patrick.net

@ robertoaribas

Do you see deflation as a scenario? How do you feel about guys like Prechter?

Fireballsocal says

I am an average American I spose. Single male, 33 years old with a $60K annual blue collar job. I am in escrow on my first house

Ok, maybe i was generalizing a bit too much.. But you mentioned some key things that make your purchase different than most. Firstly, you are a SINGLE 33-year-old male... You probably don't care too much about the school district you are buying a home in. It's a better deal after taxes than renting. so it makes sense for you now! Congrats!

Personally, I'm recently married and school districts play a larger role in my decision making. In los angeles, buying a home in a good school district would NEVER fly with $60K income. I've seen awesome homes in crappy school districts.. and then literally blocks away homes are hundreds of thousands more for the same sq footage and amenities... simply because they sit on the different side of a school district border.

I'll consider buying when i have $100K saved to put down on a $500K home... That's the average starter home cost in a good school district. I'm about 1/3 of the way there... If i had the 20% down payment with safety net income in the bank right now.. then my decision to continue renting would be more difficult. It's pretty easy to wait though, all things considered right now.

In my area, I have seen a lot of movement in the lower numbers for first time buyers, but almost nothing in the top and upper-mid level homes for 2nd level homes. People who own at house are not selling to buy a bigger, more expensive house. Anything over 500k is a rarity, as people who don't have to move are not moving. When 10 cheap homes are sold for every expensive one I can see how the numbers are going to go squirly when it comes to median home price. A cheap home in my town/state would be 250k so how does that effect the median home price for the nation?

I've tired of looking for a house in LA. We are looking in the upper-mid tier, which means about $700k+. 2 years ago that meant $800k. Movement, granted, but not as much as in the middle and lower end. I get the impression from our last round of tire kicking that the market has flattened and will not drop any further in our range. What we pay in rent only affords us a $500k mortgage; we'll stick with our palatial apartment with historical details and landlord-maintained gardens.

Both of our jobs are in the West LA area, so there is no way we would move to the suburbs or to Land of the Dirt People and commute 4 hours a day just to afford a bland 1980's tract home or, worse, shoddy new construction.

We're 70% on saving a downpayment. But the cost of living in LA is not worth all the nice weather in the world, so we've determined we'll keep collecting inflated LA salaries and then take our savings to another state where the exchange rate will buy us a house outright.

Philistine says

We are looking in the upper-mid tier, which means about $700k+. 2 years ago that meant $800k.

Two years ago the 30 year mortgage was over 6%. Now it's under 5%.

http://research.stlouisfed.org/fred2/graph/?chart_type=line&s[1][id]=MORTG&s[1][range]=5yrs

$800K at 6.3% is ~$4100/mo in cost-of-money terms, while $700K at 4.8% is $3100/mo. So prices have fallen 25% in cost-of-money terms.

I lived in WLA 1985-1992 so I understand its attraction. There is an immense --centripetal -- demand for housing there relative to the supply.

http://bible.cc/proverbs/26-11.htm Speaking of dogs, here is an interesting scripture in the Bible. BTW, dogs eating their vomit was considered very bad in those days.

jvolstad says

http://bible.cc/proverbs/26-11.htm Speaking of dogs, here is an interesting scripture in the Bible. BTW, dogs eating their vomit was considered very bad in those days.

Appealing to conscience, I feel like the "spend our way out" is simply another way to steal from the future. Taking on more and more debt is ALWAYS a path to disaster. Loading debt onto future generations has to be even worse! Yet, our "leaders" continue to return to their credit vomit. At this point we simply have a drawing of the lines between the immoral and the responsible. Congress has acted with unacceptable selfishness at the deteriment of the next generation. Housing cannot recover because they have stolen the piggy bank where the savings were being kept. The exodus of companies from the USA (and Silicon Valley as documented above) is no different than marauders leaving after marauding a country. Housing and the USA will recover only when the American people stand up and enact judgement on those who have assailed the USA. Cash for clunkers. Free housing for liars. And other government programs are not even thinly disguised assaults on American wealth designed to buy votes and reward lobbyists. Housing can't recover when the root cause of rot is still festering in Washington.

My dog eats pretty much anything. It is rather digusting. Regarding Maxweber's comments, I feel that people have lost their humanity. We have become nothing more than dogs willing to steal from our brothers with no remorse. Once there is no difference between us and the animals, are we worth saving?

If you cannot make the numbers to buy work in comparison to renting then rent. Its a easy decision. Renting makes you more mobile and you do not need to worry about maintenance or property taxes.

Looking back I should have been renting years ago.

I saw an interesting article on Zerohedge.

