patrick.net

That’s a dangerous game though. Bubbles tend to reverse just as suddenly as they rose, and it’s really hard to know exactly when.

Long-term bull cycles tend to collapse when they enter a "bump and run" chart pattern. I recommend educating yourself about this so you know what it is. The term "bubble" is completely meaningless if you are truly interested in making money.

http://stockcharts.com/help/doku.php?id=chart_school:chart_analysis:chart_patterns:bump_and_run_reversa

ChrisLA says

Are people actually buying physical silver now (instead of gold)? I mean literally, buying up the metal itself?
Or are people actually investing into something related like mining, exploration, companies that use it?

Who knows? A better question to ask is, "Will silver bullion be more profitable than silver mining stocks"?

Historically, mining stocks perform better than the metals. However, I recommend owning both long-term due to the current nature of the market.

Like I said, I agree with the Pennington's chart and narratives.

Would you like to add now some comments to his narratives ?

thomas.wong1986 says

Like I said, I agree with the Pennington’s chart and narratives.
Would you like to add now some comments to his narratives ?

So you agree that prices are about right historically. That interest rates don't typically have a large effect on nominal home prices. And that nominal home prices should be flat to slightly higher in the near future?

tatupu70 says

So you agree that prices are about right historically

Like I said many times over.. its a good time to buy in Miami.. be sure not to trip over the dead homeowner lying in the streets. Pretty sure you will find the same in Vegas and parts of San Diego..

tatupu70 says

That interest rates don’t typically have a large effect on nominal home prices.

As I have said many many times over and used San Diego as an example how prices fell along with interest rates in tandem post 1990. Pannington wrote about this back a few years back.

tatupu70 says

And that nominal home prices should be flat to slightly higher in the near future?

We have a long way to go in SF Bay Area. So no! expect plenty of correction in the BA to occur.

Wow--how about that for 3 non-answers?

That’s a dangerous game though. Bubbles tend to reverse just as suddenly as they rose, and it’s really hard to know exactly when.

People were on this site saying it was dangerous play to go all in when it dropped from $22 to $10. They thought it was going to $3. It's 1000% above the predictions that were prevalent on this board. Silver is going to $50.

Paraphrasing here a bit but the main take aways of the Piggington's analysis are:

1 - To general affordability if you are willing to stay in possession of the house up to 10 years, put very little down of your own money, and buy something that is not overvalued, it is probably favorable to buy in those conditions.

I don't think many will argue with this here on the forum. A good buy is a good buy. The trick is finding it and for an owner being willing to stay put in order to gain the benefit. Overall to me the market activity seems pretty stagnant. Everyone seems to be waiting to see which way the wind blows and not many seem willing to hold a house for a long period of time.

2 - Home prices are in the middle of their historical range and could move up or down. Typically after booms there is an undervaluation that occurs. Based on headwinds to the housing the author believes home prices will drift downward overall but not a radical cliff dive in value.

The alternative or counter to that? They go up slightly? Again, basically the market seems boring and kind of stalled.

--

Are we strongly arguing over a "flat with a slight up" or "flat with a slight down" trend in home prices? Or are we arguing really a huge crash in prices versus a huge boom in prices? To me, major movements in price in either direction seem unlikely in the short term but I base that off of gut and a sense that "we" are trying to figure out how to breathe life back into the market.

I feel often that the debates here on the forums rage back and forth between a viewpoint of those seeing homes/rentals as investment and business opportunities versus those simply looking for a decent place to live. There are commonalities in interest, homes/rentals, but the overall motives and conclusions are very different.

How's this for a crazy view point: it's a good time for investors to buy but not a great time for a would be owner to buy. Wait a minute? Wouldn't a good buy for one be a good buy for the other? I don't necessarily think so. A buyer would rather put more money down, own more of the home outright, and have less debt over them. An investor on the other-hand cares less about these things than simply can they make money on it.

One is purely seeing benefit from any monetary gain that can be made off the house while the other is seeing benefit from investment as well as the roof over their head, location, and features of the property. This leads to the tactics of sellers emphasizing all the things outside the investment/price angle and toward the features and "quality of life" angle.

