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FormerOwner
ParticipantEvery time I tell my wife I’m going to go read the housing bubble/economics blogs she says “you’re obsessed”. I tell her it’s better than smoking, gambling, drinking, or over-eating and it may save our butts. At first, I was interested in the R/E aspects of this blog but, like a lot of other members here, I’ve become very interested in the bigger picture of what’s going on in the national/global economy. Plus, there’s no ticker tape for real estate values, so this blog is one of the best ways to get up-to-the-minute info from those on the street. There are some really smart people (with common sense as well, which hasn’t been that common lately) lurking here and I like all of the different viewpoints on things in addition to the data that people share. The saving our butts part has some truth to it, but the main reason I read these posts every day is really intellectual curiosity. We’re living in interesting times. The US economy is far more entertaining to watch than “So You Think You Can Dance”.
ParticipantLooking back, our realtor WAS incompetent (although the person was a great talker in the beginning). I actually found a number of mistakes/omissions in various forms the realtor generated and had to tell the REALTOR to fix them. It was pretty bad. I wasn’t even sure that the buyer was seeing all of the stuff I was signing – I had to insist on a signed copy (by buyer and seller) of everything. I don’t think I would have ever gotten these copies if I hadn’t asked. Also, some of the info the broker and realtor told me, I later found out, was factually incorrect. Fortunately, I didn’t believe them and sought other advice. This person actually caused the whole process to be dragged out and caused my wife and I a lot of undue stress. We could have easily done a better job on our own. However, I see your point that a realtor who really knew what they were doing would add value, no doubt.
ParticipantIt seems to me that to sell a house the main thing you need is to get it on the MLS at the right price, with a good description and good photos. If you could get it on the MLS at a low flat fee the only other things remaining would be staging the house, screening potential buyers, showing the house, and filling out the offer/counter-offer forms. The escrow company handles most of the rest anyway. Actually, the buyer’s agent would be doing the showing in many cases so the seller wouldn’t have to be there. You’d still have a lock box. Maybe a company could provide a flat fee service that get’s you on the MLS and gives you a DVD and some software and/or forms to guide you through the process. There could also be a 1-900 line that you could call with questions. Maybe there could also be a flat fee up front for providing you with comps and an unbiased appraisal. It could be a la carte. Under the above scenario the seller would be their own listing agent but the buyer could still have an agent, in which case that agent would get whatever percentage commission you specified in the MLS. I’m sure the NAR would try to prevent this from ever happening but I think it’s just a matter of time.
ParticipantJust because something cost X dollars to build doesn’t mean it has X dollars of economic value. Look at cars: you buy a car for 40K and a couple of years later it’s only worth 30K even if you don’t put any miles on it. There’s such an oversupply of houses now (many of which are not near any job centers) that no new ones need to be built for quite a while. They just don’t have much economic value.
ParticipantCredit counseling services looks like a booming industry. Oh, wait, that can probably be outsourced too! I’m wondering if whatever the govt and Federal Reserve do to try and bolster the economy after the housing market crashes will create yet another bubble. Or, is the next bubble already forming in commodities/gold? I have more questions than answers at this point.
Longer term, I think peak oil is going to cause some sort of boom in reshaping our society to be less car dependent and less energy consuming. Also, it may cause a return of local farms. These are thoughts for the future, but as for the next few years, I can’t think of any “hot” sectors of the economy at all.
Participantpowayseller, my grandfather was a construction worker (specialized in tile floors) and I think his employment situation was pretty up and down. My grandmother worked in a factory making dresses. The older kids provided day care for the younger kids to some extent. When my grandfather died, my grandmother supplemented her income by becoming a bootlegger. She made wine at home (the kids all helped crush grapes in the bathtub) and would host card games at their apartment, selling wine to the patrons. Their pillow cases were old flour sacks. The education level was pretty low and people would do whatever they had to do to put food on the table. A lot of us are much more educated now but I’m not completely sure how that will benefit us other than help us make sound decisions.
One other interesting thing is that people used to put their money in coffee cans and hide or bury them rather then put money in a bank. People did not trust banks. Since deflation was going on, you didn’t need to get any interest on your money! The coffee cans (in that type of deflationary economy) were an effective way to preserve your principal.
Participantpowayseller, my wife and I are in the exact same situation up here in Temecula. We sold our “dream house” and are now renting a house. The one we’re renting is smaller but we ended up actually liking the layout better – it’s more practical and our A/C usage is a lot lower. We listed our house at the lower end of the price range and it sold fairly quickly. Others that listed higher have now reduced down to the price we sold at and are still sitting on the market. The two best days of my life are the day I bought my house and the day I sold my house.
