Watchhttp://www.itulip.com/housingbubblecorrection.htm
I read that page in 2005 and it was scary to contemplate what it means. (I think those guys predicted the dot com crash as thier claim to fame for itulip?) I would say the chance of 10 MORE years of prices declines could easily happen. How long can the feds spend twice what they take in from taxes? What about interest rates in the future? boomers retiring?
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PockyClipsNow says
Boomers are dying. That fear quote is ten to twenty years old already.
You do realize the boomers are in their late 60's and pushing 70 already right? At best Boomers have five more years playing into any meaningful statistic for home prices.
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Chicago, IL
Iwog, you are crazy.
Bay area prices may not crash, but to say that rents and prices are rising in the rest of the country is just plain silly, in addition to being demonstrably false.
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uffthefluff says
I'm always willing to learn. Demonstrate rents are falling nationwide.
Nevermind, too complicated. I'll just demonstrate rents are rising nationwide.
Improving job market ignites sharp rise in apartment rents
http://reowablog.wordpress.com/2011/05/11/improving-job-market-ignites-sharp-rise-in-apartment-rents/
And here's plenty of support for my prior assertion:
Cheaper to buy than rent in 80 percent of major cities
http://www.gibbons-realty.com/blog/index.php/cheaper-to-buy-than-rent-in-80-percent-of-major-cities/
Now combine these two data points and tell me the real estate market is going to crash.
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DIE BOOMER DIE!
Tenouncetrout says
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Tenouncetrout says
You do realize that the baby boom lasted from 1946-1964, and that the expected lifetime of a 70 year old is about 18 years, right?
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oddhack says
This is actually true. The average 70 year old can expect to live about 18 years. I just looked it up on an actuarial table.
Now if I can just make it to 70...........
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iwog says
We go out to the cemetery once a month to spend the time with relatives who passed away. Sometimes we walk around and look at the dates on tombstones nearby. There is certainly a life expectancy pattern there. Not looking good for our generation.
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Chicago, IL
Real estate has further to fall before it comes in line with historical income to price ratios.
When I run places through the NYT calculator the break even point is always more than a decade away in my local market even though trulia thinks everyplace here is a steal.
Depending on the overall economy, I could definitely see real estate only falling another 5-10%, but that's a long way from "rising".
There were also tons of news stories on how rents are up in my market, yet I was apartment hunting last year and there are much better deals to be had at present.
I guess we'll have to just wait and see.
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uffthefluff says
What assumptions did you put in for appreciation and inflation?
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Chicago, IL
Definitely looks like the price to rent ratio is still well-above trend.
http://www.calculatedriskblog.com/2011/05/real-house-prices-and-price-to-rent.html
http://www.demographia.com/dhi.pdf
Practically every city that Trulia says is "affordable" (the second greenest category) has a median multiple well-above 3.0 even though historically prices are below that multiple in America.
None of these measures even take into account a possible undershoot, which is quite common after an investment bubble. The fact that most prices are not yet fair according to historical norms, let alone once or twice in a lifetime deals, tells me that prices will continue to fall.
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Chicago, IL
I use 1% for appreciation and leave the default 3% for rent increases.
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uffthefluff says
That's surprising. I didn't think rents and prices were that far out of whack in Chicago. What areas are you looking at?
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uffthefluff says
My experience has been that new landlords GROSSLY overestimate repair costs, and that includes myself. All my properties are 1950's and older, yet the most I have been on the hook for was a $1000 water heater repair which included all the code upgrades.
I also overestimated vacancy rates. After nearly 10 tenant-years of experience, I still have a vacancy rate of 0% and the deposits have always covered me.
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iwog says
2005 was when the market started to turn (ie. sales dropped) but prices still went up some from there, which they explained. They were spot on, you're wrong, find some way to get over it already.
iwog says
Yes they were. Did you not read the section where they expected the gov. to do all manner of support actions and that their chart was just a rough guideline to how they expected things to play out? You're wrong get over it.
iwog says
That statement is just plain common sense. To say its bullshit means you don't understand the economic responsibility that goes into owning a home. Because you do realize they break right? Roofs fail, foundations fail, siding fails, etc. THEY ARE EXPECTED TO. All that can cost thousands to tens of thousands to fix. If you look at the cost to fix that and divide it over the expected lifespan of a house (30-50 years) that "5-10% price of home=upkeep" is pretty much spot on.
