[Fearful]

[quote=EconProf]Back when prices were rising 1 – 2% per month, many people made good money buying fixer-uppers, making all the improvements, and then selling them 6 months or a year later. They congratulated themselves on their skills, but forgot that it was a rising market combined with their leveraged position that gave them most of the profit.
In a falling market, both of those factors work against you, so the idea fails big time.
Add to this the tendency to underestimate fixup costs, ignor their own time committment, downplay transaction costs getting in and getting out, ignor the opportunity cost of their down payment, and you’ve got a losing proposition except in rare times and with the perfect property.[/quote]

Beautifully put. You hit on all the key points. Your post should be required reading for anyone contemplating investing in real estate. People still seem to overlook the fact that real estate is a risky, illiquid, high carrying cost investment that must provide substantial returns to compensate.

[Fearful]

[quote=EconProf]Back when prices were rising 1 – 2% per month, many people made good money buying fixer-uppers, making all the improvements, and then selling them 6 months or a year later. They congratulated themselves on their skills, but forgot that it was a rising market combined with their leveraged position that gave them most of the profit.
In a falling market, both of those factors work against you, so the idea fails big time.
Add to this the tendency to underestimate fixup costs, ignor their own time committment, downplay transaction costs getting in and getting out, ignor the opportunity cost of their down payment, and you’ve got a losing proposition except in rare times and with the perfect property.[/quote]

Beautifully put. You hit on all the key points. Your post should be required reading for anyone contemplating investing in real estate. People still seem to overlook the fact that real estate is a risky, illiquid, high carrying cost investment that must provide substantial returns to compensate.

[Fearful]

[quote=EconProf]Back when prices were rising 1 – 2% per month, many people made good money buying fixer-uppers, making all the improvements, and then selling them 6 months or a year later. They congratulated themselves on their skills, but forgot that it was a rising market combined with their leveraged position that gave them most of the profit.
In a falling market, both of those factors work against you, so the idea fails big time.
Add to this the tendency to underestimate fixup costs, ignor their own time committment, downplay transaction costs getting in and getting out, ignor the opportunity cost of their down payment, and you’ve got a losing proposition except in rare times and with the perfect property.[/quote]

Beautifully put. You hit on all the key points. Your post should be required reading for anyone contemplating investing in real estate. People still seem to overlook the fact that real estate is a risky, illiquid, high carrying cost investment that must provide substantial returns to compensate.

[Fearful]

[quote=sdrealtor]
BTW, its a lousy time to sell a house even though I get offers it usually takes 2 to 4 to get one that eventually closes for a variety of reasons. Its also a lousy time to buy because the nice homes are still too high, the affordable homes priced well are subject to alot of competition, inventory is not high (my guess is that at least 1/3rd of the active inventory is short sales with offers on them already) and there are a lot of crappy homes on the market that only a giveaway price could fix.[/quote]

Well put – that is the market paralysis I was referring to. Potential sellers think it a bad time to sell and potential buyers think it a bad time to buy. And a good chunk of the market is low liquidity – short sales and bank owned. The market only unlocks when there is a general sense it has unlocked. Ugh.

[Fearful]

[quote=sdrealtor]
BTW, its a lousy time to sell a house even though I get offers it usually takes 2 to 4 to get one that eventually closes for a variety of reasons. Its also a lousy time to buy because the nice homes are still too high, the affordable homes priced well are subject to alot of competition, inventory is not high (my guess is that at least 1/3rd of the active inventory is short sales with offers on them already) and there are a lot of crappy homes on the market that only a giveaway price could fix.[/quote]

Well put – that is the market paralysis I was referring to. Potential sellers think it a bad time to sell and potential buyers think it a bad time to buy. And a good chunk of the market is low liquidity – short sales and bank owned. The market only unlocks when there is a general sense it has unlocked. Ugh.

[Fearful]

[quote=sdrealtor]
BTW, its a lousy time to sell a house even though I get offers it usually takes 2 to 4 to get one that eventually closes for a variety of reasons. Its also a lousy time to buy because the nice homes are still too high, the affordable homes priced well are subject to alot of competition, inventory is not high (my guess is that at least 1/3rd of the active inventory is short sales with offers on them already) and there are a lot of crappy homes on the market that only a giveaway price could fix.[/quote]

Well put – that is the market paralysis I was referring to. Potential sellers think it a bad time to sell and potential buyers think it a bad time to buy. And a good chunk of the market is low liquidity – short sales and bank owned. The market only unlocks when there is a general sense it has unlocked. Ugh.

