patrick.net

brucenorris says

The last time mortgage rates were fixed at 3.25% for 30 years?

So then with your logic 2.25% would be even better? How about 1.25%, then 0.25%, then 0%. The low interest rate speaks of a deeper problem. You don't need to look that far to see it. Jobs!

Darrell In Phoenix says

brucenorris says

Saying it's a once in a lifetime event would be accurate.

Hey used house pimp,

When are you liars ever going to stop lying to the public?

When are you going to stop being a dumb ass?

SubOink says

In the meantime, you have spend 4 years of rent and pumped it down the drain.

So in essence, if you add up those 4 years of rent then you know how much you have lost on that deal.

4 years of over 2k/mth in savings. Not a bad deal at all. Add to it that this savings has grown at a rate of 8-10% annually. YMMV

RentingForHalfTheCost says

The low interest rate speaks of a deeper problem. You don't need to look that far to see it. Jobs!

The last word should be Japan!

Japan has had 0% for a decade.

robertoaribas says

how long till I have all of my invested money back?

You have debt. You have to pay the debt, or default. If you end up with less equity than you risked then you lost.

Investing in Real Estate is a job. It can be a good paying job, but it is a job. You are tied to the set of asset you acquire.

robertoaribas says

so lets see: if I can finance homes at LESS THAN HALF OF CURRENT RENT

As rates go down so do rents. I'm renting cheaper now that I ever have been in my life. Incredible, and each month I couldn't be happier. I wish time went faster...

You don't need a math degree to figure this stuff out. Good luck to you.

RentingForHalfTheCost says

As rates go down so do rents

Please explain how apartment complexes in bay area have increased rents 25-30% in the last 2 years with the rates going down.

Your chart starts at 2008. If you use the Tableau chart with Case Schiller you will see the real dynamics of the top, and bottom, as you call them.

Let's see if this works: http://public.tableausoftware.com/views/Case-Shiller-YOY/YOYChange?:embed=y&:loadOrderID=0

You can adjust the chart back to 1987, I think

OK, that worked.

So you can see that the chart is over shooting the bottom rising up to the top, but that is totally inconsistent with the market place in Arizona.

I have always been able to buy a place in Mesa for about $100K, three bedrooms, 1.5 to 1.75 baths, and a pool.

Then it all went sideways.

So I don't see a bottom or a top, what I see is volitility.

Yup says

SubOink says

my hownowners insurance = $1000.-/y

when we rented our renters insurance for the house was $950.- /y

BS that is complete crap, you are full of shit.

Why is it BS? Those are the amounts I pay/paid...

SubOink says

Why is it BS? Those are the amounts I pay/paid...

He seemingly knows more about your bills than you do. An impressive ability.

Bigsby says

SubOink says

Why is it BS? Those are the amounts I pay/paid...

He seemingly knows more about your bills than you do. An impressive ability.

I thought Darrel from Phoenix is the only guy that possesses such abilities...

Yup says

You are correct I apparently do know more about bills than he does.

You don't know more about HIS bills though, do you?

dublin hillz says

RentingForHalfTheCost says

As rates go down so do rents

Please explain how apartment complexes in bay area have increased rents 25-30% in the last 2 years with the rates going down.

Because they haven't overall. Sure, you can find places that fit your description, just like you can find places that are cheaper than 4 years ago. Overall, rents are stressed. There are better opportunities out there now that I have ever seen in the BA. I can rent a McMansion for 4k/mth. That was never true before.

Elwood P Dowd says

And here’s my second problem, not a math one necessarily, more revolving around logic: Are you saying you have no homeowner’s insurance? And that your mortgage was written in such a way to permit this? Or, is what you’re calling “fire insurance” of $129/month actually a homeowner’s policy? In that case, you’re getting the deal of a lifetime, since a property worth $875,000 is only costing you $1,548/yr to insure

Elwood,
I've seen lenders refer to homeowner insurance as "fire insurance", so, it's probably the same thing.

