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I used to read patrick.net back in 2011 and this "hard hitting" analysis scared me from buying a house. Housing prices have doubled since then.
This website has been calling the market a bubble for years. Is it really a bubble if the prices never come down?
Hello,
Should investors of HOA foreclosures be liable for tax on the "cancelled debt" COD of the mortgage since the super-priority lien foreclosure extinguishes the first deed of trust? Recently in the news - a Nevada $800,000 home was sold at auction to investors for $6,000 - this sounds like highway robbery.
Thank you.
Hello,
Could investors of HOA foreclosures be liable for tax on the "cancelled debt" COD of the mortgage since the super-priority lien foreclosure extinguishes the first deed of trust? Recently in the news, a Nevada HOA foreclosed on an $800,000 home over a $6,000 lien. Investors snagged it at auction for around $6000. Doesn't this sound like highway robbery - shouldn't investors be paying the cancellation of debt on the $800,000 mortgage?
Thank you.
Hello,
Could investors of HOA foreclosures be liable for tax on the "cancelled debt" COD of the mortgage since the super-priority lien foreclosure extinguishes the first deed of trust? Recently in the news, a Nevada HOA foreclosed on an $800,000 home over a $6,000 lien. Investors snagged it at auction for around $6000. Doesn't this sound like highway robbery - shouldn't investors be paying the cancellation of debt on the $800,000 mortgage?
Thank you.
Not highway robbery. It was the banks who failed to pay the HOA fees. If the bank had done the right thing, it would have not lost the house. I wrote a satire about it on my personal blog at Talkmarkets: http://www.talkmarkets.com/contributor/gary-anderson/blog/humorsatire/nevada-supreme-court-forces-us-bank-ceo-to-bend-over-and-take-it-in-the-shorts?post=70873&uid=4798
Even though this article was not one of my 48 approved articles at Talkmarkets, it still managed to accumulate almost 1000 views.
You guys are talking about a very very narrow case. This only applies to a few thousand houses/condos in Nevada. When the Nevada legislature wrote the HOA super priority law it was poorly worded and actually inadvertently (obviously not the intent of the legislature) allowed an HOA foreclosure to extinguish any other loans. The next session of the legislature (Nevada only meets every 2 years) fixed the wording. So yes investors who bought in that narrow window can theoretically extinguish all other loans, but it still hasn't happened 2 years after the statute was rewritten. The issue is still being fought hard in the courts, the current battle is if the wording of the statute was constitutional. No one has gotten quiet title on any of these properties to date.
If the courts should happen rule in favour in the investors all the way down the line some day there is no legal basis for tax liability for the investors. The auction by the HOA extinguished the loan, the investors bought at the value of the tax auction. There is no debt forgiveness involved. A foreclosure doesn't forgive the debt, the bank can still pursue you.
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Can I give you my SSN too? Maybe after I apply I can also let you give me a swift kick to the nuts.
You can contact him true this (redacted) because I am now a happy woman
Don't bother Rajan. Lots of dumb people on this site, just not dumb enough to fall for your scam.
We live in the Bay Area. Our rent is constantly going up. We are now looking to buy. We can only afford about $465k. Our mortgage will go up because of the size home we need however if we continue to rent the IRS continues to screw us in taxes every year. Talk about being trapped. We rent we pay a lot on taxes. We buy we pay more in mortgage. What do we do? I think buying now is our only hope.
We live in the Bay Area. Our rent is constantly going up. We are now looking to buy. We can only afford about $465k. Our mortgage will go up because of the size home we need however if we continue to rent the IRS continues to screw us in taxes every year. Talk about being trapped. We rent we pay a lot on taxes. We buy we pay more in mortgage. What do we do? I think buying now is our only hope.
You buy and prevent your monthly housing payments from going up.
Interest rates are 3%. If your home appreciates 3%+ you are getting paid to own a home.
Interest rates are 3%. If your home appreciates 3%+ you are getting paid to own a home.
and if your home depreciates 3%.....
What do we do?
use a calculator!
http://www.nytimes.com/interactive/2014/upshot/buy-rent-calculator.html
do not fall into the trap of assuming unrealistic appreciation.
Last time you posted this, million dollar homes in the bay area went on a tear to becoming 1.5 to 2 million dollar homes....
***NEVADA STEALS HOMES****
Please DO NOT buy in NEVADA HOMEOWNERS' ASSOCIATION. Many states (like NEVADA) engage in THEFT/DEPRIVED DUE PROCESS by using SUPER-PRIORITY LIENS to FRAUDULENTLY FORECLOSE on homes.
f you want to defend your home from ILLEGAL FORECLOSURE in NEVADA, you must go through EXPENSIVE FORCED ARBITRATION.
