0
0

Will the real estate trend continue in 2013?


 invite response                
2013 Jan 20, 9:53pm   41,605 views  131 comments

by lostand confused   ➕follow (3)   💰tip   ignore  

http://www.doctorhousingbubble.com/normal-housing-market-us-historical-housing-data-with-trends/

It is hard to see how the pace of appreciation can continue without a similar underlying real growth in household wages or a continued flood of investor money. Yet in markets were investors dominate, local families are outbid by global money and big funds. What makes up a healthy housing market? Today well examine seven charts and try to put this current housing market into a longer-term perspective.

#housing

Comments 1 - 40 of 131       Last »     Search these comments

1   bmwman91   2013 Jan 20, 11:50pm  

Of course it will.

I don't ever seeing it written that the housing market HAD to be healthy. In my naivete, I used to think that the housing market HAD to correct to some sort of healthy condition where normal people could afford normal houses on a normal salary. Nope. Now that the specuvestor class has seen how effective asset bubbles in RE are at transferring wealth from the productive classes to themselves for no real work on their part, I think that RE will continue to be more and more dominated by specuvestors. Rent seeking will continue unabated, and the wealth of productive people will be stripped.

At this point, I have given up on seeing the housing market behave rationally. The market is made up of people, and most people are pretty irrational. Eventually it will be rational, but it will be ugly because many of the specuvestors taking over the market possess a dire rationality, and the new rational market will exist to suck the life out of the nation.

Plan accordingly, comrades.

2   uomo_senza_nome   2013 Jan 21, 7:19am  

Housing IS the business cycle

Here's the data rich calculated risk blogger Bill McBride's view on housing and its relation to the economy.

http://www.calculatedriskblog.com/2013/01/predicting-next-recession.html

bmwman91 says

Until we put a lid on the vampiric financial sector, the wealth will continue to consolidate upward

It is important to note what the Prez did not say:

http://jessescrossroadscafe.blogspot.com/2013/01/inaugural-address-some-quick.html

The word 'reform' was mentioned only once, in reference to the need to 'reform our schools.' The words 'banks, regulation, finance, financial, property, money, and fraud' were never mentioned.

3   fedwatcher   2013 Jan 21, 10:22am  

With Real Median Income falling, extremely low mortgage interest rates and artificially constrained supply are both required to inflate housing prices.

This is far from 'normal' and can continue into 2014, however once interest rates rise and the world-wide bond bubble starts to deflate, housing prices will suffer.

Low leverage investors in retals will still do well.

4   RealEstateIsBetterThanStocks   2013 Jan 21, 2:58pm  

question is not whether it will continue but HOW MUCH will it go up from here?

5   RealEstateIsBetterThanStocks   2013 Jan 21, 3:05pm  

E-man says

Borrowing $1.5M at 4% interest rate is the same as borrowing $1M at 6% interest rate.

this is actually a very scary reality. 50% is a real possibility.

6   ELC   2013 Jan 21, 8:08pm  

bmwman91 says

I think that RE will continue to be more and more dominated by specuvestors.

I wonder how many people are renting because they have to or because they're waiting for better opportunities. Anyone renting from an amature investor will most likely get a bad taste in their mouth for renting. If their properties aren't professionally managed you know by default you are renting from a hack and only bad things will come of it.

7   Bill Frank   2013 Jan 22, 1:18am  

If we have learning ANYTHING from the recent past, it should be that like virtually all other markets, housing is manipulated and more so than ever, BUYER BEWARE.

8   Philistine   2013 Jan 22, 1:28am  

ELC says

Anyone renting from an amature investor will most likely get a bad taste in their mouth for renting. If their properties aren't professionally managed you know by default you are renting from a hack and only bad things will come of it.

You have it backwards. Property management companies are slumlords. They run their rents with boiler room tactics and Walmart maintenance.

9   ELC   2013 Jan 22, 4:08am  

Philistine says

You have it backwards. Property management companies are slumlords. They run their rents with boiler room tactics and Walmart maintenance.

That hasn't been my personal experience. I've found investors to be cheap, ignorant and hard to get ahold of when repairs need to be done. Not to mention the property isn't properly renovated to begin with. Just, "polished up." Never again.

10   dublin hillz   2013 Jan 22, 4:18am  

ELC says

Philistine says



You have it backwards. Property management companies are slumlords. They run their rents with boiler room tactics and Walmart maintenance.


That hasn't been my personal experience. I've found investors to be cheap, ignorant and hard to get ahold of when repairs need to be done. Not to mention the property isn't properly renovated to begin with. Just, "polished up." Never again.

