patrick.net

Iwag says

anyone who bought homes after 1997 is getting so fucked

so...lets say its 1999...a family with 2 kids is in need for a place to live. 2 options...rent or buy. They decide to buy a CA 3bed/2bath 2500 sqft house in a decent neighborhood for $300k with a 30year fixed loan which they defy every time the interest is 1 point lower.

Explain how they are f-ed now in 2013...when the house is 800k and their mortgage is WAY below any amount that you could rent a doghouse for...HOW are they f-ed??

SubOink says

Explain how they are f-ed now in 2013...when the house is 800k and their mortgage is WAY below any amount that you could rent a doghouse for...HOW are they f-ed??

They're not f-ed.
Anyone that buys from them at 800K - expecting a repeat - is F-ed.

egads101 says

today, it really depends where you are...

Please elaborate, I live in the Yorba Linda area.

Hmmm, sounds like recently they said inventory was down, I bet after all this buying inventory is still doing just fine. Somebody I know just did a cash for keys deal with WF, certainly enough they are coming and going, but that's good, transaction costs.
You would think we would see the market wash out some, but not with these kinds of rates, and credit seems to be still loosening up. I was priced out, or taxed out myself, and don't see how others can swing it, the property taxes on the 1500 Sq./ft. home I sold are equal to about 6 months current rent, three years later.

SubOink says

so...lets say its 1999...a family with 2 kids is in need for a place to live. 2 options...rent or buy. They decide to buy a CA 3bed/2bath 2500 sqft house in a decent neighborhood for $300k with a 30year fixed loan which they defy every time the interest is 1 point lower.

Fantasy scenarios never interest me

Iwag says

SubOink says

so...lets say its 1999...a family with 2 kids is in need for a place to live. 2 options...rent or buy. They decide to buy a CA 3bed/2bath 2500 sqft house in a decent neighborhood for $300k with a 30year fixed loan which they defy every time the interest is 1 point lower.

Fantasy scenarios never interest me

...that's what I thought.

Heraclitusstudent says

SubOink says

Explain how they are f-ed now in 2013...when the house is 800k and their mortgage is WAY below any amount that you could rent a doghouse for...HOW are they f-ed??

They're not f-ed.

Anyone that buys from them at 800K - expecting a repeat - is F-ed.

It depends...if you have no choice but rent or buy you will simply look at payment to payment comparison.
In my neighborhood, rents have skyrocket. Buying is cheaper even after this runup. Except...there is nothing but one house for sale at this moment.

If house vs rent = a wash ...then...buying makes more sense IF you love the house/neighborhood and have a pretty good feeling you will stay in that neighborhood for at least 10 years. If you know that there is a big chance that your job may move to NY, you're on the brink of a divorce, may be without a job soon, want to move around then buying makes no sense. In that case buying makes no sense no matter where prices are. Some people enjoy the oakwood furnished apartment lifestyle. Full independence. Do what you want, no liability. BUT...simply speaking from a "whats a smarter financial move" its certainly not the winner. But who cares...life costs money. You can decide how you spend it. I have friends that live by that...invest in stocks and waste in rent because if the freedom of liability. But neither of them think renting is smarter than buying. It's a lifestyle choice in their case.

kashif313 says

Im not confused. Let me put it you again, if I want to buy a house to live
in...that's was the pretext of my last scenario and it has not changed. So if I
want to buy a home to live, if there is price appreciation I dont benefit unless
I choose to become a renter or downgrade. What part of that scenario dont you
understand?

You can still benefit if you sell and upgrade because you can assume that your "starter home" went up in value from 2011 to 2013 just as the "move up" home went up in value from 2011 to 2013. Assuming that both properties went up by same percentage in the last 2+ years, the gap between the 2 properties is not going to be a whole lot different compared to 2 years ago. Now if you were renting these last 2 years, the only way you could maintain this gap would be via spectacular investments results which is doubtful because normally people don't invest via leverage. That being said, selling 2 years after buying is typically not a good idea, the recommended time is at least 5 years, preferrably 7 because of commish on buy and sell. Better thing to do is to wait before "moving up", if the person is already in the market their place will move up/down over next few years just like the "move up" place, hence more or less keeping the gap in the same ballpark.