The author believes that we are headed for deflation but the Federal Reserve fears that most of all. Bernanke has implemented Quantitative easing because he knew there would be no velocity of the money infused as well as the first stimulus has been relatively ineffective because it mostly benefited government.

The author suggested that there will be a short-term push for a second stimulus and the Fed will resume other QE to combat deflation. Ultimately there will be inflation but the Fed will counteract with high interest rates.

I think this is logical because before 2009 I never expected the government to bail out the banks. These guys are going to all in.

Whatever does happen, these guys are going to lose and us with them.

inflection point says

If you cannot make the numbers to buy work in comparison to renting then rent. Its a easy decision. Renting makes you more mobile and you do not need to worry about maintenance or property taxes.
Looking back I should have been renting years ago.

I disagree with this. In the historical postwar environment, ANY home purchase paid off eventually as household incomes rose and interest rates fell, a combination that resulted in higher home prices and rents.

Buying in a decreasing interest rate environment is juicy.

http://research.stlouisfed.org/fred2/series/MORTG/

Had I understood this in 2000 I would have bought then and made out like a bandit. My friend closed on his quarter acre of Maui the week after 9/11 and was able to serially refi down from 7% to 4.5%, a 36% reduction in interest cost.

Renting makes you the buttboy of wage inflation since household income in the end is the main determinant of rents.

Now, going forward it is highly questionable whether wage inflation is still in the cards, and left to its own devices one would imagine mortgage rates would be going up and not down from here.

But I still think we're more likely to see 3% rates before 7%, which makes buying now NOT a bad tactical decision since that also offers a ~30% reduction in interest costs should Bernanke or the PTB swing a Japan-style interest rate regime.

I say all of that fancy talk don't mean Doodeley Squat!

" ``The fact is that there's probably two to three times as much inventory as what the Realtors are saying on MLS,'...

``There's been a continuous deterioration in prices,'' Zalewski said. ``If you factor in that increase in inventory, that deterioration is just going to continue to increase.''

Read more: http://www.miamiherald.com/2010/06/29/1705736/report-s-fla-homes-for-sale-on.html?story_link=patrick.net#ixzz0sNywTb7G"

I read that today and pulled my offer from a house I was in the process of putting the close together on.

I will not be Cajoled into an over priced piece of crap house. The only Real Estate moving is the Real Estate that is bought by Sanctioned Commissioned Investors, that do the banks bidding, and is a continuation of the mentality that got us here. I will not be a Proxy of that Model.

I want one of the ones in the jaws of the Greedy Beast, my self, I'll wait until I Slay a good one.

NO SALE!!!

Troy

Buy away. You will make Obama and the NAR happy.

It's a tough decision. On the one hand I see nothing but continued economic tankage from here on out, unless something unexpected happens like fusion power is perfected.

On the other, the ptb can and will throw everything they can at the situation to save it as-it-is.

It's a coin-flip really, but I do think the Japan example educates us that two or three years into the pullback is the wrong time to buy.

TEN years was about right in Japan, and even now it's just floor-scraping interest rates that are keeping prices up.

Troy.

It is not a difficult decision for me.
- I am 49, I cannot see taking another 30 year mortgage.
- I have two college age children at home for at least 3 more years.
- I can finally sleep soundly at night because my wife and I can make our expenses on one salary.

Why take risks you do not need to?

Troy says

inflection point says

If you cannot make the numbers to buy work in comparison to renting then rent. Its a easy decision. Renting makes you more mobile and you do not need to worry about maintenance or property taxes.
Looking back I should have been renting years ago.

I disagree with this. In the historical postwar environment, ANY home purchase paid off eventually as household incomes rose and interest rates fell, a combination that resulted in higher home prices and rents.

I grant your point, however interest rates "in the historical postwar environment" shot way up from mid-'70s to early-'80s, about 16% or so (maybe a tad more?), and then slid glacially to 10% by 1988. Nearly 15 years of double-digit interest rates is, as a child of the '80s, indelible. I remember my mother slaving--as a mortgage broker of all things--to pay $1200/mo on a $130k mortgage. The circumstances may not return there for a long time to come, but I will not overpay on a house just because interest rates are low.

Philistine says

I grant your point, however interest rates “in the historical postwar environment” shot way up from mid-’70s to early-’80s, about 16% or so (maybe a tad more?)

The ball-buster interest rates were policy engendered to break the wage-price spiral that separated the economies of the 1960s and 1980s. While I don't have the data, I suspect those who bought in the teeth of Volcker's tightening policy did well as rates were loosened through the 1980s. There certainly was a run-up in prices from 1985-1989.

Philistine says

but I will not overpay on a house just because interest rates are low.

