[HLS]

JWM, sorry that I wasn’t clear.
I was saying that the stock market rise can continue.

The housing bubble wasn’t my point..

[HLS]

Following the MEDIAN price means absolutely nothing as an indication of market direction.

The market didn’t rise overnight, it’s not going to fall overnight either.

Some people are bleeding cash or wiping out their retirement accounts to keep making payments, in the hopes that the decline will stop. Nobody can bleed forever.

As actual sales do go lower, that becomes a current comp value for appraising the next one.
When someone “agrees” to pay $650K but the appraiser only values it at $620K, sellers start realizing their options a bit clearer. The deal is dead. Buyers get scared away.

Several sales will affect the values of hundreds of other homes in the area. It’s a spiraling downward slow painful (for some) descent.

The psychological effect kicks in when people start realizing that they owe more than their home is worth.
That has a more sobering effect than knowing you could rent a property for 50%-60% of what you pay to own it, but it all adds in to the equation until the bottom.

Nobody knows where/when the bottom will be.
That’s the fun part!

Don’t be influenced by the median!!!
It’s explained why on a different thread.

[HLS]

Following the MEDIAN price means absolutely nothing as an indication of market direction.

The market didn’t rise overnight, it’s not going to fall overnight either.

Some people are bleeding cash or wiping out their retirement accounts to keep making payments, in the hopes that the decline will stop. Nobody can bleed forever.

As actual sales do go lower, that becomes a current comp value for appraising the next one.
When someone “agrees” to pay $650K but the appraiser only values it at $620K, sellers start realizing their options a bit clearer. The deal is dead. Buyers get scared away.

Several sales will affect the values of hundreds of other homes in the area. It’s a spiraling downward slow painful (for some) descent.

The psychological effect kicks in when people start realizing that they owe more than their home is worth.
That has a more sobering effect than knowing you could rent a property for 50%-60% of what you pay to own it, but it all adds in to the equation until the bottom.

Nobody knows where/when the bottom will be.
That’s the fun part!

Don’t be influenced by the median!!!
It’s explained why on a different thread.

[HLS]

Ignorance is Bliss…

This is the foundation of the “greater fool theory” in any market of any product. I have a background in other volatile markets, which many people haven’t been exposed to.

With ANY product,
What is popular, hot or in demand at any point in time, has absolutely no bearing on where the future price will be.
Some people think that it can only drop XX%. That’s nonsense.
Could the housing prices drop 90% ? yes they “could”… but they won’t, because you and I and many others will step in at a level that makes sense to us, based on a return that we anticipate.

Where are the genius investors from 2-3 years ago ? Prices are cheaper now, they should be lining up and camping out.
What happened at the seminars that they attended ??

What you cannot lose sight of is that about 80%-90% (maybe more)of the local population isn’t affected by the drop in housing prices, other than a drop on paper, in net worth.

Many people have mortgages of 50% or less of today’s reduced values. They bought over 5 years ago and are quite happy with where they live.

There have been millions of dollars already received through investments, inheritance etc. Plenty of people are OK financially. Many baby boomers will be receiving inheritances beyond their wild dreams of 20-30 years ago.

I don’t think that ANYBODY expected a 300%+ rise in local property after 1996. The bottom line is that millions of people got very lucky, for one reason or another.

Our local market will probably never get back to a level that I would want to buy rentals. That’s OK with me. There are plenty of other areas that do make sense from a cash flow standpoint.

You seem to be looking for a logical answer, which I gave up on long ago. Many people have rentals today with a pile of equity, and they don’t need the cash. I spoke to one who gets $2200 a month on a home worth $600k today. He bought it over 30 years ago.

In his mind, he’s getting $26,000 a year (less maintenance etc) for nothing. He doesn’t care if the house is $400k or $800k.

You and I might say that on a $600K asset, he could get over $30K without any risk or tenant hassles, in cash, HOWEVER tax consequences keep it from truly being $600k.