iwog says
That 33% you keep bringing up doesn't matter. Why? Because total sales are in the gutter, which you well know. 33% of sales that are at historical lows counts for nothing and that you keep waving that stat around like it means something just shows how dishonest you are. Wealth extraction from homes is an important measure of how the economy is doing because people were using homes as a 3rd income stream to pay for stuff because the dual income earner family couldn't support their lifestyle anymore. With wealth extraction down people are back down to 2 income streams which means much much less is being spent on goods and services in the economy. If wages/benefits weren't so screwed up and were higher and/or the cost of living was lower this wouldn't be a problem but it is because we live in a dysfunctional economy that favors the rich and so there you go. Of course if you haven't figured any of that out yet you're really screwed seeing as how you're buying rentals and all and don't know what you're customer's income stream is likely to be like.
iwog says
Yea sure you are. Oh BTW I'm EXTREMELY happy with my 5 mistresses. Who are all EXTREMELY happy with my 14" dong, we go for 5 hours every night. AND we're all EXTREMELY happy with my 5 $5 billion dollar mansions, etc ,etc etc.
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tts says
Come on. You don't really believe you spend 5-10% PER YEAR on maintenance. That's absurd. You get a new roof every 20 years and it costs $5-10K. And that's probably the most expensive repair you'll have. 10% of a $250K home is $25K per year!!! Every year! Ridiculous.
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tts says
KNOCK OFF THE NONSENSE RHETORIC!!! If you aren't going to discuss real numbers, don't pretend like you are!
A 50-year roof costs $10,000. A water heater $1000. A major electrical problem will almost never exceed $1000. Termite extermination and a 5-year guarantee is $2000 and don't challenge me on it because I just did it last week. A new HVAC is always less than $8000. Plumbing problems run $100 to $500 but almost never more than that. New appliances come from Sears and they cost around $500 each. Throw on $10,000 for windows, paint, carpets, light bulbs, groundskeeping, lino, and other broken shit like toilets and garage door openers over each 10 year period.
Result: Even if EVERYTHING ON THIS LIST was done during a 20 year period, and there's no way in hell it will be because roofs and HVACs and windows and most other things last 20 years or longer, you're talking $50,000 worth of repairs.
$50,000 divided by 20 is $2500 per year. That's 1% annually for upkeep on my $250,000 homes, not 5-10%. It's not spot on, it's ridiculous. Anyone who tries to assert you need to replace the entire house every 10-20 years is so full of crap they shouldn't even be posting.
Truth will set you free.
tts says
Last resort of a coward, simply call someone a liar.
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Chicago, IL
I run the calculator on lots of Northside neighborhoods and it is almost always a better option to rent.
Not to commandeer the thread, but look at these:
http://chicago.craigslist.org/chc/apa/2425037351.html
http://www.redfin.com/IL/Chicago/916-W-Fullerton-Ave-60614/unit-916-3/home/13359651
Definitely not a good deal at a about 14 years to break even.
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tatupu70 says
Unless of course you get water damage in your roof before you get it replaced and then uh oh, major structural damage...
Same thing with most repairs. People usually don't go replacing roofs or siding or plumbing until there is already a problem, by that point you have to fix the damage as well as the problem too.
Also he gave a spread of 5-10% so to be correct you'd have to have said $12.5K-$25K for a $250K house.
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Los Angeles, CA
I think it only makes sense if Janzen meant to say 'maintenance AND upgrades' rather than just maintenance.
The only reason to own a home is to paint the walls red, install granite- stainless appliance, hard wood floors, etc.
I mean who here with a wife who owns a home can only spend 1% per year average on it? Its a constant spending orgy for most people I know (granted much much less now that MEW is impossible).
That makes sense - even though granite and stainless is not maintenance you DO PAY FOR IT and we all know now you WONT get that $ back in resale - thus its legit to call upgrades an expense of homeownership (with wildly varying degrees of spendyness).
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iwog says
The numbers are trivial and work out easy, just like I showed tat above. What is there to discuss about simple percentages. Also $10k for a 50 year roof? WTF? Is the roof like 5 or 6 squares or what? You know you have to use tile or metal to get a 50 year roof too right? EXPENSIVE FOR ANY HOUSE OF DECENT (ie. 1500 sq. ft.) SIZE. Shingles top out at 40 years, but that is just for the warranty, I've seen them fail far sooner than that.
iwog says
You're giving all optimistic numbers to skew your view upwards, but then you're doing rentals for a living so you can't bear with the thought you're wrong because then you'd have to admit you might screwed. I've seen prices like what you're talking about but I've also seen price go through the roof to fix termite damage or water damage and foundation damage on 30 year old homes in CA. All of that is common in CA because the homes are built like shit here, particularly during a boom.
iwog says
~~The truth will set you free.~~ Don't hate on the truth maaaaan.
