patrick.net

We will all know if it was real in 2-3 years from now. If things keep going up, you will have missed the boat on a steal. Ok, not everyone needs to buy a steal. If you are right and all of a sudden the market drops...waiting may pay off. The problem is at current rent rates, the market has to drop significantly for the waiting period to pay off. I think most people realize it and are stepping up to the plate.

a big part of it comes from all the rich guys that don't know where to park their money...so they buy real estate and rent it out.

Not just rich guys. Govt pension funds (CalPERS) etc/hedge funds are buying up SFR as fast as possible now in bulk and one at a time at trustee sale - then RENTING THEM (not flips).

You can get 8% return EZ this way currently - CD pays 1% and stock market makes everyone puke. Bonds are scary as they can 'implode' if rates spike - but an SFR rental is fine and still will return 8% if rates spike (which is higher yeild than bonds now)

I sold my last rental in 2006 as its cap rate was 2.5% and I could get 6% on a CD back then (it was a paid off house) so that was a no brainer as RE was peaking.

Now its opposite! RE is bottom, rates are bottoming. so loading up on RE is where the federal reserve is herding people with cash ritgh now. Ive been sitting on cahs/bonds for too long, about to also load up on real estate (i probably missed the bottom - it only lasted 3 years)

Yun reminds me of a used car salesman. "This a peach owned
by a little old lady. It has so few miles we didn't have to roll back the odometer."

Not in ca/ny. These places are still nuts.

hrhjuliet says

I'm sure it will go back down to normal as soon as the government gets its nose out of it.

I have been practicing holding my breath, but I don't think I can do it for that long!

bmwman91 says

I have been practicing holding my breath, but I don't think I can do it for that long!

Yeah, I can't say I have any faith in the government sticking their nose out of anything. I really should have had that sarcasm button for my last line. (;

PockyClipsNow says

Not just rich guys. Govt pension funds (CalPERS) etc/hedge funds are buying up SFR as fast as possible now in bulk and one at a time at trustee sale - then RENTING THEM (not flips).

You can get 8% return EZ this way currently - CD pays 1% and stock market makes everyone puke. Bonds are scary as they can 'implode' if rates spike - but an SFR rental is fine and still will return 8% if rates spike (which is higher yeild than bonds now)

I sold my last rental in 2006 as its cap rate was 2.5% and I could get 6% on a CD back then (it was a paid off house) so that was a no brainer as RE was peaking.

Now its opposite! RE is bottom, rates are bottoming. so loading up on RE is where the federal reserve is herding people with cash ritgh now. Ive been sitting on cahs/bonds for too long, about to also load up on real estate (i probably missed the bottom - it only lasted 3 years)

Right on buddy. Cap rates on real estate compared to CD rates are stunning, artificially created by the feds to save the economy, and unsustainable. This is a once in a life time opportunity, if missed, will make you sorry for the rest of your life.
Many areas are yielding 8% and more, while high end areas in Southern California close to the ocean have CAP rates of roughly 5% to 6%.
These CAP rates at one time could only happen in dreams, but today those dreams have come true.

PockyClipsNow says

Ive been sitting on cahs/bonds for too long, about to also load up on real estate (i probably missed the bottom - it only lasted 3 years)

You may have missed the first boat, but remember, real estate moves slowly over time. There is a boat every hour. Don't miss the next one.
Good luck

I don't know. I guess it depends. In many parts of the mid-west-at least in the areas I have been for work, houses are real cheap relative to income. In CA, excluding the inland empire, central valley etc. it is still very expensive.

People will say coastal CA is very desirable-true. But it was as desirable a decade ago and the job market was infinitely better and CA was in surplus and it was much lower. But other areas seem cheap.

Perhaps AZ too might have hit a bottom?

But having said that, the Japanese housing market has never recovered, so have we merely reached a bottom and going to scrape by for the next few decades , while the high priced coastal areas come back down to earth??

More like 20% driven, but yes, the recovery is driven by those with means.

David Losh says

CAP rates?

Sorry buddy, but cap rates are unsustainable at present with high rents. Second is the price of property, and third is long term maintainenece cost. Last, but not least is that your money is tied up, which is a lost opportunity, in my opinion.

These CAP rates are definitely unsustainable, which is why I believe home prices will double in a few years.
For the CAP rates to fall in half, either home prices have to double or rents have to halve. Rents are not gonna halve.

Raw says

For the CAP rates to fall in half, either home prices have to double or rents have to halve. Rents are not gonna halve.

Raw, you have No Clue what CAP rate is.

David Losh says

No one, let me repeat no one is going to pay a higher price for housing going forward. We are in another bubble right now, but I think even Schiller is warning us about that.

recovery! its 10-25% annual appreciation every year going forward...

good times are back again! buy now or get priced out forever!

