Forum Replies Created
-
AuthorPosts
-
Bugs
ParticipantNo mistakes? Hah!! I’m making a mistake even as we speak. I’m holding right now even though I know I could bank some nice coin (and keep it) by selling my position. I could have made a TON of money had I gone into selling apartments and commercial properties back in the late 1990s but I chose to stick with appraising instead. I’ve lost clients over the last 10 years because I wouldn’t sign off on their increasingly outrageous deals, I’ve pissed off a lot of my peers for not looking the other way while they availed themselves of all that low-lying fruit, and in general have worked against my financial interests the whole while.
A few years back I gave in to the material-girl BS and bought an MBZ (an AMG, no less) to commemorate my mid-life crisis. That certainly wasn’t my brightest move.
I’m on my second marriage, too; so there’s at least one person (my ex) who knows for a fact that I’m a complete loser.
Mistakes? I gots lots.
ParticipantNo mistakes? Hah!! I’m making a mistake even as we speak. I’m holding right now even though I know I could bank some nice coin (and keep it) by selling my position. I could have made a TON of money had I gone into selling apartments and commercial properties back in the late 1990s but I chose to stick with appraising instead. I’ve lost clients over the last 10 years because I wouldn’t sign off on their increasingly outrageous deals, I’ve pissed off a lot of my peers for not looking the other way while they availed themselves of all that low-lying fruit, and in general have worked against my financial interests the whole while.
A few years back I gave in to the material-girl BS and bought an MBZ (an AMG, no less) to commemorate my mid-life crisis. That certainly wasn’t my brightest move.
I’m on my second marriage, too; so there’s at least one person (my ex) who knows for a fact that I’m a complete loser.
Mistakes? I gots lots.
ParticipantSo now we’re talking in 30-year holding periods? How many people do you know in your generation who you think will hold for that long?
Let’s say you buy the $1,000,000 at peak and it depreciates to $500,000, then continues on at the average 3%. $350k @ 3% compounded over 30 years is what it is (about $850k in 2025). The 3% average rate of increase over the last 50 years (it’s actually only about 2.5%) is comprised of all the highs and lows along the way. That’s what “Average” means. It would only change if we are now facing that “New Paradigm”, which so far is proving to be a rather spectacular bust.
Nobody can know the future, but based on past performance the $850k in 2025 at least has a basis, whereas the $1.4m does not.
If you’re arguing that this time is different and we are now facing the New Paradigm where the long term will reset at this much higher rate then we’d all love to see what you’re basing that on.
You’re apparently in the business of giving advice. May we assume that you use data and analyses to back that advice up?
ParticipantSo now we’re talking in 30-year holding periods? How many people do you know in your generation who you think will hold for that long?
Let’s say you buy the $1,000,000 at peak and it depreciates to $500,000, then continues on at the average 3%. $350k @ 3% compounded over 30 years is what it is (about $850k in 2025). The 3% average rate of increase over the last 50 years (it’s actually only about 2.5%) is comprised of all the highs and lows along the way. That’s what “Average” means. It would only change if we are now facing that “New Paradigm”, which so far is proving to be a rather spectacular bust.
Nobody can know the future, but based on past performance the $850k in 2025 at least has a basis, whereas the $1.4m does not.
If you’re arguing that this time is different and we are now facing the New Paradigm where the long term will reset at this much higher rate then we’d all love to see what you’re basing that on.
You’re apparently in the business of giving advice. May we assume that you use data and analyses to back that advice up?
ParticipantRemember when we were talking about boom buyers needing staying power to ride out the cycle? Many of those buyers are now trapped in those homes by the equity deficit. They aren’t going anywhere because they can’t go anywhere. They can’t take a job in another town, they can’t move closer to their parents, and they certainly can’t afford to get sick or lose a job or go back to school or get a divorce.
Everyone assumes that at the end of this cycle the next cycle will reach the same prices, at which point these peak buyers will finally be free to move on without financial loss.
What if that assumption (next time will be as good as this time) doesn’t pan out? Just as society has had to come to terms with the realization that at some point the next generation will not do better than the one before it, maybe we should be considering whether there’s an upper limit to how much a residence will sell in relation to wage and population trends.
The 2005 price spike was 3 times larger relative to the long term trendline compared to the 1990 spike. What if the 2015 spike only reaches to equal that 1990 spike? What if the former $600,000 house declines in nominal pricing to $300,000 and then only increases to $400,000 the next time around? There isn’t anyone who can say what interest rates and employment are going to look like 5 years from now, let alone farther on down the line.
I seriously wonder how many of the 2005 buyers have considered the possibility that they could be stuck in that house for 20 years? And further, how many people can successfully go that distance?
ParticipantRemember when we were talking about boom buyers needing staying power to ride out the cycle? Many of those buyers are now trapped in those homes by the equity deficit. They aren’t going anywhere because they can’t go anywhere. They can’t take a job in another town, they can’t move closer to their parents, and they certainly can’t afford to get sick or lose a job or go back to school or get a divorce.
Everyone assumes that at the end of this cycle the next cycle will reach the same prices, at which point these peak buyers will finally be free to move on without financial loss.