True, it definitely leads to better quality of life to rent from lets say archstone with 24 hr service guaranteed then from some billy bob. It will likely cost more but you get what you pay for.

11   zesta   2013 Jan 22, 5:01am  

David Losh says

There are just much better way to make money than holding hundreds of thousands of dollars in debt.

In business even if you have enough equity, sometimes holding debt (especially low-interest long-term debt) is a good thing.

1. Our current tax code encourages the holding of debt through interest deductions

2. If a company finds a worthwhile investment, taking on debt may be riskier, but will allow the quick exploitation of an opportunity that would otherwise be lost.

3. Equity is riskier and more valuable than debt. This is true on corporate level and true on a personal level.

12   gbenson   2013 Jan 22, 5:27am  

ELC says

Anyone renting from an amature investor will most likely get a bad taste in their mouth for renting.

Not a universal statement. The quote below is from one of my tenants on Nov 26th 2012:
"Thank you so much for everything. I have never had a better experience with renting. Ever. You were really a blessing during a pretty crazy time in my life and the unit was AMAZING! If I could, I would one day move back just to live in that apartment, again."

As an 'investor' I care about my properties, and I care about my cashflow. But I am smart enough to know that I am running a service orientated business too. Treat them with respect and give them the level of service I'd want if I lived there myself, and in return, they take good care of my investment so I can keep renting it for years to come.

13   David Losh   2013 Jan 22, 6:16am  

gbenson says

they take good care of my investment

I'd like to make the distinction between cash flow and investment. I don't see the investment strategy in this post crash market place.

14   ELC   2013 Jan 22, 8:03am  

dublin hillz says

True, it definitely leads to better quality of life to rent from lets say archstone with 24 hr service guaranteed then from some billy bob. It will likely cost more but you get what you pay for.

I've found the service to be hit and miss with a "billy bob." For example I needed a new icemaker. Instead of just replacing the icemaker the putz brought another refrigerator from another apartment. The kitchen flooring (that I put in at my own expense) got all scratched and the (noisy) fridge broke down within a week. Another time the A/C needed a part. He did nothing for two weeks. This is in Florida in the summer. I had to buy a portable A/C and wound up getting Sears to fix it for a measely $150. I deducted it from the rent since he refused to pay me so he tried to evict me. I won in court but what a hassel. I've had similar service problems with two other "investors."

All I heard from them was bellyaching that they're on a tight budget. Like that's the tenants problem. Total dickheads. All I ever did was fantasize about filling the walls with fish guts and road kill then spackling back over it but couldn't bring myself to do it. Yet I can understand why they get their units trashed. Where I live now it's professionally managed and someone is here within fifteen minutes.

Everyone I know I warn not to rent from an individual. Eventually the word will spread like wildfire since this is going to be more prevalant and these loser's units will be sitting empty eating them alive.

I'm sure there are some good landlord/investors but when somone's happy they'll tell much fewer people than if they're unhappy. It's a dirty business. The nick name for investors is, "vultures" and it's just a matter of time till their greed eats them up and they fail. And you don't want to be their tenant when that begins to happen.

15   gbenson   2013 Jan 22, 8:17am  

David Losh says

investment

Return on my cash that I used to buy the property. (They aren't financed, so for me, net cash flow = investment return). I figure long term appreciation on the property itself is essentially zero after costs.

16   ELC   2013 Jan 22, 8:31am  

gbenson says

Return on my cash that I used to buy the property. (They aren't financed, so for me, net cash flow = investment return). I figure long term appreciation on the property itself is essentially zero after costs.

For me that's the opposite of an investment. If you can't profit from appreciation your money isn't working for you. You're working for money. In other words you are just creating yourself J O B plus taking on a potential liability. And flipping is also a JOB because it's transactional income.

IMO if you can't profit from appreciation alone find another place to invest your money or leverage your credit. Becoming a landlord should be the worst case scenario rather than a business model. People need to deprogram themselves from that Carlton Sheets sillyness.

17   thomaswong.1986   2013 Jan 22, 9:14am  

ELC says

If you can't profit from appreciation your money isn't working for you.

true.. as in the case robert shiller points out.. apprecition rate is close to inflation.
so not the investment many want... a stock with dividend could do better with apprecition in net assets plus income growth.

18   ELC   2013 Jan 22, 9:49am  

thomaswong.1986 says

true.. as in the case robert shiller points out.. apprecition rate is close to inflation.

so not the investment many want... a stock with dividend could do better with apprecition in net assets plus income growth.

I've gotten so much experience taking listings and training Realtors through the years you would think after 15 years I would feel comfortable buying real estate but the more I learned the more I learned to pass. Real estate is based on the idea of "the greater fool" which means everyone involved is a fool to either a greater or lesser extent.