If you cannot afford arbitration, you will lose your home. Not legal advice, so, please discuss first with an attorney. AVOID HOAs at all costs! Good luck.
Patrick,
I haven't really been on here since the crash of the last bubble. You called it, everyone here called it...
But, here we are again and it's worse this time!
Since the last time I posted I've gotten married. I have had a promotion or two and my income has increased somewhat. I still live in Oakland and I'm still renting the same apartment I rented as when I was active here. Yes, he moved in with me. We live in a small one-bedroom apartment by the Lake in Oakland. I've watched rents become completely insane since the crash and during the inflation of this bubble. At least during the last bubble, rents weren't so bad. Now rents are insane!!!
We couldn't afford to move to anything nicer in our own neighborhood. If we had to move, we wouldn't be living anywhere near where we are now. I've lived in the same building for the last 14 years. My rent is just above $1000/ mo..Yes, I know! It's insanely low by today's standards. The Rent Adjustment Ordinance has allowed me to remain where I am without breaking me financially. However, the building is 103 years old and the apartment is falling apart around us. And no, they don't want to do repairs because, yes, they would like us out of there so they could charge someone else at least $1800+/ mo even without renovating much to live there. So when we ask for repairs it takes FOREVER for them to fix something and it requires a lot of back and forth with the Property Manager.
Yes, we've been able to save some. But, he doesn't make a great income. My income is OK. Our household income is more than the median income for Oakland. And, there is no way we could afford to buy anything that wouldn't be an absolute hell hole even in the worst neighborhood in Oakland.
We would like to find a better place that isn't so old and run down. We would like to own something eventually, one day. We also don't want to live too far away from our jobs. Both of us have a 10-15 minute commute. I have never had such a short commute in my life. The time I save is invaluable to me, to us.
The thing is, I keep reading here and elsewhere that I shouldn't expect housing costs to decrease until the Baby Boomers finally start to die off. That means that we will have to wait until at least 2020-2024 to even think about moving if we want to find something that we could actually afford while saving for our retirement. We are both 46 and tomorrow is our 3rd Anniversary (and yes, we are in a same-sex marriage, we were the second couple in Alameda County to get married after the stay was lifted on June 28, 2013).
Now, as you can probably tell, I don't just move at the drop of a hat. I'm also very lucky since my husband is not wanting to move at all. He loves the neighborhood and he doesn't mind having a small place. It's just us and we aren't planning on having children for the foreseeable future. So, I have no pressure to be forced into a decision that will ensnare us in a giant mortgage. I would like to have better quality housing. That's me. He's fine with staying. However, I know my landlord. He will not fix our apartment up until after we are long gone. And he will continue delaying needed repairs as long as he can get away with it. After 14 years, I'm getting tired of the game.
Do I really have to wait until we are 50-54+ years old to be able to afford something better? Is it really worth waiting that long? You and others around here seemed to think that we would have somewhat affordable housing around here after the last crash. The thing is that it's only become more unaffordable, even for two middle-aged men with a decent household income. What happened after the crash is that rents are now extremely unaffordable and owning is beyond our reach too.
Yes, I do see that our savings is growing nicely, as well it should with our housing costs so low. And there is something to be said for that since we really do need our money to be invested wisely so that we will be able to retire at some point. However, I'm getting restless and tired of the waiting game.
Yes, I could move out of the area. But the thing is that my mother and brother moved here back in 2009 and they both live in Oakland now (from Chicago Area). I don't want to leave them here now that we all live within 1 mile of each other. My mother has a sweet deal on her apartment due to being a Property Manager there with very light duties. My brother is finally in a board and care situation that meets his needs (after too many moves to count and way too many train wrecks).
So, I am feeling kind of stuck due to the cheap rent we pay in comparison to the newer arrivals to my neighborhood who moved here to flee insanely ridiculous housing costs in San Francisco. I'm not exactly in a hurry and yet, I'm thinking we are 4-8+ years away from being able to move into any other situation close to where we live now that makes any financial sense.
I'm just feeling like rationality will never return to housing in the Bay Area. What we face here is nothing short of a housing crisis. I work with homeless individuals and those who have low income. These people are being hurt the most by the economic and financial craziness taking place all around us. Greed runs rampant here and I don't see any signs of it abating any time soon.
Do you really think we are going to see some rationality return to the Bay Area housing market ever? I'm not entirely convinced that it will ever make sense for me to own a place here in Oakland. And I can let go of that if I could afford the rent on a better place somewhere down the line. I don't have to own to be happy. I would like better quality housing that won't prevent us from being able to retire one day though.
