patrick.net

I just negotiated a $500 per month rent reduction in San Ramon. Although rents are going up, I think landlords may not be sure about how long this rent bubble will last, so they would rather have me sign a new lease for much less a month. I live in a corporately owned property and they do weekly market analysis (crystal ball?) to come up with their ridiculously high rents.

Before I moved to my new home, I hadn't had a rent increase in years. Rents are limited by people's ability to take fiscal pain since you can't get a bank loan for rent.

PockyClipsNow says

I also learned in last bubble not to kill yourself improving your flips. Just do
basic paint ,carpet. Let the bubble increase the value not your own hard work

While this statement almost comes across as mild sarcasm, this is actually the only reason we are still looking to buy at this point.

Last year we tried, but the pickings were abysmal. Now we are ready to just get into a house, even if it doesn't tick many of our boxes, just to ride out the next 5 years and sell for the 30-40% inflation that is coming. Note that this will not work out as well if you buy in 2014, and not at all if you buy in 2015 (factoring costs of ownership and interest payments).

Aforementioned probably doesn't work anywhere except bubblicious markets like SF, LA, coastal OC, etc.

inflation or deflation that has been the question for last 5 years. unless salaries to up its deflation

KgK one says

unless salaries to up its deflation

Not necessarilly. That's what I used to think, too.

If you are not in LA or SF or another such place, you are probably correct to use fundamentals to evaluate a home purchase.

Unfortunately, markets like LA are full of people that have been on the sidelines for 5 years and are ready to pay 15% over asking since there is no inventory on the market.

BTW, the inflation I am referring to is in house prices. The rest of the economy I would not deign to speak for.

KgK one says

inflation or deflation that has been the question for last 5 years. unless salaries to up its deflation

Not necessarily. Incomes didn't rise much at all during the last bubble. It's just that money got cheap! You could get a mega home loan just for having a pulse!
Money is cheap and easy again. I'd say it looks like it's going to get cheaper and easier from here in the short term.

I see flippers getting bolder, paid 800 last year and asking 1.1 and such nonsense. You could build a whole house for 300k but u cant find a lot to biuld on.. Fix n flips will be good money makers for 2 years probly. If u can buy one.

For there to be a bubble people actually have to be buying at those prices.
All summer long Zillow and Trulia was claiming that my neighborhood had gone back up to 225K. But the sales just wont confirm it, so now the price is back to 140K.

Listing prices does hardly a bubble make.

Its not in bubble yet, just rapid upward price movements.

If you're part of the franchise you get the easy money and pay cash for property and thus launder the loot into an eternity of monthly returns paid by people who have to do actual work. Price doesn't matter much to folks who don't work for wages.

my tip: next time bid 20-50% over asking price if necessary to avoid missing the boat.

It seems like if u can make ez 200k on a fix n flip then thats faster money than building from scratch on a pricey lot/tear down. And if u gotta day job especially so.

From what I read here it sounds to me like bay area real estate is in it's own little world, different from the rest of the world.

Jeremy says

Money is cheap and easy again.

That's only for the few who when in need can just call up Bernanke by picking up their phone, not for the rest of us.

Just borrow the maximum amount of money that you can, there is no way this could end bad.

CaptainShuddup says

For there to be a bubble people actually have to be buying at those prices.

Unfortunately in my market, they are. It's ungodly. Probably not in Florida, though.

Bankruptcy laws are generous. If you lever up and fail you will end up renting and working a day job. Not exactly prison is it?

Forgiven debt is taxable income. So if you lever up and fail, you could still be on the hook big time to the IRS.

Otoh they just recently extended debt forgiveness to ALL short sellers, no need to prove hardship. So the trend is toward debt forgiveness not collection.

Also in CA all purchase money loans are non recourse. So if u dont refi your rentals they cannot come at you if it forcloses. Ca is truly a flippers dream.

So patrick your statement is wrong in regards to purchase loans.

donjumpsuit says

My personal opinion is to buy a huge Single family home in Silicon Valley (translation= close to Google), and subdivide them into about 4-6 rental microunits.

I doubt you would get the permits to do this from the city, but who cares. I am sure some one will bring up problems with the mortgage or insurance by doing so, but also, who cares.