I've got to laugh when people accuse Realtors of stealing people's deals. Maybe stupid ones. The top producers who I've trained wouldn't touch real estate with a ten foot pole. The only time I saw the big shots jumping in was when you could put 5k deposit on a 500k condo in Fort Lauderdale or Miami then flip it for 700k (or more) a couple of months later. I'm sorry I didn't get into that scene but those days are long gone.

19   Thedaytoday   2013 Jan 22, 9:55am  

thomaswong.1986 says

True.. as in the case robert shiller points out.. apprecition rate is close to inflation.

so not the investment many want... a stock with dividend could do better with apprecition in net assets plus income growth.

Liberal elitist!

20   David Losh   2013 Jan 22, 10:38am  

ELC says

I'm sorry I didn't get into that scene but those days are long gone.

I agree those days are long gone.

I went to an investors, hard money presentation in 2008. There was another guy who I recognized from the Trustee Auctions at the Court House. We both were shaking our heads when there were promises of profits as much as $20K, or $30K.

All you had to do was four transactions a year for those $30K profits to make $120K. It was amazing the number of people who were ready to sign up, buy at auction for what we considered top dollar, and paid fees with interest.

In 2005 if I couldn't buy, and sell for a $30K profit in 30 days it wasn't a deal worth doing.

I think people have really misjudged this market. There is a lot of money going into easy deals, but the returns quoted have been at 6% which is better than a savings account, but you also have to sell this stuff to get your money out.

In the coming years it seems to me that Real Estate will go back to the hard work job that it always was, and many of these investors will be dumping properties so they can go on to do other things.

21   ELC   2013 Jan 22, 7:52pm  

robertoaribas says

the fools are the banks that allow these short sales to go through,

I'm betting that the banks know better than you being that it's their game.

22   tatupu70   2013 Jan 22, 8:24pm  

ELC says

robertoaribas says



the fools are the banks that allow these short sales to go through,


I'm betting that the banks know better than you being that it's their game.

If it's their game, they certainly haven't played it very well over the last 10 years.

23   David Losh   2013 Jan 23, 12:13am  

robertoaribas says

the home would auction for around $110K,

Why would anyone pay more than $50K at auction. I've got a buddy who buys in Arizona, and he agrees that the auctions have gone crazy, but to say $110K is stretching it.

It makes no difference because banks want to take losses against record high profits that sit in cash reserves.

They sold the mortgages, serviced the mortgages, reinvested that money years ago, and are now collecting more money with the taxes being off set by paper losses.

God bless you for taking on these rental properties, we all appreciate it, but the banks are now collecting more money from you loan, that is paying interest, and servicing fees.

Banks always win, and there was no need for the government to step in except to save an industry that provide thousands, if not millions of jobs.

24   gbenson   2013 Jan 23, 2:44am  

For what its worth, my 'real job' is in an industry that sells equipment to people who move goods and services. We tend to be a bellwether for the health of the global economy. Last year we did unexpectedly well, but for Q1 2013, we have just been told to 'tighten our belts' and 'curb non-essential spending'.

There's a storm a'brewin...

What effect this will have on the housing market this summer remains to be seen since I don't know the direct reason for the spending cuts directive. For all I know Europe is getting clobbered and the US is fine, in which case housing here could continue to climb. If US order commitments are down though, that doesn't bode well.

25   Mobi   2013 Jan 23, 3:28am  

David Losh says

robertoaribas says



the home would auction for around $110K,


Why would anyone pay more than $50K at auction. I've got a buddy who buys in Arizona, and he agrees that the auctions have gone crazy, but to say $110K is stretching it.


It makes no difference because banks want to take losses against record high profits that sit in cash reserves.


They sold the mortgages, serviced the mortgages, reinvested that money years ago, and are now collecting more money with the taxes being off set by paper losses.


God bless you for taking on these rental properties, we all appreciate it, but the banks are now collecting more money from you loan, that is paying interest, and servicing fees.


Banks always win, and there was no need for the government to step in except to save an industry that provide thousands, if not millions of jobs.

It is probably more like the bank takes it back in the auction with $110k price tag. But as you demonstrate, if banks win AND the housing price reinflates (at least in pheonix), Roberto wins out, too, if he sells before the next downturn. Of course this is not a given but he deserves it if it pans out like he wishes.

26   ELC   2013 Jan 23, 3:02pm  

robertoaribas says

I'll help: 1100-500 = 600 a month for me, so I'd really cry about the interest!

