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My first real estate bear thread (ever)

By iwog   2014 Aug 26, 7:08am   3 links   76,016 views   299 comments   watch (2)   quote      

As events between today and the 1920s line up closer and closer, I am being forced to re-evaluate the bullish position in real estate I've held since 2008.

I'll start with a simple graph of real estate prices in the 1920s and include my time code:

When I draw parallels between eras, I'm not looking for an exact match. What I'm looking for is trends that can be identified when historical corrections are applied.

For example, there was no real estate bubble prior to the 1920 economic shock. Why? Because no one was stupid enough back then to distribute billions of dollars to the poor in order to allow them to buy houses they couldn't afford. Therefore the lack of a bubble in 1914 doesn't bother me.

What does bother me is the fact that 1925 and 2013 were the hottest years. That the real estate prices recovery seems to be turning anemic. (just like 1926-1929)

I've got to do a lot more work on this, however there's no crash immediately on the horizon and there are several factors that can work to increase prices even now including all time low interest rates, a flood of foreign money, and scarcity of buildable land that didn't exist in 1925. Also our real estate crash and bubble overcorrected and took prices far below their rent justified values.

However I don't think there is going to be anymore double digit appreciation from now on and in 2015 and 2016 the market will most likely remain flat or maybe continue to move upward slightly.

#housing

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260   hrhjuliet   2014 Sep 16, 4:15am     ↑ like (2)   ↓ dislike   quote    

Mark D says

fake homeowners in disguise at patnet. what a surprise!

Don't assume. You don't know me, but people on this site do, and personally outside of this site, and so it just makes you look the fool.

261   CDon   2014 Sep 16, 4:38am     ↑ like   ↓ dislike   quote    

hrhjuliet says

I own a home here, yes, but the story of how I got it is (as the people who know me outside of Pat.net would agree as they read this) not a happy one, and I'm not up for talking about it here or anywhere else.

OK - while I appreciate your response, you can see why it asks more questions than it answers. For example,

June 2013 you said:

hrhjuliet says

Anyone that buys in this real estate market is insane.

Yet, 6 months later:

hrhjuliet says

Thank you, but I own a home in the Bay Area

You recognize how this (without further elaboration) makes no sense right?

262   hrhjuliet   2014 Sep 16, 4:45am     ↑ like (6)   ↓ dislike   quote    

I inherited. I took on the remaining mortgage so my blind brother who is older than me would not have to move from the home he lived in before he was blind. He also has a spectrum disorder, and between the two it is not recommended he leave where he has memorized. My mother died a horrendous death through FTD, before her sudden illness she was brother's caretaker and conservator. I still have PTSD from the whole thing.

Are you good now?

To be very frank I'm clearly not in an emotional state yet to even write about it. I know some of you would think that makes me a wimp and weak, but this kind of grief and pressure can go on for years, and just because some of you think I should be over it by now just means you know nothing about going through something like this. So many people think getting a home and acquiring an "empire" is all that matters and will make them satisfied. Well, I have news for all of you, it's not what matters. It's just a house. The bank owns it and the government has a right to take it away if they please. You are all guaranteed nothing. Property rights are an illusion and game at best. My mother left me a home worth over two million, and what did I get? A trap, and the worst thing is that all that matters at the end of the day is that she no longer smiles or sings in that "empire" or piece of real estate. It's empty to me, so unbelievably empty.

263   CDon   2014 Sep 16, 5:00am     ↑ like (1)   ↓ dislike   quote    

hrhjuliet says

Are you good now?

Yes, very much so, thank you. And I hope I did not offend you, you did not seem like the lying type - but I am sure you can understand the skepticism seeing how there is so much of it here on this site.

Again, thanks for the clarification, and as I noted before, I hope things go well for you.

264   hrhjuliet   2014 Sep 16, 5:04am     ↑ like   ↓ dislike   quote    

I'm so sorry CDon, it's all really hard still. I'm just not over it, and I wish I was. It's a legitimate question, just one I haven't learned to deal with without pain or crying. I spend most days shoving it to the back corner. I never dealt with it properly, just kept going like a machine for my kids, my business and my students. I'm afraid of my own grief.

265   hrhjuliet   2014 Sep 16, 5:40am     ↑ like (3)   ↓ dislike   quote    

Thank you CDon. Things are going well for me, I just worry about the future. The next generation has it stacked against them unless they inherit. It's not the kind of world I can get behind. The Bay Area is too fuedalist for me. I realize we are all here for a blink of an eye, then dust. I don't think it's right that a whole generation should live and die in the harness/cubicle to barely pay the rent or mortgage of the glutenous few. People are not meant to be work slaves supporting the few, they are humans and they deserve rest and joy in this fleeting existence. That is where I come from on the issue, with or without owning, it makes no difference, my issues are the same.

