patrick.net

Honestly, I will not be surprised to see $5 gas next summer.

Hi Zephyr,
Is it possible this k-wave might end (if it has not ended yet) with a conflict over the control of oil?

Glad to see you posting again Zephyr.
Ditto.

Double-ditto on that. Even when we disagree, your responses are always cogent, thoughtful and informative. A welcome departure from... oh, I don't know... a certain poster who monopolized the board's attention for far too long.

Btw, the improvement on the quality of posts and volume of participation post-MP has exceeded my expectations. If I had known the impact would be this great, I would have banned him a long time ago --even without a vote.

Btw, the improvement on the quality of posts and volume of participation post-MP has exceeded my expectations. If I had known the impact would be this great, I would have banned him a long time ago –even without a vote.

The difference is obvious and even more substantial than I would have thought. But it was impossible to know until after the fact. Kind of like the bubble we've spent so much time talking about. ;)

Tonight I have been unable to stop watching the Weather channel. Tomorrow (today) will be hell. But it is now way past my bedtime.

Given that we were talking about Lereah and his book, I thought I would leave you with an article that is primarily based on comments by Dr. Shiller of Yale (author of Irrational Exuberance).

http://www.foxnews.com/story/0,2933,166561,00.html

Thanks, Zephyr. The Fox story did a surprisingly good job of laying out and supporting Schiller's arguments (Fox isn't exactly known for being bearish on much of anything). It even went so far as to all but rule out the "soft landing" scenario.

Writing's on the wall people. The ending to this asset/credit bubble will not be pretty.

Area with a high population density tend to vote more liberally and seem to be the areas most affected by the housing/credit bubble. It may be a function of population density more than politics. It is an interesting observation though.

This just in…

David Lereah has denounced all U.S. weathermen for claiming that Hurricane Katrina could reach New Orleans. He characterized anyone predicting widespread flooding as “Unsophisticated, the type of people who live in bunkers and wear tinfoil hats.” He is recommending that everyone on Bourbon Street return to “partying as usual” and pay no attention to calls for evacuation.

Stanman --I'd say any correlation between liberal-majority "blue" states and areas of extreme bubbles is more a function of them having large cities than anything else. As SactoQt said, "It may be a function of population density more than politics." If you have a low population density and that low land-to-home value ratio mentioned in the "Land Prices" thread, it's very hard to get enough demand/momentum going to sustain much of a housing bubble. I.e., smaller herd = smaller herd effect.

Californians do tend to be an odd bunch, but there are plenty of right-wing (End-of-Days a-comin'/ZOG-Illuminati conspiracy) nut jobs in the South and Midwest. Trust me, I've lived in a number of red states.

"also keep in mind that the last bubble burst at the time Clinton was elected."

Not quite true. Clinton didn't get into office until January 1993. Most of the bubbles that burst in the early 90s had already begun by that point during Bush Senior's administration. California's began in late 1990.

Lereah has been accurate. Those who disagree with him have been wrong so far.

For now, I think the jury can be out on Lereah. After all, his advice should be judged by whether it produces long-term financial benefit, and not just some paper gains over a few years. And, perhaps some damning evidence is already emerging?
Still, as someone who works in educational publishing, I can take issue with Lereah's lack of objectivity. Consider statements from his book like "...those [real estate] opportunities will continue to exist throughout this decade and clearly into the next"; how is this proven? Reading an excerpt, I see the book is rife with optimistic forecasts and manipulative wording, such as insinuating that paying off your mortgage is an unwise financial strategy, etc. The book reads as boosterism; there's little cautionary balance to this glowing forecasts for RE. If we published such a weak book, it would be a dark stain on our company.

Yet, Lereah is just one of thousands of authors in the retail market who pen half-baked schemes towards finances, dieting, relationships--you name it. In retail, unfortunately publishers don't care it it's accurate--only that it sells well. Books are rushed to the press with less critical consensus. It does suck that such books get printed and mass-marketed, but if people buy into his nonsense, ultimately they only have themselves to blame.

What I want to know is where was Lereah's book say 10 years ago in 1995? How come seemingly nobody in the mid 90s foresaw what was about to be the greatest real estate boom in our lifetimes? Point being it's very easy to be bullish when things have already been bullish for so long. Where was he when nobody was boasting about the value of their properties when there was nothing to boast about?