It sounds great. With that sort of return why aren't there loads of investors from all over the world running to Phoenix? You should be up to your ears in competition. You said the homes have been appreciating there too yet you're still finding the same sort of deals you have been for a long time. What's up with that?

27   Mick Russom   2013 Jan 23, 3:16pm  

As long as the rentier thieves can borrow our money for less than the rate of inflation and jack up our rents more than the rate of inflation, the fleecing of the productive people will continue unabated.

No loans for less than 30% down. Problem solved. Unfortunately, the thieves from other corrupt nations are coming here and bulk buying our homeland - at most we should be giving these criminals 99 year lease, like the brits do, the queen owns the allodial title to all the land there for a reason, if the russians the ME types take over, at least there is a trump card.

28   snyderkv   2013 Jan 23, 8:14pm  

ELC says

robertoaribas says

I'll help: 1100-500 = 600 a month for me, so I'd really cry about the interest!

It sounds great. With that sort of return why aren't there loads of investors from all over the world running to Phoenix? You should be up to your ears in competition. You said the homes have been appreciating there too yet you're still finding the same sort of deals you have been for a long time. What's up with that?

Roberto is right. My co-workers are still buying up properties in FL 16-20% returns (after all epenses) I looked at their income/expense statements. They do have multiple offers now though so it's harder but still, there is not enough investors to absorb all the shock, so if you're quick, you can still get a good deal

Also, I have a california condo that returned 8.5% this year, not as good but safe.

29   David Losh   2013 Jan 23, 11:07pm  

robertoaribas says

Why do you bother writing stuff that is clearly idiotic?

Because you are trying to sell an e-book that has extremely limited information, which you also admit.

Losses need to make sense to stock holders, and they certainly do make sense, because you didn't answer the question about why you think the same house will sell at auction for $38K more than you paid for the short sale.

So yeah, I think you paid top dollar for your short sale, and the bank is laughing.

30   David Losh   2013 Jan 23, 11:12pm  

robertoaribas says

I'm buying it cash... How much do they get then?

did you miss the part about renting it for $1100? even if I did mortgage it, my payment would be around $500... I'll help: 1100-500 = 600 a month for me, so I'd really cry about the interest!

Mmmm, cash, that's lots of cash to tie up, no loans, no more opportunities?

Like I said, you are throwing out extremely limited information based on what you think, your opinions, and your personal returns of what I call a questionable investment.

I admire you for providing those rentals, they certainly seem like good deals for your renters, but from what I've read you are buying a job of property owner.

31   David Losh   2013 Jan 24, 3:06am  

robertoaribas says

you are still postulating I didn't know what I was doing...

I didn't say you don't know what you are doing. You are doing a good job, but it is a job, with limited prospects.

I don't talk about myself too much, but I have made a lot of money buying, and selling Real Estate over a forty year span.

My interest though is in businesses.

In 1986 I was pretty much retired at a fairly young age from Real Estate. I bought an Italian Restaurant that was my listing because no one else wanted it. The owner had died, his partner took it over, and the landlord hated him. The partner was just an opportunist who was trying to extort money from his dead partners estate. I never saw that until the land lord pointed it out to me.

I agreed to take over the lease, paid the estate for the furnishings, and moved the partner out of his position for $1.

I knew nothing about restaurants but turned it into one of the top ten places, just barely, in Seattle in three years, then sold it. It's still there today, and makes money. The guy who bought it became one of my Real Estate clients, and he has done every well with his Real Estate potfolio.

Most of my Real Estate clients have been investors who have bought lots of properties. I bought my own set of properties that I sold in 2005, 2006, and 2007.

I thought about buying in 2008, but stopped myself. Instead my wife, and I concentrated our efforts on building our house cleaning business that we had had for nine years as a side business. We also have two trucks, and prepared properties for sale including bank owned properties.

What I was shocked by at first was the number of people willing to pay a lot of money for properties. In 2009 prices seemed to have come down, when commenters started calling it a "bottom" to the Real Estate market.

Nothing made sense to me so, we kept with the cleaning business.

Our business had 20% growth last year, and 30% the year before. This year we should be able to double our business. I can sit here today because we have employees.

I can sell the business for my full investment at any time, cash, or finance.

So there are other ways to make money in Business Opportunities, as an example. You do what you do, and God bless you for that, I'll do what I do.

32   David Losh   2013 Jan 24, 4:08am  

robertoaribas says

So, I'm not sure about the limited prospects part. It will simply be income.

When I first started you only needed five units to retire, now you need twenty, the way I figure it.

There is no limit on the number of units you can own, but Real Estate, in my opinion, is an addiction.

Most of my guys talk about retirement, but none really do. It's always something else, some other deal, something else to do.

