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PerryChase
Participantsdrealtor, as first, I thought that you were just a RE industry booster. But as I read your posts, I tend to you agree with you. You’re realistic about the market and aren’t trying to justify the declines as insignificant.
I’m fairly optimistic about the general economy and a realist about the real estate market. There’s nothing like looking at individual houses (or same houses) and see how they’ve declined. That gives a true picture of the market, especially for a potential buyer who wants to buy in a certain neighborhood. There’s no need to look at the stats bandied about by the analysts.
ParticipantSure, for every house sold, someone cashed out and reinvested right back into RE at a higher price. When they realize that they can’t cash out anymore, and their ARMs reset at double or triple their current payments, and they can’t refinance anymore, then you’ll see the real pain. When economic stagnation sets in and the Fed have to hike interest rates to defend the dollar then the pain will be accelerated.
I know some people in this boat. Very few households can “afford” to carry 800k houses but that’s what has been selling. Even when those houses go back to 400k, the number who can truely afford those homes would still be the same.
Wait ’til 2010 and see who’s right.
Participantpowayseller, i’m glad you’re BACK. 🙂
I don’t share your gloom and doom predictions about the general economy but it could be a matter of semantics. I didn’t think that the early 90s downturn was that bad. Even if we have twice that hardship in this coming RE crash San Diego and California will move on.
People will go bankrupt, and there’ll be foreclosures aplenty. But that’s our capitalist system’s way of cleaning house and reallocating resources to more efficent uses. Yes, many will hurt but life will go on. The economy will not come to a halt. I predict 2 recessions before real estate prices stabilize and stagnate for the next 15 years.
And I do belive that SD housing will drop 50% from the peak (I’m not talking about the median but same house comparaison). For the sake of the general economy, I hope that people walk away from their houses instead of scraping by and holding on. It’s better to see house prices drop than people retrench on all other consumption to hold on to the albatrosses.
ParticipantI don’t think that the best way to get rich is owning real estate. It used to be that RE was highly illiquid so after 30 years you had something “to show for.”
The sweat equity factor also allowed people have something to “show for.”
However, so many new products now allow people to tap their equity and even borrow more than their houses are worth. It could turn out that owning RE is the way to the poor house for many.
From a strickly return standpoint, RE doesn’t do nearly as well as other financial investments.
ParticipantParticipantThat why I think that foreclosures and bankruptcy are not necessarily bad for the economy. That’s our system’s way of reallocating assets/resources to better owners/managers.
By holding on to those looser properties that family is not contributing to growing the economy. They are just paying debt and “scraping by.” If they sold at a lost, they could reallocate their yearly earnings to consumption and more productive investments.
ParticipantI should also mention that as a nation, we can conserve energy and easily save 20%-30% without lowering our living standards. Most people are wasteful and careless. My brother’s family is like that. Their kids turn everything on and don’t bother to turn it off.
In developing nations, people have only 1 neon light lighting up the whole household because energy is so expensive. By eliminating the use of the clothes dryer and conserving, San Diegans could easily shave 1/2 off their energy bill.
I line dry my clothes in the garage then machine dry them for 5 minutes to soften them and get all the moisture out. But then I’m all by myself so it’s not that much effort.
ParticipantMy gas and electric bill averages to about $100 per month even with the A/C runnning for a 4-bedroom house. I would never install Solar and have to maintain the system unless I could recover the cost in 10 years or less.
Because we are not a planned economy, America’s economic systems is highly flexible. It takes jolts to snap us out of our complecency. That’s what recessions are for.
As far as China goes, they will eventually surpass us in GDP simply because for their population. When that happens, their will be able to afford as good a military as ours and their political and economic influence will be monstruous.
From a standard-of-living standpoint, it will probably take another century for the Chinese to achieve per capita GDP parity with America.
America also has the option to swing its doors wide open to immigration in order to grow economically. But that will affect Joe Average and he won’t like it.
ParticipantLet’s not carried away with fiduciary duty. Realtor’s job is to find what the buyers want to buy at a fair prices AT THE TIME OF PURCHASE. It’s not Realtor’s responsibility to predict the future. The future is uncertain, predicting it is pure speculation.
ParticipantSteve Beebo, I still don’t get your logic.
You can rent beautiful condo downtown for $3000/mo or buy it for $6000/mo (interest only loan + taxes + HOA, net of tax savings).
Even if you don’t save the difference, if you rent, you have $3000/mo to indulge yourself, go on vacation, buy a nice car, have a nice life.
I think that in this case, the renter is clearly ahead of the buyer.
ParticipantI think that the real estate downturn won’t affect consumer spending enough to cause a depression. Americans have an amazing ability to move on. People will let their houses go before they cut back on their steak dinners and ice cream. Eventually, they’ll say f— it, I’m not going to let the house own me. They’ll walk away and move on.
Actually it turns out that mass foreclosures might be good for the economy because people will put their incomes to consumption rather that debt payments. That is preferable to owners tightening their belts to make mortgage payments.
Holding on to real estate albatrosses is what caused 15 years of stagnation in Japan. The beauty of the American economy is the ability to cut the losses and let better owners manage the looser assets/properties.
I see a 50% drop in real estate prices from the peak but I don’t foresee a protracted downturn in the general economy.
ParticipantWhat wrong with renting a house even for 10 years or more? My friend in renting a beautiful condo Downtown with sweeping 180 degrees views. His rent is 1/2 the carrying cost of the same condo. What’s so terrible with saving money?
To me, renting a house is the same as leasing a car. Choose the best deal for you.
ParticipantWe need to reduce the size of all governments by 1/2. I support cutting-off funding to the government and forcing our politicians to make the hard choices.
I don’t mind a consumption tax since I don’t consume much anyway. I may just do all my shopping overseas in that case.
Since we live in San Diego, a consumption tax might be a boon to Mexico and American retailers may setup shop there with American consumers coming in droves.
Participantpowayseller, I think that you have the passion to be a buyer advocate. I however, don’t feel that it’s my job educate people. While I might voice my opinion online or with a few really good friends, I find that most of the time, people like me more when I’m light and breezy.
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