From some time our economy is not producing any significant number in new goods or services.
Money can be made only through RECYCLING what we already have.

bgamall4 says

Actually, the bottom 10 percent of the top 20 percent should watch out as the article I wrote hints:

Interesting article. You're giving a bit too much credit to the "1%" in terms of direct investment. The true 1% are more about controlling the capital itself, not the direct investment. In real estate especially most of the actual direct investment activity occurs from the 2%-20% who are using capital provided by the 1%. Even HFs which are doing active RE investments aren't generally doing that in residential RE directly, but through another layer of LLCs which are comprised of investment bands who are being capitalized by HFs along with other private investors.

bgamall4 says

The housing recovery is 1 percent driven, and can be as real as much as the 1 percent has money and credit.

In order for 1% to buy up all the houses and rent them to the 99%'ers, each 1%'er would have to buy 100 houses (on the average), 1 for himself, and 99 to rent out. Does this sound realistic?

It's not real. It's speculation. The amount of people claiming to be successful RE investors on Patrick.net has risen at the same rate as prices in Maricopa County since last year October. There has to be some correlation.

REpro says

Raw says

For the CAP rates to fall in half, either home prices have to double or rents have to halve. Rents are not gonna halve.

Raw, you have No Clue what CAP rate is.

Here is the formula for CAP rates:
http://realestate.about.com/od/knowthemath/ht/cap_rate_calc.htm

Goran_K says

It's not real. It's speculation. The amount of people claiming to be successful RE investors on Patrick.net has risen at the same rate as prices in Maricopa County since last year October. There has to be some correlation.

And if you can completely destroy their arguments with simple 5th-grade math, it begs the question why we even waste our time arguing with these numb-nuts.

Job growth: Down
Unemployment: Rising
Wage growth: Non-existent
Housing price: Up

All the indicators of a speculator rally.

robertoaribas says

since Goran can't figure this out, 175,000 more jobs is 175000 more people that can pay rent...

Another lie from roberto the realtard. Here are the real facts:

The household survey showed 150,000 people dropped out of the job market. About 852,000 "discouraged workers" were not counted in the labor force, because they did not look for a job in the last four weeks.

The so called "underemployment rate" rose to 15%, its highest level since January. That includes people who are unemployed, as well as those who are working part-time because they can't find full-time jobs, and those that have looked for a job sometime in the last year.

robertoaribas says

Since Goran can't figure this out, 175,000 more jobs is 175000 more people that can pay rent...

What about the 190,000 jobs that were lost? The BLS just reported that unemployment just went up to 8.3% "mathematics professor who teaches at a major public university."

bgamall4 says

Yes, it sounds very realistic if hedge fund purchases drive it. Hedge funds lever up 10 to 1. It would be easy. There is simply too much money at the top of the food chain, and to much credit.

This is ridiculous. Do you even hear what you are saying. 100 houses per person. Also, hedge funds are not people, they are composed of people, so a hedge-fund of 100 people would have to own 10,000 houses and another 100 people who are not in the hedge fund would also need to own 10,000 houses.

robertoaribas says

never claimed I teach at a "major public university"... more made up bs from you...

the job number is a NET CHANGE number, nitwit... more people are working today, than were a month ago...

You claimed to be a lecturer at CAL (not that I believed you so it's a moot point anyway).

Regardless, here's data you could possibly decipher, but I'm not holding my breath:

Employment status (numbers in THOUSANDS)
Ciilian noninstitutional population
239,671 242,966 243,155 243,354 Change: +199

Civilian labor force
153,358 155,007 155,163 155,013 Change: -150

Participation rate
64.0 63.8 63.8 63.7 Change: -0.1

Employed
139,450 142,287 142,415 142,220 Change: -195

Employment-population ratio
58.2 58.6 58.6 58.4 Change: -0.2

Unemployed
13,908 12,720 12,749 12,794 Change: +45
Unemployment rate
9.1 8.2 8.2 8.3 Change: +0.1

Those are the most recent statistics reported by the BLS from June 2012 to July 2012.

You want to take your foot out of your mouth, or should I?

robertoaribas says

more people are working today, than were a month ago...

Wrong again. How can 175,000 be the net number of jobs gained, if only 163,000 new jobs were added and 195,000 jobs were lost. I think the math professor needs to go back to 5th grade, again.

