WatchAll bubbles in ANY investment before completely crashing have a incomplete crash, denial, a false bottom, a sucker's rally & then finally a complete shit hit the fan crash into cannibal anarchy.
Who here thinks a false rally is happening due to low inventory from banks not listing & homeowners in denial; waiting for prices to go up, then planning on listing.
Thus, prices are only temporarily going up & a very short-term bubble is happening due to a larger ratio of demand going after a manipulated false ratio of actual inventory. This is why you have multiple offers & increased competition , thus increased prices...
Homeowners will then see the prices going up.... Millions of underwater homeowners will start listing & everybody will try selling including banks...
This will crash the market again like in 2008. I expect another crash in the end of 2012, this time much more severe & no more false rallies afterwards; just a rally of cannibals.
Do you guys agree? What do you predict? Do you think I'm right? Your thoughts?
Follow
Befriend
5 comments
I sure hope so. Here is Petaluma/Sonoma county, with minimal to no employment growth, absolutely average homes are getting multiple offers in the $500k+ range. Same house in Vallejo 25 miles east is going for $100k. Frankly, as a person who is stuck here - spouse is a public employee and my children go to school here- this is really depressing. 3/2 bd/ba rentals of moderate quality get 100+ responses within listing on CL. This market is so screwed up it really confounds me.
Follow
Befriend
28 threads
1,489 comments
San Jose, CA
Premium
Robber Baron Elite Scum says
You are 100% right. There is no question that this is exactly what's happening. A "true"/fundamental bottom, after such a huge run-up we've had prior to the crash, would be a slow/prolonged and agonizing crawl for at least a decade. This is not what we are seeing now. What we are seeing now is a resumption of the blow-off mania, we've seen in the period leading up to the crash. Look at the graph below of Phoenix market, and you can see that the slope of price ascent is exactly equal to that of the 2005 blow-off top. This is not the kind of a reaction you would see, if this was really a bottom. Fundamentally, the sucker's rally is very easy to argue. People are still crazy about real-estate. Most people (especially in california) still think that real-estate is a good investment. This kind of a perception CANNOT possible be true at the true bottom of the market.
Follow
Befriend (3)
50 threads
484 comments
Roslyn, NY
I think that chart says a lot about what seems to be happening. I figure it will go on for another 6-9 months of very big false gains in real estate prices....
Then the big crash!
Follow
Befriend
10 threads
694 comments
Worst is over. We are in a sustained recovery.
This is an opportunity to buy real estate. An opportunity that will never be repeated in our lifetime.
A combination of such low prices, and low interest rates. WOW!
I'm all in.
Follow
Befriend (3)
12 threads
600 comments
The big crash has occurred in Nevada and Arizona and Florida. California is still high. I mean completely stoned.
Follow
Befriend
28 threads
1,489 comments
San Jose, CA
Premium
Raw says
Yes, this is exactly the kind of hyper-frenzy I was talking about, pertaining only to sucker's rallies and bacchanalian feasts.
Follow
Befriend (3)
50 threads
484 comments
Roslyn, NY
Raw says
Sorry but I disagree strongly.
You can't have low prices with low interest rates and FHA loans enabling reckless lending even today... Only it's now the government that is doing it.
That simply doesn't make it possible to buy at a low price.
With low interest rates and FHA reckless lending standards... Now is the opportunity to sell and cash out.
Follow
Befriend
28 threads
1,489 comments
San Jose, CA
Premium
KILLERJANE says
Yes, but that was only the 1st course. Bubble crash is usually a 3-course meal. We've only witnessed the 1st one, so far.
Follow
Befriend (3)
12 threads
600 comments
Yeah because all houses should sell for 75,000 and under.
Follow
Befriend
28 threads
1,489 comments
San Jose, CA
Premium
KILLERJANE says
Why not? At least in Arizona, they should. Why would anybody want to pay more in AZ?
Follow
Befriend
28 threads
1,489 comments
San Jose, CA
Premium
dunnross says
And in the Bay Area, I don't see any house worth more than $1M. 99.9% of all houses in the Bay Area are architectural disasters.
Follow
Befriend (3)
50 threads
484 comments
Roslyn, NY
dunnross says
In Long Island, New York...
The overpriced areas are Great Neck, Roslyn, Manhasset, East Hills, Manhasset Hills, Searingtown, Greenvale, Glen Head, Sea Cliff, Port Washington, Sands Point, Old Brookville, Brookville, Upper Brookville, Jericho, Woodbury, Kings Point, Old Westbury, Muttontown, Syosset, East Williston, Williston Park, New Hyde Park & many more...
Basically in Long Island the entire area is a rip off and overpriced....
But the biggest rip off is Nassau county and the biggest rip off of all in Nassau County is the pretty much the entire North Shore & "Gold Coast".
