patrick.net

ltemma74 says

I am considering purchasing a condo that, when monthly HOA and bank loan are taken into account, would be less than the cost of renting. Seems to me that the worst-case scenario would be that, if the market went down and I didn’t want to live there, I would have to hold it and rent it.

I would appreciate if somebody could provide another perspective.

If you were talking about a single-family home purchased with a fixed-rate loan I might agree with you. However, the worst case scenario for condos with HOAs is much worse than you suggest. Many of your neighbors could be underwater on their mortgages, stop paying their HOA dues, and you'll be on the hook for "special assessments" to cover their shortfall even as these deadbeats cause your property values to drop. This is happening to many people around the country right now: they are being totally screwed by the deadbeat squatters in their HOA. The banks won't foreclose on the squatters because then the banks would be liable for the HOA fees, and when the foreclosure or short sale finally does occur the HOA doesn't get a cent unless the bank gets 100% of their money back which isn't going to happen because people without negative equity generally don't go into foreclosure.

simchaland says

Maybe it’s all those thousands upon thousands of IT professionals people keep talking about in Silly Valley who make $150k or more per year currently and are constantly making lateral moves increasing their incomes by 30% or more with these moves these days.

In the mid to late 90's, it was very much like this (I'm one of them).

Nowadays, not so much.

CrazyMan says

simchaland says

Maybe it’s all those thousands upon thousands of IT professionals people keep talking about in Silly Valley who make $150k or more per year currently and are constantly making lateral moves increasing their incomes by 30% or more with these moves these days.

In the mid to late 90’s, it was very much like this (I’m one of them).
Nowadays, not so much.

But wait, I've been told countless times around here that most people in the Bay Area are making $150k or more and that IT professionals especially can make lateral moves right now and increase their incomes by 30% for each move.

You mean to say that none of this is true? You don't say...

Don't forget, $55k is just the asking price for the can of Coke. You will need to tell him how much you are willing to pay for it in a silent bidding process. You then return home and wait for the store keeper's call so you can return back to the store to pick up your can of Coke that you had to outbid against 25 thirsty people for.

simchaland says

You mean to say that none of this is true? You don’t say…

lol, fair enough. Yeah, it's all BS.

There's plenty of people here with plenty of money. IMHO, no where enough to support the current market. Not even close.

ns says

ltemma74 says

I am considering purchasing a condo that, when monthly HOA and bank loan are taken into account, would be less than the cost of renting. Seems to me that the worst-case scenario would be that, if the market went down and I didn’t want to live there, I would have to hold it and rent it.
I would appreciate if somebody could provide another perspective.

If you were talking about a single-family home purchased with a fixed-rate loan I might agree with you. However, the worst case scenario for condos with HOAs is much worse than you suggest. Many of your neighbors could be underwater on their mortgages, stop paying their HOA dues, and you’ll be on the hook for “special assessments” to cover their shortfall even as these deadbeats cause your property values to drop. This is happening to many people around the country right now: they are being totally screwed by the deadbeat squatters in their HOA. The banks won’t foreclose on the squatters because then the banks would be liable for the HOA fees, and when the foreclosure or short sale finally does occur the HOA doesn’t get a cent unless the bank gets 100% of their money back which isn’t going to happen because people without negative equity generally don’t go into foreclosure.

Thank you ns. Very good point!

...and a 'ungry Mob is an Angry Mob!

so, why did you post this in a nursing home forum, and why have you replied to several other messages? is it on autopilot?

How long you think unemployment benefits should last? 30,60,90 days, a year, two, indefinitely?

jkingeek says

How long you think unemployment benefits should last? 30,60,90 days, a year, two, indefinitely?

I think the present system is about right. Six months when the economy is not in recession, one year in recession, two years when in depression.

If you can't get your act together in two years then no amount of UE is going to help you.

Note that UE is about 25-40% of one's previous paycheck. The 66% COBRA subsidy was actually a much bigger deal this cycle, and that's been terminated regardless of whether the Republican filibuster on UE and income tax fixes is broken.

Tenouncetrout says

…and a ‘ungry Mob is an Angry Mob!

Very curious political struggle. So far the Dems are going to make the Republicans walk their talk about no tax increases and spending cutbacks in a recession.

