There's going to be juicy fruits and opportunities in most any market, but for single-family rental, it takes someone as good as Roberto. If Blackstone could hire 5-10 Robertos in each market, they'd do great. That will never happen. It's just not scalable to bigcorp or Blackstone-level. Some hotshot 28-year-old analyst in a suit sitting in another city with coffee and Excel will never get there. If they make money out of it in the end, it won't be the same way individual investors would. It will be enterprise/insider-scale accounting and tax strategies and part of a gestalt with all their other operations.
Nothing was fixed anywhere-except Iceland. The US and Euro are playing the same game. The Euro has one more-austerity, which might arrive on our shores with the fiscal cliff.
From the birth of this nation, till Ronald Reagan took office, the total debt was 1 trillion dollars. Reagan tripled that in just 8 years-just 8 years to triple what it took centuries to build up. Then it has been a rollercoaster ever since-except some of the Clinton years.
We are adding that same 1 trillion dollars a year in debt now-every single year. Europe is still in a nasty positon-our too big to fail banks are still there . Something has to blow up somewhere-too many dominoes.
I said I was an experienced real estate investor for 10 years since 2003
owning and managing 5 homes.
I'm in a position to analyze or riducule anyone whose argument does not hold up. Putting all your money into one asset class in one geographical region and not leveraging in an illquid investment is stupid no matter what the investment return is at the moment.
The risk is too high, especially in the current environment of 10 million shadow inventory, banks withholding inventory to artifically inflate prices, FED spending $85 billion per month on MBSs, declining wages, high persistent unemployment, and so on.
Real estate only represents 1/2 of my net worth and I was diversified geographically in single family homes in areas constrained by supply.
My current metal holdings will beat his real estate investment over the next 3 years easily. Roberto is a inexperienced investor as evidence by his position alone.
You don't know what his other investments consist of or what he is doing in detail with his real estate investments. Either way, his purchases in Phoenix look low risk with very good returns. It appears he's done well for himself. You, however, bought at the peak of the market and presumably lost money on your purchases, yet you seem set on belittling another poster's actions. How does that work?
And good for you bigging up your metal investments and knowing exactly what is going to happen in the next 3 years with your investments and Roberto's. It's a shame you didn't have such foresight when purchasing in 2005 and 2006.
Of course it makes sense to rent if you believe prices will decline 50% or more from here. We are not at bottom yet in the housing market. The next speculative bubble like now will pop in the next few years. If you study the great depression, housing and stocks took a bath. Watch Europe in real time to see what is coming to the US.
And do you think house prices will drop a further 50%? And I'd say a lot of people would disagree with you about not having reached the bottom. Maybe not in some areas, but in many, prices are clearly back in line with historical trends. You, for example, keep attacking Roberto, but he invested in Phoenix at the bottom of the market when prices had already overshot the trend line, so I'm not sure how he is leaving himself open for a massive hit. Judging by the purchase prices and rents he's mentioned, he's got a great deal of room to manoeuvre.
If, however, all you two want to do is get in a pissing match about how great each of you are, then fine, knock yourselves out.
I learn from my investing mistakes. Roberto does not. Buying thinking rents always go up is a mistake. If you look at the market, real estate is back again in a bubble with price manipulation by the banks (withholding inventory) and the FED (buying 85 billion /month MBS). Following the herd back into another speculation bubble is a mistake and will be borne out in the next few years because you can't print money at that rate and not expect consequences.
He doesn't require rents to go up to be well ahead.
If you read the thread, you will see it is Roberto who comes in as a troll and starts belittling others and name calling. And true to form his cult following comes in to defend his narcissistic behavior and cognitive dissonance instead of discussing an issue. God forbid someone else has an alternative viewpoint and can support their position.
You know what he's like and yet you trot out all the usual lines that you know gets the usual responses from him, so what does that say about you? It takes two to tango.
It is not yet a bottom until the bottom comes. A trend line does not make a bottom. I would call it a low in speculative housing bubble #2.