That's actually pretty minor, though very emotional, compared to the real difference between an investor and a buyer/owner: length of exposure to risk and risk aversion. If you can throw your money in and get out quickly conditions actually look favorable for that right now. I think people will work much harder right now to move a single home than they have in the past though. There just isn't much action. If you are going to buy and hold that seems to have a fair amount of risk involved in it unless you can hold for a long time. So being a shorter term owner doesn't seem to be very favorable right now. Being a flipper or a long term investor still looks good.

We know the gov. and the market will remain irrational longer than we can "stay solvent" as the saying goes. Go Wall Street! There are some big open questions about the future of how home buying will occur, the nature of mortgages, and financial law. Couple this with a flat economy, and most people knowing at-least second hand of numbers of people being laid off recently, and you don't have a lot of risk takers in the buyer/owner category. People are taking cash out of the game in favor of mobility and flexibility with where they invest. The result is a pretty sluggish housing market.

Investors I am sure are busy positioning themselves, licking their lips, and thinking that the time is looking near. They will see the positive before a buyer will otherwise they won't be an investor for long, or be a sub-par investor.

--

Isn't this the real debate we have in many different flavors across the forum? Or maybe I just have no clue what I'm talking about. (shrug) One thing is pretty certain to me here in the bay area, overall prices have moved a little, but in general the game hasn't changed from "put almost nothing down and buy something very expensive". When something exciting happens or that changes to "put a lot of money down and buy something reasonable" wake me.

Until then rent is far more attractive to me and cheaper than I have seen it in 9 years. If home prices shoot up again in California/the BA I'll expect we might consider moving out of the area for better quality of life elsewhere when we are ready to buy. Investors need not be scared. I'm sure there will always be those much less risk adverse than I. When you are talking about moving at-least 450K around, in the US of A, there is always money to be made off fees/interest/handling/transactions/etc., right?

bravo rewrew7, couldn't have said it better myself

Interesting summary.

There just isn’t much action. If you are going to buy and hold that seems to have a fair amount of risk involved in it unless you can hold for a long time. So being a shorter term owner doesn’t seem to be very favorable right now. Being a flipper or a long term investor still looks good.

But who then will buy from the flippers?

Homeowner demand is still relatively low in the BA - currently sales are dropping and mortgage apps are diving (well, at least nationwide)- even as cash buyers are making offers and sellers are jacking up asking prices. Sure, homeowner demand may pick up as the spring and summer selling season gets underway. It still doesn't seem likely though that it will be stronger than last year give that under/unemployment is about the same and rents haven't gone up that much. I suspect a weaker response given the lack of government incentives.

terriDeaner says

But who then will by from the flippers?

Well, likely at this stage other investors or the very occasional would be owner/buyer. Seems ridiculous from my would be buyer/owner viewpoint but commodities and stocks are traded from investor to investor everyday, so why not houses? You also have troubled asset managers, like banks, trying to offload, their 'investments'. We have seen reports in HK where empty apartments are being traded back and forth. People love to buy and sell things, to do it, and for the potential to make money, so why not houses?

I think short term trading of houses at this point has to be a small segment of the market, but given the overall inactivity, it is probably a larger percentage of the total transactions (random speculation on my part).

I don't disagree with you at all about your outlook. You will be right. I bet also prices will be reported as going up some at some point this year in certain areas. It's going to wiggle. I guess my point simply stated is it seems there are two major forces that are sandwiched into operating in one market. You have investors and buyer/would-be-owners both with overlapping interest and goals. The market is a combination of these forces acting on one another and right now, like most everything, investing is a good deal because cash is king.

A little irksome as a potential buyer/owner type though that doesn't want to "invest" in housing. To do that I would have to know how to trade it and profit from it. I want use of the asset value instead but I can't see myself stuck for 10 years in one place just to recover the amount of money bled out for the transaction. It's ok though as I'm pretty darn happy with my rental right now.

It's almost as if we should have different purchase methods and valuations for an actual person who will live in the house versus someone who will "trade" the home. Total pipe dream but taking some of that out of the system would probably be healthy for the majority of the population since the majority make their money in other vocations outside of real estate.

I can sell my used car to you without a bunch of third parties involved and people making predictions on the value of my and comparable cars. Why can't my 'used' house be the same? Oh, that's because prices of cars tend to always trend down until they are classic and then remain a little buoyant at whatever level they fell to. Should houses be any different? I suppose if locations radically change that could have an effect, but honestly, I don't think there should be as much difference as there has been. We have done some really goofy artificial things to the market and land use which is fogging up the real picture.

