patrick.net

David Losh says

So how are you making a universal statement for every one who bought?

He's not. You are though.

robertoaribas says

nd has seen the home value go up 10 to 30% depending on where has done fine.

You keep saying that and you are completely wrong. The value of the home has gone nowhere until the person sells! So that 10 to %30 up in value is totally in your head until you sell. Why can't you get this?

robertoaribas says

RentingForHalfTheCost says

And so will trillions more. Sit back and watch the continued fireworks.

let's see: you said the same thing last year and were butt ass wrong.

you said the same thing 2 years ago and were butt ass wrong...

you state no facts, no explanations for how your prior predictions sucked so bad, and yet keep predicting the same thing....

does thinking hurt you or something?

85 Billion/month to prop up a dead market is enough facts you need. Ahh, lets just forget about that, it is nothing at all. Nothing you say. Just wait... Your facts are all forgetting about what is causing them. You are one level above the root, if you dig down you will scare even yourself.

robertoaribas says

A home has a value. PERIOD. it isn't worth zero just because you don't sell it on that particular day.

Its value could actually go negative. Upkeep on a home you can't sell is negative. You need income to keep supporting the dead animal.

Any landlord ever wake up and get a note from their tenant that they will pay you more in rent? I don't think so. You have to be the enforcer and risk that they leave you without your rental income just to squeeze more juice form the orange. I'd rather the former. Just saying...

http://finance.yahoo.com/news/cisco-increases-quarterly-cash-dividend-231500984.html

Reality says

Austrians are quite explicitly against equilibrium theories. The Keynesians OTOH are quite fond of equilibria.

Some Austrians, like Mises, are critical to the point where you can say they reject general equilibrium. Others aren't. von Weiser spent a lifetime, and Hayek half his lifetime, working on their versions of Equilibrium. Hayek's version came to become Market Equilibrium, but it is heavily influenced by the classic concept of equilibrium.

robertoaribas says

as usual, you lack of intellectual ability interferes with the discussion.

YOU mad a universal statement: that everybody who bought was over their heads.

Bigsby says

He's not. You are though.

You made the statement about the past two years. I refuted it, and you came back with another anecdote about your property.

Let's see what happens when you sell.

Best of Luck.

What is interesting is that you are all in for Real Estate.

Let me see, I sold in 2005, 2006, and 2007, and again that prize of a property in Atlanta that I suppose you think we should have held onto.

The fact is that we had a global Real Estate market crash in 2007, I had my cash out, but I would have been an absolute moron to jump into a market I had already gotten out of.

I spent more time on my business which has done much better than you have with your portfolio.

and Bigby, if you have something to contribute, anything to say, then make some statements.

The discussion was about properties bought in the past two years. One of declines, the other of that great double digit price hikes we hear so much about.

If it's true, then we should all sell, and get into something much more profitable.

David Losh says

You made the statement about the past two years. I refuted it, and you came back with another anecdote about your property.

Let's see what happens when you sell.

Best of Luck.

Try re-reading the thread. You might be able to get your facts straight then.

David Losh says

The fact is that we had a global Real Estate market crash in 2007, I had my cash out, but I would have been an absolute moron to jump into a market I had already gotten out of.

What you do with your cash is your decision. Would you have been an absolute moron to do what Roberto did if you had been living in Phoenix? Come on, give an honest answer rather than trying to maintain your present narrative.

David Losh says

I spent more time on my business which has done much better than you have with your portfolio.

Another rather pointless and unproven statement. You seem to like doing that.

David Losh says

and Bigby, if you have something to contribute, anything to say, then make some statements.

And what are you doing except posting extraordinarily confused comments that seem to have a habit of contradicting themselves? Am I now not allowed to point out the problems with what you are saying?

David Losh says

The discussion was about properties bought in the past two years. One of declines, the other of that great double digit price hikes we hear so much about.

If it's true, then we should all sell, and get into something much more profitable.

Why? I'm not a landlord. I like my house. Why would I sell even if my house had seen substantial rises (which Monterey has not)? And that's not even beginning to touch on all the other factors that determine whether or not to sell.

Bigsby says

Would you have been an absolute moron to do what Roberto did if you had been living in Phoenix?

Yes, I would have been a moron to jump back into an investment that had just crashed, and is now poised to crash, again.