Participantrankandfile, I’m 1/2 Italian. I love to listen to my older relatives talk about what it was like during the Great Depression (my grandparents on my mother’s side were Italian immigrants who settled in Boston). Until the last 7-8 years I thought an economic depression like that could never happen again – at least in my lifetime. Anyway, everyone that I’ve talked to that experienced it said that they were poor but they didn’t know they were poor because everyone else was poor. Basically, it doesn’t seem like they were any less happy than people today. It seems like people were a lot more neighborly and down to earth. They would walk everywhere and everyone in the neighborhood knew each other. Crime really didn’t seem to be a major problem either. It wasn’t until the 50’s that the old neighborhood really started to deteriorate and all my relatives moved out to the suburbs. The old neighborhood now is the type of place where you would be afraid of getting shot if you drove through there after dark. So much for progress – it seems like progress has worked in reverse in a lot of our cities.
I think as long as you have the mentality of living within your means and making sound decisions, you’ll survive anything. The thing that does worry me now though is that the social structure of the nation seems a lot weaker. Rather than people helping each other out, I rather think a lot of people would rob and kill each other to try and maintain a faux riche lifestyle. As far as growing your own food, my grandmother did that and it seems like that was very common during the depression. Even city dwellers would grow vegetables on what little land they had. It seems, overall, that city dwellers fared better during the depression than people living in rural areas. Farmers were hit extremely hard.
My grandmother used to talk about a few men that committed suicide. They lost it all when the stock market crashed and were just not psychologically prepared for their illusion of wealth to be taken away. I think the people who fare the best during tough times are the ones who can adapt to change (and are not overly leveraged with debt and high-risk!).
ParticipantI’ve also had the gut feeling that we were headed for a depression. I started to get that feeling while the dot-com bubble was inflating and I saw firsthand how nonsensical some of the high flying tech companies were and how much money was pouring into them. I read an excellent book a few years ago, “Freedom From Fear: The American People in Depression and War: 1929-1945”. As you said, the conditions that led up to the great depression exist again now. This time, though, the US may not emerge as the world’s dominant economy. We do still have the world’s strongest military, by far – but we just don’t have a way to keep paying for it.
I have a nagging feeling that we are living in the last days of the Roman Empire.
ParticipantOh, and I still don’t think homes are a good investment right now. Once the house of cards fall and the govt bailout of the banks takes place, long term interest rates will rise and lending standards will tighten, putting further downward pressure on R/E prices. We’re still a number of years away from a “good value” in R/E.
ParticipantI think the nature of the lending and appraisal process may keep the refi’s going for a while longer. Appraisers are hired by mortgage brokers (in many cases) who get paid when loans fund. If a loan doesn’t fund, neither the mortgage broker nor the appraiser gets paid. Guess what, the house will appraise at the value needed for the loan to go through. I think the banks are aware that a lot of these loans will not be repaid but they don’t care since they sell the loans to Fannie Mae and Freddie Mac and make a nice profit on the transaction. Even for the loans that the bank keeps, they can count of the government bailing them out when the loans start going bad so as not to disrupt the banking system. The ultimate underwriters are the TAXPAYERS but we have no say in whether these types of loans get funded!
Also, when you think about a bank funding a loan based on someone barely qualifyiing at a “teaser rate”, the bank knows it is highly likely that the borrower will default once the teaser rate adjusts to a market rate. They don’t care. Same goes for stated income loans. The banks are making money on these loans knowing a lot of them will default. The only way out of it will be for the government to print more money to bail out the banks. The resulting inflation will be equivalent to a tax on the US population.
In the end, this can only go on for so long and eventually, you are right, people will NOT be able to refi and there’s no way the numbers can be massaged to make it work. People won’t even WANT to refi since their debt will be > than their home’s value. That’s when the house of cards will fall. I don’t think we’re too far off from that; it’s starting slowly. Some people still have some equity when the inflated appraisals are used so that’ll keep SOME of these refi’s going for awhile. As far as the income part of it, maybe some of these loans are using low teaser rates and/or stated income.
ParticipantCheck out
Also, there are a lot of rentals listed in the MLS that a realtor can show you (realtors get a commission on the rent). Just don’t get talked into BUYING! Don’t drink the kool-aid!
ParticipantSo what will the financial picture look like if the government runs the printing presses 24×7, the dollar loses value, and we have high inflation (due to each dollar having a lower value since there are more dollars)?
I think it will lead to stagflation – wages won’t increase much due to global competition, asset prices may stay the same (in nominal dollars) and commodity prices will likely hyperinflate. Am I right about this? Is that why gold prices are so high? A lot of people are expecting hyperinflation.
By the way, I read somewhere that the govt has stopped publishing some money supply (M3) figures. It makes you wonder WHY?
ParticipantDC,
I would have to say that I don’t think the economy is ACTUALLY very strong, either locally or nationally and that there aren’t enough people that will be willing or able to buy real estate at anywhere near current prices. Real estate values are set by comps so, in any given neighborhood, if most of the sales are happening at lower values, pretty soon ALL of the sales will happen at lower values. The market tends to keep going in the direction it’s going both up (ad it did) and down (as I think it’s just started to do). Rents would have to more than double to equal the cost of owning – that’s not going to happen due to the lack of high paying jobs.
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