patrick.net

Clara says

Same here. Extremely happy with my home. It's amazing to have my own place and cheaper than rent. Ha ha. Love it.

HA HA! YAY! THAT IS SO AwEsOmE! I think there are some smart operators on here!

No sir it is not. I think you are looking at the short term only. Lots of projects gearing up in the next year for big developments. Trust me trust me

not in Missouri. I am telling you tho I have information from friends who are in the biz including a brother in law. There is really a lot of exitement for this direction in residential real estate. It makes sense.

bob2356 says

Even if it were under water why would you care? Your payments won't change and sooner or later it will come back up in value. You have to live somewhere.

sorry but this is piss poor advise if ever there was. buy and hold is over. if you are upside down you walk brother! tho NOT BEFORE you drain everything you got into it out and then some before they send for the Sheriff. ! This is just good biz sense. What the pros call ACUMEN. research it. You wanna judge. fine. You sit there and judge and shake your finger and guys like me will busy themselfs with making the $$$$. Fair deal.

tatupu70-- the government wants for you to think that the bubble burst and that things are getting better. On the surface, after 3 Trillion in market manipulation, you may think that the bubble has burst, but get back to me in 24 months and you'll see that the small rock that I'm under is nothing compared to the boulder that is crushing you. It takes about 24 months after QE for things to level out. If you're in FL, CA, NV, etc. it may seem like the bubble has burst, but here in NY/NJ, homes that we're selling for $450K ten years ago and were selling for $1M four years ago, are now selling for $850K. That tells me that the bubble hasn't burst here yet.

http://www.google.com/url?sa=t&rct=j&q=&esrc=s&frm=1&source=web&cd=1&sqi=2&ved=0CB8QFjAA&url=http%3A%2F%2Fwww.econ.yale.edu%2F~shiller%2Fdata%2FFig2-1.xls&ei=-07STqXZO-X20gGLhJH3Dw&usg=AFQjCNFhxJ50Q0xIjNtl7XqZKXMLU7n6Ig&sig2=KjR-ZMu3P4VV3YWsLNMtSQ

Zachary says

the government wants for you to think that the bubble burst and that things are getting better

I don't think the government probably cares what I think.

Zachary says

It takes about 24 months after QE for things to level out

How do you figure? QE affected interest rates. If the market believed that rates should be higher, then as soon as the Fed stopped purchasing government 10 yr bills on the open market, rates would immediately rise. It wouldn't take 24 months.

Zachary says

If you're in FL, CA, NV, etc. it may seem like the bubble has burst, but here in NY/NJ, homes that we're selling for $450K ten years ago and were selling for $1M four years ago, are now selling for $850K. That tells me that the bubble hasn't burst here yet.

I'm not in any of the states you've mentioned. The bubble has burst in the US. Some places have fallen more than others because some rose more than others. Areas with higher % of crappy loans fell hardest. In any event, prices may continue to fall, they may not, but the bubble has most certainly burst.

tatupu70- You said: "I don't think the government probably cares what I think." The government represents the political parties and if you've missed all of the polls that they perform and watch, then I don't know what to tell you, except they care!...on interest rates-- Bernanke said that he would hold the low interest rates this summer for another 24 months, but is now reevaluating. What I'm saying is that I doubt that he can control that given that he's tripled the money supply. I live in NYC and the bubble has not burst here yet due to all of the foreign investment from Europeans and Chinese where the dollar against their currencies made for a pretty good investment. Those of us old enough remember how bad real estate was in NYC in the 1970's and 1980's. What goes up must come down. Now even in places like Florida where real estate values have come down, there's still a lot more room to fall. So to your point that the real estate bubble has popped, I say that it surely has begun to pop, but the floor is still years away. Just watch what happens when the Fed is forced to increase interest rates, real estate values will fall further every where, and then the pop will be closer to being over.

Look guys, I'm patiently waiting to buy a new house, but very fearful given the state of the world economy. The Chinese economy is cooling off, which was not unexpected given that 70% of our GDP is consumer spending. Europe has also stopped spending given the state of the PIIG countries and the impact on the rest of Europe. Germany is deeply invested in Italian and French banks that are sarting to crack. The USA's banks are heavily invested in the European banks. So the world wode financial system is in bad shape. The Fed tripled our money supply created the DOLLAR BUBBLE. That has to pop now to. The we have the Federal Government DEBT BUBBLE at 15Trillion that also has to pop. All of these bubbles including more are tied back to the REAL ESTATE bubble. So when austerity kicks in and we can't pay the interest on our debt, what do you think is going to happen to real estate? I will agree that in some places like Las Vegas, Reno, etc. that prices are already at 1995 levels and I hope for your sake that it's at the bottom.