Nobody else seems to care. I think you could clean up. Catering to renters who want a nice little apartment on in a great neighborhood, with a nice outdoor space, rather than your typical shit apartment.

This is a great plan. Make sure no hoa though. When prices spike you can turn it back into an SFR and sell .... Or not these home are commonly torn down anyway - its 90% land value next to google i bet.

During last run up i had two roomates which was easy money. Now im not single so much harder.... Women make u poor, children make u broke. Ha

They are buying to flip all over, especially in the city, if it's going to auction you'll see it relisted again at higher prices after a contractor put some lipstick over the moldy walls. Nothing has fundamentally changed, it just took lower rates to get the merry go round spinning round again.

The tip is to go where the money is, for example, I'm sure plenty of flippers left Phoenix already and have headed for Vegas which was down hard, as desperation mounts and easy money flows from monetary easing and fractional lending process, Vegas should again be a hot spot again.

Im pretty sure a huge huge percent of the GDP is from flippers.

Renters and zero down buyers dont blow money at home depot its flippers and the rare monied owner occupant.

As much maligned as they are on this site, they actually improve housing and neighborhoods, renters do not. They take huge monetary risks and do actual real physical work, much easier to code widgets in cyberspace while living in a neglected rented crapshack.

PockyClipsNow says

New real estate bubble firmly in place. Lets share tips.

What happened to all the preventive regulations from the Dems ?

Was this new bubble from Wall Street and Banks ?

or just irrational exuberance once again from main street public ....

If you want to really go BIG:

1. Why fix up the places? Just say you fixed them, do almost nothing and flip them for profit. Reduce your costs. Besides, people like working on their house. If people like applicances so much, don't put in a bunch, just put in one.
2. Make friends with people who have authority to approve mortgages so that you can qualify to buy as many houses as possible. Get creative. It worked the first time and almost nobody went to jail.
3. In connection with #1, do deals with contractors who would have helped fix up the place, but instead refer the new owners to them and negotiate a cut with the contractors.
4. Prey on the fears and nesting instincts of people with babies or young children. Hand out leaflets near birthing centers and hospitals with large maternity wards.
5. Buy in the worst neighborhoods, but advertise them with names that suggest the houses are in the best neighborhoods.

PockyClipsNow says

In all of coastal cali Multiple offers are now the norm for the under 800k or so market. Bay area especially. We all know why

Because the majority of people don't know fuck about shit.

Very nice. California's housing boom is back. Everybody that made big bucks buying 5 houses last time will buy 10 or 20 houses this time! If you missed the boat last time, now is your chance to cash out big time! As PockyClipsNow already mentioned, you can ONLY WIN. If things go sour, no problem, government has everything in place for debt forgiveness. Purchase loans are 100% safe to default on anyways in CA, but on refinance-cash outs: just keep 25% of the money that the banks hands you on hand in case of possible taxbill later on, so if you cash-out let's say $300k then put $100k away and blow only $200k on whatever you like. I don't care about the taxes, they are only paid on profit. Paying a lot of taxes means you made a lot of profit. Nothing wrong with profit.

PockyClipsNow says

Its not in bubble yet, just rapid upward price movements.

Fools and their money always have a way of parting. Good luck out there, this listing price bubble will be short lived. Just wait until the masses start doing their taxes come April 15th. Everything going in the shitter then. Mark my words.

Ha. I guess every pyramid scheme has to convince a new round of people that they are just going to make the cut (if they act NOW!), and they will be able to sell for big profits somewhere down the line. Good luck with that. Pass.

PockyClipsNow says

Im pretty sure a huge huge percent of the GDP is from flippers.

Goddamn, man, why do you have to sound so scientific every time you make an observation?

PockyClipsNow says

As much maligned as they are on this site, they actually improve housing and neighborhoods, renters do not.

Sheeeit -- on this site and a host of others, and by anyone registering even a faint blip on an EEG! Slapping some bottom-shelf ceramic tile throughout a place and Kilzing over water damage is hardly what I'd rate improvement, let alone good ol' fashioned American industriousness. It's just a buncha welfare queens taking advantage of government subsidized dipshittery in bubble 2.0.