He’s a happy camper. There are thousands like him. Of course nobody lives forever, so the property will get passed on to the next generation or sold by the heirs.

I would never buy a property expecting appreciation. I’d want it to pencil out, including a return on my investment, from day one, and have any appreciation be a bonus.

A big trigger for me a few years ago was the realization that probably 80%+ of those living in Southern CA could not afford to buy the home that they were living in, and that continued to worsen. I think that there is something VERY wrong with that, but it’s true in many parts of the world.

You get zero return on equity that is tied up, and most people don’t care, including me.

I think that the underlying force supporting prices is ignorance, not education. It’s easy to do something silly and profit from it when there are more just like you behind you, willing to pay more than you did, whether it makes sense or not.

It’s why I call it the greater fool theory, and in my opinion it’s also what has propelled the stock market to new highs. It could last many more years, it doesn’t have to stop yet.

(Sorry for the long post)

[HLS]

Ignorance is Bliss…

This is the foundation of the “greater fool theory” in any market of any product. I have a background in other volatile markets, which many people haven’t been exposed to.

With ANY product,
What is popular, hot or in demand at any point in time, has absolutely no bearing on where the future price will be.
Some people think that it can only drop XX%. That’s nonsense.
Could the housing prices drop 90% ? yes they “could”… but they won’t, because you and I and many others will step in at a level that makes sense to us, based on a return that we anticipate.

Where are the genius investors from 2-3 years ago ? Prices are cheaper now, they should be lining up and camping out.
What happened at the seminars that they attended ??

What you cannot lose sight of is that about 80%-90% (maybe more)of the local population isn’t affected by the drop in housing prices, other than a drop on paper, in net worth.

Many people have mortgages of 50% or less of today’s reduced values. They bought over 5 years ago and are quite happy with where they live.

There have been millions of dollars already received through investments, inheritance etc. Plenty of people are OK financially. Many baby boomers will be receiving inheritances beyond their wild dreams of 20-30 years ago.

I don’t think that ANYBODY expected a 300%+ rise in local property after 1996. The bottom line is that millions of people got very lucky, for one reason or another.

Our local market will probably never get back to a level that I would want to buy rentals. That’s OK with me. There are plenty of other areas that do make sense from a cash flow standpoint.

You seem to be looking for a logical answer, which I gave up on long ago. Many people have rentals today with a pile of equity, and they don’t need the cash. I spoke to one who gets $2200 a month on a home worth $600k today. He bought it over 30 years ago.

In his mind, he’s getting $26,000 a year (less maintenance etc) for nothing. He doesn’t care if the house is $400k or $800k.

You and I might say that on a $600K asset, he could get over $30K without any risk or tenant hassles, in cash, HOWEVER tax consequences keep it from truly being $600k.

He’s a happy camper. There are thousands like him. Of course nobody lives forever, so the property will get passed on to the next generation or sold by the heirs.

I would never buy a property expecting appreciation. I’d want it to pencil out, including a return on my investment, from day one, and have any appreciation be a bonus.

A big trigger for me a few years ago was the realization that probably 80%+ of those living in Southern CA could not afford to buy the home that they were living in, and that continued to worsen. I think that there is something VERY wrong with that, but it’s true in many parts of the world.

You get zero return on equity that is tied up, and most people don’t care, including me.

I think that the underlying force supporting prices is ignorance, not education. It’s easy to do something silly and profit from it when there are more just like you behind you, willing to pay more than you did, whether it makes sense or not.

It’s why I call it the greater fool theory, and in my opinion it’s also what has propelled the stock market to new highs. It could last many more years, it doesn’t have to stop yet.

(Sorry for the long post)

[HLS]

Miles probably cost them 1c each. They are worth about 1.5c when you want to use them.

It’s become a bit of a scam, as there are billions of miles on the books as a libility to the airlines, that they have collected payment for, but they aren’t very easy to use to popular destinations. Another GREAT example of marketing with the average comsumer being fooled.