Zachary says

The Chinese economy is cooling off

Yep. Social unrest to follow.

Remember, more than half the wealthy in China are in different stages of their exit plans. This is bullish for residential real estate in the places they wanna buy in these parts.

Again,

If I were so convinced I were correct that this is now the time to buy, AND IF I wished to convince others that this is the correct time to buy, I would post real life examples.

If only takes a few minutes to do and the numbers can be obtained in seconds on a online mortgage calculator. Usually when I want to prove a point about a certain area, I can do an advanced search on Redfin and one of the first houses to randomly pop up will suit my purposes. In the even I'm wrong, I've posted that as well(for instance I did not realize how far prices in Burbank, CA had fallen).

However, I would not post links to graphs that didn't prove my point, and then simply ignore that I'm called on it. I would not continue to make insulting statements that are unsubstantiated with verifiable fact. And I would not continually argue big city California real estate pricing and then back it with nationwide statistics and vice versa.

Zachary says

Just watch what happens when the Fed is forced to increase interest rates

What would cause the Fed to be forced to raise interest rates???

Zachary says

The Fed tripled our money supply created the DOLLAR BUBBLE. That has to pop now to.

The only way for the dollar bubble to pop is if people start literally destroying their dollars, like lighting piles of money on fire.

The USD is still the tallest midget.

The we have the Federal Government DEBT BUBBLE at 15Trillion

Shrug. You *do* know that total systemic debt has gone DOWN since 2009, right?

2009-01-01 52732.77
2011-04-01 52554.37

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

So when austerity kicks in and we can't pay the interest on our debt, what do you think is going to happen to real estate?

While I am sympathetic to this argument (austerity & real estate), we can always pay the interest on our debt, since the Earth is a closed system and the dollars we print have no choice but to come back to us in the end.

SubOink says

Let's rephrase it then - Just because you can't afford it, does not mean everybody else can't afford it. Get my message now?

Look back to the last 10 years in RE. The buyers who overbid, overpaid, overborrowed who thought they could afford it could not in the long run. They were the winning bidders. What does that say about the other buyers below them?

Clara says

Nice houses will always be out of reach of the most of us unless you made a fortunate, a fortunate larger than most other people's in order to outbid them. It's the reality.

See the prime areas of SoCal from 1989 to mid 90s. Prices declined by 30-40%. And those were in the nice parts of town.
Even Beverly Hills saw major drops. So where were the other people during this time to outbid them. The same is true today.

When ever you see a bubble and herd mentality, they eventually correct. SoCal has a history of bubbles and corrections.

thomas.wong1986 says

See the prime areas of SoCal from 1989 to mid 90s. Prices declined by 30-40%.

That time, the elite and rich in Communist China were not targeting their Exit Strategy into The Fortresses. It is different this time.

B.A.C.A.H. says

It is different this time.

Naaaa... does it really look different ?

The only rich red commies I heard of are the ones who may have embezzled billions from the Chinese government.
http://www.cbsnews.com/stories/2004/01/30/world/main596944.shtml

Eventually, the cash (after liquidation of all property) will be returned along with embezzlers back to China.

It has happened before, will again.. Not so different this time.

that chart looks flat to me my friend. bottom is in. time to change gears.

thomas.wong1986 says

Look back to the last 10 years in RE. The buyers who overbid, overpaid, overborrowed who thought they could afford it could not in the long run. They were the winning bidders. What does that say about the other buyers below them?

But those buyer couldn't really afford it. Puttin 0% down and grabbing a teaser interest rate is not being able to afford it. So those buyers don't count - and back in those days, you could rent a house for half the price than buying it. Not so now. Times have changed. Now you can buy a house and pay LESS than rent.

SubOink says

ut those buyer couldn't really afford it. Puttin 0% down and grabbing a teaser interest rate is not being able to afford it.

this is short sighted. those folks made the right move. they are more finance minded than conventional types. you will not make money with buy and hold. bad choice

thomas.wong1986 says

B.A.C.A.H. says

It is different this time.

Naaaa... does it really look different ?

The only rich red commies I heard of are the ones who may have embezzled billions from the Chinese government.

http://www.cbsnews.com/stories/2004/01/30/world/main596944.shtml

Eventually, the cash (after liquidation of all property) will be returned along with embezzlers back to China.

It has happened before, will again.. Not so different this time.

