patrick.net

Randy H,

Oh I agree. This is basically a long shot type proposal, but that is the nature of bottom feeding. While most in the mainstream steer clear bottom feeders actively seek out "dark alleys"!

I'm all about brainstorming ways to "accelerate" the crash and find analysis (however accurate) trending toward a market bottom in say 2010-2012 beyond depressing. Seriously. I don't have that kind of time. 2012? You're kidding right? If we haven't come up with a solution to be in a respectable RE equity position until 2012? we've failed. 6 years from now even those among us with the most modest of resources should be sh1tting in tall cotton!

(It's the reason I come back here damn near everyday)! Oh, that and the humor and the Surfer X perma bull body slamming!

Conor,

Global macros require a bit more thinking than that. (If it were that easy...) But you already know this. You just don't like the Fed.

DinOR,

Acceleration is what it's all about for us. I'm guessing by late 07 I'll be evaluating whether to engineer some long-term lease agreement or buy in at a premium. From the stickiness I'm seeing here in South Marin, it'll probably be the former, sadly.

A friend of mine (a VC) has a wife who's been flipping McMansions for the past 3 years as a "hobby". She's stuck now with two listings and a third coming on in September (think Strawberry neighborhood). The first 2 aren't selling at asking, so she's renting them out instead. Seems they found a renter in 3 days for one at $6200/mo which is cflo positive.

I was hoping to see these types of homes being marked down, not converting to overpriced rentals. Although I don't want to buy a McMansion, I think this is an example of a segment of flippers that aren't going to go belly up like we often imagine here. These are the "keeping my spouse busy" flippers who could probably afford to buy out all their inventory in cash if they needed to.

Depressing.

Randy H,

I know, I KNOW! Extremely tough in the BA. There's more than enough "softness" to go around but it's been difficult to make any headway in your area.

The way I would approach a situation as you describe with your VC buddy's wife is to say;

"Look, I'm not here to tell you how to run your business but let's look at this from a pure business perspective". O.K? Yeah, true your showing a very modest positive cash flow but when you look at your ROIC (then factor in inflation and devaluation of the dollar) it's actually a negative return. Wouldn't it make more sense to "harvest" the tax loss and redeploy that liquidity into something more profitable?

Granted, that's a little brazen but who knows? She might bight at it? It's what I call "the drip process". Kind of like Chineese water torture. Every time you see her, drip drip drip.

I think this is an example of a segment of flippers that aren’t going to go belly up like we often imagine here. These are the “keeping my spouse busy” flippers who could probably afford to buy out all their inventory in cash if they needed to.

When(not if) the recession hits, people will lose jobs and money will be tight. When people have no income (or less income), they fall behind on their rent (especially when it's $6200/mo) and shit happens. We are only experiencing part of the "perfect storm", you seem to have left out the most important factor, the recession (or maybe even depression).

Just saw a segement on Kron4 about the housing bubble - their take on sales being 25% down, it's been expected nothing to worry about - and the presenter concludes - don't panic, just be patient to sell your house, or maybe buy a house and get in on it, you know?

I actually thought they were going to say that it had burst from the trailers. Boy am I disappointed in them.

kiyosaki wrote about a 'track of houses' in RDPD, when he meant a tract. interesting.

allah,

"a segment of flippers"

I think Randy H made an important distinction there. However, I am totally with you as to the fate of the other 99.999% of the flippers out there. Seems like you can't swing a dead cat over on C/L without hitting a "Lease to Own" offering and I've got to tell you here in OR they are becoming legion! You can always tell the "newbies" b/c they advertise to people with "bruised credit" and yet think that this individual will somehow have the 10 or 12 or 30K "down" to cure their self inflicted arrears! Funny! Sometimes I respond to these guys and they're absolutely clueless. It's like; "this HAS to work". Ahem, no, no it doesn't. Not the way you're going about it.

Let's see, come in with MORE DOWN than 99% of "homeowners", pay ABOVE market rental rates AND you're going to "lock in" TODAY'S price for me? Such a deal! Did you need me to give you a hand splitting and stacking your fire wood?

Then 3 weeks later you see it listed as "MUST SELL". Whatever dude.

Maybe he gets his assistant to transcript the articles, and they misheard him?

yeah, and nothing gets proofread, and his 'assistant' knows nothing about property... that's why his books are full of simple misheard bloopers of common real estate terms... happens a lot in book publishing... altho kiyosaki wasn't making much money to pay an assistant before writing the books, now i think of it... he WAS involved in amway and scientology tho...

looks like the Oz Fed will raise interest rates a few more times soon to head off inflation from oil price rises...

Brace yourselves, warns Costello

Off topic:

OMFG - taken from a thread at the SDCIA message board. I'm not a member, so can't riposte there, but I thought you might enjoy a "funny" this morning..

