patrick.net

NuttBoxer says

Reminds me of someone watching the shore break, not seeing the set that just came in and is about to put them on their ass. One of the best tricks of central government economy is keeping people lost in the weeds, never understanding primary trends or big pictures. Fitch gets it, why don't you?

Fitch, Moody’s, etc… the companies that gave the garbage CDO’s AAA ratings during the last housing bubble. They get it. Got it. 👍

You live in an ideal world while I live in reality. We don’t share the same view. We just have to disagree.

Are you kidding, step into a “new construction home” these days. It feels like it was built out of popsicle sticks and dental floss.

They don’t build them like they used to…

Eman says

Fitch, Moody’s, etc… the companies that gave the garbage CDO’s AAA ratings during the last housing bubble. They get it. Got it. 👍

Right, and even they say the economy is going down. You haven't bothered to calculate your inflation losses as a landlord, my friend has. You struggle to understand trends that show huge rent drops coming, because you don't want to lower your rent.

I don't have a dog in this fight, I don't have my livelihood staked on one outcome or another. My only causes are honesty, and responsibility. But your livelihood is deeply tied to your beliefs, which makes you biased, and I'm guessing you're at least 10-20 years older than me, and haven't moved nearly as much, which makes you afraid to change.

Objective facts paint a different picture than what you think. But society pushes mental sickness and disconnection from reality. Don't buy into their bullshit. Muster some courage, face reality, and act accordingly.

@NuttBoxer,

I gave you a pass on the rent chart that you shared. You didn’t interpret the chart correctly so your 24% drop projection/prediction is simply wrong. Go take a look at the chart again and know where you went wrong.

No bias for me. I’m a data/numbers guy. If it weren’t for this, I would still be slaving away at a W2 instead of quitting my job during the last housing bust and went all-in.

This is my stock account as we speak. I have money elsewhere and my wife has a sizable retirement plan. We’ll be alright if the housing market blows up.

Eman says

You live in an ideal world while I live in reality. We don’t share the same view. We just have to disagree.

That's about what my sister said about the jab. I hope it doesn't bite her.

Rubicon says

I must laugh when people bitch and moan about how unfair the housing market in the US is and how we need to change everything. It’s just pathetic. It’s like talking to a spoiled kid.

It's not you playahs we are bitching about. It's the system that is fucked up. You're just taking advantage of it by investing in shelter.

Eman says

I gave you a pass on the rent chart that you shared. You didn’t interpret the chart correctly so your 24% drop projection/prediction is simply wrong. Go take a look at the chart again and know where you went wrong.

No bias for me. I’m a data/numbers guy. If it weren’t for this, I would still be slaving away at a W2 instead of quitting my job during the last housing bust and went all-in.

Forgive me if I don't accept your word and require you to prove your assertion. But if you won't acknowledge that working in housing for a living causes you to be biased towards certain ideas, I doubt there's any point in this conversation.

So you're retired? No right? You still get a check just like me, you still file taxes just like me. I think what you mean to say is only work for yourself, which is a great accomplishment, definitely something to be proud of. But from what I know, people who are self-employeed often work harder than the rest of us. It's a trade-off you accept for having more control over what you do. Although at this point in my career, I pretty much do what I want, and definitely don't have to slave. I might put in four hours of work a day, but this is typical for my industry.

Eman says

This is my stock account as we speak. I have money elsewhere and my wife has a sizable retirement plan. We’ll be alright if the housing market blows up.

Stocks will likely blow up first, but housing may not be far behind. Again, if you look at the big picture, everything crashed in '08, not just housing. Real diversification happens outside of paper.

NuttBoxer says

Real diversification happens outside of paper.

This is why I believe in owning a business in an early industry.

The REALLY BIG (and quick(?)) MONEY is made in tech/software and front running regulations/laws.

zzyzzx says

The phenomenon I "think" we're seeing is that only the top % of income earners are buying homes now while the rest just rent. I don't see this trend changing because there are enough rich people to keep buying homes.

