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powayseller
ParticipantI’m not sure you’re correct about the reason the condo projects have stalled. They have stalled bec. the banks don’t want to finance them without knowing the builders can sell them, not because the construction cost exceeds the sales cost. Any time construction cost exceeds sales cost, it’s because the builder overpaid for the land.
The value of a house is cost of land plus cost of construction.
The runup in prices is due to a runup in the cost of land.
ParticipantGood point about the security deposit. I think I’ll just not pay the last months’ rent when I give my 30 day notice. Then I can just pay him for any damages I caused after I move out, instead of having him deduct it from the deposit. I know I’m honorable, so I can live with that. Besides, this landlord and I last one play games with the security deposit anyway; they try to keep it in violation of CCC 1950.5.
ParticipantLeung Lewis, you might want to check a thread on a blog about how to profit during a housing bubble bust and recession. http://housingbubblecasualty.com/forum/index.php?topic=5.0
Also, a 1st deed is the first claim to your house. Your mortgage company holds a 1st deed. If you take out a HELOC, that lender would hold a 2nd deed of trust. They are second in line to be paid if you default or go into foreclosure; thus, they have a higher risk, charge more interest. And the companies selling the income stream to these 2nd deeds of trust pay a much higher yield, like 10% – 12%.
Also, be careful if you are in any pension fund or money market fund or bond fund that holds any GSEs. Divest yourself. Fannie Mae and Freddie Mac, and the other GSEs are highly leveraged in housing, and when the bubble bursts, they will default on their payments. Fannie is already under federal regulatory scrutiny, and have to revise their income many years back. Most Americans are exposed to this, and don’t even know it. I bet the city pension funds hold this in a large sum. They’re all chasing those high yields, and there is a false sense of security in holding GSE instruments.
ParticipantI am also concerned about this. My landlord bought this place about 2 – 3 years ago, so he is losing about $1K every month.
I was talking with a couple other neighbor ladies the other night, and told them I was wondering what the landlord might do if the bank foreclosed on him. One said she didn’t think it would happen, that he had so many rentals, that he’s really rich. I said that would make him even more vulnerable, as the prices on all those investments start to fall.
She said he probably put a lot down. I didn’t tell her this, but I saw how my previous landlord financed her house (bec. I took her to Small Claims Court to get my deposit back – P.S. she has to pay back the deposit plus a penalty to me). That lady took a home equity line from her own house to buy that rental.
So the landlords are highly leveraged, in my opinion.
Now my landlord was a little too smart, and he outmaneuvered me. The lease is for 6 months, with a monthly option. So he is not locked in. Furthermore, he made me initial a box in the standard CAR Rental Agreement, which allows him to put the house on a lockbox. This happened 2 days before we moved in, our house was closing escrow, and I just went along with it. That may have been a mistake.
Your post is making me think that I need to call him to lock in the rental for a lot longer. On the other hand, if he thinks he “has us”, he may become less cooperative on the repairs.
Oh, and the other rental in our neighborhood ($300 more than mine, same floorplan but bigger yard) is still vacant. And another house is listed.
Any real estate lawyers reading this? What happens to the tenant during a foreclosure? I heard that a new buyer has to buy out the lease or continue the rental contract. But a foreclosure?
And if speculators dump their rental properties, will that increase the rental costs, as fewer properties are available? It’s better to lock in for a long lease, right?
ParticipantI heard this on the news today around noon. I was really upset, wondering how the university could hire such idiots, or if you have to be stupid to be an economist. How can housing prices increase 5% when we’ve had price reductions already? Does someone on this forum want to write him a letter? If no one else does, I will.
Participantyyob – The story of “your relative” is one of the many internet hoaxes floating around. I just did a search on this claim, and found that exact text in numerous websites.
It is prudent to not plagiarize. If you quote someone, list your source. If you can’t find one, don’t bother writing it.
ParticipantWe closed escrow this month on a house listed in a range. Range listing is a marketing concept: the seller hopes to get the upper end of the range, but lists the lower end in the hopes of attracting buyers who are looking under a certain price, and who will fall in love with the house and come up with the extra money.
In the example you gave, an MLS search for a buyer who can afford up to $700K, will bring up that listing. If they want the house, they could come up with the extra $29K. However, you also have the risk of someone just offering at the lower end, and that’s what happened to us: we had 2 offers below the lower end.
I think appraisers have a little wiggle room, although someone else may correct me here. Whether a house is worth $699K or $729K is a little of an art, not a science, right? I didn’t see the appraisal for my house-sale, so I don’t know if it came in near my range, or only right at the offering price.
Perhaps we have some appraisers who read these forums, who can educate us about this.Participantteatsonbull; That’s a great neighborhood – I looked at a rental on Lincolnshire last month, but decided against it for several reasons. The price reduction is amazing!
ParticipantYou can offer as low as you want, and see what they say. Perhaps those homes are vacant because they are overpriced. How long have they been vacant? One rental 2 doors down from me, which I previewed, $2350, is still vacant. I offered them $2100 in mid-December and asked them to update the kitchen. They declined, and still have no renter. Now they have dual payments, and I bet eventually they’ll reduce their price.
So I wonder if the rental houses are more valuable in Scripps Ranch or if the owners are just trying to get enough money to cover their mortgage. A low-ball offer will make them realize they are overpriced. Are you finding the houses on the MLS? A realtor can send you regular MLS rental listings, and then you can negotiate w/ the listing realtor and not offend the owner.