Tho they did cave and give a six month reprieve on the medicare doc fix. There's still tens and tens of billions of other spending in this bill, medicaid, the annual tax extenders, and the $35B for people on extended UI benefits.

The Republicans said "pay for the stuff" and so the Dems put in fixes to the S-Corp pass-thru (for people avoiding payroll taxes by taking divies out of their professional S-Corps), and of course the carried interest fix (for equity managers taking dividends on risk capital that is not their own).

Class warfare at its finest. Dunno which way the public is going to break on this. Both sides are pretty entrenched. Complicating matter is not 1 in 100 people could tell you what an S-Corp is.

Troy says

If you can’t get your act together in two years then no amount of UE is going to help you.

Yea - but it still sucks if it's you. People didn't plan for this deep of a recession, nor did they realize that they couldn't maintain their standard of living forever.

simchaland says

Umm, who has the cash to pay for a house outright here in the Bay Area? It most certainly isn’t anyone who is in the working class here. Maybe it’s all those thousands upon thousands of IT professionals people keep talking about in Silly Valley who make $150k or more per year currently and are constantly making lateral moves increasing their incomes by 30% or more with these moves these days.

The average salary for an Oakland Police Office is $180k/year w/ nearly 100% pension. Starting pay is $100k (starting pay for a cop in NYC is $44k). So there are plenty of wealthy "working class" people who can afford expensive houses. Not that I think 760 OPD officers can move the Bay Area housing market, but it's not just "IT Professionals" that are bidding up house prices. Thankfully Oakland (and many other cities) are bankrupt so hopefully those salaries will start to come down.

grywlfbg says

The average salary for an Oakland Police Office is $180

Are you sure about this? I remember seeing the signs from the freeway few years ago "starting at 70,000". I am sure there is overtime abuse, but that can't be the average.

On another note. The city of Alameda is about to close 1/2 their schools. And yet you read about firefighters with base salaries over 100,000 and 90000 in overtime. (No verification of accuracy)

http://spreadsheets.google.com/pub?key=rTunTmsQHa5re6Rh5bk_SXA

After a year of unemployment, you're going to have to accept that you will never find a job that pays as well as the one that you lost.

The fact of the matter is that there were a lot of jobs that were grossly overpaying people in the real estate and financial service industries for decades. These jobs will never pay that well again.

If you're unemployed for two years, the smart thing to do would have been to go back to school and work on a degree in a useful industry.

Actually, you can change the area of the post. Simply choose to edit your comment and choose another forum in which to put it.

lyoungblood says

If Bernanke dropped the rate to 0%, the banks would all of a sudden need to start lending the money to anyone with a pulse again

No, it's not the banks' cash in the excess reserves with the Fed, it's their customers' cash.

thunderlips11 says

Japan kept their interest rates at near zero for more than 15 years, and they are still in a funk.
Another parallel, their sideways slump was also preceded by a huge real estate bubble.

This is NOT an accident. Real Estate is the source and sink of ALL wealth, at least until some genius invents sustainable technologies to mine everything from the sea and sky.

Henry George nailed the root problem 130 years ago:

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

The pols are now getting worried about our debt. No problem. Just print more money. With the depressed economy being what it is, I don't think we need to worry about inflation for a long time.

I want either a thread or a forum dedicated for venting about the RE market. It's kind of mean to vent while people are having an intelligent conversation.

Kevin says

After a year of unemployment, you’re going to have to accept that you will never find a job that pays as well as the one that you lost.

I do believe that it was much more than that. There are so many jobs that have gone away (see dailyjobcuts.com) that many people couldn't get jobs at walmart as greeters. In the place where I work, we get hundreds of applications for laundry jobs. It's gotten better but it's scary out there still.

Unemployment helped people not starve to death but that's about it.

Actually, those people who want to say nasty stuff add themselves to the threads everywhere.

LOL, $900K median areas should be doing well in this rich man's economy with 15 year FHA money at 3.875% today.

But if the current gridlock on HR 4213 continues you're going to see the state economy totally blow up.

Medicaid is going to get slaughtered. We're talking billions lost to the state of California. Plus millions of unemployed being prematurely ejected from the 99-week extended dole.