Based on the graph, it looks like prices rose more during the boom in high-end areas, contrary to the opinions of those people on this blog who are arguing that prices in these areas will fall less now.

that line is flat and kind of climbing somewhate. you boys don't know how to read a graph.

Congrats and good luck. I am sick of waiting but I need the right deal. The bank has one that I want but it's off market. The inventory control pisses me off.

JodyChunder says

that line is flat and kind of climbing somewhate. you boys don't know how to read a graph.

That "climbing hire" is called a "Classic Bull Trap" or a "Return to Normalcy" illusion all bubbles exhibit on the way down:

&w=600&h=389&ei=dRbTTsesBOXSiALY6OiEDA&zoom=1&iact=hc&vpx=803&vpy=167&dur=12&hovh=181&hovw=279&tx=150&ty=88&sig=102347815281620335203&page=1&tbnh=136&tbnw=209&start=0&ndsp=15&ved=1t:429,r:3,s:0

Everyone was calling the bottom in late 2010 and now we dropped about 8% since then while rates are making record lows. hmmm...

Sorry, can't really pay attention to your post when you have an avatar like that. I apologize.

JodyChunder says

Clara says

Same here. Extremely happy with my home. It's amazing to have my own place and cheaper than rent. Ha ha. Love it.

HA HA! YAY! THAT IS SO AwEsOmE! I think there are some smart operators on here!

E-man,
I agree 100%. Glad more people talk rationally in this forum.

E-man says

Suboink and Clara,

Congrats to you guys. I believe Mr. Fantastic and some others were the ones that did most of the garbage talk back then.

Real estate is very local. Maybe your market hit bottom, but that doesn't mean elsewhere has. The point of this site is about rent vs. buy. In your case, it made sense to buy than rent, but that might not be true elsewhere. In a sense, both sides are correct.

Enjoy your new home and your family. Now and the next couple of years are a great time to load up on investment properties in my opinion. Work hard and save money to buy those positive cashflow properties. They will provide you and your family an income for life.

Best of luck to both of you.

Cheers. :-)

Success isn't by chance, but by choice.

Clara says

orry, can't really pay attention to your post when you have an avatar like that. I apologize.

That is a photo from two years ago. you got your knockers more n half way out what is the difference.

anyhow you made a good decsion to buy investment houses. this is the path to riches. pretty soon you will be laughing in every ones face and telling them how ratonal you are compared to them. we will show them!

dunnross says

The RE bubble started all the way back in 1975.

Does Patrick still have nominations for the dumbest posts?

tatupu70 says

dunnross says

The RE bubble started all the way back in 1975.

Does Patrick still have nominations for the dumbest posts?

No, tatapu. The dumbest posts were all back in '06 when people were saying that "RE prices can only go up", and "This time it's different". Now that we look at the graphs, we can appreciate how dumb those posts really were.

After this RE bubble completely implodes, we will see the new graph, which will clearly show that the RE bubble started all the way back in 1975, because the bubble will completely deflate back to 1975. Then, my post will be nominated for the "Smartest post on the blog".

Really not sure what the point of this post was supposed to be other than to brag. Well, if that's the case two can play at that game.

As for me, well I am happy to report that we still pay about 50% less than the cost of buying the equivalent of what we rent- a large 4 bedroom house in the middle of the bubbly Bay Area. We both make good incomes and save a little less than 50% of what we pull in every year. We have a fairly substantial amount of cash we've saved up. At this point we could very easily buy a house just about anywhere in the US for cash straight up with money leftover. We have healthy retirement accounts. We are somewhat considering buying a house in the Bay Area but even now, it doesn't exactly make financial sense. We could quite easily do so. If rent for us was the same or more than buying the decision would be easier. But looking at it from a purely mathematical perspective buying would not bring us any real benefit. So there.

Anyway, now that my bit of bragging is out of the way, buying a house isn't a simple right or wrong scenario. All factors leading to a purchase has to do with way too many variables: Location, income, savings, job prospects, real estate taxes, the condition of the home, the market, and so on. Any of these above can make a huge difference. If you live in say- Nashville, where homes are more like $150k-$200k then sure- buying a home isn't near the same as buying- say a 500k crappy starter home in the Bay Area. If you make 50k then buying a 300k home will be impossible. If you make 100k 300k is easily doable. BIG difference.

$500,000 in Manhattan will buy you a studio apartment, although you can rent one for $1,500.00 a month. So in the big apple renting makes much better sense. Did I mention tha NYC maintenance fees that will cost you at least another $1,000 a month?

