patrick.net

Zephyr says:
When the bottom arrives I will be helping people escape the disasterous real estate market by purchasing property from them.

Zephyr, what kind of properties will you buy, in which market?

However, when all the shit hits the fan, many of those lenders who got into the market just because of the boom will probably be filling out applications at starbucks and I will have no sympathy for them.

Girgl, For three decades I have been buying mostly Single Family Homes near the beach in major urban areas that have good weather.

For the future... Where the baby boomers migrate, the prices will rise faster than average.

Pop, It does seem that realtors are overpaid. But keep in mind that the commission gets split four ways, and the agent spends a lot of time on people and deals that they do not get.

The average real estate agent does not really make much money. But, some agents do make a lot of money. It is one of those occupations where most participants earn very little and a minority do really well.

I have a friend who’s lived in the Silicon Valley for 30 years. She’s not in a technical profession, and honestly thinks every single software engineer in the valley makes millions now or will make millions later.

Wrong.....Software Engineers are being outsourced every day....their days are numbered! She doesn't know much about the Software profession.

She also believes honestly that real estate in the valley will always go up, if only for that reason. She will advise you to buy now, and that has nothing to do with deliberately sucker you into something to make her some money.

No disrespect, but she doesn't seem to bright to me.

If she had the money, she’d buy herself.

She doesn't need money.....there are plenty of lenders out there who will gladly give her a 110% IO loan......even if she works at starbucks serving mocha-chinos........If she truely believes that it will keep going up, then she can't lose with these loans!Hell, if I believed that it can only go up, I would jump at these loans a long time ago....it would be a can't possibly lose situation!........but it's just not true and anyone who believes this is not too bright....but its good that she thinks she can't buy, it will prevent her from joining the group of lemmings that are marching off the cliff as we speak!

I do believe that real estate commissions are generally too high.

allah writes:
No disrespect, but she doesn’t seem to bright to me.

I think she's ok brightness-wise, just very very naive and optimistic. She wants to believe that only good things happen. And she does.
Sometimes, I want to be more like her :-)

Kherson, No thanks. I believe that the condo market in Florida is going to experience one of the morst price declines as all the inventory swamps the demand.

I think she’s ok brightness-wise, just very very naive and optimistic. She wants to believe that only good things happen. And she does.

The younger generation being completely priced out of the market is a good thing? I know the market is going to fall....and I look at that as being a good thing. Believing that when my children grow up, they will able to buy a house near me (or anywhere for that matter).

on that same note....people who own a house like to believe in what is good for themselves or at least let other people believe that they believe (self denial)....so naturally they will say that it will only go up (even if they truely don't believe it themselves). I am the only one in my family that hasn't bought a house....fortunatly my siblings have bought way before the big boom. They like to believe RE will at least hold its value and they do get aggrevated when I talk about an RE crash because they have found alot of the things I have said in the past have happened (such as the stock crash).....So I try not to bring these things up, but sometimes someone else usually does like on Thanksgiving. :)

Allah, There is hope. No generation will be priced out, other than on a temporary cyclical basis. I remember 30 years ago people were saying that young people would forever be priced out of the market. Then the cycle shifted. It happens about once every 10 years or so.

It is true that some locations will become permanently too expensive for the average buyer, but there will always be other housing that most people can buy at some point in the cycle. Right now is a very difficult point in the cycle. However, it will not stay like this. 70% of US households own their home today – a number that has steadily increased over the last 50 years. This would not be the case if people could be permanently priced out.

Most of the people who owned homes 50 years ago are dead now. The current owners are the young people who were thought to be forever priced out of the market.

Kherson, Yes, the Florida Condo market is already overbuilt, and they are still building like crazy. It will get really ugly.

Allah, There is hope. No generation will be priced out, other than on a temporary cyclical basis. I remember 30 years ago people were saying that young people would forever be priced out of the market. Then the cycle shifted. It happens about once every 10 years or so.

Of course Zephyr, do you think I had any doubts :) , I was just explaining how my view is more optimistic. I know RE will crash....make no mistake about that.....and it is for this reason that it is illogical to say that it only goes up.....and like I say, that 70% ownership rate is flawed. Many people who bought will realize when they are underwater that they don't own the house, but rather the house owns them...and their only way out of that slavery is to run away from it and leave it to foreclosure.

Sometimes we become slaves to everything we have.

I realize that you expect a crash, and a better time to buy.

With or without a crash the market must ultimately return to better balance. It is much easier to be patient when one has confidence that the cycle will come around again.

Nobody has missed the last train. However, the scedule will be a little sparse for a while.

70% of US households own their home today – a number that has steadily increased over the last 50 years.

70% of US households have a mortgage on their home. I would hardly call the I/O loans so prevalent here in the Bay Area "ownership".

I admire your analytic nature Zephyr, but I can't help but think you are being a bit disingenuous about the motivations of a good many realtors and lenders right now. Of course, I am one of those "young people", so perhaps I'm not in a good position to have a disinterested opinion.

Have I mentioned my "Baby boomers (and U.N. and trilateral commission) conspire to put Gen X in perpetual debt slavery" theory? I can get quite wild eyed while talking about it. To the point that I will stoop to reading "The Nation" on the topic!

Cheers,
prat

Or, heaven forfend!, the village voice:

http://tinyurl.com/7b7wc

_smile_

Cheers,
prat

Their motivations are to make money.

I do not see what you are getting at with your claim that I am being disingenuous. My comments are honest and sincere.

Zephyr says:
Most of the people who owned homes 50 years ago are dead now. The current owners are the young people who were thought to be forever priced out of the market.

