patrick.net

If we have statewide declines of more than 30% for detached homes you will be more likely to be standing in a soup line than to be buying a home.

Let's hope that they have good Lobster Bisque.

Market prices decline from excess inventory, not foreclosures. Distressed sellers add to the severity.

Yeah, Jack, I should've said "sorry to butt-in here" instead of "okay I'll butt-in here".
I think the long & short of it is that many people here get a little defensive/touchy/whatever-you-want-to-call-it because these are big financial decisions we're talking about here...which influence not only ourselves & our families, but future generations. And we all would like to think we're doing the right thing for the collective future well-being.

Long ago they might very well have served lobster.

It was a cheap food at one time. Servants were fed lobster so much that some would contractually insist on limiting the frequency of it to a specified number of days per week. It was even used as fertilizer. How things have changed.

I’d say profit taking (selling) right now –especially if it’s investment property– is a far less risky bet than buying into the current market. It’s still gambling though.

Actually it's not a gamble at all to cash out now....not anymore of a gamble then being in vegas up 200k and calling it a night.

It was a cheap food at one time. Servants were fed lobster so much that some would contractually insist on limiting the frequency of it to a specified number of days per week. It was even used as fertilizer. How things have changed.

Have we met before?

This is one thing that I used to talk about all the time! :)

How things have changed.

Yes indeed. :(

Lobster is my favorite animal.

"Have we met?" Could be. But I don't know. I am known to many people. Far more than I know.

Got to go. Back in a while.

Market prices decline from excess inventory, not foreclosures. Distressed sellers add to the severity.

Foreclosures cause excess inventories.

“Have we met?” Could be. But I don’t know. I am known to many people. Far more than I know.

I know many people. Far more than those to whom I am known!

I am known to many people. Far more than I know.

Zeph you are cryptic. I'm guessing you're not known by "many people" due to a prolific blogging appetite....

Hey, werent we just supposed to be double checking Matt Walsh’s math? LOL Wild board tonight, could be one of the best threads ever IMO.

Yeah, 600+ posts later and still no clear answer for me!

Went to my tax expert today and did a 'what if'. Surprised to find that indeed, I DO NOT want AMT repealed if it will mean losing a mortgage deduction. Modesty asside, I consider myself a high income earner and yet is amazing how little AMT impacts me...and I even did a 'what if I add on ~$80k of ordinary income' calculation.

ANYWAY, if anyone cares at this point, it turns out my calculations were pretty close. Tax savings are around $1449. So, with a jumbo loan at 6.25% now, it looks like a 'soup to nuts' payment of $3371. Assuming I get my principal back, the 'down the toilet' money is $2765. Rents are $2300-2700. Opportunity costs are still about $1000 though.

On the other hand, stupid as this sounds, at least if I tie $250k up in the house, I no longer have to worry about successfully investing that money in the stock market.

Landlord wants to know what to do...time has run out...and I still don't know. If only I didn't have to move maybe this would be easy.

HEY THERE'S AN IDEA! What if I had a 'bubble-avoidance moving party'. I'll supply beer and food, and anyone that comes can help me move to my new rental. We can take pictures and so on. If there's a housing drop, I'll take the difference in house prices (say from $891k to $600k = $300k) and split it among everyone! Well, scratch that last bit, but let me know if you want to be part of this event!

Next thread:
"Who is Zephyr in the real world"
Time to comb previuos threads & look for clues. LOL.

It (Lobster) was a cheap food at one time. Servants were fed lobster so much that some would contractually insist on limiting the frequency of it to a specified number of days per week. It was even used as fertilizer. How things have changed.

Oh for a return to those days. Lobster is still relatively cheap in Boston. Similar was true for oysters...they used to be served like hot dogs around SF. But I guess runoff dirt and stuff from the neighboring mines flowed into the SF Bay and destroyed the oyster beds.

Lobsters can still be obtained for around $10/lb live. Let's hope that there will be no lobster bubble.

Prime neighborhoods like Los Altos Hills, Los Altos, Saratoga went down cumulatively 30% in the last 90's depression, second tier neighborhoods like Cupertino, Los Gatos went down slightly for around 5-10%. Marginal neighborhoods like Oakland went down 40% in the first two years.

Particularly noteworthy was, in the last 90 recession, there was no I/O loans, almost no mix of ARM loans, and property flipping was unheard of.

I would lose my low property taxes, a large chunk of equity to a RE commision, and then what?

Sorry, but I didn't know we were refering to your particular situation.... I know in your case it would be a no-brainer to stay....I know I have told you this before. When I say it's not a gamble, I'm talking about those who bought like 5 years ago who luckily have seen their house appreciate enormously. These people haven't been in the house long enough to put down roots and for them to cash out and rent would not be a gamble at all.

SJ_Jim,

I can understand your assumption about me, but it’s not the case.

I am known to many people because I am the CEO of a financial services company with many corporate customers and competitors. We have about $1 billion of invested assets on our balance sheet.

Anyway, this visibility makes me known to many who I do not know.

It is important for me to anticipate economic trends, so I spend a lot of time staying on top of the market environment. This is particularly true for issues of inflation and general economic health. I read a lot every day.

The web is a great resource. I usually spend an hour or two reading the websites of a variety of economists. I also have my own website that exists solely for my convenience in finding, linking and sorting sources.

Residential real estate is a key part of my personal investment portfolio, so I read what I can find on that topic as well. In doing that I stumbled onto this blog. I often check it later in the night. When the discussion is serious I will join in. When the discussion is more casual I move on to other things.

The internet enables people from diverse walks of life (who would probably never meet or talk to each other) to mix and discuss ideas. It is a powerful media and source of ideas. It gives unlimited access to facts. The blogs provide access to diverse points of view.

