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  • April 17, 2009 at 9:57 AM #15512
    Rt.66
    Participant

    I posted some of this on another thread, but that thread is up to 7 pages so I thought it might make a good new thread topic:

    This 50% off thing is funny. Do people still rush into the jewelry store waving their credit card when they see the ever-present 50% off sign?

    50% off in RE gets us to what, 2001-2002? 2002 was a good economy, houses had been going up for years, it was in no way a bottom from which the bubble started. 2002 was the last year of regular, almost sane price increases in RE, then the bubble took over and people gladly paid twice what a house sold for in 2001-2002.

    So is 50% a good deal? Is the shape of the economy as rosy as it was in 2002?

    Just as everyone now knows that the jewelry store’s regular price is actually the 50% off price, 2001-2002 pricing will be seen as the real price and the point at which real discounts begin.

    Look at Japan; people over there hung on year after year thinking the market would come back and now hundreds of thousands have paid 20 years on a house STILL worth 1/2 what they paid. And things are not finally getting better over there; rather they are sinking back into a financial black hole.

    The market needs knife catchers and it will find them. The Gov. is orchestrating finger amputations perfectly with a new housing programs every 3 months, relaxed mark-to-market, TARP funding, etc. The banks in turn hide the inventory, stall foreclosures and create a frenzied bidding environment on any house they pull out of the massive backlog of REOs and put on the market in the magical (mythical) 50% off range.

    Jobs disappear, stores close, 401ks become 201ks, pensions evaporate in BK courts and yet prices that doubled in the biggest bubble in history, and then came back down to where they started, are considered 50% off deals????

    A realtor skilled in digit re-attachment could probably make a killing offering a 2-for-1 service.

    April 17, 2009 at 10:33 AM #382941
    Coronita
    Participant

    If a good CV home that I want to upgrade to is now 50%, I’d rush to the bank and buy it.

    I would meet and possibly slightly bid up the price to beat out everyone who has to carry a loan to buy the home…

    So to answer your question, yes there are people who would buy at 50% off, since we don’t consider this the end of the world.

    That said, I *doubt* most people will find 50% homes anytime soon in the coastal areas available to be bought. I see three tiers of buyers.

    1) Wholesale: this will be the private equity groups that buys homes in bulk. They are the ones that will have the resources to buy homes in desirable areas 50% off. They’ll come in with cash in hand and buy in bulk. and try to resell it for a profit.

    2) Discounted: these will will be people that pick up homes slightly marked up from wholesale. They have financial capital in hand (near or close to near cash deal, but lack the capacity to do bulk deals). Mostly these are folks looking for primaries

    3) Retail: folks that buy from agents,mls,etc and pay more than discounted. Typically people that will need to carry a loan to buy a home in these coastal areas.

    Short of having cash on hand or access to cash on hand or connections with banks, me thinks those tier 1 & 2 buyers are going to scoop up these 50% properties (if any)…

    As Rich has writen about, Japan might not be the model to follow in drawing parallels to the U.S. Afterall, americans are a net debtor, not a net saver. Deflation as a public policy, probably isn’t the solution.

    April 17, 2009 at 10:33 AM #383210
    Coronita
    Participant

    If a good CV home that I want to upgrade to is now 50%, I’d rush to the bank and buy it.

    I would meet and possibly slightly bid up the price to beat out everyone who has to carry a loan to buy the home…

    So to answer your question, yes there are people who would buy at 50% off, since we don’t consider this the end of the world.

    That said, I *doubt* most people will find 50% homes anytime soon in the coastal areas available to be bought. I see three tiers of buyers.

    1) Wholesale: this will be the private equity groups that buys homes in bulk. They are the ones that will have the resources to buy homes in desirable areas 50% off. They’ll come in with cash in hand and buy in bulk. and try to resell it for a profit.

    2) Discounted: these will will be people that pick up homes slightly marked up from wholesale. They have financial capital in hand (near or close to near cash deal, but lack the capacity to do bulk deals). Mostly these are folks looking for primaries

    3) Retail: folks that buy from agents,mls,etc and pay more than discounted. Typically people that will need to carry a loan to buy a home in these coastal areas.

    Short of having cash on hand or access to cash on hand or connections with banks, me thinks those tier 1 & 2 buyers are going to scoop up these 50% properties (if any)…

    As Rich has writen about, Japan might not be the model to follow in drawing parallels to the U.S. Afterall, americans are a net debtor, not a net saver. Deflation as a public policy, probably isn’t the solution.