They quit thier jobs do some traveling then are back at it.

Like with me, I have always had the truck with the stuff, and worked on my properties or worked for other people.

Three times in my career I've stopped, traveled, tanned, and laid on the couch until I start all over again with something.

I just pointed out that this market is different than I have ever seen. In my opinion banks are in control of the Real Estate market place, and I just can't figure out what that means.

Sure things are better to me than a market place that makes no sense.

33   swebb   2013 Jan 24, 4:16am  

David Losh says

If you borrow a million dollars you owe a million dollars. It makes no difference how low the interest is, you have to pay the money back.

The interest rate clearly matters. The amount you end up paying back is more with a higher interest rate. If your investment has some given return, it may not cover a 5% interest rate, but it may cover a 3% interest rate....that could be the difference between making money and losing money.

Seriously, this is a crazy statement. If you don't think the interest rate matters, please come to me for your next loan. How about 25%?

34   uomo_senza_nome   2013 Jan 24, 5:10am  

David Losh says

If you borrow a million dollars you owe a million dollars. It makes no difference how low the interest is, you have to pay the money back.

To add on to what swebb says, interest rate is the price of money. If interest rates are artificially low, then some activity can take place (even if it is totally unproductive to the real economy) which would not happen otherwise. So it does cause misallocation of resources.

Interest rate is a very important signal, but what we have today is market manipulation because the Fed is engaging in open-ended QE.

Monetary inflation without reform is the 'solution' that most favors the monied interests and the financial class given the extractive nature of the system as it is.

http://jessescrossroadscafe.blogspot.com/2013/01/bernankes-hammer-when-everything-looks.html

35   tatupu70   2013 Jan 24, 5:16am  

uomo_senza_nome says

To add on to what swebb says, interest rate is the price of money. If interest
rates are artificially low, then some activity can take place (even if it is
totally unproductive to the real economy) which would not happen otherwise. So
it does cause misallocation of resources

I know this is a generally accepted theory, but I don't see it. Lower rates will allow riskier activity to take place, but it shouldn't cause a misallocation of resources. Only if the risk/reward of investment is misrepresented would misallocatoin occur.

36   uomo_senza_nome   2013 Jan 24, 5:25am  

tatupu70 says

Lower rates will allow riskier activity to take place, but it shouldn't cause a misallocation of resources

From the same link that I just posted:

The 'hot money' seeks beta, and that means financial paper, and frauds like collateralized debt obligations, tied to whatever hapless aspect of the real economy that is convenient, such as housing for example.

So yes, you are right. lower interest rates would encourage riskier activity that wouldn't have been taken otherwise. Who knows if this riskier activity is actually productive?

Well, we can figure out if it is likely to be productive or not, by ensuring that the firm which takes on the risk is actually punished for taking such a risk in case the venture fails. What happens in the current economy? Risk is always socialized, Finance is rent seeking through seignorage.

37   Mobi   2013 Jan 24, 5:31am  

David Losh says

I just pointed out that this market is different than I have ever seen. In my
opinion banks are in control of the Real Estate market place, and I just can't
figure out what that means.

I agree with you but it does not take a genius to see they are trying to pump the price back and higher. If they are going to win, why not ride the tide?

38   ELC   2013 Jan 24, 6:35am  

Mobi says

I agree with you but it does not take a genius to see they are trying to pump the price back and higher. If they are going to win, why not ride the tide?

Because it is not just "pump." It's pump then dump and it WILL take a genius or inside information to figure when they're ready to dump. And when it comes to real estate it's not a simple click of the mouse to get out. IMO you're playing with fire. That's why most of the world is parking it's money and happy to get zero return. A zero return IS a profit in this market, but they'll always be a percentage of people who just can't see the sense in that. Those will soon be your servants.

39   ELC   2013 Jan 24, 7:19am  

robertoaribas says

the rest are managed by a business partner for 10% of the rent.

Nice of you to finally mention that. Things are looking less and less rosy.

40   gbenson   2013 Jan 24, 7:30am  

Mobi says

If they are going to win, why not ride the tide?

And the corollary of that also applies. If the current monetary policy fails, a LOT of people are going down in a big big way. So there will likely be bailouts, tax breaks, and forgiveness up the wazoo. If you are going to fail, might as well do it in America where you get ahead by failing upwards.

Elc, I think you are a bit overly optimistic on the number of people that will get out on the next one. Most 'industry professionals' get caught with their pants down every time a bubble bursts.

Comments 1 - 40 of 131       Last »     Search these comments

Please register to comment:

api   best comments   contact   latest images   memes   one year ago   random   suggestions