I don't believe in a crash, but I do think we will find an equilibrium that finds prices in Phoenix excessive.

I think $50K, or $26K for a condo in Phoenix is a fair price, as we saw in Atlanta.

The other thing is about rents. We had ten years of building that ignored apartment construction. We had a glut of construction Nationally, but now we have apartment development.

I never saw why people paid high rents. You can always move twenty minutes away, and pay less.

You don't like these broad statements because they contradict the other broad statements like Real Estate always goes up, it doesn't, rents don't always go up either.

We are in a whole new economy.

Now about this thread and the 50% low in Bay Area housing. That may be, but the premise is that some one is paying $4K per month in rent, and the house payment is $1952.

Now why is that? How is that happening? Seven hundred fifty thousand dollars in debt, plus the bank gets $250K of my hard earned money, and I save $24K per year on rent. Does that mean it takes me ten years to recoup my down payment?

So you think that some how, by magic, in those ten years we will have Real Estate appreciation of 2%, or will we be at those great double digit price hikes forever?

At 2% it's $20K so we get our down payment back in five years, or there abouts.

The actual return on investment is low, unless you have that rental income.

I personally don't think you have thought any of this through.

So I own my family home, and as soon as I can, I'll sell it, and move onto other things, but I'd be an absolute moron to buy into the Real Estate market place.

thunderlips11 says

Reality says

Austrians are quite explicitly against equilibrium theories. The Keynesians OTOH are quite fond of equilibria.

Some Austrians, like Mises, are critical to the point where you can say they reject general equilibrium. Others aren't. von Weiser spent a lifetime, and Hayek half his lifetime, working on their versions of Equilibrium. Hayek's version came to become Market Equilibrium, but it is heavily influenced by the classic concept of equilibrium.

So why did you single out Austrians for affinity for fanciful equilibrium when they are about the farthest removed from advocating equilibrium compared to almost all other schools of economic thoughts.

David Losh says

Yes, I would have been a moron to jump back into an investment that had just crashed, and is now poised to crash, again.

I don't believe in a crash, but I do think we will find an equilibrium that finds prices in Phoenix excessive.

You just can't make it up. What did I just say about you constantly contradicting yourself?

David Losh says

I think $50K, or $26K for a condo in Phoenix is a fair price, as we saw in Atlanta.

You think it's fair? Based on what? Seriously, how on earth can you make a comment like that?

David Losh says

You don't like these broad statements because they contradict the other broad statements like Real Estate always goes up, it doesn't, rents don't always go up either.

Complete nonsense. Who on here says RE always goes up? I don't like your broad statements because they aren't based on any kind of rational analysis of the situation. They are just you painting your imaginary picture.

David Losh says

Now why is that? How is that happening? Seven hundred fifty thousand dollars in debt, plus the bank gets $250K of my hard earned money, and I save $24K per year on rent. Does that mean it takes me ten years to recoup my down payment?

I wouldn't do what the original poster did, but that's me. I, however, can see what he's arguing and I can also see the pitfalls. If prices shoot up and he cashes out (as I think he said he was going to do), then he'll come out ahead and his 250k down and 24k savings a year would represent a pretty good use of money. And no, it doesn't mean it'll take 10 years to recoup his down payment. What are you talking about?
Investments are risky. Would you want to drop 250k in the stock market as it is now? Would you put it in RE? Buy gold..? Leave it in the bank? Each to their own.

David Losh says

So you think that some how, by magic, in those ten years we will have Real Estate appreciation of 2%, or will we be at those great double digit price hikes forever?

At 2% it's $20K so we get our down payment back in five years, or there abouts.

The actual return on investment is low, unless you have that rental income.

I personally don't think you have thought any of this through.

He's trying to take advantage of the current market. Of course the current double digit increases in certain house prices won't last forever. Who the hell is saying they will? But some areas are having them now and that's what certain people are trying to benefit from.
And what is low about Roberto's return on investment, for example? Any idiot can make up a figure and say 'look at this low return.' If the original poster's purchase goes up 2% a year and interest rates stay about the same, then in 10 years, he'll have saved the rental difference, pocketed 200k or so, and basically have done alright for himself. If circumstances change... And what about the actual returns of Roberto's investments, the ones you constantly attack? If he sold right now, which he clearly could easily do, he would make a fantastic return on his investment in just 2 years, or are you really arguing otherwise?

