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Prices won't drop forever!


By SubOink   Follow   Tue, 8 Feb 2011, 11:25pm PST   8,234 views   161 comments   Watch (1)   Share   Quote   Permalink   Like   Dislike  

Every broken clock is right every 12 hours...

If you keep being a doom and gloomer...you will be right at some point, if you are bullish you will also we right.

I have been a bear on real estate ever since 2003, when we first looked into buying and got terribly frustrated here in LA, not to sound like a broken record but of course all realtors were laughing at me, CA would NEVER crash...maybe level out...yeah right, I don't call a 35% drop leveling out - I was stubbron back then and I am very happy to have waited it out...the fact is though...I have lived in a crappy rental for 6 years, landlord is a pain in the ass, I work from home and would love to setup a nice office alla new floors, cabinets, possible break down a wall and extend - all the things I cannot do in a rental. I am in escrow now on a much much nicer house (w/pool), even better neighborhood and my mortgage is going to be only slightly higher than my rent is. (20%down 30yr loan) -

I don't care what anybody says...I don't see how that is not a no brainer. And if the market goes down further - so what? If I don't buy, I still have to pay the rent, in essence I am still paying a mortgage, somebody else's mortgage because I have to live somewhere. I'd rather pay my own. Been on the sidelines way too long. We rented a really nice house for a while in 2003...then the landlord had to sell - BAM, we had to move. Totally sucks living with that uncertainty! And moving sucks anyways...

Funny Thing is...I have kept all 45 listings that we looked at in 2003 and just looked them up on zillow and guess what...that's exactly where we are now here in LA. 2003 prices. Amazing!! Of course, back then I didn't have the downpayment like now so it still helped to have rented all these years.

Don't be a bear forever! I have a few older friends that have been bearish on real estate for 30 years...I almost became one of them :)

Buy a house for the right reason - because you need a place to live. If you are waiting for the market to be at the very bottom then you are speculating just like you would with a stock. That mindset is what has caused the bubble in the first place. Don't expect to make big money with your home. Buy it so you have a place for your kids to grow up. And once its free and clear in 30 years, the kids can have it and rent it out and get a head start like some of you in this forum who were lucky enough to inherit a rental prop.

…Deals are out there!

The only person I feel bad for is the next tenant in this crappy rental house with a landlord that hates to fix anything...but there is always a sucka out there. I was that sucka for a long time...

Now, go and buy a house! The time has come.

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Patrick   befriend   ignore   Thu, 10 Feb 2011, 9:44am PST   Share   Quote   Like   Dislike     Comment 122

tatupu70 says

If you rent, you basically have a lifetime mortgage… Not only will you never pay it off, but the costs will almost certainly increase over time.

It's all a matter of which one is worse.

If you own, you will never pay off property tax, maintenance, and insurance. Ever. They will always increase over time as well.

If the rent is less than property tax, maintenance, and insurance, the renter wins. Every year. Forever, as long as that situation holds. And that's not even counting the return on capital that the renter can more profitably invest elsewhere.

Katy Perry   befriend   ignore   Thu, 10 Feb 2011, 9:58am PST   Share   Quote   Like   Dislike     Comment 123

tatupu70 says

Katy Perry says


tatupu70 says

But I don’t get the enslavement argument. You have to live somewhere. Whether you rent or own, you are a slave to some sort of housing cost. If you rent, you basically have a lifetime mortgage… Not only will you never pay it off, but the costs will almost certainly increase over time.


30 years vs 1 year get it?

After 1 year you get to live for free?

Free for me means,... freedom to change. we all have to live somewhere. some just lock themselves in harder than others.
That's really the main point here folks. I can move and take work anywhere as a renter. at least I feel that way.
That is my own personal salvation. so don't F' with it! I like freedom not debt slavery.
as a borrower you're in the mans pocket. he owns your labor. these are my feelings make up your own just don't tell me mine are wrong for me. and don't expect me to ever drink the funny kool-aid.

TadPole   befriend   ignore   Thu, 10 Feb 2011, 10:00am PST   Share   Quote   Like   Dislike     Comment 124

You have some great points! I bought my home at one of the peaks in 1990. There were a few times when I was under water. My mortgage is now cheaper than rent.