Funny. Looks like a chart showing what 34 years of falling interest rates does to monthly buying power.

Rubicon says

And btw a 2x4 is a 2x4.

The first house I rehabbed was built in the 1950s using first growth southern yellow pine. I stripped the walls to the studs to redo electric, plumbing and add insulation. I moved a wall or two, and repurposed as much of that yellow pine as I could. Today's SPF whitewood studs are balsa wood compared to that old stuff. I did not even try nailing the yellow pine, I predrilled and used screws. The studs you get today are from fast growth trees and are much less dense.

I had a older house that I did a ton of work to new lumber never matches up exactly anymore. 2x4 is really 3 1/2x1 1 1/2

I had a older house that I did a ton of work on, new lumber never matches up exactly anymore. 2x4 is really 3.5x1.5
4x4 is 3.5x3.5

Eman says

This is my stock account as we speak. I have money elsewhere and my wife has a sizable retirement plan. We’ll be alright if the housing market blows up.

Dude,

why are you trying to rationalize/justify how rich and successful you are playing ®eal estate games in The Bay Area, exploiting strapped out renters, etc?

Who are you trying to convince about how savvy, rich and successful you are while hiding behind anonymous pseudonyms on a blog? You trying to convince other anonymous blog followers here (like me), or trying to convince yourself?

Rubicon says

And btw a 2x4 is a 2x4.

My best pal here is in charge of managing the building 100-150 houses in parallel on average for DR. Horton. He'd argue with you over that and he has a lot of gripes with respect to the builders (all builders) shortcuts and cheap outs over the past 30 years. One in particular is that 2x4s were actually reduced in size AGAIN a few years ago...

Onvacation says

Eman says

You live in an ideal world while I live in reality. We don’t share the same view. We just have to disagree.

That's about what my sister said about the jab. I hope it doesn't bite her.

I hope it doesn’t bite her either. I share what I know and don’t bother to try to convince anyone of anything.

On my side of the family. Several kids are pure blood. The same on my wife’s side. At the end of the day, it was their parents’ decision. Everyone’s circumstance is different. They do what they feel is best for their family.

Being self-employed is easier. There’s no mandate to be vaccinated.

NuttBoxer says

Eman says

This is my stock account as we speak. I have money elsewhere and my wife has a sizable retirement plan. We’ll be alright if the housing market blows up.

Stocks will likely blow up first, but housing may not be far behind. Again, if you look at the big picture, everything crashed in '08, not just housing. Real diversification happens outside of paper.

If you look at the chart you shared, rent growth happened between 2005 to mid 2008. Mid 2008 was when rent growth went to zero and started to decline 2-3% to end 2008 to early 2009. Early 2009 to mid 2009 experienced another 3-5% rent drop before stabilizing and going back to 0% in early 2010. Then rents started to go up again. Total rent drop between 2008 to 2009 is not more than 10% compounded, which is what the data show.

In the Bay Area, the biggest rent drop happened after the dotcom years in early 2000’s, which was 28%. For this reason, we use 25% vacancy for our stress test and see how long we can sustain and put 5 years cash reserve in the bank untouched while making 3% interest on this money. It used to be 0.25%.

We didn’t know what to expect during the pandemic years, but 2021 turned out to be the lowest vacancy year for us at 1.2%, and 2.1% for 2022. As much as California is losing population, we have been on the blessing end not experiencing it….yet. SJSU is back in full session, and rents are at record high. It’s the market. We didn’t do anything for the rents to go up.

RC2006 says

I had a older house that I did a ton of work to new lumber never matches up exactly anymore. 2x4 is really 3 1/2x1 1 1/2

We rehab older houses and see this all the time. Whenever we need real redwood 2x4, we buy them at the old yards. I asked someone in the lumber biz this question before. Why 2x4 is only 1.5” x 3.5”? He said 2x4 is the “nominal dimension” before they shave and clean up the wood to make it nice and smooth. Don’t know how true it is, but it doesn’t impact us.