Well if you didnt want your date hacking your phone, usin your credit cards to order shit, going through your contacts list, and reading your email, then you had better not fall asleep after sex. It would be the easiest thing in the world for her/him to put your hand on the phone and unlock it while you snooze.
And what about hospital patients? Etc.

Vicente says

Dan8267
says

Selling for less than cost to run competition out of business is called
price dumping and I believe it's illegal in most states.

You really think that is enforced? It would be difficult to prove without
getting all UP IN the books. And we know the bigger/richer the corporation, the
more likely the lawyers and accountants have money & means to prevent
that.

Not to mention the free shit from the local/county government when they build a new store like turn lanes and utilities run onto the property that other businesses ever get.

My biggest complaint by far, and I have seen this happen in more than a couple of locations is the deals that Wal Mart makes with them keeping the sales tax for X amount of time. They run their competitors out of business and those businesses are then no longer generating/collecting sales tax, so the revenue from that sales tax plummets, and the taxing body with jurisdiction raises the tax rate to offset the drop, and Wal Mart gets a windfall.

Then there's the property tax abatements for 20 years, on average, and when they expire Wal Mart closes the store and builds a new store right next to it to get a new abatement. Ma and Pa Kettle across the street with a 1st or even 2nd/3rd generation business doesn't get that luxury.

Also there's the profit leak whereas the profits do not stay local, and I'm not even factoring in the rise in county services because their employees can barely afford food, but definitely not health care.

thunderlips11 says

Increasingly, Wallyworld is getting the bottom rungs of consumers; whereas
before they had a much more diverse (and profitable) customer base. With that
bottom rung base comes more security problems, as well. Walmart Parking Lots are
often huge black spots in otherwise crime free locales.

One of Wal Mart's biggest chunk of income is SNAP payments. Over half of Wal Mart's income is from food(around 53%) and in some locations 40% or more of their business is from SNAP recipients, and it's very high and common especially in the South.

The recent Farm Bill in congress had the food and farm portions of it seperated with some hard proposals to lower SNAP spending drastically. The way Wal Mart throws around lobbyist money, and the fact that the lowered spending will affect their profits, it won't ever happen. I thought that it was a ruse all along just to up political contributions, considering that 532 companies signed a petition against splitting the two parts.

egads101 says

AND... they happen to have a clear high resolution fingerprint... of the proper one of my 10 fingers...

Who needs to sneak around an pickup bar glasses, etc. I bet the surface of a iPhone -- perhaps even the FP sensor -- is a great source of fingerprints.

I bet phone thieves start holding iPhones by the edges and dropping them in little baggies.

egads101 says

AND, they happen to know how to make a fake of it, wait for it to dry and can use it to access my phone...

Impersonating people's fingerprints is pretty easy. Due to how lucrative phone theft is it would not surprise me if phone theft rings get setup to do this pretty quickly.

Oh yeah, well take this:

http://www.zerohedge.com/news/2013-09-23/housing-recovery-endgame-escalates

Another hedge fund says F it.

BE SCARED, SLUMLORDS, BE VERY SCARED!!1

leo707 says

Who needs to sneak around an pickup bar glasses, etc. I bet the surface of a iPhone -- perhaps even the FP sensor -- is a great source of fingerprints.

I bet phone thieves start holding iPhones by the edges and dropping them in little baggies.

Exactly. Fingerprints are such an obviously bad means of security because fingerprints are so commonly copied. That's why I use my dick print for security. With the exception of Anthony Wiener, most people's dick prints are not publicly accessible.

And yet you use CA and these 800k type houses for your examples...

he's already wrong.. forget about 2014..

home mortgage and sales jobs are the first to go... always are.. then new home construction.. then the restaurants will cool because there is less to talk about when your house is not making you rich... then auto sales and auto manufacturing will cool, just like in 2008 for the same reasons.. nobody really cares what you drive if you're not a wealthy homeowner any longer.... then home improvement jobs at the very end as people will do whatever they can with their remaining discretionary dollars to dress up those overpriced shacks to try and sluff them off on the next sucker... then repeat after the Fed figures how to kick prices up again.. next round won't be as easy as this one, though.. just like an addict .. need more and more junk each round to get that same high.. don't be surprised if they don't start buying homes directly from the market sometime in the distant future.. we got close this round with hedge funds.. next might be the big banks directly w/the explicit backing of the Fed and taxpayers.. its all good.. all normal .

