patrick.net

@SFGuy,

As you can see from my posts, I agree. I've realized it can actually be fun pushing the buttons on these trolls and expecting the cliche'd responses. I've got work on the computer to do this afternoon, anyway.

What should we try next? Should we see if we can elicit the, "they're not making anymore land" argument? Or how about, "the BA is special" argument? Or "there are more companies hiring in tech these days?" Or "traffic on BA freeways is worse - must mean housing prices will go up?" Or maybe, "rents are going up - what's a JBR to do?"

@SQT,

C'mon, but we're having so much fun here!

This thread just smells of sheer desperation on the poster's part, and on ConfusedRenter aka FaceReality's part.

@ConfusedRenter,

Hate to crash your "double take" party, but the Moody's predictions are (a) predictions (someone's opinion), and (b) wrong. They predicted for Boston, MA a decline of -2.2%, with a peak in 2nd qtr 2006 and a trough in 3rd qtr 2006 - WTF?? Boston has already declined (hard facts) 6-8% in nominal terms, even more in real terms YoY, and they are continuing to slide. I've got an idea, why don't we take all the cities they predicted a decline in where the trough has already passed, and let's see what prices do from here on out?

I guess I missed the "take RE-friendly organization predictions and use them as fact" argument in my list. Nice one.

I literally did a double take when i saw San Jose dead last, and looked at the dates they were forecasting peak and bottom.

Don't give yourself whiplash there, laddie!

CR:

I'm going to grow old with the interest from selling last year paying my rent for the rest of my life. How about you?

@ConfusedRenter,

Off to a concert, or did you run out of options from your "Standard Realtor(tm) Replies to the Bubble Crashing Argument" list?

The point is, there’s no crash people are talking about.

Oh, and I forgot that one too - the one you, aka FaceReality liked to use in previous posts: that people on this blog have been crying wolf about a crash for "years" now, and look, no crash! Whew, dodged a bullet. Now let's all get back to flipping homes again!

@SFGuy,

We'll have to settle this one later. Too bad about CR's "concert."

SFGuy- Wow big earthquake in Hawaii! I'm watching the live feed from KITV. Ice is probably the thing to have since electricity might not be on for at least 10 more hours.

thanks! I take it back. You’re not a party-pooper. Only Randy is! A koi pond on his dream craftsman then!

LOL! For that alone I vote to leave the thread in tact.

SQT, how about we let it run it's course then close it to comments; maybe in a day or two.

The first 10 years of that loan is I/O and then it’s a standard 30 year after that but the interest rate doesn’t readjust.

Wait, there's more!!??!!

That's a nifty loan product - it's designed for "buyers" who are banking on assessments continuing to rise to build equity (you're certainly not paying it off for those first 10 years), planning to sell within 10 years in an increasing market, or for massive inflation to eat away at the mortgage amount.

There's two types of buyers; one who is looking at the numbers and the other is driven by ego. I guess, in some way, I'm wearing both hats. On this purchase I'm going to squeeze out every dime I can from the seller and can "offer abuse" almost anyone. However, if "THE HOUSE" pops up, I'll pay whatever's necessary, including an above list price offer. Here's the check; now get your ass out of my house....

I'm not going to resell so I really don't care what the market does in the next 10-20 years. I suppose that puts me in the scumbag boomer category.

Not being arrogant......just explaining why people do such strange things like pay more than asking. Whoever spent $1.8 in the Marina, decided they were going to buy the house and screw the economics.

If you weren't such an a$$ in your post, I'd wish you good luck. When you see SFH on sale in 4 years for the same price you paid for your condo, don't say you weren't warned. Maintenance fees... mmmmm.

For the record, we're all thinking of buying, otherwise why else would we come here to gather data? I have to offer that since you're in an I/O for the next 10 years, your fear of a housing failure will likely grow, not shrink, now that you've bought. By jumping in, you've committed to bullish camp and thus you must disparage the bears and pray that you are right.

Enjoy the water. I hope you brought your snorkle.

...the whole point of this thread is to stop trying to time the market. stop trying to wait for a crash.

The whole point of my advice is to wait.

The whole house of cards depends on people who populate the weltanschaung of this blog capitulating - it will buy one more spring for the truly wise to unload.

I vote this guy is trying to sell, and in all his spare time found this blog.

Economic pain is necessary in the housing market to restore fiscal balance to society.

No way I would pay $600,000 for a townhouse. That sucks.

akr:

Congratulations on your new long-term townhome rental with donwside price risk and maintenance costs!

Who was it that said "buying now is like taking an FB's head out of the hangman's rope and inserting your own"?

Please! Please let me take your place in the electric chair of debt!

akr:

What's the same townhome in the same location renting for in the traditional sense?

SFGuy Says:
…..decided they were going to buy the house and screw the economics.

That’s totally legitimate if you can afford it.

I know what you mean, but being able to afford it does not give you license to be stupid.