Bigsby says

And what about the actual returns of Roberto's investments, the ones you constantly attack?

Let me stop you there, because Roberto attacks every one who disagrees with him. He folows many of the threads to interfer with discussions that are contrary to his Real Estate investment strategy.

You should follow all of the threads that Roberto has commented on.

Roberto insults any one who brings real data to the table with his own anecdotes about his personal residential housing investments.

I personaly applaud Robertos accomplishments, and he is starting to come around to the idea of cashing out, because I think, according to what I read, that 2014 will be about the end of the government propping up the housing market.

As an example the article yesterday about Fannie Mae turning a profit: http://www.cnbc.com/id/100610000

Roberto doesn't like the fact that my wife, and I own a cleaning company, and that is where I chose to put my money.

Most of my buddies, and family made fun of me for my choice, because we did pretty well buying, and selling properties. I recovered my lost income within a year, and have built larger profits every year since. Last year we had 30% growth, and project the same this year.

Yesterday I hired back one of my regular laborers because the demand for preparing properties for sale is growing. We have two trucks that we haven't used in three years, because our income from cleaning has been high.

You see, Roberto doesn't like that because it's contrary to his investment strategy, or lack of strategy. Roberto says he didn't see the rapid price increases coming.

As far as your analysis of the above presented buy in to save on rent, you don't pocket $200K, you recover your down payment. It was your money to begin with.

David Losh says

Let me stop you there, because Roberto attacks every one who disagrees with him. He folows many of the threads to interfer with discussions that are contrary to his Real Estate investment strategy.

I know he does, but that wasn't what I was discussing.

David Losh says

I personaly applaud Robertos accomplishments, and he is starting to come around to the idea of cashing out, because I think, according to what I read, that 2014 will be about the end of the government propping up the housing market.

This is another example of how you contradict yourself. I've seen you post this kind of comment before, and then in the same breath state how the bottom will drop out of the market and he'll be screwed. Make up your mind.

David Losh says

Roberto doesn't like the fact that my wife, and I own a cleaning company, and that is where I chose to put my money.

Most of my buddies, and family made fun of me for my choice, because we did pretty well buying, and selling properties. I recovered my lost income within a year, and have built larger profits every year since. Last year we had 30% growth, and project the same this year.

You don't have to prove yourself to me. Your job is your job. All jobs are important to someone otherwise they wouldn't exist. Roberto's belittling of what you do simply reflects badly on him, so why concern yourself about it?

David Losh says

Yesterday I hired back one of my regular laborers because the demand for preparing properties for sale is growing. We have two trucks that we haven't used in three years, because our income from cleaning has been high.

You see, Roberto doesn't like that because it's contrary to his investment strategy, or lack of strategy. Roberto says he didn't see the rapid price increases coming.

Your market place isn't of much relevance to someone not living there. If more houses are going on the market where you live, how exactly is that contrary to his investment strategy? He's already said he's finished buying. And last I heard, he wasn't buying where you lived anyway.
And who did see such rapid price increases coming? He believed there would be increases of some kind, invested accordingly and has done very well. You seem to accept that in some of your posts and then say the exact opposite in others.

David Losh says

As far as your analysis of the above presented buy in to save on rent, you don't pocket $200K, you recover your down payment. It was your money to begin with.

What are you talking about? If prices rise 10% a year for two years, he'll walk away with that increase minus expenses AND his down payment.

Bigsby says

What are you talking about? If prices rise 10% a year for two years, he'll walk away with that increase minus expenses AND his down payment.

Expenses can be a pig! Maintanence, Insurance, Property tax, easements (if you are a condo), interest on the over-inflated price, necessary renovation that don't increase the house value at all, lawyer fees when your financial distress leads to a divorce, huge university costs because your kids see their parents indebted for life and they want something better, etc. etc.

Rent= problems are just a phone call to the landlord saying "Fix it"! ;)

RentingForHalfTheCost says

Expenses can be a pig! Maintanence, Insurance, Property tax, easements (if you are a condo), interest on the over-inflated price, necessary renovation that don't increase the house value at all, lawyer fees when your financial distress leads to a divorce, huge university costs because your kids see their parents indebted for life and they want something better, etc. etc.