We are itching to find a deal. But even the deals don't look that good when you compare income with housing prices.

Frankly, I don't see how houses cannot fall even lower. Unemployment is getting worse. ObamaCare is scaring the hell out of would be business owners.

Does the US still manufacture anything except paper assets?

Our borders have been infiltrated by day laborers rather than educated people who bring something to table in exchange for legal residence.

I am optimistic about the future after the bottom falls out. I long for a crash of the US dollar so it will be attached to gold and silver.

SubOink   befriend   ignore   Thu, 10 Feb 2011, 10:37am PST   Share   Quote   Like   Dislike     Comment 125

Patrick says

tatupu70 says

If you rent, you basically have a lifetime mortgage… Not only will you never pay it off, but the costs will almost certainly increase over time.

It’s all a matter of which one is worse.
If you own, you will never pay off property tax, maintenance, and insurance. Ever. They will always increase over time as well.
If the rent is less than property tax, maintenance, and insurance, the renter wins. Every year. Forever, as long as that situation holds. And that’s not even counting the return on capital that the renter can more profitably invest elsewhere.

In general that's true...and would have to be decided on a case by case basis...but in my case

The actual numbers are like this:

- My Prop Tax is 7000/year (and it's a tax write of, so its actually less)
- Insurance $80.- (state farm)
- Earthquake $100 (statefarm)

The rent for this house would be $3000/month and that is 2011 - not sure where it'll be in 2030...Prop Tax could go up of course but I doubt very much that prop tax would be anywhere near rents otherwise nobody could rent their house for profit anymore. So Prop Tax and Rent Prices will always have a relationship.

Maintenance is also upgrading floors, replaster pool and keeping things in very nice conditions, something a landlord will not do (none of my landlords ever did) - a landlord will pay for a plumbing stop up but not to put in efficient A/C , Heat, add a jacuzzi...my electricity bill in the rental was enormous because...no insulation, old A/C - more money out the window. In our house we are planning on going solar...many tax incentives for that stuff. It'll take 10 years to amortize that stuff but after that I am going to be selling power back to the grid. All things you can't do in a rental.

Look in great neighborhoods like Tarzana, south of Blvd, Woodland Hills etc Rentals are the biggest pieces of crap...and go for $2500-2800 for 1500sqft. house.

Most people that rent, don't invest their money - and if they did...how did they do in the last 10 years...?

The only way renting makes sense (imho) is if you find an amazing deal somewhere and lock that rent in for 2 years. We have looked at many rentals over the years and only found one that was absolutely amazing - we loved it there...unfortunately, the landlord decided to sell after only 1.5 years. We couldn't afford it, he wanted $900k...so we had to move out. I hate that part about renting. Some people call it freedom of choice where to go next - but once you move into a house, you don't want to move that often really. You end up staying. But you also have the uncertainty of your landlord raising the rent, forcing you to move out because he sells - once you are on a month to month lease - 30 day notice and you're out! How do you like to live without knowing for sure if you are going to be in the same place in a few months - especially when you have kids.

tatupu70   befriend   ignore   Thu, 10 Feb 2011, 11:31am PST   Share   Quote   Like   Dislike     Comment 126

Patrick says

tatupu70 says


If you rent, you basically have a lifetime mortgage… Not only will you never pay it off, but the costs will almost certainly increase over time.

It’s all a matter of which one is worse.
If you own, you will never pay off property tax, maintenance, and insurance. Ever. They will always increase over time as well.
If the rent is less than property tax, maintenance, and insurance, the renter wins. Every year. Forever, as long as that situation holds. And that’s not even counting the return on capital that the renter can more profitably invest elsewhere.

I 100% agree.

tatupu70   befriend   ignore   Thu, 10 Feb 2011, 11:34am PST   Share   Quote   Like   Dislike     Comment 127

Katy Perry says

tatupu70 says


Katy Perry says

tatupu70 says

But I don’t get the enslavement argument. You have to live somewhere. Whether you rent or own, you are a slave to some sort of housing cost. If you rent, you basically have a lifetime mortgage… Not only will you never pay it off, but the costs will almost certainly increase over time.


30 years vs 1 year get it?