Follow
Befriend (23)
55 threads
3,836 comments
Scottsdale, AZ
robertoaribas's website
Robber Baron Elite Scum says
total wishful "thinking"
Lets try a simple example: Mr. X owns a home with a loan of 300K, currently worth 280K. Obviously, Mr. X can't sell without losing money or doing a short sale... The supposedly manipulated market drives Mr. X's value up $400K, so he decides to sell. Can he crash the market? NO! IF the value dropped down below $320K, he wouldn't make anything after transaction costs, so he would very likely give up and remove his home from the market.
Simply put, nearly underwater homeowners can DAMPEN appreciation, but cannot start severe depreciation, without foreclosure or short sale.
Similarly, in this ridiculous scenario, the 'genious banks' that engineer the crash suddenly turn into the 'stupid banks' that crash prices. Which is it? are they master manipulators or not? if they are so clever, why would they suddenly turn stupid? [hint: they are actually quite stupid! they loaned money to people who couldn't pay it back, did such shoddy paperwork they got thrown under the bus, and today are approving short sales at prices far under what the home would sell at auction for. Sorry to say, there is no way in hell the banks are cleverly engineering anything!]
Follow
Befriend (3)
50 threads
484 comments
Roslyn, NY
robertoaribas says
They want to crash prices because they never even lent the money in the first place.
They practice "fractional reserve banking".
When people default, they get to seize an asset for which they never even really provided money for.
robertoaribas says
All underwater homeowners will willfully give up their home to foreclosure or a short sale in the future eventually. If not willfully, the banks will repossess after they default which is very likely due to a contracting of the economy in all sectors.
Underwater homeowners WILL start severe depreciation.
robertoaribas says
Yes... Because he will be a part of the millions of others who will also be trying to sell once values jump 15-20%...
Too many sellers and too little buyers is a crash.
robertoaribas says
No. He will very likely file bankruptcy. Default and let it foreclose or do a short sale.
And if another housing crash comes along... Unemployment will increase by many times and many people will go under foreclosure whether they did so willfully or not.
Banks will then either sell off to investors or hold on to properties. Most likely sell off to investors/big brokerages who are their business pals.
Follow
Befriend
10 threads
694 comments
robertoaribas says
Robber Baron,
How do the the banks benefit by seizing an asset that is underwater? The value of Citibank stock had gone down to $1.00, down 98% because of the crisis, so where was the benefit? Banks make money by getting their loans paid back with interest, not by loaning money to people who default.
Raw truth
Follow
Befriend (5)
57 threads
1,332 comments
Premium
It's not "stupid" for a bank to loan out to people they know cannot pay back, it is criminal/fraudulent, but definitely not stupid. Most of the money they lend out is backed by nothing and most of the the involved parties get instant kickbacks. Then when they foreclose they get the home for free as they have not had the money on the books to begin with. Also if the bank ever folds - which is unlikely as they keep getting bailed out with taxpayer money - most have made enough money, far more in those "golden" years than they would have if they had to pay themselves "regular" salaries on a lifelong basis.
Follow
Befriend
28 threads
1,489 comments
San Jose, CA
Premium
robertoaribas says
That would already be too late, because prices would "gap down" like they did back in 2008. Houses are only worth this much, because people perceive their value to be this high. If everyone wakes up in the morning and realizes what some of us, on this blog, already realize now (that, basically, most RE in the country is still in the bubble valuation), there would be a huge stampede for the exit door, and prices will gap down, before the poor house owner has a chance to react.
Follow
Befriend (3)
50 threads
484 comments
Roslyn, NY
Raw says
Because they create money out of thin air through fractional reserve banking.
They lend out the bogus shadow money which doesn't even exist. Borrower buys an asset. Borrower fails to pay back lender money which was created out of nothing through fractional reserve banking...
And they then seize the asset... Unrightfully taking the asset.
Raw says
Like any of that matters.
Raw says
That is only one way to make money for banks. But the best way and most profitable way to make money is through fractional reserve banking and then contracting the credit after making as many loans as possible.
This way you artificially create money yourself and then destroy that money. This allows you to take over an asset without the victims knowing you just basically robbed them blind.
Follow
Befriend (3)
50 threads
484 comments
Roslyn, NY
mell says
+1
Mell has also explained another way that banks make money through defaults regardless of whether they even practice Fractional Reserve banking...
Which they do.
Follow
Befriend (9)
168 threads
1,552 comments
Premium
Something is not right in this market. Prices of houses were much lower both in the bay area and socal, when the dot com boom was in full swing. Companies were fighting over employees and people had so much hope, confidence and money . Housing was much, much lower than now.
Since then we have had the dot com crash, housing bubble bust , offshoring of iT jobs and now back office jobs too and CA is broke and yet in many places, the prices are higher than before the dot com bust. Something ain't right.
