BUY REAL ESTATE NOW

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Submitted by FormerSanDiegan on December 14, 2011 - 11:53pm

Point to this thread in 3 years to prove that I am right.

Submitted by FormerSanDiegan on December 14, 2011 - 11:53pm.

... or wrong.

Submitted by sdduuuude on December 15, 2011 - 1:11am.
Submitted by CA renter on December 15, 2011 - 2:01am.

LOL! :)

Which is it, FSD? 2009 or 2011?

Personally, my money is on December 2012.

Submitted by sdrealtor on December 15, 2011 - 8:34am.

My money is on December 2012 also same as it was when I predicted that nearly 6 years ago.

Submitted by FormerSanDiegan on December 15, 2011 - 9:42am.

CA renter wrote:

LOL! :)

Which is it, FSD? 2009 or 2011?

Personally, my money is on December 2012.

I was correct (so far) on the bottom call. April 17, 2009 at 9:37 pm. is still the bottom in terms of nominal price.

That is different than making a call to buy real estate.

Submitted by FormerSanDiegan on December 15, 2011 - 9:46am.

The Buy call also takes into account:
1. Carrying costs
2. Expected return (including rents)
3. Relative return to alternatives
4. Risk/reward ratio

The nominal price bottom in 2009 occured when we were still losing jobs, rents were declining and interest rates were higher than they are now. These factors are much more favorable now heading into 2012.

Submitted by sdduuuude on December 15, 2011 - 11:24am.

FormerSanDiegan wrote:
CA renter wrote:

LOL! :)

Which is it, FSD? 2009 or 2011?

Personally, my money is on December 2012.

I was correct (so far) on the bottom call. April 17, 2009 at 9:37 pm. is still the bottom in terms of nominal price.

That is different than making a call to buy real estate.

Seriously, that April 17 2009 call was pretty good and doesn't mean the call to buy real estate is bad. I'm just havin' a bit of fun. Dec. 2012 sounds right to me as well for the bottom. Possibly Dec 2013. They'll be pretty close.

Submitted by SD Realtor on December 15, 2011 - 11:25am.

So far it looks like anyone who bought after the beginning of 2009 seems to be in decent shape if we are looking at a long term holding. I would not argue with your latest call with one exceptional wildcard.

I still believe that when interest rates run high (early 80s model) then that will spell depreciation for real estate. Consequently it will be much harder for those who need financing to obtain it so perhaps things scale. However in terms of the classic, I bought my home for $A and now I am selling it for $B if rates run up very high then B may very well be less then A. Lots of factors come into play.

Submitted by briansd1 on December 15, 2011 - 2:24pm.

FormerSanDiegan wrote:
Point to this thread in 3 years to prove that I am right.

That implies that in 3 years one who buys real estate today would feel he made a great investment.

Any advice on commercial property?

Submitted by FormerSanDiegan on December 15, 2011 - 4:01pm.

briansd1 - My original post was a bit light on details, but I am looking more at residential real estate as a landlord (or for personal use).

The commercial cycle (at least in San Diego) seems to usually lag well-behind the residential cycle. But, I really haven't a clue regarding viability of commercial/industrial property right now (or ever).

Submitted by CA renter on December 16, 2011 - 2:28am.

sdrealtor wrote:
My money is on December 2012 also same as it was when I predicted that nearly 6 years ago.

Well...my guess (also made over six years ago) was that December 2012 would be the bottom IF we didn't have any interventions. I said that if the Fed/govt intervened in the market, it would actually bottom later than that, possibly decades later.

Still, I think if someone buys in December 2012, they should be okay. Not that they'll make money, but that they won't take the kind of hit that folks who bought in the 2004-2007 timeframe did (and will). That's obvious to everyone here, though.

Submitted by sdrealtor on December 16, 2011 - 8:37am.

IN all my fairness, my prediction was based upon my belief that option arm/toxic loans would get wiped out quickly which they did.

I beleived those with long fixed periods (10 and 30 yr fixed rate loans) would be fine but I figured on a 2nd wave from all the people that took out 5/1 ARM's between 2004 and 2007 getting hit with resets when rates went way up which they didnt. The low rates minimized much of that and many of these folks have refied into even lower rates. So while it didnt play out exactly as I expected the timeline seems like it should be spot on IMO.

I guess it really speaks to how dynamic all the factors influencing things are.

Submitted by paramount on December 16, 2011 - 10:01am.

BUY REAL ESTATE NOW

Brought to you by NAR

Submitted by Blogstar on December 16, 2011 - 10:56am.

Getting the bug, here. Not sure I want to manage another rental though and I don't have the money yet.

I like the idea some piggs have expressed about buying a rental that becomes a place for the kids to stay when they go to college.

