[powayseller]

Also exclude sdrealtor and SD Realtor from wearing rose tinted glasses.

[powayseller]

I e-mailed my assigned agent, and told him I was a bubblehead, just looking. He was very respectful, and left me alone after that. You can also deselect “Notify by e-mail” before your search.

[powayseller]

We had a thread on that last week.

[powayseller]

Funny you should ask…. her house is for rent again, and I copied her Phoenix phone number off the For Rent sign.

She is high as a kite in Phoenix. Despite the soaring inventory and dropping prices, she is doing very well flipping properties. I was going to make a thread about this, because I am so amazed, and don’t see how this can last.

First, her Poway rental is attracting 3 calls/week, for $2500/month, well in excess of her mortgage and HELOC. So she is going to be cash flow positive on that one.

Second, they bought a foreclosure which they flipped at a $30K profit, and her husband just bought another one. He will spend $40K and sell it at a $60K profit in a few months. I wonder if they will chase the market down, or if they are really savvy and have figured out how to make money in a declining market, just like Chris J makes money on some days when the stock market is up, even though the general trend is down. Perhaps this friend finds a few gems that are a bargain.

I asked her how the housing market is, and she said “very good”. Her cousin sells high end homes, and the market is hot, she said. Now I know that the high end market is still holding up well.

I am flabbergasted by her experience, and I have no clue how they pulled this off so far. My guess is the house they are fixing up might be worth $380K in today’s market, but by the time he is done fixing it up and lists it, it will be worth only $330K, and his profit is gone. I will check back with her later this year. She said we should keep in touch.

She asked me, “Have you bought another house yet”? She doesn’t get it… but her perspective is so different from mine.

On a related note, my neighbor made 3x her money in Yuma, AZ investment property, and is putting money into another deal: a commercial plot, which should increase in value after the oil company deal in Yuma goes through. I will check this out further and start a thread. Do any of you know about the potential for this?

[powayseller]

They claim the law limiting their sales price was enacted in 2004. If these same people had bought 3 years later, at a little higher price, say $350K, and sold in 10 years for a market price of $300K, they would be suing the government too, for not subsidizing the market price and giving them money at closing. Some people want to blame someone else for everything, and we will see a lot of blaming and suing going around when the real estate tide goes out.

[powayseller]

Isn’t raising the funds rate, the “expected response”?

Here’s the take on recession from freemarketnews.com

“Generally speaking, a recession is a prolonged period of time where the economy is contracting. During a recession, you will most likely see consumers spending less money and saving more, a subsequent decline in the stock market, a rise in unemployment, and a decline in real estate prices.
The idea is that the economy has to have periods of contraction after years of expansions.

From 1991 to today our economy has been constantly growing. Some Economists might argue that we did go through a recession in 2001. I disagree. Although we did have some characteristics that were indicative of a recession, we also had some glaring omissions. How can we have a recession that only lasts one quarter, especially after we just came off a major stock market bubble? Why would real estate prices continue to rise in a time of less spending and more saving?

In either case, the recession that is to come will be a multi year recession that will serve to slow down this economy that has been wildly expanding over the last decade and a half.

I see the commodity markets as the premier place to invest during this upcoming recession. Like the recession of the 1970s, I also expect to see rising inflation and soaring commodity prices. Whether you invest in the metals markets, agriculture, or basic raw materials, I believe that positioning your wealth towards commodities will best position you to ride out this housing burst and subsequent recession.”

What I am interested in: is the 1970’s like today? I know that the low global interest rates fueled a liquidity glut that took several years to bring up inflation and it is now happening, and that’s why many central banks are busy raising interest rates. How bad will inflation get? How far will they have to raise?

[powayseller]

I don’t remember what Bill Miller bought, or what his plans are to buy more, or who else is bullish enough on housing to buy more. There are plenty of guys like murray out there (10% drop, plateau, and then take off again…). Plus, I don’t short stocks. That’s for the pros.

