patrick.net

This time around its worse and not only is it nation wide many other nations are involved in housing bubbles. I think housing will be in the doldrums for years to come. And when it returns to normal it will seem like sub-par growth to many who come to expect annual increases of like 7-10%.

I think we had our own bubble in the Bay Area back in the late 80's. I was in high school then so I really didn't pay attention all that much. But I remember friends who bought in the mid 90's being able to get really reasonable prices.

The baby boom was aged 20 to 35 in 1982. Now it's aged 50 to 65.

Generation Y is about the same size and now aged ~15 to ~30.

The 1980s was a happy time for oil, as the North Sea, Mexico, Alaska, and other non-OPEC sources came fully online towards their peaking, keeping oil under $20.

Interest rates were favorable, with rates falling from 18% to 10%:

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

we could get that same favorable gradient again, but it will require rates falling from 4% to 2.5% (i.e. where Japan is now).

The PC was improving dramatically and began showing up on peoples' desks in the 1980s, replacing typewriters and calculators. Not sure what great productivity boost is going to arrive this decade, if anything tech is becoming something of a productivity drain if you ask me : )

China was just beginning to ramp up its SEZs. Big Box retail wasn't yet getting started.

Systemic leverage was still at ~3X in 1980:

http://research.stlouisfed.org/fred2/graph/?g=4jC

rising to 5X by 1990 (and shooting up from 5.5X to 8.5X when the Wise & Prudent Republican Party was fully in power).

The world was really a different place in the early 1980s. I don't have the first clue as to where we're going from here but I see no reason to be particularly optimistic or to expect past patterns will appear again.

the effects of lower rates haven't been felt yet. In hindsight we could be saing that the fed held rates too low for too long but right now we are still loading up the slingshot.

toothfairy says

As I stand at my podium I try to warn you guys about these things. Yet nobody seems to believe me.

Maybe it's your hat that's a little scary.

Just like 1981. Except we don't have Reaganomics spurring economic growth but instead have Obamacare showing the downside of the Laffer Curve. And the personal savings rate is currently around 2% rather than 10%. Oh, and mortgage rates are at an all-time low, not high. Wait, how is this anything like 1981?

CameronCrazy says

Just like 1981. Except we don't have Reaganomics spurring economic growth but instead have Obamacare showing the downside of the Laffer Curve. And the personal savings rate is currently around 2% rather than 10%. Oh, and mortgage rates are at an all-time low, not high. Wait, how is this anything like 1981?

well it's never going to be exactly the same circumstances. Housing is driven by sentiment and FED policy. It has little to do with personal savings. Throughout the 80's rates were falling. Now rates are already at historic lows so it's probably more like 2003 than 1981.

robertoaribas says

You were warned to buy a year ago.

The ownership aspect of property has changed radically. This isn't the 1980s, there is no big technology revolution on the horizon.

What we do have is the ability to build more housing units than we could ever possibly use.

My ex brother in law lived in Tempe Arizona, kind of across the highway? from the Motorola? factory. One day he took us to dinner at a Chili's? of something, in a planned community of Urban Outfitter, type of shops.

The thing was that none of that urban center, or surrounding homes existed five years before.

In a five year span a complete community was built, kind of like a Henderson Nevada, where there was only desert.

In my home town of Seattle one developer, Paul Allen, has built built thousands of condos, offices, complete shopping centers, in South Lake Union. It took about, five years, after years of planning. We now have a few thousand more apaprtments being built within a matter of blocks.

Our work force has changed. Manufacturing, like the Motorola factory, was built in the planned community, in the desert where it was cheap to do.

Here in Seattle many of the workers who come here are on five year contracts. Some over lap contracts with different companies so they can have full time employment, they need to be off payroll for six months to be considered contract employees.

I don't think we will see cradle to grave employment again, or will we see full employments ever again.

For that matter I don't see a growing GDP as possible.

It will be interesting to see what happens when the banking sector is done collecting on bad debts, and securities have to be valued on production.

I think we are heading into a whole new era where the value of assets will be greatly diminished. In my opinion the people with the jobs will be much more sought after than the people who hold onto housing units.

robertoaribas says

You said that a year ago, and have been proven as wrong as it is possible to be. You are the most clueless person on here, ever.

A year? Once again you are another sales person with hype.

The increase in your market place has been explained to you repeatedly, but you don't get.

You don't understand my Real Estate market place so you avoid it.

