patrick.net

TMAC54 says

I don't know about you but I still consider a 20 to 30% value loss a POP

Bubbles are a very special case. Just because prices go up, it's not a bubble. And the converse is also true--just because prices fall, it doesn't mean the a bubble is popping.

If prices fall because of external factors like Euro collapse or another recession, it's not a bubble bursting--it's a normal reaction.

bulletdodger says

I'd much rather have prices rising at historic norms while I save than have to wait on the sidelines watching the government do back flips to keep an overpriced asset class from dropping back to reality.

I'm pretty sure there aren't many here that are happy about the insane policies of our government. But, I'm left wondering why 95% of them have repeatedly voted either republican or democrat and will do so again in 2012?

tatupu70 says

If prices fall because of external factors like Euro collapse or another recession, it's not a bubble bursting--it's a normal reaction.

But if prices are 25% higher than historical relationships to incomes, and then we have a European shock, the sound you hear is air continuing to rush out of a bubble.

On another note, the yield curve inverted in Italy today. 2-year notes are at 7.8%.

moldhaven says

tatupu70 says

If prices fall because of external factors like Euro collapse or another recession, it's not a bubble bursting--it's a normal reaction.

But if prices are 25% higher than historical relationships to incomes, and then we have a European shock, the sound you hear is air continuing to rush out of a bubble.

On another note, the yield curve inverted in Italy today. 2-year notes are at 7.8%.

People will believe what they want to believe. Those who think home prices are stable also believe that the economy is recovering and the US gov't is trying to spread "freedom" in the middle east. There is a sucker born every day.

HousingBoom says

Those who think home prices are stable also believe that the economy is recovering and the US gov't is trying to spread "freedom" in the middle east. There is a sucker born every day.

lol--I like it. Anyone who disagrees with your line of thinking is a sucker?

tatupu70 says

HousingBoom says

Those who think home prices are stable also believe that the economy is recovering and the US gov't is trying to spread "freedom" in the middle east. There is a sucker born every day.

lol--I like it. Anyone who disagrees with your line of thinking is a sucker?

If you believe everything you are told, then yes, I think you are a sucker!!

But, nothing personal of course ;)

SubOink says

our payment is actually not what our rent used to be but $280/m less

My whole point is that it's dumb to throw away more money to own than you would pay in rent for the same thing over the typical 6 or 7 year ownship period.

If you're owning for less than it would cost to rent the same thing, more power to you!

But did you take into account all the costs of buying, owning, and selling, like commissions? Check my calculator:

http://patrick.net/housing/calculator.php

But did you take into account all the costs of buying, owning, and selling, like commissions?

Home repairs, insurance and the list goes on. Most people think the mortgage is the only expense to owning a home. lol

The point is not if we have hit bottom or not. Also, the point is not if the economy still sucks and challenges are ahead of us.

The point is that my family has to live somewhere in a bad economy and also in a good economy. There is no way around it. So the choices at any given point are to rent a place or to buy a place.

IMHO, if you pay $2500/month for a small, wrecked, cabin style house in encino (for example) and put up with a shitty landlord that hates to put any money into the place (because thats what rentals are like in LA) then it would be wiser to get a loan where you're payment is $2500 (incl prop tax - tax deduction) - time will pass, either way. 10 years pass. When you look back at your rental history you will realize that you paid somebody else's house off and spent $300k on rent (!!!)

Now, you guys will jump in and say, yes but interest is also throwing money out - correct, except that you can deduct interest from taxes AND in the example of a 2500 mortgage, about $600 of that go towards principal (in the first years, y'all know its a curve, more and more goes towards principal over time) - so your interest portion (at current rates) is only about 1800-1900. In a nutshell, what would you rather do - throw out 1900 a month in interest OR throw out $2500 a month in rent?

My computation did not work for the bubble years. My rent used to be half of what the house would cost if I bought it - made no sense to buy. But times have changed. I am not making any predicitions whether we have bottomed or not. I am not a fortune teller like many of you. But what I am saying is that no longer is it more expensive to buy than to rent.

That is given you have 20% to put down and qualify for a loan - have a job :)

Of course, if you are convinced that the market will come down 20% from here...then sit back and live in a cheap little dirty apartment while saving your penny's. I chose to wanting to live nicely NOW and start paying of a house. Time flys. I do have older friends that have always said what everybody else was saying here and never bought. Now they are retired and hate the fact that they never stepped up to the plate.