[Fearful]

[quote=sdrealtor]
BTW, its a lousy time to sell a house even though I get offers it usually takes 2 to 4 to get one that eventually closes for a variety of reasons. Its also a lousy time to buy because the nice homes are still too high, the affordable homes priced well are subject to alot of competition, inventory is not high (my guess is that at least 1/3rd of the active inventory is short sales with offers on them already) and there are a lot of crappy homes on the market that only a giveaway price could fix.[/quote]

Well put – that is the market paralysis I was referring to. Potential sellers think it a bad time to sell and potential buyers think it a bad time to buy. And a good chunk of the market is low liquidity – short sales and bank owned. The market only unlocks when there is a general sense it has unlocked. Ugh.

[Fearful]

[quote=sdrealtor]
BTW, its a lousy time to sell a house even though I get offers it usually takes 2 to 4 to get one that eventually closes for a variety of reasons. Its also a lousy time to buy because the nice homes are still too high, the affordable homes priced well are subject to alot of competition, inventory is not high (my guess is that at least 1/3rd of the active inventory is short sales with offers on them already) and there are a lot of crappy homes on the market that only a giveaway price could fix.[/quote]

Well put – that is the market paralysis I was referring to. Potential sellers think it a bad time to sell and potential buyers think it a bad time to buy. And a good chunk of the market is low liquidity – short sales and bank owned. The market only unlocks when there is a general sense it has unlocked. Ugh.

[Fearful]

[quote=thebreeze][quote=sdrealtor]Sorry but most of the CV buyers have 20% down or more. The truth is most of the buyers out there today that I am seeing do. I am sitting on a pile of listings and get offers on a daily basis. It is rare that I get an offer with less than 20% down these days. I also have several buyers looking and all but one has 20% or more.

There is alot more money out there than you all think around here. There are also a ton of folks who sat out the last few years waiting for prices to fall or who were priced out but not anymore.[/quote]

Imagine that. A realtor talking about how strong the RE market is. Never thought I’d see the day.[/quote]

Haw – “Now is a great time to buy or sell a house”

The reason buyers have 20% down: 5% down buyers cannot get financing.

sdrealtor is just doing his job, being himself. Interesting anecdotes, for sure, but the only really useful data is in the aggregate.

I drove around Cardiff today looking at houses. There are for sale signs everywhere.

Most CV houses I look at are heavily financed. This is actually a significant disincentive to considering leasing these houses. I fear the owners will give up and stop making payments when they become underwater.

The wealth destruction is in process. The bigger factor, though, will be the drop in confidence, particularly as layoffs start to impact the local economy. Also fear a jump in long bond rates in 2009, which would translate to higher mortgage rates. The U.S. government has a lot of debt to sell.

The other thing to fear is a paralysis of the market, perhaps resulting from a foreclosure moratorium.

This is gut wrenching – I have the cash to buy the house, but am ever so nervous!

[Fearful]

[quote=thebreeze][quote=sdrealtor]Sorry but most of the CV buyers have 20% down or more. The truth is most of the buyers out there today that I am seeing do. I am sitting on a pile of listings and get offers on a daily basis. It is rare that I get an offer with less than 20% down these days. I also have several buyers looking and all but one has 20% or more.

There is alot more money out there than you all think around here. There are also a ton of folks who sat out the last few years waiting for prices to fall or who were priced out but not anymore.[/quote]

Imagine that. A realtor talking about how strong the RE market is. Never thought I’d see the day.[/quote]

Haw – “Now is a great time to buy or sell a house”

The reason buyers have 20% down: 5% down buyers cannot get financing.

sdrealtor is just doing his job, being himself. Interesting anecdotes, for sure, but the only really useful data is in the aggregate.

I drove around Cardiff today looking at houses. There are for sale signs everywhere.

Most CV houses I look at are heavily financed. This is actually a significant disincentive to considering leasing these houses. I fear the owners will give up and stop making payments when they become underwater.

The wealth destruction is in process. The bigger factor, though, will be the drop in confidence, particularly as layoffs start to impact the local economy. Also fear a jump in long bond rates in 2009, which would translate to higher mortgage rates. The U.S. government has a lot of debt to sell.

The other thing to fear is a paralysis of the market, perhaps resulting from a foreclosure moratorium.

This is gut wrenching – I have the cash to buy the house, but am ever so nervous!

[Fearful]

[quote=thebreeze][quote=sdrealtor]Sorry but most of the CV buyers have 20% down or more. The truth is most of the buyers out there today that I am seeing do. I am sitting on a pile of listings and get offers on a daily basis. It is rare that I get an offer with less than 20% down these days. I also have several buyers looking and all but one has 20% or more.

