WatchI've started my own Google news search, "Housing Market". Here's today's top four headlines -
Shadow inventory still depressing the housing market: NAR
Pessimism revealed on US housing market
Pending Home Sales Cast Doubt on Housing Recovery
Global Housing Market Slows, Recovery Falls Off Track
I am sure this is proof to some on this board that housing is going Up! Up! Up! Since whenever "everyone" says it's going down, it must be going up (I actually get that logic - but not when it's in the face of fundamentals).
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Doom-and-Gloomer!
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there is also this...
http://finance.yahoo.com/tech-ticker/warren-buffett-is-bullish-...-on-housing-%22he's-putting-his-money-where-his-mouth-is%22-535970.html;_ylt=AlTfJ3rPfr46imDyhQY5cda7YWsA;_ylu=X3oDMTE1dWJjN24wBHBvcwMzBHNlYwN0ZWNoVGlja2VyBHNsawN3YXJyZW5idWZmZXQ-?tickers=BRK-A,BRK-B,XHB,GS,WFC,KO,%5EDJI
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you have to paste the whole link into your browser..
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47 male
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The tricky thing about fundamentals is that they usually aren't a secret. At the same instant you become aware of fundamentals depressing prices, there are a million other buyers who come to the same conclusion.
As a result, markets anticipate by a huge degree and the BEST time to buy is when nearly everyone agrees that fundamentals are going to (future tense) force housing lower.
At the point when fundamentals are (present tense) trying to force housing lower, it's too late. As soon as people reach the conclusion that things are bad now but will get better next year, prices move up.
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iwog says
Housing isn't stock market, doesn't work that way. Besides what you are talking about is gambling/daytrading on wall street risk vs reward system.
It's simple, just add the numbers up and see if fundamentals match. Which is why I think Patricks calculator is so great. It basically puts the numbers right there in front.
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San Carlos, CA
I'm talking fundamentals like can the people who want to live in the area afford to pay the asking prices without neg-am (etc.) loans.
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pkowen,
If it makes more financial sense to own than rent, buy. If it's more expensive to own, then rent & keep the net difference. There is no point in arguing back & forth. This is what this website is all about :)
Iwog is typically talking from an investor's point of view where he buys a house for $250k & rent it out for $2k/month. As Patrick pointed out, the break-even point is around $400k for $2k in rent/month. Due to the current low interest rate environment & if you include the principal paydown like Troy has pointed out mutiple times, the break-even point (buy vs.rent) is closer to a $500k home with a $2k/month in rent.
It doesn't make any sense to buy a house for $700k to rent it out for $2k. However, certain people do crazy stuff like this because they want to diversify their portfolio IMHO.
Here are some statistic & please correct me if I'm wrong. There are approximately
51M homes with a mortgage
13% in deliquency rate (this includes 30+, 60+, 90+ & homes are in foreclosure process)
6.6M homes of shadow inventory (51M * 13%)
5.2M existing homes were sold in 2009
4.9M existing homes were sold in 2010
29% of existing home sales in 2009 & 2010 were distressed sales (REO's & short sales, excluding trustee sales)
Based on the stats, the market has absorbed about 3M distressed homes in 2009 & 2010. The shadow inventory is about 3.6M. At this pace, it would take the market approximately another 2.5 years to clear the shadow inventory if we were to have a flat market from here. Up or down from here is anyone's guess.
Nevertheless, I can confidently say that the low-end SFH market in the SFBA hit bottom in early 2009 & we will not see those prices again.
I believe most people that bought their mid-end SFH home in the SFBA in early 2009 are very happy now due to the fact that they were able to refinance last year with a sub 4.5% interest rate. I doubt the mid-end market in the SFBA will undercut early 2009's low.
I'm currently seeing many opportunities in the Condo & Townhome markets. I expect this market sector to get softer especially the newer complexes.
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E-man says
I can't get over association dues. Lord knows I've tried. I've even started writing a check then stopped in mid scribble.
The numbers on some condos can be pretty good.
