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Daniel
Participant“Someone please tell me I’m not the only one on this board who would have a problem breaking a contract like that. If you make an agreement with someone, you have an obligation to see it through. Even if the agreement is with a bank, and even if it costs you money.”
I actually don’t see a moral problem here. A mortgage is an asset-backed loan, that is, a loan guaranteed by physical property. The borrower can walk, and in that case the lender takes ownership of the property. Both sides know that (the lender certainly does), and that’s why mortgage rates are higher than risk-free Treasuries. Same for corporate bonds, and any other kind of loans. Default is always a possibility, and the lender compensates for that risk by a higher rate. It’s totally fair game, in my opinion.
That being said, I’m a very pro-business kind of guy, and totally agree with the bankruptcy reform last year. Before that, it was so easy to walk from debts, it was almost an invitation to default.
ParticipantTo continue my previous post, the beauty with options is that you can play either side. You can be the gambler at the slot machine (buying options), or you can be the casino (selling options). But you have to be careful because, unlike casinos that make good money on slot machines, option sellers have no “house” advantage in the long run over option buyers. It is tempting to start playing the casino and collect option premiums. However, sooner or later, an option you write will blow up in your face and wipe out all your profits.
Participant“Also didn’t you say 90%+ of options expire worthless? How would that happen as a zero sum game? Every dollar gained is a dollar lost, right? does money disappear, or is it actually 50%?”
It is a zero-sum game, even if most options expire worthless. The catch is that the 10% of options that make money usually make A LOT of money, to compensate for the 90% that lose. Think of it like a slot machine that 9 times out of 10 eats your dollar, and one time out of ten gives you $10 back.
ParticipantYou’re right, some areas are worse off. Condos and new construction have taken a bigger hit than the rest. And stuff that’s both new construction and condos (such as Airoso) has probably been hit the most.
ParticipantMy understanding is that: 1. yes, they can walk, 2. the bank takes the property, but can’t take anything else, and 3. a foreclosure will be on their credit report. When people are in this situation, they have the choice of either taking a hit to their credit score or taking a hit to their wallet (if they continue feeding the gator). If faced with these two bad options, I would choose to walk, but I have a feeling that most people would choose to stay, as long as they can make the payments.
Participant“You are an appraiser – what are you seeing? Have you seen homes in Del Mar fall 30%, or do you think the 30% drop is due to fewer high end homes selling?”
I’m going to chime in on this: the areas that show wild swings (30% or so) are mostly areas with just a handful of sales (Rancho Santa Fe, Del Mar). When the sample is small, the median bounces all over the place. Based on same home sales, net of incentives, I’d say that we’re 5-10% off the peak in most areas. Steve and others, feel free to correct me if I’m wrong.
ParticipantFYI: “Heat map” = standard scientific term for a color-coded map such as the one above. Has nothing to do with heat.
ParticipantPowayseller,
A friendly advice: be careful what you wish for. You have very strong beliefs, and it seems to me that you’re looking for validation, not advice. You want a broker to guide your hand, but you also want a broker to give you exactly the advice you want to hear (economy is going into the tank, and go short). If the broker/advisor tells you to go long or stay in cash, you’re not happy.
To make a somewhat cynical analogy, you’re like the patient convinced that she has a certain disease, and shopping for doctors in the hope that one will diagnose it “correctly”.
Powayseller, you either trust yourself to be right, and in that case you don’t need an advisor, just open an account at Schwab, or Ameritrade, or whatever, and trade according to your beliefs. Or you trust an advisor, and give that person your money to invest as he/she thinks it’s best. You really can’t have it both ways.
ParticipantPowayseller asked…
“which stocks went up and earned more than CDs, without taking on any more risk?”
My answer: none, never. If you want a stock that has less risk than a CD and returns more, I have news for you: it doesn’t exist.
And an answer to some other comments on this thread: missing an opportunity to make a profit is exactly the same as taking a loss. Most people fail to see that. They will be happier with 3 trades that return $100 each, instead of a trade that makes $500, and two that lose $100 each.
ParticipantOh, yes, “Glengarry Glen Ross”. Folks, if you haven’t seen it, rush to your favorite video store and get it. IFC Channel also shows it from time to time. Great movie, great cast (Al Pacino, Jack Lemmon, Ed Harris, Kevin Spacey, Alec Baldwin, Alan Arkin). It’s THE real estate salesmanship movie. Nothing else comes close.
ParticipantI have a question for the realtors on this board: is there a way to figure out what is the buyer’s agent commission on new construction sold by the builder? Sometimes they say in their ads, for example, “3% broker co-op”. But more often than not they imply there is a broker co-op, without specifying how much it is (for example “You must escort your buyer to the sales office & register them on their very first visit to the community to receive a broker referral”). Is there a hidden MLS field where the commission is listed?
Thanks,
DanielParticipant“…due to the upcoming recession”. Presenting forecast as fact certainly makes an impression on the reader.
ParticipantJosh,
It seems to me that a lot of people on this board happen to work in the Torrey Pines and Sorrento Valley areas. Those areas have lots of companies and high-paying jobs (engineering, computers, biotech, etc). For those of us working there, CV is a natural choice. It’s very close to work, it has good schools, and it is substantially cheaper (in the past, present, and, no doubt, future) than either La Jolla or Del Mar.
I have friends who live in Rancho Penasquitos, Poway, Encinitas, etc. All of them went there because they couldn’t (at the time) afford CV. So it’s nothing necessarily special about CV, other that it’s really, really close to a lot of good jobs.
Daniel
ParticipantI also think that the high-end is not immune at all. Quite the contrary. Rich folks are not stupid, and they can figure out as well as anybody else, if not better, that the market is falling. They won’t buy overpriced properties just because they can afford them. I am fortunate to have a substantial liquid net worth, but that doesn’t mean that I am going to throw my money down the drain on an overpriced asset.
CV has different issues. On the downside, there is a lot of new supply coming down the pike. On the upside, it is not really “high end”, but it is a great location for all the techies employed by the biotech and computer industries in the Torrey Pines – Sorrento Valley region. It will no doubt be affected, like everything else, but, if I were to make a bet, I would say that it will go down far less than outlying areas (Escondido, Santee, Temecula, etc).
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