    April 17, 2009 at 10:33 AM #383401
    Coronita
    Participant

    If a good CV home that I want to upgrade to is now 50%, I’d rush to the bank and buy it.

    I would meet and possibly slightly bid up the price to beat out everyone who has to carry a loan to buy the home…

    So to answer your question, yes there are people who would buy at 50% off, since we don’t consider this the end of the world.

    That said, I *doubt* most people will find 50% homes anytime soon in the coastal areas available to be bought. I see three tiers of buyers.

    1) Wholesale: this will be the private equity groups that buys homes in bulk. They are the ones that will have the resources to buy homes in desirable areas 50% off. They’ll come in with cash in hand and buy in bulk. and try to resell it for a profit.

    2) Discounted: these will will be people that pick up homes slightly marked up from wholesale. They have financial capital in hand (near or close to near cash deal, but lack the capacity to do bulk deals). Mostly these are folks looking for primaries

    3) Retail: folks that buy from agents,mls,etc and pay more than discounted. Typically people that will need to carry a loan to buy a home in these coastal areas.

    Short of having cash on hand or access to cash on hand or connections with banks, me thinks those tier 1 & 2 buyers are going to scoop up these 50% properties (if any)…

    As Rich has writen about, Japan might not be the model to follow in drawing parallels to the U.S. Afterall, americans are a net debtor, not a net saver. Deflation as a public policy, probably isn’t the solution.

    April 17, 2009 at 10:33 AM #383447
    Coronita
    Participant

    If a good CV home that I want to upgrade to is now 50%, I’d rush to the bank and buy it.

    I would meet and possibly slightly bid up the price to beat out everyone who has to carry a loan to buy the home…

    So to answer your question, yes there are people who would buy at 50% off, since we don’t consider this the end of the world.

    That said, I *doubt* most people will find 50% homes anytime soon in the coastal areas available to be bought. I see three tiers of buyers.

    1) Wholesale: this will be the private equity groups that buys homes in bulk. They are the ones that will have the resources to buy homes in desirable areas 50% off. They’ll come in with cash in hand and buy in bulk. and try to resell it for a profit.

    2) Discounted: these will will be people that pick up homes slightly marked up from wholesale. They have financial capital in hand (near or close to near cash deal, but lack the capacity to do bulk deals). Mostly these are folks looking for primaries

    3) Retail: folks that buy from agents,mls,etc and pay more than discounted. Typically people that will need to carry a loan to buy a home in these coastal areas.

    Short of having cash on hand or access to cash on hand or connections with banks, me thinks those tier 1 & 2 buyers are going to scoop up these 50% properties (if any)…

    As Rich has writen about, Japan might not be the model to follow in drawing parallels to the U.S. Afterall, americans are a net debtor, not a net saver. Deflation as a public policy, probably isn’t the solution.

    April 17, 2009 at 10:33 AM #383577
    Coronita
    Participant

    If a good CV home that I want to upgrade to is now 50%, I’d rush to the bank and buy it.

    I would meet and possibly slightly bid up the price to beat out everyone who has to carry a loan to buy the home…

    So to answer your question, yes there are people who would buy at 50% off, since we don’t consider this the end of the world.

    That said, I *doubt* most people will find 50% homes anytime soon in the coastal areas available to be bought. I see three tiers of buyers.

    1) Wholesale: this will be the private equity groups that buys homes in bulk. They are the ones that will have the resources to buy homes in desirable areas 50% off. They’ll come in with cash in hand and buy in bulk. and try to resell it for a profit.

    2) Discounted: these will will be people that pick up homes slightly marked up from wholesale. They have financial capital in hand (near or close to near cash deal, but lack the capacity to do bulk deals). Mostly these are folks looking for primaries

    3) Retail: folks that buy from agents,mls,etc and pay more than discounted. Typically people that will need to carry a loan to buy a home in these coastal areas.

    Short of having cash on hand or access to cash on hand or connections with banks, me thinks those tier 1 & 2 buyers are going to scoop up these 50% properties (if any)…

    As Rich has writen about, Japan might not be the model to follow in drawing parallels to the U.S. Afterall, americans are a net debtor, not a net saver. Deflation as a public policy, probably isn’t the solution.