October 2022 - Median Sales Price for New Houses Sold in the US: $496,800.

May 2023 - Median Sales Price for New Houses Sold in the US: $415,400.

Loss of 16.4% or $81,400.

So if you bought that $496,800 new house in October 2022, your neighbor is buying the same new house for $415,400. And if you try to sell your no longer new house, you will lose more than $81,400, as new is more valuable than used, plus transaction fees.

https://fred.stlouisfed.org/series/MSPNHSUS

Q4 2022 - Median Sales Price of Houses Sold in the US: $479,500.

Q2 2023 - Median Sales Price of Houses Sold in the US: $416,100.

Loss of 13.2% or $63,400.

So if you bought that $479,500 house in Q4 2022, your neighbor is buying the same house for $416,100. And if you try to sell your house, you will lose $63,400, plus transaction fees.

https://fred.stlouisfed.org/series/MSPUS

Rubicon says

I have bought several new builds

Same, and builders grade shit fails in the first 5 years. AC, dishwashers, water heaters and so on. If you replace with better quality things tend to last after that. Rent tends to cover it though.

Eman says

If you look at the chart you shared, rent growth happened between 2005 to mid 2008. Mid 2008 was when rent growth went to zero and started to decline 2-3% to end 2008 to early 2009. Early 2009 to mid 2009 experienced another 3-5% rent drop before stabilizing and going back to 0% in early 2010. Then rents started to go up again. Total rent drop between 2008 to 2009 is not more than 10% compounded, which is what the data show.

You have blinders on. Look at the ratio of rise to drop in '08 and make a prediction based on the current rise. It's not that hard, and it will come out to over 20%. If you can't live off that, consider changing up like you did in '08. You've admitted you are successful because you embraced change, it time to do so again.

https://sfstandard.com/2023/08/03/safeco-insurance-to-drop-950-homeowners-across-bay-area/

The news comes shortly after insurance heavyweights State Farm and Allstate halted new business in California and Farmers Insurance placed a limit on the number of new customers it is willing to pick up. Last week, Liberty Mutual—Safeco’s parent company—also announced it would stop providing business owner coverage in California starting later this year.

All of these decisions have made it more difficult for Californians to insure their homes. But the latest policy by Safeco is slightly different: It will specifically impact the Bay Area.

Due to the Bay Area’s “significant earthquake risk and the resulting home fires they cause, and our high concentration of insurance exposure, we have taken the difficult but necessary step to further reduce our overall book of business through underwriting decisions on new and renewal homeowners policies,” a Liberty Mutual spokesperson said in an email to The Standard. “This decision impacts approximately 1 percent of our California homeowners business.”

Eman says

We didn’t do anything for the rents to go up.

That was my point that you still missed. You don't have to anything, the government does it for you. If you understood what happens when free market principles are manipulated, you'd know why this is dangerous. The market will always return to a state of equilibrium, it is a law as much as gravity. The more manipulated it is, the harder the crash will be.

Rubicon says

Oh boy.
First off, there is no loss. You don’t lose a penny until you sell.

@Rubicon - this is why I don't listen to too much of what you have to say. Of course there's a loss, a loss of that sweet sweet equity you're always yammering about. The less sweet equity means the less you can pull out for more RE or tax free income.

Guess what, there's no gain either until you sell. Right?

Rubicon says

There’s a big difference between a 2.75% and a 7% rate.

Who has the bigger write off AND the most upside?

Question: is it better to buy when rates are high or when they're low?

GNL says

Question: is it better to buy when rates are high or when they're low?

@GNL,

Great question. Nobody knows IMO. History suggests the Fed hiking rates; they overdo it and cause a recession; followed by housing prices fall, then the Fed cuts rates.

The housing recession cycle tends to last 3-5 years from peak to trough.

GNL says

Rubicon says

There’s a big difference between a 2.75% and a 7% rate.

