patrick.net

In the single biggest epic failure I know of.....

Homeowner bought in the late 90's in a gentrifying area of LA. Honestly don't know the price paid at that time, but an educated guess would be in the high 100's.

Sold in 2005 at $630K.

Unfortunately..............

To avoid paying taxes on the principle, went and bought an inland empire castle in the $700's in 2007.

EBGuy says

am now renting a 2 bdr/1 bath appt

What are rents like these days. Those complexes down by BART are fairly interchangeable and are a good proxy for the state of the rental market. I know rents were going down in that area the past couple of years. Just wondering if they’ve bottomed.

In our area you can get 1bd for $900 and 2 bd for $1100. Or you can rent a guest house for $500 a month.... plenty of these out here.

I sold at late 2005. Made good money and now bought at late 2010. Great timing.

robertoaribas says

dodgerfan: you don’t have to buy another home to avoid capital gains taxes on an owner occupied home. 250K single/500K married is tax free. that law was changed decades ago.

Actually the law was changed in 1997. Look at what happens to housing prices starting in 1998 http://mysite.verizon.net/vzeqrguz/housingbubble/ Coincidence?

I sold in 2006 when I realized that almost 50% of houses sold were NOT going to be owner occupied. Still renting since in my area you can rent for a LOT less than the cost of carrying the same house.

I'm buying all the large cardboard boxes I can. Back in the Great Depression, there were a lot of people living in makeshift shacks that were called "Hoovervilles." We've progressed quite a bit from those bad old days. Now, people live under bridges enjoying the comforts of heavy-duty cardboard boxes. The way I figure, it's only a matter of time before a lot more disillusioned (and out of work) Obamabots will be living under bridges looking for shelter. I plan on supplying (at a very modest profit) the housing needs for these "Obamavilles." Maybe there should be a government program that would be willing to pay me for my boxes? Of course if that happens, I'll have to increase my prices accordingly. Maybe Obama could call it "Carboard Stimulus; Yes We Can?" Like Rahm Emmanuel said: "Never allow a crisis to go by without taking advantage of it" or something like that.

Roberto.....

Even worse then. I'm guessing $450K over the late ninties purchase price. So the person(single) avoided capital gains on only $200K...............

The person was running around complaining about how the two year time period was almost up and needed to buy immediately.

dodgerfanjohn says

In the single biggest epic failure I know of…..
Homeowner bought in the late 90’s in a gentrifying area of LA. Honestly don’t know the price paid at that time, but an educated guess would be in the high 100’s.
Sold in 2005 at $630K.
Unfortunately…………..
To avoid paying taxes on the principle, went and bought an inland empire castle in the $700’s in 2007.

Interesting story. I guess this type of loss was probably taken by many of the folks who cashed out in the BA or LA area and then bought a different overpriced house immediately after in a "less expensive" area of California. This seems like a pretty severe case though.

E-man says

dodgerfanjohn says

Roberto…..
Even worse then. I’m guessing $450K over the late ninties purchase price. So the person(single) avoided capital gains on only $200K……………
The person was running around complaining about how the two year time period was almost up and needed to buy immediately.

Uh huh!!! You got no idea what you’re talking about. Fantastic!!!!!!

Your posting makes no sense.

Did you make a typo? Or perhaps you are a troll?

I sold a house in 2006 in Bay Area CA. Bought it for 119k in 1996 and sold it for 404k. Zillow says it's now worth ~195k. Moved to east coast and paid cash for new house.

E-man says

Maybe my posting makes no sense. Perhap you can help me understand what you’re trying to say and I quote what you wrote above:
“The person was running around complaining about how the two year time period was almost up and needed to buy immediately.”
What do you mean by this?

When a person buys a house, then sells at a profit.....If they do not buy another house within two years they are liable for taxes on the gains. But if they buy a house that uses the gain amount, they do not need to pay taxes on the gain.