From the article:

"With mortgage rates having risen to their highest in two years, applications to refinance home loans plunged in early September to their lowest in nearly four years"

Is the refinancing party over? Sure, rates have gone up. Is the purchase party over? Not in Denver, at least.

Refinancing business is *very* sensitive to interest rate change, purchases not nearly as much. It's obvious, isn't it?

It was a buyer's market until around March/April 2013. We were looking around that time and then all of sudden, it became "crazy" quoting my agent, as not like she had seen ever....it was the Investors with cash that were driving this increase, not your typical homeowner who plans to live there. With the huge influx of cash, othesr jumped in worried they would be priced out. Due to a personal situation, we had to drop out of the market for a while and were glad we did. Prior to that something would open and be sold the same day; we did not have a chance.

Now, homes are sitting, price reductions, and per my agent again, it 'dropped dead'....

So it may take a little while, but those that 'have to sell' will see a price decrease if they don't price their home at a good price.

I do not know if this will create a 'crash'; that remains to be seen. It will probably return to what it was like before the "frenzy" i.e. around January of 2013.

But it depends how much 'money' was keeping this afloat by the investors and if they cannot get anyone to buy their portfolio, then they will need to sell their portfolios...and that will create a major downturn if all that inventory comes on the market to "sell"....

We'll see.....

It's OK, the slope will never go negative. Etch the plus sign in your granite countertop.

See, everybody's playing nice.

In 2011 a Real Estate blogger in Seattle called a "bottom" to the Real Estate market. It caught on while the Fed started operation twist to drive down interest rates: http://www.npr.org/blogs/money/2011/09/21/140643696/operation-twist-explained-in-4-easy-steps

If you look at all the charts, and graphs you see a pretty steady increase in Real Estate pricing until the spike we had fro 1998 to 2007. Pick a chart any chart.

Then we had Case Shiller, at the "top" of the market come up with an Index of housing prices based on 20 Metropolitan areas.

What that did is set up a Zillow like scheme where the price of housing could be determined by the average person so they can buy mortgages.

Mortgages are the name of this game. That paper, those loan documents, become the financial instrument used to show those financial products are a safe investment.

We'll there is no top, or bottom to the housing industry. A Real Estate transaction is a personal thing between to consenting parties. The seller can have any motivation they want, but the buyer usually wants the best deal they can get, or that is the way it used to be.

Now buyer go crazy with internet searches, statistics, and data, like the were day trading stocks.

Stock usually come with a buy in the gambler can afford to lose, a home comes with a 30 year debt, for the price paid.

I've pointed out a number of times that the price of housing compared to wages, not wealth, but wages, is way out of whack, no matter who pays the ratios. My first sets of purchases were at a little higher than my yearly income, and I had to prove it. Now housing is three times the yearly wages buyers are brining to the table, some times more.

If we were in a period where we could generate hyper inflation, great, but I think we can all see that isn't coming.

All we have now is another mess to unwind.

Give me equity or give me death!

That's the key to preventing the revolution.

Prices can never go negative because real estate is a worldwide market now. It only takes one.

OK, sure, they can go negative in the very short term, but long term it's nothing but up, up, up!

All you have to do is zoom out enough to fit the point you're trying to make! lol

Seriously, who needs a mortgage anymore?

If you can't pay all cash, there are plenty who can. It's different this time.

Well, there is no discussion with three years of Real Estate hind sight.

Everything you are asserting is wrong, and misdirected.

You didn't address anything in my comment, but I will pull out a tid bit you keep missing.

Some sellers just want to sell. It's called diminishing returns, and obsolescence.

That differs from some stock that the individual has no control over.

Bob, if you have nothing to say, just move on.

exfatguy says

Seriously, who needs a mortgage anymore?

If you can't pay all cash, there are plenty who can. It's different this time.

There are millions of cash-flush twentysomethings positively salivating over the deals we're seeing in housing right now.

There will never be a better time to buy - it's different this time!

The mathematical trend is for them to go negative. That is what is meant by phrases kike "growing more slowly. So ,egads, are you saying that trend won't continue and that, instead, prices will steady or trend up again suddenly for several months? I'm not a permabear. I just think some of us are saying the trend will continue because we can't think of a reason for it to stop.

egads101 says

FunTime says

The mathematical trend is for them to go negative. That is what is meant by phrases kike "growing more slowly

No, it is not. Any more than a skiier going down a fast part of the hill, who then runs into a less steep part of the hill.

