[cyphire]

Really great post!

I guess it really puts into perspective the adage: “Those who ignore history are doomed to repeat it!”.

[cyphire]

Really great post!

I guess it really puts into perspective the adage: “Those who ignore history are doomed to repeat it!”.

[cyphire]

Really great post!

I guess it really puts into perspective the adage: “Those who ignore history are doomed to repeat it!”.

[cyphire]

Really great post!

I guess it really puts into perspective the adage: “Those who ignore history are doomed to repeat it!”.

[cyphire]

Really great post!

I guess it really puts into perspective the adage: “Those who ignore history are doomed to repeat it!”.

[cyphire]

I lived down by the water in La Jolla – lots of the homes where I rented were 3rd or 4th homes for out of towners. Where I lived previously in the North County, 2 of my neighbors were from Chicago and only came there in the winter. It’s a crazy world out there.

Alex_Angel… Where are : “People are still trying to outbid each other on homes” happening?

I don’t see it.

The market is where I expected it to be, and has a lot more dropping to do (at least a few years).

[cyphire]

I lived down by the water in La Jolla – lots of the homes where I rented were 3rd or 4th homes for out of towners. Where I lived previously in the North County, 2 of my neighbors were from Chicago and only came there in the winter. It’s a crazy world out there.

Alex_Angel… Where are : “People are still trying to outbid each other on homes” happening?

I don’t see it.

The market is where I expected it to be, and has a lot more dropping to do (at least a few years).

[cyphire]

I lived down by the water in La Jolla – lots of the homes where I rented were 3rd or 4th homes for out of towners. Where I lived previously in the North County, 2 of my neighbors were from Chicago and only came there in the winter. It’s a crazy world out there.

Alex_Angel… Where are : “People are still trying to outbid each other on homes” happening?

I don’t see it.

The market is where I expected it to be, and has a lot more dropping to do (at least a few years).

[cyphire]

I lived down by the water in La Jolla – lots of the homes where I rented were 3rd or 4th homes for out of towners. Where I lived previously in the North County, 2 of my neighbors were from Chicago and only came there in the winter. It’s a crazy world out there.

Alex_Angel… Where are : “People are still trying to outbid each other on homes” happening?

I don’t see it.

The market is where I expected it to be, and has a lot more dropping to do (at least a few years).

[cyphire]

Ultimately, nothing – nothing the banks can do will actually help the in trouble homeowner. The banks can’t drop the rates to teaser levels (that would be as bad as the ‘investors’ who are losing money each month renting out their properties at below carrying costs), interest rates are too high.

Most everyone in trouble, isn’t in trouble because they have an extra 100-300 payment. They are in trouble because they cannot reasonably pay back any amount that would come close to the dollars they were funded to buy their home. In a world of sinking home values, they have even less reason to stick around.

I think that by propping up the homeowners in default, will only lengthen the time that housing is in the dumps. On the other hand there isn’t really much they can do to fix it anyway.

The defaults are going to happen, people are better off pulling the plug now, before they rack up huge debts trying to service their liar loan estates.

Everyone I know who bought an investment property are trying to rent them. They would rather lose 1-3K per month renting than try to sell at a substantial loss. I don’t blame them, I think it will just keep housing down in the dumps.

As prices slowly sink, more and more of them will sell for whatever they can get. There are still deals out there, there hasn’t been a baseline of price declines yet. When the general public sees how long it is going south, and they are trying to service that debt, they will try to sell out.

[cyphire]

Somewhat on track, perhaps a little less.

I am most concerned about buyer psychology. As Rich states, I am in agreement that the level of denial out there is amazing. I wonder if the Fed actually has something as too a reasonable goal out there… If they keep interest rates low they keep the economy propped up (even with the damage to inflation, etc.), but as far as the real estate market goes, it’s all about employment and interest rates. If they can keep the numbers in check, the seller / buyer psychology won’t take over too harshly.

This is why we don’t have too many rental conversions or sales right now. The buyers are in denial, and the fundamentals are getting hammered, with a long, long painful way to go. Consumer confidence is so low, but imagine if San Diego starts resembling Detroit… Wow will the landscape start changing.

The news media which was totally on the side of the advertisers (Realtors), has now shifted to the bear side, but still downplays the forecasting of many real bears – the recovery is always around the corner, now they are talking about the end of 08, till 09. Of course many smart folks (I hope I am one of them!) think that we could have years of price declines, all taking the economy along for a ride. I don’t think the panicking will be until late 08, and if interest rates aren’t at least 1% lower by this time next year, we could have a calamity on our hands.