I think the main difference between the gotta-buy-now crowd and the hurry-up-and-waiters (of which I am one) is that the latter are better at seeing how bad things could get, whereas the home-owner-wanna-be's see mainly what they want to see. Every day that I read the latest apocalyptic headline about the credit system freezing up, or how many more millions will be underwater if housing prices drop even a little, I sleep a little better knowing that my only stake in the system is a six month lease.

Joe_Mumau says

I think the main difference between the gotta-buy-now crowd and the hurry-up-and-waiters (of which I am one) is that the latter are better at seeing how bad things could get, whereas the home-owner-wanna-be's see mainly what they want to see. Every day that I read the latest apocalyptic headline about the credit system freezing up, or how many more millions will be underwater if housing prices drop even a little, I sleep a little better knowing that my only stake in the system is a six month lease.

And you are doing no different, except you have decided to see the worst in everything. Housing in most of the US is not overpriced. In fact, it is cheap relative to pretty much all other Western countries. Just look at the Economist article posted up on the front page that was presumably intended to show how bad things are, but in fact states that homes are, comparatively speaking, undervalued in the US. That may not be true for your particular location, but hey, not everybody lives where you do.

Joe_Mumau says

I sleep a little better knowing that my only stake in the system is a six month lease.

Right, and when that lease is up you could always live...ah....live in the mountains for free? I sleep good because I know my "rent" is never going up in my lifetime from here and I will be rent free at 65 years old (worst case scenario)

edvard2 says

Really not sure what the point of this post was supposed to be other than to brag. Well, if that's the case two can play at that game.

You obviously didn't understand the purpose of the post. People were predicting a year ago how screwed up I would be financially and how much I would regret having bought a house and how my house will have lost 20% in value etc etc etc ...well, the main posters from back then (like klarek and co) are nowhere to be found now. - THAT's the purpose of the post.

Little point bragging in a forum on the internet with a bunch of strangers I don't even know, don't you think?

If you can rent a place for half the price than buying it (assuming a mortgage based on a 20% down fixed 30 year loan) - then it makes perfect sense to rent. That is if you love the house and enjoy living there, get along with the landlord etc. - We did the same thing for 10 years.

If its working for you that's great, however you might wanna check your math. You really do not know what your house is worth until you try to sell it.
It still is a "buyers market" and homeowners today rarely get what the house is "worth". Buyers Demand deep discounts and you need to compete with all of the discounted inventory on the market

6% in and 6% out for realitor fees, improvements moving costs ect.
You probably are not planning to sell today but if you did you would most likely take a hit.
Important to think about if job changes or other life events occur.
We all feel richer on paper. The reality does not always match with the "pretty" numbers.
So those on the fence consider all factors before taking the risk.

Doesn't the fact that investors can purchase investment property and be cash flow positive, suggest that we are at or close to the bottom?

If prices drop some more, this will attract even more investors, driving up prices.

I'm personally considering my first investment property, simply because rents in SF are so high relative to the low mortgage cost (I consider property tax and M.I.D. to be a wash financially).

OP, I am glad that you are happy with your choice. For your sake, I hope that your area has hit bottom and that you will live happily there for many years.

Jimbo in SF says

If prices drop some more, this will attract even more investors, driving up prices.

Investors have never been able to sustainably drive up house prices. Ultimately, somebody needs to live in that house, and, as long as those buyers are few and far between, those investor/knife-catchers are going to be taking some losses on their balance sheets.

dunnross says

Investors have never been able to sustainably drive up house prices. Ultimately, somebody needs to live in that house, and, as long as those buyers are few and far between, those investor/knife-catchers are going to be taking some losses on their balance sheets.

I wouldn't guarantee that they're gonna' take some losses but I would say that at least in places like the Bay Area, I can think of many better ways to invest money rather than 300k teardowns. I think there is a general attitude amongst house "investors" that they're somehow getting terrific steals only because they're making simplistic comparisons between now and the peak of the boom, paying top-dollar for houses that were easily under 150k prior to the boom. Now they're paying 300k-400k for those same houses. I assume its because many believe the boom is surely about to return and they'll be none the better.

While I don't actually believe in investing in real estate since stocks will and have always outperformed it, if I were to do so it wouldn't be in places like the Bay Area. I'd be looking to areas that are actually growing and have a better financial situation- places like cities in the Sunbelt- aka, NC, TX, and so on. Cities where rent to own ratios are closer, prices are lower, jobs are growing, and the median incomes more closely hook up with home values: metros with 200k and under overall medians. *Not investment advice.