"Yet, Lereah is just one of thousands of authors in the retail market who pen half-baked schemes towards finances, dieting, relationships–you name it."

Very true. If all those diet books really worked, we'd be the thinnest nation on earth, but instead we're the fattest. Hmm. If all those books about finances really worked, we'd be the most financially sound nation on earth, but instead we're in over our heads in debt. Hmm.

Publishers just want to publish something that will sell. Real Estate is hot right now (at least in the minds of many people), so a book about the red hot real estate market will sell. The usual way of selling a non-fiction book is either to say something controversial that lots of people will want to read, or to say somethng popular that lots of people will want to read.

What I want to know is where was Lereah’s book say 10 years ago in 1995? How come seemingly nobody in the mid 90s foresaw what was about to be the greatest real estate boom in our lifetimes? Point being it’s very easy to be bullish when things have already been bullish for so long. Where was he when nobody was boasting about the value of their properties when there was nothing to boast about?

*DING*

Perhaps publishers will sell books in boxed sets. I see Mr. L's book in the same box as Dow 36000. It will be something like Comical Economics.

It amazes me that paying down your debt is now called "unsophisticated."I wonder what Lereah will call bankruptcy in the near future, "trendy" perhaps? "Superior financial management" He's going to have to think of some positive spin as he guides the masses into rampant financial indebtedness.

FYI: Patrick fixed the average rents graph last night (so it shows the year):
patrick.net

And he alphabetized the average rents by City table:
patrick.net/cache/rankrent.html

Hmm... novice investors initially unwilling to cut prices as the market turns... even at a profit!

Greed is now impairing their decisions.

I have it currently listed at 389,990 much lower than the 400 I expected.
Hmm… novice investors initially unwilling to cut prices as the market turns… even at a profit!

Someone @ "richdad" should tell him to sell to break even--he'll be lucky to do that.
Looks like a great site for a bear to lurk, hehe.

In case you needed any more evidence for NOT trusting anything Mr. Lereah says, here's some more:

Apparently David's not so new to the investment book-writing game after all. He published this gem back in June, 2000 (just as internet stocks were tanking):

"The Rules for Growing Rich : Making Money in the New Information Economy" tinyurl.com/a55qc

As one reviewer put it, this book puts "unlimited faith in Internet related stocks that would have had you buying and holding leaders at the price peak in 2000, and subsequently losing over 80 plus percent of your money."

MORAL: Whenever David Lereah writes an "investment" book about a particular market, get the hell out of that market --fast.

I have no idea why "investors" all expect to be able to sell at an expected "peak" value. Market goes up and down all the time.

Perhaps they are taking real estates never go down literally.

@KurtS,

Someone @ “richdad” should tell him to sell to break even–he’ll be lucky to do that.

One of the posters did exactly that --the guy just ignored him!

One of the posters did exactly that –the guy just ignored him!

Soon enough he will be asking for advice to break even - when the market is down 20%.

When greed and stupidity go together... we should just watch and entertain ourselves.

As one reviewer put it, this book puts “unlimited faith in Internet related stocks that would have had you buying and holding leaders at the price peak in 2000, and subsequently losing over 80 plus percent of your money.”

Seems Lereah is one to jump on whatever is hot at the time. The fact that his book was published a couple of months after the tech market crashed shows that Lereah isn't a great prognisticator, he's just someone who writes a book whenever there's a mania. Like I said before, he's gotten lucky on the RE market. Right place right time, nothing else.

"Like I said before, he’s gotten lucky on the RE market. Right place right time, nothing else."

Yep, that's why he waited until 2005 to get this book published! Like I said, if he had writen the book in 1995 then I would be VERY impressed.

That guy in Sac is hilarious but not unique. I posted before about a friend of my husband's who recently sold his home and now the new owner thinks she can rent the house for $1500 or higher even though bigger homes in the neighborhood are renting for less. And even if she gets the rent she wants she'll still be negative cash flow. I can't figure out how she thought this was a good buy. The market is slowing and there is no way she'd get more than she paid for it, and it's not good for cash flow as a rental. What was she smoking when she bought the place? Oh and to add to the mix, my husband just told me that 2 sex offenders live on the same street. That ought to add value to the property. :eek:

read The Tipping Point by Malcolm Gladwell

Just started "Tipping Point". "Blink" was very good.