What if that assumption (next time will be as good as this time) doesn’t pan out? Just as society has had to come to terms with the realization that at some point the next generation will not do better than the one before it, maybe we should be considering whether there’s an upper limit to how much a residence will sell in relation to wage and population trends.
The 2005 price spike was 3 times larger relative to the long term trendline compared to the 1990 spike. What if the 2015 spike only reaches to equal that 1990 spike? What if the former $600,000 house declines in nominal pricing to $300,000 and then only increases to $400,000 the next time around? There isn’t anyone who can say what interest rates and employment are going to look like 5 years from now, let alone farther on down the line.
I seriously wonder how many of the 2005 buyers have considered the possibility that they could be stuck in that house for 20 years? And further, how many people can successfully go that distance?
ParticipantIt’s been my experience that the additional value that’s attributable to the extra living area is virtually never equal to the cost of building that area.
There can be some extenuating circumstances that would economically justify a room addition. For instance, if you have a great loan on the property and don’t want to reset the clock with a new loan on a new property; or if you or your family can do the consturction yourselves; of if you have a personal attachment to that location and can’t necessarily find the larger house in that neighborhood; etc., etc.
Other than that, if you need the larger house you’re usually better off going and buying it. For one thing, adding second floor additions to a structure that was designed and engineered as a 1-story structure can cause problems. Extending outward on a ground floor eats up usable lot area, which can be a problem on the smaller subdivision lots. If you add too much living area relative to the other properties in your neighborhood you’re getting into an overimprovement situation. The value of those projects never comes close to their costs – we’re talking $.25 on the dollar in many cases.
Also, a lot of room addition and remodeling projects turn out nice but do so at the expense of the marriage. I’ve seen a lot of couples get divorced because of the additional stress it places on a relationship to live in a construction zone or incur cost overruns. The reliability and honesty of these home improvement contractors is variable and you are usually rolling the dice when dealing with someone you don’t know well.
Without those connections I wouldn’t even consider it.
ParticipantIt’s been my experience that the additional value that’s attributable to the extra living area is virtually never equal to the cost of building that area.
There can be some extenuating circumstances that would economically justify a room addition. For instance, if you have a great loan on the property and don’t want to reset the clock with a new loan on a new property; or if you or your family can do the consturction yourselves; of if you have a personal attachment to that location and can’t necessarily find the larger house in that neighborhood; etc., etc.
Other than that, if you need the larger house you’re usually better off going and buying it. For one thing, adding second floor additions to a structure that was designed and engineered as a 1-story structure can cause problems. Extending outward on a ground floor eats up usable lot area, which can be a problem on the smaller subdivision lots. If you add too much living area relative to the other properties in your neighborhood you’re getting into an overimprovement situation. The value of those projects never comes close to their costs – we’re talking $.25 on the dollar in many cases.
Also, a lot of room addition and remodeling projects turn out nice but do so at the expense of the marriage. I’ve seen a lot of couples get divorced because of the additional stress it places on a relationship to live in a construction zone or incur cost overruns. The reliability and honesty of these home improvement contractors is variable and you are usually rolling the dice when dealing with someone you don’t know well.
Without those connections I wouldn’t even consider it.
Participantmyito,
I think everyone on this board would agree that all of the reasons you gave for buying now are legitimate reasons. Your decision to purchase is based on fulfilling what you percieve to be your emotional needs; the financial aspect of it is apparently very secondary to you, if relevant at all.
Like you, I choose to enjoy the benefits of ownership rather than making the long dollar; unlike you, I chose to buy at the bottom of the cycle so I can hold without risking any of my down payment. I haven’t sold my residence and will not sell my residence, even though financially I’d come out ahead. Money isn’t everything.
But it is something. If I wasn’t already holding, I wouldn’t buy right now because from an economic standpoint I don’t hold my sentimentality THAT much higher than my economic well being. You might say I fall in between the two extremes – sell now to maximize profit vs. buy now at any price to enjoy homeownership. Despite my personal situation I don’t criticize anyone whose priorities are different than mine.
I do disagree with those people who think they can have it both ways. If you want the emotional benefits of homeownership you need to be prepared to live with the downside of that priority, which in this case will probably be a massive economic loss. You’re not the only one who has to deal with compromises, though. The renters need to be able to live with their compromise, and us ‘tweeners need to live with ours’.
If you made your decision in an informed and considered manner then we agree that you made the right decision for your situation. If you made an ill-informed decision and are now trying to rationalize that decision by saying that anyone who disagrees with you is just being negative then you’re probably going to run into some opposition here. For one thing, you’d be wrong about the negativity. Some of the biggest bears on this board are foaming at the mouth at the prospects of making a killing during the next RE cycle by buying at the bottom of this cycle in a few years. I call that an optimistic attitude – what do you call it?
As long as you don’t mind living with the stigma of buying at the worst possible time and losing all that money, I’m pretty sure the bears won’t mind being saddled with the stigma of being out of sync with the social pressures to own their home.
