WatchIs this the case? where does this common knowledge come from?
Out of curiosity, I searched all of the Fannie Mae and Freddie mac owned homes in the entirety of Maricopa county. I found just north of 5000 homes. Then, I selected 100 at random, and searched the addresses on the mls. Just over half were currently for sale, or pending on the local mls...
This doesn't seem like homes being withheld from the market. In fact, in a market selling over 7000 a month, if the remaining 2500 were all suddenly listed at once, it would be a minor hiccup, and back to the same market. [Obviously, they can't all be listed at once, some are rented to tenants, others are still occupied by the prior owners, etc.]
Since banks often reaquire homes under local LLC's, or assigns, it isn't really possible for me to count say BofA's home ownership in the county, but I'm disinclined to believe it would matter. The majority of loans were backed by Fannie/Freddie here anyways during the bubble years.
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Robber Baron Elite Scum says
Small banks might have a solvency problem. The big ones will have an endless stream of newly-printed cash from Uncle Ben.
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We are moving forward on a condo short sale here in Oregon that also has a 2nd mortgage. Took a little more time clearing the title, and I am not privy to what lender is getting what out of the deal, but guessing the 2nd mortgage holder is getting close to diddly.
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LOL! This site is just too awesome sometimes.
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"sarcasm is actually being pretty polite"
No. It is trying to discredit someone's stance through childish off topic mockery of they other debating party. It certainly isn't polite to yourself since it clearly reflects to everyone that you can't counter it so must resort to comedy.
A clown's work is easy. Obviously, being a rational debater with what I said is too hard in this case for you.
"someone who's posts can be summarized as follows: Prices will fall due to facts that only I know, and won't tell you."
Yes... You are 100% correct. I will not sit here & write a book for you because the sheer amount of factors going against the housing market to explain the prediction will require an entire textbook heavy book.
Certainly, no one wrote a book for me about all factors pointing to a collapse. I had to research it for 3 years, myself.
Go do the same. Be your own teacher.
"Really? under a different name you posted the same crap on here a year ago."
You are now trying to assert that I changed my name to try giving the impression to this forum that someone else entirely different also agrees.
That is completely false as I clearly once stated to iwog that I changed my name as stated here 4 months back...
http://patrick.net/forum/?p=1209968&c=807733#comment-807733
The reasons for changing my username was because the old one was boring. No other reason neither did I have any malicious intent to deceive.
"the homes I bought a year ago are up 30 to 50% in value, AND have paid me rental income in excess of 10% of the purchase price..."
If you even have one brain cell, you will sell. You are getting greedy. Cash out, now. Once you win, don't become intoxicated & try to win more.
That's another way how people lose besides cutting their losses when they lost in the first round.
The champagne of success maybe very enticing, but don't drink it because it is equally very intoxicating that will cause you to lose clear sight & sound thinking which was the basis of your first success.
"If your mystery collapse happens 5 years from now, why would I even care? I will have taken 75% of my invested money back out of the market in rent!"
Rents will collapse as well. And defaults in rents from tenants will skyrocket. Qualified tenants will also be harder to find.
You are really making very risky & bad financial bets. At least cover both sides, so if a collapse happens, you don't lose & if a market rally happens, you make gains.
Do whatever you want though... Doesn't affect me either way. I'm sure a realtor or broker however will pressure you to one side: BUY!
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freak80 says
I believe all banks will have a solvency problem. I do not think their will be bail outs this time.
I think their will be a currency devaluation first & then the FDIC will give depositors cheap money.
FDIC is by the way a private corporation severely lacking in funds to cover major bank failures & solvency issues.
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The problem is he has 2 cells left in his brain. That's why he hasn't sold yet. Why sell at $120k today when you can sell it for $240k or more in ten years. In the meantime, the property mints money for you. :)
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Robber Baron Elite Scum says
Your believe is not the reality. Here is the reality. Wells Fargo & JP Morgan Chase are making record profits despite the fact that JPM recently loss $4.4B in derivative trades.
Hello? Anyone home?
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E-man says
You will think that you are making gains but when you adjust inflation you are actually not & in fact losing.
Rents will fail as well. They are just temporary sources of income.
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E-man says
What these banks practice is crony capitalism. Where the debt is PUBLICALLY shared, yet their profits are PRIVATELY shared.
You are very short-sighted with how these banks are making their money.
J.P Morgan will have a solvency problem but will not go out of business, since they essentially have shares in the Federal Reserve & FDIC.
If not solvency, they will shut down all banks no matter how big or small... Devalue the currency & the reopen all banks to pay out depositors.
Small banks will likely however be bought out along with buying out whole entire corporations for pennies on the dollars. They did this during the great depression & they will do it again.
Ignorance gives you often a opposite appearance of reality.
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They did this during the great depression and they will do it again!
