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powayseller
ParticipantThis article points out what even many bubble proponents have failed to realize: the entire country will be affected when this bubble bursts. ARMs have been used by borrowers all over this country.
ARMs, with their lower payments and looser credit requirements, were used by subprime borrowers to get in to a house. Although the homes were not expensive by CA standards, there are people in Missouri, Oklahoma, etc. who were subprime borrowers, and could finally afford a home. This didn’t make the prices jump as in CA, but increased homeownership rates.
Cash-out refis were used all over the country too. Exotic loans allowed people to pull out cash and go on a spending spree, nationwide.
Although only the coastal cities (and Las Vegas and Phoenix) had the huge appreciation, the toxic loans were extended to consumers all over the country. I don’t know why it didn’t cause a housing bubble nationwide. That is a mystery.
I recently checked the foreclosures in a city in Nebraska, and there were hundreds.
This article shows that the housing bubble is nationwide.
ParticipantI look forward to working with you, and my kids are excited too. Why do you think Mandarin is more useful than the other Chinese dialects? I’m sorry to be so ignorant about this.
ParticipantI would add to watch these leading indicators: days on market, inventory, HAI (housing affordability index), mortgage applications. You’ll need to work with a realtor to get the first two metrics.
As sdrealtor said, the media is great at telling you what happened 6 months ago in the market. When I listed my house in 10/05, only this site and a few bloggers informed of the bubble. Now, it’s in every media outlet. Even I missed the top by a few months. I took a 5% haircut on my offer.
ParticipantThat’s also the answer given in the book. AG was helping the banks by moving interest rate from the bank to the consumer. However, he miscalculated, because in the end, the banks are worse off, due to the upcoming foreclosures.
ParticipantYou wouldn’t get back $300/month in equity if your house is depreciating at 12% annually. You’d be losing $40K/year in equity. If you ever need to sell, you’ll end up owing the bank money, and be in bankruptcy. This could happen if the cash flow drag gets to be overwhelming.
As far as getting the actual numbers, you ought to consult a CPA. May I suggest Michael Gallon, from Savage & Gallon in El Cajon, at 619-440-4780. I don’t benefit from giving out his name. He’s a sharp guy w/ extremely low overhead, so his prices will be good. He could maybe do a phone consultation for you.
I can see why Rich wouldn’t want to give advice. There are some landlords on this forum, and they’ll probably check in during the week.
My question would be: Why would I want to hang on to a depreciating asset? If you believe housing will bust, your only thought would be to unleash the darn thing as fast as you can. In 1999, the answer would be different. In a rational or appreciating market, rental property makes sense.
As far as renting in the new place: I have 3 kids and pets and we love our rental house. We just sold our house in January, and will rent for many years, until prices bottom out. I’ll be watching for leading indicators of a recovery before we buy again.
ParticipantBugs, can you describe how the last real estate downturn played out?
ParticipantRe the IRS play: renters meeting certain income criteria can claim a renters’ credit, and I read once the purpose was to let the IRS match up renters with the landlords who should be claiming landlord status.
ParticipantIf the dollar loses value, the question is how much, and is it worth buying commodities.
As long as CDs are paying 5% interest, are you ahead of inflation?
If not, the euro should be much safer than the USD. The European Central Bank seems to have a better grip on reality.
ParticipantLennar made a profit Q1 2006, despite a 10% decline in sales in their West region. Their sales were up and profits were up.
I suspect sales were up only because they lowered their prices so much.
I suspect profits are up because they sold off a bunch of land. The U-T article didn’t say how much land they sold, only that the land sale generated more profit than last reporting period.
ParticipantRegarding the stable gov’t job -my husband’s company does a lot of gov’t work, and through the years, we’ve learned that good times for companies doing gov’t work (as well as gov’t employees)depend on tax revenue and gov’t regulations. In a recession, not even teachers are safe. So we all need to be careful in assuming our jobs are stable. Even if the job is stable, the actual person doing it can be voted out of his position. However, if you are really safe, then you can plan better for your future.
Someone posted a question on the forum recently: is it better to buy high at low interest rates, or wait for lower prices even though interest rates may be higher. You can scroll back through the forum to see the answers.
I saw an article in the U-T about Lennar. They posted a profit and had an increase in orders, although their orders were down 10% on the West coast. They sold some land, and made double their expected profit on the land sales. I wonder if they had to sell that land to show a profit. I picture increasing sales, each at a loss. Thus, the land had to be sold to show a profit.
ParticipantGreat insights. You already answered your own question.
Sell now for a price below your competition. I can’t advise you on a price. Consider your location, view, yard size, upgrades, and price it a little less. What does your realtor recommend? I’ve been reading that in San Diego, the Sold houses were priced more agressively, and that offers are 93% of list price.
The investors with negative cash flow are pure fools. They believe their monthly money loss will be overcome by increasing appreciation. You obviously don’t believe this, so why would you consider renting it out?
Well, hopefully you’ll get more advice.
ParticipantI agree. China imports almost as much as it exports. You wouldn’t know it from our trade deficit. I’m checking into a china fund. The US boom and its stock market prospects are questionable, but China has real growth coming. It makes sense to be part of that. Investing in China is not a fad, though. It’s just watching what’s going on around you. (Something we Americans are not as good at… we tend to not look beyond our living rooms or borders.)
ParticipantI think Josh asked the question because you stated you had only one house which was on the market over 120 days. I expect most houses to be on the market that long, unless you can convince the seller to price it right. You’re more astute than most realtors. However, your experience working in real estate has been only in the good times, and that’s about to change. How you adapt determines if you will be one of the survivors.
SdRealtor, when you entered the profession, there were about 300,000 realtors in CA. Today, we have over 470,000 realtors.
As sales volume declines, many realtors will leave the profession. Still, there’ll be a smaller pool of realtors chasing a smaller pool of homes for sale. Those homes are falling in value, decreasing the commission. As homes fall in value, sellers will seek out agents who charge lower commission. I used Help-U-Sell, and paid 3.5%. My agent was fabulous! I suspect with the federal suit/investigation into realtor commission price fixing, eventually the market will become competitive in commissions. I see the job market for realtors changing, and it’s necessary to adapt.
So, how long will it take for all those who entered the profession in the last few years to leave, how will the remaining ones survive, and how can you get sellers to set a reasonable price? As lending standards tighten, how can you keep finding buyers? Have you networked with those in the biz since the 70’s, to learn from their experience of dealing with a down market? I suspect you will survive, but only if you can succeed in a down market.
I don’t mean to single you out Sdrealtor. We had a discussion a few days ago about outsourcing, and a few people in the software industry voiced concern about losing their jobs to China.
We each have to consider the threats to our livelihood, so since this is a housing bubble site, I’m interested in how the slowdown is affecting realtors.
ParticipantWhat’s your personal opinion regarding buying gold? Do you remember how the last cycle played out? I still don’t get all the gold bugs – they don’t consider that gold is the next fad. The rising price validates their long-held belief that gold is the only true store of value. They perceive that the markets have finally priced gold at its true value.
I think the gold bugs are just as foolish as the people who were buying tech stocks 6 years ago.
I observed that fad, with utter astonishment, just as I’m observing this RE fad. I’m getting too cocky though. It will serve me right if the goldbugs turn out to be right. Until then, I’ll feel like a scientist who observes his mice, knowing they are going to be eaten by a cat if they do nothing, and watching for signs they will finally decide to run for cover. Human psychology and the role it plays in investing is fascinating. So much for rational markets!
Do you remember what companies did well in the last recession?
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