[powayseller]

contraman, you are a breath of fresh air! I’m curious, are you selling any real estate at all, or telling buyers to wait another year?

[powayseller]

asianautica, Most of Poway is not tract homes, and I’ve seen many neighborhoods throughout San Diego where each home is unique, usually they are older homes. Maybe I will build again.

[powayseller]

theplayers, I agree with every point you made, and I have said the same things. I also think that some people on this forum could be afraid to buy at the bottom, esp. when every 5th house is listed for sale, and you know of people who haven’t had a showing in over a year. You start to think, “This house is cheap, but I’ll never be able to sell it if I need to…maybe this will be like Japan and we’ll go down for 20 years.”

Investors will buy when they can be cash flow positive, but if prices are still falling, and rental rates are falling and good tenants are hard to find, even they may wait a bit longer.

sdrealtor, what do you mean with a gardener and varying? In any case, you have some bullish leanings, if nothing else due to your job and owning rental property, and I have none. We will never agree on everything because I don’t have those bullish leanings; I’m a total gloom and doom bear. If it’s not raining yet, it soon enough will be 🙂

[powayseller]

Oh, the financial sector that lost $7 trillion in the stock market, and the Fed which “allowed” it to happen, has the ability or power to save the housing market?

Hmmm, which financial sector has ever kept any asset bubble from reverting to them mean? Let’s make it an easier question to answer: which sector of any kind,financial or otherwise, has prevented an asset from reverting to its mean?

Why didn’t this financial sector prevent the S&L crisis or the LTCM collapse? While the markets in general were bailed out so there would not be a systemic collapse of the financial system, no individual investor was bailed out.

It will be interesting to observe the Fed’s response to the recession. Probably they’ll cut rates like crazy, but it won’t help. It will be like pulling on a string; there is no further debt the American consumer can take on.

BTW, you think I’m doom and gloom, you should read Roubini, my favorite hip and cool economist.

[powayseller]

sdude, you have such a charming way with words. If you are tired of me, why do you read my posts? I find it interesting that you read someone of whom you tire, or perhaps it is so tiring, you read my posts to help you fall asleep. Of course, then you post a reply that gets your brain going again, negating the sleepy effect. Now I am truly baffled.

Anyway, the discussion was about investors, not people who cashed out and are waiting to buy. How many people have $100K laying around for the purpose of buying rental properties? I know of nobody with such intentions, but perhaps you do. Of those people, who would buy a depreciating asset?

Institutional investors buy apartment buildings, REITS, not single family homes.

The thousands of people waiting for the market to fall? Are you referring to the few who cashed out, waiting for a bottom, or those who are priced out and cannot buy anything over $150K?

The data from CR’s site is about the median price. this is the first year the median price is negative. So this is just beginning.

Have you read Dr. Roubini? He will shatter all your Delusional Dreams, sdude.

This post has some new ideas, but you will have to wake up from your tired state to find them all.

[powayseller]

Steve, would you provide a list of homes that sold in the last month at the 2005 summer comps? I find your statement very surprising, and definitely requiring some data to be backed up. The median in San Diego is down 1% over the last year.

[powayseller]

I brought up Carmel Valley only because docteur, a 40-year veteran of real estate in San Diego, said it would keep rising in value. He emphasizes that he is so much more knowledgeable than me, so much more savvy and clever about real estate issues. So I set to find out if he could be right…

Could coastal properties keep rising in value through this downturn? The answer: definitely not! Not only is his neighborhood “nothing special” (sorry, no offense, just repeating what a realtor told me), but in the past downturn every neighborhood dropped, including a RSF Covenant REO that lost 30%.

Also, CV is dropping already.

Personally, I would never buy a builder tract home, where every home looks the same. None of my 3 homes were tract homes. Unfortunately, I let my husband decide on each of our 3 homes and I ended up in locations I hated, out in the boondocks. The rentals we’ve had have been just my style! Our previous house, while beautiful, was on a crappy road in the wilderness, definitely rural. You realize we live in a desert when you are surrounded by brown shrubs. I digress…. So I have zero interest in Carmel Valley or any other clone neighborhoods. This post and my other CV posts were merely a research project.

[powayseller]

My 2-tier comment was that some sellers were getting the higher price.

[powayseller]

Could be repos… People don’t turn their foreclosed-on cars in to the lender as requested, or it’s a service provided by the lender. Looks like the bank sends the repo company out to get the vehicles.

[powayseller]

sduuude, if you ask the selling agent for advice on filling out our offer form, you are in essence letting your opponent represent you. Not a good idea. The purpose of having a pro, is because they represent what is best for YOU, not what is convenient for the seller.

deadzone, how many homes have you bought and sold?

I buy all my cars used and get them inspected by a mechanic, use carfax, etc. I save 20% minimum, from a used car dealer’s price. I’m an independent savvy woman, I like to think. But I also realize when I’m better served with a professional, whether a real estate attorney, a realtor, a CPA. I don’t do my own taxes either.

I wish we could have an insider’s view of a person who bought a home without a realtor, to tell us the advantages, if any, and the pitfalls. I hope they will be open enough to admit the shortcomings of that transaction.

