[no_such_reality]

Give the owners a break.

They work all day in cubeville.

They wouldn’t feel at home unless they were in a slightly larger version of it.

[no_such_reality]

You’re between need and want.

That’s the crux of your problem. You’re much like me. And in effect, much like many renters. What you need is pretty much a 1 bedroom place to sleep, make a few meals and come back to after working or a night out.

What you want is a place where you can have space, throw parties and have al sorts of friends over to socialize and be impressed with the place.

And for the cherry on top of that sundae, you’d like the place to be good enough to support whatever future direction your life takes.

It’s like LA-renter said, find yourself a great place to rent. You’ll be amazed at how jealous people get when they realize you have such a great place and it’s only costing you 1/3rd of their mortgage payment.

The more time I spent looking around for a place last time, the more apparent it became to me that the difference between a virtual slumlord rental and a nice place was $100 and difference between slum and a great place was only $300.

[no_such_reality]

PS, I was here, don’t remember that. I remember everything being a wreck. I also don’t remember the homes dramatically depreciation in nominal dollars. They trickled down 10, 20K year, home medians were in the high twos/low threes. They took some hits, but not 50%. The bulk of the loss in the last down turn was due to inflation catching incomes up.

I also remember all my coworkers talking about wanting to get out of their upside down loan but not being able to. And others tough talking about getting the bank to forgive some of the equity loss, but it not occuring. We’re talking losses that pale compared to the equity run up lately.

I think the voice of San Diego site had the historical housing median price numbers on it. You can look, they simply didn’t implode, they trickled down.

50% in 18 months is an implosion.

[no_such_reality]

Actually, I think this is smart on his part. I can see him using this as leverage against the banks that gave him the cash-back loans on close to let him out completely free just to not get this blown up bigger than it is.

Which of those banks are going to want their logo appearing on the screen as Katie Couric interviews little 24 yr old blonde Californian web surfer boy on the CBS evening news explaining the financial structure of 7 home purchases in four states with no job AND the banks giving him money to do it.

[no_such_reality]

Yeah but… the IRS is unleashing Private Debt Collectors to collect back taxes that get to keep 25% of the proceeds… link

[no_such_reality]

PC, I don’t think the banks will let them walk that easily this time. A 1/2 million isn’t chump change, even to a mulit-billion dollar bank.

Also, what about deficiency judgements, it’s longer and more painful to foreclose, but if the bank is looking at that substantial of a loss, do you see a switch to judicial foreclosure so the lenders can exploit the lying in the ‘liar’s loans’?

Finally, we must keep in mind that most will never admit to themselves that their $800,000 house, that they owe $880,000 on, is really worth $400,000. most will never even realize, what they’ll know is they can’t sell it.

In all honesty, I’m suspecting the housing market is going to become really illiquid. Possibly to the point that the only thing available on the market is prior-foreclosure resales. Those resales will likely be in our target range of 40-50% from peak, but I suspect that’ll be all we have to choose from. People will rationalize that their house is really still worth $800,000, just once all these foreclosures clear out…

[no_such_reality]

Cardiff, yes, there is a rule of thumb to calculate if a rental is a good investment. It’s a 8-13%. The rule of thumb is a Cash on Cash return using a Gross Rent Multiplier. In the current housing market, they’ve been out of whack for years. Even in the normal market, California has tended to the high end (low return).

Basically, the purchase price of the rental should be between 8-13 times the Gross Rents. SFR’s tend to be a little higher (10-15X). However, in the current market SFR’s are tending towards 20-25X due to the speculators thinking they’ll make a year’s worth of appreciation (10-20%) on a million dollar unit and flip it after carrying a 1 year ARM with a 1% teaser.

Literally, I gave up looking last year after seeing unit after unit where the rents wouldn’t cover the mortgage payment on a 1% loan. You check the financing scoop and the owner has had it one year with a 1% loan buying the the previous year and marking it up 10-15%.

[no_such_reality]

I got the same note, and immediately concluded it was more meaningless babble to churn accounts.

One look at the first graph shows two main points.
1. It’s a lousy ten year period.
2. 1994-1995 on the chart shows the exact opposite of their conclusion. In fact, 1994-1995 shows the housing market index collapsing 50% to be followed by the S&P rising 50%. They forecast the same collapse in 2006 with big ? mark to ask what’ll happen.

The rest are equally babble-speak.

Argh.

[no_such_reality]

That’s only 20% on the high-end. Provided it sells.

What’s more concerning is that idiotic spread, it is 20% by itself.

[no_such_reality]

IONE, the main thing working against the more traditional stagnation is the number of people that bought in the last 2-3 years that financed with ARMs that could only afford the payment based on the teaser rate or using other features like the minimum payment on the Option ARM.

The reality is that bewteen 60-80% of the people that bought in the last two years could not afford their home mortgage using the actual mortgage interest rate or long term fixed rate.

As they run out of time, the race to exit will begin for those that find themselves in an unsustainable situation.

[no_such_reality]

There’s a couple reasons it is coming down:

The potential good news with the Gulf of Mexico discovery.
Opec maintaining volume.
Summer driving season ending.
Hurricane season not materializing for the Gulf oil industry (knock on wood)
Iran not escalating
Nigeria not escalating.
and Chavez while being more bombastic, continuing to ship oil.

All of these made oil nervous throughout the summer. All are slowly becoming non-issues or standard political posturing.

[no_such_reality]

Isn’t the current trend gated without gates?

The gate houses, entry way, and possibly even gate are built, but they are in the permenantly open position so that the gate maintenance and hassle is removed. The community has the appearance of a gate, without the hassle.

I think the reasoning is that the drive by trouble makers keep driving and the ones that’ll look close enough to see there’s no gate guard are coming in anyway.

[no_such_reality]

Poway, you’re talking about the double whammy. The interest rate rising at the same time the teaser rate and option payment expires. Technically, you’re both correct. Interest rate alone going from 6-8 won’t do it. Going from teaser or losing their minimum payment will.

Jim, quick questions, I was under the impression that the option ARMs were more stringent than your example. I thought most were coming in with a 110% cap cuasing reset which in turn drops the reset to about 29 months. 2.5 years.

[no_such_reality]

“Executive” house? Give me a break. AFAIK, that word doesn’t mean anything other than “really, really, nice” or perhaps “elegant,” and neither of this house is.

Executive house means priced to fit a big ego.

[no_such_reality]

It could also be that sellers have heard “the median continues to rise”

In OC the peak was June, but the price drop since has been meager. All year long, year over year numbers continue to increase.

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