I need your opinions…..

[HLS]

I am working on something that needs your input, whatever that might be….

Crazy Premise:

Let’s say Oct 2007 becomes the bottom of So Cal real estate market and prices flatten out by month end…

Builders stop cutting prices and resale home sellers don’t want to reduce prices.
REO’s come on the market at prices equal to what resales are, so asking prices stop dropping.

There are thousands of homes for sale.

People who want to buy now cannot qualify for a loan at todays rates nor do they have a down payment of at least 10%.

Now what ???

[The OC Scam]

A few problems with your questions:

1. As long as Builders have inventory they have to cut prices until they sell.

2. Seller that has to sell will cut prices until they sell.

3. REO’s are exposed to the worst of the of the price cuts because the banks have liability that require limited property ownership. This is why if you follow the reverted back to lender discount price in which the banks are purchasing homes back are extremely low making room for low listings to beat the rest of sellers.

By the way you answered your questions with People want to buy but cannot afford!!!! Therefore homes must become affordable or banks start offering subprime loans again?

OCT 2007 is just picking up speed and no way the bottom…

I have put an offer on a REO with a 35% low ball offer the bank is getting a BPO on my offer because I have scared the shit out of them with local comps, listings and repairs that put it at 35% off with room to depreciate and also I’m the only offer they have received

[The OC Scam]

A few problems with your questions:

1. As long as Builders have inventory they have to cut prices until they sell.

2. Seller that has to sell will cut prices until they sell.

3. REO’s are exposed to the worst of the of the price cuts because the banks have liability that require limited property ownership. This is why if you follow the reverted back to lender discount price in which the banks are purchasing homes back are extremely low making room for low listings to beat the rest of sellers.

By the way you answered your questions with People want to buy but cannot afford!!!! Therefore homes must become affordable or banks start offering subprime loans again?

OCT 2007 is just picking up speed and no way the bottom…

I have put an offer on a REO with a 35% low ball offer the bank is getting a BPO on my offer because I have scared the shit out of them with local comps, listings and repairs that put it at 35% off with room to depreciate and also I’m the only offer they have received

[Navydoc]

I don’t think the stagnation you describe can exist for one reason: the outstading debt on all those properties, whether being maintained by owner, builder or lender, must continue to be serviced. At some point somebody has to decide they can’t continue to hemorrhage cash and take the loss. Whoever the bagholder is will go under. I do not think bank failures are out of the question at all, and HAVE already occurred.

It has happened before, why do we think it can never happen again?

[Navydoc]

I don’t think the stagnation you describe can exist for one reason: the outstading debt on all those properties, whether being maintained by owner, builder or lender, must continue to be serviced. At some point somebody has to decide they can’t continue to hemorrhage cash and take the loss. Whoever the bagholder is will go under. I do not think bank failures are out of the question at all, and HAVE already occurred.

It has happened before, why do we think it can never happen again?

[HLS]

OC,,
I am well aware of what’s going on…I’m not even suggesting it is anywhere near the bottom.

My premise is that builders and sellers STOP cutting prices and REO’s are too high, and most people cannot afford to buy.

I am looking for opinions on MY original scenario, not a variation.

Does that make sense ??

Thanks DOC.

[HLS]

OC,,
I am well aware of what’s going on…I’m not even suggesting it is anywhere near the bottom.

My premise is that builders and sellers STOP cutting prices and REO’s are too high, and most people cannot afford to buy.

I am looking for opinions on MY original scenario, not a variation.

Does that make sense ??

Thanks DOC.

[gn]

For the sake of discussion, if HLS’s suggested scenario materializes:

1. If the prices of the homes are such that it makes financial sense for institutional investors to buy, they will scoop up these properties.

2. Otherwise, the market will be dead & all realtors/brokers will go out of business.

But, I agree with Navydoc that HLS’s scenario will never occur.

[gn]

For the sake of discussion, if HLS’s suggested scenario materializes:

1. If the prices of the homes are such that it makes financial sense for institutional investors to buy, they will scoop up these properties.