With a little more clarity the market will thaw and life will come back. I hope I like the picture in the Bay Area better after the fog is gone this time around. I'm guessing probably not as we are still very densely populated around urban centers and heavily land regulated. After CA suffers some more business attrition and migration away from the state it may change. Give it what ... 20-30 years? By then it likely won't matter and it might not be such a desired place to be.

Well, likely at this stage other investors or the very occasional would be owner/buyer. Seems ridiculous from my would be buyer/owner viewpoint but commodities and stocks are traded from investor to investor everyday, so why not houses? You also have troubled asset managers, like banks, trying to offload, their ‘investments’. We have seen reports in HK where empty apartments are being traded back and forth. People love to buy and sell things, to do it, and for the potential to make money, so why not houses?

Sure, but the speculative buying/selling has to eventually end with a homeowner signing a bloated mortgage for the ponzi to work, right? I guess it is all a matter of timing...

It’s almost as if we should have different purchase methods and valuations for an actual person who will live in the house versus someone who will “trade” the home. Total pipe dream but taking some of that out of the system would probably be healthy for the majority of the population since the majority make their money in other vocations outside of real estate.

How about a flexible county-specific, statewide progressive tax for sellers, prorated from THEIR date of purchase. Goes to zero as X months pass. Rates and X's could be easily adjusted to cool down speculators in targeted markets... Send all proceeds to fund education.

A pipe dream as well... the CAR would never let something like this get written into law, or would quickly find a way to pervert it in their favor.

terriDeaner says

Sure, but the speculative buying/selling has to eventually end with a homeowner signing a bloated mortgage for the ponzi to work, right? I guess it is all a matter of timing…

They can keep trading paper back and forth until someone actually goes to try and sell it. "The house down the street went for ..." "Last year this was traded for ..." "yeah, but we have held this for too long and blah blah needs to be repaired ..." ... on and on.

Pretty neat and flexible tool to force "real" buying of homes to take place. Would definitely take some of the game out of the system.

Thanks. Maybe I should try for a ballot initiative...

These charts do not tell the entire story.

In 1981 mortgages were not affordable because rates were ridiculously high. Rates topped 20 percent. See:

http://mortgage-x.com/general/indexes/prime.asp

However, in 1981 existing home sale activity fell. Home sales went from 2,973,000 in 1980 to 2,419,000 in 1981.

In 2006 existing home sales reached 6,478,000 -- the third highest total on record. How? Lenders made option ARMs and other "nontraditional" loans available so that a given level of income could buy more house. People could bid up prices because they had more borrowing power.

In 2009, corrected for inflation, household had less income than in 1999.

http://www.census.gov/hhes/www/income/data/historical/household/H05_2009.xls

What these charts really show is how the financial system was tilted to enable more borrowing with less buying power.

Nomograph says

It’s very difficult to get a loan without meeting these requirements

amen .... it is proctology-ish

thomas.wong1986 says

If Joe six pack decides to move out there will be little left for the ‘elite’ landlords as rental revenues decline.

Not if Jose Seis pack decides to move in.

You know, people doubling, tripling, or quad'ing up to share on the rent in what a different poster derisively referred to as a "starter" home, working 2 or 3 low wage jobs, it is still a very high standard of living conditions compared to much of the world. As long as there's money and elites in The Fortress for service employees, there's gonna be tennants.

rewrew7 says

How’s this for a crazy view point: it’s a good time for investors to buy but not a great time for a would be owner to buy.

This makes sense to me. The article made the point that it is a good time to buy some houses in SD now if you are going borrow money and hold for a long time. If you need to sell in 5 yrs, it might not be a good time to buy. This is pretty clear from the high price but low payments (relative to historic levels) due to low interest rates.

The only bad thing for the long hold leveraged buyers would be deflation in rent coupled with price declines.

The first plot has monthly mortgage payments as a fraction of annual per capita income. The typical value is around 0.06. Multiply this by 12 months, and the mortgage payments to income ratio per year is 72%. The high in 1981 was 0.11, which is 132% of per capita income. If there are two wage-earners per house @ 25%tax rate, that means that the mortgage was 88% of the total take home pay. I can't imagine there was much buying and selling going on at that time. The current low value of 0.035 is 42% of per capita income. That's still pretty high.