STAGING FAQ'S...
My house isn’t worth being “professionally staged”…

OK, I can just about stomach the first few points, but this one really takes the biscuit.
YES - homebuyers CAN visualise past your nasty glass furniture! In fact, don't put it there in the first place! I'll only have to move it (and possibly break it, don't I wish...) while I'm busy measuring up, tapping walls, looking at flooring and generally checking the place out.
What kind of fool wouldn't bring thier own tapemeasure when viewing a house?

Someone on the thread proudly pointed out that they spent something like $6K to have thier house 'staged'.
Why - in the name of all that's holy - why not just reduce the price by $6K and let the buyers figure it out for themselves?

It appears that, indeed, I AM a child that needs leading by the left nostril while viewing a house, just in case I miss the fabulous glass coffee table - which hopefully won't be there when I actually take possession of the place.

OK, rant over. Normal service is resumed.

SmartMoney magazine (Karma Chameleon by Eleanor Laise, February 2003, pages 97-103) provides the best summary of Kiyosaki's deceptions regarding Rich Dad.

When questioned by Laise, Kiyosaki gave this string of answers regarding Rich Dad's existence.

1. "Rich Dad passed away at around the same time as his biological father -- in 1992."

2. "Two weeks later...Kiyosaki [claims] Rich Dad...is very much alive -- he's just a reclusive invalid."

3. Later when asked again, Kiyosaki "insists there was an original Rich Dad, but he admits that the character in the books is actually a 'composite' of seven different mentors..."

4. When pressed further, "Kiyosaki finally loses his cool. 'Is Harry Potter real?' he demands. 'Why don't you let Rich Dad be a myth, like Harry Potter? The real issue is, am I credible?'"

No, Mr. Kiyosaki, you are not credible. A man or woman is only credible by telling the truth. Liars are not credible.

Kiyosaki's Imagination: "Sometimes I even start the company and take it public [i.e., an "initial public offering" or IPO]." (page 90)

In Reality: SmartMoney was only able to get the name of one such company from Kiyosaki, "Yamana Resources [now Yamana Gold, Inc.], a gold exploration company that trades on the Toronto Stock Exchange. And if he had anything to do with Yamana's IPO, that comes as a surprise to the company's founder and CEO, Victor Bradley. Kiyosaki's only connection is that he owned shares of Platero Resources, a privately held mining exploration company that Yamana bought in 2001 -- six years after Yamana went public."

etc...
Problem #4 - Kiyosaki's Many Other Fabrications
that's 2 guys and 2 finance magazines and a failure to verify any of kiyosaki's claims now...

The NAR has published their Q2 existing home sales volume data:

http://www.realtor.org/PublicAffairsWeb.nsf/Pages/2ndQtrStateResales06?OpenDocument

as well as the Q2 2006 Metro-Area existing home sales data:

http://www.realtor.org/PublicAffairsWeb.nsf/Pages/2ndQtrMetros06?OpenDocument

Check out the linked tables too. Some tidbits: CA 2006 Q2 sales volume is down YoY -25% (no surprise there), and the fun fact the NAR spin-blurbs fail to mention is that YoY prices in many areas are flat or negative. SJ area is "up" 0.4% and SF area is up 3.4% YoY. Last I checked, neither of these numbers beats inflation. In fact, the national median home price is only up 3.7%, which is a close call with inflation, depending on which "real" inflation number you believe.

Interestingly, the areas that still have double digit price appreciation are areas that are later into the bubble game like Portland, Spokane (sorry MA and DinOR), VA Beach, SLC, and oddly enough, lots of FLA (sorry George). If the current pattern continues, it looks like Learah's "rolling boom" will become a "rolling bust" too.

Hey, can someone get my post out of moderation? I'm guessing it's the multiple links???

Just saw a segement on Kron4 about the housing bubble - their take on sales being 25% down, it’s been expected nothing to worry about - and the presenter concludes - don’t panic, just be patient to sell your house, or maybe buy a house and get in on it, you know?

I think the fact of the matter is that the Peninsula and South Bay are going for soft landing, mild decline - not as many FBs as the East Bay.

The East Bay is mega f'ed. Pen and SB are going to be fine. :(

http://www.contracostatimes.com/mld/cctimes/15269667.htm

The trend to tap equity seems especially prevalent in the East Bay, primarily because of the white-hot housing boom in the region. Valentine, who has hundreds of clients, sees differences in the portfolio mix of his East Bay and Peninsula customers.

“You are mortgaging your future,” Feiger said. “If you borrow money on the house, you have to pay the interest. That’s cash out of your pocket. So, you are betting not only on the house value appreciating in the future, you also need enough cash flow to service that debt.”

LILLL,

We should put together a "Housing ATM Debt Clock"? Then run the defaults side by side with all the public HB's and with a "premium subscription" live streaming quotes of all the Mortgage Backed Securities ETF's.

Yeah, that would be cool.