2. Otherwise, the market will be dead & all realtors/brokers will go out of business.

But, I agree with Navydoc that HLS’s scenario will never occur.

[HLS]

All of you are too logical.
I didn’t ask if it COULD occur. Say that it IS occuring.

I guess that I need to ask this elsewhere…

From a smart business standpoint, builders will cut prices in a down market.
ALL BUILDERS AND SELLERS ARE NOT SMART. They don’t HAVE TO cut prices, although they should.

[HLS]

All of you are too logical.
I didn’t ask if it COULD occur. Say that it IS occuring.

I guess that I need to ask this elsewhere…

From a smart business standpoint, builders will cut prices in a down market.
ALL BUILDERS AND SELLERS ARE NOT SMART. They don’t HAVE TO cut prices, although they should.

[stansd]

Your scenario proposes that the market stays in a perpetual state of disequilibrium, which cannot happen…that’s the reason people don’t understand your question.

My answer: builders would go belly up because they wouldn’t have cash to service their debt…BK ensues and large scale auctions of new homes, partially built homes, and graded land begin in earnest.

Banks start to experience financial difficulty because investors get grumpy about all the assets sitting on their balance sheet consuming cash and screaming opportunity cost.

Sellers get desperate because their houses are sitting vacant for months, or they can’t meet their newly minted ARM adjusted payments.

J6P starts to save so he can afford a home someday.

Or, lenders get creative and start offering creative products that have lower payments in exchange for a share of appreciation on sale.

That’s the pure answer to your question…reality is that each of those scenarios will further pressure prices, so it won’t persist for long.

Stan

[stansd]

Your scenario proposes that the market stays in a perpetual state of disequilibrium, which cannot happen…that’s the reason people don’t understand your question.

My answer: builders would go belly up because they wouldn’t have cash to service their debt…BK ensues and large scale auctions of new homes, partially built homes, and graded land begin in earnest.

Banks start to experience financial difficulty because investors get grumpy about all the assets sitting on their balance sheet consuming cash and screaming opportunity cost.

Sellers get desperate because their houses are sitting vacant for months, or they can’t meet their newly minted ARM adjusted payments.

J6P starts to save so he can afford a home someday.

Or, lenders get creative and start offering creative products that have lower payments in exchange for a share of appreciation on sale.

That’s the pure answer to your question…reality is that each of those scenarios will further pressure prices, so it won’t persist for long.

Stan

[stansd]

Your scenario proposes that the market stays in a perpetual state of disequilibrium, which cannot happen…that’s the reason people don’t understand your question.

My answer: builders would go belly up because they wouldn’t have cash to service their debt…BK ensues and large scale auctions of new homes, partially built homes, and graded land begin in earnest.

Banks start to experience financial difficulty because investors get grumpy about all the assets sitting on their balance sheet consuming cash and screaming opportunity cost.

Sellers get desperate because their houses are sitting vacant for months, or they can’t meet their newly minted ARM adjusted payments.

J6P starts to save so he can afford a home someday.

Or, lenders get creative and start offering creative products that have lower payments in exchange for a share of appreciation on sale.

That’s the pure answer to your question…reality is that each of those scenarios will further pressure prices, so it won’t persist for long.

Stan

[stansd]

Your scenario proposes that the market stays in a perpetual state of disequilibrium, which cannot happen…that’s the reason people don’t understand your question.

My answer: builders would go belly up because they wouldn’t have cash to service their debt…BK ensues and large scale auctions of new homes, partially built homes, and graded land begin in earnest.

Banks start to experience financial difficulty because investors get grumpy about all the assets sitting on their balance sheet consuming cash and screaming opportunity cost.

Sellers get desperate because their houses are sitting vacant for months, or they can’t meet their newly minted ARM adjusted payments.

J6P starts to save so he can afford a home someday.

Or, lenders get creative and start offering creative products that have lower payments in exchange for a share of appreciation on sale.

That’s the pure answer to your question…reality is that each of those scenarios will further pressure prices, so it won’t persist for long.

Stan

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