There is alot more money out there than you all think around here. There are also a ton of folks who sat out the last few years waiting for prices to fall or who were priced out but not anymore.[/quote]

Imagine that. A realtor talking about how strong the RE market is. Never thought I’d see the day.[/quote]

Haw – “Now is a great time to buy or sell a house”

The reason buyers have 20% down: 5% down buyers cannot get financing.

sdrealtor is just doing his job, being himself. Interesting anecdotes, for sure, but the only really useful data is in the aggregate.

I drove around Cardiff today looking at houses. There are for sale signs everywhere.

Most CV houses I look at are heavily financed. This is actually a significant disincentive to considering leasing these houses. I fear the owners will give up and stop making payments when they become underwater.

The wealth destruction is in process. The bigger factor, though, will be the drop in confidence, particularly as layoffs start to impact the local economy. Also fear a jump in long bond rates in 2009, which would translate to higher mortgage rates. The U.S. government has a lot of debt to sell.

The other thing to fear is a paralysis of the market, perhaps resulting from a foreclosure moratorium.

This is gut wrenching – I have the cash to buy the house, but am ever so nervous!

[Fearful]

[quote=thebreeze][quote=sdrealtor]Sorry but most of the CV buyers have 20% down or more. The truth is most of the buyers out there today that I am seeing do. I am sitting on a pile of listings and get offers on a daily basis. It is rare that I get an offer with less than 20% down these days. I also have several buyers looking and all but one has 20% or more.

There is alot more money out there than you all think around here. There are also a ton of folks who sat out the last few years waiting for prices to fall or who were priced out but not anymore.[/quote]

Imagine that. A realtor talking about how strong the RE market is. Never thought I’d see the day.[/quote]

Haw – “Now is a great time to buy or sell a house”

The reason buyers have 20% down: 5% down buyers cannot get financing.

sdrealtor is just doing his job, being himself. Interesting anecdotes, for sure, but the only really useful data is in the aggregate.

I drove around Cardiff today looking at houses. There are for sale signs everywhere.

Most CV houses I look at are heavily financed. This is actually a significant disincentive to considering leasing these houses. I fear the owners will give up and stop making payments when they become underwater.

The wealth destruction is in process. The bigger factor, though, will be the drop in confidence, particularly as layoffs start to impact the local economy. Also fear a jump in long bond rates in 2009, which would translate to higher mortgage rates. The U.S. government has a lot of debt to sell.

The other thing to fear is a paralysis of the market, perhaps resulting from a foreclosure moratorium.

This is gut wrenching – I have the cash to buy the house, but am ever so nervous!

[Fearful]

[quote=thebreeze][quote=sdrealtor]Sorry but most of the CV buyers have 20% down or more. The truth is most of the buyers out there today that I am seeing do. I am sitting on a pile of listings and get offers on a daily basis. It is rare that I get an offer with less than 20% down these days. I also have several buyers looking and all but one has 20% or more.

There is alot more money out there than you all think around here. There are also a ton of folks who sat out the last few years waiting for prices to fall or who were priced out but not anymore.[/quote]

Imagine that. A realtor talking about how strong the RE market is. Never thought I’d see the day.[/quote]

Haw – “Now is a great time to buy or sell a house”

The reason buyers have 20% down: 5% down buyers cannot get financing.

sdrealtor is just doing his job, being himself. Interesting anecdotes, for sure, but the only really useful data is in the aggregate.

I drove around Cardiff today looking at houses. There are for sale signs everywhere.

Most CV houses I look at are heavily financed. This is actually a significant disincentive to considering leasing these houses. I fear the owners will give up and stop making payments when they become underwater.

The wealth destruction is in process. The bigger factor, though, will be the drop in confidence, particularly as layoffs start to impact the local economy. Also fear a jump in long bond rates in 2009, which would translate to higher mortgage rates. The U.S. government has a lot of debt to sell.

The other thing to fear is a paralysis of the market, perhaps resulting from a foreclosure moratorium.

This is gut wrenching – I have the cash to buy the house, but am ever so nervous!

[Fearful]

[quote=SD Realtor]
What about the guy that bought the 900k home and really could only afford the equivalent payment of a 600k home. Maybe he got a 5/1 option arm in 05 or 04. Why wouldn’t his loan be reworked into that new 600k payment? [/quote]

Thank you for your insights and taking the time to post them.

Maybe bailouts for “rich” homeowners are even less politically palatable than for the general public.

Overdue, yes. Imminent? Who knows.

[Fearful]

[quote=SD Realtor]
What about the guy that bought the 900k home and really could only afford the equivalent payment of a 600k home. Maybe he got a 5/1 option arm in 05 or 04. Why wouldn’t his loan be reworked into that new 600k payment? [/quote]

Thank you for your insights and taking the time to post them.

Maybe bailouts for “rich” homeowners are even less politically palatable than for the general public.

Overdue, yes. Imminent? Who knows.

[Author]

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