By Peter P
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2006 Jan 2, 6:15am
19,990 views 214 comments
Let's try again.
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The article "So many Lenders, So few Borrowers" said it all for me. For the bigger more diversified institutions the "retrenchment" means laying off a "few" people in their Mort. Dept.". No big, happens every day at the Bank. For the "niche" houses where their sole source of revenue is cranking out mortgages this downturn WILL be devastating! In the authors opinion the industry is overbuilt on a grand scale, "like a V-8 engine stuffed into a tiny ford focus".
SQT, another article cautioned buyers about being duped by stale comps! I've kept wondering where some bulls have drawn their faulty conclusions from and now I have "the rest of the story". If nothing in your area/price range has sold for gee, let's see now, 2, 4 or 6 mos. then the seller is leveraging ANCIENT history to bail them out! It just strikes me funny that bulls, doggedly defending outrageous run ups in prices by whatever means available refuse to acknowledge stale comps on the way down!
Just for example; if you, (soon to be John and Jill McMansion homedebtor) were to tell an agent a year ago "on the way up" that homes in this area where only selling for 999K just 6 WEEKS ago the agent would have laughed in your face and kicked you to the curb!
This cuts both ways people! If an agent were to tell me, "Homes in this area are going for 999K" I would want to know exactly what their definition of "going for" was! Going for 999K on what, Ebay, Craigslist, Wish List? Agents are leveraging the fact that most people do what they're told (although not here) and the ones that don't have lost the art of haggling generations ago. Like I'm afraid of being blacklisted!
"Excellent links Patrick is putting on here, I hope everyone is reading them all like I am. Good stuff!" -- Sunnyvale Renter
Yes indeed, and just a reminder: if anyone finds a good recent article that is not on there you can/should e-mail the link to Patrick and he will post it on there if it is deemed worthy. As he says right above the link list:
"Comments? Mail email@example.com. Please send me good links about the housing bubble and I'll include them here. I prefer links that do not require any registration."
Any credible argumets here?
If this is the "Investor Elite" I'm glad I hang out in the peanut gallery. "December 30th 2005 is the worst it's going to get". "Lending standards will get EVEN looser still". I could go on and (hasn't someone posted this link before?) This isn't Feliz Chuck again is it? Small matter. I tend not to place any credibility on an article written by some guy called "Ninja K".
I've always been told that if you're going to commit a crime plan it from the witness stand backwards. If I did (God forbid) take this "anger stage" tirade with even a grain of salt and place client assets at risk based on it I suppose I could always tell the Judge that I based my research on a guy called Ninja K. This way my atty. could fall back on an insanity plea, skip the sentencing phase and have me fitted for a straight jacket Ninja K.
No, I had that link forwarded to me by (surprise!) a Realtor neighbor.
The only thing I thought compelling was the argument on interest rates - will they be going back down again over the next 5 years?
Despite having been around this and other HB blogs for a while, you still seem to be under the mistaken impression that current RE trends are permanent and sustainable (either that or you're trying to get a rise out of somebody ;-) ?). Anyhow, the endless discussions over the past year about PE ratios, mean-reversion, affordability, GSEs, interest rates, M3, etc. indicates that the days of $50-100K a year increases and serial IO refinancing is quickly drawing to an end.
Unless practically everyone here and a zillion economists are flat out wrong and the "paradigm shift" is real, you don't need to worry about your kids not being able to ever afford to buy. Asset bubbles eventually always correct, and the rug (easy credit) is being pulled out from this one as we speak. Barring some unforseen economic catastrophe, the correction will probably play out in slow motion over many painful years --this is the "sticky" nature of real estate market. Some of the gains will be given back in nominal price drops, the rest eroded by inflation, but revert to the mean they will.
Patience will be rewarded.
True. Maybe I jumped the gun a bit. IF China actually moves in that direction it should cause some instabilityâ€¦weâ€™ll see.
Gold is now at 541.5!