You have NO IDEA the extent of the fiscal crisis that is barreling down on us, and that's at the Federal level.

I can't even wrap my head around the state's problems. While my location says Bellingham that's just one of my bug out options. Probably not far enough.

Don't know about real estate. I know the internet stock buyers were wiped out in 2002. Most of them lost everything and went back to their normal life (such as pizza delivery). There is a myth that some of them get out the stock market and get into real estate in 2001. They all become rich. I don't believe it. Because when I mention Ariba or ICGE, they have no idea what I am talking about.

My horizon is more on the Mayan calendar, we've had a pretty impressive extend & pretend so far, but we're not out of the woods, quite the opposite. Zillow says Lafayette is up 3% since late 2009, rates fell 6% (30bps) over 2H09.

But if this sample is any guide:

http://www.redfin.com/CA/Lafayette/3440-Solana-Ct-94549/home/1349926

shows that Lafayette isn't that hot a market.

RayAmerica says

How does being unemployed help “people not starve to death?”

Welcome back, rayray. They let you out on your own recognisance? Good for you. Shall I say that unemployment benefits helped people not starve to death? But you know that - you were just being an asshole like usual.

RayAmerica says

elliemae says
In the place where I work, we get hundreds of applications for laundry jobs.
Do you work in a large laundry or is it a Mom & Pop? LOL

Actually, if I did work in a laundry, I would be proud to do so. Your condescending comment reflects your elitist inability to understand that people take pride in their jobs, whether they're the janitor (or laundry person) or whether they're the executive director. And that many, many people are applying for any job that's offered, because eating and living indoors is more important to them than believing themselves to be "better than" someone else.

But you wouldn't understand that, because you lack the ability for reason and compassion.

I appreciate your input, though.

http://www.bizjournals.com/sacramento/stories/2010/06/21/daily55.html

Some 200,000 people have lost their safety net.

cooperjames says

This is a wonderful opinion. The things mentioned are Great and needs to be appreciated by everyone. Real Estate Brokers

We're not gonna read your shit, no matter how much you troll to place it here.

1. Realize your Potential
But remember your potential is extremely low, because if you are inspired by a list of simplistic platitudes, you are extremely stupid.

2. Dont Look Back
After all, your past mistakes make you feel bad and history is for losers.

3. Dare to Dream Big
Greed is good. It is the 'Merican way. And the biggest dream is to make money on other people's foolishness! You want to be a Patriot, don't you? Don't make me call Sarah Palin!

4. A Powerful Business Plan
It all starts and ends with, "I am going to sell lots of real estate!"

5. Dont Give Up
After all, quitters never win and winners never quit! Giving up is statisticially shown to be the main reason people quit something!

6. Have an Unstoppable Attitude
Reality is no object. There is always someone dumb enough to believe your cliche lines, no matter how dumb those lines (or you personally) are! Never stop repeating them!

7. Stop Complaining
As Warren Buffet will tell you, happy talk is the only way to success ...

SF ace says

So yeah, I think Layayette is special. It’s a place I wouldn’t mind living in myself.

Clearly the $900K median is indicative of that. The property I listed above:

http://www.redfin.com/CA/Lafayette/3440-Solana-Ct-94549/home/1349926

has a tax assessment of $100K (!), less than my mom's place in Fresno. If they didn't do any equity borrowing, this owner has a VERY strong pricing power. This looks rentable for $50K per year, a 5.5% return at the current list price.

Not much downside bargaining left for that property, not until the Soylent Green future comes. But even so, the fortress areas will retain value, since safety of one's person, offspring, and property has an IMMENSE potential price premium. I chose to pay an extra $200/mo to live in a mini-fortress, just to reduce the chance of somebody f----ing with my car at night.

SF ace says

Interest rate movement is a function of the underlying fundamentals of the economy

TURNING and turning in the widening gyre
The falcon cannot hear the falconer;
Things fall apart; the centre cannot hold;
Mere anarchy is loosed upon the world,
The blood-dimmed tide is loosed, and everywhere
The ceremony of innocence is drowned;
The best lack all conviction, while the worst
Are full of passionate intensity.