Profound stuff. And I'd say looking at historical price trends is of use. He bought in Phoenix. How does his purchases relate to a 'low in speculative housing bubble #2'? If he bought at the bottom of the market, then he bought at the bottom of the market. That wasn't the bottom of speculative bubble 2, it was just the bottom of that particular market, and it's looking pretty much like he got lucky in that regard. Even if prices fall back down, it still looks like he'll be fine, though not according to your winding up of course.
It is going to drop lower than the previous lows. The market has not deleveraged from the 2008 housing blowup with shadow inventory in the pipeline with 10 million homes still there and is being inflated by banks and the FED.
That's speculation. Nothing more, nothing less. Affordability is high currently, so I don't really see why house prices can't track around the rate of inflation. A lot will depend on the economy, but as neither of us possess a crystal ball... What I would suggest is that it is highly unlikely there will be substantial declines moving forward in the majority of the US simply because house prices are very affordable historically speaking, so what would be the impetus for large scale declines? The only thing that might trigger that would be major economic problems and as the US has already been going through them... And you keep mentioning this 10m. Where does that figure come from? I haven't noticed any great flood of inventory. Quite the opposite in fact. Why would that change?
Saying the current market is recovering when their is such massive manipulation of the supply side with withholding of inventory and unsustainable ZIRP interest rates ignores the simple fundamentals. We saw with clarity how speculation in the housing market results in a collapse in 2008. 2008 is version 1 of the speculative bubble. Version 2 is happening in real time at this moment.
And yes, the housing market is manipulated. So what? And why are low interest rates unsustainable? Interest rates have been declining for a prolonged period globally. Low rates could well continue for quite some time.
You've been doing it since 2003, and I'm then novice? I had 8 year experience by 2003 pipsqueak!
Your a novice because you make novice mistakes like putting all your assets into one illiquid investment in one market. I see your threatened again and have to resort to name calling.
That's a perfect example right there. Neither of you need to go down that line, but you are both deliberately insulting one another. Neither of you appear to be novices, but from what you said, you have done well in metals but fucked up your own real estate investments, so it hardly puts you in a position to belittle what others have done in the area of RE, most especially when they seem to have timed things better than you did.
You on the other hand are doomed to repeat history and troll patrick.net getting your entertainment by namecalling instead of discussing the issues. In 3 years time, when the next housing bust comes, you and your bottom fishing expedition will have failed and be caught in an even worse financial crises than 2008. You will have all your assets tied up in housing and your equity will disappear in an instant just like everyone elses did in 2008.
Eh? Speculation again. Anyway, he didn't buy at a peak. He bought at the bottom, so how does that equate to the previous bubble? If house prices go up rapidly for a few years and then fall back down to the price he paid, then it will hardly lead to him being destitute under a bridge. He has indicated he is renting out for far more than his PITI, so he has plenty of flexibility. He got fortunate in one particular market. It doesn't translate to the BA, but then he doesn't live in the BA. Seriously, saying his investments are going to blow up in a few years seems just as ridiculous as Roberto's OTT nonsense bullshitting about what an investment genius he thinks he is. He's bought a bunch of cheap homes in Phoenix at what looks like a low point in the market, and is renting them out at a very good rate of return. That doesn't require the nonsense he spouts but it also doesn't require him having to face the sort of bullshit that gets thrown in his direction all the time by the perma bears on this site.
Anyway, he didn't buy at a peak. He bought at the bottom
A correction in a bear market is not a bottom. I could have said the same thing in 2007 when my investment was up a 800k. I can buy $10 homes in Detrioit Michigan and positive cash flow. Doesn't make it a good investment and doesn't make it a bottom.
You are quick to judge my real estate investment when you don't know the details and you ignore the precious metals current investment and seem to defend Roberto's. You seem to ignore my argument that we are not at a
bottom and that investing in one market with all your networth in an illiquid investment is foolish.
