patrick.net

The current economic environment is the result of dirt cheap credit, not jobs or any other economic fundamental. WHO is going to be the first-time home buyer? If they can't get loans based on liar-loans, then how? You guys are lost in a mass delusion. As i mentioned in the other thread. I now live in Austin instead of Seattle and yet all of my clients and contracts that are not overseas are in California. People have finally taken to the idea of using dirt-cheap crystal clear high-definition video conferencing if you deal in Ones and Zeros like so many of us do. My competitors in California and Seattle can't possibly compete with my low overhead. Screw living in CA. Screw ever buying a home. Uncle Sam covered your ass the last time it crashed and you're still drunk from the hair of the dog. Don't expect the Fed (or me) to print 15 Trillion more dollars to cover your losses this time. Everyone patting themselves on the back for being geniuses when the Fed has simply been buying up all of the bad debt. That's funny. How in the hell is that sustainable? China is just not that stupid.

Get ready for worldwide, simultaneous, multi-currency meltdown. Canada and Australia will burst simultaneously with the US this time. They haven't even popped yet! Spain has 27% unemployment and STILL some of the highest real estate costs in the world. What fundamentals beyond currency manipulation are fueling that?
Why do you have such faith in currency manipulation? Is it because it's been 35 years since the last round of high interest rates and inflation? YEP.

deepcgi says

Get ready for worldwide, simultaneous, multi-currency meltdown.

But what about this statement?

This-like all the other bubbles- will also crash. Its not a matter of if but when and whatever the severity is would be anyone's guess. As others have noted and disagreed with me over, I don't view real estate investments as the best use of investment capital. There's simply wayyyy too much volatility and up front risk involved. That and it has never actually outperformed plain old fashioned stocks and bonds. People have disagreed with me in the past with that statement. But most economists agree. Its just that some people feel more warm and fuzzy if what they invest in is some physical thing rather than something they can't- like various stocks.

I bought my house to live in. That's it. If everyone else did the same then the US economy would be in about 200% better condition with more stability and more overall consumer purchasing power versus how it is now, with too many people looking at houses as investments which in turn manipulates the market, ups the volatility, limits the supply, causes prices to rise, and thus places more of the country's money into debt versus actual consumer goods and services.

edvard2 says

That and it has never actually outperformed plain old fashioned stocks and bonds

I'm not sure about that. Are you including rental income or just looking at appreciation?

tatupu70 says

edvard2 says

That and it has never actually outperformed plain old fashioned stocks and bonds

I'm not sure about that. Are you including rental income or just looking at appreciation?

He is refering the housing price appreciation v.s. stock price gain (e.g., the Dow Jones index). The problem for me is that the stock is very well overpriced at this point IMO. Maybe his bet is right but I do not have the gut to hold stocks as long term investment veihcles for present time.

Mobi says

He is refering the housing price appreciation v.s. stock price gain (e.g., the
Dow Jones index).

If you're right, that's not a fair comparison. Investors don't buy real estate solely for appreciation--they buy for cash flow.

So, my next question for those who saw the 2007 crash coming is: what happened that changed your view towards the market?

no fibre...just copper.
and you call yourself edudaded u simple minded fuck.

robertoaribas says

deepcgi says

People have finally taken to the idea of using dirt-cheap crystal clear high-definition video conferencing if you deal in Ones and Zeros like so many of us do. My competitors in California and Seattle can't possibly compete with my low overhead. Screw living in CA.

why austin? why not move to Bali?

Thanks, but I meant what happened in 2004-2007 that turned a bull market into a soon-to-be-crashed one?

danalyst says

Thanks, but I meant what happened in 2004-2007 that turned a bull market into a soon-to-be-crashed one?

"This time is different!" happened ;)

danalyst says

Thanks, but I meant what happened in 2004-2007 that turned a bull market into
a soon-to-be-crashed one?

We ran out of greater fools...

This time is different b/c a lot of fools are still in the credit jail waiting to buy.

"An industry building 2M + homes for multiple years, much more then needed"

"Rapidly increasing inventory, housing starts off the charts"

----x-------------

So if the problem in 2007 was super saturated supply of housing, and only 4-5 short years later, the problem is an inventory shortage, where did all the houses go? I know that new builds halted there to a near stop for almost three years, but still. If there is no shadow inventory waiting in the wings, what happened to all the houses? I thought that, by definition, every bubble post pop was defined by the surplus of supply?

The OC register guys love poking fun at people who took advante of the last crash. But looking at this purely from a business standpoint, shouldn't we all be buying like crazy? As a business model, buying homes, pulling out every ounce of equity makes sense. You know it will collapse at some point, but when it does you do what any business does, squirrel away your investments in protected vehicles, file bankruptcy and move on to the next great thing.

Hypothetical model: Let's say I managed to pick up 5 homes @ 300K each. At 12% appreciation that's $32k/year per home in income that you pull out. (150k'ish total after paying mortgages, but hopefully you rented them out to offset the mortgages). Let's say the bubble makes it out 3 years, then your business just pulled down roughly $500k. Good by any measure.

Say what you want about morality, but as a business model, it's pretty sound.

is an interesting chart. Doesn't count immigration, but it should.