***NEVADA STEALS HOMES****
Please DO NOT buy in NEVADA HOMEOWNERS' ASSOCIATION. Many states (like NEVADA) engage in THEFT/DEPRIVED DUE PROCESS by using SUPER-PRIORITY LIENS to FRAUDULENTLY FORECLOSE on homes.
f you want to defend your home from ILLEGAL FORECLOSURE in NEVADA, you must go through EXPENSIVE FORCED ARBITRATION.
If you cannot afford arbitration, you will lose your home. Not legal advice, so, please discuss first with an attorney. AVOID HOAs at all costs! Good luck.
Just pay your damn bill, and you won't be foreclosed.
Do you really think we are going to see some rationality return to the Bay Area housing market ever?
I think it's you who is irrational.
You make above median income, but can barely afford $1,000 per month in rent. How the hell are you gonna afford to buy a home in the BA? It's only a matter of time before you end up paying market rent. Living at someone else's expense is free loading, and does not last for ever.
As for the bubble.....just because YOU think prices are high, does not make it a bubble. Wake up. If anything, prices in the BA are set to jumping the next few years. And yes, this time it really is different.
Get real. The only way you can afford a home is to move far away from the BA. Hope you can digest constructive criticism.
Strategist,
Gee, I never said I could barely afford our rent...
Gosh, what an assumption...
I could afford much more. I don't want to pay outrageous money for housing. It's not my priority. I would like better quality. If I can't get it here, yes I will move. But I am in no hurry. I can afford to wait and see while I invest our considerable savings. Did you miss that part? We are saving... A lot.
And it would be nice to have better digs that won't prevent us from saving for retirement.
Oh we could be like the rest of you lemmings. We could pay insanely inflated rent and or house payments and pretend it's going to last forever. But I'm a bit smarter and more prudent than that. We will save for retirement. We won't pay stupid money for better digs. We will wait this out.. I just don't know how long that will take.
We are not freeloading. This building has been in the hands of the same owners for generations. Their property taxes are insanely low thanks to Prop 13. If anything they are freeloaders for using up infrastructure that they don't pay for.
Their expenses don't go up. Ours shouldn't go up just because they are all getting greedy. And yes, it's greed. It's irrational. And I'm smart to stay where I am for a while longer, paying below market rent (because the market is stupidly overpriced for rent). Just because all of the lemmings from SF are stupid enough to pay inflated prices for rent and houses doesn't mean I have to.
So stop with your ignorance and I'll wait for Patrick to respond since I addressed my post to him.
And it would be nice to have better digs that won't prevent us from saving for retirement.
Really? You pay well below market rent, yet you want more for the same price.
I could afford much more. I don't want to pay outrageous money for housing.
Hello? market rent is not outrageous. Below market rent that you pay is outrageous.
We could pay insanely inflated rent and or house payments and pretend it's going to last forever.
Mortgages can last for 30 years. Try that with rent.
We are not freeloading.
Paying $1,000 for an $1,800 apartment is free loading, regardless of what the landlord pays.
And yes, it's greed. It's irrational.
Wanting a fair, market rent is not greed. Wanting below market rent is greed.
And I'm smart to stay where I am for a while longer
Considering the below market rent, I would stay there for ever, and not complain about repairs. Gosh, you can't get everything in life, you know.
Strategist,
You are a very disagreeable person, I can tell.
So, I'm not going back and forth with you. If you feel that I'm being a freeloader for paying below market rent in a building where I have lived for 14 years without any problems for my landlord and obeying all of the laws for Rent Adjustment in Oakland, then you are a narrow and simple minded person too. Or you are just jealous because I have found a way to save a lot of money while you cannot with paying stupidly inflated housing costs.
The market is running on stupid, immoral, insane, and outrageous greed. There is no disputing that. You haven't seen my apartment. You have no idea the condition it's in or little bit of space we have. You also don't really understand how bad things have really gotten in Oakland and how out of whack things really are here.
I would say that I'm being quite rational staying where I am until the sanity can return, or if it doesn't, eventually I will take my hard earned/saved/invested money somewhere else where I can pay rational prices for housing and save for retirement.
Meanwhile feel free to be insanely jealous and grouchy. The cortisol you are producing can't be good for you but if that's what you want, go for it.
Meanwhile I will continue to save, invest, and wait for a good opportunity to find better housing that doesn't cost so much that I cannot continue to save an invest. That's what rational people do.
Strategist,
You are a very disagreeable person, I can tell.
I agree.
So, I'm not going back and forth with you. If you feel that I'm being a freeloader for paying below market rent in a building where I have lived for 14 years without any problems for my landlord and obeying all of the laws for Rent Adjustment in Oakland, then you are a narrow and simple minded person too.