PockyClipsNow says

They take huge monetary risk

Yeah, they're like modern day Preston fucking Tuckers. We should all stand up and salute them as they trail blaze a path to Home Cheap-o.

Give me a fucking break already...

From Fox News yet, Housing Bubble 2.0, completely speculator and Fed driven, it's all in there.

http://video.foxbusiness.com/v/2152197530001/stockman-this-is-the-start-of-housing-bubble-20/

I NEVER watch FOX news but actually a decent segment. I believe that this scenario described within is basically true for most real estate markets. I still don't believe that this is the primary reason for increased prices in the SFBay area. I believe that this has been primarily created by a combo tech boom and next to zero new housing being built over the last 5 years.

Buster says

in the SFBay area. I believe that this has been primarily created by a combo tech boom and next to zero new housing being built over the last 5 years.

So you think the balance between houses lost to foreclosure, sales to investors sitting empty is not the primary restriction on supply, but the slow to nothing building that has happened the last five years? That makes sense but I don't remember reading anything making that argument work.

I agree with the Fox segment, makes perfect sense. But does it apply to SFB area? I don't know. There is pent-up growth and good salaries. I know a couple who just bought (in San Diego Area). They are young professionals and just saved 100K for their down payment in a year's time. People got money here.

I think we all just need to concede that the real estate market is not based on fundamentals, and hasn't been for some time. Nor is the stock market.

So the question becomes, how to succeed in an irrational market. What are the warning signs of an implosion? There were town criers in the last market run up nearly the entire time prices were rising. They were right that it was a bubble, but it was a bubble that lasted for 6'ish years, which is plenty of time to make a small fortune.

A better discussion would be: "At what point do you know its time to pull the rip cord and bail out?"

You have to track inventory in your local market like roberto-wog. When its going down prices will trend up. When its way higher and trending higher you might want to list for sale at agressive price - easy to undercut the greed heads asking top dollar in declining market.

Obviously april 15th will only make people buy MORE homes as RE has huge tax savings. Anyway theres no inventory so prices will go up up up until there is much more for sale then stop rising.

Housing is priced way too low now in this 2% mortgage world. You can live in a 500k home for about 1200 a month. You could also rent a 1 bd apt for 1200 a month. Very out of whack. Rents not going down so prices will rise, back to 06 peak in 2 years in nice areas. I see asking prices already at 06 prices.

gbenson says

I think we all just need to concede that the real estate market is not based on fundamentals, and hasn't been for some time. Nor is the stock market.

So the question becomes, how to succeed in an irrational market. What are the warning signs of an implosion? There were town criers in the last market run up nearly the entire time prices were rising. They were right that it was a bubble, but it was a bubble that lasted for 6'ish years, which is plenty of time to make a small fortune.

A better discussion would be: "At what point do you know its time to pull the rip cord and bail out?"

With stocks you can increase your exposure to low-beta and decrease you exposure to high-beta stocks when you get the feeling that it may be time to bail. Plus a few short hedges.

MsBennet says

I agree with the Fox segment, makes perfect sense. But does it apply to SFB area? I don't know. There is pent-up growth and good salaries. I know a couple who just bought (in San Diego Area). They are young professionals and just saved 100K for their down payment in a year's time. People got money here.

A young professional is able to save 100K in a year? that would require at least a 230K salary, which is reserved for directors at most companies around here, and those jobs aren't filled by young people. Don't kid yourself, the vast majority of buyers here use FHA 3.5% down or they are investors.

if two IT pros who make 100k each live at home with a parent for a year, they EASILY can save 100k in a year.

Lets remember mulitgenerational households are the norm in the rest of the world. Only in america does everyone 'cant stand thier parents' and have to move out asap. its a pricey luxury.

JodyChunder says

Because the majority of people don't know fuck about shit.

lol

A Shit Leopard Can't Change Its Spots
http://www.youtube.com/embed/24RgMIochm4

American immigrants help their kids with college costs, so their kids don't have the debt overhead that baby boomers kids face.
With less debt to pay back, the young professionals can afford to buy a house and save for retirement.

Baby boomers are sucking the life out of their kids future.