patrick.net

Just bought my first post bubble rental. That being said, I hope the market continues to go down. My balance sheet will take a hit, but I hope to buy more rentals a bargain prices.

EBGuy says

I have to admit the Clear Capital report did surprise me a bit

It might not even be reflected in Case Shiller since CC isn't doing a rolling average (hence, more volatile data).

Troy says

Looks like a 2B condo sold for $380,000 in the complex I like to watch.

I think we’re bouncing along the bottom here and chances are in fact non-zero that prices will move up.

They certainly want to, given that the 30 year cost of owership on that condo is just $1300/mo, well under rents (actual cash outgo is $2300/mo, which is pretty affordable around here).

What are the homeowners fees in said condo... What's to keep those fees from skyrocketing? Buying a condo with HOAs may be similar to buying an adjustable rate mortgage with interest rates at all time lows....

In 30 years your HOA fees might be $1300 a month! have fun with that!

You'll know home prices have hit bottom when everyone says they will never buy real estate ever again. Too many people still are talking about what a great deal houses are.

common_sense says

Too many people still are talking about what a great deal houses are.

You have got to be kidding........Patrick.net is chocked full of doomsday, 1/2 glass empty, chicken little types. Watch out the sky is falling in ALL parts of the USA at pat.net

Safe mortgage= 3X Yearly Salary.

How many people in the bay area make $463,246 / 3 ???

We are still in a bubble.
Don't kid yourselves.

3 X Monthly Salary.
End of story.

I rent a house in Newark that sold for 165,000 in 1997.
They tried to sell it for $599,999 in Dec. of last year before going back to renting it.
They cannot get it through their heads that NOBODY can get a loan for .6 Million anymore on a signature.

It will take time, but we have a lot of adjusting to do in the bay area.
I and my wife WILL wait. Many hundreds of thousand, if not millions of rational Californios like us will undoubtedly follow suit.

divingengineer says

How many people in the bay area make $463,246 / 3 ???

Tons, actually. Plenty to soak up any new supply really. Which is why only houses in the po' areas are under $500,000 right now.

It will take time, but we have a lot of adjusting to do in the bay area.

but I agree that there is a great possibility for "adjustment" here. Depends on whether or not the state can get its fsical act together, how local spending holds up, and the tech job market.

It's a mixed bag, more bad than good, but it's not all bleak. Prop 13 protection on rentals is a beautiful thing WRT limiting supply here.

Troy says

divingengineer says

How many people in the bay area make $463,246 / 3 ???

Tons, actually. Plenty to soak up any new supply really. Which is why only houses in the po’ areas are under $500,000 right now.

in 1999 17.3% of all california households (11.5M) made $100k or more.
6.9% of california households made $150k or more.

note: stats are for 1999 not 2010, and for california not bay area. 2010 census numbers for california will be out before april 1 of this year.

http://factfinder.census.gov/servlet/QTTable?_bm=n&_lang=en&qr_name=DEC_2000_SF3_U_DP3&ds_name=DEC_2000_SF3_U&geo_id=04000US06

robertoaribas

Be civil and avoid calling other posters names. Case Schiller is a lagging index. The truth will be be revealed in time.

Confidence comes from not always being right but from not fearing to be wrong - P Mcintyre

marcus says

RE prices go up when interest rates go down, and RE prices go up when interest rates go up. So what I hear you saying is basically that RE prices always go up.

Historically -- yes. Right? Due to the supply/demand nature, as long as after-tax incomes keep rising so will home values.

But I think comparison of this decade with past decades is totally wishful thinking.

We've never been at the zero-bound before, and we've been basically running scared economically since 2002.

Volcker was actually using higher interest rates to KILL housing appreciation in the late 70s, and so did Greenspan in the late 80s, and mid and late 1990s.

http://research.stlouisfed.org/fred2/series/FEDFUNDS

Bernanke, too -- rates were mildly raised in the 2005-2006 back to "neutral" -- and THAT partially caused the Great Recession.

That's why things are Different Now. Raising rates back to 5% shouldn't result in the mother of all recessions.

The problems run deep with this economy and all we're doing now is throwing borrowed and printed money at the problem. This is probably not going to end particularly well.

Raising rates will be a significant liability to the banks who own property and people who want to sell their homes.

inflection point says

robertoaribas
Be civil and avoid calling other posters names. Case Schiller is a lagging index. The truth will be be revealed in time.
Confidence comes from not always being right but from not fearing to be wrong - P Mcintyre

Don't be too hard on Robert, he rarely has anything good to say to anyone. He just can't help himself. Just look how sad him and his dog look.

I realllllly like robertoaribas' dog.