Participantmyito,
I think everyone on this board would agree that all of the reasons you gave for buying now are legitimate reasons. Your decision to purchase is based on fulfilling what you percieve to be your emotional needs; the financial aspect of it is apparently very secondary to you, if relevant at all.
Like you, I choose to enjoy the benefits of ownership rather than making the long dollar; unlike you, I chose to buy at the bottom of the cycle so I can hold without risking any of my down payment. I haven’t sold my residence and will not sell my residence, even though financially I’d come out ahead. Money isn’t everything.
But it is something. If I wasn’t already holding, I wouldn’t buy right now because from an economic standpoint I don’t hold my sentimentality THAT much higher than my economic well being. You might say I fall in between the two extremes – sell now to maximize profit vs. buy now at any price to enjoy homeownership. Despite my personal situation I don’t criticize anyone whose priorities are different than mine.
I do disagree with those people who think they can have it both ways. If you want the emotional benefits of homeownership you need to be prepared to live with the downside of that priority, which in this case will probably be a massive economic loss. You’re not the only one who has to deal with compromises, though. The renters need to be able to live with their compromise, and us ‘tweeners need to live with ours’.
If you made your decision in an informed and considered manner then we agree that you made the right decision for your situation. If you made an ill-informed decision and are now trying to rationalize that decision by saying that anyone who disagrees with you is just being negative then you’re probably going to run into some opposition here. For one thing, you’d be wrong about the negativity. Some of the biggest bears on this board are foaming at the mouth at the prospects of making a killing during the next RE cycle by buying at the bottom of this cycle in a few years. I call that an optimistic attitude – what do you call it?
As long as you don’t mind living with the stigma of buying at the worst possible time and losing all that money, I’m pretty sure the bears won’t mind being saddled with the stigma of being out of sync with the social pressures to own their home.
ParticipantMy wife’s best friend is a consumer loan officer for one of the region’s biggest credit unions. She tells stories of indebtedness among her borrowers you wouldn’t believe. I’ve heard similar comments from several of my clients who are commercial lending officers at some of the community banks in town.
You know the commercial where the guys gives you a tour of his great home, his cars, his new pool and delivers that “and I’m in debt up the my eyeballs” line? Apparently there are a LOT of people like that running around town living paycheck to paycheck.
Even some of the “Greatest Generation” who are now retired are treading on thin ice, maxing out multiple credit cards and buying new cars every couple years. The SoCal lifestyle costs a lot of money to maintain.
ParticipantMy wife’s best friend is a consumer loan officer for one of the region’s biggest credit unions. She tells stories of indebtedness among her borrowers you wouldn’t believe. I’ve heard similar comments from several of my clients who are commercial lending officers at some of the community banks in town.
You know the commercial where the guys gives you a tour of his great home, his cars, his new pool and delivers that “and I’m in debt up the my eyeballs” line? Apparently there are a LOT of people like that running around town living paycheck to paycheck.
Even some of the “Greatest Generation” who are now retired are treading on thin ice, maxing out multiple credit cards and buying new cars every couple years. The SoCal lifestyle costs a lot of money to maintain.
ParticipantDavelj,
In answer to your question about the appraisals, I am as confident as Steve is that those appraisals have serious and obvious problems. For one thing, appraisers are required to analze and reconcile the sales and listing history of their subject property when appraising them for mortgage lending. $100k spiffs over list price on a house in the $500k range just doesn’t happen and I cannot imagine what rationale those appraisers were using. Strike that, I can well imagine the required analyses weren’t performed.
As for ignorance, that is no defense. We are required to adhere to competency requirements, which include being familiar with the market wherein we are working. There’s no way an appraiser could legitimately see 20 closed sales in a search for comps and not recognize that 15 of the sales fit in with the larger trend and the 5 that don’t are so far outside as to be obviously fraudulent. Market analysis isn’t rocket science and there’s no way an appraiser can claim ignorance when appraising a tract home and expect to get away with it.
I can practically guarantee a couple appraisers will go to jail if some of these homes really were overvalued by that much. Conspiracy to commit mortgage fraud isn’t something the FBI is just going to let slide.
ParticipantDavelj,
In answer to your question about the appraisals, I am as confident as Steve is that those appraisals have serious and obvious problems. For one thing, appraisers are required to analze and reconcile the sales and listing history of their subject property when appraising them for mortgage lending. $100k spiffs over list price on a house in the $500k range just doesn’t happen and I cannot imagine what rationale those appraisers were using. Strike that, I can well imagine the required analyses weren’t performed.
As for ignorance, that is no defense. We are required to adhere to competency requirements, which include being familiar with the market wherein we are working. There’s no way an appraiser could legitimately see 20 closed sales in a search for comps and not recognize that 15 of the sales fit in with the larger trend and the 5 that don’t are so far outside as to be obviously fraudulent. Market analysis isn’t rocket science and there’s no way an appraiser can claim ignorance when appraising a tract home and expect to get away with it.
I can practically guarantee a couple appraisers will go to jail if some of these homes really were overvalued by that much. Conspiracy to commit mortgage fraud isn’t something the FBI is just going to let slide.
-
AuthorPosts