Its possible I have a misunderstanding of this.

dodgerfanjohn says

When a person buys a house, then sells at a profit…..If they do not buy another house within two years they are liable for taxes on the gains. But if they buy a house that uses the gain amount, they do not need to pay taxes on the gain.

Not since 1997. From wiki:

"Under 26 U.S.C. §121 an individual can exclude up to $250,000 ($500,000 for a married couple filing jointly) of capital gains on the sale of real property if the owner used it as primary residence for two of the five years before the date of sale. The two years of residency do not have to be continuous."

If you are talking bigger numbers than this you get into 1301 house swaps. Is this a 1301 you are talking about?

bob2356 says

If you are talking bigger numbers than this you get into 1301 house swaps. Is this a 1301 you are talking about?

I think you mean a 1031 exchange. I did those when I sold rental/investment property in Northern Cal and bought in Southern Cal. I did this because I moved to SoCal and have no interest in being a long distant landlord even though I use a management company. A 1031 exchange is for investment property......several reasons for selling such as a move like mine, or the neighborhood is going down hill and an owner wants go get a different property or any other number of reasons a landlord would want to exchange homes.

If you want to sell your primary residence you simply sell it and take the 250K or 500K (depending on your filing marital status) and put the money in the bank or investments or whatever, there is no requirement to buy another home. The statute you quote is to keep people from renting out their home for 5 years as an investment property and then getting the payout. You have to live in the home 2 of the 5 years for you to just walk away with the profits...end of story. For example, you can rent your place out for three years and then live in it for two years and then sell it and walk away with the profits. In the "old days" you had a one time exemption (I believe it was if you were over 50) to do this, then I believe it was in the early 90s Congress changed the rules that it became anyone at any age as is the case today. I believe this is one of the reasons that the bubble inflated like it did.

This following web site breaks down a 1031 exchange for landlords/investors because it's not a simple transacation due to time limits and you must use an intermediary and have only 45 days to identifying a like kind property after the sale, and 180 days to close, etc. http://www.1031exchangemadesimple.com/

ptiemann says

I know someone who made - in 2006 - around 500k by selling a SFR in Aptos, Santa Cruz County.

Tax free because he is married.
Unfortunately he bought 3 houses with those 500k cash
- one in Sacramento (cost was $300k)

- one in Capitola (cost was $850k)

- one in Live Oak (between Santa Cruz and Capitola, cost unknown but I guess $600k)
Estimated unrealized losses as of today:
$200k in Sacramento

$250k in Capitola

$200k in Live Oak
First a $500k gain, then $650k loss, overall $150k down.
Collected rent, maintenance, depreciation for tax purposes are another game.
It really could be worse, in 20 years we know more, for now, he’s holding on to all 3.

He'll probably do ok in the long run. I'm in the same situation. I sold in 2007 but I bought another house
which has lost value. I'm no good at timing the market. I just happened to sell at the peak because I needed to move. I guess I could have rented and left the money in the stock market but probably would've gotten hammered in the stock market crash of 2008 and ended up with no house and no money.

So not really regretting my decision.

toothfairy says

He’ll probably do ok in the long run. I’m in the same situation. I sold in 2007 but I bought another house
which has lost value. I’m no good at timing the market. I just happened to sell at the peak because I needed to move. I guess I could have rented and left the money in the stock market but probably would’ve gotten hammered in the stock market crash of 2008 and ended up with no house and no money.

So not really regretting my decision.

There is something called a bank. You wouldn't have lost your profits if you put them there. Even putting the money in stocks would have been less risky than on a down payment for a house. Sounds like you're making excuses for "having" to buy.

Is this why you want principal reductions to start happening?