Surely some revelation is at hand;
Surely the Second Coming is at hand.
The Second Coming! Hardly are those words out
When a vast image out of Spiritus Mundi
Troubles my sight: somewhere in sands of the desert
A shape with lion body and the head of a man,
A gaze blank and pitiless as the sun,
Is moving its slow thighs, while all about it
Reel shadows of the indignant desert birds.
The darkness drops again; but now I know
That twenty centuries of stony sleep
Were vexed to nightmare by a rocking cradle,
And what rough beast, its hour come round at last,
Slouches towards Bethlehem to be born?

Just a thought experiment for your consumption. In 3 or 4 years, we’ll know if 2009 was the bottom for California real estate. Assuming the market goes up from here, are you going to hold yourself to the same standard? Are you going to admit you victimized countless people by telling them real estate was going to continue to fall? Studies on investor psychology clearly demonstrate that a dollar lost "hurts" at least twice as much as gaining a dollar feels pleasurable. There was someone with the moniker of "landbarron" on another forum I frequent that was all gung-ho regarding LV RE. He eventually disappeared after his holdings reverted to 20th century values, but I too feel for the rubes who bought into his dopey rambling. Then again, since these folks would've been late to the party, they were perhaps also the first to stop paying on their underwater homes and have instead been adding to the increased consumer spending statistics (eyes roll). BTW, I've been reading this forum for years but have never posted. How do I quote correctly? Thanks in advance.

schmitz_kris says

How do I quote correctly?

Select the text you want to quote and then click the "quote" link.

What we will most likely see is another small price swell for California for the next few months, but the state tax credit is almost tapped out (if not so already), so I predict prices will start to go down later in the year, as they did the last couple of months. On the other hand, it's possible prices won't go up at all, even with the state tax credit. We'll see.

Rigged--

Let me start by saying I have no idea if prices will rise or fall in CA in the near future. But you're wrong about the adjusted vs. unadjusted discussion. Look at Boston in your graph--there is no way you can tell me that there isn't a seasonal effect. Shiller is saying since we can't be sure about the magnitude of the effect, it's best not to try to adjust for it. He's not saying that there isn't a seasonal effect. BUT, I'm sure he'd agree that you can't use a 1Q drop in sales to justify that housing prices are falling. Again--look at Boston 2002 - 2005.

And when someone starts their post with "it's quite possible", I think it's pretty well understood that whatever follows is not a fact. No need to point that out.

Just thinking as someone who knows a little about markets, and considering the graph above.

On the way up, everyone who felt they didn't want to miss out bought in if they could, while many others borrowed against their new found wealth.

On the way down, buyers came out of the woods to jump on deals (relative deals that is, hey 50% off what somebody paid for it 3 years ago). More buyers jumped in with incentives from the federal and or state government.

Here is my question. With stagnant economic employment numbers and low inflation, who is going to provide the "demand" side, that is the bids for the next leg up in real estate prices ?

The euro is down, so it won't be Europeans.

Perhaps it will come from those of us who are still waiting for lower prices. No, that doesn't make any sense, we are waiting for lower prices.

Hmmmm.....

I'm not saying prices have to go down from here, but it's pretty hard to imagine a scenario where they go up any time soon. Everyone who would be "long" real estate, already is.

That just leaves sellers.

marcus says

Here is my question. With stagnant economic employment numbers and low inflation, who is going to provide the “demand” side, that is the bids for the next leg up in real estate prices ?

Well, I agree that if employment stays stagnant, then it will be difficult for housing to go up, but I think that's far from a given. Also--you kind of answered your own question earlier in the post:

marcus says

On the way down, buyers came out of the woods to jump on deals (relative deals that is, hey 50% off what somebody paid for it 3 years ago).

Unless you think we ran out of those buyers, I guess...

Also look at the national Case/Shiller index. It seems very clear to me that what's going on currently is not just a seasonal variation. Does anyone disagree?

California real estate is back to 2003 levels, nearly double what it was priced a decade earlier.

I think that whether we are at or near a bottom in Real Estate is dependent on where the economy goes from here ( rocket science, right ? ).

If things get progressively better with the economy and there is no depression, then maybe housing kind of bottoms out for a couple years and then goes up.

If on the other hand this turns in to a full blown depression ( or protracted worsening great recession ), then all bets are off.