Looks like people do not trade much overnight even with news. The market is not really that efficient then. Now we know what we need to do next time. ;)
Michael, you were right!
Gold will soon retest its 12/12 high.
How much does housing have to keep going up before prospective homebuyers see IO loans as unattractive due to the increasingly higher monthly payments?
IO loans are no longer attractive. It is so 2004 anyway.
Option ARM is prime choice for those who want to commit financial suicide.
Gold resumes bull run as dollar falls - MarketWatch, Jan 06, 2006 10:59
Gold jumps two percent in Europe - Reuters, Jan 06, 2006 11:04
Gold Heads for Second Weekly Gain on Comex as Funds Increase Investment - Bloomberg, Jan 06, 2006 14:41
Gold closes up over 4% for the week as the dollar dips - MarketWatch, Jan 06, 2006 14:41
Gold futures top $540 as dollar dips; China diversifies - MarketWatch, Jan 06, 2006 14:26
Gold futures gain over $22 an ounce for the week - MarketWatch, Jan 06, 2006 14:08
Dollar Mixed, Gold Rises in Europe - Yahoo Finance, Jan 06, 2006 13:54
Gold up $13.50 as of now. Not $20+ but a little run nonetheless...
(Can't type much, I'm at work)
The FED really can't lower rates from here, we've become so dependent on overseas investment as is. If rates of return were any less appealing investors (institutional) would flee for the exits. It's a RE Bull fanatsy. Besides, returning to a "free money" policy would be counterproductive to the balance of GDP (non-real estate investments). They've gotten about as much mileage out of RE as the FED is going to get. We can't continue to be THE UNITED STATES OF REAL ESTATE any longer.
I think the Santa Cruz and Marin areas might be shielded from the bubble burst.
At least at this point, I'm seeing Sonoma and Marin markets flattening quicker than the peninsula (Palo Alto, San Mateo, Belmont, etc.). DOM appear to be much shorter down there. Then, add the recent damage from the storms here, and I can't see how that will help buyer interest come Spring.
I have friends who live in Napa and they werenâ€™t trippin out about it. Napa is nothing to worry about.
Seattledude--you were there, as in living there--or visiting? Perhaps a local like Moonvalley can chime in. I happen to live on the water in Marin, through all the storms, and I've seen firsthand the local damage in San Anselmo, Mill Valley, Ross, etc.
Napa is also an area the governor happened to visit, and qualify for state assistance. Whether or not your particular home was flooded, the scenes of Napa, Sonoma, and even Marin flooding might make an impression on some buyers. At least: smart buyers are going to make damn sure any home they buy won't be in an area that floods. That's going to make creek/river/floodplain homes in Napa, Sonoma, Healdsburg, Guernville, Sebastopol, etc. little less desireable--unless the buyer is totally clueless.
The way I look at it is that the flooding is just one more thing. In an already weakening market, it gives buyers one more reason not to buy.
Agreed, that's basically the original gist of my post: it won't help sales in these areas.
Would you rather put a large amount down 50- 75% on a home or invest it.
220K on a 380K home for example.
Iâ€™ve heard that it is foolish to put large amounts of money down. I think that it is wise to put a large amount down because you will save a ton of money in interest and you will pay off your house sooner.
IMO, it should be fine if the downpayment represents less than 50% of your *liquid* net worth.
lots of nice white people
Come on now, is color really the determining factor if someone is nice? I think nice people are just nice people, color isn't part of the equation.