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Chicago, IL
Also, according to the just released Beige Book, there was slower growth seen in New York, Philadelphia, Atlanta, Chicago districts.
That doesn't seem to point to higher prices any time soon.
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tts says
My lord. Is this really what you want to argue about? OK, let's say 5%/year on a $250K house = 12.5K/year. Even if you have extra damage, you'll still get a new roof for ~12.5K. Which will last at least 20 years. So, now what expenses will cost 12.5K/year for the next 19 years??
It's completely absurd. When you argue something like this you lose all credibility.
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tts says
I just installed a 50 year architectural roof. Shingles. And it was a bit over $5K.
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Cvoc13's website
IWOG prices are headed lower for the much of yours and mine lifetimes. Someday in like 4 years the fed might be able to go from Zero - .25% Target rate and tighten all the way up to say 1% But first we need to go round 2 of the Financial collapse, we have NOT FIXED underling reason for first one, all we did was kick it down the ROAD, a bunch of times, and with EURO should be the tipping point, I am expecting this Summer to be round 2 of 2008 all over again, Look at the Financials
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If we adjusted for real inflation, the often-kicked-around charts would look far worse than they do and much closer to what they claimed (but offset a year or so). The current charts are floating on government debt and inflation. There really is nothing to keep prices up, they're simply sticky and slow to move.
The deepest fundamental issues are generational and they won't be fixed any time soon (sadly, it's likely to leave us a third world country). Roughly 75% of the next 10-15 years of first time home buyers is gone (priced out, unemployed, and/or deeply in debt; they will not be able to buy), which in turn means those moving up are gone (most action has been horizontal), so you will have a cascade starting at the bottom where layer upon layer of the cake collapses. The fix will take at least as long as Japan and will be primarily based on how rapidly baby boomers die off...
I think their estimates are low. The downturn will probably go well into the 2020s and potentially into the 2030s. There will be no real gains for at least another decade or so after that. Housing could even become a depreciating asset like an automobile, if this situation lasts long enough (realistically, they are very similar; the fact you change an engine or alternator doesn't make a 15-year-old car instantly worth dramatically more than an identical one with an old part). There are so many things that could cause this change in opinions on housing, and it wouldn't be the worst thing that could happen.
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tatupu70 says
OK now add plumbing, foundation, siding, interior work (ie. drywall, carpet, paint, etc.), termites, etc. etc etc. That you keep focusing only on the roof as if its the end all be all of just goes to show how dishonest you're being.
Also if you think those shingles will last 50 years I have a bridge to sell you. Many 20 and 30 even 40 year shingles last only 10-15 years. Repeat after me: asphalt is asphalt is asphalt no matter what they say the warranty is. There are only 2 things that last that long: metal and tile. Everything else is BS. BTW you're probably also getting screwed on the warranty on those shingles which is how they plan to keep their money. Any quick and dirty google will show you this:
http://www.roofery.com/shingles/warranty.html
and here is another one too:
http://roofgenius.com/roofmaterialchoices.htm
"Many of the high end, man made roofing materials made in the last 10-15 years have failed prematurely. Most of these materials promised 50 year warranties. Many homeowners are stuck with failing high dollar roofs, and are involved in class action law suits Be careful in selecting materials that do not have a proven track record. Investigate thoroughly."
and if you don't believe that you can talk to any roofer and they will tell you the same. You only paid $5K because you're getting screwed out an extra $10K to $20K easy depending on how fast you replace the roof before the damage gets really bad. And that is just for the roof. If you get a black mold infestation going or the water gets inside the walls for only a few weeks than welp. Your $5K roof can easily end up costing you upwards of $30K. Happens all the time.
Hell you can even get your house condemned tat if you get a very bad mold infection. You know I argue with you and others all the time but I really feel sorry for you if that happens. You better not screw around and get that roof done properly over again within the next 10-15 years. I'm serious, asphalt, even the best asphalt shingles, are not very good at all. And get it done right. For $5K its pretty much a sure thing they half assed the roofing job unless your roof is tiny.
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tts says
I have no idea where you think you're getting your numbers, but I'm getting mine off actual estimates. The presidential shake roof over my 3000 sq ft personal home only cost $20k and I wrote the damn check.
tts says
Right. I'm "doing" rentals so I couldn't possibly know exactly what things cost. For the record, I'm giving pessimistic numbers. I'm using a furnace in at least two of my homes that is near 60 years old. One of them needed a $200 gas valve replacement. Oh the horror.
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tts says
I'm sorry to have to be so rude, but you are totally completely full of crap.