You are free loading. Obeying the rules does not give you a free pass to free land at someone else's expense.
Or you are just jealous because I have found a way to save a lot of money while you cannot with paying stupidly inflated housing costs.
How the hell amI gonna be jealous of someone living in the conditions you describe?
Meanwhile I will continue to save, invest, and wait for a good opportunity to find better housing that doesn't cost so much that I cannot continue to save an invest. That's what rational people do.
You are waiting for the bubble to burst when there is no bubble. The last bubble burst in 2008. Did you take advantage of that?
Simchaland, there is a six stage grieving process for the American Dream. I think you are still in Denial--and I say that sympathetically. 10 years ago when I found PatNet, I was in Denial, too (well, actually, New York City). Look, you have a sweet deal on rent. I don't think you are "freeloading", so much as sitting on a windfall and not counting your blessings.
Like Strategist said, you are going to eventually pay market rent. It's a matter of time. We haven't had our rent raised in 6 years and continue to store our acorns for the winter, but I have no issue with the inevitable day that the LL asks for the favor in return. Meanwhile, we invest our savings as wisely as we are capable of.
After I passed the Denial stage in 2012, prices starting going back up. That's the problem with metro-city areas; they dropped the least after the bubble, and immediately went right back up. By the time I had a 20% DP, it was cash-only-or-FUCK-YOU. So, I could have been stuck at the Acceptance stage, but instead I jumped right ahead to the Move the Fuck out of The City stage. I came from a longtime Southern family, though, so small towns and backroads are not uncomfortable for me. We all travel our own journey.
The end of the grieving process for the American Dream is when you realize we were not born at a time that allowed endless cheap land and opportunity. Our grandparents did not compete with Chinese money or the massive population we now have, nor did they prize metro-city real estate the way we do today. That said, we all have our personal situations, and if you cannot move for personal reasons, perhaps the price you pay is not to own where you live and instead play the renter's game.
I don't see a bubble. Certain markets are definitely going to plateau, or even decline somewhat if there is a recession coming, but SF/NYC/LA/etc. are going nowhere but up.
justme, Thank You! I hope you are well!
Philistine,
Thank you for your thoughtful response.
I don't think I am in denial but then again, that could be the definition of denial... lol!
I am no stranger to small towns myself. I lived very well in smaller town Iowa and Northern Illinois and I loved it. I am not ready to leave yet because I love the work I do here and my family can't afford to move with me if I do move.
I still think that the housing in this area is very overpriced because most people are spending way too much of their income in housing costs and this isn't sustainable in the long run. Eventually, landlords and house owners/sellers run out of other people's money.
But then again, that could be a side effect of denial.
I still want to see what Patrick thinks.
And no, I don't expect to find cheaper rent than I have now or to see rent go back to what I pay now. I do understand inflation and markets. I do think that it is smart to stay as long as we can where we are (our rent does increase every year following the law, it's just that for 9 years we were fortunate not to have any rent increases because no one wanted to live here because it was too dangerous, so my rent is ridiculously lower than usual).
I just want to pay fair prices for housing, not the insane prices others are paying and mostly cannot really afford. If you cannot save for the future, you are paying too much for housing, I don't care where you are.
Do you really think we are going to see some rationality return to the Bay Area housing market ever?
I don't know. I just know that the rent-vs-buy calculation consistently told me to rent around here, and that worked out well for me since I saved a lot by renting and invested it. I suppose I was lucky like you that my rent has not gone up much over the years. Now I can comfortably stay here and rent, or go off to almost anyplace outside the Bay Area or NYC and buy outright. So I don't worry about it much anymore.
Sure, you want to own and feel permanent, but there is an army of realtors in the Bay Area in particular who are world-class experts at abusing that emotion to get everyone around you to bid prices up to and over the brink of bankruptcy. I won't play that game. My personal choice is to keep renting until it's cheaper to own.
Do the math, it always makes me feel better:
http://www.nytimes.com/interactive/2014/upshot/buy-rent-calculator.html
Thanks Patrick! That calculator always makes me feel better and so does the money I save by staying put.
I am very fortunate to have a husband who is as practical as me when it comes to cutting costs. And he likes the lower stress that we have like I do knowing that we have savings to fall back on if things really get bad. I guess we will continue to stack cash and when things get even more super insanely outrageous around here, we will take our money and run. Perhaps it will be worth it to retire in his country some day (The Philippines) or I will get the Italian Dual Citizenship I qualify for and we will find a cheaper place to retire in sunny Italy (or elsewhere in the EU if it still exists then).
The best revenge is living well.