266   CDon   2014 Sep 16, 5:45am     ↑ like (2)   ↓ dislike   quote    

Nothing to be sorry about HRH. Its difficult enough being members of the sandwich generation having to care for kids & parents - even more so given what you have to deal with.

For what its worth, the silver lining (if there is one) is that if your parents bought long ago, you could assume the remaining debt, spread out over a 30 year mortgage and pay far less than you would have to versus renting the place out for the remainder of your brother's life. Even worse, imagine your parents had rented and the owner suddenly decided not to rent to your brother anymore. Its a pyrrhic victory at best, but may be the best way to play the cards that life has dealt you.

267   hrhjuliet   2014 Sep 16, 5:57am     ↑ like (4)   ↓ dislike   quote    

You are so right. I am so grateful for that, and so grateful my family is safe, and not forced out of our home, and most of all, not living somewhere war torn and brutal.

My concern is and will always be that I know America has been more, has been an example of what a thriving society can be like. We have lost our way, and the next two generations are paying the price. We have turned our back on the consitiution and let our country become a plutocracy. We supposedly learn history so we recognize what doesn't work. Feudalism and totalitarian empires never ended well, and except for the people climbing and stepping on others to get to the top, no one enjoyed those times before the end. I want to rebuild our once great country and get it off the track of plutocrats. We need to take the money out of politics, and if we have to, set up temporary sortition until the people are back in control and get back to the ideals of the constitution. Or else we will be like many plutocracies and empires of the past: governed by the few sociopaths, with the majority of people working to support the elite's chemical imbalances and gluttony.

Homes and rent should be afforadle to young families that work hard. It's a sign of sick times that that is not the case.

268   E-man   2014 Sep 16, 8:57am     ↑ like (2)   ↓ dislike (2)   quote    

This is what I said
E-man says

Too busy building an empire for the next generations.

and this is your response. Not sure what to make of it.

hrhjuliet says

So many people think getting a home and acquiring an "empire" is all that matters and will make them satisfied. Well, I have news for all of you, it's not what matters..........We have lost our way, and the next two generations are paying the price.

I'm different with you. I see the potential issues. Therefore, I work hard so the next generations don't have to pay the price.

Imagine if what CDon said below were reality...... Think about the unthinkable for a moment.

CDon says

Even worse, imagine your parents had rented and the owner suddenly decided not to rent to your brother anymore.

Crap happens all the time. If one owned his own house, he has more control of his destiny. Iwog had to move twice because his landlords wanted to sell the house. Reality sucks sometimes, but it is what it is.

Regardless of what you and anyone want, the market will do what it does. Facing reality and figure out how to outsmart the system is the way to get out to the rat race hell hole.

269   cloud15   2014 Sep 16, 2:18pm     ↑ like (3)   ↓ dislike   quote    

I feel for you hrjuliet . If u take your argument further then why do people in Ethiopia deserve the life they have ? . Tour some 3rd word country and see the shanties there , why do they deserve life like that ? The planet belongs to everyone but .....it's a sad reality that people are trapped ( you , me , everyone ) but we are really fortunate ones . Try imagining the life of someone who is just going to get bombed Ina warzone ? The world is really a messed up place , I can't understand it's messy ways . I guess no one can

270   cloud15   2014 Sep 16, 2:23pm     ↑ like (2)   ↓ dislike   quote    

Take your argument even more further ( principle of induction ). By you I mean human race. Why have you created zoos ? Your kids clap happily there while the families of other animals being trapped there. You love to hug your kid and sleep peacefully with them but you mercilessly eat baby back ribs ? It's so fucked up and we don't even have an ounce of shame left in us. We call them farmed animals . They have same emotions . Planet belongs to them too.

271   cloud15   2014 Sep 16, 2:28pm     ↑ like (2)   ↓ dislike   quote    

You can see the irony. It's a big trap. So one should at least try to free themselves from this bullshit , so that he can think and enjoy free moments of happiness and then may be they can do some charity or improve the world a bit.

272   hanera   2014 Sep 16, 5:23pm     ↑ like (4)   ↓ dislike (1)   quote    

cloud15 says

The planet belongs to everyone...