I can understand your assumption about me, but it’s not the case.
Hey, Zeph, no assumptions here! Assumptions generally get me in trouble so I shy away.

So, now, I know you're a CEO for a reason, but if enough strong arguments are made here for RE cliff-drop, will you substantially drop your RE holdings? Then the other big financial services industry players will follow suit? Wow, we have a golden opportunity here to promote a self-fulfilling prophecy.
(yes, I jest, I jest...and badly at that)

Seriously, now, I'd love to know of some of the economists' websites that you peruse.

Had a rather uncomfortable conversation with our part-time admin assistant today. Here & husband (med. tech.) closed on an investment rental property a couple months back.
They're having trouble finding a renter...their current prospect is a recently divorce amateur boxer...FICA = 600.
I asked if the rent would cover mortgage...she said, "pretty close...maybe not, if you consider the property manager's fee."
I said, "Well, but good thing you locked in an interest rate since they've been rising lately & will probably continue to rise for a while."

That's where everything turned sour.

She told me they were on variable interest & have already seen their mortgage rise. She also said they only have to pay $XXXX even with the rising rate. But if they don't pay enough, then after a while they might have to pay more, "or something like that."
I asked if they could re-finance to something fixed, & she quickly shook here head no. So, it looks like they're pretty tapped out (perhaps took equity on primary residence to buy rental), or otherwise restricted.
I told her everything will work out somehow. She said "yeah, at least if we lose money we can deduct it." This made me think of her previous statement, a while back, when telling me about her aprehension to buying the place: "At least if it doesn't work out we could always sell it."

So, yes, that was a bit of an uncomfortable conversation. What are the chances that that is the only conversation of its kind to take place in the bay area, now or in the not-too-distant future?

SJ_Jim,

While I have hundreds of links on my lists, I am posting one here that is an aggregator of serious economics and finance web logs. Start with this one and explore the chain of links. If you run out of places to go from this one let me know and I can give you more. However, this one is like a central hub to the universe of such blogs, so exhausting the trail is probably not possible.

http://www.rtable.net/

Mr. Wrong,

I agree. Flipping has been around for ever.

I was a mortgage guy in the 1970s and I remember some customers who were so active that they would have more than a dozen houses in process at any given time. Some of these operators would not make any payments and would be delinquent from day one. We would keep lending more money to them for their new purchases anyway. They were money machines for us because we got the up front points and the prepayment fees on loans that would last for only a matter of months. Often we would get the new buyer as well.

Mr. Wrong, I left the mortgage business in 1978, although I have often provided capital in those markets since then.

H.Z.,

Absorbing information is an important part of my work. I delegate almost every task, and create a flow of information coming to me from everyone.

I agree that it is good to hear the negative case before making a financial commitment. One danger I worry about is people around me wanting to tell me only what they think I want to hear.

As for the RE cycle, I believe the downturn has started. I will wait for the bottom and start buying at that time. The deeper it goes the better it will be for me. However, like you, I am not convinced that it will be so deep.

Mr. Wrong, You really move fast to keep it under 2 months. Are you delaying the close on the front end?

Zeph thanks for the link -- looks to be just what I was looking for.

Let’s hope that they have good Lobster Bisque.

is everything related to food? 6 degrees of sushi?

We all live to eat.

Don't we?

New thread: "Reputable Sources"

"Prime neighborhoods like Los Altos Hills, Los Altos, Saratoga went down cumulatively 30% in the last 90’s depression, second tier neighborhoods like Cupertino, Los Gatos went down slightly for around 5-10%. Marginal neighborhoods like Oakland went down 40% in the first two years."

Owneroccupier, do you have a source for these numbers? I'd love to be able to quote them to people who tell me the Bay Area didn't take a hit in that recession except for condos and luxury homes. I didn't quite believe them but haven't been able to find solid numbers to counter with.

"Yes, partly because a substantial part of my total WAD is involved"

You were just looking for an opportunity to say that, weren't you, Jack?

And I also do not want someone to buy a house with coffee water without knowing what they are getting into.

They could sell the coffee......I hear it's a pretty good business.....and if the coffee is free, you have fewer expenses and more profit. :lol:

hmmm…have another espresso Jack…..sorry for the long post.

Hmmm...post got cut-off.
I SAID: nice post!

OH, I also said: I could use an espresso, too.

"I dont care where the market goes as far as my own little situation. That IS true Frank!"

Well thanks for the long clarification Jack. I guess I'll have to reclassify you then. How about the "Bay Area RE bull who has a substantial portion of his WAD at risk but defies commonsense because he doesn't really care if he loses it all" guy? Oh and yes, you're a nice guy who cares about us bears too.

Well all I can say is you're quite an anomaly Jack and without you this blog might be less interesting :-).

"In the last year I sold my two small apartment complexes that I bought years ago for 10+ caps for caps of 4.5 and 4.65. I’ve never seen that market so inflated, and if someone is buying for those prices, I’m damn sure selling. I still own a couple of rentals locally that are highly “prime”, cash flow well and are almost paid off." - Mr.Wrong.

Gee, and you still have the time and desire to post to this little blog about all your marvelous RE success stories. One would think you would be off on your own tropical island by now what with all those riches you must have accumulated by now. lol.

Frank, Jack can respond for himself, I know; but as far as I know he's not planning on selling his home anytime soon...and he doesn't really care about short-term paper gains or losses on his HOME.

And frankly, being more bearish myself, it's mildly annoying seeing such sour sarcastic barbs by other bears. But if that's your style....

I’ve never seen that market so inflated, and if someone is buying for those prices, I’m damn sure selling.

Mr. Wrong, I believe, from your posts, that you don't think RE is headed for a very severe downturn; how do you reconcile this sentiment with the statement above?
If RE is "so inflated," what will prevent it from becoming "so deflated?"