After 1 year you get to live for free?

Free for me means,… freedom to change. we all have to live somewhere. some just lock themselves in harder than others.
That’s really the main point here folks. I can move and take work anywhere as a renter. at least I feel that way.
That is my own personal salvation. so don’t F’ with it! I like freedom not debt slavery.
as a borrower you’re in the mans pocket. he owns your labor. these are my feelings make up your own just don’t tell me mine are wrong for me. and don’t expect me to ever drink the funny kool-aid.

It's not funny kool aid. You think you are more mobile renting--that's a perfectly reasonable reason to rent. Others would rather have more security--stable mortgage payment, can't be forced to move, etc. Just depends on what you want.

But the whole indentured slave business is just garbage.

tatupu70   befriend   ignore   Thu, 10 Feb 2011, 11:36am PST   Share   Quote   Like   Dislike     Comment 128

TadPole says

Unemployment is getting worse.

How do you figure? You may or may not believe the government statistics, but even ADP is saying businesses are hiring. There's almost no chance unemployment is getting worse.

seaside   befriend   ignore   Thu, 10 Feb 2011, 11:56am PST   Share   Quote   Like   Dislike     Comment 129

tatupu70 says

There’s almost no chance unemployment is getting worse.

This can be one of the memorable comment of the year, of course, depending on what's gonna happen in the future. :-)

FortWayne   befriend   ignore   Thu, 10 Feb 2011, 12:07pm PST   Share   Quote   Like   Dislike     Comment 130

Suboinc, your comments to me sound very phony and lacking integrity.. I think you over-leveraged and all of a sudden hoping your gamble will go up. I wish you all the best with your purchase, but be realistic; most people here on the forum do not care what you do with your money.

So coming here all of a sudden and telling everyone that it's time to buy is rather pointless, because I heard the same crap back in 2009. With interest rate being all time low, prices are going to be all time high. Simple as that.

I rather find it pathetic that someone who cried that times were bad, jumped onto the market and all of a sudden decided to become bearish. In America we appreciate honesty, not opportunism.

Of course if I misjudged, than I apologize.

inflection point   befriend   ignore   Thu, 10 Feb 2011, 12:07pm PST   Share   Quote   Like   Dislike     Comment 131

Tatupu,

Businesses may be hiring, but it perhaps mostly temporary part-time help rather than good paying jobs with benefits. Unfortunately the government statistics around employment much like inflation are quite distorted.

APOCALYPSEFUCKisShostikovitch   befriend   ignore   Thu, 10 Feb 2011, 12:10pm PST   Share   Quote   Like   Dislike     Comment 132

America has not yet begun to achieve terminal velocity in its free fall to total chaos and, finally, cannibal anarchy.

Wall Street keeps shrieking for higher earnings and companies keep offshoring to slave states.

Whole generations of workers subsist by wolfing down fistfuls of food they can snatch while wandering around grocery stores or returning to hunter/gather subsistence, hunting feral animals and squatting in the ruins of smoldering, ruined cities like Detroit.

Tens of millions of unemployed will finally be herded as a political force by a united neonazi/teabagger party which will devolve into a religious cult led by apocalyptic prophet sarah palin who will write the first cannibal cook book when the crops fail due to a combination of meteorological convulsions and the loss of petroleum based fertilizers.

If you love your family, teach them to kill with rocks and sticks because in two generations that is all that will be left!

inflection point   befriend   ignore   Thu, 10 Feb 2011, 12:28pm PST   Share   Quote   Like   Dislike     Comment 133

Apocalypse

I think we should just eat the bankers and politicians. That would be a great start.

SubOink   befriend   ignore   Thu, 10 Feb 2011, 12:39pm PST   Share   Quote   Like   Dislike     Comment 134

ChrisLA says

Suboinc, your comments to me sound very phony and lacking integrity.. I think you over-leveraged and all of a sudden hoping your gamble will go up. I wish you all the best with your purchase, but be realistic; most people here on the forum do not care what you do with your money.
So coming here all of a sudden and telling everyone that it’s time to buy is rather pointless, because I heard the same crap back in 2009. With interest rate being all time low, prices are going to be all time high. Simple as that.
I rather find it pathetic that someone who cried that times were bad, jumped onto the market and all of a sudden decided to become bearish. In America we appreciate honesty, not opportunism.
Of course if I misjudged, than I apologize.

