We are only at the bottom when absolutely no one thinks there is money to be made in real estate. Yesterday, hanging out with the neighbors, up comes the topic of house flipping. With a completely straight face, one otherwise intelligent and educated lady begins talking about how house flipping is her next career. Maybe not right now, but soon.
It has to be the right career for her, because she really likes looking at houses!
The bottom is when the man, or in this case woman, in the street swears only a fool would buy real estate.
Friend of mine has a friend who is really excited, she bought a house which had gone up to about 900K in 2005 for 640K. Current sales prices in her neighborhood were 740K. Has no intention of living there…. She bought it for an investment! It’s a neighborhood in La Costa – older homes – can get about 2,800/ month rental.
I’m figuring that she will be negative by $2,500 / month on this ‘investment’. I guess she hopes that she will sell it for a million next year (after the bubble stuff goes away!)…
There are still suckers out there… There are still folks who can’t do math but can sign their name!
Fools and their money are soon parted. It’s an old adage but it’s still applicable to many fools who attempt various endeavors.
Why ANYONE who can read and has an I.Q. over 80 would buy a home for investment or as a principal residence before late 2009 (at the earliest) simply escapes my comprehension.
“Why ANYONE who can read and has an I.Q. over 80 would buy a home for investment or as a principal residence before late 2009 (at the earliest) simply escapes my comprehension.”
Ditto, but people are slow to learn. Thus the down slope accelerates. People buy, thinking that prices couldn’t possibly go down further, then they complain bitterly to everyone they meet when they find out they were wrong. The malaise spreads until the last bull is silenced. That is the bottom.
In the last few weeks my mom has wanted to buy a condo (great deal! Only 640K, was 740K! I told her NO… She knows real estate is having problems, but the average person doesn’t really know what we know is going on, doesn’t care, or is afraid to look at the reality – after all this is their home we are talking about…
What’s alarming to me is that everything we are seeing today is just the start of the effects of the bubble. Considering what’s to come from declining home values, resetting ARMs, job layoffs, tightened spending, rising foreclsoures and inventories, it unequivocally has to get worse before we get out of this mess. The pressure on the middle class among higher costs of living, and declining wages is eventually going to necessitate revolutionary reform.
If she can write a check for $128K and has an income of 200K (Or she is sitting on $640K), she is probably a very smart lady and knows what she is doing. You shouldn't be too worried. If she want's a mortgage for $512K, the lender is also going to do a rather thorough due diligence on the property.
Actually she wanted me to pay cash for it… That’s why I said NO! She rents on the outskirts of Newport Beach for about 2K / month (I pay it) and told me her real estate friend said that she is just throwing money away – it is such a good deal at 640K…
I went semi-berserk! My own mom, agreeing with the Real Estate establishment! LOL… Anyway I explained the economics to her and told her to keep renting for a couple of years…. As cooprider14 just said – it is gonna get hugely worse…
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