:-)
Simchaland, there is a six stage grieving process for the American Dream. I think you are still in Denial--and I say that sympathetically. 10 years ago when I found PatNet, I was in Denial, too (well, actually, New York City). Look, you have a sweet deal on rent. I don't think you are "freeloading", so much as sitting on a windfall and not counting your blessings.
Great post Philistine - I agree with everything you said.
Simchaland, the ultimate "housing trap" is the one you describe, but as Philistine said, count your blessings that its still cheap. For me, that trap has sprung, and now I am doubly trapped.
http://patrick.net/Rent+going+to+4K%2C+my+family+is+crumbling%2C+I+am+fucked%21
Regarding prices going down because of the boomer dieoff, (or other BS reasons) Patrick will never admit this, but I will. No, sanity will never return. Never, never, never, never, NEVER! There MAY be a dip in pricing, and certainly a reduction in the rate of increase, but by the time that "hits" nominal prices will be more than what they are now (i.e. ...........)
June 2016 Price 850K
June 2017 Price 883K
June 2018 Price 905K
June 2019 Price 931K
June 2020 Price 938K (slowing down)
June 2021 Price 941K (peak)
June 2022 Price 930K (dropping)
June 2023 Price 900K (rapid drop)
June 2024 Price 895K (bottom)
Presumably you get a great "deal" in 2024 as prices rose far less than 1% per year. However, few people are happy to pass on 850K only to pay 45K more 8 years later. So its up to you if you decide if you can accept that fate.
Also, as someone who is a veteran of bear blogs, the biggest attribute you can have IMO is self awareness. I too was in denial, as we all were. We were all so wrapped up in our bearish personas. Our egos wouldn't let us admit that the bottom had come and gone and we missed great opportunities. We all patted each other on the back until our bear comrades turned bulls (forming the bottom) at which point we collectively yelled "you'll be sorry" as we doubled down and rented and rented and rented.
http://patrick.net/Housing+-+I+was+wrong%2C+and+I+am+sorry.
It hurt like hell to accept the fact that I fucked up, but for me, the journey has been helpful in that I now accept that I likely will never own, and will eventually be forced to move away from my friends and family. I don't know if that is the answer for all of us, but as one bear to another, I hope it helps. Good luck.
11th reason to not buy an expensive home now: that dumbfuck trump could win, and given today's speech he will certainly start trade wars with China and Mexico, which will put us in a massive decades long great depression.
Dearest Friends and Colleagu
From: Dr. Apu P. Bhat
Satellite Tel: Note:Do not send emails.You can contact me directly on the tel.number or by sending me a satellite message stating your telephone number and email address contact on this number just given to you using the link online below. www.thumbupyourass.com you will see send a satellite message to my sat.tel.number- 881-631-410-574
Attn:President/C.e.o.
Strictly Confidential and Urgent Business Proposal.
Re: Transfer Of Usd $21,500.000{Twenty - One Million, Five Hundred Thousand Us Dollars Only.
I am a member of the Federal Government Of Nigerian National Petroleum Corporation (N.N.P.C). Sometime ago, a contract was awarded to a foreign firm in the Petroleum Trust Fund (P.T.F.) BY MY COMMITTEE.
This contract was over invoiced to the tune of us$ 21.5Million Dollars. This was done delibrately. The over - invoicing was a deal by my committee to benefit from the project. We not want to transfer this money, which is in a suspense account with the P.T.F. into any oversea account, which we expect you to provide for us.
Share:
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If interested in assisting us, please contact me via my secured satellite tel number- 881-631-410-574, specially procured for this project, using the text message..
It may interest you to know that a similar transaction was carried out with one Mr. Patrice Miller, President of Crane International Trading Corp., of 153 East 57th St., 28th floor, N.Y.10022, Telephone: 212-308-7788 and Telex: 6731689. The deal was concluded and all covering documents, forwarded to Mr. Miller to authenticate the claims. Once the funds were transferred, Mr. Miller presented to his bank, all the legal documents and remitted the whole funds to another bank account, and disappeared completely. My colleagues and I were shattered, since such opportunities are not easy to come by.
Please, if you are interested in assisting us carry out to the fullest capacity, this transaction, we would require the following information from you which would enable us make formal application to the various ministries / parastatals, for the release and onward transfer of the money to your account.
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It might also interest you to know that we are mere civil servants who do not want to miss this opportunity, hence, we want this money transferred out, as soon as possible, before the newly democratically elected government ever think of making enquiries as regards the various activities of the past military government.
Kindly contact me as soon as possible, whether or not you are interested in this deal, so that whereby you are not interested, it would give us more room to scout for another partner. But if you are interested, kindly contact me via above email, telephone or fax, so that we can swing into action, as time is not on our part.