[powayseller]

sduuude, if you ask the selling agent for advice on filling out our offer form, you are in essence letting your opponent represent you. Not a good idea. The purpose of having a pro, is because they represent what is best for YOU, not what is convenient for the seller.

deadzone, how many homes have you bought and sold?

I buy all my cars used and get them inspected by a mechanic, use carfax, etc. I save 20% minimum, from a used car dealer’s price. I’m an independent savvy woman, I like to think. But I also realize when I’m better served with a professional, whether a real estate attorney, a realtor, a CPA. I don’t do my own taxes either.

I wish we could have an insider’s view of a person who bought a home without a realtor, to tell us the advantages, if any, and the pitfalls. I hope they will be open enough to admit the shortcomings of that transaction.

[powayseller]

I still don’t see what this information tells the buyer or seller. So what if the c/e/w is 15x last year? What is the impact of this? Numbers by themselves are meaningless; I only use them if they are correlated with an outcome, or they tell a story. I still don’t get why it matters how many people pull off the MLS but keep their contract with their realtor, or how many listings expire just to relist? that long listing time is completely reflected in days on market.

Does anybody else get it and want to explain it to me? I’m not being difficult, I simply don’t see the value of those numbers.

[powayseller]

In your example, the landlord makes a negative return if the home’s value drops by more than 7% per year, which this home is likely to do. So why would anyone buy rental property now, when the value of their asset will keep falling?

Also, could you really get $2260/month for a $320K house? When we rented that Green Valley house, we paid $2200 (+$300 for gardner, poolman, and insurance = $2500), but that house was valued at $850K at the top, not $500K. Are you renting that house now for $2260?

How many investors are ready to buy in San Diego this year, even the $320K house? First, they will wait until prices stop falling, second they will be reluctant as they see vacancies rising and get concerned about finding a reliable tenant because the good ones left town or own a house, and third, they won’t want to buy a depreciating asset.

By 2009 – 2010, when homes are depreciating only 5% per year, so the main correction is behind us, the credit crunch will be pretty severe, and fewer people will qualify. They will need money down, stable jobs, proof of income, high FICO. Many of today’s landlords would not qualify for a loan in 2010. However, perhaps the type of people you describe would have the credit rating to obtain a rental loan. Then there is the question of credit availability, but I’m sure that banks will still be making some loans. Hopefully they will not be scared of real estate entirely. Can you imagine some banks making a moratorium on mortgages?

There is no paradox in rental rates. Remember in the year ending 6/05, 44K people left San Diego. I expect this rate is picking up momentum, so the second derivative is growing. The people not owning and not renting have left San Diego. This problem of declining population, rising unemployment, and rising vacancies makes owning rental property even less desireable.

Would you rent your house to a construction worker? The cashier at Home Depot? The mortgage officer at Option One? As a landlord, you’ll start wondering where you could even find a tenant with a stable job. If these are your options, you would rething wanting to be a landlord.

But mostly, a savvy investor will not want to buy a depreciating asset. So what that you earn 7% on your $100K downpayment, or $7K/year, when you are losing $30K per year in depreciation as the market keeps going down?

This downturn will feed on itself, and the smart money will not come in until it’s smart to do so: when their asset is safe from further depreciation, the job market ensures they can find a good tenant, and they can obtain financing. In my opinion, this puts us into 2010 – 2015.

Schahrzad Berkland

[powayseller]

bob007, it is certainly possible that rental prices will drop, as rental demand decreases, so that the price drops wil overshoot the value of today’s rental prices. You betcha! If today’s $2500 rental becomes a $2100 rental, then the 10x mutliplier means todays’ fair market value of $250k would turn into $210K.

Furthermore, a severe credit crunch is exactly what I and others predict. By 2007, there will be no more I/O loans, 100% financing. The FDIC guidelines are going into effect sometime next year, most likely.

The Fed had no role in encouraging I/O loans, stated income, etc. They allowed it, but they didn’t create rules to make it. Thus, they cannot interfere to bring those rules back, since it is independent investors who buy those loans.

Your comment, hoping that the foreign central banks and Fed won’t allow a credit crunch, sound like the hopes of a homeowner. Are you not a renter? The Fed has no control over what the private investors do, and their aversion to stated income loans. If they increase liquidity from the government side, vs. the private side, inflation is going into the double digits, and the recession will be even worse. We desperately need a credit crunch to cleanse the excesses from our banking system, or the ultimate recession we get will be much worse than the Great Depression.

Remember too, that this is the first time since the Great Depression that national median housing prices have fallen year over year!!!! Every area fell, except the South. If you include the South, the gain for the country was .9% for resale, .3% for new homes. BUT, those figures do not include the incentives, which range from 3-8% (Roubini’s blog). If you include the seller incentives, such as move-in allowance, or closing costs, and the builder allowance, even the South is down.

We are heading into a serious recession, which could end up like a Great Depression. Remember, we have never had a median year over year housing drop since the Great Depression. The fact that we have it now, is a scary scary situation. Bank failures are next, just watch. It is happening very quickly. Also, did you know that GMAC has been saving GM? Wait until next year, when GMAC cannot save GM anymore, and see what happens to our economy when one of the most highly traded bonds (GM) default?

Schahrzad Berkland

[powayseller]

They sell and repair commercial trucks. I hope that is general enough to preserve their anonymity.

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