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powayseller
ParticipantI owned a home in San Diego since 2000, and I sold it in January 2006. My family, including 3 kids, is renting a house until the market stops depreciating. I am going to wait for signs that it turns back up. Renting has many advantages to owning a home, and in a depreciating market, why would I buy?
ParticipantHave you considered going back to your high tech roots? Or do you like the freedom and excitement of the real estate business?
I think realtors should charge for each part of their service. A fee for a listing appointment, another for taking the listings, etc. Or are you happy with the 1%, because of the high volume?
ParticipantI agree with Bugs and masayoko. I see both points of view. You’re on your way to living in a paid-off house, a goal we all should strive for before retirement. Who wants a mortgage or rent payment in retirement? You could open a line of credit for a rainy day. OTOH, selling would get you enough monthly income from a CD to cover the rent. This house-selling money is almost like winning the lottery. You may have ideas for investing some of that money now.
Another consideration is whether you would want or need to sell in the next few years due to a job move or loss. If there is a chance you would be moving, or that your job would be affected by a real estate downturn, you would probably get more money for your house now, than in a few years.
ParticipantWaiting Hawk, great site. I watched the video a few days ago, when it was first linked. Very funny. I especially liked your closing, where David Lereah says, “If the economy keeps going strong we may actually see a drop in foreclosure rates in some of these areas”.
ParticipantWith all the condo reconversions, and glut of downtown condos, it seems that rental prices will go down, rather than up, for condos at least. For SFH, the market seems tight, and is more likely to go up in the near term. Also consider that people are moving out of SD, and not many people can afford $1500 or more rent.
OTOH, I am reading that rents are going up. I think that trend will reverse when the thousands of apartments that were taken off the market to be converted for condos, will come back on the market as apartments. Couple that with fewer tenants as people move out of San Diego, and you get lower rents. My guess is that by this fall, you have a good chance of having a bank or developer as a landlord for a downtown condo. They’ll have trouble selling these units. These are just my thoughts, I could be wrong.
What kind of deals/incentives are you seeing?
ParticipantNorth15, do you have any suggestions?
The other day, someone asked about shorting DR Horton. This is what Bill Fleckenstein said, and my question:
What do you think about shorting homebuilders, like DR Horton?
• It’s a bit late… there are better targets.Bill is short TXN, but didn’t say when he shorted it.
About foreign currencies:
Hey Bill,
Are you using the recent volitilty in FX [foreign currency] to add to your positions??
Are you still mainly focused on yen??
thanks!!
• I have CDN$, EUR, and YEN but haven’t added much YET… I plan to though.My brother, who is brilliant, told me to diversify. Since we don’t know which sector will do well… Buy some foreign currency, precious metals, etc. That’s what I will do, but I will keep my majority in cash. I could be all wrong. Some things are easy to see, like the housing bubble that is before us, but the future I cannot see.
The book I am reading on $200 oil suggest loading up on gold and oil stocks and alternative energy companies. I bought some shares of Conoco Phillips last month. I believe oil will keep going higher, and oil seems more necessary than gold, so I should increase my oil position.
I am really clueless where to make money, but I believe that the general stock market is going down, so I got rid of my index funds and stocks. I kept Berkshire Hathaway and bought Conoco Phillips. So I put 95% of my money in cash, in a CD, while I figure this out. Now I am almost paralyzed, because I keep reading about what to do, and am doing nothing, because no clear strategy emerges. I am scared to short stocks.
I subscribe to the Yamamoto Forecast, and he tells his subscribers to be 100% cash, 0% bonds, 0% gold. Zeal Intelligence is waiting for a gold pullback. I am paying for their advice, and am heeding it.
ParticipantRented some jet skis with the family at Dana Landing…really cool place. You can rent bikes too and pedal around the bay. What caught my attention is how few tourists I encountered there, and at the fish diner by Seaforths. Where are all the tourists? My husband’s so cool to put up with me and my housing bubble stuff… Oh, and while on the topic of well-known people (weatherman), I caught this blurb over at VoiceofSanDiego:
“Chris Thornberg, the charismatic, outspoken go-to-guy at the University of California, Los Angeles Anderson Forecast, will be leaving the university at the end of the month.
Thornberg is leaving the well-respected team of economists to start his own company, Beacon Economics.”
I wonder if he will become more outspoken about the demise of the housing bubble, when disconnected from the UCLA group. Probably not.
ParticipantWhy is zero down worse than an adjusting mortgage? If the mortgage payment were to stay constant, then one wouldn’t feel the effects of having no equity.