And well you shouldn't. My point was buying in a DECLINING regime was good. If rates plateau or go up from here, buying now will be a mistake unless these rate rises are in response to "inflation expectations" aka wage inflation.

But if you ask 100 people whether or not buying when rates are low is good, 100 people will say "yes", when the correct answer is "depends" . . . on household after-tax incomes.

inflection point says

Troy.
It is not a difficult decision for me.

- I am 49, I cannot see taking another 30 year mortgage.

. . .

Why take risks you do not need to?

Actually, a 15 year mortgage is the OPPOSITE of taking a risk. You're locking in your housing cost for the rest of your life, especially if you live in California or another Prop 13-protected state.

15 year interest rate is 4% now, on a $250,000 property that's a holding cost of ~$1250/mo ($2300 including principal repayment).

This housing cost will decline over 15 years as the loan is repaid, and in 2025 and beyond will be on the order of $500/mo.

What will your rent be in 2025, and how many years do you plan on living past 2025?

Troy says

But if you ask 100 people whether or not buying when rates are low is good, 100 people will say “yes”, when the correct answer is “depends” . . . on household after-tax incomes.

Few people actually get this... :)

I think I will wait for the bottom on this one.

inflection point says

I think I will wait for the bottom on this one.

Easier said that done... The problem is you only know it's a bottom when you see it in the rearview mirror.

I dont need to be at the precise bottom.

Right now I rent a much nicer house than I can afford to buy so I am sure we are not there yet.

It will be more likely we are their when no one thinks housing prices are going up.

He didn't do a walk through before closing? You're kidding. If anyone would have been there, the deal would have been put on hold until they left and the locks were changed. Where is the title company in all of this?

You get what you pay for. The reality is the buyer got a great deal but that is exposure/hidden cost to short sales. A case that tenent protection is out of whack. You shouldn't have to go a long legal process to evict like this.

I hope that cash was somehow documented with an agreement. That was really dumb.

The thing is any reasonable person would know/expect that the previous owner was going to string this out as long as possible and wait to be evicted. There is no motivation not to. Your acquantance who bought the home should have known this and plan for it accordingly. Worst, giving 3K dollars in cash without proper legal consideration is just plain idiotic. Most people do negotiate the buy out in lieu of eviction but not with cash and without a contract.

folks, that is how I view our population now.

The eviction cost is part of the reason why short sales are cheap. This person has no street smart.

Nomo, it has been my experience that the first step a REwhore takes when an asset manager gives them an REO to list is to have locks changed. In a ShortSale it is different. A ShortSale listing is normally 1 of 2 types. Type 1 has a person wanting to use the ShortSale system to force the foreclosre process to stop for a while. Type 2 has a person that has taken a ton of money out of a home and is using the ShortSale offers to "prove" to a bank/gov that they should not be made to pay taxes or get a loan adjustment. It has been my experience that renter-occupied ShortSales are type 2 and are normally owned by RE type people, pocketing the cash.

I made an offer on an occupid SS. I offered the occupant cash for some of their belongings along with the offer. Just how I roll. lol

I think there's another type of short sale candidate where the person thinks they can short sale to get out of their underwater home and go buy the cheaper bigger house across the street.

If I were looking to buy I would stay clear of short sales. Even foreclosures are questionable because you know that behind each foreclosure is a disgruntled former owner. There's no telling what may happen.

E-man says

I’m not surprised at the situation. I can’t speak for your acquaintance, but I do believe in karma.

Karma - as in the buyer deserves it? Or karma as in, the occupant will eventually get his own? Sounds like this guy bought a house he currently can't live in. He's not the bad guy in this story, but is getting screwed anyway.

Why fool around with all of the hassles and pitfalls of a short sale or REO when there are so many other great deals to be had without the headaches? Just the waiting and waiting on banks to make a decision is enough for me to stay away from them. Buyer beware

This depression is much better with bankers bonuses, home buyer credits, and bridges to no where.

I made one attempt at buying a foreclosed home. That was very frustrating.

After reading some of the short sale stories in this forum, that sounds far worse.

there is no recourse with the bank
The bank didn't sell him the home; the owner did (with bank approval). I assume the former owner did a short sale (as opposed to a foreclosure) because he had something to lose. I'm sure a decent lawyer should be able to come up with several reasons to sue the pants off the former owner (assuming he still has pants, of course!) What am I missing?

My gosh are u guys a bunch of miserable frackers .

Can't wait until u guys fall into the ocean :)

Looking all these charts, graphs and indicators there is no way in hell you can predict the market. It's all hogwash. The Bankers and media are praying the market will correct soon. Correct to where? up^? Ridiculous...Buying a house in today's fiasco is almost impossible because the homes on the MLS are complete wrecks while good value homes are scooped up in a week not even hitting the MLS radar. Good luck trying to buy an REO or forecloser property with multiple bidding unless you have all cash.