Rent= problems are just a phone call to the landlord saying "Fix it"! ;)

And how much of that is relevant to the original poster, who is looking at a relatively quick turn around? if the price rises continue for another year or two, then he can sell and will be well ahead. That's the risk he's taking. And total expenses, including property tax etc... would still come out less than if he was paying 4k rent. That was one of the main points of his original post, was it not?

Part of total expenses is closing costs from the initial purchase plus later the selling commissions. A lot of money--especially on a $1mill purchase--flushed down the crapper for only a couple years' tenancy.

Makes you wonder why you need a $1mill house if you know you are only living in it for that short of a term.

Philistine says

Part of total expenses is closing costs from the initial purchase plus later the selling commissions. A lot of money--especially on a $1mill purchase--flushed down the crapper for only a couple years' tenancy.

Makes you wonder why you need a $1mill house if you know you are only living in it for that short of a term.

Hardly flushed down the crapper if his purchase sees a substantial short-term increase in value. That's what he's hoping for, and he may well be in luck.

Bigsby says

And how much of that is relevant to the original poster, who is looking at a relatively quick turn around? if the price rises continue for another year or two, then he can sell and will be well ahead. That's the risk he's taking. And total expenses, including property tax etc... would still come out less than if he was paying 4k rent. That was one of the main points of his original post, was it not?

No way it comes out less than the cost of a 1M dollar home. 4K a month is a steal for such a home. The OP is not doing the math properly. He is ignoring the opportunity cost on the downpayment, under-estimating maintance, insurance, realtor fees, closing costs, etc. The real math looks pretty ugly. Don't fall into the hype of this market, it can bite you in the ass. It really is a game of musical chairs. Don't believe me, then look at the prices of homes in Tahoe at this time. You can pick up a 3/2 right at the ski hill for 200K. First time I can ever remember that this can be done. People are broke. Credit is all they have, and relying on that for your income is more than just being risky. It is downright foolish IMHO.

Bigsby says

That's what he's hoping for, and he may well be in luck.

Hope doesn't pay the bills. It is a good way to bankruptcy. Work pays the bills.

RentingForHalfTheCost says

Bigsby says

That's what he's hoping for, and he may well be in luck.

Hope doesn't pay the bills. It is a good way to bankruptcy. Work pays the bills.

It sounds like he's perfectly capable of paying his bills, so what is your point?

RentingForHalfTheCost says

No way it comes out less than the cost of a 1M dollar home. 4K a month is a steal for such a home.

?

RentingForHalfTheCost says

The OP is not doing the math properly. He is ignoring the opportunity cost on the downpayment, under-estimating maintance, insurance, realtor fees, closing costs, etc. The real math looks pretty ugly. Don't fall into the hype of this market, it can bite you in the ass. It really is a game of musical chairs. Don't believe me, then look at the prices of homes in Tahoe at this time. You can pick up a 3/2 right at the ski hill for 200K. First time I can ever remember that this can be done. People are broke. Credit is all they have, and relying on that for your income is more than just being risky. It is downright foolish IMHO.

It's not something I would do, but then I don't invest in RE. But anyway, I rather doubt he has ignored all the additional costs, and I suspect that as long as the house was in a decent enough state when purchased, that maintenance costs could well be pretty minimal in the short-term, which is, after all, what he is looking at. It's his risk, and like I said, it doesn't look too bad for him so far.
And some people are broke, but broke people don't tend to buy $1m homes.

I was perfectly happy renting an apartment when house prices went down yearly from 06 to 2009 or 10.

If you are renting and watching prices rise in the double digits for years on end that will make you crazy and poorer than if you rode the home equity train up the hill.

Its all risky. Ben is inflating both stocks and RE with all this printing/mbs buying so I guess both are good bets at the moment. I fuking hate stocks and all publicly traded companies with their overpaid CEO's and mega bonuses - so I choose to live in a big house as my speculative investment instead. If prices tank I'm ok, if they go up im more than OK.

Buying a house is a pretty good move to keep up with inflation mostly.(and by inflation i mean house price inflation!)

PockyClipsNow says

Its all risky. Ben is inflating both stocks and RE with all this printing/mbs
buying so I guess both are good bets at the moment. I fuking hate stocks and all
publicly traded companies with their overpaid CEO's and mega bonuses - so I
choose to live in a big house as my speculative investment instead. If prices
tank I'm ok, if they go up im more than OK.