Since there are so many smart people on this blog, I would like to ask your opinionsâ€¦
Boy, you haven't been around here long, have you? :lol:
I hate to sound waffle-ish, but I'd have to say it all depends. Large down payments reduces principal, and therefore also reduces total interest payed over the life of the mortgage. However, there are other factors that are just as (or more) critical in determining how much interest you pay, such as:
--sale price (which may be grossly inflated at present time)
--interest rate (for ARMs & option ARMs, this varies and is impossible to predict)
--length of loan (15, 30, 40-years)
Is the area a major bubble/speculation infested region (CA, NW, NV, NE, FL, etc.)? If so, I'd avoid buying right now, PERIOD. Whether or not your purchasing mostly using someone else's money (small down) or your own (high down), odds are you're going to end up upside-down if you buy right now. Either way, when you pay too much for an asset, you risk ending up with less (or negative) equity and higher payments. Much better to wait until the PE ratio (monthly estimated rent vs. monthly ownership costs) approaches even money before even thinking about it.
One of the best ways to save money on mortgage interest at ANY time, bubble or bust, is to shorten the term. Choosing a 15 over a traditional 30-year means somewhat higher monthly payments, but also means you are repaying principal much faster and less total interest.
Of course being of a group with more civil rights is good, whites donâ€™t dare be mean to you due to your greater level of civil rights.
I'm sorry but I really don't understand what you are trying to say? Perhaps you could think a bit more clearly without the pointy white hat obscuring your view. If I've offened you in any way Mr. Duke, I apoligize. It's just that my landlord will confiscate my deposit if another cross gets burned in my front yard.
Also keep in mind that many of those who say that using a large down payment is "foolish" are: (a) RE industry cheerleaders or (b) convinced that their investments will always return more than they are/will be paying in mortgage interest. This is an optimistic assumption at best. Today, it's very difficult to find any relatively conservative investment that consistently returns more than, say 6-7%. Gold is way up this year and climbing, but there's no guarantee it will stay up indefinitely.
One of my favorite quotes (from Need 2 Leave CA): Those that understand interest, earn it. Those that donâ€™t, pay it. That sums up our homedebtor sheeple.
Iâ€™m sorry but I really donâ€™t understand what you are trying to say? Perhaps you could think a bit more clearly without the pointy white hat obscuring your view. If Iâ€™ve offened you in any way Mr. Duke, I apoligize. Itâ€™s just that my landlord will confiscate my deposit if another cross gets burned in my front yard.
:lol: :lol: :lol:
Also keep in mind that many of those who say that using a large down payment is â€œfoolishâ€ are: (a) RE industry cheerleaders or (b) convinced that their investments will always return more than they are/will be paying in mortgage interest.
They will probably say, if you can put 60% down for a house, why not put 10% down each for 6 houses?
"With things going up 50, 100k a year in places with no end in sight, are your kids ever going to be able to afford a house someday?"
Yes. Since housing goes up $100K a year forever, it doesn't matter where you get on board or when. You will be rich beyond belief and be able to afford those 72 virgins in no time.
For instance, zero income, 400 FICO score? You can still get a hundred grand loan and buy ten houses with 10k down on each. After a year, you can sell 'em. You WILL make a million and pocket $700k in equity after commissions, taxes, etc.
Here's the math. It's simple: 10 houses X $100k per year equity = $1M
Pay beck the 100k loan & taxes, etc. & pocket 700K.
Next year with the $700k buy 70 houses X $100K appreciation each? Well, you do the math.
You will be a retired billionaire in five years! It's that easy.
The new world order has arrived and we are all financial genius gods!
It's a new miraculous economy that's making the dotcom economy look like child's play.
Nirvana/Utopia/the great buffalo range in the sky/streets paved with gold, etc. is here now!
This is heaven on earth and everyone will be rich rich rich from housing.
Thank God we've found it! Praise the lord...Helleluia!
God bless you all and God bless Tiny Tim. We will all be megamillionaires!
What are your guys thoughts?
Thank God weâ€™ve found it! Praise the lordâ€¦Helleluia!
Which God you ask? Ha!
THE God: $$$
The one that will liberate us and give us everything we want beyond our wildest imagination as the TRILLIONS roll into your fat bank account.
I plan on retiring a billionaire in five years from housing!
Amazing! Sweet! What a great market!
What in the f are you waiting for Surfer-X? Christmas?
