patrick.net

Wonder what's going through this suckers mind!

It's official, home sales have dropped for the third month in a row:

http://news.yahoo.com/s/nm/20060125/bs_nm/economy_existinghomes_dc

What is going through the mind of a homedebtor? What is more important is what is going through the mind of a prospective buyer, and that is clear: why should I buy now when prices are clearly in decline and the market is over the hump? The market is fresh out of buyers, and that's the main issue here in my mind.

"There is something out there."

It is the truth.
And it is going to hurt.

I think people are pointing to the 50-year out of desperation. Maybe trying to convince themselves that there is something out there that will prevent the market from crashing and sending them into foreclosure.

Perhaps we should have "Half-life Mortgages". Imagine, a term as long as the half-life of plutonium. You do not have to pay it all off until the civilization falls, rises, and falls again! Payment will be just a bit higher than an I/O ARM. Rate adjusted monthly.

"Leaving California" makes the case that the state job market is not the reason folks are leaving...but take away the real estate boom and a lot of employment will go *poof*

Someone on Ben's blog pointed this out:

FYI - The NAR's Mission Statement, taken directly from the NAR website (http://www.realtor.org/realtororg.nsf/pages/narmission) is:
The core purpose of the NATIONAL ASSOCIATION OF REALTORS® is to help its members become more profitable and successful.

If the market is a zero-sum game, then it would appear that their mission is to screw non-members.

I expect the following things after the burst:

1. Mortgage interest deduction reform
2. Heavy mortgage industry regulation
3. Heavy GSE regulation
4. Open MLS
5. A few scandals, trials, and scapegoats

I also expect something like a "Foreclosure Abuse Prevention, Homeowner Protection Act" that makes it very hard to walk away from upside-down mortgages.

If we never said the word bubble, there wouldn’t have been one. WE created the frenzy. Jeeze….

It only proves that our prediction is correct and that they should have listened to us earlier.

What I’m worried about is that when it gets really bad, all of a sudden Realtors and the NAR will say that the reason for the Burst is that guys like us have been discussing it. If we never said the word bubble, there wouldn’t have been one. WE created the frenzy. Jeeze…

Nonsense --that would be shooting the messenger. That would be like blaming Richard Clark or Jack Murtha just for telling the truth...

Oh, shit! :-(

If the market is a zero-sum game, then it would appear that their mission is to screw non-members.

LOL. You don't need your "zero-sum-game" economy fallacy to prove that the NAR is out to screw non-members. The DoJ is working on that right now.

LOL. You don’t need your “zero-sum-game” economy fallacy to prove that the NAR is out to screw non-members. The DoJ is working on that right now.

Well, I said IF it is a zero-sum game... :)

Nonsense –that would be shooting the messenger. That would be like blaming Richard Clark or Jack Murtha just for telling the truth…

Don't worry... they only go for people who have made out like bandits in the bubble. Who made money?

Living a Godly lifestyle by obeying and thanking God for His blessings
Staying financially free from debt
Maintaining strong ties with family and friends
Exercising and eating healthy
Reading Patrick.net

God bless you. God bless patrick.net.

Living a Godly lifestyle

No disrespect, but I always wondered what this meant.
Have y'all obeyed god today?

The 10 yr moved somewhat significantly today:

http://finance.yahoo.com/q?s=%5ETNX

"What I’m worried about is that when it gets really bad, all of a sudden Realtors and the NAR will say that the reason for the Burst is that guys like us have been discussing it. If we never said the word bubble, there wouldn’t have been one. WE created the frenzy." --Michael

Not to worry, there are number of rational counters to that argument:
1.) Not only did you DISCUSS the bubble, but you refused to participate in it in by not buying into the market. You actually put your money where your mouth is, and thereby did not contribute to the price run-up with your actions, which of course speak louder than words.
2.) You tried to warn people to NOT buy into the bubble in hopes of stopping them from inflating it even more. So you actually tried to stop the excessive inflation BEFORE it burst.