    April 17, 2009 at 10:56 AM #382998
    Rt.66
    Participant

    You are correct. Many areas have yet to see 50% off. Some areas appear to be below that mark. It’s just a matter of time though. The time frame at which this market has fallen already, is staggering. Areas of Riverside Co. seemed to fall to 50% off right out of the gate, as if the banks knew this was the starting point at which to start pricing inventory, entering this global collapse. Still the better areas of SD will put up a fight.

    The sales pop that “50% off” generates will die in RE. Lower prices breed expectations of still lower prices. The debt bubble America is buried in (and the world) is worse than the housing bubble. And we will not be working our way thru it in 2-3 years, not the way Obama and his cronies are handling it.

    Does anybody go to the gas station today and pay $2.30, and consider that a 50% off sale? Afterall it is 50% off the bubble price. Nope, $2.30 is the regular price.

    You make a good point about Japan; they were in a better position than us, post RE bubble bursting. From what I have read, we are following Japan’s model in dealing with this crisis.

    April 17, 2009 at 10:56 AM #383266
    Rt.66
    Participant

    You are correct. Many areas have yet to see 50% off. Some areas appear to be below that mark. It’s just a matter of time though. The time frame at which this market has fallen already, is staggering. Areas of Riverside Co. seemed to fall to 50% off right out of the gate, as if the banks knew this was the starting point at which to start pricing inventory, entering this global collapse. Still the better areas of SD will put up a fight.

    The sales pop that “50% off” generates will die in RE. Lower prices breed expectations of still lower prices. The debt bubble America is buried in (and the world) is worse than the housing bubble. And we will not be working our way thru it in 2-3 years, not the way Obama and his cronies are handling it.

    Does anybody go to the gas station today and pay $2.30, and consider that a 50% off sale? Afterall it is 50% off the bubble price. Nope, $2.30 is the regular price.

    You make a good point about Japan; they were in a better position than us, post RE bubble bursting. From what I have read, we are following Japan’s model in dealing with this crisis.

    April 17, 2009 at 10:56 AM #383456
    Rt.66
    Participant

    You are correct. Many areas have yet to see 50% off. Some areas appear to be below that mark. It’s just a matter of time though. The time frame at which this market has fallen already, is staggering. Areas of Riverside Co. seemed to fall to 50% off right out of the gate, as if the banks knew this was the starting point at which to start pricing inventory, entering this global collapse. Still the better areas of SD will put up a fight.

    The sales pop that “50% off” generates will die in RE. Lower prices breed expectations of still lower prices. The debt bubble America is buried in (and the world) is worse than the housing bubble. And we will not be working our way thru it in 2-3 years, not the way Obama and his cronies are handling it.

    Does anybody go to the gas station today and pay $2.30, and consider that a 50% off sale? Afterall it is 50% off the bubble price. Nope, $2.30 is the regular price.

    You make a good point about Japan; they were in a better position than us, post RE bubble bursting. From what I have read, we are following Japan’s model in dealing with this crisis.

    April 17, 2009 at 10:56 AM #383502
    Rt.66
    Participant

    You are correct. Many areas have yet to see 50% off. Some areas appear to be below that mark. It’s just a matter of time though. The time frame at which this market has fallen already, is staggering. Areas of Riverside Co. seemed to fall to 50% off right out of the gate, as if the banks knew this was the starting point at which to start pricing inventory, entering this global collapse. Still the better areas of SD will put up a fight.

    The sales pop that “50% off” generates will die in RE. Lower prices breed expectations of still lower prices. The debt bubble America is buried in (and the world) is worse than the housing bubble. And we will not be working our way thru it in 2-3 years, not the way Obama and his cronies are handling it.

    Does anybody go to the gas station today and pay $2.30, and consider that a 50% off sale? Afterall it is 50% off the bubble price. Nope, $2.30 is the regular price.

    You make a good point about Japan; they were in a better position than us, post RE bubble bursting. From what I have read, we are following Japan’s model in dealing with this crisis.

    April 17, 2009 at 10:56 AM #383633
    Rt.66
    Participant

    You are correct. Many areas have yet to see 50% off. Some areas appear to be below that mark. It’s just a matter of time though. The time frame at which this market has fallen already, is staggering. Areas of Riverside Co. seemed to fall to 50% off right out of the gate, as if the banks knew this was the starting point at which to start pricing inventory, entering this global collapse. Still the better areas of SD will put up a fight.