Exactly. The fact that life expectancy has been and is still growing is an additional constraint on supply these days.
There are lots of people living in my area who moved into their homes in the 60s, when the area grew like crazy. These guys are in their late 70s and early 80s now, and most are remarkably healthy. However, these people, sad as it may be, will start joining their ancestors in the foreseeable future and create a little supply bump. And it seems that this will coincide with not so good times in the real estate market.

I still fear that some day, the Silicon Valley market will look like Detroit's today. Tons of pretty nice houses built in the 20s and 30s, and expensive at the time, really cheap now. That'll be a while, though.

Prat, It would take an amazingly competent group to secretly conspire in such large numbers. Power brokers secretly conspire, but a whole generation is incapable of such.

Besides the truth is that the Boomer generation has been the most debt ridden generation in history. So if it is a conspiracy, it is the boomers who are the target, and the Gen Xers are just getting hit with the stray bullets.

Girgl, Some areas will end up like Detroit, while others will end up like Beverly Hills.

Excellent article prat...I especially agree with the part:

"The next generation is starting their economic race 50 yards behind the starting line," says Elizabeth Warren, a Harvard Law School professor and author of The Two-Income Trap. "They've got to pay off the equivalent of one full mortgage before they make it to flat broke, in order to pay for their education. They can never get ahead of the game, because they're constantly trying to play catch-up.

"And once you've got accumulated debt, the debt takes on a life of its own. It demands to be fed, and it takes that first bite out of the paycheck. And it means the opportunity to accumulate a little, to get a little ahead, to maybe put together a down payment—it's just never there. It's just staggering to me that this is not a part of our national debate right now."

Zephyr says:
Girgl, Some areas will end up like Detroit, while others will end up like Beverly Hills.

I take it that means it's better to buy in a better (more expensive) area when the time comes?

Zephyr says:
Allah, There is hope. No generation will be priced out, other than on a temporary cyclical basis. I remember 30 years ago people were saying that young people would forever be priced out of the market. Then the cycle shifted. It happens about once every 10 years or so.

Even though it may be temporary, it's still painful, especially if it lasts 10+ years. Who wants to buy a starter home at age 45?

Girgl, "I take it that means it’s better to buy in a better (more expensive) area when the time comes?"

Yes, but the point of my comment is that some newer expensive areas will eventually decline like Detroit while others will continue to thrive.

Zephyr says:
70% of US households have a mortgage on their home. I would hardly call the I/O loans so prevalent here in the Bay Area “ownership”.

That is not what it says here. Looks to me like they are used mostly in the bay area....at least they were before the bubble popped.

[snip]
Two out of three Bay Area home buyers are choosing interest-only loans, and some experts warn that the popularity of the controversial form of mortgage debt is a sign that the overheated housing market is boiling over.

Girgl, The whole cycle typically lasts 10 years. The decline in prices usually occurs over a period of about three years. So the wait for better affordability should only be about three years from the very top of the cycle. During the 1990s it was six years. That was a major aberration from historical norms.

opps, Sorry I misinterpreted what prat had said....never mind Zephyr.

RealityBased says:
Blind greed and ignorance must eventually suffer. After being locked of the real estate market due to the combination of poor timing + a modicum of personal financial responsibility, I find that I have an insatiable appetite for the post-bubble sob stories that are coming.

Heh. I look forward to those, too.
Except the ones from folks who were never arrogant and greedy, but rather just naive or scared, and who are royally screwed nevertheless.

On the other hand, no one will admit to having been arrogant and greedy when the shit hits the fan :-)

On the other hand, no one will admit to having been arrogant and greedy when the shit hits the fan

No, but the stains from being hit by a flying turd will be there for everyone to see and to remind them of the stupid mistakes they have made. :lol:

Zephyr says:
Yes, but the point of my comment is that some newer expensive areas will eventually decline like Detroit while others will continue to thrive.

In your opinion, what characterizes an area that is more likely to thrive?

Lending normally becomes more liberal as the cycle progresses toward the peak. Lenders become increasingly optimistic as values rise and loan profits seem easier and less risky. This effect has been stronger during the current cycle than during past cycles.

Interest only loans and negative amortization loans are not new, but they are more widely used than before.

Prat, It would take an amazingly competent group to secretly conspire in such large numbers.

I know. I'm just kidding, my friend.

Cheers,
prat

Girgl, An area should thrive if it has a sustainable economic base that generates good paying jobs (in addition to the low paying jobs that are everywhere). Alternatively, the real estate can do well if the area is a preferred destination for people who have lots of money. If an area has both, even better.

Prat, Sorry. I missed that you were joking.

Girgl, Detroit should have been sustainable, but the big auto makers got complacent and built themselves into cost structures that could not be sustained.

Interest only loans and negative amortization loans are not new, but they are more widely used than before.

If you disregard their use during the great depression, Interest only loans are new as for the past 5 years....and none of these products have been time tested...and being that they are more risky, there is obviously much more likely that they will fail. When the dust settles after mass foreclosures, these loans will never be used again.

Zephyr says:
Girgl, An area should thrive if it has a sustainable economic base that generates good paying jobs (in addition to the low paying jobs that are everywhere). Alternatively, the real estate can do well if the area is a preferred destination for people who have lots of money. If an area has both, even better.

That would be the SF Bay Area, IMHO. Oh goody :-)

It’s not easy selling real estate.

...but in the same post you said: The proper attitude is this: the house sells itself.

There is no marketing strategy, no sales pitch or seller’s concession that is ever going to change the fact that she’s not going to buy the house.

This is not true.....people are talked into buying real estate all the time. You act as if there are no dishonest people in the business....almost as if you are sticking up for everyone in the business. There are dishonest people in all occupations....but some occupations are more prone to attracting dishonest people...especially salesmen, and realtors are salesmen!

Scott, you never answered my question "Is it ever a bad time to buy?" yes or no?