Not in the view of many Americans. Just because they are born in America they are entitled to a good middle class lifestyle, conveniently forgot what their forefathers have done to the native Americans. Looking forward to the day when we could call ourselves Earthlings, no more nations and no more races (with enough inter-marriages and migration, should not have any)

273   hanera   2014 Sep 16, 5:31pm     ↑ like (1)   ↓ dislike (1)   quote    

cloud15,

Are you a buddhist? Anyhoo, we should try to eat more fruits and vegetables, and not kill unnecessarily (only to fill hunger).

274   cloud15   2014 Sep 16, 11:55pm     ↑ like (2)   ↓ dislike   quote    

Hanera , I'm not Buddhist but I'm just pointing out a simple fact. When it comes to them , people think they are entitled and when it comes to think of pain anyone else then they reverse the logic and say that they must deserve it.
Hrjuliet inherited 3M and was born in this land of opportunity and lives in this pivot of innovation and she thinks it's a crap hole. It's really a sad way to look at life .

275   Carolyn C   2014 Sep 17, 7:29am     ↑ like (2)   ↓ dislike (2)   quote    

Something that Hrjuliet wrote in a previous thread was that she and her husband worked hard, saved money, invested wisely, and purchased their home outright. For me something does not add up.
I am thinking that if someone inherits a home that is to be split three ways and there is a disabled sibling that is blind that sibling would need to remain in the house for the rest of their life. Thereby prohibiting the sale of the home until the generation passes. No good if you have little kids and want a home of your own.

I do think patneters need to take caution before listening to the advice of people who are discontent. There is a reason for their negative attitude and they may have wrong motives. Thomas Wong is one example. He could not purchase so he told others not to purchase. Renting for half the cost was a child who knowingly lied about housing after spending most of his childhood listening to his parents try to come up with a way to make a home purchase.

I would only take the advice of those that are successful and listen with a grain of salt to all the rest. But this is only my opinion so I guess now I'm open season.

276   hrhjuliet   2014 Sep 17, 3:22pm     ↑ like (2)   ↓ dislike   quote    

I never said we purchased it outright, so who is dishonest Carolyn? I said we saved by renting, not buying non necessities, driving old cars, and we did, and we do. We save more than most people I know by a long shot. The money I use to pay for the remaining mortgage was all our savings and hard work. I also used that money to help my mother as she was passing, and for my brother. He recieves disability, but it's not enough. So, I'm glad we saved.

I'm not here to give advice. I'm here to discuss, listen to other's opinions and get advice from people I respect on this forum. Don't like my situation, don't read about it Carolyn. That's what I do with many on this forum. I ignored most threads here for months, but I respect Iwog, so I read this thread. For example, I read all of Dan, Patrick, Iwog and Logan's threads, but it would be a rare day that I read a thread started by you.

I hope you realize that many people reading this know me outside of Pat.net and know that everything I've written is honest and straightforward since the beginning, so I imagine they feel that your thoughtless and unfair accusation that I'm lying about my situation is not only rude, but completely insensitive given the situation. Also, people on pat.net who keep up with my posts know I never said I bought my home outright, that is your narrative and bull crap, not mine.

277   Carolyn C   2014 Sep 17, 11:19pm     ↑ like (2)   ↓ dislike (3)   quote    

I am not being dishonest just stating what I remember. I think it is misleading to say that you worked saved money, made smart investment choices to purchase your home when in fact it was partially inherited. It just doesn't sound like something I would say to describe that situation. I don't know if you are lying or telling the truth I just know the way you have described your situation at various timelines sound out of place. Another red flag is that you advocate that others not buy in the area. I would hate for others to listen to a persons advice that did not have their interest at heart otherwise I would have mentioned it. Either way Iwogs call is bearish on housing for now.

278   cloud15   2014 Sep 18, 12:27am     ↑ like (1)   ↓ dislike (2)   quote    

Also,we should not preach what we don't practice. The reason people respect iwog is that he posts even screenshots of his trades. While Thomas.wong, BACAH etc are preaching Dakotas , Montanna's and Hrhjiliet likes Portland. All if these guys just don't like "where they are ". Probably they are trying to discourage other people from buying ( like Thomas ).
It's hard but no one is stopping you guys - then move from here ( if you don't like ) but if you are living here /anywhere then just learn to appreciate that place
Paradise is not a place somewhere in Geography but it is an attitude. If you carry this attitude and you somehow even manage to reach the mythical heaven/paradise then your complaining mind will complain there too.

279   hrhjuliet   2014 Sep 18, 2:54am     ↑ like (1)   ↓ dislike   quote    

Whatever Carolyn, I never once said I purchased a house by saving and then buying it outright, either your memory sucks, or you are a casual liar, it doesn't matter either way, I simply never said anything like that. You can accuse people of rude and inaccurate things, lie, make up stupid comments behind an anonymous screen name all day long and there is nothing anyone can do to stop your slander.