For the cost. In LA or Silicon Valley it's common for the lot to account for more than half of the purchase price. Someone may purchase a rundown house for $1m with the intent to scrape and rebuild. So the lot is $1m. A typical SV Fortress house that sells for $1.5m would be roughly $1m for lot, $500k for structure. The insurance covers the structure, not the lot. The insurance price then is lower than you might think, based on the purchase price. Insurance on a 2k ft $1.5m house could be $1200. It also depends a lot on the deductible and liability limits.

This is a flaw in many rent vs own calculators; they will show the homeowner insurance as a percent of purchase price, but if the lot is expensive, that's misleading.

Same with maintenance. You'll have a lot more maintenance on a $1.5m house in the midwest than in Fortress, just because the $1.5m house in the midwest will be much bigger. 25,000 sq ft if Darrell builds it for $60/sq ft. There will be much more maintenance on a 25k ft house than a 2k ft house in SV, even if they both cost $1.5m.

However, it is true that maintenance is not zero, and the calculation needs to account for that.

RentingForHalfTheCost says

Overall, rents are stressed. There are better opportunities out there now that I have ever seen in the BA. I can rent a McMansion for 4k/mth. That was never true before.

I seriously do not buy that. We rented the same 4 Bedroom house for 8 years for $1,500 a month. We were lucky in that the LL never raised the rent. Back then Landlords couldn't give these away. When we looked at rentals, the immediate area we looked in had pages of houses for rent and the one we settled on was one of the more expensive. Some were for as little as $900.

About a year ago I started looking out of curiosity at what stuff was renting for around us. The same houses were renting for $3,000 a month. What's more, there were few if any to rent. A lot of people who probably would have bought before can't do so now hence the demand for rentals, especially houses. I just looked now. There are a total of five 3+ BR houses to rent total in our east bay city. Five.

Basically what I pay for the mortgage is just slightly more than what we had been paying in rent and about 40% less than what the type of house we bought would rent for in the current market.

If we were talking say- 2002-2003, sure- the rental market was dirt cheap and highly flooded. At least in the immediate BA I can't really say that's the case. Besides- $4,000 a month in rent? You can buy a house for 50% less then that these days.

The cost of sleeping in the car is inflation proof!

edvard2 says

Besides- $4,000 a month in rent? You can buy a house for 50% less then that these days.

It depends on the area, and the property.

If you are renting a million dollar place then $4000 seems reasonable for rent.

Actually a lot of tech people in Seattle pay high rents to be in good areas close to work. The kicker is that they are in some really nice areas. People with really nice houses can afford to rent to the people who will take care of them.

edvard2 says

Besides- $4,000 a month in rent? You can buy a house for 50% less then that these days

The houses that are equivalent to my rental would cost me 7-8K/mth in owning expenses. Sure, you can buy cheaper, but I just got too much crap to house now. ;)

robertoaribas says

I'd take 10 homes in Phoenix for my million

OK, but that is discounting the millions of people who are underwater on homes they "own."

I could tick off a dozen homes in my area that are renting because the owner can't sell them. Most can't rent for near what the payment is and those people supplemant the payment.

I noticed right off that Patrick has Menlo Park listed as his home. My aunt Grace lived in Menlo Park, back in the day, down the street from Shirley Temple Black. I don't think he could own a home in the area, no offense, but for sure you can rent for less than the price of a mortgage.

RentingForHalfTheCost says

The houses that are equivalent to my rental would cost me 7-8K/mth in owning expenses. Sure, you can buy cheaper, but I just got too much crap to house now. ;)

Well... granted our house isn't a Mcmansion, but its 4 bedrooms and the mortgage is less than half of $4,000. So not sure I would necessarily equate $4,000 a month in rent as a steal per say...

Well renting for 4k a month when you can own for half that is only a good deal when prices are trending down. When they are going up like now you lose your shirt every year in missed equity gains and get no tax write offs unless you own a business.

Im going to pour at least 25k in remodeling costs into my house but that is only one year of the money i save by owning vs renting same house.

robertoaribas says

million dollar homes have never made any kind of freaking sense as investments... Even at $6K rent, it still pretty much sucks.

