ice said...

You'll know the bottom when the average smoe says now's a bad's time to buy. Or, a home's a bad investment, which it is.

Frank@Scottsdale-Sucks.com said...

We're already at 40% here in Newport Beach, on tons of properties (some are inching above 40%). I'll be a happy camper a year from now when it hits 60% from peak.

W.B. said...

STOP BEING STUPID. You're getting carried away.

First off, be more specific. Are we talking about:

-80% off some gheto crack house?
-80% off an exurb neighborhood that is 90% vacant?
-80% off a nice house in a nice community with low inventory?

Prices are not coming down 80% on the latter of the 3.

How about 100% off? How about you pay me to live in a nice house? You are making the same error of losing fundamentals on the way down as speculators did on the way up.

Walmart is my GOD said...

I would start to think at 50% off of peak. But then I would have to look at my job situation. I work with an importer of fine chinese goods(walmart ;D) and if I loose my job I wouldnt be able to find anything.

Has anyone looked in Monster.com lately. It is bad in my area, no jobs.

Anonymous said...

I'll lick the bottom of my shoe if Los Angeles prices fall to $200K (basically 50% from current) median for single family homes.

That puts prices at below the long-term trend I think. But crazy things are happening each day it seems.

Anonymous said...

People have yet to snap out of their early 00's fueled euphoria regarding housing prices. 10% off from last year sounds like a superb deal if you're used to 20% gains each year. No one believes that housing prices are really going to fall that much in SoCal. But they're wrong wrong wrong.

DOPES said...

MY EQUITY FADES...

THE AMERICAN DREAM DIMS...

I REMEMBER A TIME OF CHAOS...

MCMANSIONS BUILT ON WASTELAND...

BUT MOST OF ALL, I REMEMBER THE ECONOMIST...

THE MAN WE CALLED LEREAH...

TO UNDERSTAND WHO HE WAS, YOU HAVE TO GO BACK TO ANOTHER TIME...

WHEN THE WORLD WAS POWERED BY HOUSING...

AND THE DESERTS SPROUTED GREAT CITIES OF VINYL SIDING AND STUCCO...

GONE NOW, FORECLOSED UPON...

FOR REASONS LONG FORGOTTEN, THE POLITICIANS PROMISED BAILOUTS WHICH ULTIMATELY BANKRUPTED THEM ALL...

WITHOUT FINANCING THEY WERE NOTHING. THEY'D BUILT A HOUSE FOR US ALL...

THE ILLEGAL IMMIGRANT CONSTRUCTION MACHINE SPUTTERED AND STOPPED...

THE LENDERS TALKED AND TALKED AND TALKED...

BUT NOTHING COULD STEM THE AVALANCHE OF JINGLE MAIL...

THEIR BANKS FOLDED AND THEIR CITIES DEFAULTED...

A WHIRLWIND OF COPPER LOOTING...

A FIRESTORM OF BURNT FORECLOSURES...

MEN BEGAN TO BEAT ON REALTWHORES...

ON THE ROADS IT WAS A FOR SALE NIGHTMARE...

ONLY THOSE MOBILE ENOUGH TO RENT...

BRUTAL ENOUGH TO DENY HOMEDEBTOR RELATIVES LOANS WOULD SURVIVE...

THE STARVING LENDERS PANHANDLED THE HIGHWAYS...

READY TO KILL FOR RAMEN OR JAMBA JUICE...

AND IN THIS MAELSTROM OF DECAY...

ORDINARY MEN WERE BATTERED AND SMASHED...

MEN LIKE CASEY SERIN...

THE POSTER CHILD FOR MORTGAGE FRAUD...

IN THE STROKE OF A GAVEL, HE LOST EVERYTHING...

AND BECAME A WANTED MAN...

A MAN HUNTED BY THE LENDERS OF HIS PAST...

A MAN WHO HID OUT IN THE AUSSIE OUTBACK...

AND IT WAS HERE IN THIS BLIGHTED PLACE...

THAT HE LEARNED TO BORROW AGAIN...

DOPES!!!

christiangustafson said...

You WANT to buy in a hostile lending environment. I want to maximize the value of my sterling credit.

Also, any down-payment money you have on hand today should be kept aside as a "Depression survival fund" to get through the coming dark times.

Anonymous said...

I'm thinking 2001-2002 prices
ultimately, 250-300k for a decent
30yr old 3+2 single family.
In parts of OC these were
650-700 at the peak.
If prices do fall this
much, the economy in SoCal
will be so weak that rents
may fall as well. Or not
go up for many years.
In the 90's rents barely
budged for 7-8 years.
91-98 or so.

mairca izda debol said...

The housing bubble is a conspearsy by white people to dithenfrangize the blacks and browns

Anonymous said...

You just can't say xyz% off. Three years ago, the house I'm purchasing was 73% overvalued. Three years of inflation later (not appreciation) and a 35% drop in price and it's at it's (constant $) long term historical price (and rent/income/price ratios make sense).
So yes, prices went up to 250% of their starting price (which is a 150% increase) but only a 35% drop over three years brings it down to historical norms. It's math and wording.
BTW, huge ugly houses in nowhere land have 0 appeal to those who can afford the upkeep that will kick in once the roof/flooring/paint wear out. Also read a good article saying Miami beach condos rent is less than overhead (before mortgage). Both of these could easily fall to $0.

Agent 99 said...