Submitted by sdduuuude on December 16, 2011 - 11:16am.

FormerSanDiegan wrote:
My original post was a bit light on details ...

HAHAHAHA. "a bit light"
That's hilarious.

Submitted by sdduuuude on December 16, 2011 - 11:19am.

Jacarandoso wrote:
I like the idea some piggs have expressed about buying a rental that becomes a place for the kids to stay when they go to college.

Hmmmm. I haven't heard anyone mention it, but I like it. Not sure if I will be able to keep my Clairemont house when we move north but that is a pretty compelling reason.

Submitted by Blogstar on December 16, 2011 - 11:30am.

sdduuuude wrote:
Jacarandoso wrote:
I like the idea some piggs have expressed about buying a rental that becomes a place for the kids to stay when they go to college.

Hmmmm. I haven't heard anyone mention it, but I like it. Not sure if I will be able to keep my Clairemont house when we move north but that is a pretty compelling reason.

Your Clairmemont house would be ideal. Lots of room for them to have roommates that keep income coming in...and for parties.

Submitted by sdduuuude on December 16, 2011 - 11:30am.

paramount wrote:
BUY REAL ESTATE NOW

Brought to you by NAR

Because now is a good time to buy or sell a home.

Submitted by FormerSanDiegan on December 16, 2011 - 3:45pm.

sdduuuude wrote:
paramount wrote:
BUY REAL ESTATE NOW

Brought to you by NAR

Because now is a good time to buy or sell a home.

While I can't say anything for NAR, I don't think it is a good time to sell a home. 2005-2006 was a good time to sell. If you still own something and have survived the past 6 years, it might be the worst time to sell since 1997.

Submitted by Rich Toscano on December 16, 2011 - 11:57pm.

FormerSanDiegan wrote:

While I can't say anything for NAR, I don't think it is a good time to sell a home. 2005-2006 was a good time to sell. If you still own something and have survived the past 6 years, it might be the worst time to sell since 1997.

He didn't mean it; that was just a callback to this hilariously inept piece of NAR propaganda from late 2006:

http://themessthatgreenspanmade.blogspot...

Submitted by outtamojo on December 17, 2011 - 4:00pm.

OMG- mortgage rates seem to have hit a new low. I'm seeing 4.00 with about 3k in fees on Aimloans for investment property- I'm sure others can find even better.

Submitted by sdrealtor on December 17, 2011 - 6:04pm.

FLU must have refied again last week

Submitted by briansd1 on December 21, 2011 - 2:13pm.

Just for fun, I looked at a friend's purchase in an 8 unit development (not in CA). He bought in 12/2010 for $253k including finished basement.

The neighbor two houses down paid $300k without finished basement on 01/2009.

The next door neighbor paid $280k, without finished basement on 3/2009.

There are 7 units that are about to be completed and sold later in the spring. We will see what they sell for. I'm thinking about $275 without finished basement.

As the market is bouncing along the bottom, it depends on the micro market, and you have to create your own bottom.

Submitted by briansd1 on December 21, 2011 - 2:14pm.

sdrealtor wrote:
IN all my fairness, my prediction was based upon my belief that option arm/toxic loans would get wiped out quickly which they did.

I beleived those with long fixed periods (10 and 30 yr fixed rate loans) would be fine but I figured on a 2nd wave from all the people that took out 5/1 ARM's between 2004 and 2007 getting hit with resets when rates went way up which they didnt. The low rates minimized much of that and many of these folks have refied into even lower rates. So while it didnt play out exactly as I expected the timeline seems like it should be spot on IMO.

I guess it really speaks to how dynamic all the factors influencing things are.

I agree with this.

I will add that the reseting ARMs at lower rates have helped people have adjustable mortgages.

People who bought or took cash-out refis at the peak cannot refi anyway because they don't have equity.

Those who got fixed mortgages at the peak and are under water are definitely stuck... so ironically they have all the incentives to strategically default. In the meantime, those with ARMs are benefiting from a low rate environment so they are more likely to stay put.

At the high end, I'm seeing that owners are slowly running out of wherewithal and there are more choices coming up. That's what I expected to happen.

Submitted by flu on December 21, 2011 - 3:57pm.

sdrealtor wrote:
FLU must have refied again last week

Just shut up and rub it in.... or I will add you to my ignore list :) (j/k)

15 year is 3.00 now...Still waiting for a 2.50 no points/no cost.

http://aerofcu.mortgagewebcenter.com/Def...

Submitted by briansd1 on December 21, 2011 - 4:25pm.

Could interest rates fall to 2%?

Interesting question. I suppose they could if we continue to have slow growth like Japan.

Like I said before, I have a friend who's only had ARMs for more than 20 years. He's saved a lot of money. Those who wanted the "security" of fixed rates paid the price. Greenspan was right on this point.

