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privatebanker
ParticipantNew Guy,
Are you speaking about buying RE as an investment or a place to live? I would assume your speaking of a place to live. If not please comment. If you’re waiting to buy a place to live, clearly wait until you have at least 20% to put down on a property. But beyond that, it’s hard to accurately say how the market will drop. I know for certain that a major correction is coming, to the degree, no one can accurately predict that. The RE market has deviated far far from it’s average mean or average rate of return. Typically when an asset class makes such a strong deviation, it over corrects. Only time will tell here but it doesn’t look good. Just remember no asset class grows to the sky. I also think that in a few years and I’ve said this before, the popularity of real estate as an investment will certainly be of the unpopular variety.
ParticipantC’est possible. Alan could have a second career. I’m sure he could also be a “Consultant” for real estate related services. Don’t get me wrong here, I’m sure Alan is a very intellegent individual however, I think he has let $ signs or some other motivating factor get in the way of him divulging truthful information to the public.
ParticipantAlan Gin = Mary Meeker? Sure one’s an economist and the other an analyst but their claims are/were very similar. Pounding the table with their biased views ended up and will end up losing millions for investors willing to believe in their hot air.
One shouldn’t trust the opinions of those who could be speaking with two tongues. We all know “Al” is just trying for job security at this point.
July 15, 2006 at 8:07 AM in reply to: D.R. Horton slahes earnings forecast by almost one third for the year #28403ParticipantThe homebuilders forecasts are all looking scary. The HGX dropped below 200 marking a new 52 week low. One of their (HBs) problems besides earnings is their stock’s book values are decreasing due to large holdings of land that is losing value.
ParticipantBugs,
I think you are absolutely right. I’ve always been amazed how people have thrown caution to the wind with regards to RE dollars.
To comment on this post, the downtown situation is going to get really bad. Just look at all the cranes, this will definitely be a sign of the times. I’ve been approached by several builders over the past year proposing new developments downtown and the Hillcrest area for financing. I’ve told them no because my bank has stopped these deals well over a year ago and we view these projects as sure money losers. I’ve noticed some buildings reverting back to full blown apartment rentals. People let me tell you, this is going to get ugly, ugly, ugly!
ParticipantI think we are headed for a recession without a doubt. When or the degree of it is uncertain but when an economy is heavily dependent on a certain cyclical sector it is very vulnerable. Once that sector pulls back, there either needs to be something else to step in and support the economy (none to my knowledge at this point) or the economy pulls back. The degree of the pull back is debatable. Recessions can be good for the economy in the long run. This one will be dubbed something like the “land rush /credit hangover”.
ParticipantRental prices lag behind property purchase prices. Example, real estate became very cheap to purchase so the flock flew into buying properties. Now, buying property is getting more and more expensive so the flock is starting to collect in the rental market. We are at a point in the transition stage where rental property owners are either trying to sell or rent out their “investment”. When they rent, they’re trying to rent at a price that would reduce the cash flow bleed. This is a short term solution however and is not sustainable. By reading everyone’s views on this forum, it clearly shows that the average renter is not willing to pay for such a high rent and will either continue looking for a cheaper deal, stay where they are at or move away. Either way, the prices of rents will have to adjust to the renter’s demand not the owner’s need to reduce their cash flow bleed. Rents are as cyclical as property prices and are showing a deviation from the mean at this point. Hang in there, things will change for the better.
ParticipantPoway,
You forgot the best of them all, the “self-employed real estate investor”. This is a very well known type which breaks into two categories. 1. The experienced investor that has seen it all before and has transitioned out of their properties except for those that truly cash flow. 2. The amateur investor. These are the folks that do not have any investment experience and buy into all the hype with no acknowledgment to fundamental values. We’ve also seen these types buying tech stocks in 1999 & 2000. They refied or HELOC’d and bought another property with the cash out. They now own several properties and have very little equity. I think they are really starting to suffer now. Their ARMs are resetting and/or their HELOC rates are skyrocketing and their negative cash flow is getting worse and worse every month to handle. They brought the bubble up and are definitely contributing to it’s down fall from panic selling and foreclosures.
I don’t think the news can down play this predicament for much longer. We are certainly in a worse situation than we were during the tech bubble. The real estate/credit bubble has a lot of complicated webs to it that affect a lot more people than the tech bubble did. A recession is eminent.
ParticipantHi PS,
The development is somewhat NW of 4S ranch. If you stay on Camino del Sur, you can’t miss it because it’s at the end of the road.
Please define “real tan”. That sounds interesting (just kidding, cheers!)
ParticipantI just thought that everything about this development was completely unrealistic. It was almost as if the sales people had a tongue in cheek expression on their face as people would come in and out of the model homes. Pretty suspect if you ask me. Who in their right minds would commit to such a high tax burden along with the rising costs of a mortgage and not to mention the built out HOA fees. This is why these developers are going to be doomed here. This development will surely be a tragic event that will be remembered during the “Great Housing Boom of the early 2000’s”.
As a side note, the first time I visited this place, there was a band playing in the park and there was a greeter at the entrance of the project. The most recent visit had no band or greeter. Not to mention the sales staff appeared to be significantly reduced. Maybe margins have gotten so tight, they can’t afford those extras.
ParticipantWithin 4-6 years, the market will have made it’s adjustment. The thought of buying real estate will be similar to buying a new car. Once you purchase it, look for the value to depreciate somewhat or remain relatively flat. You’ll have to build equity the old fashion way, put at least 20% down and pay down your mortgage over time. Maybe get some appreciation over time but nothing like what we have seen in the past few years. There’s a good chance that we may never see a RE boom like the one we just experienced again in our lifetime.
ParticipantI agree with SDrealtor on this. Zillow is saying that my home on the beach with a clear ocean view is only worth $890,000.00. It’s calculated by a bunch of averages in my Zipcode. Completely inaccurate. My neighbor is selling for multi-millions. Of course this place has been sitting for a few months like most high ends but it’s a beautiful home. I can see prices drop well below the $800’s here when rates are even higher and the market is taking a major dive. But prices have not corrected like that quite yet.
ParticipantI watched the tail end of a “Real Estate Survival Guide” on CNBC last night that featured: Robert Shiller (Yale), the Century 21 CEO, David Lereah and some Mortgage Co. CEO. I thought it was pretty amusing to see the views of the die hards changing to a negative perspective. David Lereah actually sounded somewhat pessimistic. Of course their was some RE bull spin on a lot of statements but I just think that a lot of their expressions were very similar to the expressions that Wallstreet Exec’s were showing back in 2000.
Clearly hard times are ahead for the RE industry and have already started to take shape as we speak.
ParticipantI’d like to see how that story ends.
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