His vertical velocity decreases. Is the mathematical trend for him or her to start going up the hill?

The oracle outlined what it took for prices to fall: HUGE supply/demand inequalibrium. Do we have that? Hell no, we still have historically low supply. AND, adding gas to the fire were foreclosures. Do we have increasing foreclosures? nope, they are literally vanishing.

Prices higher in September of 2014 compared to September of 2013.

yes

Lacking more information, one might say it is an unlikely outcome because of gravity.still possible if attached to a rubber band, for example.

bay area home prices dropped year over year in august from 2012 to 2013 and that was with lower inventory and better mortgage rates

some liar is about to get exposed

egads101 says

The oracle predicts homes will be several percent higher, in September 2014, than they are today.

saved

this way roberto cant go back and try to change his shitty prediction

Call it Crazy says

egads101 says

However, it is quite moronic that most permabears on here, which is the majority on here, seem to think that it is inevitable to go negative.

Like that didn't happen before a few years ago??? Weren't realtors saying in 2006, real estate ONLY goes up??

Who can ever forget ben bernanke in 2005 - I guess I don’t buy your premise, its a pretty unlikely possibility, we have never had a decline in housing prices on a nationwide basis

Here is the video: http://smaulgld.com/the-dark-side-of-rising-home-prices/

Call it Crazy says

egads101 says

oh no! the value of homes is going up, but more slowly? what ever will I do?!?!?!

Hmmmm... looks like the trend line has the seasonally adjusted numbers back to the same point as August 2012. But, CS reports as of July 2013, so add two months to the trend line for today...

Want to guess where it is now and where it is going??

Just FYI, since that is a rate of growth chart, its helpful to put that in terms of numerical values and you will see what a nothingburger you get for going slightly below the line in Oct & Nov 2012. For an apples to apples comparison here is how that chart (CS-20) played out, as well as the 6 months prior...

Month.............Value
Feb-2012.......134.08
Mar-12............134.07 (FYI, this is the bottom)
Apr-12.............135.98
May-12............139.20
Jun-12.............142.36
Jul-12..............144.58
Aug-12............145.81 (this is where your chart starts)
Sep-12............146.21
Oct-12.............146.02 (the Oct drop--still higher than Aug 12)
Nov-12............145.81 (the Nov drop--now same as Aug 12)
Dec-12............146.08 (prices rising--never saw Aug 12 again)
Jan-2013.........146.19
Feb-13............146.58
Mar-13............148.56 (rate of growth increasing)
Apr-13.............152.38
May-13............156.15 (rate slowing, still far above Aug 12)
Jun-13............159.54(rate slowing, even further from Aug12)
Jul-13..............162.49 (last value on your chart...)

So forgetting for a moment that the bottom was @134.07 -- if you were telling someone to buy, when on your chart was a better time --

Aug 2012 when prices were @145.81?
Oct 2012 when prices were slightly higher @146.02?
Nov 2012 when prices were falling but now even with Aug @145.81?
Today (i.e. Jul 2013) when prices are @162.49?

Bottom line, as you can see, with prices now @162.49, the trend will need to go from slightly negative to resoundingly negative to smash through the 145.81 value at the start of your chart-- to say nothing of the 6 months earlier bottom @134.07

Also, before you get all angry at me -- yes I realize these are not actual home values - just (like all indexes) representations of the underlying values. Also, yes this is not any particular city or any particular house...its simply the CS20 where (to my knowledge) your chart is derived. That said, if you wish to have a constructive debate on the merits of what I noted, please let me know.

Also, I just noticed your comment was regarding the seasonal values, whereas my numbers are the non-seasonal. I can re-create my post with seasonal values if you like, but I can tell you now, you wont like that result much either.

Edit - actually, I just looked at it -- you will like it less.

Call it Crazy says

CDon says

Also, before you get all angry at me -- its simply the CS20 where (to my knowledge) your chart is derived.

Two, things.....

First, It's not MY chart... it comes from S&P/Case-Shiller and was posted on MarketWatch... But thanks for giving me credit....

Second, I made reference to future trend lines of the chart, not actual points on the line, since CS lags by a few months....

