[powayseller]

Clever stragegy!

I know my story is repetitive for those who’ve been on these forums for a while, but I will tell it for you. We built a house, w/ a killer kitchen, ocean views to 18 miles away, and moved in Sept 05. After much prodding from my brother that the market was overvalued, I googled “San Diego housing bubble”, to see if he was right. I came across this site. I read the Bubble Primer, and realized we are in a huge real estate bubble. We listed our house, and had 2 offers, both were 5% below list price! My husband wanted to hold out for a higher offer. He figured that someone would come along who would appreciate our wonderful house. Thus, I understand the seller psychology, of holding out for an unrealistic price. We came to our senses, and had to take the 2nd offer. The 2nd offer was “firm and final”. When we countered, the buyer’s agent said, “We told you this was firm and final. If you counter, we walk. We have 2 other houses which interest us”. Aaaah, the effect of high inventory!

We closed in January 06, and moved into a rental house in Poway. A 4-bedroom. We have 3 kids, and plan to rent until prices drop to bottom, which will take 4-7 years. We love the rental house, and the neighborhood, and can easily enjoy it for the 4-7 years.

We took the equity, and invested in CDs earning 4.75%.

This is the easiest money we have ever made in our lifetime. And a very smart move.

The longer you wait, the less equity you will have. Prices are softening, and heading down. Sell now, before prices get even lower.

And be smart – price your house at market rate, so you don’t chase the market down. Too many sellers list at last summer’s prices, when the market is 5-10% less now. By the time the seller realizes they are overpriced, and lower by 5%, the market is 10-15% less. That’s called chasing down the market.

Good luck to you! And welcome to the forums.

[powayseller]

It’s great to have another realtor on the forums!

Did you consider to speak with the seller’s agent, and inquire what’s up with that high listing price?

How difficult is it to get through to sellers, to convince them that their list price is too high? I spoke with a relative today, whose 2 friends have overpriced houses for sale. Both sellers think they should be able to get 10% more than the comps from last summer. How can a realtor get through to them?

[powayseller]

Have you reported this to the newspaper? Isn’t this a significant event?

[powayseller]

That loan basically converts to a 20yr fixed in Year 11.

I checked a mortgage calculator. $500K loan.
30 yr fixed @ 6.25% = $3079/mo
20 yr fixed @ 6.75% = $3802/mo
So the payment jumps about 15-20% in Year 11. Mangeable for many folks, I presume, as long as you’re prepared for it…

[powayseller]

Welcome to the forums. That sure is a cute house. If you are anything like my husband, you’ll spend an additional $600-$800 per month at Home Depot to do all kinds of fun things with it.

A $400K loan, w/ taxes and insurance, will run about $3K/month. So you’d be out $2K/month over today, plus you’ll be losing equity, as your home depreciates.

What’s the big hurry? I imagine you are impatient for the market to cool. Acting on that impatience will cost you…

Have you read posts by others, who said they were glad they waited to buy, as they are seeing the market price continue to go down?

Did you see the previous post, where people asked about buying vs. renting? The advice from everyone was to keep renting, and wait a few years to get that same house at 30%-50% off today’s price.

If sounds like the market is softening in your area, since the guy has had no offers. He is obviously overpriced.

Good luck, and keep us posted.

[powayseller]

I would be interested in meeting with such a professional. Do you have any recommendations for an average person like me, I mean non-wealthy?

[powayseller]

Thanks for the perspective. GoldenWest is an exotic loan leader, and although they issued ARMs in the 1990’s, suffered no losses in their portfolio. They credit this to strict underwriting, so their option ARMs are held by credit-worthy borrowers. I wondered why they weren’t affected adversely in the 90’s, and this explains it.

This time may be different. More homeowners are overextended. Wage inflation is not keeping up with rising interest rates in this economic cycle.

[powayseller]

OK, so I shouldn’t sell gold, because there will be no dips, just up, up, and away?

[powayseller]

Thanks, Chris, and don’t put me on a scoreboard. I was purely lucky. I only take credit when I made an investment based on conviction, like selling my house in 2005, or in 1999/2000, buying Vanguard small cap and emerging market and overseas index funds while everyone was piling into tech mutual funds. The GLD thing was pure luck, and I would have lost it all if the market had shorted last week.

[powayseller]

I believe the Fed will step in to minimize any damage, so I am certainly not predicting elimination of fiat currency or a Depression. I’m just looking at the data, and realize that unless we change course, we are putting our entire financial system at risk. This is what has been said by Greenspan, Paul Volcker, and many others. I only quote respected economists in my posts. Take it or leave it….

[powayseller]

How can someone use my debit card without knowing my PIN? If you make 3 false entries, the card stops working. If you make unusual purchases, the bank stops the card from working and calls me. This is actually a big hassle, as I once went to buy gas, and my card wasn’t accepted. It turned out the bank had temporarily shut off my card because I’d made a purchase in another state (internet purchase) earlier that day. So while I want to be careful of identity theft, I’m not sure I want to get rid of my debit card. I am a big believer in paying cash, whether by debit or check.

[powayseller]

It sounds like I should sell now, but wait for a good buying opportunity to get and hold for the long term. I’m going to stay away from shorting. I have lots of good ideas, but not the expertise to play against the big boys.

What do you think of the other commodities, not just precious metals, but also sugar, coffee, lead, cotton, lumber, etc.

[powayseller]

If you buy ticker symbol GLD, you have shares of real gold kept in a vault. It’s a pure play on gold.

If you buy mining companies, you are subjected to the benefits and problems of owning any company: management, tax, labor, legal, currency exchange and other issues. If they don’t mine enough gold, your shares go down. If they need to replace equipment and have high capital expenditures, your shares go down. Thus, when you want to invest in commodities, your best bet is to buy just the commodity, without the extra baggage of the company. If you want to buy mining companies, then that’s more of a stock play.

Some people prefer to buy physical gold. Then you have to pay a little extra for delivery, I think about 5%. You also have to pay for storage, perhaps a safe at your home or at the bank. I don’t know where to get physical gold at a good price. The transaction costs are high, so I have not done that. I think it’s bought by a more radical thinking group, who things our financial markets will collapse, and they won’t be able to redeem their GLD shares, and feel comfortable only with physical possession. These folks also believe that the USD will become worthless, and they will need gold on hand to make their purchases. I have a hard time seeing how we will pay our landlord, cashier, and utility company in gold, but maybe someday we will…For now, I am still buying shares and not taking possession.

[powayseller]

This makes a lot of sense. Point #1 and #2 is a summary of the book Hot Commodities by Jim Rogers, and that entire book makes sense. Point #3 makes sense too, and I wonder if you can give us some examples.

What makes you think that China is backing their currency with gold? If they are, could they be responsible for the rise in gold, as they are buying lots of it? Do we know who is buying gold? Is that listed anywhere?

Do you have any explanation for gold’s sudden rise? Do you expect profit taking to give us some good buying dips?

If you wish, you can post the answers on the What’s Up with gold post.

[powayseller]

That makes sense. Why hasn’t there been more profit taking? I read yesterday that the longs have not been willing to sell. At what point will they take their profits? What if they don’t, and it just keeps going up? Gold goes by rules of its own, doesn’t it?

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