In 1929, you had a incomplete crash. Then denial. Then false hope and then a complete crash in 1933.
In 2008, you had a incomplete crash. Then denial. Now false hope and miss guided optimists like Roberto. And the complete crash is coming in end of 2012.
1929-1933
2008-2012
All 4 years apart. History repeats itself. You will also likely have a major war.
Many people during 1929 through 1933 in the media were optimists & even common people like Roberto were becoming optimists. The the crash of 1933 came & they lost everything. Many of these same people paraded themselves as being experts & extremely credible due to "education". You have the same problem with so called "credible experts" today.
Great depression ended around December, 1941. The coming great depression will end around December, 2020.
8 years apart from shit hit the fan until you begin to have some level of prosperity & decent living standards for the majority of people.
Now is not the time to make money. That should have been done during the 90's & early to mid 2000's.
Now is the time to keep what you have & prepare for collapse so it doesn't affect you. Then, once the collapse comes... Then you become greedy & buy as much as you can for pennies on the dollars.
Passing on your pennies on the dollar deals to future generations 80 years later... Making them very wealthy as long they weren't fuck ups.
Just like the Rockefeller's, Rothschild's, Carnegie's, Dupont's, Vanderbilt's & Morgan's along with the rest of the secret aristocracy.
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Robber Baron Elite Scum says
Good grief.
1929 was the top, the bottom was in 1933: 4 years
2006 was the top, (not 2008) and the bottom was pretty much 2009 although some will say 2011: 3-5 years
You're demonstrating that a full bear market takes about 4 years, which is probably true in many cases. However this is year 6, therefore you only have two choices:
1. The real estate crash is totally unlike the Depression crash and therefore everything is different this time.
2. The real estate crash resembles the stock market crash of 1929 and therefore is pretty much over.
Which is it? "The real estate crash resembles the stock market crash of 1929 and therefore is going to continue another few years" is the wrong answer.
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Roslyn, NY
^
Useless babble up ahead.
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iwog says
you're kinda over-arguing your book here.
1929 has strong parallels with 2008, but how we got in and how we arrested the crash are rather different.
http://research.stlouisfed.org/fred2/graph/?g=96D
blue line is monthly job growth, red line is government debt add, green line is consumer debt add.
Green line shows the growth we had 2002-2007 was dependent on unsustainable consumer debt take on, 99% housing sector driven.
Red line 2008-now shows job growth is dependent on similar-scale federal debt take-on.
The economy wasn't half as screwed up in 1936 as now. Pull back government deficit spending to the level we were at in 1936 and this economy would turn into a smoking crater.
$600B/yr bleeding out overseas to our trading partners.
$1T+ being sucked out of the working class by real estate parasites using your business model.
Another $1.5T of pure economic rents being siphoned from the middle class via our outrageous medical costs.
To keep the monopoly game going the Feds are dumping $1.2T back into the economy via deficit spending, but what happens with that next year is still unknowable.
Should Romney win, I think they'll do a double-twist move of doing the Ryan thing accompanied with massive tax credits or something to cushion the shock for most of the decade, kicking off major inflation or something.
If Obama wins, the gridlock could get nasty unless he and the Senate Dems cave to the Republican program, whatever that is.
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Delurking says
The guy above you decided his main point was that both took 4 years. You can't simply create an argument that uses 4 years as a guideline then pretend you're still right when the whole analysis blows up.
We're in year 6 of the bear market in real estate assuming the recent spike in prices is temporary. Real estate affordability is at historic lows. American real estate when compared to other 1st world nations is at historic lows. Anyone making the bear market case NOW has a huge burden of proof that has not been met in this thread or any other.
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Delurking says
I agree with most of your bullet points, however it's a lot more complicated than jobs. If wages and employment stay flat, we could still experience a booming bull market in real estate if the average household size expanded from 2.6 to 3.6.
The aristocracy would be all too happy to swoop in and rent to the new multi-income families.
Furthermore we're now going to see a geographic consolidation of wealth similar to Detroit but on a much larger scale. You'll see both coasts and Florida do fine and improve while the rest of the nation is gutted and turned into New China.
I'm pretty sure that's the plan anyway. Rich people like America and don't want it to be a smoking crater. A new feudal empire however would be just fine with them.
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robertoaribas's website
RBES:
Fair enough, you've given a basis for your beliefs, and I respect that. In fact, when the crash started for real in 2007-2008, I dusted off my old economic history textbooks, and re-read the chapters on the great depression. Then, I downloaded several more journal sources through my college library to read up.
So, lets review a few salient points:
1. the general consensus for the resumption of the great depression in 1933 among economists, is that the government removed fiscal supports too soon, in an attempt to balance the budget.
This one, I'll give you points for. We have the fiscal cliff staring us in the face, and a GOP party that frankly will destroy the country if given the chance. If Obama loses the election, and the GOP gets control of both houses of congress, we really may live through a decade of recession and stagnation, and the middle class may be destroyed for our generation.