I sold my over sized home in 93536 in summer of '06 (after my brother, a realtwhore, refused to list it in December of '05 because he said you always make more money in the spring) for 475,000. My house did not have the 500 sq ft. bonus room that some homes in my neighborhood had. In 2009, numerous houses in the the same neighborhood WITH the bonus room (~3800sq ft.) sold between 190,000 & 230,000. Now the average home in that neighborhood is selling for 225,000 on average. I have been renting ever since in a much nicer area, 91354. I am 35 miles closer to work. Biggest difference is that I am in a much smaller home, but it's actually pretty decent. My rent is just under 2k. Someday I will own again, but I'm in no hurry.

klarek says

toothfairy says

He’ll probably do ok in the long run. I’m in the same situation. I sold in 2007 but I bought another house

which has lost value. I’m no good at timing the market. I just happened to sell at the peak because I needed to move. I guess I could have rented and left the money in the stock market but probably would’ve gotten hammered in the stock market crash of 2008 and ended up with no house and no money.
So not really regretting my decision.

There is something called a bank. You wouldn’t have lost your profits if you put them there. Even putting the money in stocks would have been less risky than on a down payment for a house. Sounds like you’re making excuses for “having” to buy.
Is this why you want principal reductions to start happening?

Well principal reduction wouldn't apply to me since I'm not underwater.

I didn't have to buy in 2007, I just wanted to because I needed a place to live. The alternative would be spending about 36k per year in rent while waiting for the market to bottom.
plus 4 years of stressing out knowing that I still need to buy a house.

ptiemann says

toothfairy says

plus 4 years of stressing out knowing that I still need to buy a house.

hard-core renters will be eager to point out that there is no such need.

And whatever desire there is, it's assuaged by saving hundreds of thousands of dollars.

waiting_for_the_fall says

I sold my 4 bdr/ 2.5 2200 sqft home in Fremont in 2005 for 830k and am now renting a 2 bdr/1 bath appt. ...

Why did you ever purchase a 4br home if you only needed 2br?

This may be an example of a midwesterner not understanding the CA mentality. Or an example of a baby boomer who has purchased homes to live in long term with no intention of financing my retirement from the equity.

Yes, I sold in 2005 and then rented. I felt prices were way too inflated and didn't want to be trapped in an overpriced house and loan when the house of cards fell apart. Was really glad I did know enough to do this, because eventually we had to move for a new job in another state, and because we were renting we were free to do so. Had we bought a house again, we'd have probably been screwed.

@CSC,

If you don't mind...What did you sell it for, and what do you think the current market value is?

I bought my current home in Feb 2004.
Huh? There is no shame in being part of the Prop 58 aristocracy that is making serfs of us all...
Hey, check this out. While doing taxes, I was looking at my property tax bill and it actually went down this year (maybe $70 bucks total)! And the punchline, my tax basis did INCREASE. Looks like the city and school district paid down some bonds; no worries, though, we passed a $200 million school bond this past year so they'll be shootin' up again. Once indentured, always indentured...

Payoff2011 says

waiting_for_the_fall says

I sold my 4 bdr/ 2.5 2200 sqft home in Fremont in 2005 for 830k and am now renting a 2 bdr/1 bath appt. …

Why did you ever purchase a 4br home if you only needed 2br?
This may be an example of a midwesterner not understanding the CA mentality. Or an example of a baby boomer who has purchased homes to live in long term with no intention of financing my retirement from the equity.

I don't think that is fair. Most houses in my area are 4BR. When you go 1 or 2 BR, you're exposed to a much smaller market share of buyers. While I'd agree that buying say a 5000sf McMansion when only a 1500sf house is necessary would be a waste, the number of bedrooms isn't always indicative of the size of the house.

bought it back in 1998 for around $150 K

sold back in oct 2006 for $506 K....just got very luck with the timming

same home sold for $323 K in aug 2009.....

Where did all that funny money go? I still have most if it.... more to follow
and what I have done with the funny money...

@Hdog,

Thanks for the story. That beats out any investment return I have ever made (assuming you put 20% down), you got over a 1500% return in 8 years...

@klarek

"...the number of bedrooms isn’t always indicative of the size of the house."

True that is.

American in Japan says

@CSC,
If you don’t mind…What did you sell it for, and what do you think the current market value is?