The wishful thinking scenario that many here have will probably not come true. The fact is and will always be - not every american will own a ferrari, not every american will own a house, not every american will own a private jet. That does not mean that prices of private jets will come down or ferrari's will be $30k.

Just a thought.

HousingBoom says

If you believe everything you are told, then yes, I think you are a sucker!!

I'm good then. I believe very little of what you tell me.

HousingBoom says

Most people think the mortgage is the only expense to owning a home. lol

I love when posters here say what "most" people think....

SubOink - it looks like you are convinced and happy with the purchase of your home. Good for you. buying a home is not all about the financial cost. If you're happy with it then that's all that matters. But when home prices start to fall like it is now, don't be whinning like all the 2006 buyers and hope for a bailout. I understand that every city is different so your area might have bottomed already. On a national level, prices WILL continue to fall.

tatupu70 says

HousingBoom says

If you believe everything you are told, then yes, I think you are a sucker!!

I'm good then. I believe very little of what you tell me.

uh..no, you passed the test by a landslide

Bias much suboink?

SubOink says

In a nutshell, what would you rather do - throw out 1900 a month in interest OR throw out $2500 a month in rent?

If the house I want to buy is falling by at least $600/mo, I'll rent.

suboink protests way too much for a guy that's supposed to be a happy owner. further, throwing insults at renters, which is typical of insecurity, says a lot about the shit slinger. again, it goes against the idea of a happy owner.

once i buy i'm gone from these forums.

what loser sticks around and trys to convince others that now is a good time to buy? who cares. do your analysis, make your decision, then move on.

get a life, instead of hanging out with us loser renters. sheesh.

HousingBoom says

tatupu70 says

HousingBoom says

If you believe everything you are told, then yes, I think you are a sucker!!

I'm good then. I believe very little of what you tell me.

uh..no, you passed the test by a landslide

OK--whatever you say. Good luck to you. When BA houses are $120K, you'll be sitting high on the hog, ready to pounce, I'm sure.

B.A.C.A.H. says

I learned about The Fortress concept from a wealthy immigrant who used to post on patrick.net a lot whose handle was "OO"; he lived in The Fortress and explained why it was a Fortress.

The term Fortress certainly was an unknown concept. IF i met this ####head, Im pretty sure I would ask.. how soon they will be leaving California, never to return. Im sure it wont be soon enough!

In the long run, high home costs dont mix well with the health of local industries (hi tech). You cant have both!

SubOink says

The wishful thinking scenario that many here have will probably not come true. The fact is and will always be - not every american will own a ferrari, not every american will own a house, not every american will own a private jet. That does not mean that prices of private jets will come down or ferrari's will be $30k.

LOL! actually you can buy a Ferrari for 30K. Lots of 3x8 on the market.

thomas.wong1986 says

LOL! actually you can buy a Ferrari for 30K. Lots of 3x8 on the market.

Uh huh...for sure. Been shopping for ferrari's lately? Maybe you could upload a ferrari depression chart for us. :)

Here is your $30k Ferrari...not quite what I was talking about...HAHA

and here is what I AM talking about - Price tag $300k ...

L O L

thomas.wong just went to the ferrari dealer in calabasas - threw $30k on the table and said "Yo! Here is all I have for your 458 Spida...take it or leave it before the price drops further" ...

he was last seen in a grey Toyota Yaris leaving the ferrari parking lot...

haha, sorry thomas...this was just too funny. No pun!! You just opened the door for me and I had a glass of wine too much...I apologize.

That $30K V-12 Ferrari is the automotive equivalent of a foreclosure sale of a crack house. It needs new everything (by which I mean it is due for its "major service....what in the old days was called a tune up). By which I mean a process in which the engine is actually lifted from the engine bay so that the spark plugs and consumables can be changed.

Zachary says

Let's be frank folks, Patrick's analysis was right on. The Federal Reserve instituted QE (quantitative easing) 1 & 2 and used our tax dollars to buy up lots of the bad mortgages. In essence all that they have done is kick the can down the road by increasing our debt.

I agree with your points with one minor technical correction: Every cent of our tax dollars went to the military. The Federal Reserve created "dollars" out of thin air. That's what they used for QE. . .and it's what the banks use. . .and what the government uses to "pay" for its expenditures. Ultimately it's what we all use instead of real money. Isn't this great!