Raw says

Here is the formula for CAP rates:
http://realestate.about.com/od/knowthemath/ht/cap_rate_calc.htm

Formula is good, but the trick is to know how to calculate NOI. This value VARIES greatly and only experienced investor, broker or appraiser is able to calculate it right way. It is also an area where manipulation takes place. It simply too many variables to be taken in account. Every real property is different. I’ve seen properties with NOI as high as 65% of Gross Anticipated Income and as little as 40% of GAI.
Anyway, is a great quick formula to arrive with possible purchase price.

I haven't heard a credible or believable argument yet on how home prices can rise outside of a speculator rally with rising unemployment and stagnant wages.

Goran_K says

I haven't heard a credible or believable argument yet on how home prices can rise outside of a speculator rally with rising unemployment and stagnant wages.

Well speculator rallies can last longer than anyone has the patience to wait. We saw this back in 2002-2007. But, one thing for sure, the longer it lasts, the more blood will be shed, in the end.

You know what is truly amazing is how much people let their wishful thinking overpower sane logic. After 5 straight years of "false rallies" during the spring season, people are still clinging on to the idea that this year is going to be somehow different, and their "hope" of a true recovery is finally going to pan out.

robertoaribas says

see this is what makes you goran, as a person, a complete asshole... you call me a liar with no shred of evidence...
while in grad school there, I lectured calculus, now piss off.

I didn't call you a liar, I simply don't believe a lot of what people claim about themselves on the internet. You do often boast a lot on patrick.net, and one of the things you commonly bring up is how you were a "lecturer at CAL", like I said, doesn't matter to me.

Now, what say you about those BLS employment statistics I posted? Or are we going to ignore that whole debate never happened? It's okay, I would too if I were you.

Goran_K says

I didn't call you a liar,

Too bad, because he is.

Call it Crazy says

I know the monthly report is a phone household survey and is not taken directly from the weekly numbers, but come on, if 1.4 Million file each month for multiple months and the rate only goes from 8.2% to 8.3%.... REALLY?????

Election year. One of the unemployment numbers you will never see is REAL unemployment (including long term unemployed). It's simply too hard to get an accurate number, but like you mentioned, all indicators show it's high (some estimate in the 15 to 20% range).

robertoaribas says

the job number is a NET CHANGE number, nitwit... more people are working today, than were a month ago...

Still no response Roberto? Am I still a nitwit? Is unemployment down?

Temporary bubbles or bounces need to be distinguished from any real recovery. It is also well known that bubbles can last quite longer than you'd expect. But without a grip on the massive debt floating around, starting from the federal deficit to state and municipalities deficits, no real recovery can take place. Doesn't matter whether it continues in inflation or deflation, or most likely stagflation, but while I am willing to believe personal success stories (which can happen) I must say that anybody arguing for a grand recover in spite of the cold hard debt facts is at least mildly delusional.

robertoaribas says

yes you are still a nitwit. It is not my job to run and do tasks you set for me, you obnoxious idiot.

You don't disappoint Roberto. :)

dunnross says

Well speculator rallies can last longer than anyone has the patience to wait. We saw this back in 2002-2007. But, one thing for sure, the longer it lasts, the more blood will be shed, in the end.

Well 2002-2007 had the benefit of endless amounts of liquidity and credit to continue going (aka no skin in the game). The current bubble trap is being funded by real actual investor cash, that's the scary part (if you're an investor of course).

mell says

I must say that anybody arguing for a grand recover in spite of the cold hard debt facts is at least mildly delusional.

Apparent investor logic:
"rising unemployment, stagnant wage growth, massive private debt is built into the market, we don't buy for today, we buy for the future"

So you are probably right.

First, who else would come out and say these things other than the NRA?

Second, and this will not be broadcast on any new media, I think if this trend continues, as it has for years, i.e. weak fundamentals, and high prices it is obviously some set up of some kind.

The hedge funds will but up the foreclosed properties at fire sale prices and rent them out, (Anyone remember the early 1990's when WE got to pick as some fire sale items?) If that doesn't work, an immigration gate will open and a new flood of willing debt slaves will be up for feast. Or something similiar to keep the bottom line.

Lastly, and there will be no news articles about this either, (But you can sort listings) Look at the crap for sale, damaged, no stove, microwave torn out, 1 bathroom no matter how many bedrooms. Sure! anything half way nice gets snapped up in a day.

Goran_K says

I haven't heard a credible or believable argument yet on how home prices can rise outside of a speculator rally with rising unemployment and stagnant wages.

I'll give you 3 reasons:
1. It is cheaper to buy than to rent due to falling interest rates and rising rents.
2. There is a huge pent up demand from people who waited to buy their home.
3. The perceptions have changed. People, especially investors with large amounts of cash believe home prices are going up. They start jumping into the market creating a self fulfilling prophecy.
--
And here is a bonus 4th reason.
4. It is cheaper to buy a home than to construct one.