Price increases have been around every Real Estate cycle. You don't have that perspective.

Low Inventory! Low Interest Rates! You better buy now or be Priced out Forever!!!!

Come on! Where have I heard this before? Oh yeah 2006, but don't let that stop you.

robertoaribas says

You are too stupid to understand price rent ratio.

I get it. You have renters. So what? I have employees, and make more money than you. So what? What's the difference?

I have unlimited income potential, and you are stuck with the hope of hyper inflation. I don't see hyper inflation coming. I see deflation.

It's opinions, but like I said, I'm very rarely wrong about Real Estate.

BTW, 2014 is the end of the seven year cycle so, save it.

robertoaribas says

You clean homes to get by these days.

You do realize that cleaning a home is the best value you can give a listing? Don't you? but we don't do that much any more because there just isn't enough business to go around. Low inventory, low interest rates, and lazy Real Estate agents who blog all day looking for business.

Now I blog every day, and get business, that pays an immediate return. You don't get those kinds of pay days, do you.

As far as house cleaning, it's a $49 Billion, that's with a B math professor, business in the United States. The company five blocks from me is International with Billions in sales, cleaning rest rooms.

My business grew at 30% last year according to my net, how are those renters doing for you?

You're a maroon. All of my buddies made fun of me when we left Real Estate to concentrate on my side business, but they aren't laughing much any more.

Service is what it's all about. Real Estate agent? kind of a big gamble.

robertoaribas says

And a failed investor

and I still have my rental income, so what?

Here's the problem Roberto, your a guy trying to sell a plan that only works for you.

Your market is different than say Detroit, which I'm liking more all the time, but if my money were tied up in some rentals I wouldn't have choices when Bernanke decides he can move on from housing, and banking.

Will Bernanke move on? What do think?

David Losh says

Once again you are another sales person with hype.

You're wasting your time. His peers even started a thread on Zillow telling him to shut up (www.zillow.com/advice-thread/Roberto-Ribas/6491/) and was apparently telling people 2008 was the bottom.

toothfairy says

it's probably more like 2003 than 1981

People say it's more like 1991 (A False Glimmer Of Hope). But that's just good news for you, right? Less competitors to buy up all these cheap houses. If people would rather invest their money somewhere else, like the DOW which is at an all-time high, why try to sell so persistently these houses with prices that are about to skyrocket?

robertoaribas says

leave real estate analysis to those who haven't lost their tails in the business!

We owned the place in Atlanta for a lot of years, and should have sold sooner.

Like I said, you have no idea about Real Estate as a business other than your simple little rental analysis.

What bothers me is that some one may buy into your story, and start buying with the idea of being priced out forever.

Today we'll be preparing another of our properties for sale, because I'm really pretty good at timing the market.

You? not so much.

robertoaribas says

Why would anyone hire anyone as clueless as you?

People do hire me. We prepared six properties for sale last month.

People who do what I suggest sell quickly, for full price, or multiple offers, and those with a different idea languish on the market.

David Losh says

robertoaribas says

leave real estate analysis to those who haven't lost their tails in the business!

We owned the place in Atlanta for a lot of years, and should have sold sooner.

Like I said, you have no idea about Real Estate as a business other than your simple little rental analysis.

What bothers me is that some one may buy into your story, and start buying with the idea of being priced out forever.

Today we'll be preparing another of our properties for sale, because I'm really pretty good at timing the market.

You? not so much.

Why would people do that? He's been saying he's basically finished with buying for quite a while now.

robertoaribas says

You took the quote out of context, because you are too stupid to understand context... I said, I see why you left real estate agency, why would anyone hire you.... I'm sure with your fine at cleaning floors and toilets...

You do yourself no favours with such childish digs.

robertoaribas says

I am sick of this idiot following me around and commenting on every single thing I post. His track record at understanding real estate is the worst ever. His own personal record is terrible as well. He never has an actual point, except that buying anything is bad, and no analysis ever.

He accuses me of selling an investment scheme, when I at no time sell anyone on anything. Though, in actual point of fact, this may be the only intelligent thing he has ever said: that I should sell my real estate investing techniques, rather than writing about them for free, only to suffer insults from him, callmecrazy, etc on here, who are too stupid or jealous to actually think.

Fine, so take him to task about that, but don't attack him because he has a cleaning business. What makes you so superior because you are a community college professor? It's a pretty low dig to make at someone.

robertoaribas says

that I should sell my real estate investing techniques,

I'll leave your sales posts alone, because we are all here blogging for business, and you have the same rights I do to spout your nonsense.

