[powayseller]

theplayers, why are you 100% in US dollars?

[powayseller]

My gloom and doom about ARM is because of one big problem in the lending guidelines: borrowers are qualified based on the intial teaser rate, or at the most what the payment is at the current non-ARM teaser rate. The financial institutions *should* qualify borrowers based on the average of today’s LIBOR rate and the maximum lifetime cap of the loan, to make sure the borrower can afford the payments if the LIBOR or Fed funds rate goes up.

Borrowers are too ignorant to consider that the LIBOR or Fed rate could ever exceed 3% or 4%, or whatever it was at signing.

None remember 18% home loan rates in the 80’s. It may never get that high again, but even 8% rates would almost double your payment from that 4% teaser rate. DaCounselor, do you really think that interest rates will not go back up to the historical average of 7-8%? What will happen to the ARM mortgage payment when rates go from 4-8%? Can the borrower refinance and qualify with less equity and a double payment? No way.

So the only way the ARM person can make their payment in 5 years is if mortgage rates are back down to the lowest rate in history plus they have not lost equity due to home price declines, OR they got a 50% pay raise and qualify for the higher payments. But without the equity, could they get the loan?

DaCounselor, I am not a loan officer, so if you could check into this and bring back some opposing facts, I am happy to corrected.

Until then, what I write is the info I got from a realtor, my loan officer friend, and the website housingbubblecasualty.com, run by a mortgage broker who exposed the exotic loans and the problems they would bring. That guy left the mortgage industry this spring and doesn’t post much anymore.

I would like to ammend my statement to say, “I believe that the buyers will be forced into foreclosure in 5 years, unless interest rates are back to 5% AND they can qualify for that $780K loan for a house which will at that time probably be valued at $480K. So in all likelihood, they will be forced into foreclosure”. Does this satisfy you?

[powayseller]

I ran into a couple looking for a rental yesterday, as they drove through my neighborhodd, and picked up the flyer of the House for Sale on my street. They told me that the rental market is so scarce, they can’t find anything at all, except houses which are very overpriced or very run-down or odd in some other way. Now their strategy is to call sellers, and approach them with the idea of renting their homes that are not selling.

hs told me she has been checking the rentals since last winter, and the # of rentals has falled by 2/3 in Poway and Scripps Ranch. hs, please correct my version of this if it’s not quite accurate.

[powayseller]

Everbank, and presumably ING Direct, are FDIC insured, yet let you buy foreign currencies. So you can buy euros and Swiss francs, FDIC insured.

I am also scared of holding all my money in $$s, so I’ve been asking people here which currency they think is stronger. I’ve heard pro-euro and con-euro arguments, and enough opinions to have immobilized me with indecision.

Probably the best strategy is to diversify among various currencies of governments with solid trading programs and strong budgets, and precious metals.

theplayers told me yesterday that he has most of his cash in Treasury bills, since that is more safe than banks. He has some in CDs, and I am going to move my cash to Treasury bills in September, when my 4 months are up.

But please don’t copy what I do. I have no crystal ball either. I could be totally wrong and lose all my money and miss out on big run-ups in stocks. Or my euros that I plan to buy could lose against the dollar, if we have a dollar rally.

Gold: Check out GLD, the gold ETF. Read about it at Euro Pacific Capital, kitco.com, and Zeal. I subscribe to Zeal Intelligence, and that’s where I got the COP idea. They have done well on their recommendadtinos, bec. they were early on the commodities investing.

I subscribe to Yamamoto Forecast, which is $350/year. Very pricey. Every month, I get a typed newsletter. typed. The guy is not even on a website, but he is one of the best market traders, and that’s why I subscribe. Anyway, he has been telling his subscribers to be 100% cash, 0% bonds, 0% gold. The reasons are given in his newsletter. He recommends CDs for the cash part, and I don’t know why. It seems Treasury bills are safer. I don’t know why he doesn’t recommend euros or yen or swiss francs. If the dollar loses value, aren’t we better off holding euros?

If you want to know how clueless our senators are about the problems of our economy, watch Bernanke’s testimoney, and their Q&A, on C-SPAN video. From this, I can tell that nothing will ever change about our deficit and manufacturing outsourcing. What we are discussing is very real, and not something we are just making up. It is real.

[powayseller]

Search the forum archives for my lengthly posts about the stock market, and the recommendations made in the newsletters to which I subscribe. I got out of the stock market because it is overvalued, and the next recession will reduce earnings which will cause another sell-off. I sold my Vanguard index funds and various stocks, right before the first 2% downturn. The timing was luck. I wanted to be out of the stock market well before the recession. We are 95% cash. The only stocks I own are BRK.B, and COP and a canadian lead mining company (maybe a bad decision). I would like to buy gold, and am waiting for a price drop.

If you are bullish on stocks, explain your reason.

Treasury bills are the safest way to hold cash, and CDs are good too. They pay over 5%.

This is the time to preserve assets, not to hope for big returns. Keep some money, maybe 10% to invest in stocks, gold, or whatever you deem a good play.