If oil does go to $200/barrel, will Bernanke keep raising interest rates to slow inflation, or will he lower them, to avoid a big recession? How often in our country’s history have rates been below 5%, and how likely is it to go that low again? Isn’t the historic median at 7%, so wouldn’t that be figure to go by?
What advice do you have for people who are stuck in these loans? Just stay put until you are forced to deal with it?
It’s great to have a mortgage officer on this forum.
ParticipantWell, if you can buy a house for 8-10x the annual rent income, then the price is right. OTOH, your house will decrease in value, because of the high foreclosure rates there. Depending on the types of jobs there, which I have not researched, the upcoming recession could result in more job loss, and more foreclosures.
Again, why the interest in rental properties? The housing boom is over?
I hope I am not offending you, but your interest in buying rental property now is like someone wanting to buy Qualcomm in April 2000 (one month after the collapse started). So we are past the peak, and coming down.
Don’t feel bad, I also missed the real estate run-up. I thought this whole thing was crazy. If I’d been smart, I would have flipped properties from 2000-2003. Now it is too late, but let’s look for where we can make money…For now, I am preserving my assets in CDs, but will oil, commodities, gold be the next bubble? Is there enough global liquidity to support another bubble, or are the bubble years gone? Can any asset rise by more than the 5.5% paid by CDs?
ParticipantForeclosure rates are low when housing prices rise quickly and the economy is good, so high foreclosure rates mean “stay far away”.
The last 5 years in CA, foreclosure rates have been abnormally low, because prices were rising so fast. When a homeowner ran into payment trouble, they listed their home for sale, and within days, they got their asking price. There is a normal national foreclosure rate of under .5%, due to illness, job loss, mental problems, etc.
As housing prices flatten out, or decline, it is impossible to sell the house for the mortgage amount, so the homeowner just lets the bank foreclose. What is raising the foreclosure rates in CA is the use of exotic loans. In other cities, like Denver, it’s the poor economy.
When you see foreclosures rising, you have a lagging indicator that homeowners did not have the wages or employment to make their mortgage payment PLUS the demand for homes is so poor that they could not find a buyer during the long preforeclosure period.
Foreclosures put a lot of downward pressure on prices, because the bank is a very motivated seller, and they will sell at a rock bottom price. But before you think you are getting a good deal, beware that with all the recent real estate seminars, the competition at the auctions usually leads to people paying above market prices, plus you don’t get to see the house or do an inspection first: it’s as-is, not a good way to buy a house in my opinion.
In a period of declining prices, why buy? Why catch a falling knife? How do you know that prices won’t keep falling? Today’s $350K foreclosure house could be worth $290K next year, $213K the next year, etc.
I am waiting to buy until prices come back up, as indicated by the leading indicators. NOT median price, which is a 2 year lagging indicator. Prices in SD have been falling 2 years, and our median just showed it this month.
Work with a good realtor, who can keep you tied in to the months supply, HAI, and can tell you when prices are starting to turn around.
I am sure there is money to be made in real estate somewhere, but I do not know where. Definitely, not residential. Maybe land used for oil drilling, or areas where people might buy housing if oil rigs come to town, or some other unique idea. I think commercia/retail is still spending, as they lag the slowdown by 9-12 months, and since retail is just now slowing, they have already made their building construction plans are completing them. My friend is a RE attorney in Phoenix, and just finished the legal work on a very large retail center in Phoenix; by next year, the anchor tenants will not be in the mood to rent/build these buildings, but today, maybe they are still out buying land. I have no knowledge of these things, though. Perhaps others on this forum do.
Why real estate? Why not oil stocks, Precious metals, euros, yen? I also want to diversify, but am in cash until I figure it out. Why not farmland, water? Isn’t water supposedly in short supply?
ParticipantMy friend is a mortgage officer, so I can ask her, but I need more details, without invading your privacy. First, if home prices continue to go down 10% – 15% per year, would you have 80% equity in your home in 2 years? So if your home lost 30% of value today, would you still have 80% equity, meaning you have it at least half paid off at today’s value. Next, is your job stable and will your wages be enough to qualify for the higher payment that a 30 year fixed would be, assuming that fixed rates are at 7% in 2 years? If the rates are less, even better for you. Are you sure the rate caps at 8.5%, because that seems pretty good, almost too good to be true. I thought the rates can go up 7% max, but yours is going up 4% max?
I guess you have to decide also if you think rates will be higher or lower in 2 years than they are today. If I knew the answer about where rates are going, I’d be rich, so I have no suggestions on that.