I wanted to buy a beach house/condo.
But, they were out of reach.
More than $600,000 for something "second row". Then, I thought, I'd rather spend one month every summer for the rest of my life in a Tuscan rental and have money left over. So, I never bought a beach property...They'd have to go down by 80%..."Hello, Virtual Reality, I'm looking for a little house near the beach..."

Big Cheese said...

Wait for the next big one (earthquake) to hit SoCal. That'll get the prices down to 70 - 80% below the peak.

Gotta love the forces of supply & demand.

-BC

Russ DoGG said...

http://housingfear.blogspot.com/2008/02/my-condo-development-has-been.html

The mortgage meltdown is so bad that banks are now refusing to lend money to certain condo developments that they feel are high risk.

If you click Michigan on the Wamu blacklist you will see a list of all the condo developments which have been blacklisted and mine is one of them.

I guess soon you will need to have the full purchase price in cash if you want to purchase a condo which will only drive condo prices down even further.
****
Blogger chris provided a link to the blacklist. Check it before you buy a condo. It isnt smart to try and get a deal catching these falling knives. These condo units may start selling for cash on hand- or next to nothing.

The monthly association fee maintenance costs are so high on those Miami condos- I really think that they may just be transferred when you agree to take over liability for the monthly fees.

Simply amazing

Anonymous said...

I go a little further: It's the CAP Rate stupid.

Anonymous said...

I work with an importer of fine chinese goods(walmart ;D) and if I loose my job I wouldnt be able to find anything.

That explains the loose word applied, then.

Anonymous said...

Nation, you should listen to me. I told you more than a year ago that things would get interesting by Dec 2007, because Alt-As were worse than subprime. Then I told you long time ago that the next shoe to drop was mass unemployment.

You can add to that costly food, skyrocketing gas, inflation raging, and you have a perfect storm.

Wait for the mass unemployment to explode first in all sectors, but really really wait for the next shoe to drop: CREDIT CARD DEBT. Many people are still living off credit cards, especially the ones who just got laid-off or will be by:

airlines, Wall Street, retail, local gov, automakers and parts, hospitality, real estate, mfrng, construction, tech, etc. A huge tsunami of lay-offs is coming.

There will be a lot of broke people with rotten credit ratings, unable to buy a home for years to come.

Just in time for the European economy to blow.

LauraVella said...

In San Leandro,Ca a new, small condo development was built last year. Priced at $612,000 each.

Today, these same units are selling for $349,000 - that's a 42% drop, and we're just getting started.

There are either 6 or 7 condos in this new building. It's on a very busy street, across from a 7-11 and an Arco Station. Not the best location for sure. Imagine paying $612,000 for one of these three story small condos (with no yard)then 6 months later the price is cut almost in half because the remaining ones (2)had to be auctioned off just last Month.

Check them out here on Zillow:
addresses: 1111 Davis Street, 94577
1121, 1105, 1119 & 1111. Some have sold twice in less than a year.

If prices are 42% off now, imagine how much further prices will drop another year or two from now.

Knife catcher better think twice about assuming they're getting a great deal...I guarantee prices will fall a lot more in the coming years.

I grew up three blocks away over on Gardner Blvd. I know this area very well. These auction prices of $349K are not going to hold their value. Realistically, they should be selling for more like $150,000.

I'm sure buyers and homeowners never imagined in their wildest dreams these would ever sell for $349k ...do I hear $150?

Anonymous said...

Anon said:"i'd buy at 50% current prices (in LA) even if there is further likely price decine. that would bring the mortgage payment to about what rent would be. basically it would be getting a 0% return on my down payment, but better then a stock market loss"


What happens when the price drops another 20%further, and the value doesnt recover? Just because prices always recoved before, doesnt mean they will again. Remember, we have never seen this kind of credit lending abuse since the great depression.

X said...

I don't know why people are even trying to guess where the bottom will be.

You won't have to guess. Housing prices have never experienced a V-shaped rebound (like stocks).

They hit bottom and stay there for several years. It's not like all of a sudden prices are going to start shooting back up.

So, relax - when prices stop going down for at least a year or two - then we might start talking about a bottom. But there should be no fear in "missing" it. Prices aren't going back up anytimes soon. And in most places, they will fall much further from where they are now.

Anonymous said...

The worst modern market we've ever seen was Japan and Hong Kong. Both countries had prices drop about 70%but over 7-10years. I'm sure we will see a quick 15-30% initial drop then just drag around. The time to buy is when everyone says "real-estate? you are crazy, its a horrible investment" So far people are either in denial or fear, maybe panic

Anonymous said...

I wonder about the long-term situation in California. It is easy to laugh at what went on in Detroit and Cleveland, where prices were bid up in areas with falling employment/population and rising crime. But how different is California these days?

California is now a rotten place to raise kids, especially if you can't afford private schools, and the weather is only nice if you are reasonably close to the beach. The crime, the taxes, the crowded freeways and other public places -- all of these factors make California much less attractive than it was in the 60s and 70s. Educated white people in their 20s and 30s have been much more likely to leave the state than to arrive over the past couple of decades, and most people do NOT want to live in "highly diverse" high density housing developments. All of the overpriced condos in CA have been advertised as being "exclusive" in one way or another. Once the condo development is more than half non-white, white people simply will NOT buy at any price, and non-whites will not see the property as "exclusive" either. They will rightly assume that the community will become 100% minority within a couple of years, with further price declines. Many of these condos will be undermaintained as people stop paying HOA fees.

Anybody buying a California condo these days that isn't in an upscale right-at-the-beach area may indeed end up in gang-banger slum housing (with granite countertops.)