I’m personally not making any bets on interest rates either way. But before you make any bets on higher interest rates as “a sure thing,” don’t forget that…

1) For the last 30 years, the trend in interest rates has been down.
2) Mortgage rates in Japan today are less than 2%.

http://www.topstockanalysts.com/index.ph...

Submitted by AN on December 21, 2011 - 5:28pm.

Sure, if you look from the peak to now, it was a good idea to go with ARM. Here's a chart from 1963: http://mortgage-x.com/images/graph/fhfb_...
Those who got ARM in 1963 would be pretty pissed off for not getting a FRM. It didn't get back to sub 6% until 40 years later. Today, we're at 50+ years low, do you think it's as wise to go with ARM as the 1980s, when you were above historical average?

Submitted by briansd1 on December 22, 2011 - 3:27pm.

AN wrote:
Today, we're at 50+ years low, do you think it's as wise to go with ARM as the 1980s, when you were above historical average?

I think it depends on your holding period. If you want to buy for 7 years and then move up, then I think an ARM might be the way to go.

The difference between 4% and 2.75% is huge in terms of percentage. Maybe go with the ARM and put the difference towards paying down the principal.

I think that rates will stay low for the next 5 years or so because that's how long it will take the western economies to work out the debt overhang. By that time we would have had our own lost decade of slow economic growth.

IMO, as long as economic growth does not get stronger, central banks will work extra hard to keep rates low.

I think that 1963 to 1983, roughly a two decade stretch, was a different kind of economy. Population growth was strong. People were buying cars and new technology. The babies boomers were moving to the suburbs, installing central air, and enjoying things their parents never had growing up.

Anyway, time will tell... in 5 to 7 years, we can look back just for fun.

Submitted by bearishgurl on December 22, 2011 - 3:31pm.

briansd1 wrote:
Could interest rates fall to 2%?

Interesting question. I suppose they could if we continue to have slow growth like Japan.

Like I said before, I have a friend who's only had ARMs for more than 20 years. He's saved a lot of money. Those who wanted the "security" of fixed rates paid the price. Greenspan was right on this point.

I’m personally not making any bets on interest rates either way. But before you make any bets on higher interest rates as “a sure thing,” don’t forget that…

1) For the last 30 years, the trend in interest rates has been down.
2) Mortgage rates in Japan today are less than 2%.

http://www.topstockanalysts.com/index.ph...

brian, its been 25 years for me (taking out only ARM mtgs). I feel I HAVE saved a lot of money over the years since I never had a need for "serial refinancing" (for a rate reduction) OR "cash out."

However, since I believe I have a low lifetime cap of 2.7%, I'll never see a low of 2% with my current mtg (assuming fixed rates ever go that low).

***

Happy holidays, Piggs! I've been "swamped" lately :=D

Submitted by AN on December 22, 2011 - 3:51pm.

briansd1 wrote:
AN wrote:
Today, we're at 50+ years low, do you think it's as wise to go with ARM as the 1980s, when you were above historical average?

I think it depends on your holding period. If you want to buy for 7 years and then move up, then I think an ARM might be the way to go.

The difference between 4% and 2.75% is huge in terms of percentage. Maybe go with the ARM and put the difference towards paying down the principal.

I think that rates will stay low for the next 5 years or so because that's how long it will take the western economies to work out the debt overhang. By that time we would have had our own lost decade of slow economic growth.

IMO, as long as economic growth does not get stronger, central banks will work extra hard to keep rates low.

I think that 1963 to 1983, roughly a two decade stretch, was a different kind of economy. Population growth was strong. People were buying cars and new technology. The babies boomers were moving to the suburbs, installing central air, and enjoying things their parents never had growing up.

Anyway, time will tell... in 5 to 7 years, we can look back just for fun.


I agree with you that it all depends on your desired holding period. If you plan to hold for only 7 years, getting a 7/1 ARM is almost like getting a FRM, since rate won't change for you at all. Even if rate goes down, you won't get the lower rate. Unless you're talking about getting a 1/1 ARM.

You say rates will stay low for the next 5 years, but you didn't say wether it'll be lower than it is today or higher and what's consider low? Considering historical average is ~8%, isn't anything <8% considered low?

I agree that as long as economic growth doesn't get stronger, the central banks will work extra hard to keep rates low. For our sake, I hope we will get stronger economic grow soon. It would suck for a lot of people if we continue what we're seeing today for the next 5-10 years.

Kids have always and I would assume will always enjoy things their parents never had growing up. Just look at kids today, they're enjoying smartphones and tablets. Their parents never had such things growing up, even if their parents were billionaires.

BTW, serial refinancing isn't always a bad thing, especially if you get a credit back.

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