We sold it for at/about the top of the market price for similar houses in mid 2005 in that area. In less than a year similar houses were selling for at least a few thousand less, then tens of thousands less. Many similar houses were staying on the market for months, some foreclosing. I stopped paying much attention after about a year or so, but have seen that pretty much nationwide prices have continued to fall or at least stagnate. The area we sold in was not a real huge bubble area like some cities, but nevertheless prices had inflated some, then come down. I think the biggest inflation and bust in that area was on newly built McMansions, (but our house was a modest ranch house).

Looks like almost everyone did very well who sold (no surprise).

trying to time the housing market is a little bit like playing with fire.

I'd never sell my house because I expected prices to go up or down.
There are people who got the timing exactly right. There are also folks who sold "at the peak" in 2003
and sat and watched as prices continued to soar out of their reach.
Some ended up buying again in 2007. Others have been renting for the past 8 years still waiting for prices to come
down to the level they sold at.

for folks who did sell right at the peak it's not because they were smarter in most cases they just happened to get lucky.

Sat, 9 Apr 2011 at 5:34 pm Link Top Quote Email Flag Edit
>”There are people who got the timing exactly right. There are also folks who sold “at the peak” in 2003
and sat and watched as prices continued to soar out of their reach.
Some ended up buying again in 2007.”

Wow, you know people who did that? Any specifics on amounts or size of homes?

American in Japan says

Sat, 9 Apr 2011 at 5:34 pm Link Top Quote Email Flag Edit

>”There are people who got the timing exactly right. There are also folks who sold “at the peak” in 2003

and sat and watched as prices continued to soar out of their reach.

Some ended up buying again in 2007.”
Wow, you know people who did that? Any specifics on amounts or size of homes?

I know somebody that did that, then bought at the market peak and his house lost 50% of its "value".

I sold in June of 2006.

In my mind.

Because my partner would not go along with the idea. I told her we could sit tight on the 500K equity we'd get out and buy it back for cheaper but she would not go along with such a radical idea. Something about being a home"owner".

Some idiots bought one on my street in San Jose that same summer of 2006 for 630K. Smaller lot, smaller house, in deteriorated condition. Idiots they were, a whole household of adults working like dogs at low wage jobs to make the payments. (Of course they're not there anymore but that is a different thread). When I refinanced in 2009 the appraisal came in at around 330K.

Damn.

At least we still have our relationship and place to live that allows pets, because we are our own landlords.

And at least she doesn't argue with my financial ideas anymore.

klarek says

I know somebody that did that, then bought at the market peak and his house lost 50% of its “value”.

And there are plenty of others who purchased and still sitting on depressed values. Not defualted or shadow inventory.. Those homes will be hitting the market down the road.

toothfairy says

Some ended up buying again in 2007. Others have been renting for the past 8 years still waiting for prices to come
down to the level they sold at.

Many who sold didnt rent or buy around here. Many people I know sold off at peak and left the state to retire elsewhere.

sybrib says

And at least she doesn’t argue with my financial ideas anymore.

nearly 99.99% IMPOSSIBLE to argue with women about the 'nest'.

I heard (2nd hand) of one person who sold a house in the SF Valley around 2005 and then moved to Arkansas (bankng about 200k dollars)...

toothfairy says

for folks who did sell right at the peak it’s not because they were smarter in most cases they just happened to get lucky.

You can tell yourself that if it makes you feel better. But some of us were indeed watching this mayhem unfold, and quite rightly decided that the bubble had probably inflated itself to the max. Klarek and I debated this topic for months back in the winter of 2006-2007 and came to the conclusion that if he wanted to get out of the market, now was the time. He sold a few months later, and a year after that the property was 10% below what he sold it for.

You can call that, "just lucky, that's all" if you want, but in many cases these sales were calculated and carefully timed transactions. I find the people who call other's "lucky" for not getting raped by the market are usually the one's who also say things like, "No one can predict the future", or "No one could have seen the crash coming", and other inane statements which have no bearing on reality. Many of us correctly saw the bubble forming, and correctly predicted (within 18 months) when it would pop. Anyone who bought a house in 2007 who claims, "I didn't really see this coming" just wasn't paying any attention at all. It's not a matter of being smarter, it's a matter of being realistic and actually paying attention to what the data is telling you.