You got my agreement there. A million dollar home is the bay area is nothing to be proud of either. The workmanship on the 150K home in Phoenix is far superior IMHO. Because of the continuously mild climate, no one sees the shady construction.

RentingForHalfTheCost says

You got my agreement there. A million dollar home is the bay area is nothing to be proud of either. The workmanship on the 150K home in Phoenix is far superior IMHO. Because of the continuously mild climate, no one sees the shady construction.

Most people who have never lived outside of CA are fools drunk on the California kool-aid, repeating what they've heard for years.

~~ I could NEVER live anywhere other than California ~~
~~ They're not making any more land here, so housing is a sure thing! ~~
~~ I CAN'T leave the ocean! (even though I only go every 6 years or so) ~~
~~ (Even though when I eat out it’s mainly at Taco Bell or off McDonald’s Value Menu because I don’t have any money) California has the restaurants and culture that I need ~~
~~ It's too hot/cold there, I could NEVER move there! ~~
~~ Where else can you drive 1.5 hours to the ocean and 1.5 hours to skiing?!? (even though I rarely do either of those) ~~

When I returned to CA from Colorado and was driving through my parent's million$$+ neighborhood in the Bay Area I realized that I never would have agreed to live in such a lower-middle class neighborhood in Colorado. I would have rejected it outright and moved on to a more well-kept area, but people in CA are so used to buildings that are old with owners who don't have enough money for regular maintenance - let alone repairs - that they don't see this anymore.

Whether you rent or own, far too much of your income goes to your housing (my parents spend over $1,000 per month in taxes on their “paid off” house). When everyone else skimps on maintenance/repairs and relies on patches and quick fixes in order to keep the illusion that their 50 year old house is not falling apart, you start to think this is normal, even for the rest of the country. They just keep telling themselves that they are “special” because they live in California.

Meanwhile, they live multiple people to a room in a tiny 1200 square foot house with a poor layout, no coat closet/dishwasher/pantry because their house was built before these things were priorities. It’s even worse when John Nguyen decides to improve his house (and obliterate any tiny bit of “character” left in the house) before selling by doing his own crown molding and throwing some Home Depot landscaping down over his Bermuda grass yard. NOW the house will look reeeeeeeal nice with that For Sale sign out in the front yard… if you can ignore the cars jammed up to all the curbs, in all the driveways, and parked on the lawns (oops, what USED to be the lawn!) because the garage doors have been plywood-ed over as the garages are used for a living space for the masses of people crammed into each house!

PockyClipsNow says

When they are going up like now

Speculation is a crazy way to make money, but it works out some times.

Any Real Estate agent who knows anything will tell you we are in a period of massive speculation on the out come of this election. Both Congress, and Presidential canidates are promising prosperity is just around the corner.

These historically low interest rates along with the low inventory should be warning signs to most people, but to some it's a sign of opportunity.

You never really know what will happen. We all make our own bets.

My bet is that prices will fall further, and if any one has any sense the price of housing will fall like a rock, for all the reasons I've expressed before.

David Losh says

PockyClipsNow says

When they are going up like now

Speculation is a crazy way to make money, but it works out some times.

Any Real Estate agent who knows anything will tell you we are in a period of massive speculation on the out come of this election. Both Congress, and Presidential canidates are promising prosperity is just around the corner.

These historically low interest rates along with the low inventory should be warning signs to most people, but to some it's a sign of opportunity.

You never really know what will happen. We all make our own bets.

My bet is that prices will fall further, and if any one has any sense the price of housing will fall like a rock, for all the reasons I've expressed before.

David,

Based on what you said above, how long have you been advising your buyers to wait and not to buy? How's that working out for you so far? What's the percentage of buyers appreciating your advice? What's the percentage of buyers ignored you & bought anyway? How many buyers did you lose for giving your honest opinion? What indicators are you using to come up with your "house prices will fall further" reasoning? How much further do you think house prices will fall?

TIA.