Also, the new developed homes seems to have a much higher demand than the homes on the resale market. The builders have been sold out month after month, but homes on the resale market has languished. I've undercut the builders price and still have had problems with selling the house.

I find this quite interesting, as well, because I have read other articles where the resale market is doing better than the new homes. I guess it's really tough to figure out which way the pendulum is going to swing.

I think, the market has come down for sure.

Most of the homes looks like staying in the Market for more than a month. It used to be days before in this area.

TestMe....

That is definitely what's happening...in a lot of areas, my friend. You will do well to do a little homework quickly in order to sell, even it means setting a lower price. You are on the down side of the peak, which is not a good place to be right now.

BayQT~

Jack,

*DING*
The @“richdad” thread ends with the flipper doing EXACTLY as you predicted. Sad...

I have been trying to sell my condo for the past 2 months in Fremont,CA but no luck so far. I think, the market has come down for sure.

TestMe--good luck; I hope it works out for you. If volume's high in Fremont, you might consider Jack's advice--and not chase the market down (imho).
I'm also actually rather surprised at turnaround; I thought sales were still brisk in S.Bay.
On the other hand, I've noticed more "for sale" signs last weekend down there--if that's any indication.

October surge

Surge in ___?

(A) interest rate
(B) inventory
(C) bankruptcy
(D) All of the above

they end up losing far more money by being stingy with too-small, incremental price reductions, often doing nothing more than following down a dropping market. At this point they are still practicing need-based pricing and STILL not being realistic.

That whole scenario is being played out by sellers of a Dublin townhouse I have been watching. On the market in April...didn't sell for 2+ months....dropped price, uh, a BIG $2,000....recently took it off the market. Perhaps they were just sniffing around to see what numbers would come in. Perhaps not.

BayQT~

October could well be the beginning of the end for some areas, and actually show a surge for others. (IMHO as they say)

I wouldn't be surprised. Some might see a flattening/drop as the "low" and buy. Possibly old news, but reminds me of the conversation overheard "London RE is low--time to buy is now!"

Or is it that you just like the way “October” looks in print Peter P?

I just have a weird feeling about October.

Jack,

Actually it is a current thread. The last post (today) is from the flipper, making his final decision:

"Looking at this situation from a business perspective, I have decided to keep the [house] on the market empty until the end of Labor Day Weekend. If I don't get an offer by then, I will go forward with renting out the house and refinancing the loan at a better rate."

In previous posts he also said he was "losing about 2K a month" in interest ALONE. He also said that the most he could get in rent was $1200-1500/month.

Wow, with a "business perspective" like that, he should be working for Worldcom.

Probably some of everything will happen, everywhere. (How’s that for a cover-my-ass prediction?)
Well, at least you're have no responsibility in this scenario, so your CYA has "equity." ;)

The slowness is going to be excruciatingly painful, now matter HOW it plays out.
Yes, I agree people will generally "chase the market all the way down." Gloating all the way up = whining all the way down? I can see the IJ headlines now...

Just got a visit from some former neighbors down in the DC burbs. They are waiting until their son graduates next spring to sell.

They were very curious about why I had sold in such a rush, etcetera.

I then noted that the inventory in Fairfax VA was up about 25%+ relative to July 04. I then felt bad. I don't gloat, generally. I just do my happy dance by myself in the bedroom with the lights out. But I felt like I had just inadvertently stuck it to them.

They are retiring and movign to a bed and breakfast in Viriginia - the real Virginia. They both had a hint of fear on their faces. Then they reassured themselves - "oh the market will still be good in the spring."

Yeah, maybe, maybe not. For folks like them, who are selling out for the last time, coming in 18 months after the peak can make the difference between steak or burgers once a week for the rest of their lives.

Anyway -
Hey Praet, good to hear from you you English guy!
It is sad.
People already talking about "rebuilding" New Orleans. How about, it's time to go? I like the idea of chicks boobs out everywhere, and all that, but moving is a huge pain I only want to do once again. Rebuild? No thanks.

Gloating all the way up = whining all the way down

I am so surprised that flippers/sellers are whining already. It is like someone complaining about water being too warm in a cannibal's pot, not knowing what is going to happen next.

Rates do not need to hit 7%... people are already stetching themselves thin with 1% NAAVLPs.

Jack, now that MP is gone, are you more of a bull or a bear? Or an optimistic bear? Or a cautious bull?