In a downward moving stock market, what is the chance that your stock will move opposite of the entire market and go up?

Some people here are bullish on commodities, but in our discussion yesterday at the meetup, several members told me that commodity prices are high only due to high US consumption. In our next recession, we will buy less from China, China’s demand for commodities will fall, and commodity prices will revert to the mean.

A real good book about the dollar weakness and commodities and money supply is Richard Duncan’s The Dollar Crisis. The most important thing I learned in that book, I have not read anywhere else: he has Federal Reserve and IMF data, about a hundred tables of graphs of this stuff, and he shows that commodity prices and stock markets around the world fell sharply due to the 2000-2001 weak US capital-spending led recession. He says the next recession will be a consumer spending led recession, and that makes it much stronger, since it is 70% of GDP. Commodity prices will fall off the cliff then, he says. Gold excepted. Duncan was an IMF consultant, so he presents original insight. I read the book twice, and it is heavily underlined.

Now, how do we make more than 5%, with low risk of losing our principal? That is the question, and I’ve asked this many times on this forum. Let’s see what answer pop up today.

[powayseller]

If she is truly concerned about seller feelings, why doesn’t she lower her commission?

Prudential, I believe, is the last hold-out in lowering commissions, and they are at 5% or 6%. If she really wants to help people, lower it to 1% for her half.

Her plea reminds me of senators, eager to please their voters, asking Bernanke why he keeps raising interest rates. If they really wanted to help the economy, those same senators would pressure Congress to tighten lending guidelines, overhaul GSEs, and reduce the deficit.

That lady is just like a lame senator. She issues a bunch of words to schmooze her clients, instead of taking the action that will make a difference: tell the client to lower the price.

[powayseller]

Shane, thanks to you for organizing this event, and tell your BIL the gourmet pizza was superb.

Who showed?
barnaby33, three people who read the forums but have not posted yet, North County Jim, saiine, lindismith, rseiser, Chris J, theplayers, hs, Rich and his wife, SD Realtor (*not* sdrealtor, they are 2 different people), powayseller and her husband.

Sorely missed: everyone else

Next month, last Saturday, same time, same place? Bring your favorite investment idea and a housing story to share?

[powayseller]

280 x 3 = 840. Tripling.

The new number is 840, an increase of 300%.

The difference, or the equity gained, is 560 or 200%.

zillow uses the former, since they show the market value of the home over time. In this case, a home that moved from 400K to $1.16m went up not 190%, but rather 269%.

Thanks for checking my math. Sometimes I make mistakes.

[powayseller]

John, I am still interested in whether the perception of better schools in Poway creates a price premium or time=on-market premium (lower DOM). Could you run the Poway DOM, and compare it to cities that are perceived to have a bad school district, like San Marcos or Vista or Ramona? They are all inland cities, with approximately similar pricing and age and house sizes, right? Is there any effect of the perception that Poway schools are better?

[powayseller]

Thread bumped. Another in a series of Piggington Meet-up Day Anniversary Posts, from the beginning days of the forum.

[powayseller]

I sure miss KingKong. Are you still around?

[powayseller]

Hey all, I was having some fun perusing my first posts on piggington, to see what was my state of mind when I was selling my house last December. So I am moving some of my posts up, just to see if anything has changed in the last 8 months.

[powayseller]

Let’s say she tries to sell in 2 years, and her current $500K attached home will be worth $400K, or 20% less. She undercuts to $360K, 10% lower than market.

Then she turns around and buys a $640K home that is listed 10% below market by a motivated seller to $576K home. Assume this huose in today’s market would be worth 800K, so she has the same ratios of discounts on the new house as the one she is selling.

So today the price difference in moving up is $300K, and in 2 years it is $216K. So if they want to own, and plan to move up, it is better to wait to do it. They don’t want to rent, as they are attached to their home, and they believe in the logic I just outlined. After all, the move-up home will be cheaper too.

[powayseller]

zillow shows San Diego homes are up 275% (Poway homes only 200%, Chula Vista 275%, National City 340%, Solana Beach 400%, Del Mar 240%) in the last 10 years. We might disagree on their accuracy, but unless you think they are always biased in the same direction, that is a good guide.

The homes I looked at in spring 2000 were in the mid 300’s, and had been in the high 200’s the year before. By 2004, they were in the high 700s to low 800s. That is a tripling, is it not?

I am sure some houses did not gain as much as others, but I don’t really know enough about real estate to explain why one person’s home went up 140%, while the other went up 300%.

[powayseller]

Prove to me that it *won’t* go down 55%.

Read the Bubble Primer, and see what we need to get back to a median of wages/prices ratio of 7. We are at over 14 today.

Why would wages suddenly rise? No, I doubt it. Competition from China and illegals have kept downward pressure on wages and those forces are not going away soon. Healthcare costs keep rising so any extra pay that employers can offer, is passed on to the benefits portion of compensation, not to the wages.

That leaves prices. Prices will come down to revert to a ratio of 7.

[Author]

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