2. Some mistakes from the Great Depression, that we did not repeat: FDIC did what it is supposed to do. We did not have runs on banks, which probably contributed about 10% to GDP loss during the depression that didn't need to happen. No bank ever has the cash on hand to survive a depositor run, it is loaned out in long term loans. There is a HUGE difference between a liquidity crunch (running out of cash on hand) and a solvency crisis (business is literally worth nothing) but during the depression, illiquid banks closed under withdrawal pressure, shutting down profitable businesses that couldn't access their money. We perhaps over bailed out financial institutions, without getting enough concessions for consumers out of them this time around, but that has turned out to be far superior to what happened in 1930.
So, while I do have some fear going forward, that if the GOP wins, and goes through with draconian spending cuts while keeping defense so high, the economy will enter a severe tailspin, I have to balance that risk against measurable improvements that are happening right now.
And, I have considered what would happen if we get hit hard again. Currently, if I had to drop all of my rents by 50%, I would no longer make any money, but I still wouldn't be losing money. I researched Argentina and Brazil from there currency crisis as well, and one of the safest investments to survive a bitter shock is real property that rents for far more than carrying costs.
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This crash is far worse than the Great Depression when you consider the ratio of privately held debt, to income.
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robertoaribas says
Is the middle class not already at that point? Seems like it from most indicators (income growth, job growth, privately held debt per capita, etc).
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Goran_K says
Privately held debt is a mirage that can evaporate with a single bankruptcy filing. If we DID decline into Great Depression territory, all that private debt isn't going to be worth the electrons it is written in.
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iwog says
And few years from now some will say the bottom was 20___
We purchased our property in June 2009 thinking it was the bottom.
At that time it was apprised at $430,000
Tried to refinance two times in 2010 and 2011. In Nov. 2010 it was apprised at $395,00, and in Sep. 2011 at $354,000.
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zhanka says
Appraise it again and you'll find out it's worth over $400,000. Santa Clara is crazy booming right now.
http://www.redfin.com/county/345/CA/Santa-Clara-County
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"Fair enough, you've given a basis for your beliefs, and I respect that."
I will also give points for at least owning some physical land & real estate. And not keeping all your wealth in fiat currency.
At least it is something physically valuable unlike paper. I also believe that the coming crash will be worse for those with no assets of real estate... Just fiat currency kept in banks.
But also believe again that buying real estate now is a mistake.
Silver is the best investment right now. Protects you from fiat currency crisis & another RE crash.
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gbenson says
Jest be sure you don't have problem with the deed later down th e line. i have some hassle right now with that very sort of deal on one of my properties.
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iwog says
Except for student loans...and in my case, alimony, which is not debt exactly, but sure takes a bite out of my ass every months
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Robber Baron Elite Scum says
Disagree. The dollar is king and will be. Listen to Jody.
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JodyChunder says
Deflation will be short-term. I do believe it will be king since all other fiats will collapse and the world will run to the dollar.
It is the world's reserve currency that will rise due to other currencies collapsing... Until the dollar then collapses.
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iwog says
Really iwog, is that your solution to the problem of skyrocketing privately held debt? Bankrupting ourselves out of it?
C'mon. Be realistic. This debt is held not only by individuals, corporations, states, but also by foreign governments. Your make believe scenario would lead to APOCALYPSE's "cannibal anarchy".
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Also while probably everyone agrees on the need to drastically reduce the military budget by ending useless wars, thinking that the continued spending spree by Dems will save the middle class is stupid - cuts are needed and yes, there will be stagnation, maybe even depression for a while, but in the end prosperity will set in faster as the bad debt is gradually cleared and deflation is correcting the prices. If you spend and inflate the rich will have it easy as they have most of their fortunes in assets that will inflate with them while the middle class is mainly depending on day job salaries as their main source of income, and we all know that those already haven't been able to follow the recent inflation. A loose spending policy under the false premise to help the middle class will make things far worse than spending cuts where prices will deflate back to fair value - money always finds a way to trickle up but it never comes back.
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mell says
No sir. This will not save the middle class. besides what we are in is a depression like new-normal. That's all.
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Goran_K says
Yeah pretty much.
It's funny how all these free market advocates don't accept lending risk. They love making the argument we're insolvent, however instead of the natural result of insolvency (default) they cling to the idea that we're gonna let debt drag us down the drain.
Goran_K says
Our debt is held by our economic adversaries and billionaires. The amount of debt owned by working Americans is a rounding error.
Iceland defaulted and murdered all three Icelandic banks. Result? Iceland wins. Risk takers lose. Maybe those investors will actually use their wealth to create more wealth in the future instead of trying to suckle off interest from government excess.