There used to be a HUD rule against refinancing a property that has been re-sold within the past 90 days -- it was an effort to stop illegal flipping. It also hurt legal flipping. In 2010 HUD waived the rule and as a result the FHA insured more than 21,000 mortgages worth over $3.6 billion on properties resold within 90 days of acquisition -- in other words, deals that would have been banned before the waiver.

The waiver continued until December 31, 2011.

For details see:

http://www.ourbroker.com/mortgages/hud-dumps-fha-90-day-anti-flipping-rule/

and

http://portal.hud.gov/hudportal/HUD?src=/press/press_releases_media_advisories/2011/HUDNo.11-007

As for the county’s top sale in Coronado, which was on the market for 158 days, the original asking price was $14.8 million before it was sold for $10.5 million.

Yes, when million dollar homes take massive haircuts, they start selling :shocker:

I hear when Levi's has a 30% off sale they sell more of those too. Of course, there's nothing to say they won't have a 40% off sale anytime soon either.

Million dollar homes is not what makes the market, it's the mid-high. There are vastly more of them which cater to a vastly higher amount of people. Will the mid-high where I live keep crashing? Yeah, you bet.

right along with:

Over 10% of the houses in US are empty:
http://patrick.net/?p=618167

I went to my account today to sell some SLV, and I can't stop looking at the chart.

WTF is going on today?

Okay, I am ready to buy a home for 1 million that was listed at 2 million. Just to make Nomo happy. :)

The low-end and middle markets have begun to recover? Prices are down, not up, and will continue to fall lower for some time. Yes, real estate prices are going to keep crashing.

Nomo - better buy yourself another property.

Nomo, it is time for you to invest in multi million $ properties, screw the low end. LOL.

bubblesitter says

Talk about optimism that Nomo talked about on other thread.

Optimism to counter what most realtors or those in RE business perceive as
"lost confidence" in the market place by buyers ...
Nomo is probably listening to some motivational tapes or something on that
subject matter...

tatupu70 says

reality into the doom and gloom/world is ending crowd.

Oh is that what you call it... seriously did you ever consider missionary work
in some third world nation ? I hear the soup lines downtown are taking volunteers!

Are you really trying to make a difference here ?

thomas.wong1986 says

tatupu70 says

reality into the doom and gloom/world is ending crowd.

Oh is that what you call it… seriously did you ever consider missionary work
in some third world nation ? I hear the soup lines downtown are taking volunteers!
Are you really trying to make a difference here ?

Are you?

Mr.Fantastic says

Never been a better time!

Miami babe! Sunny weather nice beaches... property discounted by 50% or more and yet couple clowns are tied down with property in the Bay Area... Shame that just cant jump on a plane and head to FL pick up half a dozen properties on the cheap.

tatupu70 says

Are you?

The people here know what they are doing!

Is this reality?

http://www.redfin.com/CA/San-Carlos/101-Club-Dr-94070/home/2052341

Previous sale, 4/9/1981 $171,000. Four way stop intersection, the front driveway could be mistaken for a shortcut. Looks a lot like a modular (trailer) home. From what I can tell, it's been sitting empty since early 2007.

Meelion dollas. $750 a square foot.

Dream on.

pkowen says

Meelion dollas. $750 a square foot.

$1,185,000 at 6% = $71K in commission.... They dont give a rats ass!

thomas.wong1986 says

tatupu70 says

reality into the doom and gloom/world is ending crowd.

Oh is that what you call it… seriously did you ever consider missionary work

in some third world nation ? I hear the soup lines downtown are taking volunteers!
Are you really trying to make a difference here ?

Speaking of soup lines I'm a volunteer. They need a lot of help; there are many people in need.

bad karma for the elite to “in your face” to the rest of us who are left behind
Sybrib, Perhaps I'm mistaking you for another poster, but is there any reason you could not employ the same strategy as duckie? Even I'm considering a refinance to the 'normal' conforming limit to give this a try at a much more modest level. As someone from GenX, this will be a once in a lifetime buying opportunity (the nineties bust was too early for me). Not sure I have the stomach to be a landlord, though.

Nomograph says

terriDeaner says

I’d like to see these sales records

Zillow, Redfin, and a variety of other online sources provide sales records. It’s a matter of public record.
Keep in mind that foreclosures are listed as sales since it’s a change of title, but those are easy to weed out.

Nomo just a heads up. For whatever reason sales records often do not match county assessors sales records. Accuracy isn't always there. You are better off checking with the assessor for real data.