Have you considered Poway? My kids are also in GATE (you mentioned your daughter is in it), and most Poway schools have very involved PTA and Foundations. Poway schools have the highest test scores (after DelMar and LaJolla). The parents at the high-score schools raise lots of money for the schools, funding PE, art, music, and computer labs. There are lower-score schools, and I would avoid those (South Poway). Poway is a great family area, and sounds a little cheaper. Just a thought.ParticipantInteresting tool! However, the CA percent-of-income figures should be much higher for the following reasons:
1. The authors assumed an 18% downpayment, and about 80% of CA loans are 100% financed. Thus, the mortgage payment is about 20% higher, right?
2. The authors don’t include property taxes, which have doubled along with home prices.ParticipantI just reviewed the ProFunds SemiAnnual Report, and their report lists about 40 funds, but not any of their Short funds. It is impossible to get information on their holdings! Perhaps they just short the funds they hold in their regular Real Estate Sector Fund, which mimics the Dow Jones U.S. Real Estate Index. In any case, it seems like they don’t want anyone to know what their holdings are in that fund.
Have you checked my other tip, i.e. shorting companies which hold first deed trusts, or anyone else that is bound to go down when the foreclosures start? Subprime mortgage holders are vulnerable. Locally, since our economy is completely reliant on real estate and home equity withdrawal to fuel consumer spending, look for reduced profits at stores (although I’ll still be shopping at Coach), mortgage companies, escrow companies, construction companies, etc. To the extent we could short local companies, it could be a safe play. I’ve never shorted before, and I won’t buy any options. I’ve only bought stocks in the expectation of them going up, so this would be new for me.
What do you think about gold? I think people are crazy for buying gold. Historically, it’s very volatile, and the price can easily go in half again. It’s another bubble, isn’t it, and stocks/commodity bubbles can pop within hours. Too risky. Gold doesn’t underlie money anyway, so how is it a “safe haven”. How could I pay my rent with gold regardless of how deflated the $ becomes. I remember when gold was $250/oz, and what would prevent it from going there again? The gold bug web sites conveniently show the price of gold only from 2000, because that’s the time when it started its sustained upward trend.
Foreign currency CDs are risky, too. Too much potential downside with currency swings.ParticipantI wonder about this also. I know foreclosures can be a bargain, but with prices so much further to fall, this won’t be a good time to get a foreclosure. Perhaps if you really know what you’re doing, you can still make money on a very good foreclosure despite a declining market.
I’ve requested info from ProFunds Short Real Estate fund, which invests in companies opposite of those held in the Real Estate Index; I wanted to find out what companies they invest in and it’s not in their prospectus, so I’m waiting for them to mail me their annual report.
Of course, if you own a house, you can sell it.
Is there a way to make money on the companies that hold 1st trust deeds? They are offering 12 – 16% APY for investors buying 1st trust deeds, but as their borrowers default, they won’t be able to absorb the losses and they will go under, too. Perhaps some of them are publicly traded and can be shorted. I just read about Residential Capital, Mercury Capital, CA Loan Servicing.
In the meantime, I’m putting the money from the sale of my house into a 4.5% 4month CD. Anything paying a higher rate has a risk of loss of principal, and I didn’t sell my dream house with a magazine worthy kitchen, just to lose it all chasing a higher yield.
Keep us posted, leung_lewis. You are an inquisitive person, and I hope to learn more from you.ParticipantI sent a follow-up letter to the editor about the point I made, that people who reference an article should speak to its points, refute it, present alternate data, whatever, not just reference it and then say they disagree about the housing bubble. I also e-mailed Lew Breeze, and he wrote me back some niceties, without any substance. I wrote to him again, and challenged him to send me some data to refute any of the points you made.
1/21/06 – Mr. Breeze responded to me as follows per e-mail:
“Now, in response to your questions, I think there is a myth, to the myth of a housing shortage. I haven’t seen for a couple years now, anyone who seriously things there is a shortage. So actually, I don’t have a reason to disagree about the shortage (there isn’t one), but again do not believe there is even a myth to a shortage.”
I wrote him back: the CAR website has on its front page the following:
“California has faced chronic housing shortages and housing affordability problems for decades. Recent analyses of the housing gap indicate that the state faces a housing shortfall of 80 to 100 thousand units each year. Given the housing shortage, it is no surprise that only thirty percent of California households can afford the median-priced home in the state, compared to fifty-five percent nationally. REALTORS® across the state are well aware of these issues, and have often been in the forefront in publicizing these problems and seeking solutions to them for several years.” (www.sdar.com, front page)
So the realtor association blames high prices on the housing shortage.ParticipantRental prices are about $1/sq ft around Poway and Rancho Bernardo, with a base price of at least $1700 for a house. So a 1500 sq ft house could cost $1700, but after 2000 sq ft, they’re about $1/sq ft. You might find a little higher for a brand new house or a huge lot, about $1.10/sq ft. The owners who are asking more, are not getting it – those are vacant. Next time you see a rental priced over $1.10/sq ft, ask how long it has been on the market, and check what the landlord got when he/she finally found a tenant.
On my street, another rental has been available for over 3 months. It is 2000 sq ft, and they are asking $2350 (down from $2650). It is still vacant.
Asking price doesn’t mean much. Landlords, who bought on hopes of appreciation, are trying to get what they can. Experienced landlords ask for competitive market rates, such as I quoted you above.
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