There are some good points on here furthering my education. I see rising inflation which could increase housing prices but crush your spending power (I don't think the average citizen would fully understand that). Rising interest rates which could keep some people from buying, or go the other way to force peoples decisions who want to lock in a lower rate. Then their is the inventory of foreclosed homes on the market that seems to keep rising.

Inflation raises prices up.
Interest rates for this year could spark some people buying or keep people out. (neutral)
Excess inventory on the market drives prices down.

Of these three factors, I see a fairly stagnent scenario. I am no expert however.

Truthplease says

Inflation raises prices up.
Interest rates for this year could spark some people buying or keep people out. (neutral)
Excess inventory on the market drives prices down.

This has been the debate for the past several years on this board.

The biggest problem housing has, is if credit dries up - and they make 20% + down mandatory. You'll see home prices TANK as very few people even have 20%.

joshuatrio says

Truthplease says

Inflation raises prices up.

Interest rates for this year could spark some people buying or keep people out. (neutral)

Excess inventory on the market drives prices down.

This has been the debate for the past several years on this board.
The biggest problem housing has, is if credit dries up - and they make 20% + down mandatory. You’ll see home prices TANK as very few people even have 20%.

Your "if" is not reality. We just went through the biggest credit contraction in history, and we are right back to lending with 3.5% down. The chances of making 20%+ down is pretty much 0%. The gov't is hellbent on inflating away our problems, they are not all of a sudden going to restrict housing so that only the rich can buy.

ch_tah says

Your “if” is not reality.

That's why it's an "if."

ch_tah says

joshuatrio says

Truthplease says

Inflation raises prices up.
Interest rates for this year could spark some people buying or keep people out. (neutral)
Excess inventory on the market drives prices down.

This has been the debate for the past several years on this board.

The biggest problem housing has, is if credit dries up - and they make 20% + down mandatory. You’ll see home prices TANK as very few people even have 20%.

Your “if” is not reality. We just went through the biggest credit contraction in history, and we are right back to lending with 3.5% down. The chances of making 20%+ down is pretty much 0%. The gov’t is hellbent on inflating away our problems, they are not all of a sudden going to restrict housing so that only the rich can buy.

Government is actively restricting everyone from buying by artificially keeping the prices above what people can afford. However, they've done it for so long that an average person is ticked off at how government officials have handled this and don't want to be on the market.

With internet being free government can't keep people from finding out, communicating, and universally coming to a consensus that some officials are screwing us all for personal gain.

joshuatrio says

ch_tah says

Your “if” is not reality.

That’s why it’s an “if.”

But an "if" that has 0% chance of happening is not worth mentioning.

If the gov't hands everyone $1M tomorrow, then almost no one will be underwater on their mortgage. Is that really a concern of yours as a potential future purchaser? No, because the chances of it happening are pretty much 0.

Troy says

divingengineer says

How many people in the bay area make $463,246 / 3 ???

Troy says:
Tons, actually. Plenty to soak up any new supply really. Which is why only houses in the po’ areas are under $500,000 right now.

Average household income in the greater bay area is $65,052.
Average house in the greater bay area is $463,246

463,246 / 65,052 = 7.121 times annual income.

Am I missing some glaringly obvious point here?

divingengineer says

Am I missing some glaringly obvious point here?

yeah, inflation & Prop 13 basically. Not all homes are sold every year, so the median income is irrelevant.

Historically, 5% of the stock comes on the market every year, and the buying public has had to stretch themselves to get onto the "housing ladder".

Those who stay out of the market remain renters and have had inflation continue to kick their ass as rents rose to match inflation.

Buying power is also increased thanks to move up buyers transferring equity from old place to new.

It's the inflation element that makes the 3X annual income thing non-operative. People who stretched to buy 15 years ago are perfectly fine now.

So this can't end well.

ChrisLA says

Government is actively restricting everyone from buying by artificially keeping the prices above what people can afford.

I disagree with this. Affordability is orthogonal to what the government does and does not do.

At the end of the day what it comes down to is "how-much-a-month", plus the impetus of inflation creating a speculative premium that people are willing to pay. When Government intervenes to reduce the monthly expense for a given pricepoint, pricepoints just rise to compensate.

Houses will always be on the edge of affordable, since they are sold on the bid.

ch_tah says

But an “if” that has 0% chance of happening is not worth mentioning.

That's your opinion. And you know what they say about opinions...

You make is sound like a return to conservative lending standards is a bad thing.

Unless you're underwater, or have recently made a house purchase - a return to "sane" banking would be a good thing (long term) for our economy.