Prices in Phoenix collapsed and dropped below the historical adjusted averages. That is when he bought. It's pretty clear at this point that he bought at a decent time. And once again, you don't know what his other investments consist of.
And I'm not judging your RE investments. You said you bought in 2003, 2005 and 2006 and didn't sell until 2012. It doesn't take a rocket scientist to work out that those weren't the best times to buy (or sell). You named yourself Underwaterman after all.
What do you think the end result of the this manipulation is going to be?
What do you think caused the 2008 financial meltdown?
What exactly do you think has changed to produce a different outcome?
Ignoring history and consequences is convenient but dooms you to repeat the same mistakes as the 2008 crises.
Sing me that tune if house prices across the US inflate to previous peak prices + inflation. As it stands now, prices aren't too far away from normal price trends and are actually more affordable than in the past with current interest rates, so what has that got to do with ignoring history?
So why don't you post your previous investments and your current ones.
Then I can selectively focus on your previous investments and bash them back an d forth and ignore your current ones also.
Why don't I? Perhaps because we aren't talking about my investments. And it's you who is bashing another posters RE investments despite the fact that you appear to have done poorly in that regard, and he, so far, seems to have done well. There's nothing selective about that.
It's in my post above from the congressional testimony on the housing crises by Laurie Goodman. You haven't noticed any great flood of inventory because the banks are withholding their inventory and holding the properties on their balance sheets at inflated 2007 prices and have been good at this practice. There have been a number of links on patrick.net about this.
What do you think is going to happen when this inventory comes on the market?
Er, the banks haven't stopped releasing inventory onto the market over the last 5 years. And what makes you think they are suddenly going to dump it all in the near future? They'll release it as and when they see fit and that won't include the wholesale dumping of millions of properties all in one go. If it's released gradually as it has been, then I think it'll have a fairly minimal impact on the market.
I said they are now withholding inventory to artificially prop up prices. This is a well documented and known fact
Source? The link at the bottom of your post is an opinion piece referencing some real estate agents that the author spoke to. Hardly fact.
The bottom line is that if banks were purposely holding back inventory, it would show up in the 90 day delinquent statistics. The number of seriously delinquent mortgages would be steadily rising.
The fact is that the exact opposite is happening. The delinquency statistics have been slowly falling--they're still high by historical standards and there is a big gap between the judicial and non-judicial states. To me it looks like banks were/are overwhelmed and are foreclosing as fast as they can--the judicial/non-judicial gap certainly supports that theory.
It just doesn't look like there's a tidal wave of foreclosures coming...
Er, I never said they stopped completely. I said they are now withholding inventory to artificially prop up prices. This is a well documented and known fact.
You can't continue to withholding inventory forever without the backlog building.
We are in year 5 of the "housing recovery" and they are still withholding inventory and the FED has to pump 85Billion a month to stimulate the housing market. When are they supposed to trickle out this huge backlog without affecting prices if they haven't been able to do it in 5 years and they are still stockpiling houses sitting empty? There is a direct effect of ZIRP and the distortion of capital. Artifically low interest rates flow into speculative investments taking unnecessary risk.
We've heard this all before. Every year since the crash this monster inventory was going to flood the market and precipitate a further enormous crash in housing prices. And yet...
Banks don't dump all their inventory in one go. They have been slowly releasing what they have to minimize losses. If you want to call that witholding inventory, then fine, but you seem to want to infer that foreclosures aren't being released and that the held inventory is going up and up when from what I've read, it isn't.
There will be some crises which causes those properties to be dumped on the market. They can't keep them off forever and they can't trickle that size into the market without prices falling substantially.
Or maybe there won't. Foreclosures are down. Held inventory will more than likely be released onto the market at a controlled rate to maintain prices. And by the way, I've read completely different figures to your 10m. J.P. Morgan puts the figure at 4.3m and projects that this will decline to 4m by the end of 2013. This hardly amounts to a tsunami of bank dumped properties.