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iwog says
Same here. However, you can sell these for a nice gain once the HOA deliquency issue is cured. I'm trying for a back door financing on a condo. I'll let you know it works out :)
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why are the picking on her? aren't there MILLIONS more like her - we don't have enough prisons..
http://latimesblogs.latimes.com/lanow/2011/02/woodland-hills-woman-pleads-guilty-to-mortgage-fraud-scheme.html
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E-man says
What if the deliquency issue worsens?
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bubblesitter says
You will laugh at my answer so I will refer this question to robertoaribas. He should be able to tell you with more informed information because he's a realtor :)
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E-man says
I don't know about what roberto has to say. But good businessman/investors have good backup plan. Like Iwog!
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bubblesitter says
If Iwog is a good businessman, I believe it carries more weight coming from him. So I would refer this question to Iwog, too :)
I'm the type of investor that would dive into an empty pool with head first so I definitely don't have any backup plan. :D
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bubblesitter says
My backup plan is actually my plan going in. Don't buy condos!
I may yet buy my first condo if the price is right and the neighborhood isn't too bad. In that case my backup plan is to carry four leaf clovers.
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Los Angeles, CA
IWOG, here's the problem.....
This internet crowd is a very very small portion of the people out there.
Most people continue to believe that buying a home is the single very very best investment they can make. They also believe that there is no better to buy a home.
Even in craptacular Las Vegas...with its 15% "offical"(El Oh El) unemployment rate, over 50% of people intend to buy a home in the next year(another LOL)......
http://www.fox5vegas.com/news/26793166/detail.html
And until that mentality changes...and it will eventually.....the idea that everyone realizes news is bad simply does not apply.
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E-man says
I think there is a point in arguing back & forth. Financially dumb decisions of other people hurt all of us by making housing more expensive, crashing the economy, adding to our taxes, and provoking the Federal Reserve to inflate much faster than they usually do.
It's a mission. Explaining the housing scam saves people money, and has good effects for the public too.
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Cvoc13's website
last chance to hear and see this HarryDent http://hsdent.com/replay/index.html
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Cvoc13 says
I see. This is the kind of economist that you take your advice from.
Before you and others get too excited about his bold predictions it might be worth looking at his past "accomplishments"....
Harry Dent's prediction: Dow 44,000 & Other Flimsy Forecasts
For example:
With less than auspicious timing, Dent brought out The Roaring 2000s Investorin 1999, confidently predicting that the Dow would hit 44,000 by 2008. With the luxury of hindsight, we now know he was off by 32,000 points or so.
At the time, Dent also argued forcefully for NASDAQ stocks, predicting, “The technology revolution will favor Internet-oriented companies.” Within three years, the NASDAQ lost three quarters of its value and the leading index of Internet stocks plummeted 89%.
And Dent didn’t confine his market predictions to the U.S. He further forecast that Argentina would see “moderate growth until 2015 and then stronger growth into 2025.”
No, Argentina would suffer a currency collapse and financial crisis followed by rioting, social unrest and years of economic stagnation.
It’s obvious now just how wrong Dent was. But 10 years ago, plenty of brokers and investors agreed with him. He sold hundreds of thousands of books and raked in millions as an advisor to top Wall Street firms, including Morgan Stanley.
Harry Dent’s Next Bold Prediction: The Great Depression Ahead
Five years later, bloodied but unbroken, and using his same demographic trends theory, Dent published The Next Great Bubble Boom: How to Profit from the Greatest Boom in History: 2006-2010.
Well, no. That period encapsulated the biggest bust since the Great Depression. As for his revised forecast of Dow 40,000 in 2009, it looks like he’s off by 30,000 or so points again.
With a track record like this, you might imagine Mr. Dent would shy away from economic prognostication.
Yet he’s promoting a new book. And if you’re looking for a reason to be optimistic about the market, you’ll find it in his chosen title: The Great Depression Ahead.
Within weeks of the book’s publication, the Dow began a 48% ascent, one of the six biggest rallies in the last 100 years.
SHOULD I GO ON? :)
Why don't you people listen to Warren Buffett for a change? The man has a great track record of being right more often than not. If you listened to him & bought GE & GS during the panic period in 2009, you would have been up 200% on GE & 100% on GS.