You're going to sit here and tell us that a 50 year roof (with a warranty by the way, you don't seem to realize that) will fail after 10-15 years?????? I'll pretend that I believe you. Give me the phone number of this horrible roof material producer so I can call the manufacturer and get their side of the story.
I had the foundation on my 1937 home (with basement) inspected when I bought the property. 100% original. Guess what!!!!!!!!!!!! It's just fine.
I focused on everything you listed. The result was about 1% per year worst case. 5-10% is a joke and no one investing in real estate uses such a silly estimate. For that price, you could literally tear down and reconstruct the entire house every 10-20 years. Furthermore you seem to be under the impression that real estate investors are buying these homes totally blind, deaf, and dumb. You DO understand that we can actually LOOK at what we're buying right?
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iwog says
Wait so you used fiberglass shingles? You know those are only slightly better than asphalt right? edit: Technically they're just a variant of plain old asphalt shingles but use fiberglass instead of "organics" as a backing, so "asphalt is asphalt is asphalt...." still applies. And you paid $20K for THAT??!? You got played. You got played hard if you really beleive you'll get 50 years out of em'. You won't see 50 years out of them, 30 is the best you could hope for realistically AND you'll get fucked on the warranty just the same if they did say they were good for 50 years and try to collect on that. And whatever happened to $10K for a 50 year roof huh?
iwog says
There is an old quote that goes along the lines of "its hard to convince a man of something when his paycheck depends on him not believing it", that is you. You're that man. You're giving very optimistic numbers and you cannot realistically do that and expect things to work out long run. Especially not rentals in a market where your customer is watching his wages slip and get eaten up by a higher cost of living. A pipe can leak for weeks or months and destroy your walls or undermine your foundation. Happens all the time so that is hardly pessimistic too. $500-1000 for plumbing my ass. And electrical almost never exceeding $1000?! Hahahha, try $5K to wire a house just for hard ethernet in the walls and home entertainment, they didn't even touch mains. My boss did that just last month and he couldn't believe it either, but that is what happens when you have to rip open walls.
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tts says
That's why I said it'd last 20 years. Can you read?
tts says
Sure--add them up. Show me how you get $12.5K/year out of those.
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tatupu70 says
Sure you also said this too.
tatupu70 says
Not my fault you double posted and weren't clear since "architectural" is also a marketing reference to shingle type. Did you mean to say structural?
tatupu70 says
Already gave you some simple examples if you can't figure that out you're wasting my time.
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iwog says
Nope. I know full and well what it really costs to own a home. I've been in 2 so far in my life and helped my family with theirs over the years. Homes are fucking money sinks.
iwog says
They all lie. All of them. There isn't a single one that doesn't, and don't give me some line of crap at how they're sooo trust worthy. So go look in the phone book and take your pick. Call em' up and what'll they say? You'll get some customer relations sap who works for minimum wage to man the phones, or heck maybe even a manager who'll say: "Oh no sir we're totally telling you the truth you can trust us!!" The internet is littered with stuff like this:
http://misterfix-it.com/blog/?p=433
http://www.integrityroofingandpainting.com/colorado-springs-roofers/organic-asphalt-shingle-claims-expert/
http://www.seattleroofbroker.com/FAQ-CommonKnowledge.htm
"The premature failure of fiberglass shingles is simply Historical Fact. By the mid-1990's these defective fiberglass
shingles were reported by consumers and contractors across the country and documented in industry publications.
Fiberglass shingles were failing in less than 15 years - but asphalt manufacturers did not initiate any product recalls.
Asphalt manufacturers did not recall defective shingles or even warn consumers about the known defects, instead
manufacturers started to increase shingle warranty periods in order to sell more (defective) shingles.
Historically, the premature failure of fiberglass shingles has involved excessive granular loss and brittleness,
cracking and splitting, blistering, curling, buckling seal failure and "weeping" (water seeping through the shingle).
When a thorough inspection reveals ANY of these conditions the roof is beyond the "Re-Sale Window" and will
normally require either replacement of roofing or negotiation of a "Roofing Allowance" in order to sell the home.
Roofing contractor associations across the country became aware of the inferior quality of fiberglass shingles
when member contractors complained the shingles didn't contain enough asphalt and were failing within 10 years.
Contractor associations presented these concerns to the asphalt manufacturers and, in a short period of time,
the inferior quality of fiberglass shingles became common knowledge within the entire roofing industry.
...
As a result of complaints from contractor associations - In the early 1990's asphalt manufacturers were finally forced
to admit they had been (and were) selling defective fiberglass shingles and that the premature failures of fiberglass
shingles were not limited to any particular manufacturer, or any particular type of shingle.