I wait in anticipation of your fullest co-operation. Yours Faithfully,
Dr. Apu P. Bhat
Send me your email address and tel.numberif interested for re- verification that you actually received this mail.
I don't know
My personal choice is to keep renting until it's cheaper to own.
It has been awhile ! I don't know either Patrick, and that is OK !
i should be happy the value of my condo in Dallas has gone up, but so has my taxes !
I want to sell and yes, later, I can find something somewhere.
And ! I am very happy in this new apartment ! A repeat of the pics.
Ciao. David
Also, as someone who is a veteran of bear blogs, the biggest attribute you can have IMO is self awareness. I too was in denial, as we all were. We were all so wrapped up
Jason, to be fair, not all of us were bears, either. 10 years ago I was 3 years into my first real job out of college. Try saving 20% for a (then) $700k apartment in Brooklyn in your first adult years out of school. And there were none of those famous FHA freebie loans for that kind of purchase. The all-cash (in the city, anyway) environment of 2009-2013 in LA eradicated any purchasing power of a 20% DP. That was the point we realized $250k was a lot of cash to have saved and we could just move to Bumblefuck, Mississippi and retire with that kind of money.
What I realized is that my need to live and work in big cities was the biggest impediment to my home ownership. I don't regret it; my career would have gone nowhere if I hadn't left the sticks and started (with nothing) in New York. With maturity, I now see the big city as a place I don't need anymore. But I have a few years left in me before we can go off into the sunset for early semi-retirement.
As the great Jody Chunder once said on this very site (I'm paraphrasing and forget his exact, elegant wording), I lived and worked in the city and all it ever got me was chair-ass, a bruised liver, and a broken heart. Amen, brother.
David9, always good to see you check in.
Whatever happened to ol Uncle Jody of Victorville fame?
Is it true he retired to Pahrump?
Our grandparents did not compete with Chinese money or the massive population we now have, nor did they prize metro-city real estate the way we do today
Heh, I'm reading some good, old histories of the original settling of Central California.
Ca. 1890 Somebody named E.B. Perrin owned land around Fresno by the square mile:
https://www.raremaps.com/gallery/enlarge/24804
His 9+ sections in the NE of that map are worth up to $5M an acre now . . .
And that's around 6,000 acres, LOL.
Somebody named Bullard bought 72,000 acres at around 25c an acre back then, around $500,000 in total in 2015 dollars.
Now 2 nice acres of it will set you back $1M . . .
https://www.redfin.com/CA/Fresno/6475-N-Sequoia-Ave-93711/home/58375844
But this was utterly useless land back then, when the town had more land (~8,000 sections within a 50 mile radius) than the people (all 3,000 of them) could use.
Banks say a safe mortgage is a maximum of 3 times the buyer's annual income with a 20% downpayment.
20% is in the past like balloon and assumable mortgages are now.
Now it's 5% and pay some more points to avoid PMI.
3X factor was based on the 8% mortgage rates. Now they're well under half that.
Landlords say a safe price is set by the rental market; annual rent should be at least 9% of the purchase
price, or else the price is just too high. Yet in affluent areas, both those safety rules are still being violated. Buyers are still borrowing 6 times
their income with tiny downpayments, and gross rents are still only 3% of purchase price.
Two things; 10 year rates have collapsed:
So what was 9% gold-standard cap rate is now a 2% cap rate.
Plus CPI is still the landlord's best friend:
Rents never, ever go down, not since 1930 at least. You want to own your customers by the balls, buy RE.
I just bought a home for $195,000.00 (closing next friday hopefully) Tax is $1200 a year, insurance $500. non owner occupied loan 25% down, 4.375%.
My payment is less than $900 a month.
I showed it to potential renters at $1950 a month, and have several interested, may have an app and deposit tomorrow. Have about $5000 in rehab to do, and promised to convert the carport to a garage, which is easy since it only needs one wall and the frame around the door on the front.
Yeah real estate is a terrible buy.
that's a cheap house with excellent cashflow.
did i ever say you should not buy such a house?
Sharingmyintelligencewiththedumbasses says
I just bought a home for $195,000.00 (closing next friday hopefully) Tax is $1200 a year, insurance $500. non owner occupied loan 25% down, 4.375%.
My payment is less than $900 a month.
I showed it to potential renters at $1950 a month, and have several interested, may have an app and deposit tomorrow. Have about $5000 in rehab to do, and promised to convert the carport to a garage, which is easy since it only needs one wall and the frame around the door on the front.
Yeah real estate is a terrible buy.
Price of 8 x gross income for a house is one hell of a return. Is it an old home?
