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August 4, 2006 at 9:49 PM in reply to: Danger of Stated income loans, 75% of borrowers face payment shock at least 50% #30759
PerryChase
ParticipantYeah, the exotic loans are one big factor that’ll cause the crash we’re expecting.
ParticipantYeah, I read that developers have been playing the sex card in New York for a while now. It works otherwise they wouldn’t be wasting their money.
ParticipantI too love the usability of one story floor plans. However, I think that large lots are wasteful. Personally, I’d rather have a 1 story apartment/condo than a same size townhouse.
One story houses are definitely better than 2-story house, if given the choice.
BTW, cul de sac is generally not Feng-Shui.
ParticipantCardiffbaseball, I was amazed at my cousin’s house in Ohio. Everything is so green there. It’s like they live in a park setting — all for 1/4 of a similar house here (without the land).
ParticipantPowayseller, thanks for the post on vastu housing. I learned something new today. I follow Feng-Shui principles but I never knew about Vastu. I never liked south facing houses because in San Diego, it’s simply too hot.
I looked at the pictures and I find the Vastu houses too imposing. I would rather live in an architecturally understated house. My ideal house would be a mid-century modern type home. I’m so sick of the Tuscan, Spanish, Italian, Hollywood Regency style houses around SD (but i live in one, yuk). I wish developers would do something more innovative.
As far are an alternative to granite, how about concrete? A while ago there was an LA Times article on concrete counters tops. It’s too bad that they are expensive.
PS, thanks again for the info on Vastu houses. I’ll definitely do some more reading. I’m sure there are many different ways to make a house Vastu.
ParticipantSD has been a place where businessmen in the Real Estate related fields have done well. I remember the people involved with S&L and development in the late 1980s. The speculation is all over today so I wonder how RE related businesses will fare in the coming RE crash.
ParticipantPolitically, there’s no way to fix Prop 13. The whole tax structure in CA and USA needs fixing but there are too many special interests involved.
The ideal would be to have a progressive tax structure with protection for the disadvantaged.
ParticipantA write-down is a book (non-cash) entry to bring a previously overvalued asset to the current value. The write-down results in one-time non-operating loss (which btw results in income tax savings). It’s bad on the balance sheet and also bad for earnings per share. If the value of the asset continues to decline, then it’ll have to written-down again.
The manner in which companies and industries come up with current value is highly subjective. Ideally, the value of the land should be what is would sell for today. Financial Accounting Standard Board rules determine when a write-down needs to (or can) be booked.
If a public company’s stock went down a lot, they have the incentive to write-down as much as possible because they figure that the write-downs would not lower share price any more that it’s already been by other factors. In the future, they get to book higher profits from selling the lower basis asset, thus influencing share price on the up side.
A private company would want to write-down everything it can in order to defer taxes.
ParticipantI’ve read Piggington since the beginning and only posted recently. For sure, Rich was among the first to call the housing bubble. That was at a time when “investing” in real estate was the no brainer thing to do. Rich took a lot of personal risk developing this site. I’m sure he educated countless readers. Thanks Rich! I believe Professor Piggington is now tenured and chair of the department.
August 4, 2006 at 12:48 PM in reply to: Risky Investment Ideas or “Don’t risk your home equity shorting stocks” #30696ParticipantPS, i see your point. And yes, capital preservation combined with a good return is the best way to go.
I think that Daniel was saying that if you were 100% sure of your predictions, you’d risk all because there’s zero downside. If you were clairvoyant, you could easily make the Forbes list in a short time.
Don’t worry if people don’t take your point of view. If they think that houses are always a good buy, let them buy. They are not sure either so that’s why they are here.
Tell us more about your previous house. What is a Vatsu house? I love architecture and good designs so I’d love to know more.
ParticipantI second the notion that RE depreciation is no longer debatable. We just need to sit back and see how far down it’ll go.
vcjim, on Prop 13, what I find unfair, is that if your parents bought a house in La Jolla for $100k, and now it’s worth $2 Million, you now own the house but you pay less in property tax than somone who just bought a condo in Escondido. That’s just a very regressive tax structure.
Participantybc, yes you can adjust your property tax down in case of depreciation. That’s proposition 8 — temporary reduction of assessed value for property tax purposes.
However, when prices go up again, your house will automatically revert back to the original basis + 2% annual compound. Therefore, for property taxes purposes, it’s always better to buy low and hold-on forever. When you retire (after 55, I think), you can transfer the original basis to another house of equal or lesser value.
Here’s more on Prop 13. I benefit but I still think it’s unfair.
http://patrick.net/prop13/unfair.htmlParticipantI’m all for Wal-Mart. The low prices have contributed to our higher standard of living. Imagine who much our standard of living would increase if RE were wal-martized.
ParticipantWell, I think the big difference this time is the level of debt that people take on to afford a house.
Like the professor said, homeowners are all speculating on a price increase. Once that price appreciation is gone, there’ll be panic. My guess it that 50% of house in SD were bought by speculating resident homeowners or investors.
The new financial products out there have caused buyers to no longer consider the price of the homes they are purchasing and they now look at the monthly payment. Sure with a buy-down to 1%-3% buyers can swing the payments but they’ll be in for a big shock once the loans reset.
I’ve been following the new developments (condos to expensive SFR), and with incentives, I see that we already have an effective 10%-20% price drop from the peak as compared to similar resale homes. That information is not yet reflected in statistics. Houses built in 2003-2004 are only now being listed for sale at a loss. If anyone you of feels like doing so, go to a new project and check out prices. Then look for previous purchases in the same project. You’ll clearly the the 10-20% decline.
As compared to the last RE downturn, the internet will spread the info widely so the depreciation will over correct on the way down. MLS and other data is now widely accessible to everyone. In 5-10 years, it’ll be a different generation of buyers.
I think that the difference this time is the level of speculation out there. That’s what my gut instinct is telling me.
The sentiment for a 50% correction is already out there. But no reputable economist will say so lest he is labeled irresponsible. It’s more circumspect to predict 20-25% decline with price stabilizing.
Remember Bush the father insisting that there was no recession? He was trying to talk up the economy. Now, we have vested interests trying to talk up real estate. But everyone is already feeling the pain.
Yes, yes, you guys want hard numbers… however, compiling that info would become a full time job.
I’m happy to sit back and let time be the judge.
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