There is no doubt that people will look for a scapegoat after the bubble has decisively burst. We are way too early in the game for that. But the bottom line is that the people they will scapegoat are the people who fueled this thing and especially the people who made money. See: flippers, Realtors, brokers, appraisers.

When the tech bubble burst it was mainly cheerleading stock Analysts that were scapegoated, Henry Blodgett and Mary Meeker being the most public examples. Arthur Levitt, chairman of the SEC at the time, actually tried to go after the big brokerages like Merrill and Bear at the time, but guess who ended up settling with Wall Street? Elliot Spitzer.

Why believe in the Christian imaginary friend when you can believe in the Mogambo Guru?

Huh?

I have been lurking for a couple of months, 1st time posting.

I also left Los Gatos, CA in 2000. I am not having the same experience as "not missing California". I miss it TERRIBLY! The schools are really bad, I could go on and on but I won't. We will be leaving here and heading back to the Bay Area in about a month! Oh and it is true about the u-hauls being cheap, $240.00 from Colorado Springs to the Bay Area, the guy said they are really low on trucks in CA. I wonder how many people will be going back in about 5 years like us?

Does “Patrick” own or rent?
Does “Peter P” own or rent?

Does David Lereah rent or own?

oh, and we will rent, thanks to patrick.net!

The Mogambo Guru:

http://www.dailyreckoning.com/Issues/2006/DRUS011606.html

If I said "I own", I would be accused of being a hypocrite. If I said "I rent", I would be accused of being a bitter renter. Answering the question by asking another question is the best response.

Okay...off the thread, but I've been watching metals markets. Why is this sector rising so fast? And it's not just gold and platinum. 20 articles give you 20 spins. I can't believe that the middle class in India is suddenly spending more on jewelry, causing a worldwide surge. Are investors who see the RE decline turning to metals? Are the oil mullahs hedging against an Iran-Israeli armageddon? Anyone have a "spin-free" angle on this?

Anyone have a “spin-free” angle on this?

Perhaps a lack of confidence in fiat currencies?

Does " " rent or own?

We all "rent" space on this blog. :)

Btw, there's no reason why owners shouldn't take issue with the current market.

Btw, there’s no reason why owners shouldn’t take issue with the current market.

Exactly. 100% of all homedebtors rent money from the bank anyway.

Linda, it would be helpful if you post this in the latest thread. Most people here do not check older threads.

I cannot give financial advice. However, let’s look at some numbers:

You owe 300K with a 5.25% mortgage, your monthly interest is only around $1300. You have also locked-in a low property tax rate, thanks to Prop 13. Can you rent a comparable home that costs less than your current total housing expenses?

I would seriously try to look past the equity gain and stay in the house. However, it is a good idea to consult a financial professional before any decision.

Do not forget that commission alone is 6% of 700K, which is 42K, but it also really depends on what you are going to do with the 350K - 400K proceeds.

Do you value stability? Do you value equity gains?

Linda,

Based on what you posted I'm guessing that:
(a) This is your primary residence (NOT investment property).
(b) You have no intention of leaving the Bay Area, so if you sold, you'd have to find another place to rent in the same area.
(c) Your PI+TI - interest tax deduction = roughly the same as or less than renting an equivalent home.

You didn't say anything about your current income/cash-flow situation, but I'm assuming that no one's lost a job, gotten sick, getting a divorce at al, and you can comfortably make the mortgage payment each month without struggling.

If all the above is true, I really can't see an overriding reason for you to sell. If housing prices decline over the next few months, what's that to you? You're building equity on your fixed-rate amortizing mortgage at a monthly payment no worse than equivalent rent. For you, the bubble issue is moot. You bought so long ago that you're not going to end upside-down regardless of what happens.

@"Pat McGroine",

no seriously, raise your hand if you rent an apartment for $1800 or less.

Ooh-ooh-ooh --I do!

Say 'hi' to your friends, Ben Dover, Butt McCracken & Major Stiffie for me.

1. do i have to rent a place for $1800 per month or less to join the cult?