Price of 8 x gross income for a house is one hell of a return. Is it an old home?
of course it is old! 1960's. the pipes are in fine shape, roof needs about $2500. Landscape has some problems and it is overgrown, original owner or heir selling it, so it needs serious updating, but that's what I do. Agent/seller screwed up selling it. I could clean it up, get it to pass a home inspector and make $20K+ instantly.
Found this blog post; absolutely amazing.
I totally agree to this premise - I reached the same conclusion independently.
We bought our "rather modest" townhouse at $370K. However the rental market here shows that the maximum we can rent it out for is $2200 - realistically, it's $2K. And we won't be guaranteed a 100% occupancy either. Even at my current 30 year mortgage at a low interest rate of 3.6%, my rent barely exceeds (by some $150) my total housing payment including taxes and HOA dues. There isn't enough cushion to do any repair works or even account for low occupancy.
Worse yet, rental income is subject to taxes and since we are in 28% bracket, we are sure to east a lot of them. The only way I can offset them is to start using depreciation from year 1, which gives me maybe a few years of "break even" income, after which I will have to start paying more in taxes. The only hope is that rent increases every year, but unfortunately, my experience in this area shows it's either the same or even decreasing! And this is a prime area, near malls, highways and even a great school district. It's baffling why rents wound't be higher, but a major housing frenzy in a neighboring town perfectly explains it actually.
Yeah...people are buying $700K-$900K newly constructed houses like there's no tomorrow. People even on single income with salaries barely into 6 figures are doing it (they have 2 kids to boot too). We see the resale market in the same town, and houses are being sold at $100K less than their asking prize clearly showing that the bubble is losing air even now. More interestingly, we can rent houses bought at $550K at as little as $2200. These people will bleed money on rentals. But apparently, no one cares. Having a loot-at-me house trumps personal finances.
We have decided to be rational in an irrational market. This town has a lot of our irrational friends, so we will rent one of their houses when we sell ours.
We bought our "rather modest" townhouse at $370K. However the rental market here shows that the maximum we can rent it out for is $2200 -
Rule of thumb 100 months rent is the price of the house. Over that doesn't pay off unless you are gambling on appreciation. Fast and easy way to tell if it's a renters market or an owners market. Having 2200 in rent on 370k is a big renters market. http://affordanything.com/2016/04/28/one-percent-rule-gross-rent-multiplier/
The only way I can offset them is to start using depreciation from year 1, which gives me maybe a few years of "break even" income,
You don't have any choice in depreciation. The IRS requires it. Then they claw it back when you sell the house.
We have decided to be rational in an irrational market. This town has a lot of our irrational friends, so we will rent one of their houses when we sell ours
Yep good call. Downside is in a renters market rentals are frequently much harder to come by because no one is making much or any money renting. You wind up renting from people looking to sell the house but won't tell you that. You are paying for the privilege of being a caretaker without knowing it.
I ended up buying when I came back to the states even though the market where I live favored renting. Where I am the taxes are so high and renter protection laws are so onerous, 6 months to evict is common, that people would rather put houses on the market and wait however long it takes for a sale rather than rent them out. Carrying a deadbeat $1500 a month tenant (who might trash the house moving out) for 6 months at with 600 a month taxes and 200 a month water/sewer on top of a mortgage is a real loser.
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On the other hand, in some poor neighborhoods, prices are now so low that gross rents may exceed 10% of price. Housing is a bargain for buyers there. Prices there could still fall yet more if unemployment rises or interest rates go up, but those neighborhoods have no bubble anymore.
The only true sign of a bottom is a price low enough so that you could rent out the house and make a profit. Then you'll know it's pretty safe to buy for yourself because then rent could cover the mortgage and ownership expenses if necessary, eliminating most of your risk. The basic buying safety rule is to divide annual rent by the purchase price for the house:
annual rent / purchase price = 3% means do not buy, prices are too high
annual rent / purchase price = 6% means borderline
annual rent / purchase price = 9% means ok to buy, prices are reasonable
So for example, it's borderline to pay $200,000 for a house that would cost you $1,000 per month to rent. That's $12,000 per year in rent. If you buy it with a 6% mortgage, that's $12,000 per year in interest instead, so it works out about the same. Owners can pay interest with pre-tax money, but that benefit gets wiped out by the eternal debts of repairs and property tax, equalizing things. It is foolish to pay $400,000 for that same house, because renting it would cost only half as much per year, and renters are completely safe from falling housing prices. Subtract HOA from rent before doing the calculation for condos.
Although there is no way to be sure that rents won't fall, comparing the local employment rate (demand) to the current local supply of available homes for rent or sale (supply) should help you figure out whether a big fall in rents could happen. Checking these factors minimizizes your risk.
