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powayseller
ParticipantGo back to the 2nd comment, from davelj, who recommended pricing just under your competition and selling before the market declines further and your loss increases further.
ParticipantIt seems logical, that the loss will be slow at first, pick up some speed as ARMs reset, and then really get going as more people bail out and the psychology shifts from “RE only goes up” to “RE is a terrible and risky investment”.
Did you see Saturday’s U-T? Investor Gene Burns, featured in the House section:
“I always say: follow a Hummer and you’ll find a pre-foreclosure home.”
After making a bundle on Las Vegas real estate, investor Gene Burns has his eye on Southern California, and his reasons may not be good news for local homeowners used to riding a wave of appreciation.“I’m planning on buying San Diego property when the market goes through the correction that will start in the summer of 2006,” he said. “I think it will crash in 2007.” “A lot of 32-year-olds bought a house for $800,000 and they just can’t afford it,” he said. “In 2007, their adjustable rate mortgages will start to adjust upward and they won’t be able to find that extra $500, $800, $1,000 a month to make the mortgage.”
Most borrowers aren’t planning ahead and they will be stunned when their mortgage payment rises, Burns said.
“I like that town by Encinitas, below Oceanside, with all the new construction,” he said. “Carlsbad – there will be lots of people who are upside down in their mortgages there. ”
He also said he had his eyes on Carlbad as the zip code to go down first.
Investor’s Next Stop: San Diego
Why does he think Carlsbad has more overextended borrowers than anywhere else?
ParticipantA related thought: if you sell and rent a house, make sure your landlord can handle being cash flow negative for the duration of your tenancy. The worst thing is having a landlord with an ARM, and he loses his house to foreclosure, and you have to move out (when your 1-yr-lease is up).
This is not a problem in apartments, since those are marketed to renters.
ParticipantWe could see a 22 year decline of 80% of prices, if we copy Japan.
Japan’s houses doubled nationwide, and tripled in the largest cities, between 1986 – 1991. Since then, prices have been falling. Prices fell 40% in the nation, and 65% in the biggest cities. Some homes declined 80%! In 2004, prices were still declining in Japan. I don’t know if they’re heading back up yet.
Also remember that extreme situations often overshoot when they correct. If housing today in SD should be 50% of today’s prices, we will overshoot and end up at 40%, or 35%, etc.
We may have many reasons why we won’t copy Japan,but the lesson is: do not think a housing bust is short-lived. It takes years to hit bottom.
Be careful to not buy in too early: check leading indicators from the MLS: DOM (true days on market, including all the expireds), inventory, and Housing Affordability Index. When the tide turns on the data, and when everyone says you should never EVER buy real estate, then take the cash you’ve saved up, and get back in.
ParticipantI like your thinking! I had never heard of these ways of structuring real estate. If the poster assumes prices will go down by 50%, would you still advice the lease option, equity share, or subject to sale deals?
ParticipantInterest rate is 5% now, and going up. So it takes 14 years, not 24 years, to double your money.
I understand the rest of your points. It is a good deal for the government – they lend us money, and then keep printing money so they can pay us back with inflated dollars.
I read that the US has secretly been selling off its gold reserves, and that not too much is held in bank vaults anymore.
There seems to be some behind-the-curtain stuff going on with the government and gold. They probably want us all to keep thinking of it as a scary, unknown. The government doesn’t want us all to fear inflation and hoard gold. The economy and banking system (fractional reserve) work only as long as confidence is high. That is one of the most important components of the economy: trust in the Fed, trust in the banks. Without that, the system cannot work. Imagine if everyone realized that their money is not really in the bank,but lent out to people who bought overvalued homes. Consumer rush to the banks to get their money out, and of course w/ the fractional reserve system, only a few % of the deposit is actually there. Voila, the whole system collapses.
So the government must paint rosy employement and inflation reports, speak about the flexible economy, downplay the importance of gold (whose rise is linked to inflation and loss of confidence in the Dollar). This is necessary to keep optimism and trust in the system. And there’s nothing wrong with that, as long as it keeps working.
But if we all think it will stop working, we can’t be misled by government data.
ParticipantSorry – I meant picpoule. Anyway, there must be a way to reconcile this. He knows his local economy best. Picpoule, do you think the foreclosures are caused by job loss, or by ARM resets, higher payments on equity lines/credit cards, or too many cash out refis that caught up to people? In a weak economy, those factors can take hold faster.
ParticipantThe Local Housing Monitor’s recent study found the Denver market fairly priced, at only 10% overvalued.
I can’t make sense of the discrepancy between the data and pippoule’s observations. Job losses are the usual reason that housing prices decline.
ParticipantCould you make that comparison to something that is not overvalued like housing? How much gold did you need to buy a car in 1960, and how much gold do you need today?
How had gold fared against other currencies, such as the euro or swiss franc?
Since 75% of gold demand is from jewellers, how can we be sure that a worldwide recession won’t reduce jeweller demand? Would that be offset by increased investor demand? If only 25% of gold is bought by investors, does that tell us that not too many people think of gold as a store of value, and how does that affect its price? Is the recent rise in gold price because commodities is the next hot fad, or because there is really something to it?
As far as the different ways of holding gold, there are varying opinions. I’m just trying to learn more about how much I should even buy in the first place. Have a book – Hot Commodities – that just arrived. Hopefully that will answer these questions that I have.
ParticipantWhy are you bullish on China?
Their trade surplus is only $12 billion. They are voracious consumers. “China’s exports in the first two months of 2006 rose 25.5 percent from a year earlier to $119.2 billion, while imports rose 27.4 percent to $107.2 billion, producing a trade surplus of $12 billion.”
When the US consumer’s housing credit card (incorrectly called the housing ATM) is out of credit, to whom will China sell their products? As the US goes into recession, won’t China follow suit?
ParticipantI think you can post articles as long as you credit the magazine. You could also summarize it for us.
ParticipantWhen 92111 was created the mls goes back and restates the sales figures into the appropriate zip code. If
this were not done then all of the mls reports and statistics would be meaningless. Why are there sales in 92111 before the zip was created?ParticipantThis article is available only to subscribers. Can you post if for us?
ParticipantBob did account for that. He adjusted the area by taking out shadow zip code listings and adjusted for the difference in house size year over year. There’s a lot more to his analysis, most of which I don’t even understand.
To conclude this forum topic, I would like to offer the following. I won’t be posting Mr. Casagrand’s reports here anymore. The folks who have questions about his data are not seeking clarification, but are ridiculing instead. Mr. Casagrand, if you ever come upon this forum topic, I sincerely apologize for what this has turned into. You have been a professional all along to not jump in and respond in kind.
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