[powayseller]

My advice, is to buy only if you meet these 3 conditions:

1) Your income is stable throughout the upcoming recession. You know you will not be laid off in the downturn.

2) You have a mortgage you can afford so you can ride out the downturn. You won’t be forced into foreclosure when your ARM adjusts.

3) You don’t mind losing half of your home’s value. Prices will decline 35% – 50% from their summer 05 highs, and you don’t care about losing the equity.

I have 3 kids, and I rent. What’s the problem with renting a house?

In 2010, your Escondido house could be worth $280K. If you don’t care, go ahead and buy.

I don’t want to say anything harsh, as I admire your courage to come here and say you are buying a house. That takes guts. But I think it’s a crazy move. Unless you are a millionaire who doesn’t mind losing 200K, why in the world would you buy an asset whose value is pretty much guaranteed to shrink by half?

Your house purchase is like buying Lucent in May 2000. It had come down off its peak, and seemed like a good buy. You really wanted to start a 401(k) stock portfolio and get started with dollar cost averaging. That is your situation. Just like I watched my $5 LU stock go all the way down to $2.50, losing half my $2K investment, you will watch your house lose its value all the way down to $250K or thereabouts.

The best thing to do: put your cash in Treasury bills or FDIC insured bank rated A+ by Weiss ratings, and earn 5%. Rent a nice house for a fraction of the mortgage cost. For $2500/month you can rent a really nice house.

And if you have kids, think seriously about whether you want to be in the Escondido school district. I know some of the schools have good ratings, but very few. Think about the coast or Poway schools. Coast if you can afford it.

Oh, you want to go back to Denver. Then you will be selling at the bottom of the market, when 10% of the MLS will be foreclosures. So you are not in a position to ride out this downturn, since you plan to sell at the time we predict will be the bottom.

Wheew, if I reached you, then I can chalk up household saved.

One more thing – do you know how hard it is to work when you have a baby around? Even with a nanny to help out, baby will cry for mom. Your wife may not want to leave her baby in day care, and prefer to raise him herself. Then, your ties to the mortgage will not give you the flexibility to have mom at home. Your baby will be better off with mom at home, and he won’t know the difference between a yard owned by the bank or by the landlord. He really won’t. He will know it is his mom holding him in her arms as she rocks him to sleep, vs. being laid down in a cot inside a noisy day care room. Once your son is born, you will see what I mean. You don’t feel it yet, but you will.

So I vote for a rental, to support a flexible family lifestyle, and to give your young family a good financial start.

[powayseller]

I started a thread in the last few months with these calculations, but I included a 4% annual wage increase. I came up with a 35 – 50% drop. The Search feature on this blog is lousy, and I don’t feel like reading all the old threads. I should keep my analysis stuff on my computer, so I can copy it at times like this. But I didn’t….

[powayseller]

Don’t forget to add Thornberg to your list. He went from “prices will NOT go down” in May 06, to “prices can fall 10%” just recently.

[powayseller]

SDR – That means that 5 out of 6 3/2.5 condos that have come off the market in 92130 since 6/1/06 were either expired, cancelled, or withdrawn. Explanation, please, for us non-realtors…What does this tell you?

DOM has a strong seasonal component. Thus, DOM should increase in the fall and winter, and decrease again in the spring and summer. How do we thus use DOM in any logical way, since its increase in the winter is normal, not a sign of a slowing market, right?

[powayseller]

Love your sense of humor, sdrealtor. That was a good one…

[powayseller]

asianautica – I thought you use a 100x rental multiplier, so with a rent of $2100, the most one would pay is $210K. Can someone elaborate on the landlord/investment property rules?

[powayseller]

gunbuster, can you still buy rental property at 100x rental income in those areas? I also heard Texas, Utah, and CO are seeing an influx of people, but two of those states have the highest foreclosure rates in the country. My landlord was smarter than I, and bought rental properties in the areas you mentioned after the storm; he gained a lot of equity he told me.

[powayseller]

1) women who seek attention by wearing skimpy clothes or talking loud, esp. on their cell phones.

2) formula feeding for infants (natural milk is best)

3) waiters whisking my plate away when I’m done eating

[powayseller]

Dan seemed pretty good, except he didn’t acknowledge the rampant price drops, and return to 2004 and 2005 values. His version of the story is that price drops are merely sellers who had overpriced their homes, thinking they were worth more. An interesting point he made is that 100% financing is more likely to cause foreclosures, because the borrower has nothing to lose by walking away. How many 100% financing loans are coming due in the next few years for adjustment?

Why did Shiller say twice that he wasn’t sure if prices would go down? Is he trying to balance the one-sided trades on his futures index, or was he always cautious about predicting price movements? He emphasized psychology as the driver of prices. What factor triggers a change in psychology? Shiller said it’s hard to identify a trigger; we still don’t know what triggered the 1929 and 1987 crashes.

A realtor from the Bay Area said some very good homes are selling for 4-5% off.

NAR economist Lawrence Yun was straight forward about the declining market. He used a new term: sudden transition. He warned the Fed that further increases in interest rates could tip the economy into recession, due to its damping effect on MEW.

[powayseller]

So you all think this is done to speed the patron out of there? Tonight, we were at a 100% occupied restaurant, so that makes sense.

I originally thought the whisking-away-the-plates was considered proper restaurant etiquette, i.e. the waiter didn’t want the patron to be left with a table full of dirty dishes.

So it is business (get this table outta here!) or etiquette (no dirty dishes)?

Either way, I’ve had to resort to clutching my plate fiercely when the waiter approaches. If my son, who goes to the restroom every 22 minutes anyway, is briefly gone from the table, his plate is at great danger of being removed.

Maybe I should start drinking, so this stuff won’t bother me. I’ll be like, “Sure, take my plate who cares, just bring more wine…”

[powayseller]

I don’t have cable, so I’ve never seen any of these shows. I might have a chance tonight though. What time/station does one air tonight?

[powayseller]

I love NPR. I’ve listened to Talk of the Nation a few times. Do they take calls, and what time does it air?

[powayseller]

There isn’t a need to make this a match of wits. The purpose of my question was to determine what happened in the last downturn with the coastal property values. SDR, do you know?

[powayseller]

Since these wealthy people have a 40% portfolio of real estate, and real estate is going down, so is their portfolio. I also wonder how their portfolio was assessed. It probably was a questionnaire, and the people said their $400K condo was worth $600K. I will be interested in the wealthy people survey of 2008, and how many wealthy will remain…

[powayseller]

leung_lewis, I truly appreciate your generosity in sharing your results with us. This took a long time to figure out. Very interesting stuff.

What is most noteworthy is this:

1) we’ve never gone into a recession during the mid-year cycle, so the pattern may not hold this year

2) every rally came from a low, and was preceeded a by a long bear market. This is clearly not the case.

To me, it looks like this year is different. Our economy is different now. We are truly at a breaking point. We traded in our productivity, and investment in education and research and development to foreign financed consumption and debt creation.

There are many other factors which could have made these past rallies work: falling interest rates, strong dollar, low inflation. Maybe you need all these to line up to get the mid-year rally.

[Author]

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