The way to win the game is to have cash on hand to buy outright at a low price when others cannot borrow very much because of high interest rates. Then you get a low price, and you get capital appreciation caused by future interest rate declines. To buy an expensive house at a time of low interest rates and high prices like now is a mistake.
It is far better to pay a low price with a high interest rate than a high price with a low interest rate, even if the mortgage payment is the same either way.
The Fed exists to protect big banks from the free market, at your expense. Banks get to keep any profits they make, but bank losses just get passed on to you as extra cost added on to the price of a house, when the Fed prints up money and buys their bad mortgages. If the Fed did not prevent the free market from working, you would be able to buy a house much more cheaply.
As if that were not enough corruption, Congress authorized vast amounts of TARP bailout cash taken from taxpayers to be loaned directly to the worst-run banks, those that already gambled on mortgages and lost. The Fed and Congress are letting the banks "extend and pretend" that their mortgage loans will get
paid back.
And of course the banks can simply sell millions of bad loans to Fannie and Freddie at full price, putting taxpayers on the hook for the banks' gambling losses. Heads they win, tails you lose.
It is necessary that YOU be forced deeply into debt, and therefore forced into slavery, for the banks to make a profit. If you pay a low price for a house and manage to avoid debt, the banks lose control over you. Unacceptable to them. It's all a filthy battle for control over your labor.
This is why you will never hear the president or anyone else in power say that we need lower house prices. They always talk about "affordability" but what they always mean is debt-slavery.
The simple fact is that the renter - if willing and able to save his money - can buy a house outright in half the time that a conventional buyer can pay off a mortgage. Interest generally accounts for more than half of the cost of a house. The saver/renter not only pays no interest, he also gets interest on his savings, even if just a little. Leveraged housing appreciation, usually presented as the "secret" to wealth, cannot be counted on, and can just as easily work against the buyer. In fact, that leverage is the danger that got current buyers into trouble.
The higher-end housing market is now set up for a huge crash in prices, since there is no more fake paper equity from the sale of a previously overvalued property and because the market for securitized jumbo loans is dead. Without that fake equity, most people don't have the money needed for a down payment on an expensive house. It takes a very long time indeed to save up for a 20% downpayment when you're still making mortgage payments on an underwater house.
It's worse than that. House prices do not even have to fall to cause big losses. The cost of selling a house is kept unfairly high because of the Realtor® lobby's corruption of US legislators. On a $300,000 house, 6% is $18,000 lost even if housing prices just stay flat. So a 4% decline in housing prices bankrupts all those with 10% equity or less.
From The Herald:
"We were all corrupted by the housing boom, to some extent. People talked endlessly about how their houses were earning more than they did, never asking where all this free money was coming from. Well the truth is that it was being stolen from the next generation. Houses price increases don't produce wealth, they merely transfer it from the young to the old - from the coming generation of families who have to burden themselves with colossal debts if they want to own, to the baby boomers who are about to retire and live on the cash they make when they downsize."
House price inflation has been very unfair to new families, especially those with children. It is foolish for them to buy at current high prices, yet government leaders never talk about how lower house prices are good for American families, instead preferring to sacrifice the young and poor to benefit the old and rich, and to make sure bankers have plenty of debt to earn interest on. Your debt is their wealth. Every "affordability" program drives prices higher by pushing buyers deeper into debt. Increased debt is not affordability, it's just pushing the reckoning into the future. To really help Americans, Fannie Mae and Freddie Mac and the FHA should be completely eliminated. Even more important is eliminating the mortgage-interest deduction, which costs the government $400 billion per year in tax revenue. The mortgage interest deduction directly harms all buyers by keeping prices higher than they would otherwise be, costing buyers more in extra purchase cost than they save on taxes. The $8,000 buyer tax credit cost each buyer in Massachusetts an extra $39,000 in purchase price. Subsidies just make the subsidized item more expensive. Buyers should be rioting in the streets, demanding an end to all mortgage subsidies. Canada and Australia have no mortgage-interest deduction for owner-occupied housing. It can be done.
The government pretends to be interested in affordable housing, but now that housing is becoming truly affordable via falling prices, they want to stop it? Their actions speak louder than their words.
Next Page: Eight groups who lie about the housing market »
The Housing Trap
You're being set up to spend your life paying off a debt you don't need to take on, for a house that costs far more than it should. The conspirators are all around you, smiling to lure you in, carefully choosing their words and watching your reactions as they push your buttons, anxiously waiting for the moment when you sign the papers that will trap you and guarantee their payoff. Don't be just another victim of the housing market. Use this book to defend your freedom and defeat their schemes. You can win the game, but first you have to learn how to play it.
115 pages, $12.50Kindle version available