Here’s a Bill Fleckenstein post from today:

Bill
In your opinion, what lenders have the most negative exposure to the declining housing market
• I don’t have a list, maybe someone else does… but I htink FNM, NEW, MTG, and TGIC will have plenty of trouble… there are lots and lots of names like CORS whidch maybe more direct hits but the first 4 I mentioned are ones that I am involved in currently though I plan to expand the list.

[powayseller]

I sent ocrenter’s Lies Lies and More Lies link to Roger Showley at the U-T, and here is his response.

As you can imagine, we leave a lot of the realtors’ comments on the cutting room floor and balance their assertions with those of the less rose-colored variety. We do ask them tough questions and most of the time, they don’t know a thing. They know marketing but not necessarily economics. And when they say something is certain and forever, we try to counter with comments from somebody else who doesn’t necessarily agree. So don’t give us a bad time and do give us some credit for critical thinking.
– roger

[powayseller]

There are value investors, like Bill Miller, who think they are underpriced becaue they sit on so much cash. If he buys 20% of the builder you shorted, you’ll get a short squeeze. I think it’s risky. I will post this question to Bill Fleckenstein, bec. I subscribe to his service, and he answers all the questions. Will let you all know next week…

[powayseller]

I agree with Bugs.

Another point for murray: the median does NOT show that sellers are now paying closing costs, reducing their home prices by 2%.

[powayseller]

I measure success in character and hard work, not in how much you earn. School teachers are successful, because they enrich lives and they work hard, but they make diddly. Likewise, Ken Lay was not successful, because he ruined lives. I look forward to meeting you.

[powayseller]

The unique factor this time is the exotic lending. About 80% of SD purchases since 2001 are some kind of exotic loans. That is 32,000 sales every year are either 100% financing, option ARM, ARM, I/O, stated income, or some combination. Less than 10% of buyers put 20% down.

Thus, debt service capability will be the prime factor affecting people’s ability to keep their homes.

Plus, you’ve got old time homeowners who got carried away by refinancing all their equity out. I followed some of these on realtytrac.com. You can go through the loan history, and see how the 1980’s home buyer started cashing out equity in the early 2000’s, and has no equity left. If you go on realtytrac.com, look up your own zip code. You have to pay $40/month for this priviledge.

How to quantify this? This is uncharted territory, so we have to make guesses. If 100,000 purchases are due to reset in the next 3 years, that would be 30,000 people every year, which is the current amount of homes sold. That means by next year, every single home on the market will be a forced sale. What will that do to prices? You don’t even need a single job lost to see that prices will go down in a hurry.

Now, add the data from HR Horton slashing forecast, Washington Mutual and others laying off, RE sales are off 30% thus reducing realtor income, and you see that the construction/lending/RE jobs are coming down by 30% this year. Job loss!

By fall, I think psychology will turn. With the anticipated hot spring/summer seling season that turned out to be dog, the motivated sellers have to engage in some serious price cutting to move their properties.

Nobody knows the future, but I bet my own home sale on a big decline. Likewise, I averted the NASDAQ crash, because I saw the bubble. I do not know where to put the money from the sale of my home, and I am not a savvy investor, but I do know how to avoid bubbles. I am an expert in this area. Averting the loss of money is as important as making money, so I got half of it… Now, I need to learn the other half.

[powayseller]

From what I read, Countrywide is the loosest lender. They lowered their standars to increase their volume. They will go down the most, because of the high risks they took, risks for which they are not charging the appropriate risk premium.

[powayseller]

lindismith, I can’t wait to meet you. I know only what I’ve written so far, which is not too much. You are so successful, having started your own business.

[powayseller]

Shorting is for pros. You’ve got value investor like Bill Miller at Legg Mason who are buying up homebuilders, and all you need is one bounce to lose all your money. I posted a link the other day about all the people that lost money in GM puts due to a small bounce. I think it’s risky, although I know this stuff is going down big time, I can still lose it all shorting,by technicalities and big traders buying on a dip.

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