SP

akr and CR are probably the same person

can someone check IPs and ISPs etc?

If this akr's story is legit, then I too feel sorry for him and I'm saddened by how little he learnt from this site. He and his family are buying a home they cannot truly afford. They will see their savings and living standards suffer for many years compared to renters with similar income and family structure.

And akr better hope that his job position is permanent and smooth financial sailing for the next ten years. He's placed himself in a very precarious financial situation and will have a much harder time staying afloat than if he had been a JBR.

astrid Says:
If this akr’s story is legit, then I too feel sorry for him

Don't bother. If the story is true, then this guy is a GF who has bought into the notion that he is 'living life on his own terms' - by taking out a suicide loan to buy a depreciating asset at the peak of a market cycle. The separation of a fool and his money is predestined, and is not a cause for concern.

Posting here to 'prove' his maverick-hood, is nothing more than whistling past the cemetery.

SP

If this akr’s story is legit, then I too feel sorry for him and I’m saddened by how little he learnt from this site.

This guy gets to enjoy his home. If he is comfortable about the purchase, there is nothing wrong and nothing to be sorry for.

I feel sorry for vegetarians.

All else being equal, a 40 yr is a better deal than a 30 yr at the same rate.

If it does not have prepayment penalties.

Huh?

Who added the graphic? Excellent work.

Whatever happens happens. i’ve just chosen to live my life by a certain set of rules and feel that i’ve compromised myself by listening to those who, in my view, have an irrational fear of losing everything.

Yes, terrible the way the data-driven views expressed on this blog have so horribly warped your vision to the extent that you waited a WHOLE YEAR before realizing your dream of lifelong debtorship, using a 10/40-year I/O lead anchor. If you had taken the leap last year, you could easily have paid an additional 15-20% more than today. Who are WE to caution you against strapping those weights to yourself and jumping overboard.

Such hubris... I am truly ashamed for my lack of "vision" and impulse. I always insist that economic fundamentals justify price and make sure the purchase "pencils out" for my budget before leaping. I am constitutionally averse to accepting soul-crushing debtloads on a whim, without some form of risk-reward calculations. Clearly, I am mentally defective and am gripped by irrational fear. The fact that buying now may saddle me with an illiquid albatross near the peak of an enormous bubble is irrelevant.

Thank, you for setting me straight, "akr" (twin of Face Reality?)

Btw, thread graphic courtsey HARM-X Industries, Ltd.

@jose,

Huh?

Long CD and short MBS, anyone?

H.Z., some months back we have several threads on arbitraging & hedging against the bubble (RE-proof 'safe' investments, shorting, ETFs, futures, options, etc.). I don't have all the links handy, but if you peruse the archives (pre-April 06), you might find some useful information.

@jose,

Thanks for your "clever" commentary on the how renters are REALLY dumb. We get it. Let's move on.

Low cost shorting for individual investors is the hard part.

Are there MBS ETFs?

Suppose there are, but can you invest the short proceeeds without paying margin interest?

I think it depends on the broker. 2x margin is probably not enough on the short side anyway.

@jose,

Your crushing satirical piece on the mindset of a renter has pushed me over the edge. My sense of my own manhood is so threatened that I'm now girding my loins to sign on to a 10/40 for a condo lest I be considered dumb. Thank you for your clever ad hominen argument. It deftly and elegantly counters the over-reasoned economic arguments presented here that favor of renting. Why think rationally when steely resolve and courage are all that's needed to make million$ in real estate?

Here's my wallet, RE agent. Sign me up, devil the cost.

With a fixed return of 6.5% wouldn't there be a significant opportunity cost exposure to interest rates? At some point you would be better off not taking on the debt to CD purchases and instead investing the alternative cash flows derived from not paying on the debt at a much higher return. I don't think this is a pure arb. And it's definitely not worth the complications for anyone with less than a couple million to plow into the game.

HZ

I understand. So it is a pure arb excepting t. And the t risk is purely a variable -v- fixed risk, so it could be plugged with an additional hedge.

Say one borrows 400K at 5.8 and buys CDs at 6.5 resulting in about 2800 a year in free money, minus tax complications.

I wonder what is the after-tax rate differential though.

For those who cannot maximize mortgage interest rate deduction, this does not worth it at all.

Moreover, taking a HELOC to buy securities (CDs) may not be deductible under AMT.

t is not really that big a risk, because if the ARM goes up, you can always cash the CDs early and pay off the loan that way.

You are risking losing some of your gain though.

Doh, didn't mean to post my name on that. Can you change me back to "Jimbo" on that post before Google grabs it?

I am not trying to hide or anything, but I try to keep my name off of Google, especially when posting something controversial. You never know when a future employer might go searching for something...

cd's are callable? Has this ever happened? I dont understand.

DataQuick "Bay Area Home Prices Decline"

http://www.dqnews.com/RRBay1006.shtm