Websites like:
foreclosureradar.com
realtytrac.com
foreclosure.com

and all the others who want your money only to sell you lists of properties. You will have no chance of buying these homes(wrecks) and are a real waste of time.

ditto here. Avalon Bay is sitting on 4B in debt, but they are also generating 400M in operating cash flow. Debt in itself is not the concern, it's how you use and manage it.

If Avalon Bay can make it work with all that overhead, it certainly can work individually.

For me it's a mixed bag--some things I'm happy about, some things not so much.

For me it's a very mixed bag. I knew he wasn't a Liberal before he got elected. I just thought he'd be leaning left from the middle. Lately it seems that he leans to the right of center and has sided with corporate interests at our expense. Also, he's dragging his feet on "Don't Ask Don't Tell" and he shouldn't count on enthusiastic GLBTQI support for other reasons around Gay Rights, like his stance on Gay Marriage that we didn't like even before he was elected.

I'm disappointed that he took single payer healthcare off the table even before negotiations started, thus giving away negotiating room with the Corporate Hacks Who Run Congress. I'm happy that he was able to get something through our very disfunctional Congress though.

Financial reform hasn't been going well and I don't expect miracles. The credit card reform was full of giant holes for the banks to walk directly through.

The thing is that the POTUS can only do so much to influence Congress. He is the Supreme Executor and is in charge of only 1/3 of the government. Congress writes and passes the laws and has 1/3 of the power. Congress and the POTUS have equal power and since Congress is bought and paid for by Big Corporate Special Interests, there's only so much Obama can influence.

I'm not terribly thrilled with his selection of Justices for the Supreme Court that heads up the last 1/3 of our government. However, he does have to get his appointees through the Giant Corporate Special Interest Group Purchased Congress.

And, we've had 30 years of Conservative/Republican dismantling of the middle class and our economy. They've cut taxes for the very rich while spending giant sums of money on weapons and war leaving record deficits when they were running things. Under the the former regime we had 8 years of the largest expansion in goverment ever seen as evidenced by the creation of the largest Governmental Department Ever -- The Department of Homeland Security. We saw an unprecedented dismantling of our basic rights that were enshrined in the Bill of Rights and our Constitution. This is now a police state.

Obama inherited a giant mess from his predecessor (the appointed p-resident who won his second election only through voter fraud in Ohio) and only 1 term won't turn that around.

So, I think Obama has made sour lemonade out of the rotting lemons he was given by the former regime.

I spotted him coming in that he would be a "conservative" Democrat, meaning cautious, in the Clinton mold of triangulating towards the middle on things.

Contrary to the Right's propaganda about him, he's not the second coming of Marx or Che. He's basically Clinton, or a little more to the right of him perhaps.

He knows that it's the mushy middle in this country that determines elections and reelections, the people so clueless that they actually still consider voting for Republicans these days.

This means he's got to dumb down his policy to not surprise or shock them.

Continue Bush's policy of saving the banks. Double down in Afghanistan in a repeat of Bush's surge in Iraq. Not outrun middle America on equal rights for gay couples. Pro-Israel at all costs.

Not terribly impressed with his two SCOTUS picks but as long as they are pro-choice and anti-Fundamentalist (ie pro-Brain) that's the main thing.

The Bush team handed over an economy in total free fall and what we have now is about what could be expected. Same thing with Afghanistan.

We'll see how the Az thing goes. As a left-libertarian my sympathies are with the state not Feds. I did like that Arizona is using English ABILITY as a key indicator of possible immigration problems. NOTHING wrong with that from the libertarian perspective. If the Az law breaks down such that if you can't speak English like a native, you have to carry your papers, I think it's great. I had to carry around my gaijin card in Japan for years and it was no big deal.

But if actual citizens are getting harrassed, then the Feds have an interest, but I think the Feds are moving in too soon here.

Scaling back the war on pot was a good move I think. Bush's Federales coming in an busting growers in Santa Cruz was total BS.

What ^ simchaland said, too.

Like Clinton, Obama would make a good Republican. My preferred Democrat is more of the Howard Dean mold, somebody willing to get in the Right's face on things and tell them to blow it out their ass.

I thought the Devil made him "Do it".

And soon the cat will make a big thud sound... And it did, but it bounced... That cat looked alive for a brief few moments when rising in the air... Alas the velocity decreased and then the cat looked as if it were suspended in mid air... It became immediately apparent to everyone just then that this cat was definitely dead... There was only one direction that dead feline was going and the floor had disappeared...