You, however are missing the finer points of Real Estate investing.

In 2008 we had the tax credit to deplete Real Estate inventory: http://www.smartmoney.com/taxes/income/do-you-have-to-repay-your-homebuyer-credit/

That is what made me pause in buying another property.

The Fed followed this up with decreasing interest rates to make your ROI look more attractive, but prices were rising from the lows of 2008.

So when you quote sales data you are quoting increases of double digits based on lows created by a Global Real Estate market crash.

Your own example is that you bought a condo, or some condos for $50K after the crash, and now they are worth $100K. That's your double digit across the board rise in Real Estate pricing.

As I pointed out our condo in Atlanta Georgia never recovered from the crash. We paid $60K back in 1984, but it sold for $30K last year. How does that figure into your analysis? It doesn't.

You have blinders on because you do want to sell the books, and tapes.

You also never address economic viability for the long term with Real Estate. You focus on this last cycle which I view as highly manipulated.

The question is what will happen if Bernanke decides he's done fooling around, and moves on to fixing the over all economy, and unemployment.

You also aren't reading that construction, right now, is having a hard time finding workers. You don't get it do you?

The Fed has said they want to create jobs. Construction is a very cheap, and easy way to create jobs. Well, those jobs aren't attracting workers so why is the Fed continuing to dump money into Real Estate?

No jobs, no more Fed dollars. The Fed should move on to something more promising like Health Care, and services.

You just don't get it.

Bigsby says

don't attack him because he has a cleaning business.

Oh man, I have heard the same thing a hundred times over from my buddies in the Real Estate business.

I sold some properties before the crash when they were stilling pumping the market place. They told me I was nuts.

Then when I didn't jump back in and concentrated on our side business a lot of people called me stupid.

Come on, they still do, because today they are catching up from losses that they had.

My income has steadily risen.

As an example: we net $1300 per month per employee. We can add as many employees as we want, without a huge cash investment.

We don't advertise, I simply blog for business the way I do here.

Patrick.net is a great Real Estate site, and some of his ideas are very much on target. We service more individual home owners than Real Estate agents.

I think there is a shift away from Real Estate commissions, and more one on one Real Estate transactions. It was that way in the 1970s, and 1980s, more people did business direct as Principles Only, but we lost that in the rapid appreciation of the price of housing.

We'll see what happens, but there's no rush, Real Estate isn't going anywhere.

David Losh says

As I pointed out our condo in Atlanta Georgia never recovered from the crash. We paid $60K back in 1984, but it sold for $30K last year. How does that figure into your analysis? It doesn't.

And why should it?

Bigsby says

And why should it?

Exactly right!

Today we were discussing our acrage in Pinedale Wyoming. We have owned it forever, but I don't think it was wise to hold on during the crash, or then soon after.

I held because I thought fracking might boost the value of the mineral rights, but as we discussed today there are bigger players who own substantially more acrage that can play a waiting game.

I'm thinking there are other places I would put my money.

CameronCrazy says

David Losh says

Once again you are another sales person with hype.

You're wasting your time. His peers even started a thread on Zillow telling him to shut up (www.zillow.com/advice-thread/Roberto-Ribas/6491/) and was apparently telling people 2008 was the bottom.

toothfairy says

it's probably more like 2003 than 1981

People say it's more like 1991 (A False Glimmer Of Hope). But that's just good news for you, right? Less competitors to buy up all these cheap houses. If people would rather invest their money somewhere else, like the DOW which is at an all-time high, why try to sell so persistently these houses with prices that are about to skyrocket?

My point with this article is that housing prices go up and down (but mostly up). It's not like we haven't been through this before. So it's a bit naive to think oh, this time it's different and housing prices only go down.

CameronCrazy says

Just like 1981. Except we don't have Reaganomics spurring economic growth but instead have Obamacare showing the downside of the Laffer Curve. And the personal savings rate is currently around 2% rather than 10%. Oh, and mortgage rates are at an all-time low, not high. Wait, how is this anything like 1981?

people keep forgetting this...

toothfairy says

My point with this article is that housing prices go up and down (but mostly up).

no, adjusted for inflation home prices have been flat...
and every decade has been flat since 1945.

for SFBA there is plenty to go...

for SoFlorida they are back to 1975 prices...