Follow
Befriend
28 threads
1,489 comments
San Jose, CA
Premium
lostand confused says
Some places like Palo Alto, Los Altos prices are even much higher than they were in 2007 at the peak of the frenzy.
Follow
Befriend
15 threads
2,857 comments
Another Miner says
Realtors have been saying that for the past several years and yet even with rates declining .. prices have also declined.
Follow
Befriend
5 comments
Amen. I know of three homes that have sold in the more desirable side of Petaluma over the past couple of months. In all cases, the real-a-doors(tm) told me that they expected 10+ offers after the opening weekend. More than 45 days after the offers were accepted, only one of the three homes has a resident. The other two (both sold for north of 550 for 3/2 bd/ba's) have long browning grass, unraked yards and one still have a lock box on the front yard.
Supposedly, most accepted offers in the area are all cash. The (buffoon) mortgage broker I was using (until I confirmed he was sloppy and incompetent) said that 35% of the market was all cash, and the balance was 3.5% FHA. No place for prudent savers. I decided to sit this party out until at least Feb.
Like you said, something aint right.
Follow
Befriend (3)
50 threads
484 comments
Roslyn, NY
lostand confused says
Perhaps people had lost all hope in the stock market, jobs, business start-ups & internet enterprises that their home is they only thing left for them to make money off...
Which is actually kind of sad.
Follow
Befriend
1 comments
Well, iv'e been sitting on the sidelines for the past three years hoping prices will get into a realistic range so i can get into something(to live in, not invest). And i don't even know if that would be a wise thing based on the politico and economic realities that have developed.
I'm at a point in my life where i have stable employment and finances and am enjoying life now, but i don't know about the future of this country. Not sure i want to get invested in anything here anymore. Patrick has been an immeasurable resource for cutting through all the party line you get from the mainline media sources, and it makes you realize how controlled our country has become from these monied investment interests.
I think the baron is right; the market is going to go up in these cycles and then come down siginificantly in a matter of months.
Follow
Befriend
5 comments
http://www.zillow.com/homedetails/315-12th-St-Petaluma-CA-94952/15755261_zpid/
thomaswong.1986 says
This house was a time warp from middle class 1910. As in, there was not an updated system in the house in the last 100 years.
Real-door(tm) can say whatever they want, but someone paid 500+ for this and it needs another 200 to be brought into this century. This isn't Palo, but you wouldn't know it by the prices.
Follow
Befriend (31)
34 threads
2,554 comments
San Jose, CA
Premium
KILLERJANE says
Done stoning? :)
The central valley & inland empire of CA got decimated. The coastal neighborhoods are holding up better. The fortress is .......... well, still expensive as ever. :)
Follow
Befriend (23)
55 threads
3,836 comments
Scottsdale, AZ
robertoaribas's website
Robber Baron Elite Scum says
whenever anyone says clearly demonstrating so little knowledge about finance or economics, it is best to just nod and smile. SImply put, they don't have either the education to bother talking to them... mell says
ok, we have a society of the economically illiterate! have fun!
Follow
Befriend
28 threads
1,489 comments
San Jose, CA
Premium
The fact that the fortress has cities with prices still higher than 2006, is a sure sign that the true RE bottom is nowhere close in sight. During the NASDAQ bubble collapse, the bell-weather cisco stock dropped from $80 to $10. The nifty-fifty stocks took a beating during the 70's downturn. From real estate, examples, we've had former fortress enclaves: Tokyo, Hong Kong, London and many others take brutal beating during their respective recessions. The Bay Area fortress will be no different. I expect to see a brutal crash, here, just because, prices have been going up for so long, that everyone, here, is blindly convinced that this area is truly invincible. Now, historically, it's always been the case, that after a bubble, the top-tiered places will see earlier appreciation. This happened back in 1970's and 1995 and many other examples of this. So, if we are seeing that cities like Phoenix going up before the fortress areas of the Bay Area, this cannot be a true recovery. Places like Phoenix and Las Vegas don't lead the RE market, they follow it, and only once other places have sufficiently appreciated, do places like Phoenix and Las Vegas start to rally. Places like Palo Alto and Santa Monica lead the prices action, and, since this is not happening this time around, it cannot be a true recovery.
Follow
Befriend
5 comments
Since most loans are FHA these days and government backed, why would the lender even care if the borrower can repay the loan? As long are at the borrower qualifies based on income, they are good to loan (from what I have recently seen). Nothing fraudulent there...that is the way the government wants the game played.
I am not really sure why the government wants people in bubble real estate areas to go all in at 3.5% loans on $600,000 stater homes, since it will take very little to get them underwater, but that is not my problem. But it helps get the inventory off the banks foreclosure books.
You can trivialize it if you want, but fractional reserve lending is a big part of the problem, but that is not even worth discussing.