Who is holding the bag? Ultimately the homeowners and the people who hold the mortgages (are these the hedgefunds?) – because the banks don’t seem to own the paper anymore.

When we are at 1998 prices, we will have some small measure of normalcy in the market, but now I forecast that it will be sub 1998 pricing.

We haven’t seen a tumble in actual prices which comes close to the rate of increase up till 2005. I think that this is the mother of all bubbles, and as homes are VERY VERY illiquid, it will take a long time for the prices to come down, sort of like what happened in Japan. But if the economy keeps pace (It won’t), and interest rates go down (for every .25 percent the fed lowers the rate, the banks won’t give back .1 percent to the consumer as the risk spread will just profit the bank – to protect their own previous and current portfolio downsides) we could expect sellers to hold their positions.

If the economy starts to tank – remember folks – this is the U.S. and we have been fed a diet of ‘capitalism is best, socialism is horrible, taxes should be cut’, rampant capitalism. The execs and shareholders will easily start firing people to protect their bottom lines and executive compensation. When profits start dipping because of the housing market and the paper losses, the people will get fired, the economy will go into a bigger tailspin, and whatever the Fed does will only be a salve for the financial institutions, not the middle/lower class of taxpayers.

Did I answer the question??? LOL… About on track, will depend on the mob psychology, employment and wage movement, and of course interest rates.

[cyphire]

Hey Cashman, I have an exact opposite experience than you do. I sold my house in 2006 (December) for 2M. I sold for just over what I paid for it 2 years before. My neighbors told me I was nuts to dump it for less than 2.25, but I wasn’t going to jerk around letting people come see my house for a year while it got worse and worse to sell a home.

Here it is 10 months later. The home I am renting is pretty expensive (over 6,500), but it includes gardening, pool maint, and of course all repairs, etc. You may think I’m crazy for spending this kind of money, but the carrying charges (including lost interest on the part not financed, the water, electricity, etc.) were probably about 14K per month. That coupled with the future loss of asset value, made it a no brainer to move. We also had a reason to move, I wanted to be closer to my kids school to avoid an almost 1 hour commute.

This house has built in speakers, a pool, a casita (I just moved my office in there and am saving 1600 / month on office rent for a really nice workspace), and a tiki bar (outdoor entertaining). The location is awesome and the best part is that I am paying 6,700 for a house that is worth 2.6 Million – if they could sell!!! (They can’t at that price). Do you know what 2.6 Million costs to carry? Plus the 100K+ that the house is currently losing in value right now? I am the HAPPIEST GUY ON the planet!

Your problem is that you are renting a piece of crap. As a previous poster said, you are renting a sub 1M property in an urban, major market. What do you expect? My cousins are in real estate (Malibu) and rent places to people for 10-75K PER MONTH! You get what you pay for, but since it is California and we have hit the top of the market, you are getting a severely better deal by renting.

My house is 3,600 feet, has a pool, balconys looking at the ocean, stereos, ect, all remodeled, brand new kitchen with 40 feet of granite counter space, and most importantly, I don’t own it!

My last comment is – whats the deal with your landlord showing the house? Something is fishy. There were a bunch of landlords who couldn’t sell their homes, so they would rent them and leave them on the market (secretly). I stood very clear of those deals. I took a 1 year lease, with a second year option at the same rent. My landlord can’t come over (other than by himself if he needed to see that the place was being taken care of), and he certainly can’t show the property (until 2 months before I give notice)! That is a standard clause in the lease.

It sounds like you haven’t really considered your living arrangements, I am paying a lot of rent, but basically am (even after subtracting the tax benefit I would have had for owning) way ahead 4-5K per month. Now if I felt that the market was going to be soft, but then go gangbusters again, I would be foolish, but only a mad man would think that we are going to have a quick recovery. I think that 5 years from now this place will be sub 2M (or possibly much lower – mid 1.6M if we have a brutal recession), and I wouldn’t mind saving a MILLION dollars over 5 years and buy it then… Meanwhile – don’t be stingy on rent, you are getting double or triple your money back in not losing equity – like your poor landlord!!!!

Just my opinion…. Chilling out in style in La Jolla with all my money in the bank!!!

[cyphire]

Without shows like that to distract my wife, she might notice that I spend most of my time playing Halo 2 (and now Halo 3). She is on board with me as to what is going on in the real estate market, the big pain is coming, what we are experiencing now is the calm before the storm!

I love how all these shows (what you get for the money, etc.) are pro-real estate, they generally make things sound rosier than they are.

[cyphire]

Ummmmmm….

Don’t these people need to get mortgages???? LOL

[cyphire]

It is crrzzy!

[Author]

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