David Losh says

Bigsby says

And why should it?

Exactly right!

Eh? So you just posted it to demonstrate you were one of the very few people in the country who managed to sell a property in 2009 for less than you paid in 1984. Half the price in fact. OK.

thomaswong.1986 says

toothfairy says

My point with this article is that housing prices go up and down (but mostly up).

no, adjusted for inflation home prices have been flat...

and every decade has been flat since 1945.

Maybe we are looking at different graphs then because the one you just posted shows prices going up.

Bigsby says

Eh? So you just posted it to demonstrate you were one of the very few people

There were no buyers, number one, and the second is that the building had reached it's obsolescence.

That's not to mention the number of bank owned properties that have been selling at these prices. We did nothing to improve the property, so it was all income.

The point is we aren't one of a very few. The building could be torn down to make way for something bigger, and better.

There are many market places where this is the same. When you want to sell, you sell for what the market will bear. There is no magic in the idea the price of property always goes up.

At the time in 1984 this part of Atlanta was considered a technology hub for software development. Today it's kind of mortibund.

So when people say they bought in the 1980s and they have an equity, that depends on if the property gets sold. I don't see Atlanta coming back, do you?

This is very simple. I don't see an upside to Atlanta Georgia, any more than I see an upside in owning property in Phoenix Arizona.

You followed the exact market timing plan that I had recommended since 2006, sell before the crash, and buy after the crash.

The problem is that the Real Estate market was never allowed to crash.

We got the tax credit, QE 1,2,3, and ended up with historically low interest rates. The banks got bailed out and are allowed to pursue more profits, cash reserves, all with very little risk. The Fed, and government seem very pleased with the housing recovery, but I don't see it as sustainable.

Now Atlanta Georgia in the 1980s was the home of Peach Tree Accounting. Back in the day that was a big deal. Today I don't see any economic viability to Atlanta so why hold on?

In the mean time, say in the past ten years, thousands of housing units were added to Atlanta, many have ended up in the hands of the bank. So I don't see prices rising there. I don't see rental potential there in Atlanta.

You're going to find many more people with the same idea. There are much easier ways to make a buck than being a land lord. I talk with Real Estate investors, who are older, who are looking to sell the properties, and put the money into something that will give greater returns, or safer returns.

Which reminds me, Real Estate is a 24/7 business. My side business was directly related to my Real Estate business, school teaching doesn't match that.

So you are either a full time Real Estate agent of not an agent at all.

You are one of thousands of people who are puffing the brilliance they had in the past seven years, but we are just getting started on this cycle.

David Losh says

So when people say they bought in the 1980s and they have an equity, that depends on if the property gets sold. I don't see Atlanta coming back, do you?

I have no knowledge of Atlanta, but if I'd bought a property back in '84 pretty much anywhere in the world, I'd be more than a bit surprised that its value had halved 25 years later. Atlanta doesn't create the images of Detroit, for example.

David Losh says

You followed the exact market timing plan that I had recommended since 2006, sell before the crash, and buy after the crash.

That's not exactly a novel recommendation in all fairness.

David Losh says

I talk with Real Estate investors, who are older, who are looking to sell the properties, and put the money into something that will give greater returns, or safer returns.

What do they have in mind? The stock market looks like a far from safe proposition at the minute.

Bigsby says

I'd be more than a bit surprised that its value had halved 25 years later

The problem there is the bank foreclosures.

In 1980 Atlanta was booming, it lost financial momentum, then over built into the 2000 mortgage backed securities scheme.

Alright, to be fair we could have changed the carpet, painted, redone the kitchen, and bath for about $10K, but still the market place is a crap shoot.

Bigsby says

That's not exactly a novel recommendation in all fairness.

Exactly right.

Bigsby says

What do they have in mind? The stock market looks like a far from safe proposition at the minute.

The video in this article talks about entrepreneurship. The article is about Blackstone, the biggest holder of residential Real Estate.

http://www.cnbc.com/id/100542594

In 1986 I had a restaurant listed for sale no one wanted, so I bought it. For three years I lived that place, it bacame one of the top ten places to be in Seattle. I sold it for many, many times more than I paid for it, and had good daily income.

People need more income, and less expenses today. I think more people are looking for good paying jobs than a high priced rental.

I see under utilized businesses every day, but that is just me.

As for my investor clients they would sell to go into safer havens, like bonds, or dividend income. I would encourage them to invest in small business, but they just want a simplier life.