Edit: http://blog.useforeclosurelaw.com/2011/02/07/housing-debt-financing-is-disappearing/?source=patrick.net#post-233 this article today was a pretty good read. If financing becomes difficult in the future - and lending standard do tighten - I don't see any reason why they won't start requiring 20% down again - or at least a higher percentage.... Heck, if they are requiring 3.5% now - that's a huge leap from nothing during the boom. Even worse, if banks refuse to lend, it'll just make things cheaper. Granted, all we can do is guess at this stage in the game, but saying that the chance of lending standards changing is 0% is pure hogwash.

joshuatrio says

a return to “sane” banking would be a good thing (long term) for our economy.

I'm a happy renter and I'm not entirely sure about this.

There's this $6T mortgage bubble we've got to pay off . . .

http://research.stlouisfed.org/fred2/series/HHMSDODNS

joshuatrio says

ch_tah says

But an “if” that has 0% chance of happening is not worth mentioning.

That’s your opinion. And you know what they say about opinions…
You make is sound like a return to conservative lending standards is a bad thing.
Unless you’re underwater, or have recently made a house purchase - a return to “sane” banking would be a good thing (long term) for our economy.
Edit: http://blog.useforeclosurelaw.com/2011/02/07/housing-debt-financing-is-disappearing/?source=patrick.net#post-233 this article today was a pretty good read. If financing becomes difficult in the future - and lending standard do tighten - I don’t see any reason why they won’t start requiring 20% down again - or at least a higher percentage…. Heck, if they are requiring 3.5% now - that’s a huge leap from nothing during the boom. Even worse, if banks refuse to lend, it’ll just make things cheaper. Granted, all we can do is guess at this stage in the game, but saying that the chance of lending standards changing is 0% is pure hogwash.

Ok, I guess that's your opinion.

Be sure to let me know when 20% down is required again.

ch_tah says

Ok, I guess that’s your opinion.

Be sure to let me know when 20% down is required again.

That's all opinions are - opinions.

But completely dismissing an idea, just because you don't agree with it doesn't make it not worth mentioning. We may never see 20% down again, but we may never see 0%... Who knows? What if banks require 40% ? **gasp** People would actually have to save money again if they wanted the luxury of buying a home (when was that ever such a bad thing) !

You're on a forum - guess what you typically read on forums - you got it - "opinions."

Troy says

joshuatrio says

a return to “sane” banking would be a good thing (long term) for our economy.

I’m a happy renter and I’m not entirely sure about this.
There’s this $6T mortgage bubble we’ve got to pay off . . .
http://research.stlouisfed.org/fred2/series/HHMSDODNS

This! I am not sure why the 2009 bottom callers can't see it. Oh they pretend not to know it. I get it.

joshuatrio says

ch_tah says

Ok, I guess that’s your opinion.
Be sure to let me know when 20% down is required again.

That’s all opinions are - opinions.
But completely dismissing an idea, just because you don’t agree with it doesn’t make it not worth mentioning. We may never see 20% down again, but we may never see 0%… Who knows? What if banks require 40% ? **gasp** People would actually have to save money again if they wanted the luxury of buying a home (when was that ever such a bad thing) !
You’re on a forum - guess what you typically read on forums - you got it - “opinions.”

I'm not sure what your point is. I understand these are all opinions and predictions. I said the chances of your idea (20% down requirement) is pretty much 0% for the foreseeable future. If you want to live in fantasy land of unrealistic "ifs" that's your prerogative. I'd rather focus on what might realistically happen. I agree that requirement a larger down payment would be a good idea. It should have been the requirement all along. That doesn't mean it's going to happen again.

ch_tah says

I’m not sure what your point is. I understand these are all opinions and predictions. I said the chances of your idea (20% down requirement) is pretty much 0% for the foreseeable future. If you want to live in fantasy land of unrealistic “ifs” that’s your prerogative. I’d rather focus on what might realistically happen. I agree that requirement a larger down payment would be a good idea. It should have been the requirement all along. That doesn’t mean it’s going to happen again.

I will treat this, future and past comments posted by you as irrelevant and useless.

If you disagree with myself or others users on this board, no matter how radical ones "opinion" might be, consider yourself out-of-line and borderline criminal.

Going forward, please stop posting your opinion as most of what you state isn't worth mentioning to begin with :)

joshuatrio says

ch_tah says

I’m not sure what your point is. I understand these are all opinions and predictions. I said the chances of your idea (20% down requirement) is pretty much 0% for the foreseeable future. If you want to live in fantasy land of unrealistic “ifs” that’s your prerogative. I’d rather focus on what might realistically happen. I agree that requirement a larger down payment would be a good idea. It should have been the requirement all along. That doesn’t mean it’s going to happen again.