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iwog says
Iceland's total external debt in 2008 (right before their 3 major banks collapsed) was around $785 Billion, or a chunk more than what people estimate Apple's market capitalization would be (around $600 billion). A big number, not to be marginalized.
U.S externally owned debt amounts to $15,813,740,000,000. Yes you read that right, nearly $16 TRILLION dollars held outside of the U.S in debt.
While I agree that the U.S needs to take its medicine and simply pass this humongous kidney stone that the boomer generation has left upon us, I think you are seriously ignoring the scale of the debt that needs to be passed, and what would happen if the U.S bankrupted itself out of it.
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I'll also admit that I somewhat respect Roberto for not falling for 2005-2007 prices.
Cashing out and selling then.
I also believe that even if the crash which I expect really happens... Then Roberto will better off than 99% of people since he at least sold during the peak and then bought as cheap as he could in today's prices with profits he made during the peak.
But I still strongly disagree with his investments and am bearish vs him being bullish... Albeit respectfully.
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Robber Baron Elite Scum says
Roberto is mathematician so he calculates risk in a way that is very hi tek and not emotional
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zhanka says
Z, you jumped in a little too early with the condo market. SFH homes bottomed out first in 2009. In early 2010, I talked to a veteran investor, and he advised me not to touch condos and townhomes until Feb 2011. This guy bought 50 SFHs for himself in the Silicon Valley in 2009.
We bought 2 condos and 2 townhomes between October 2011 and May 2011 this year. Got one more condo in pending status. Hope to get it wrapped up in the next couple of months. The complex has appreciated tremendously. Fingers crossed.
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Robber Baron Elite Scum says
Wow. How did you know? That's correct. I wear glasses. :0)
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If TPTB navigate thru the headwinds "we" are facing here over the next few years, and people still have faith in the currency, it will be nothing short of a miracle imo.
When interest rates bottom out (stop going lower to accommodate flatlined prices ) that will be our 'take the training wheels off' the damn thing moment. The way I see it, they won't even have to start going up like many have claimed they eventually have to do, they'll just have to stop going lower, and then all bets are off. By the election, you'll have to figure every house debtor that will have made their final refinance by then, so there won't be much of a re-fi market moving forward. Then the fun starts
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E-man says
Yes, I believe we did jump too soon, but on the other hand with 3.5% down, and almost 15,000 back at closing from a seller, we though it was a good deal because of Cupertino school district. So our plans were to sell it in 3 years or rent it out before buying a house. But it is hard to refinance it now (I don't see comparable sales that would support high price tag), and it will be even harder after we buy a house considering a fact it would be a rental property.
I spoke to a few different brockers at different times, almost all of them say not to put cash down to get it refinanced, kinda not worth it, and even some of them advised to buy a house and then dump this one.
My husband and I still believe it is better to hold on it since it almost cost us nothing and the rent ($2,800 if believe to patrick calculator) would cover mortgage, interest and HOA, and maybe someday taxes, so rent would pay it off someday and we will have additional income when we retire and pass it to our kids...
Anyway, I'm like many patrick readers believe we didn't rich the bottom yet, but it is a good time to refinance if you can. I hold my husband to not buy a house at least before election...
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Z,
If your loan is FHA, you might qualify for streamline refinance. Underwater or not doesn't matter. Talk to a mortgage broker that understand HARP 2.0.
Good luck.
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iwog says
LOL, I've been looking at Japan real estate and this is very correct.
Way out in the wilds of Hokkaido, over an hour out of Sapporo, lists for ¥6000/m2 . . . that's $300,000/acre.
A half-hour out of Tokyo proper (midway in the larger Tokyo metro region), land is $1.5M/acre+. In the primo core areas it's going for $40M/acre+.
Now, Japan is depopulating now so I expect this curve to continue to fall this decade and next, but it's insane that middle-class land in bedroom suburban Tokyo is almost as costly as the bay area border-fortress, and Tokyo's fortress is still priced much higher than anything in California outside of primo beachfront.
Anyone making the bear market case NOW has a huge burden of proof that has not been met in this thread or any other.
But my general thesis, or difficulty, about today's conditions is not being able to see the future, or a good path in the future.
This is the same feeling of unease I had ca. 2005, when I was wondering how the economy was working as well as it was, and had no inkling about:
http://research.stlouisfed.org/fred2/graph/?g=97s
(I only figured that the cash-out nature of real estate was keeping the game going later, in late 2006)
As I've said here this week, if Romney wins, I expect some sort of flim-flam campaign to push a lot of money into the economy, to go along with the tax cuts.
If Obama wins, I think total gridlock is not impossible, and is really a best-possible case IMO (I don't want him compromising with the republicans any more)
Returning to the Clinton tax rates, plus the 2% FICA adjustment would be a shock to the system. Plus whatever's going to happen at the state level, tax-wise, if anything.
I just don't see where the engine is pulling this train forward from here.