[kev374]

it’s a buyers market in terms of control but it doesn’t really mean anything since the values are so out of wack so the buyer really has no choice to do anything but wait, if you can’t afford anything by a long shot what difference does it make if you have the power to negotiate 5% or 10% off the asking price, it’s all pointless…so from the latter angle I guess it’s not so much a buyers market 🙂

[kev374]

I want to start making offers on places I like but my assessment of reality and what the sellers want is still so so far apart that I guess I will just have to wait at least 12 months more.

What I do basically is take the 1998 price (or the first sale price if newer than 98), apply a GENEROUS 8% YOY appreciation. I then round up the figure to the nearest 10k. I consider this much MORE than fair because houses historically don’t have 8% long term appreciation in SoCal and some of these houses have monster HOA dues for which I should deduct from the sale price further but I am being VERY GENEROUS and not doing that.

Even so, I usually arrive at 30-50% of the list price which just shows you how amazingly out of wack this market really is. We will be back to earth, just have to excercise more patience that’s all.

[kev374]

The sad thing is that there are some naive people who actually think that is a legit home loan like they are building equity and paying off the home in the normal way.

[kev374]

$800,000 to live in Garbage Grove? There are 4 bedroom houses a mile away from the beach in Laguna Niguel and Dana Point selling for $700,000. Seriously, these buyers got scammed but apparently they did not do one bit of research on their own so they need to quit blaming everyone else and blame themselves for their bad decision.

[kev374]

Besides the term “Suicide mortgage”, they are also called “Neutron mortgage” because they have a fuse that blows up at a later date and kills everyone but leaves the building standing…that is how Businessweek magazine put it in it’s recent article.

Link from MortgageDailyNews

The original Businessweek article

[kev374]

It’s the biggest no brainer in the history of mankind.

hahaha! I keep hearing that ad on the radio!! Too bad I forget the name of that company. LOL!

[kev374]

I agree, that is just a 45 day window..I can’t imagine any circumstance in which a home can go from sale to owner to REO in 6 weeks!!

[kev374]

I had an argument with this jerk investment financial advisor partner at a large brokerage firm recently who does not believe real estate in San Diego will go down. He kept saying it will flatten out and be a soft landing not a crash.

well, it is still the majority opinion that if prices slide it’s not going to be more than 5% at most. When I make the case that prices will indeed fall upto 40% I get laughed at. Yes, we’ve had a 125% appreciation, unprecedented in history so I don’t know why it’s so hard to believe that an equally unprecedented downturn cannot take place?

Homeowners are in absolute denial because for many people a big decline in values is going to reduce their net worth to nothing and that is too much for them to digest.

They would like to believe that they are so financially savvy for having bought a home that created so much wealth when infact they are financially illiterate and cannot comprehend the fact that RE market is cyclical and has always been like that.

In the early 90s prices went down 30-35%, this time it is far worse with so many more aggravating factors (excessive home equity borrowing, exotic lending, speculators etc.).

[kev374]

my guess would be 2007 Q2 at the earliest…not before that. It’s prudent for them to increase rates right now but I think they will holdoff at lease 2 quarters.

[kev374]

run up was due to speculation by investors and financially illiterate buyers participating in a buying frenzy using exotic loans due to an irrational fear of being priced out forever.

the whole run up is going to reverse itself with a long term (probably 6-7 year) decline of 40% or more.

[kev374]

my investments are mostly in international index funds and those have been doing extremely well lately.

[kev374]

25%!!! whoa! my rent increased 8.5% from last year and I thought that was outrageous! I live in Lake Forest (South OC). I did renew my lease for another year since I didn’t want to deal with the hassel of moving 🙁 I’m counting on home prices coming down A LOT in 2007 at least to 2002 levels…may happen!

[kev374]

even in a downturn the graph doesn’t come down uniformly, there are short periods where it appears things are picking up. The truth is that we have a VERY LONG way to reach the bottom of this market, perhaps another 5 years or so. In SoCal I’m very sure of at least a 30-35% decline when all is said and done. Markets always re-align to fundamentals like income and rents, that is just the reality.

When the ratios between prices, rents and incomes make sense then and ONLY THEN is it a good time to buy.

Just my $0.02.

[kev374]

Diego, my cousins condo bought in 1990 for $207,000 declined 33.8% to $137,000 by 1995, this was in the upscale area of Rancho Palos Verdes 😉 so it’s not speculation but fact that values dropped that much! Current value at zillow is $660,000 (about 200k off!) and a comp sold a few months for $450,000.

[kev374]

This time the whole thing is going to be much more severe due to the introduction of all the suicide mortgages going bust within the next 1-2 yrs. If homes could decline 35% in the last downturn there is no reason to rule out a 40-50% decline.

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