Sounds like you are possessed with an inverted/skewed form of schadenfreude. Hope you hold on to that house for quite a few years - otherwise the sooner you sell - the more likely you are going to get screwed (esp if/when the shadow inventory is released, or the EU bond market implodes, or ANY systemically dangerous institution collapses, or Israel bombs Iran, etc.. There are WAY too many variables to itemize... all NEGATIVE) The Banksters and their gov't lapdogs are counting on SUCKERS like you (thus the 1st time homesucker credits, etc).... We are in the midst of a deja vu of 1932...

Anywayz, I sincerely hope I'm wrong...good luck.... Bye..

SubOink says

IMHO, if you pay $2500/month for a small, wrecked, cabin style house in encino (for example) and put up with a shitty landlord that hates to put any money into the place (because thats what rentals are like in LA) then it would be wiser to get a loan where you're payment is $2500 (incl prop tax - tax deduction) - time will pass, either way. 10 years pass. When you look back at your rental history you will realize that you paid somebody else's house off and spent $300k on rent (!!!)

SubOink, I'm with you on this. Many people are offering their advice based on what they read about real estate, the economy, etc. And if our housing purchase decisions were only economic decisions then a lot of this advice would be relevant. But there are other factors, too. Namely, you bought your house for shelter, not necessarily for an investment. On that basis you should ignore all the naysayers EVEN IF your house does decrease in value.

I reached this conclusion myself in 2010 when I considered strategically defaulting on the house I live in and on the duplex I rent out, and then paying cash for another house. I was $30K upside down on my house and $38K upside down on my duplex. And here in Florida the values continue dropping. Then I said to myself: 1. My income is rising 2. My mortgage payments are fixed (actually they are dropping slightly because my property taxes are decreasing) 3. My renters cover my mortgage. And if I pay cash for another house then I would not have that cash to work for me in other more lucrative investments- and I still would own a depreciating asset only a big chunk of MY cash would have gone into this rather than the bank's.

I am only theoretically worse off because of the drop in property value. However, from a cash flow perspective I am no worse off than if the properties had actually appreciated. So, bottom line is everyone needs a place to stay and if your cost of ownership is less than your cost of renting, then you're better off owning.

sure but... in 2005 who the heck was actually putting 20% down to buy a house?

Bellingham Bill says

moldhaven says

where people can save a down payment without house prices appreciating against their savings.

This is a VERY good point.

When I moved to the bay area in 2000 the 20% DP of home prices was appreciating faster than my savings!

Between 3/2003 and 9/2005, a 20% DP on a low high-end home increased from $110,000 to $150,000, or ~$1500/mo!

“Nessuna soluzione . . . nessun problema!„

Hysteresis says

suboink protests way too much for a guy that's supposed to be a happy owner. further, throwing insults at renters, which is typical of insecurity, says a lot about the shit slinger. again, it goes against the idea of a happy owner.

once i buy i'm gone from these forums.

what loser sticks around and trys to convince others that now is a good time to buy? who cares. do your analysis, make your decision, then move on.

get a life, instead of hanging out with us loser renters. sheesh.

Obviously.

If Suboink REALLY wanted to prove a point, and not just be an angry Realtroll, he/she would actually post and link a relentless barage of recently sold properties that prove his/her point.

SubOinc now you are just trolling, or have severe insecurity issues.

Most people don't need to write on internet asking for public approval of their purchase. We have owned since early 90's when we paid cash for our humble place, before the bubble, you don't see me constantly posting about it either.

SubOink says

and here is what I AM talking about - Price tag $300k ...

Like I said, there are plenty of 308/328/348's on the market for around 30K and less. Classics! A little more gets you a 355 or a Testarossa. If I had $300K to blow, it would certainly be the early 70s Daytona. Truely a classic! Guys can appreciate classic cars. Its not like they need a new overpriced handbag every year. My current toy is an Alpha Romero Spyder.. sweet !

Godetevi lo spettacolo bambino! (Enjoy the show baby)

http://www.youtube.com/embed/TBBy-4tnWoM&feature=results_video&playnext=1&list=PL670265C637FAE4C3
http://www.youtube.com/embed/Bu7On1rNo3w&feature=results_video&playnext=1&list=PL670265C637FAE4C3

SubOink. Right on.