No. Many here are current owners.

2. i want to sell my home and join the cult - who has the $1800 apartment for me to rent?

When did you buy? It may not be prudent to sell and rent. Consult a professional.

3. …and which one of you wisemen will come snuggle with me in my $1800 apartment on superbowl sunday?

We have beer parties.

no seriously, raise your hand if you rent an apartment for $1800 or less.

Is this a troll?

no seriously, raise your hand if you rent an apartment for $1800 or less.

Why is $1800/mo rent a magic number? This may be your number, but results will vary for each person's specific case. In our case, even a number double that for rent is still significantly less than the PIIT that we'd pay on a home comparable to the one we sold last spring. Given that our equity is banked in an inflation-protected vehicle, we'll come out ahead if we see even so much as a small real-price adjustment downwards (which has already occurred). In fact, we could buy back in now for about a 2-3% real-price benefit, weighing our rent costs and everything else.

So what is your troll-question again?

@Linda,

Your most welcome. Sometimes I think newcomers get the wrong idea about the regulars at this site and assume that we are all RE-hating perma-bears (perhaps due in part to idiot comments from posters calling themselves "Pat McGroine"?).

I assure that nothing could be further from the truth. Many of us are already homeowners, and those of us who aren't (disclosure: I'm a jealous bitter renter :-) ), would eventually like to own someday, when market conditions indicate that purchasing makes sense. If I could buy a nice place today at pre-Bubble prices with a sane, amortizing mortgage that compared favorably to rents on equivalent properties, I would buy without hesitation.

For now, I rent, save and patiently wait.

Linda:
I'm going to echo what Peter P. and HARM said: keep the house. Key point of your situation being that you don't want to leave the Bay Area.

You got in early enough that your monthly payment is quite comparable to our going rental rates around here. Perhaps more importantly you have 5.25% locked in, and I have a hard time believing we're going to see that rate available for 30-year fixxies again in at least 5 years.

Basically, you're "old school" which is the best way to be in our "new paradigm" housing market. You're building equity one payment at a time and you seem to have the rest of your financial ducks in a row, and you have all that in the Bay Area where we have a strong and diverse economy.

How do you like that advice from a housing bear? I'm a housing bear right NOW, not a housing bear on buying 5 years ago!

Finaly, I DO expect Bernanke to attempt to inflate us out of the current situation. So even if you do cash out and plunk all that money in HSBC Direct earning 4.25%, in the long run it will at best likely only hold its real value.

Jesus H. Christ, I almost sound like a REALTOR (TM) in my prior post! Worlds are colliding!

I tend to think if anyone had a lot of unearned money staring them in the face they would feel the same way.

You know, this really cut to the heart of the Bubble for me. This is the real tragedy of the Bubble (aside from the looming correction) --it's distorting the way people view their own homes and diverting an incredible amount of energy, labor and capital away from more productive uses.

Your house is no longer a place to live, it's a rapidly appreciating "asset" to be traded like a NASDAQ stock. Your mortgage isn't a debt to be repaid, it's a speculative financial instrument used to "liberate" the "trapped" equity in your house. Why should people bother to do real work and hold a regular job when we can all get rich selling each other real estate?

@DinOR,

I hear ya, bro'. Never fall in love with four walls and a roof, run the numbers and always have the ability to take a cold, detached look at your financial situation. Even so, given her desire to remain where she is long-term, when she purchased and the financing, I'd still say the numbers are in favor of her staying put.

Ahhhh money, it's just so fantastic, when you get some all you want is more and then when you get more you treat people like shit.

Here's a though, you're an archeologist, you find a 300 yo tomb in the middle of the united states, full of wampum, which was at one time considered currency. Are you stoked?

You find another tomb which has gold bought 300 yo ago with an equivalent amount of wampum.

It's just green fucking paper folks.

surfer-x Says:

"Ahhhh money, it’s just so fantastic, when you get some all you want is more and then when you get more you treat people like shit."

Ha, ha, haaa... I love it. Isn't it true?