Unfortunately, while asphalt manufacturers were finally forced to acknowledge the sale of defective shingles, they
did NOT initiate any product recalls and they did NOT alert consumers to the known problem of premature failure.
They simply acknowledged they were aware of the defective shingles and they promised to "study" the problem.
....
The premature failure of fiberglass shingles is simply historical fact. Reports of defective fiberglass shingles
were documented by contractor associations and acknowledged by manufacturer associations. By the late-1990's
premature failure of "modern" asphalt shingles, both fiberglass and the newer organic, was common knowledge
within the roofing industry - and had started to become more widely known by the general public, finally resulting in
several recent Class Action Lawsuits.
Unfortunately, many asphalt manufacturers were very reluctant to even admit shingles were failing prematurely,
they NEVER issued product recalls or warned consumers about defective shingles after acknowledging problems
and they continue to deny liability - while providing (hundreds of) millions of dollars for class action settlements...
And still, some consumers are SHOCKED by information that manufacturers (and roofers) are currently selling
fiberglass shingles with a documented history of premature failures. Consumers should not be shocked that roofers
are currently selling products KNOWN to be defective - they have been selling defective shingles for almost 30 years.
...."
Pick who you want to believe. Random wage earning saps paid to say the company line or historical fact about a industry that just does not care and has been screwing people over for decades. You're like any other person, you don't think you can't be screwed over? Or that an entire industry couldn't be made out of screwing people over? Even after all that has happened in housing and what banks have gotten away with is that idea reaaaally so shocking to you?
I know you're not that naive. So what is going on here? Cognitive dissonance that is what. edit: And I know good and well there is a warranty, it doesn't matter, its effectively bumwad.
iwog says
Maybe it is, maybe it isn't, do you really expect it to stay fine forever? You do know well and good that foundations from that era aren't built to the same standards or materials they are today and that most were only built to last 50-60 years right? At some point it'll need fixing and foundation repairs get expensive like you won't believe.
iwog says
People like you looked at homes during the bubble and thought it'd be a great idea to buy too. Plenty of them were realtors. You're like any one else, nothing special at all. Don't think you can't be played for a sucker just because you have some knowledge of the field.
I said it once and I'll say it again “its hard to convince a man of something when his paycheck depends on him not believing it”. You got real money invested you can't let the truth stand in the way of that no sir.
No sir.
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Warranty?
Ha!
Hahaha!
Hahahahahahahahahahahahahahahahahahahahaha!
iwog says
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tts says
It was pretty clear to anyone who read it. It's a roof with a 50 year warranty, but I only assumed it would last 20 years.
tts says
lol--Yes. The reason you won't break it out is because you know that they won't add to anything remotely close to $12.5K/year. Give it up already.
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tatupu70 says
No it wasn't clear apparently and good on you for factoring in a good BS factor on your roof, now all you have to do is the same for the rest of the house to see where the rest of the costs will come from.
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tts says
I've done that. It comes up to about 1%/year. Defintely not 5%/year. 10%/year is just absurd.
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47 male
Lafayette, CA
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tts says
Put up or shut up. Show a 5 year budget where expenses come to 5% of the home's value per year. tatupu asked you for this and I think it's entirely reasonable.
I have 5 homes that are all worth around $250,000. Your claim that it will cost me at least $12,500 per year to maintain is idiotic and unsupportable. What I said before is absolutely correct. I could literally rebuild the entire house every 10 years for that amount.
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5% is ridiculously high. Are you remodelling every year or something? Our property that is $450k - the roof that the neighbor just did costed $10k. $22500/year in maintenance?? You can probably redo the roof, kitchen, and bathrooms every year at that price. You'd only be able to get brand new appliances every 2 years though.
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vain says
TTS was desperately trying to defend iTulip because I pointed out that their assertion about maintenance costs was totally absurd. I use 1% and so does everyone else.
Idols fall hard on the interwebs.
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$ 209/ square foot for Cal. homes with tile roofs ( and pigeons that live in them ) + stone fireplaces + granite counters+ bay windows+ central air + in-ground sprinklers+ vaulted ceilings+ curved grande-staircases, mature landscaping +quiet location + new appliances, and a walk-to-the grocery store location, and near San Jose, or SF-Oakland-Berkeley is the absolute cheapest that I have ever seen homes go for in Calif in my entire life.
But you have to get clear, simple-for-morons, plunk-downable title. It has to be just like in Saskatchewan: where you plunk-down your clear and easy-to-read title at the land-titles office, and you walk out with a cheque.