I give up - You obviously, didn't understand one thing I said...

joshuatrio   befriend   ignore   Thu, 10 Feb 2011, 12:46pm PST   Share   Quote   Like   Dislike     Comment 135

tatupu70 says

But the whole indentured slave business is just garbage.

One thing to consider - what if you or your wife lost your job and can't find another one locally?

What if you had to sell/move?

How underwater would you be?

Can you rent it for your mortgage payment?

How much stress would it impose on your marraige - trying to deal with "the house"? In that case, your marriage is a slave to the house.

You might say, this isn't a valid argument, but I know so many upside down debt slaves that are trying to sell/move/relocate.... They constantly say "I don't know what we're going to do about the house"...

I'd say it's very possible to be a debt slave, mortgage slave, or house slave.. It's happening all over.

I've gotten job offers in various parts of the country (how I got from the East coast, to TX, to CA) - and it's nice being flexible and being able to go after opportunity when it's presented. We love CA, but with all the garbage going on in this state, it's nice not to be owned (be a slave) to the mortgage company, knowing that if we wanted to, we could move on a dime.

I'm sure the slave/non slave mindset is viewed differently by each renter/mortgage holder - but you can't completely dismiss this view as "garbage."

APOCALYPSEFUCK says

America has not yet begun to achieve terminal velocity in its free fall to total chaos and, finally, cannibal anarchy.
Wall Street keeps shrieking for higher earnings and companies keep offshoring to slave states.
Whole generations of workers subsist by wolfing down fistfuls of food they can snatch while wandering around grocery stores or returning to hunter/gather subsistence, hunting feral animals and squatting in the ruins of smoldering, ruined cities like Detroit.
Tens of millions of unemployed will finally be herded as a political force by a united neonazi/teabagger party which will devolve into a religious cult led by apocalyptic prophet sarah palin who will write the first cannibal cook book when the crops fail due to a combination of meteorological convulsions and the loss of petroleum based fertilizers.
If you love your family, teach them to kill with rocks and sticks because in two generations that is all that will be left!

You're hilarious (and probably right). You need to film/produce you're own zombie movie - I'm thinking it will be similar to "28 Days Later."

inflection point   befriend   ignore   Thu, 10 Feb 2011, 12:53pm PST   Share   Quote   Like   Dislike     Comment 136

Joshuatrio,
I understand your point. Some people (including myself) are very wary of excessive debt. I appreciate the flexibilty that renting provides me. For example, my job is transfering me to another location about 20 miles further than my current commute. If I want I can move easily. Its much more complicated and expensive if you "own" a home.

bubblesitter   befriend   ignore   Thu, 10 Feb 2011, 1:56pm PST   Share   Quote   Like   Dislike     Comment 137

APOCALYPSEFUCK says

America has not yet begun to achieve terminal velocity in its free fall to total chaos and, finally, cannibal anarchy.
Wall Street keeps shrieking for higher earnings and companies keep offshoring to slave states.
Whole generations of workers subsist by wolfing down fistfuls of food they can snatch while wandering around grocery stores or returning to hunter/gather subsistence, hunting feral animals and squatting in the ruins of smoldering, ruined cities like Detroit.
Tens of millions of unemployed will finally be herded as a political force by a united neonazi/teabagger party which will devolve into a religious cult led by apocalyptic prophet sarah palin who will write the first cannibal cook book when the crops fail due to a combination of meteorological convulsions and the loss of petroleum based fertilizers.
If you love your family, teach them to kill with rocks and sticks because in two generations that is all that will be left!

What took you so long? LOL.

SubOink   befriend   ignore   Thu, 10 Feb 2011, 3:57pm PST   Share   Quote   Like   Dislike     Comment 138

toothfairy says

So Thomas in your opinion where are we in this chart?

Of course most bears will say we are still in the denial stage. D

I like that...wanna argue about where on the graph we are - let's go bears!!

SubOink   befriend   ignore   Thu, 10 Feb 2011, 4:01pm PST   Share   Quote   Like   Dislike     Comment 139

I would say we are somewhere between Panic and Capitulation...