Or they are like one of Klarek's acquaintances, who in 2006 I believe absolutely railed against him at a party for suggesting to her husband that buying a condo at that time was not prudent and that they might want to seriously reconsider. I believe her retort was, "You're just jealous because of all the money we're going to make on this place." Currently I believe they are about 25% underwater, and most assuredly would be in the, "No one could have predicted this" camp, even though they were given this prediction by klarek on several occasions before they closed on the property. People believe what they want to believe much of the time. The people who quell this urge and try to accept congnitive dissonance as a necessary function of letting rationality and logic battle with the id, instead of letting the id win every time and then justifying it away, do indeed deserve credit for this quality. Not for being, "smarter" but for having more self-discipline.

Schizlor is right IMO. Most people beilieve what they want regardless of facts. Its hard wired.

Most of you probably believe in some insane fictional religion (everyone believes something different and ALL claim to be right! Logically, everyone is wrong there is no other sane truth! lol) anyway we are just monkeys chattering away at each other.....

I sold at the peak and I was obsessed with that decision, turned out I was correct in my 'crazy doomster housing bubble predictions' mostly thanks to this blog as it was one of if not the very first 'bubble blogs'.

The rise of the bubble blogs mirror the bubble 2003 to now. Crazy days.

Schizlor says

Currently I believe they are about 25% underwater

What their place is worth now is about 60% of what they paid. Don't know what their loan balance is, but I'm pretty sure they're not making the big bucks from it that she thought they'd be making.

And the quote is almost word-for-word what she said. Talking somebody out of buying a house back then was as simple as finding somebody with a room temperature IQ (or above) and an open mind. f they bothered looking at the numbers, they'd at least have had some doubt about jumping into the shark tank. "You don't know anything; my realtor said" was another common angry retort to a person that was only trying to help ffs.

PockyClipsNow says

I sold at the peak and I was obsessed with that decision, turned out I was correct in my ‘crazy doomster housing bubble predictions’ mostly thanks to this blog as it was one of if not the very first ‘bubble blogs’.

The thing that gets me is that those very same people still want to call us "Doom and Gloomers", as if we just try and shit on parades and revel in people's misery, instead of actually trying to prevent misery by steering people away from bad decisions.

First they say, "You're all just doom and gloom". Then, when our predictions were correct they say, "It's not like you could have actually known what you predicted would come true (ie, no one can predict the future)". These are the same people who now make the laughable claim that, "It's people like you with your doom and gloom that are partly responsible for the depressed housing market." People resent being told what to do. They like being told, "I told you so" even less. But to now make the claim that your misery is being prolonged by the person who told you not to do it in the first place? Comical.

klarek says

“You don’t know anything; my realtor said” was another common angry retort to a person that was only trying to help ffs.

That was the #1 comment made to me the minute I tried to suggest to any prospective buyers that buying now was not prudent because of overall market fundamentals and what the data was indicating.

"Yeah, but this area ......blah blah blah........... Our realtor did a lot of research on this neighborhood."

(I bet it was Suzanne. She's dynamite at research)

I ran into this attitude also back then. But I also thought in 1999/2000 real estate was in a bubble. ( I was horribbly wrong, I did not see 9-11 and the money printing tsunami/perpetual ZIRP coming at us).

Who could have predicted 9-11 and the feds response (money printing and ZIRP?). No one. BUT it was not that hard to see house prices triple in 5 years is an unsustainable situation when wages were basically flat.

Looking back at the last 10 years I will say this: Bin Laden won the war on terror or at least made a huge dent in our ass. How much longer can the feds sustain 10,000 military bases and all the Wars On Everything? Were gonna find out.

of course everybody has 20/20 vision in hindsight. You knew exactly when the bubble would peak.

I can probably pull up a few examples of houses selling at 2007 prices
or higher. Others have lost half their value. it all depends on location.