I do advocate saving, especially to young people, whether they rent or buy. Would I have been able to take time off work, take money out of my savings, repair and keep my family home if I didn't save and invest? No, absolutely not. We didn't see my mom's death coming. FTD is swift and traumatic, so if I had started saving when she was diagnosed it would have been too late. No, I do not advocate buying when the market is this high, too big of a risk in my opinion. I am too conservative in my investments to do it, but many people have taken risks and done well. Would I recommend to my sons or students to take that risk? No, because I'm not a risk taker and it would worry me, but still, once again, I could be wrong. The numbers don't add up to me, but that is my opinion, just some ballet/science teacher everday mom's opinion, I never claimed to have answers. I have always said the same things, the same boring things, for the years I've been on Patrick.net. I like Portland and Austin, I don't like the Bay Area, I feel trapped, not happy with the schools here, I think the numbers in Real Estate are at a historically odd place, I believe in saving and living simply and I like to talk about classical music and cooking. I think Mr. Shostakovich is funny and Dan is brilliant. If anything I am pretty predictable and consistent. The only thing that changed was I became an owner of property, and never claimed I earned it outright, only said that price drops would affect my home value.

So try not to lie or exaggerate Carolyn, it just makes everything you say devalued.

280   Heraclitusstudent   2014 Sep 18, 3:05am     ↑ like   ↓ dislike (1)   quote    

iwog says

I've been out since August 28th, two days after I published this thread. I rolled all my cash into bond funds.

So far it has been pretty close to flat.

Humm... bonds are hardly a safe haven these days. In fact a downdraft in stocks - if any - may well be caused by an other jump in rates.

281   hrhjuliet   2014 Sep 18, 3:10am     ↑ like (1)   ↓ dislike   quote    

Heraclitusstudent says

iwog says

I've been out since August 28th, two days after I published this thread. I rolled all my cash into bond funds.

So far it has been pretty close to flat.

Humm... bonds are hardly a safe haven these days. In fact a downdraft in stocks - if any - may well be caused by an other jump in rates.

That is my main question: What is a safe option? The numbers are unusual across all investments. If we are about to take a nose dive, let's say in 2017, what would you do to keep yourself afloat?

282   iwog   2014 Sep 18, 4:34am     ↑ like (1)   ↓ dislike   quote    

Heraclitusstudent says

Humm... bonds are hardly a safe haven these days. In fact a downdraft in stocks - if any - may well be caused by an other jump in rates.

I am absolutely convinced that any jump in rates will be temporary and small.

I think most theories concerning interest rates are wrong and over the long term, interest rates are nothing more than an opportunity gauge which is primarily influenced by the wealth of consumers.

In the short run, an argument can be made that interest rates are jostled by all sorts of factors.

In the long run, there is only one thing I can come up with to explain why rate decline since 1980 is a straight line. In fact it's almost too straight. ridiculously straight. If someone started trading bonds on my premise in the early 1980s buying when rates were over the trend-line and selling when rates were under it, they would be a billionaire by now.

283   Heraclitusstudent   2014 Sep 18, 4:36am     ↑ like (1)   ↓ dislike   quote    

hrhjuliet says

That is my main question: What is a safe option? The numbers are unusual across all investments. If we are about to take a nose dive, let's say in 2017, what would you do to keep yourself afloat?

Stay invested 100% in stocks till the top, then swiftly move everything to gov bonds, then at the bottom move everything back to stocks.

That's safe.

The key of course is to correctly time top and bottom.

In the absence of knowing this, you could progressively shift more and more to gov bonds, after you feel the market had a good runup/bubble, then in reverse in the deep of a recession/crisis.

284   hrhjuliet   2014 Sep 18, 4:37am     ↑ like   ↓ dislike   quote    

iwog says

In the short run, an argument can be made that interest rates are jostled by all sorts of factors.

In the long run, there is only one thing I can come up with to explain why rate decline since 1980 is a straight line. In fact it's almost too straight. ridiculously straight.

Why do you think that it is so straight, and for so long?

285   hrhjuliet   2014 Sep 18, 4:39am     ↑ like (1)   ↓ dislike   quote    

Heraclitusstudent says

hrhjuliet says

That is my main question: What is a safe option? The numbers are unusual across all investments. If we are about to take a nose dive, let's say in 2017, what would you do to keep yourself afloat?

Stay invested 100% in stocks till the top, then swiftly move everything to gov bonds, then at the bottom move everything back to stocks.

That's safe.

The key of course is to correctly time top and bottom.