"So if the problem in 2007 was super saturated supply of housing"

demand for housing is unbounded, everyone would like a better place to live, or a 2nd, 3rd, 4th . . .

Housing -- outside of desert crapholes -- wasn't really 'saturated' in 2007, it's just that flow of suicide lending was reaching the end of the line, and the macro economy good-times the $6T+ housing stimulus was creating was collapsing with bubble home prices, since they were interlinked -- good times pushed up home prices, and rising home prices gave us more good times!

http://research.stlouisfed.org/fred2/series/LNU00000060

is another important graph to understand.

Bellingham Bill says

this was a $1T/yr redistributionary flow from the world's savers to the US
home-owning consumer (most people),

It sounds like the architects of this heist should face imprisonment.

I agree with your premise of scavenging blown out assets. It's a wise strategy to "Buy when the streets are running with blood."

HOWEVER, and this is abundantly clear in every other post by Eman and Roberta, the leverage you guys use is made possible by ZIRP and borrowing as much as you can for as little as you can. You just refinanced one of your places.

Did you put 50000 from your savings or borrow from Ben at 1.9% interest?

If doctors are earning 45000 in 5 years, you're all fucked.

I say that as a doctor.

robertoaribas says

Obviously, you need a lesson in modern economics and trade, but I am here to help:

the Chinese sell us:

1. toxic lead based painted childrens toys.

2. toxic dog food that kills dogs.

3. toxic dog biscuits that kill dogs.

4. toxic toothpaste that causes cancer.

5. fake counterfeit shampoo laced with sulphur.

6. baby formula with ground up chalk in it, plus possibly melamine.

7. Milk with cancer toxins in it.

8. Rice with plastic in it.

9. cheap computer and phone batteries that burst into flames.

10. Fake drugs that are either ineffective, or poisonous.

11. Sulphur dryfall that ruins your house and stinks.

We sell China toxic mortgage loan backed securities.

Thank buddha we have toxic loans, otherwise the toxic trade imbalance would be even worse!

I never thought I'd say this, but you are quite correct on nearly all fronts, except we sell china toxic treasuries.

However, China has stopped buying treasuries and is going to eventually dump the dollar.

http://www.zerohedge.com/news/2013-04-11/tic-tic-tic-ominous-warning-foreigners-us-bond-positions

http://www.bloomberg.com/apps/news?pid=newsarchive&sid=anZbHuX9q8gI

http://www.wnd.com/2013/04/australia-to-dump-u-s-dollar-in-trade-deal-with-china/

http://www.bbc.co.uk/news/business-16330574

I'd say Japan will probably blow up before the US, and that means treasuries have some beautiful days in front of them and US real-estate as well.

donjumpsuit says

I desperately desire to do the same, however cannot compete with all cash investors who bid the price higher than the home is willing to appraise for a mortgage.

As for the comments that come like "Perhaps you should start with an apartment", fuck off.

I have an evolutionary tick that prevents me from buying into a swelling and over demanded market.

I share the feeling.
But talking of the Bay Area, a lot of people have salaries just as inflated with cheap money as RE.
There *are* cheap houses to be bought - just not in places I would want to buy them - but that's a choice.

Participating the frenzy is optional for all of us. There are other choices.
We just don't like these choices.

Facebooksux says

However, China has stopped buying treasuries and is going to eventually dump the dollar.

http://www.zerohedge.com/news/2013-04-11/tic-tic-tic-ominous-warning-foreigners-us-bond-positions

http://www.bloomberg.com/apps/news?pid=newsarchive&sid=anZbHuX9q8gI

http://www.wnd.com/2013/04/australia-to-dump-u-s-dollar-in-trade-deal-with-china/

http://www.bbc.co.uk/news/business-16330574

Yep - and the Indians don't care about gold's pullback and continue to buy hand over fist.

Nor do I.

The best is how their finance minister is begging people not to buy gold.

You know, he's merely a politician/banker looking out for the people.

http://www.indianexpress.com/news/govt-can-take-more-steps-to-curb-gold-imports-p.-chidambaram/1118247/

robertoaribas says

meanwhile prices in your town seattle have gone flying up

You are an ignorant bubba.

Give it a rest.

I have been correct for the past two years. Real Estate is done as soon as the Fed is.

David Losh says

I have been correct for the past two years. Real Estate is done as soon as the Fed is.

When is that?

indigenous says

When is that?

I personally think the Fed intervention is way past it's prime.

Even though Bernanke put on a good show for Congress the Fed minutes indicate they may slow bond purchases as soon as next quarter.

There is no further point that the Fed can make. All of this cheap money certainly didn't create the amount of jobs the Fed wanted.

David Losh says

indigenous says

When is that?

I personally think the Fed intervention is way past it's prime.

Even though Bernanke put on a good show for Congress the Fed minutes indicate they may slow bond purchases as soon as next quarter.

There is no further point that the Fed can make. All of this cheap money certainly didn't create the amount of jobs the Fed wanted.

Bubba posted something that said August of this year. It surprised me that it would be that soon. Plus they were saying Benny would have to raise rates fast:

http://www.marketwatch.com/story/bernanke-out-by-august-qe-ends-rates-up-crash-2013-05-22?source=Patrick.net&link=MW_story_popular