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powayseller
ParticipantOnce rentals are cash flow positive, investors should be buying rental properties. That’s what I think.
As far as buyers on the sidelines, I have my doubts. Everyone who wanted to buy has done so, as low interest rates and loose lending pushed demand forward. This caused home ownership rates to go up from its historical rate of 50% in the 1950’s, and 64% since 1980. Today we are at almost 70%. Who can possibly be left to buy? Illegals? Babies? Below 500 FICO scores? The unemployed?
SD Realtor, can you share some anecdotes of the type of people waiting on the sidelines, and how many you think there are.
ParticipantLink created for LA-Renter, you owe me one…
Calculated Risk ran this story a few days ago, and had a copy of the letter too. Rich has an RSS feed to Calculated Risk in the Bubble Blogger section. Countrywide letter
ParticipantWhat made you decide to sell?
Participantdeadzone, we don’t have any group waiting to buy houses at current prices. Sure, some people here rent, like one of my neighbors, because they think prices are too high. They can afford to buy, but won’t at today’s prices. I know nobody else in that situation, outside of piggington.
People are leaving at the rate of 44K – 50K/year, and maybe a lot more. What if the current exodus is 70K/year? I’ll start a survey on another thread about this.
Nationally, the home builders are saying overbuilding has caused the high inventory and falling prices, and it can take 2 years or more to absorb the houses.
Even if no new homes are built, it can take 2 years for today’s housing stock to be sold.
Anybody who thinks that lowering prices will draw in buyers and prop up prices doesn’t understand the real estate market at all.
I am flabbergasted by people who make a living in real estate, who have no clue about how pricing works, how real estate cycles play out, and who think prices will keep climbing.
ParticipantI’m the most bearish here of all, so am I overly optimistic in thinking that prices will stabilize when they equal 100x rent? I think once investors can be cash flow positive on rentals, they will start buying again.
My thought was that the lower end and properties which can be rented, will pick up first. A year later, the middle market, and last the higher end.
What can delay it all is the depressed economy and tight lending, as people won’t be able to qualify for loans. Imagine needing 5 or 10% down on a $200K house. How many people have $20K laying around? This is not exactly a nation of savers.
Bugs and privatebanker, were you specifically paying attention to this last time? Which sectors and communities picked up activity first? Also, does anyone have info on coastal properties, and how they held up in the last bust?
ParticipantStatistics tell us that home ownership is saturated. That means, statistically, no buyers on the sidelines. We are at 69% homeownership,the highest in our history. As far back as this is tracked, we were at 62 or 65%, I can’t remember which. Loose lending has raised this to 69%. Who can still buy that hasn’t? Sure, you have a few bubblesitters, but we folk on piggington are not going to move the market. Even if 1,000 people in the US cashed out to rent, I would be surprised. I personally know of no other people who cashed out to rent, except this group here.
I think you’ll be hard pressed to come up with data supporting any notion of money on the sidelines. The fact is, everyone who wanted a house already bought one. Or two. Or three.
Once prices fall enough, investors and first time buyers will enter the market. But many people will lose their homes first. We will NOT have an increase in the percentage of homeowners. New buyers will be replacing retirees and NOD victims. It’s as simple as that.
A reversion to the mean requires that we return to the historic 65% (or 62%, ?) homeownership rate.
Schahrzad Berkland
August 25, 2006 at 4:57 PM in reply to: David Lereah now says hard landing for some CA and FL #33315Participantwaiting hawk, I’ll make the link for you. You owe me one…
ParticipantmanMom, there are no new developments in south Poway. There a subdivision going in south of the Poway business park, but that is accessed from Pomerado Rd, I think, so it is at the outskirts of Scripps Ranch. Unfortunately, it probably falls in the San Diego school district. The land is outside the Poway city limits. Poway has turned away the builders, as they want to keep their City in the Country ambiance. That’s why I love Poway so much; the neighborhoods are diverse, not those look alike tract homes.
ParticipantThanks for that link. I had not seen this site before. David Lereah’s last presentation was surprising; he admits the rough times ahead. It’s quite different from what he says on TV.
ParticipantRich one e-mailed me that he gets the income data from bea.gov. I think he used the OFHEO data at one time, but now prefers Case-Shiller.
ParticipantGood point, Daniel. The Case-Shiller index was our long-awaited metric, but since it relies on the sales price, it is off by up to 5%. There doesn’t seem to be a reliable way to track home prices, because the only organizations tracking this data don’t care about reliable data. Realtors and country assessors have databases already; they could add one field: incentives, and a second field: price after incentives.
August 25, 2006 at 12:24 PM in reply to: 1 year ago — “Real estate guru: Local housing market stable” #33245ParticipantDaniel, his forecast that prices will remain flat until incomes catch up is reasonable to you? As he said, “Don’t sell your house. Prices will NOT drop.” Your comment is mind boggling! What did you think of my analyis of Thornberg’s reports?
August 25, 2006 at 10:00 AM in reply to: Another KPBS (89.5 FM) program on the SD housing market #33206ParticipantI am disappointed in KPBS. Last December, after their “economy is good and houses are never going down” show, I e-mailed Tom Fudge, who obviously was clueless about the market. He just didn’t know what to ask!
I sent him an e-mail explaining the dire situation of SD jobs, and the unraveling housing market. I provided the piggington links, including the charts.
These guys had plenty of time to do their homework, but the problem is the local station has a group of journalists who are more comfortable with interviewing people in their Rolodex than in digging into stories. They have little understanding or interest in serious economic issues. Their little brains just don’t get it.
Tom Fudge completely ignored my e-mail and phone call, full of data. Why? He’s uninterested or incapable of getting it. Either way, I am no longer donating or listening to a station that delivers bull.
The best media is Voice of San Diego. They have a staff of sharp journalists, who understand law, economics, and people. Plus they can write.
KPBS hired journalists, not experts in a field. Bad mistake… I hope Voice will plow them all under.
August 25, 2006 at 9:55 AM in reply to: I think we’re past the point of treating Permabulls with Kid Gloves #33204ParticipantWhen to get out of the way depends on how fast prices move. In stocks, I got out of the way in March, thinking a recession later this year would lower stocks. I don’t care that I was early.
In housing, I didn’t understand the bubble aspect until recently. In hindsight, anyone that got out at as soon as price softening was evident, like summer of 06, is going to be okay. Housing prices move so slowly, it’s almost impossible to lose money if you are really watching the market. The bears just didn’t know what to look for. They saw prices were unrealistic, but failed to understand that they should buy anyway, because there is plenty of time to get out of the way. People with proper knowledge would have bought until spring 04, when the low end softenend, and sold between summer 04 and summer 05.
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