We have people camping on the street for free food and intangible ideology and we have people working 80 hrs a day to save for downpayment. It's a free country. We have Jean Quan as Oakland Mayor and uc davis chancellor katehi who can't even speak English (that you and I can understand...)

My point is, this country is free and fair enough to pursuit your happiness if you work hard for it. Buying a house is not a necessity, it's a luxury good. It's not intended to be affordable for everyone. It's not. You have to do something right in life to be rewarded one ( or handed it down by parents if you luck enough). Nice houses will always be out of reach of the most of us unless you made a fortunate, a fortunate larger than most other people's in order to outbid them. It's the reality. Whether house price will come down 20% or not? I don't know, no one will. I just know it is a right decision for me given my rent vs own situation. It's cheaper to own the same house than renting a similar one. I pay a mortgage that is super comfortable. 2 incomes, stable jobs, big yard with a view, nicely decorated the style I want, no neighbor can see me and I see no neighbors, quiet and peaceful. Quality of life is more important to me than wasting time feeling angry & complaining why houses are not getting a cheap enough to buy.

I am happy living in my reasonably priced home also, enjoying turkey and hunting for my 3rd rental property.

Sounds like a typical angry renter. You can choose to be happy while you rent, you know? It's your own choice. I bought a $110k condo all cash and renting it out for $1350 per month now. Do YOUR math, "bro". I am showing you what's out there. I guess most are too stubborn to listen to sound advice. Keep renting, then.

(I sound like a Landmark coach...)

Hysteresis says

suboink protests way too much for a guy that's supposed to be a happy owner. further, throwing insults at renters, which is typical of insecurity, says a lot about the shit slinger. again, it goes against the idea of a happy owner.

once i buy i'm gone from these forums.

what loser sticks around and trys to convince others that now is a good time to buy? who cares. do your analysis, make your decision, then move on.

get a life, instead of hanging out with us loser renters. sheesh.

Fantom says

That $30K V-12 Ferrari is the automotive equivalent of a foreclosure sale of a crack house. It needs new everything (by which I mean it is due for its "major service....what in the old days was called a tune up). By which I mean a process in which the engine is actually lifted from the engine bay so that the spark plugs and consumables can be changed.

Exactly. And you put it nicely :)

The fact that even those rusty pieces of crap sell for $30k proves my original point...which was - just because you can't afford it, does not mean the price will automatically have to come down.

Clara says

Buying a house is not a necessity, it's a luxury good

LOL

You belong in a woodchipper.

Clara says

Sounds like a typical angry renter. You can choose to be happy while you rent, you know? It's your own choice. I bought a $110k condo all cash and renting it out for $1350 per month now. Do YOUR math, "bro". I am showing you what's out there. I guess most are too stubborn to listen to sound advice. Keep renting, then.

(I sound like a Landmark coach...)

another loser home owner that's trying to convince renters to buy.

i make more money on stocks/bonds/other asset-classes, than i could make being a slumlord like yourself.

having a large portfolio, unless i want to be a full time landlord (which i don't), renting out one, two or even three of your crappy slum rentals for $17k per year (gross, that's not even net) doesn't make any sense.

why would i spend the hassle managing angry renters when i can make a better, easier return on other investments?

rentals don't have economy of scale(i need a lot of units to match what i get investing in liquid assets). but i wouldn't expect someone with so little money, and such a big mouth, to know that.

all you and suboink do is peddle tired cliches. why don't you say something original for once. oh that's right, you're incapable of any original thought.

and i wouldn't trust you to coach a little league game, let alone any part of my portfolio.

Hysteresis says

all you and suboink do is peddle tired cliches. why don't you say something original for once. oh that's right, you're incapable of any original thought.

Yes, we are definitely not as original as your posts. Wait, what was your message - rent and buy stocks?

Wow - now there is an original thought!!

And what makes you think I don't also have money in the stockmarket :)

Housing is still wildly inflated in Orange County, Calif. In the city of Orange I am seeing 1600sqft townhomes still with asking prices around $400,000. That's almost half a mil. for a starter home in a very average neighborhood. Given 3x income and 20% down as a conservative estimate.. one would need $133,000/yr income with a $80,000 downpayment. This is a pipe dream for most.

Rents have a very wide variation, perhaps you have taken a very high value for rent rather than the median rent.