No more renters calling, no more repairs, no more evictions from people who lost a job, got divorced, or went crazy.

The concensus is that when rents go down, they will sell.

robertoaribas says

The last post is so idiotic, it doesn't even warrant a response.

Then why bother yourself?

It's because what I do is contrary to the very simplistic view you have about Real Estate.

Phoenix is the third cheapest palce to buy Real Estate in a metropolitan areas in the United States. It is just ahead of Detroit, then Atlanta, then there is Phoenix Arizona.

Detroit done, Atlanta done, how far is Phoenix away from being done?

robertoaribas says

Yeah... The twit who lost money on 20 years of investing, and cleans toilets and carpets day to day, calls the math professor who made over a million dollars and climbing in real estate simplistic... My investments pull in 6k in net rental income, plus pay off 1k in mortgage debt each month. How many toilets do you scrub, to match that?

Do you have a winning smile?

robertoaribas says

The twit who lost money on 20 years of investing,

I made money, why do you think I didn't? Cutting losses on a property paid for many times over is a pretty simple concept.

robertoaribas says

calls the math professor who made over a million dollars and climbing in real estate simplistic...

I thought you were a big time Real Estate agent. You sure talk that way.

robertoaribas says

My investments pull in 6k in net rental income, plus pay off 1k in mortgage debt each month. How many toilets do you scrub, to match that?

Like I said, I make more money than you do.

Look it, I just came back here to post this chart, and found you whining, again:

http://www.bankrate.com/finance/real-estate/total-monthly-homeownership-costs-by-city.aspx?ec_id=cmctre_02_comm_RE_image_headline

You just seem so bitter about your lot in life. You made a million dollars, live it, breath it, but don't try to lord over the people here. Save that for your renters.

Bigsby says

Do you have a winning smile?

I do have a winning smile, and firm handshake, that is all it takes.

Well that, a closet full of suits, and my collection of Cole Haans.

robertoaribas says

that until just recently, it was you, your wife and your kids....

Now you're resorting to lies about me to make yourself feel better.

So you are a college professor, and part time Real Estate Investor.

I take it this is your first cycle so you really only have this experience to share.

Being a college professor with limited Real Estate experience gives you what insight?

You bring your simplistic view of price versus rent like it works for all market places, when I've shown you repeatedly it doesn't.

If you have a million dollars in equity I would cash that out so you can keep it, but where will you put your money next?

David Losh says

robertoaribas says

that until just recently, it was you, your wife and your kids....

Now you're resorting to lies about me to make yourself feel better.

So you are a college professor, and part time Real Estate Investor.

I take it this is your first cycle so you really only have this experience to share.

Being a college professor with limited Real Estate experience gives you what insight?

You bring your simplistic view of price versus rent like it works for all market places, when I've shown you repeatedly it doesn't.

If you have a million dollars in equity I would cash that out so you can keep it, but where will you put your money next?

I don't get this. One is a landlord from Pheonix and the other is a small cleaning company owner in Seattle and they are arguing who has a better business? It's like comparing apples to oranges. Power of the internet.

It's clear to me Robert could care less about cleaning business since he has a daytime job and David does not want to be a landlord since he does not want to deal with tenants. So, what's the problem here? Robert may generalize it a bit more but a sensible person should understand real estate is highly location dependent. He did not claim his business model is the best among all.

Patrick, would you stop a dog fight like this? We all like to argue on internet but this is a bit over IMO.

robertoaribas says

I have 17 years at this, and sold my properties in 2005. Unlike you, I saw the bubble coming, took my profits, waited out the crash, and bought more...

Well, if you found me online you know I did sell, but didn't buy, for all the reasons I outlined here, and everywhere.

There are reasons why you can't sell everything when you want. It depends on the market you sell into.

So your million dollars today will be worth what it sells for in a future market. What does your crystal ball say about that?

The fact still remains the Market place in Atlanta did go steadily down. I see you over giving your same tired advice about Detroit. How about that Detroit?

The Real Estate market is screwed up, manipulated, propped up.

So I don't see a comparison to the 1980s. In the 1980s there was a lot of upside potential in the economy. PCs, software, and the technology revolution were all on the horizon.

That was the point about the Atlanta property. In the 1980s it was in the hub of software development, before any teen ager on the planet could write code. What is it today? Nothing.

Real Estate markets are different all over the country, and your one size fits all approach is childish.