    The sales pop that “50% off” generates will die in RE. Lower prices breed expectations of still lower prices. The debt bubble America is buried in (and the world) is worse than the housing bubble. And we will not be working our way thru it in 2-3 years, not the way Obama and his cronies are handling it.

    Does anybody go to the gas station today and pay $2.30, and consider that a 50% off sale? Afterall it is 50% off the bubble price. Nope, $2.30 is the regular price.

    You make a good point about Japan; they were in a better position than us, post RE bubble bursting. From what I have read, we are following Japan’s model in dealing with this crisis.

    April 17, 2009 at 11:31 AM #383034
    SDEngineer
    Participant

    You need to take into account the effect of inflation over time as well.

    At 50% off, prices may be at a nominal level approaching that of 2001, but inflation adjusted, they’re much closer to the previous busts lows of 1996-1997. Wage inflation in San Diego County between 2000 and 2008 was over 30% (using US Census estimations – yes, San Diego did much better in wage inflation than much of the country), and that has to be taken into account. An inflation comparable “bottom” equivalent to the previous “bottom” would then be about 140% of 1996 prices (and thats probably on the conservative side).

    Admittedly, this was a historic bubble, it’s POSSIBLE that the overshoot will be enough to get us back to the previous cycles nominal bottom prices (which looks like about 60-65% off peak), but I think it unlikely, as flu’s tier 1 and tier 2 buyers would be out in droves picking up properties that would cashflow instantly (and heavily) as rentals.

    April 17, 2009 at 11:31 AM #383304
    SDEngineer
    Participant

    You need to take into account the effect of inflation over time as well.

    At 50% off, prices may be at a nominal level approaching that of 2001, but inflation adjusted, they’re much closer to the previous busts lows of 1996-1997. Wage inflation in San Diego County between 2000 and 2008 was over 30% (using US Census estimations – yes, San Diego did much better in wage inflation than much of the country), and that has to be taken into account. An inflation comparable “bottom” equivalent to the previous “bottom” would then be about 140% of 1996 prices (and thats probably on the conservative side).

    Admittedly, this was a historic bubble, it’s POSSIBLE that the overshoot will be enough to get us back to the previous cycles nominal bottom prices (which looks like about 60-65% off peak), but I think it unlikely, as flu’s tier 1 and tier 2 buyers would be out in droves picking up properties that would cashflow instantly (and heavily) as rentals.

    April 17, 2009 at 11:31 AM #383491
    SDEngineer
    Participant

    You need to take into account the effect of inflation over time as well.

    At 50% off, prices may be at a nominal level approaching that of 2001, but inflation adjusted, they’re much closer to the previous busts lows of 1996-1997. Wage inflation in San Diego County between 2000 and 2008 was over 30% (using US Census estimations – yes, San Diego did much better in wage inflation than much of the country), and that has to be taken into account. An inflation comparable “bottom” equivalent to the previous “bottom” would then be about 140% of 1996 prices (and thats probably on the conservative side).

    Admittedly, this was a historic bubble, it’s POSSIBLE that the overshoot will be enough to get us back to the previous cycles nominal bottom prices (which looks like about 60-65% off peak), but I think it unlikely, as flu’s tier 1 and tier 2 buyers would be out in droves picking up properties that would cashflow instantly (and heavily) as rentals.

    April 17, 2009 at 11:31 AM #383539
    SDEngineer
    Participant

    You need to take into account the effect of inflation over time as well.

    At 50% off, prices may be at a nominal level approaching that of 2001, but inflation adjusted, they’re much closer to the previous busts lows of 1996-1997. Wage inflation in San Diego County between 2000 and 2008 was over 30% (using US Census estimations – yes, San Diego did much better in wage inflation than much of the country), and that has to be taken into account. An inflation comparable “bottom” equivalent to the previous “bottom” would then be about 140% of 1996 prices (and thats probably on the conservative side).

    Admittedly, this was a historic bubble, it’s POSSIBLE that the overshoot will be enough to get us back to the previous cycles nominal bottom prices (which looks like about 60-65% off peak), but I think it unlikely, as flu’s tier 1 and tier 2 buyers would be out in droves picking up properties that would cashflow instantly (and heavily) as rentals.

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