Get out there and buy 20 houses. NOW, damn it!
@taken a mental Holliday,
Dude, I already own 40 houses, shit I just bought Mr. UPs compound (go Voodoo), but I had to fire Pinar as she was stealing tortillas.
So what's another 20? Shit, just do it!
New thread: Conspiracy Theories
"I am not so sure what will happen if this turns out to be a grand-supercycle top."
We already had that tangent. It started in 1865 ;)
Wow, skip a few days to work, and I missed religion and the cancer of liberalism.
As for Santa Cruz, I miss living there. It's a great place. Too bad the couple that "double downed" by renting out their house and buying mine are gonna go bust. I sure miss Santa Cruz though.
And for Gold Bulls: What a week!
P.S. If Ben drops rates in 2H2006 or 1H2007, Gold is to the moon! (IMNSHO)
Wow, skip a few days to work, and I missed religion and the cancer of liberalism.
DeoVindice, fear not. You'll love the new thread --TRUST ME :mrgreen:
"Would you rather put a large amount down 50- 75% on a home or invest it...I think that it is wise to put a large amount down because you will save a ton of money in interest and you will pay off your house sooner." -- Margie
If you ever put down a large downpayment or pre-pay on your mortgage, the simplest way to think of it is that you are essentially locking in an investment of whatever the interest rate is on your mortgage. If you've got a 6.5% 30-year fixed and you pre-pay, each pre-payment is essentially being put into an investment that gives you 6.5% return because otherwise you would be paying 6.5% interest on that amount that you did NOT pre-pay.
So the consideration comes to your own confidence in your own investing accumen or that of your Advisor should you be lucky enough to have found a good one that you trust. You need to be earning returns in excess of 6.5% in the above example or you are losing money to interest expense.
Me personally, I would hedge my bets. I work in financial services so I follow the markets rather closely and am therefore fairly confident in my investing skills. Still, if I had the means I would put down 1/3 on any home purchase. Lock in a decent ROR on that chunk of change and forego some interest expense. I would never put down more than 1/3 because I'd rather be investing that money in other asset classes than just my house. My 2 cents for ya, hope that helps.
Btw, here's a story that came to me about the flooding and Marin home sales:
"I heard from a friend in San Anselmo who is just about to close escrow on her house that a lot of houses in San Anselmo (and I would also guess Fairfax) have fallen out of contract. Buyers just said no way after the flood damage. Can't be good, when volume is clearly down to begin with. I can't imagine Spring will be an easy time to sell around here. "
Good advice SF Renter. That is exactly how I think of it.
Here is an interesting article about how housing has gotten cheaper in most of the nation:
NYT, subscription required.
There is a fascinating herd mentality surrounding the housing market. Does anyone know of any recent, good articles or books on it?
Irrational Exuberance, 2nd Ed. by Robert Shiller has a chapter on it, but most of the book deals with the Dot.com stock bubble. For zillions of links to good bubble articles, check out Patrick's links: http://patrick.net/housing/crash.html#links
You Seattle guys are legendary for talking about how bad Seattle is to Californians.
It rains 400 days out of 365, I have heard it before.
Looks like Seattle home prices about half of what Bay Area prices are:
The toniest neighborhood is $436/sq ft, less than half Telegraph Hill and the average appears to be about $300, about half of SF prices.
Linda, it would be helpful if you post this in the latest thread. Most people here do not check older threads.
I cannot give financial advice. However, let's look at some numbers:
You owe 300K with a 5.25% mortgage, your monthly interest is only around $1300. You have also locked-in a low property tax rate, thanks to Prop 13. Can you rent a comparable home that costs less than your current total housing expenses?
I would seriously try to look past the equity gain and stay in the house. However, it is a good idea to consult a financial professional before any decision.
Also, do not forget that commission alone is 6% of 700K, which is 42K.
It also really depends on what you are going to do with the 350K - 400K proceeds.
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