Who has the bigger write off AND the most upside?

My buddy is having this dilemma at the moment. Sell, or keep and rent it out. Another friend suggested he keeps it for the kids.

Al_Sharpton_for_President says

If you plot it on a log curve, or follow the lower high curve, the bottom will be around $350-$375k? Another 10-15% drop?

NuttBoxer says

Eman says

We didn’t do anything for the rents to go up.

That was my point that you still missed. You don't have to anything, the government does it for you. If you understood what happens when free market principles are manipulated, you'd know why this is dangerous. The market will always return to a state of equilibrium, it is a law as much as gravity. The more manipulated it is, the harder the crash will be.

We live in an inflationary economy. Time does all the heavy lifting through inflation. The rules of the game have been established. You can choose to play, or not. It’s up to you. The same goes with the IRS tax loopholes. This is why real estate investors and business owners pay much lower taxes than W2 employees. Even Warren Buffett said it himself.

Rubicon says

“Q4 2022 - Median Sales Price of Houses Sold in the US: $479,500.

Q2 2023 - Median Sales Price of Houses Sold in the US: $416,100.

Loss of 13.2% or $63,400.”

Oh boy.
First off, there is no loss. You don’t lose a penny until you sell. people don’t buy and sell shortly after. They stay put for 20years and sell for 2-3times more than what they paid for. Or never sell and rent out the property.

The first guy who paid a higher house price than the next guy in your example has a lower PITI per month.
There’s a big difference between a 2.75% and a 7% rate.

That first guy who bought the peak smiles everyday with his ~3% rate. We might not see such a low rate for a decade.

I don’t know if we will see low rates again, but I wouldn’t be surprised to see it again in a decade.

It’s brutal to buy in the current mortgage rate environment with high prices. It’s a supply/demand imbalance at the moment.

I bowed out of the apartment market since 2019. I’m also bowing out of the flip game. Keeping the powder dry and wait for better opportunity. It may come, it may not. This is not the time to be aggressive IMO.

GNL says

Rubicon says

Oh boy.
First off, there is no loss. You don’t lose a penny until you sell.

Rubicon - this is why I don't listen to too much of what you have to say. Of course there's a loss, a loss of that sweet sweet equity you're always yammering about. The less sweet equity means the less you can pull out for more RE or tax free income.

Guess what, there's no gain either until you sell. Right?

He has a point with respect to the lower mortgage payments with the lower rates. These owners don’t have to refinance even if they’re underwater. Current buyers at 6-7% mortgage rates are “hoping” rates will come down in the coming years so they can refinance. Two different kinds of pain. 😅

GNL says

Question: is it better to buy when rates are high or when they're low?

Don't overpay in either case.

Eman says

He has a point with respect to the lower mortgage payments with the lower rates. These owners don’t have to refinance even if they’re underwater. Current buyers at 6-7% mortgage rates are “hoping” rates will come down in the coming years so they can refinance. Two different kinds of pain. 😅

It's a job loss question. A lot of people started to figure out they could live on 1 income during covid. Or a spouse doing just part time work. Factor in that no one wants to work and there's a shit ton of jobs out there. Basically they'll stay in their current home if they can afford it. There's no point in moving.

The average was something like 7 years in a home a decade ago. That's changing dramatically I believe. I wouldn't be surprised if it's 10-12 years now. That alone will reduce inventory after very little was built after the housing crash outside of hipster place. If you don't move that mean no used houses for sale. Little is being built.

Interest rates matter for sure, but I personally don't think that's as big of a deal. It will stall the market and drop it in some places. But ultimately any "crash" would be due to job losses or some other catastrophic event like war.

gabbar says

GNL says

Question: is it better to buy when rates are high or when they're low?

Don't overpay in either case.

Good grief, of course it matters. Higher interest rates "should" mean lower house price. Then when rates go down refinance and prices shoot up. You bought at a lower price than guy with low the rate.