Follow
Befriend (3)
50 threads
484 comments
Roslyn, NY
"whenever anyone says clearly demonstrating so little knowledge about finance or economics, it is best to just nod and smile. SImply put, they don't have either the education to bother talking to them..."
What a US President & a Founding Father has to say about Fractional Reserve Lending...
“No one has a natural right to the trade of money [loan money], but he who has money to lend.”
-Thomas Jefferson
I guess in your flawed estimation, Thomas Jefferson is also a dumb idiot who knew nothing about economics nor finance. His knowledge is also very poor. The only smart one is you.
Follow
Befriend (2)
61 threads
1,307 comments
Premium
Robber Baron Elite Scum says
Good first sentence, but 0 substance.
Robber Baron Elite Scum says
The way I see it and I'm sure E-Man, AZrob, IWOG will say the same thing, if they don't get their price, they are not going to sell, ever. Supplies are permanently reduced, they will sell in a hot market and will never have to in a weak market.
Robber Baron Elite Scum says
Yes, but all it does is slow down rate of growth, not crash housing price.
Robber Baron Elite Scum says
Slow growth, more of the same. It won't be 2008, more like 2010, 2011 and 2012.
Follow
Befriend (9)
168 threads
1,552 comments
Premium
robertoaribas says
Self professed experts are always entertaining. You must have heard about fiat currency?
Follow
Befriend (1)
1 threads
387 comments
Buffalo, NY
If markets were run by the free market, I'd agree, but government has been caputured by the corporatists and media is owned by them. The people are stressed to the limit, so they can't think for themselves and tons of misinformation is put in the public's line of sight, specifically for the few intrepid souls who want to try to wade through what is real and what is hype to get mired down in. And as a last line of defense, the means with which the market reports on itself is digital, which means open to hacking, and proprietarily complex, which means open to creative accounting. In short, the best illusionists and con men in history run the show, and prices will do what they tell them too, regardless of fundimental truths.
Follow
Befriend (5)
57 threads
1,332 comments
Premium
robertoaribas says
Look, I'm not trying to predict house prices (though I have a general direction), also I am generally happy for people who enjoy their home or can make decent rental income from their houses and the work they out in - IF I didn't have to substitute so many of the mortgages and zombie banks out there with my taxes time and time again. Debt should be treated equal without favoritism and rigged low interest rates at the expense of the saver. I trade stocks (besides having a full time job) - no bank crap though and not on margin - and maybe I am part of the system because of this, but at least I take full responsibility and all the risks for my investments. Also to simply deny that banks have not been using mark to market (thus inflating their value), hiding non-performing mortgages from their balance sheet, rigging interest rates (liebor), knowingly selling junk MBS for AAA and not practicing "one dollar spent/lent backed by one dollar of capital/collateral)" makes me wonder where you have been the last 5 years.
Follow
Befriend (48)
274 threads
12,577 comments
47 male
Lafayette, CA
Premium
Robber Baron Elite Scum says
I can understand why Jefferson kept slaves, but I can't understand why the only slaves he freed upon his death were those related to him. (and I think one cook)
So yes........in some ways, Thomas Jefferson was a dumb idiot.
That being said Thomas Jefferson's world has no relevance to modern finance. As a country we have decided on a system of fiat currency, having both advantages and disadvantages, that cannot exist without debt.
Follow
Befriend (3)
50 threads
484 comments
Roslyn, NY
iwog says
Actually private corporations have decided that for you peons. It's funny that peasants think they had any say in it.
Enjoy having your currency fail & your country fall apart since all fiat systems have failed in history.
Clueless serfs...
Follow
Befriend (31)
34 threads
2,554 comments
San Jose, CA
Premium
SFace says
This is true for me. I intend to sell most of my holdings when the yield/return doesn't make much sense. I would keep them forever if the market stayed stagnant because the cash-flow is good and the tenants are paying off my mortgages. The rental market will have to collapse 30%-35% for me to be cash-flow neutral. I will keep properties in good locations for my family and keep passing them down from generation to generation. That's the game plan, but who knows?
Follow
Befriend
1 threads
1,055 comments
Raw says
I hope you are being ironic, or heavily drinking.
Follow
Befriend (1)
3 threads
14 comments
The only way new buyers in this economy can afford such prices is to be either the beneficiaries of rare circumstances (inheritance, lottery, being able to sell a similarly priced home, etc.), or via such exotic and unhistoric financing products that they are effectively renters whether they know it or not. The bottom is nowhere near here so long as prices remain so out of whack vs. incomes, and incomes are mostly going down or have been flat for the last decade with no end in sight. Prices will have to adjust to what people can afford, or else the property sits unsold, becomes derelict (Grey Gardens, anyone?), or gets eminent domained and turned into something else (like the way a lot of the mansions and near-mansions of old cities like Philly got chopped up and turned into apartments. This process will likely take decades to work out, because that's how long it took in times past.