Buying a house is a pretty good move to keep up with inflation mostly.(and by
inflation i mean house price inflation!)

I think your strategy is alright. I don't hate stock but pretty sure I am not good at trading it.

I would definitely do it similarly if I were in CA except less down payment.

David Losh says

This is another example of how you contradict yourself. I've seen you post this kind of comment before, and then in the same breath state how the bottom will drop out of the market and he'll be screwed.

You seem like a nice person, and thank you for taking the time to engage me in this way.

I'm an old time investor in Real Estate. I did see prices climbing after the tax credit, and continued to think they would until interest rates dropped by 1% in one year. That was a red flag that things won't last.

My thinking about holding Real Estate, or even short term investment, which I have done, changed over time.

I don't predict a crash of Real Estate pricing, but I think it can decline substantially.

The example Roberto keeps throwing at me is that we, a trust, sold a condo in Atlanta that was purchased in 1986 for $60K. We were only able to get $30K when we sold it in 2011?

I have never seen anything like that before. Purchased in 1986, and sold 25 years later for half the price?

The point of that is that the Real Estate market place is volatile right now, but I think it will equalize. I think prices of property will go down.

I think we will see deflation.

OK, the term deflation was never on my radar before I started reading blogs like this. However I met a guy who made a compelling argument for deflation, and it sure looks like he is right.

I come here to learn. What bothers me is having this one note noise about a specific Real Estate system. It interferes with what I consider constructive discussion.

David Losh says

I come here to learn. What bothers me is having this one note noise about a
specific Real Estate system. It interferes with what I consider constructive
discussion.

I do too and have learned a lot !

Call my paranoid if you want, I think there is the possibility of paid internet shills infilterating this site, using persuasive techniques to try and alter viewpoints. I don't think the NAR is broke, other monied interests would be happy to pay some dumb shill to post comments.

Adding to this, think about how off the wall some of the comments are, like a 4 page fact filled acticle from the New York Times and a response comes up: "100 Percent Wrong"

Golly, if the New York Times is 100% wrong, I don't even know what to say.

If anyone wants to pay me to post please PM me! lol

I have a degree in Dumbshillery with an emphasis on Oververbosity.

David Losh says

The point of that is that the Real Estate market place is volatile right now, but I think it will equalize. I think prices of property will go down.

I think we will see deflation.

If it didnt go down, it would be the first time in recent history going back a couple decades which diverged beyond inflation and incomes. We had not had that happen since 1945, and there is no comparison to then vs now. Especially in SFBA. A further correction downwards is necessary.

Bigsby says

RentingForHalfTheCost says

Bigsby says

That's what he's hoping for, and he may well be in luck.

Hope doesn't pay the bills. It is a good way to bankruptcy. Work pays the bills.

It sounds like he's perfectly capable of paying his bills, so what is your point?

Point is that RE investing in the SFBA right now is more than risky. You could lose all your investment and then have to listen to thousands of people in mainstream media say they saw it coming. If people have the money to lose, then good for them. I am more of a capital preservationist I guess.

Bigsby says

No way it comes out less than the cost of a 1M dollar home. 4K a month is a steal for such a home.

?

4K/mth is way cheaper than owning a 1million dollar home in the SFBA. No confusion needed. Run the math. 11K just in property taxes, these goes 3 months rent right there. Oh, and then the interest on 1Million. Let me write it out so you see what that value is 1,000,000. Even at 3% that runs you 30K/yr. There is another 8 months. We haven't even factored in the good stuff like the realtor thievery, closing costs, upkeep, insurance, etc. etc. Not even close.

It only makes sense to own when prices are going up, the 300k I expect to make is giving me koolaid eyes (red punch flavor the best one!).

No one can refute the fact that if prices are going up double digit, you want to be sitting on that asset.

PockyClipsNow says

It only makes sense to own when prices are going up, the 300k I expect to make is giving me koolaid eyes (red punch flavor the best one!).

No one can refute the fact that if prices are going up double digit, you want to be sitting on that asset.

You also want to make sure to unload said "asset" before it turns into a liability. What are your triggers for deciding to sell?