Call it Crazy says

Want to guess where it is now and where it is going??

Noted on both points. And I appreciate the civil response.

That said, you see what a herculean task it is going to be to get from where we are now (2 months ago) @162.49 all the way back down to the beginning of that chart @145.81 don't you?

I've noticed quite a few price drops in MLS listings lately, property taxes are moving up again as well. I live in a condo community surrounded by a rental, walked over to one building the other day and they had 9 keylock boxes in a 42 unit. Even so, the RE market in my area is red hot, home buyer class attendance is up, sales up 17% yoy, and statewide median price - up 9%.

I think prices are moderating, or checking up because most of the action is in the summer months, and that time is over. Watch for listings to fall off the MLS and re-appear come spring time.

It's going to be a long cold winter, time to hibernate for a bit, save up, or come up with a down payment and with no tapering on the horizon, and if interest rates stay the same or fall back a bit we should be off to the races come spring time again.

The other data is tough to sort. Thats at least part of the reason we have differing views. Part of the reason supply is low is that investors have bought a signifcant number of houses. I know you(actually I'm not sure I've read much of your writing here) will say they've not bought enough to make a difference but I disagree. Investors will see those purchases in bulk. They won't mess around with individual houses for long. Thats why articles reporting on the issue often mention the Fed buying mortgage backed securities. Investors are watching that and if it looks lije free lunch is going away they'll go eat sonewhere else by buying another investment type.

FunTime says

Part of the reason supply is low is that investors have bought a signifcant
number of houses.

According to this article from March 2013: "Here in Orange County, nearly every home listed for less than $400,000 "is being pursued by institutional investor capital," he said."

I can't imagine why Los Angeles County would be immune to the same.

http://online.wsj.com/article/SB10001424127887324034804578346800317118568.html

John Bailo says

It doesn't matter housing goes up a bit or not.

The question is whether it goes up a lot in relation to other investments.

If not, then the impetus to buy is nil.

A person living in a low cost apartment, socking away money with some of it in Facebook, will be able to easily afford to buy something better later on and not have to get rid of a white elephant like the house his Dad and Mom are stuck with.

Liquidity is the goal of Gen M.

Facebook Inc
NASDAQ: FB - Sep 24 7:59pm ET
48.45+1.26 (2.67%)

As they said in The Office:

...I would buy one with thicker walls...

Speak for yourself there. Its interesting, in 2005-2006, some bull would gloat about the appreciation of their house, to which a bear would reply:

"a house is a place to live - NOT an investment"

With what you are saying here, the shoe is on the other foot...how ironic.

That aside, if you need housing to beat all other classes of investments before you buy, you will never buy, nor should you. Most people believe housing is basically an inflation hedge, and nothing more. Yet, if $$$ is the end all be all for you, go with growth stocks, and rent as cheaply as you can for the rest of your life.

Now all that said, there are (or at least were) a bunch of moderates here, who could afford a decent place, but were terrified to buy in large part because of bears like you who continuously said 2009 was "nowhere close to the bottom," and ever since then, its been nothing but crash crash, CRAAAAAASH!!!!! Case in point, look at what you posted here 2 months ago:

http://patrick.net/?p=1227587

You even had the temerity to add your own hyperbole based headline Crack In The Dam: The Flood Begins ...as if years from now, we would all look back at that one house in Kansas and say, Boy that John Bailo - he really nailed it there... that really was the beginning of the flood we all were worried about since 2009.

As it stands, it is now 2 months later, and that "Crack in the Dam" is looking as merely the latest in a never ending stream of nothingburgers from the bears.

And this is precisely why the 20:1 soccer score ass kicking is so appropriate here. You can try to reframe the debate as to "which investment will do best" if you so choose. But if you do, you cannot also post such irresponsible threads as the "CRACK IN THE DAM" and not expect people to call you out on it.

Say hey! This was in the Wall Street Journal on March 30, 1999:

Holy cow/interesting/compelling ...!

And where is it up to date??? Right here ... see the first chart shown in this thread.
Recent Dow day is Tuesday, September 24, 2013 __ Level is 98.0

WOW! It is hideous that this is hidden! Is there any such "Homes, Inflation Adjusted"? Yes indeed, go here:
http://patrick.net/?p=1219038&c=999083#comment-999083