¥   befriend   ignore   Thu, 10 Feb 2011, 4:15pm PST   Share   Quote   Like   Dislike     Comment 140

"temporary setback -- I'm a long term investor"

SubOink   befriend   ignore   Thu, 10 Feb 2011, 4:28pm PST   Share   Quote   Like   Dislike     Comment 141

Troy says

“temporary setback — I’m a long term investor”

You think the millions of people that have been foreclosed on and evicted from their homes and the thousand of homes that are just going into foreclosure now and all the short sale home owners are saying "I am a long term investor"...I doubt that - we're past that stage for sure! They are capitulating and they want OUT!

MarkInSF   befriend   ignore   Thu, 10 Feb 2011, 4:43pm PST   Share   Quote   Like   Dislike     Comment 142

SubOink says

I would say we are somewhere between Panic and Capitulation…

In the markets that were affected by the late 80's mini-bubble, it was a full 6 years from the peak when prices started rising again. That includes LA by the way.

Given that this bubble was, oh just slightly larger, it's hardly a stretch to think it will take longer than that to resolve.

SubOink   befriend   ignore   Thu, 10 Feb 2011, 4:59pm PST   Share   Quote   Like   Dislike     Comment 143

MarkInSF says

SubOink says

I would say we are somewhere between Panic and Capitulation…

In the markets that were affected by the late 80’s mini-bubble, it was a full 6 years from the peak when prices started rising again. That includes LA by the way.
Given that this bubble was, oh just slightly larger, it’s hardly a stretch to think it will take longer than that to resolve.

Not sure how long it will take in between the dots on that graph above - it could be 5 years to get from Capitulation to Despondency...and another 5 years to get from there to Depression...the graph does not say anything about how long it will take. We are not talking time, we're talking sentiment.

¥   befriend   ignore   Thu, 10 Feb 2011, 5:14pm PST   Share   Quote   Like   Dislike     Comment 144

MarkInSF says

Given that this bubble was, oh just slightly larger

What few people apparently realize is that the bubble itself was keeping the economy afloat 2003-2007.

You can't just take away ~$500B/yr of free money injection from an economy and expect it to recover in any sort of cyclical manner, especially since the economy was already sliding into recession in the 2001-2002 timeframe.

What has been going on since 2008 has been very aggressive fiscal intervention. It has stopped the slide but not fixed the weakness in the system.

The damage is simply too many middle-class Americans and not enough middle-class jobs for them.

This is what happens when we integrate our economy with those where a $5/hr gross is a pretty decent salary in the scheme of things.

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

The ongoing intervention is going to serve to further divide the country into haves and have nots, as those with inflation-protection stay afloat and those without come under increasing levels of economic stress.

The CBO in its deficit predictions has dialed in $1.5T/yr deficits.

$1.5T!

This is $13,600/household/yr, a simply stunning amount of deficit spending.

This is when we were supposed to have our fiscal house in order to be able to handle the surging baby boom retirees, the front rank of which are now turning 60-65 this year.

In the next 10 years the age 70+ population is going to expand from 28M to 38M (+33%), and the age 55-69 population is going to expand from 48M to 60M (+25%)!

The yuan is going to strengthen from 1/6 to ~1/4, giving 400 million or so first-world Chinese an additional 33% of buying power.

I don't know where this is all going, but damn if we'll be lucky to end up as well as Japan has.

¥   befriend   ignore   Thu, 10 Feb 2011, 5:16pm PST   Share   Quote   Like   Dislike     Comment 145

SubOink says

They are capitulating and they want OUT!

The Japanese were capitulating in 1995, too. They still had 10 more years of normalization ahead.

¥   befriend   ignore   Thu, 10 Feb 2011, 5:21pm PST   Share   Quote   Like   Dislike     Comment 146

SubOink says

We are not talking time, we’re talking sentiment.

The idea that we're going to just oscillate from 'bad' to 'good' is really ignoring a lot of fundamental stresses that have been building up and not resolved, not resolved at all.

Chart: consumer debt + corporate debt + federal government debt (blue) vs. GDP (red)

FortWayne   befriend