Well I got two triggers:
#1 fat profit = sell
#2 fat profit + tax free sale after owning it 2 years = sell

I've been lucky with this 'sell when you get a fat profit' strategy. I learned it watching many many people get burned on stock options during the dot com bubble who had a few mill, then not so much a year later....

coastal cali is easily 60 to 90% land value. the value sure isnt in the 1962 crap shack.

RentingForHalfTheCost says

Bigsby says

No way it comes out less than the cost of a 1M dollar home. 4K a month is a steal for such a home.

?

4K/mth is way cheaper than owning a 1million dollar home in the SFBA. No confusion needed. Run the math. 11K just in property taxes, these goes 3 months rent right there. Oh, and then the interest on 1Million. Let me write it out so you see what that value is 1,000,000. Even at 3% that runs you 30K/yr. There is another 8 months. We haven't even factored in the good stuff like the realtor thievery, closing costs, upkeep, insurance, etc. etc. Not even close.

And that's not what he's doing, so why is your point relevant to this example? What he is doing is cheaper than paying 4k a month.

chanakya4773 says

This is true in most places in US except some areas where the value of the house is land value and not build value. If your home value is primarily the building itself, there is no way you can sell it to someone for more than what a builder is able it build and sell it for.

If house prices go well over cost of build plus land, builders immediately adjust new house prices accordingly. Instead of taking a typical 15% profit, don’t mind to take a 100% or more. Builder will never disclose to you how much his break-even price is.

We are one if the few outliers in our friends that haven't bought considering our age and income. But, maybe, it is bcos we can't resonate with your so-called net worth idea, we evaluate our living standard by how freely we could enjoy ourselves with *liquid* money, not so much on checking the zen estimate how much your net worth is ..... And, making money is just a means to an end, not the end.

And, we rent not because we can't afford, but because when we buy Lexus, we expect Lexus, not Toyota corolla in disguise. Our rent is only $2400. Buying a house of equivalent mortgage is probably a 800k house at San Jose, for those types of houses, we rather rent, we can treat rents as money spent at hotel during vacation except much better deal. At house that would make us move probably cost twice as much. We even consider 500k down for those houses, but then, why?! We might be able to have early retirement elsewhere.

PockyClipsNow says

Somehow I have met a very large number of people with net worth > 1m from real estate.

At the same time, almost no one who rents and has a stock portfolio over 1m. I'm sure they are out there.

Clearly the fed inflates everything, although unequally and haphazard, timing is tough.

chanakya4773 says

If your logic was right, our entire world of capitalism is a myth.

Welcome home. You are pretty close to reality.

chanakya4773 says

The builders are not able to bring down prices yet because they are not able to produce enough units yet because its a slow process. once the machine goes full throttle, you will see capitalism at work.

Indeed this works but only in markets were number of units to be build have no limits. However in many areas e.g. SFBA, municipalities have limits per year, banks also control situation with builders credits to avoid get burst when suddenly prices go south.

SparrowBell says

And, we rent not because we can't afford, but because when we buy Lexus, we expect Lexus, not Toyota corolla in disguise. Our rent is only $2400. Buying a house of equivalent mortgage is probably a 800k house at San Jose, for those types of houses, we rather rent, we can treat rents as money spent at hotel during vacation except much better deal. At house that would make us move probably cost twice as much. We even consider 500k down for those houses, but then, why?! We might be able to have early retirement elsewhere.

I am a 100% with you.
Additionally, while waiting for retirement, I am buying properties outside of CA where rent/price ratio works great and enjoy by avg. 25% ROI today.

I see some misunderstanding in land value.
Developer usually do not start to build until can achieve land value to construction costs ratio 20/80. How it is done? In country side we have single family houses siting on very large plots of land. When we go to more dense area, building plot is subdivided on tiny lots and two or three story townhouses are building. Same is true for Manhattan, where lots cost in 10s of millions, so the only way to achieve this ratio is to build condos as high as can be permitted.
You can find this relation on county tax assessment; land plus improvement of new houses. As time elapse, land portion of your assessment balloons, while improvements not so fast. Obviously in desirable areas land portion appreciate much faster than in rural areas.

The construction cost portion is a perfect example of inflation tracker. Wood, plywood, sheetrock, screws, paint, are all staples plus labor wages, all goes with inflation.

Theoretically; if High Tech comp. move to TX, Cupertino houses will drop 80%.