And the point that you seem to be ignoring when asking what has changed is that RE in most areas is massively cheaper than it was back in 2007. That is a pretty important change when discussing RE.
Yeah, that really proves a meaningless point. So you are saying prices went down from the peak? Profound statement there. How again does that demonstrate banks are withholding inventory much less the not accumulating shadow inventory?
Eh? I didn't say it had anything to do with banks withholding inventory except in terms of limiting further price declines. You are the one going on about RE collapsing in the future, but it has already fallen back close to historical price trends and is more affordable than at many times in the past because of interest rates. Affordability is obviously a major factor going forward and yet all you want to look at it is supposed scenario when the banks dump their inventory on the market presumably in a very short space of time. Well, like I said, it hasn't happened so far and the inventory is projected to decline in 2013, so...
Yeah, just like I've heard everyone calling the bottom in housing for the last 7 years and they have been wrong every year. Ignoring housing fundamentals like inventory and saying it is going to continue forever is just like people who argued since early 2000 housing prices can never go down until they crashed in 2008 predicted by many because of the fundamentals.
So what? People predict things all the time. There's a world of difference between people saying that house prices will go up and up forever even as affordability had long since disappeared over the horizon and people now saying that the bottom could be in because house prices are close to being back in line with historical price trends and that affordability is extremely high. Fewer and fewer people seem to be envisaging a further massive collapse in prices.
So let's use your numbers then (bad numbers to use but use them anyway).
So JP Morgan says the figure is 4.3 million and this inventory will decline to 4million. 4 million divided by .3 is 13.33 years of inventory overhang at that rate.
13 more years of waiting to clear the inventory backlog?
Why are they bad numbers? Apparently yours is a good number because... well, you used it. And what are you talking about? Banks always have inventory on their books. It's not as if they're going to get to the point where they have zero inventory.
You obviously missed the obvious point: using your numbers gives 13 years of inventory. Not a healthy market that has hit bottom. The bottom using your numbers will come 13 years from now when inventory is cleared out.
The bottom won't come when the inventory has all been cleared out. Banks always have some inventory on their books at any given time. If they've managed to control the flow up to this point, then why will it all change going forward? If the inventory is 4.3m now 5 years after the peak, why is it suddenly going to leap to 10m? That simply isn't what the banks are predicting. Your blogger might be predicting it, but not the actual banks holding the inventory.
And foreclosure rates have been declining. If that continues, and even if banks continue to release inventory at the rate they have been, shadow inventory will drop a lot quicker than a 13 year time frame.
What the hell? Your figure is reality? Did you click on the link and read the post?
It comes from congressional testimony from Laurie Goodman. I think I'll take her numbers over yours anytime of day since she gave testimony under oath.
I think this is the end to my responses to Bigby. You don't read the posts and don't understand obvious points and seem to be arguing for aguments sake.
They are utilizing what if figures - there is a possibility of this, a possibility of that. Nowhere do they say that the shadow inventory will reach 10m. You said that. And J.P. Morgan's figures aren't my figures last I checked.
You are the one arguing from your perma bear position, cherry picking hypothetical figures that fit your criteria whilst ignoring actual figures. You seem to be missing that simple fact.
Yes. We know you have to ignore and discount any evidence contrary to your opinion. I'll take Laurie Goodmans 28 years of experience with MBS in the banking system and her testomony before congress of 10 million homes sitting in the inventory. But hey, that's just me. I like credible sources to base my information on.
You link to an absolute worst case scenario that she lays out to place her remedial measures into context, and you say this is what you believe will happen. She doesn't argue it will happen. You do. Her own testimony (back in March) calls for limiting supply and increasing demand for distressed properties - 'increasing reliance on principal reduction modifications; a ramp up of the bulk sales program, coupled with financing for these properties; and a careful vetting of new rules that affect already tight credit availability.'
Like I said, you are cherry picking.