Yup says

SubOink says

Why is it BS? Those are the amounts I pay/paid...

If you paid $950/year for renters insurance you are an idiot.

It does not cover the structure but it covers your belongings and in my case a very expensive array of equipment and other stuff.

You are a moron - look up what it costs to do renters insurance for 150k worth of stuff. And then look up insurance that only has a $500 deductible and see what the premium is.

Your little brain obviously knows nothing about that. My homeowners now not only covers my structure, dwelling blablabla but also that, I have an amazing deal with that. Only difference is that my deductible is $2k on the home owners.

The world is more complex than you think.

E-man says

How many buyers did you lose for giving your honest opinion

Real Estate is a two edged sword. When you don't have buyers you can list properties for sale.

Well, I'm not very popular in either area of Real Estate with buyers, sellers, or other agents.

I started telling sellers to get rid property in 2006. There were still deals to be had then, but no buyer wanted to hear about keeping a lid on what they bought, and to keep it simple.
Sellers didn't want to hear "get rid of it."

Unlike many of my contemporaries we have a business that provides Real Estate services. We prepare properties for sale. We did one yesterday on a little town house from the 1960s.

I did my last deal in 2008, and referred out buyer's and sellers to other agents I know. A lot of people made fun of me, but not so much today.

When we work on properties for other agents we keep our standards, and work directly for the home owner. We stopped working at Real Estate agent direction because some of the agents were getting a little desperate.

OK, now, in 2007 my wife, kids, and I took a trip to Barcelona. In 2008 we went to Peru to visit my wife's family, she's from there.

Once you see the global Real Estate market you get a real sense of how whacky it is.

The mortgage market is a complete sham. The idea that mortgages are traded as securities is ridiculous. We might talk about moral obligaions here in the United States, but in Europe, or emerging markets, it's a complete joke.

In Spain the unemployment rate is 24%. How do you think those mortgages are doing?

In Peru I had to explain why, after two years of paying on a credit card, the balance is still the same.

We "saved" our banks who are now to big to fail, but in Europe, China, and South America I just don't see how banking as we knew it will survive. I don't see how the stock market will continue to go up.

I also watch oil kind of carefully, and don't see oil being the go to commoditiy is was ten years ago, but it keeps going up in price.

I don't think it will be a crash. The United States has anchored itself, and the world body is going along. We will have a correction that will last a decade or more.

David Losh says

Any Real Estate agent who knows anything will tell you we are in a period of massive speculation on the out come of this election.

Are there seriously people out there who are basing their decision to purchase a primary residence based on whether they believe Barack or Bain is going win? If that is the case, the only meaningful variable that I can think of is their prediction of future interest rate movements (ex: interest rates fall, home prices rise as we have witnessed the last 2 years) - so I assume that current homebuyers are more likely to buy if they believe that Barack wins and keeps Bernanke on whereas if Bain were to win a new fed chiefs who is in favor of monetary tightening will be appointed which may stress the home prices.

dublin hillz says

decision to purchase a primary residence

No, I was talking about people buying housing for investment purposes. There are many more people who think prices will stay the same, rise by 2%, or just go up because we hit bottom, and will go back to "normal."

I'm very different in my thinkink that housing will become an after thought to the broader economy.

I think people will take on less debt, and look for ways to cut expenses while they figure out how to make more money.

I think all the money that could ever have been wrung out of the housing market wil be reinvested into huge corporate housing projects that will wipe out the small investors.

What I really think is that a lot of the small investors think they are bigger than they are, and will get creamed by a newer concept in housing.

I look at housing as going the same way as lumber jacks, and commercial fisher people. Bigger, and bigger fish will take over the market place, and prices will recede in that wake.

dublin hillz says

keeps Bernanke

Bernanke is toast, either way.

David Losh says

dublin hillz says

keeps Bernanke

Bernanke is toast, either way.

I doubt it. He's been doing a fantastic job.

E-man says

David Losh says

dublin hillz says

keeps Bernanke

Bernanke is toast, either way.

I doubt it. He's been doing a fantastic job.