I am definitely not qualified to give you any advice on this, but I will check with my friend.
ParticipantI agree that being in all cash is silly if inflation hits. I parked in CDs while I figure out what to buy. But for now, my principal is safest in CDs, since gold and real estate seem overpriced.
Dallas is a high risk area, since it is #3 in the nation for foreclosures, indicating speculative excess and that prices have a long way to fall.
Here’s a 2 copies of an article on Ben’s foreclosure report.
QUOTE
Some foreclosure news from around the US. “Indianapolis, Atlanta and Dallas have the highest foreclosure rates among the nation’s 100 largest metropolitan areas, according to an industry report released today. ‘Indianapolis narrowly edged out Atlanta as the city with the highest foreclosure rate in Q1,’ said James Saccacio. ‘Most of the cities with the highest foreclosure rates have above-average unemployment rates and below-average home-price appreciation.'”“Saccacio added that other economic factors such as decreasing affordability, rising interest rates and speculative buying can also fuel foreclosures. He cited Jacksonville, Fla., and Las Vegas, both of which documented foreclosure rates in the top 10 despite below-average unemployment and above-average home-price appreciation.”
“‘Because of the high home prices in many areas, more home buyers have stretched themselves financially with creative, and often risky financing that involves adjustable interest rates, interest only and negative amortization loans’ Saccacio said. ‘Home buyers with these types of loans are more susceptible to default and foreclosure when interest rates move higher.'”
Top Ten Metro Foreclosure Rates:
1. Indianapolis
2. Atlanta
3. Dallas
4. Memphis, Tenn.
5. Denver
6. Detroit
7. Jacksonville, Fla.
8. San Antonio
9. Canton, Ohio
10. Las Vegas
END QUOTEQUOTE
The Dallas News reports on defaults in the metroplex. “The surge in North Texas home foreclosures shows no sign of abating. Next month, 2,961 homes are scheduled for foreclosure. That’s a 26 percent jump from the number of foreclosure postings for August 2005, Foreclosure Listing Service Inc. reported Thursday.”“Through the first eight months of 2006, more than 24,000 Dallas-Fort Worth area homes have landed on the foreclosure list. That’s an increase of 15 percent from the same period last year.”
“Dallas County had the largest number of homes facing foreclosure in the latest survey. More than 1,400 residences are scheduled for sale at next month’s foreclosure auction. That’s 30 percent more than in August 2005.”
“‘Many households that were barely squeaking by last year will be pushed off the edge by these extra costs,’ George Roddy said. ‘With both the cost of living expenses and interest rates expected to continue rising, I anticipate that foreclosure postings will remain high for some time and may even reach a higher level than we have seen thus far this year,’ Mr. Roddy said.”
“The biggest jump in August foreclosures was in Collin County, which saw postings rise by 34 percent. Foreclosure postings in Denton County were up by 30 percent.”
“Texas has one of the highest home foreclosure rates in the country. Because the state has lagged behind the rest of the nation in home appreciation, homeowners who get in financial trouble sometimes find they don’t have enough equity built up in a house for a quick and profitable sale.”
END QUOTEParticipantI have liquid assets, because I sold my San Diego house. I am totally afraid of buying real estate anywhere in this country, becaue of the loose lending, which has caused buyers nationwide to overextend themselves. This is causing foreclosures to rise nationwide, and prices will drop. What city is immune from this problem? Not Texas, not Nebraska…
I am in CDs, but want to put some money in hard assets, like 5% gold, 10% oil stocks… I am reading a book about peak oil, and I believe we are at peak oil, and that it could easily go to $200/barrel. Wouldn’t an oil investment be a good money maker? I haven’t finished the book yet, but will summarize it by tomorrow on this site.
Before you invest in real estate, I would verify that the local prices are a historical median multiple of wages, that months supply is less than 3, HAI (housing affordability index) is at the historic median, that very few exotic loans were made, that there has not been major appreciation yet, and that the area will have the types and number of jobs to weather the recession. By the latter, I mean an economy not dependent on construction, realtors, lending, retail, tourism, restaurants, as San Diego. SD’s economy is not diversified at all, and many here will lose their jobs when the next recession comes along, and when we can no longer make money buying and selling homes to each other.
So I remain interested: does any city in this country meet this criteria? I do not know of any, but it could exist.
ParticipantI like this quote, “the median sale has moved up, but housing hasn’t appreciated.” It’s another way to say that the median is useless.
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