EBGuy says

bad karma for the elite to “in your face” to the rest of us who are left behind

Sybrib, Perhaps I’m mistaking you for another poster, but is there any reason you could not employ the same strategy as duckie? Even I’m considering a refinance to the ‘normal’ conforming limit to give this a try at a much more modest level. As someone from GenX, this will be a once in a lifetime buying opportunity (the nineties bust was too early for me). Not sure I have the stomach to be a landlord, though.

By "left behind" I don't mean locked out of ownership. It was not the best choice of words. I meant left behind in wealth accumulation. In another thread a poster named Troy made his moral argument against Land-Lord-ism, and gave an example of a landlord he rented from in Japan who he thought was doing good by landlording. Gaming the system to exploit people and using moral hazard as an exit-plan backup strategy is not my cup of tea.

EBGuy says

bad karma for the elite to “in your face” to the rest of us who are left behind

As someone from GenX, this will be a once in a lifetime buying opportunity (the nineties bust was too early for me). Not sure I have the stomach to be a landlord, though.

Once in a lifetime, now? I am not sure. I am siding with the "slow grinders". I think that this opportunity will be with u s for a while and getting slightly better as time passes. My parents owned 6 or 8 rental properties when I was a kid. I would be happy to follow that path, but I just don't think this is the time to jump in.

0utside Party says

What a buyer really needs is two things:

1) About 6 months of steady upward home price movement nationwide to determine an upward trend is in place (with no govt manipulation)

2) A sizeable down payment saved up to help bypass the effect of higher interest rates
Trying to time the exact bottom likely means you are also interested in timing the exact top. Statistically, traders who do this are committing financial suicide. The trend is your friend. Latch onto the trend after it is established, and then jump off when you are profitable (well before it reaches the train station).

I would agree with you...if we apply this to the stockmarket. A house should not be an investment but a place to live. By the time, houses trend upward, you are back in a sellers market and good luck to negotiate anything with a seller that has 6 backup offers ready to rock.

Very different with stocks...you could wait until you buy a stock because it doesn't cost you anything to wait - where with housing, it does. You have to live somewhere and renting costs money - so while you are waiting for the bottom to set in and prices to turn around, you are wasting money on rent.

I think the time to buy is when you can afford something that works for you. Period! It doesn't matter if the market trends down or up...because it always will go up and will go down, that's why everybody in this forum will at some point be correct in their prediction.

This retarded investment mentality with housing is the #1 reason why we are in trouble. Also the reason why landlords never spend a dime in their rental properties. Horrible mindset! It's always about turning every aspect of life into a profit. And look at where that greedy mindset has gotten us as of today as a society.
Europe has so much more stable prices in real estate (especially germany), why? - because people don't speculate with houses like we do. If you have enough money to buy 2,3, 4 and pay them off and then rent them - GREAT!! There is your return. But if you don't have that kind of money, buy a place for your own family to live in - then pass it on to your kids, so they have it easier than you because they are getting a head start with a house they can either live in for free or rent out for additional income.

Stop speculating. Get a job, work hard, pay the mortgage, save money for rainy days, raise your kids and be happy! And stop worrying about if your house is worth more than when you bought it.

Nomograph says

terriDeaner says

I’d like to see these sales records

Zillow, Redfin, and a variety of other online sources provide sales records. It’s a matter of public record.
Keep in mind that foreclosures are listed as sales since it’s a change of title, but those are easy to weed out.

I didn't find Zillow or redfin to be too helpful for this - at least in terms of the summary data they provide. Short of checking individual listings one-by-one, the only useful index I found was Zillow's foreclosure resale rate, which should to some degree track flipping. It's only useful back to ~2007 since foreclosures were much less common back then.

On the other hand, DataQuick had this information summarized nicely in a recent report:

http://www.dqnews.com/Articles/2011/News/California/Bay-Area/RRBay110217.aspx

Provided their analysis is correct, their conclusions support your assertion that most BA investors that are currently buying property are not flippers. They also indicate a weak uptick in investor activity (at ~23% which is ~3-4% m/m and y/y), which is higher than the historical monthly average since 1988 (16.5%). I'd like to see what investor activity was at the peak (2005-2007), however, for comparison.

So again, why the sharp spike in BA asking prices (well, at least $/sf from redfin) at this time of year with broadly weak demand already baked into the mix? Wishful thinking for the spring?