You have to be kidding. We all just lost the next 20 years of income because of him. Paying for floating today's dream with tomorrows money. Stupid economics.

E-man says

I doubt it. He's been doing a fantastic job.

It's pretty well accepted that QE !, 2, and 3 failed.

I think he made this last bone head move of buying mortgages because he knows he's gone after the election.

E-man says

David Losh says

dublin hillz says

keeps Bernanke

Bernanke is toast, either way.

I doubt it. He's been doing a fantastic job.

At providing a lucky few to collect high returns on borrowed money in the form of rent and property appreciation while simultaneously dumping the vast majority of investment risk to the taxpayer? If that is what you mean then yes, he is doing a bang up job.

David Losh says

I think all the money that could ever have been wrung out of the housing market wil be reinvested into huge corporate housing projects that will wipe out the small investors.

What I really think is that a lot of the small investors think they are bigger than they are, and will get creamed by a newer concept in housing.

Corporate housing? Do you mean something akin to company towns?

http://en.wikipedia.org/wiki/Company_town

I suppose what is old is new again...

robertoaribas says

David Losh says

It's pretty well accepted that QE !, 2, and 3 failed.

I think he made this last bone head move of buying mortgages because he knows he's gone after the election.

does "pretty well accepted" mean some anonymous people with no economics education think so on line? Because, the majority of eocnomists give Bernanke pretty high marks for his handling of what could have been the 2nd great depression.

Again, you don't need to study economics, it's basic math. If you are really good at math you can create some complicated constructs and slice and dice them and then sell them as investment vehicles and hide the simple truth behind complex formulas, but under the hood everything can be reduced to basic math which just is. If you believe the man behind the curtain can create wealth out of thin air or increase government spending without equally hurting all the ones that are not on the receiving end then I have a bridge to sell you..

New Renter says

Corporate housing? Do you mean something akin to company towns?

http://en.wikipedia.org/wiki/Company_town

I suppose what is old is new again...

part of that is what some of these Companies do with Free Kitchens... and entertainment. Keep you at work as much as possible like Google (how evil).

when i got stated in SV the point was to leave after 5pm ASAP to have a real life, and many did just that. but today the cool hipsters have been brainwashed.

Will Google's Housing Plan Do No Evil?
http://realestate.aol.com/blog/2010/02/22/will-googles-housing-plan-do-no-evil/

Despite the generous perks enjoyed by the Mountain View, Calif., company's workers, such as free lunch and dinner, on-site medical clinics and subsidized day-care centers, many still put up with inconvenient commutes to Google's remote corporate headquarters.

Now Google is urging Mountain View city officials to change local zoning laws to allow the company to build six- and seven-story housing units in the North Bayshore near Highway 101, Silicon Valley's sclerotic traffic artery. After a tentative nod of support from city planners and council members, the officials reconsidered, citing potential pitfalls such as increased population density and more local traffic. Does Google's housing plan for the future violate the ubiquitous company's mantra "Don't be evil"?

David Losh says

E-man says

I doubt it. He's been doing a fantastic job.

It's pretty well accepted that QE !, 2, and 3 failed.

I think he made this last bone head move of buying mortgages because he knows he's gone after the election.

Looks like my beloved Bernanke still has his job. :)

New Renter says

E-man says

David Losh says

dublin hillz says

keeps Bernanke

Bernanke is toast, either way.

I doubt it. He's been doing a fantastic job.

At providing a lucky few to collect high returns on borrowed money in the form of rent and property appreciation while simultaneously dumping the vast majority of investment risk to the taxpayer? If that is what you mean then yes, he is doing a bang up job.

The money was available to anyone that has a job with a FICO score above 620. Don't tell me you don't fit in those criteria. Properties are available all over the country. If you're not willing to take the risk, you have no one to blame but yourself wouldn't you agree?

I'm speaking from a person who stayed home for 1.5 years to take care of my newborn and still managed to acquire rental properties during this time with other people's credit and money. You're in a much position than me. I'm not sure what you're complaining about.