I will treat this, future and past comments posted by you as irrelevant and useless.
If you disagree with myself or others users on this board, no matter how radical ones “opinion” might be, consider yourself out-of-line and borderline criminal.
Going forward, please stop posting your opinion as most of what you state isn’t worth mentioning to begin with

That's fine. I do find it interesting that because I don't agree with your opinion, you view my posts as irrelevant and useless. You seem to be very hypocritical. As for not posting, I'll post what I like; if you choose to ignore it, that's ok.

Yes, yes, I'm sure all that capital will push all these foreclosures up to higher prices than 2009.

http://www.mercurynews.com/ci_17342795?source=patrick.net&source=most_viewed

ch_tah says

joshuatrio says

ch_tah says

I’m not sure what your point is. I understand these are all opinions and predictions. I said the chances of your idea (20% down requirement) is pretty much 0% for the foreseeable future. If you want to live in fantasy land of unrealistic “ifs” that’s your prerogative. I’d rather focus on what might realistically happen. I agree that requirement a larger down payment would be a good idea. It should have been the requirement all along. That doesn’t mean it’s going to happen again.

I will treat this, future and past comments posted by you as irrelevant and useless.

If you disagree with myself or others users on this board, no matter how radical ones “opinion” might be, consider yourself out-of-line and borderline criminal.

Going forward, please stop posting your opinion as most of what you state isn’t worth mentioning to begin with

That’s fine. I do find it interesting that because I don’t agree with your opinion, you view my posts as irrelevant and useless. You seem to be very hypocritical. As for not posting, I’ll post what I like; if you choose to ignore it, that’s ok.

LOL !! Classic example of the pot calling the kettle _____. Funny how I dismiss your comments as irrelevant and now I'm the hypocrite.

I rest my case.

You wouldn't know sarcasm if it slapped you on the face.

Troy says

ch_tah says

I said the chances of your idea (20% down requirement) is pretty much 0% for the foreseeable future.

You’re entirely right about this, of course, since 30% is much more likely:
http://wisecatrealtors.posterous.com/wells-fargo-now-asking-for-30-down-on-mortgag

I'm sure you read the entire article and saw this:
"If the 30 percent requirement does stand, some in the mortgage industry say it will drive more of the lending business from the private sector to the government. The Federal Housing Administration is exempt from the risk retention rules and offers loans with downpayments as low as 3.5 percent."

ch_tah says

The Federal Housing Administration is exempt from the risk retention rules and offers loans with downpayments as low as 3.5 percent.”

AFAICT they also want to change FHA back into a low-income thing -- like it was 10 years ago -- but with higher down payments (10%) too. The FHA limit was $240,000 in my area when I was in the market in 2001-2002.

Remember, they're making their money from the loan processing "fees", not the interest, because they don't keep the loans.

And now we're right back to that very bottom of 2009 in southern California:

http://www.bloomberg.com/news/2011-02-15/southern-california-home-prices-decline-to-their-lowest-level-in-18-months.html?source=patrick.net#related_categories_tags_top

It's just investors chasing yesterday's news that caused a tiny little temporary blip up, that's all.

The realtors are back to their old tricks of telling people the water is fine, jump on in.

Los Angeles Renter says

We shall see if banks decide to give strategic defaulters loans again…. What’s to stop banks and credit agencies from extending the WAIT period on strategic defaulters.. It’s pretty easy to look at someones credit history/score and see plain as day that they screwed a BANK in the past.. aka.. great credit everywhere except the default. Those living rent free may find the 4-5 year wait period may be extended for them to 10+ years wait before they can get another loan. Sure they could pay in cash… But any bank that would give a strategic defaulter another loan with a reasonable interest rate under 10% is not a bank I’d want to be invested in.

It only takes one or two banks scarfing up the business of the former SD's for the rest of them to fall in line.

Why were they defaulting on these loans anyway? Most likely (or highly likely) they were upside down. If they put money down on a house that isn't likely to go upside down then they (the punitive banks) are just passing the business to their competitors. The same thing happened with the crazy loans this past decade.

Stupidity is infectious. The only backstop to this is some sort of regulation but look at FHA now - they are still handing out low down payment loans. I am guessing someone would cry foul if the government mandated a "do as I say not as I do" policy.

While you might see the government entities implement some sort of policy against these people, other banks will probably not - even if you think they should. So the answer to your question regarding what is to stop them from implementing a penalty for a strategic defaulter is: MO MONEY!

Dunross--

Well, does the bull trap usually occur when the price is back at the mean? Like it is in most places in the US?