1,000 miles is worth about $15 IMO, but you need 20-25K minimum before you can even consider using them for anything worthwhile.
Read the fine print, you probably pay dearly in the long run, but there are consumers that will fall for it.

P.T. Barnum said it best.

[HLS]

Miles probably cost them 1c each. They are worth about 1.5c when you want to use them.

It’s become a bit of a scam, as there are billions of miles on the books as a libility to the airlines, that they have collected payment for, but they aren’t very easy to use to popular destinations. Another GREAT example of marketing with the average comsumer being fooled.

1,000 miles is worth about $15 IMO, but you need 20-25K minimum before you can even consider using them for anything worthwhile.
Read the fine print, you probably pay dearly in the long run, but there are consumers that will fall for it.

P.T. Barnum said it best.

[HLS]

YES, we are on the same page.

This entire site is speculation, based on some facts.
I don’t KNOW what values will be in 5 years.

People definitely get misguided by loan thieves.
There are way too many myths about mortgage loans.

Many/Most people in lending biz are financially ignorant and don’t really have a clue what is best for the borrower.
They cannot explain options to the client or the pros and cons of a loan. They are sales people only trying to make money for them, regardless of what’s best for the borrower.

They DO know that they can get the largest commission possible by selling the low payment of the option arm loan. They also know that they can make more money by charging the borrower “just a half-point” more than they should.

People who tell me that they had 700+ scores and knew they wanted to be in the property long term, yet were sold a 2 YR ARM, with the promise of a “free” refi in 2 years. It’s a disgrace. The stories are true, and are endless.

I believe that the vast majority of borrowers are in the wrong loan for their situation OR paid too much in rate or fees. There are honest, ethical people in the industry, but it’s hard to find them. It’s a rogues gallery.

More people get outright screwed by friends and family on loans than you would think. It’s also a falacy that going directly to a large bank gets the best loan. It may be, but not necessarily.

I give people straight answers and options and explanations beyond what they even knew possible. It’s their decision, not mine.
The 10YR ARM provides many people the security that they need, however they choose the 30YR fixed. It’s expensive insurance.
It doesn’t matter to me, I just want them to know their options.

[HLS]

YES, we are on the same page.

This entire site is speculation, based on some facts.
I don’t KNOW what values will be in 5 years.

People definitely get misguided by loan thieves.
There are way too many myths about mortgage loans.

Many/Most people in lending biz are financially ignorant and don’t really have a clue what is best for the borrower.
They cannot explain options to the client or the pros and cons of a loan. They are sales people only trying to make money for them, regardless of what’s best for the borrower.

They DO know that they can get the largest commission possible by selling the low payment of the option arm loan. They also know that they can make more money by charging the borrower “just a half-point” more than they should.

People who tell me that they had 700+ scores and knew they wanted to be in the property long term, yet were sold a 2 YR ARM, with the promise of a “free” refi in 2 years. It’s a disgrace. The stories are true, and are endless.

I believe that the vast majority of borrowers are in the wrong loan for their situation OR paid too much in rate or fees. There are honest, ethical people in the industry, but it’s hard to find them. It’s a rogues gallery.

More people get outright screwed by friends and family on loans than you would think. It’s also a falacy that going directly to a large bank gets the best loan. It may be, but not necessarily.

I give people straight answers and options and explanations beyond what they even knew possible. It’s their decision, not mine.
The 10YR ARM provides many people the security that they need, however they choose the 30YR fixed. It’s expensive insurance.
It doesn’t matter to me, I just want them to know their options.

[HLS]

Affordability gap..
This makes sense to only the logical.
Beach property, San Fran Bay area, New York City, have markets that have sustained gaps that don’t pencil out either.

In the same way that many stocks don’t support the valuations that they are at, it’s a combination of I don’t care what it costs, I want what I want combined with the ignorance factor that will support markets forever.