In the absence of knowing this, you could progressively shift more and more to gov bonds, after you feel the market had a good runup/bubble, then in reverse in the deep of a recession/crisis.

Such a difficult game to play, but yes, a prudent choice. It makes me nervous though, I'm not a gambler, so I don't enjoy the game at all.

286   Heraclitusstudent   2014 Sep 18, 5:06am     ↑ like   ↓ dislike   quote    

iwog says

In the long run, there is only one thing I can come up with to explain why rate decline since 1980 is a straight line. In fact it's almost too straight. ridiculously straight.

Well... the line can't go below 0, so the trend has to break at some point and we are close to that.

In fact add 0.7% population growth and 1.7% inflation, that puts us at 2.4% nominal growth, even ignoring any productivity gain.

10yrs treasuries are at 2.6%. I think below that, SPY starts looking damn good.

287   indigenous   2014 Sep 18, 5:14am     ↑ like   ↓ dislike (2)   quote    

Soros is shorting the SPY?

288   Heraclitusstudent   2014 Sep 18, 5:26am     ↑ like (1)   ↓ dislike   quote    

indigenous says

Soros is shorting the SPY?

People like Buffett or Soros open a trade, publicize it, then quietly close it after all the sheep jump in.

That's how they make money.

289   Peter P   2014 Sep 18, 5:38am     ↑ like   ↓ dislike   quote    

Successful traders are not married to their trades. They certainly will not use their trades to prove a point.

290   indigenous   2014 Sep 18, 5:40am     ↑ like   ↓ dislike (1)   quote    

Heraclitusstudent says

People like Buffett or Soros open a trade, publicize it, then quietly close it after all the sheep jump in.

I'm thinking they have inside information especially in the case of Buffet.

The dynamics are in place for the stock market to correct at least 25%, which has nothing to do with Soros or Buffet.

No doubt they both create their self fulfilling prophecy but the index funds are a good bet to short regardless.

291   hanera   2014 Sep 18, 7:07am     ↑ like   ↓ dislike (1)   quote    

Hedge or a bearish bet? Duration for hedge is usually much shorter.

292   indigenous   2014 Sep 18, 7:15am     ↑ like   ↓ dislike (1)   quote    

hanera says

Hedge or a bearish bet?

I think the later.

293   Peter P   2014 Sep 18, 7:45am     ↑ like   ↓ dislike   quote    

indigenous says

hanera says

Hedge or a bearish bet?

I think the later.

And a "bet" does not imply knowledge.

294   indigenous   2014 Sep 18, 7:49am     ↑ like   ↓ dislike (2)   quote    

Peter P says

And a "bet" does not imply knowledge.

What ever, not the first time Soros has done this...

295   Peter P   2014 Sep 18, 7:54am     ↑ like   ↓ dislike   quote    

indigenous says

Peter P says

And a "bet" does not imply knowledge.

What ever, not the first time Soros has done this...

And he is notorious for being wrong many times. Successful trading is less about being right than betting for favorable risk/reward.

296   hrhjuliet   2014 Sep 18, 7:55am     ↑ like   ↓ dislike   quote    

Well, we are just guessing and betting really.

297   indigenous   2014 Sep 18, 8:02am     ↑ like   ↓ dislike (2)   quote    

Peter P says

And he is notorious for being wrong many times.

Who has made more off of shorting?

If he is not right this time it will cost him plenty.

298   Smallblock57   2014 Sep 20, 9:53pm     ↑ like   ↓ dislike   quote    

Iwog:

Question for ya...................due to the fact that you bought your properties during a time period that will probably go down in history as one of the best buying opportunities in real estate AND the fact that you say that you think options are going to be limited in the future as far as investment then why not just hold your real estate? You say you bought wayyy under value and that you are cashflowing so just wondering why that doesn't seem like you are considering it an option as you are wanting to sell in 2015 or 2016

299   iwog   2014 Sep 24, 1:36am     ↑ like   ↓ dislike   quote    

Smallblock57 says

Question for ya...................due to the fact that you bought your properties during a time period that will probably go down in history as one of the best buying opportunities in real estate AND the fact that you say that you think options are going to be limited in the future as far as investment then why not just hold your real estate? You say you bought wayyy under value and that you are cashflowing so just wondering why that doesn't seem like you are considering it an option as you are wanting to sell in 2015 or 2016

Because investment has become like running up a down escalator.

We're in an economy where wealth concentration is continuing to escalate. That means the truly rich, the .1% that has accumulated $100 million or more, will continue to acquire assets. Since the bottom 80% is tapped, they will put more and more pressure on the top 20%.

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