Personally, I wouldn’t have bought a $300K house that rented for $1500 in 2003, but people who did saw gains of 100% in equity, with a minor increase in rental income.
They didn’t know that the increase was going to take place, but they gambled and won.

Those who bought in 2005-06 gambled and lost, at least for the time being.

I agree with you, but the balance that we want may never happen again.
When the market does finally bottom, we won’t know it until well after, but there is absolutely no reason for a bounce at that level.

So many people will have a bad taste and have ruined credit they won’t be looking to buy back in. After a few years, newbies enter the market with visions and rose colored glasses, and the cycle starts over again with new players.

Many people who got burned in the dot com crash and swore “never again” are have been back in the stock market for the last few years.
They certainly didn’t forget. Is there an explanation ?

It’s just human nature, controlled by fear and greed.

[HLS]

Affordability gap..
This makes sense to only the logical.
Beach property, San Fran Bay area, New York City, have markets that have sustained gaps that don’t pencil out either.

In the same way that many stocks don’t support the valuations that they are at, it’s a combination of I don’t care what it costs, I want what I want combined with the ignorance factor that will support markets forever.

Personally, I wouldn’t have bought a $300K house that rented for $1500 in 2003, but people who did saw gains of 100% in equity, with a minor increase in rental income.
They didn’t know that the increase was going to take place, but they gambled and won.

Those who bought in 2005-06 gambled and lost, at least for the time being.

I agree with you, but the balance that we want may never happen again.
When the market does finally bottom, we won’t know it until well after, but there is absolutely no reason for a bounce at that level.

So many people will have a bad taste and have ruined credit they won’t be looking to buy back in. After a few years, newbies enter the market with visions and rose colored glasses, and the cycle starts over again with new players.

Many people who got burned in the dot com crash and swore “never again” are have been back in the stock market for the last few years.
They certainly didn’t forget. Is there an explanation ?

It’s just human nature, controlled by fear and greed.

[HLS]

I’m not as unstable as I might appear. I’m not too concerned about me. It’s others that I truly worry about.

A 5 YR ARM is actually good for people who only plan on having their loan for a max of 6 years.
Many people have a goal of selling or leaving the area, based on age, kids, etc. it DOES serve a purpose for those who understand their options.

It’s not hard to figure out what the guaranteed savings is over the initial 5 years compared to a longer term loan, and it isn’t uncommon to save $15K-$25K, which more than offsets a higher payment in year 6 or maybe even 7.
If the plan is to stay in the loan longer than 6 years, of course it’s silly to gamble on a 5 YR ARM.

It is crazy to pay the 30 YR rate if you don’t need that security, so I respectfully disagree with your last line.

[HLS]

I’m not as unstable as I might appear. I’m not too concerned about me. It’s others that I truly worry about.

A 5 YR ARM is actually good for people who only plan on having their loan for a max of 6 years.
Many people have a goal of selling or leaving the area, based on age, kids, etc. it DOES serve a purpose for those who understand their options.

It’s not hard to figure out what the guaranteed savings is over the initial 5 years compared to a longer term loan, and it isn’t uncommon to save $15K-$25K, which more than offsets a higher payment in year 6 or maybe even 7.
If the plan is to stay in the loan longer than 6 years, of course it’s silly to gamble on a 5 YR ARM.

It is crazy to pay the 30 YR rate if you don’t need that security, so I respectfully disagree with your last line.

[HLS]

It’s a self serving organization.

Do you think that they would dare utter those two horrible, terrifying words..
“irrational exuberance” ????

They believe that they can talk themselves out of a falling market. It’s just called DENIAL…..

Don’t worry, they will catch on eventually.

[HLS]

It’s a self serving organization.

Do you think that they would dare utter those two horrible, terrifying words..
“irrational exuberance” ????

They believe that they can talk themselves out of a falling market. It’s just called DENIAL…..

Don’t worry, they will catch on eventually.

[Author]

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