Seems they found a renter in 3 days for one at $6200/mo which is cflo positive.

That IS depressing, though I'd image the pool of renters who could afford this much AND haven't yet bought a place must be miniscule. I wouldn't waste too much time worrying about stupid people in the 0.0001% top income percentile.

skibum --done.

But 6200/month is just the low-end opportunity cost of around 1.5M. I bet the McMansion "worths" more than that?

SFWoman,

Yea, Strawberry is pretty transient for remodelers, temporary corporate re-locations, etc. The effect is pronounced though, as the home prices there continue to post healthy YoY gains despite everything else around there slowing.

I only mentioned this because it is an example of why there is clumpy sticky price action. Strawberry is just one neighborhood of many like this sprinkled throughout the BA. These are not the neighborhoods to watch if you're trying to time the bottom. It's very easy to underestimate the tremendous amount of wealth that props up these types of communities. Strawberry isn't Belvedere/Atherton/Woodside etc. Most of the people there have to work. But very few are likely to be forced into selling at 50% off. All they'll do is rearrange their portfolios and find new hobbies for their flipping spouses.

I'm not so sure the $6200/mo level demand will be much affected by a recession. People paying that kind of money for rent aren't price shopping, and usually represent the upper 2-3 levels of corporate management, high-income professional services, or successfully self-employed/entrepreneurial types. Recessions are just "take from the poor and give to the rich" periods, after all.

[The theatre is on fire...]

Please do not rush to the exit, and if you are running, please crawl. It "falsely" signals to the moviegoers that their lives are in danger.

But 6200/month is just the low-end opportunity cost of around 1.5M. I bet the McMansion “worths” more than that?

The lesser of those homes start around $1.5M. The three people I know who live there are roughly $2.4M, $3.5M, and one that's maybe $4.0M.

The lesser of those homes start around $1.5M. The three people I know who live there are roughly $2.4M, $3.5M, and one that’s maybe $4.0M.

So 6200 is a bargain! :)

One of the options my wife and I considered was making arrangements with a luxury rental place in Las Vegas? Some rent for as much as 20K a month (so I'm pretty sure that ain't happening) but others which seemed every bit as nice were going for as little as 5K per month. Not only furnished but additionally had the kitchen completely outfitted and stocked with essentials.

We felt (b/c nobody seems to know what LV homes should be priced at) that this may be a good short to medium term solution. It's definitely easier and more straight forward then BUYING a place you'd be lucky to use 2 months out of the year and then YOU having to worry about an either rented or empty (abandoned) home the other 10+ months out of the year!

SFWoman,

Uh, could someone refresh my memory here. Is this the same "15% is in the bag for Orange County" Gary Watts? Or is this a different guy? If so, how did we get from 15% in the bag to, "Please don't make your desperation to unload your overpriced pos so damn obvious"?

Some rent for as much as 20K a month

I will not be surprised because I heard some hotels charge that much per day.

The lesser of those homes start around $1.5M. The three people I know who live there are roughly $2.4M, $3.5M, and one that’s maybe $4.0M.

My, we move in exclusive circles, don't we ;-). Please remember to toss me a few truffles and filet bones when I pass through the neighborhood, m'key?

Peter P,

You know, I've heard those kind of numbers being thrown around by high end hotels but just because Robin Leach tells me that Mick Jagger paid 20K a night doesn't necessarily make it so? Or was "Sir" Elton?

Some of the homes in LV rent by the week also for the many convention goers as well. You DO save by taking the whole month but by the week is still pretty reasonable.

Some of the homes in LV rent by the week also for the many convention goers as well. You DO save by taking the whole month but by the week is still pretty reasonable.

I think hotels are definitely cheaper than vacation condos. 30 nights/year at Four Seasons should cost WAY less than an IO mortgage of 1M.

What a great stock market day, by the way.

Days with thin volume and strong breakouts are always good if you've bet the right direction.

Luckily for me the more doom & gloom I kept accumulating the more I reversed my bias to the bullish side.

Peter P,

Let's say an avg. rate of $800 a night (Four SeasonsExecutive Suite) that's about 24K for the whole month. I'm not sure what an IO for a cool mil. would be but even if it WERE less, the "magic" seems to only work until midnight when the carriage turns back into a pumpkin anyway!

Not too sure how I'd feel about Mrs. DinOR brushing up on her tennis skills with the "resident pro" at the Four Seasons though?

Not too sure how I’d feel about Mrs. DinOR brushing up on her tennis skills with the “resident pro” at the Four Seasons though?

Don't worry. It does not have a tennis court onsite. ;)

And don't worry about her gambling either. It does NOT have a casino.

http://www.fourseasons.com/lasvegas/

That said, it is too pricy. I rather wait for those $149/night special at Venetian...

MA,

I know it wasn't me. I've heard that for some time too. Can't get my mind wrapped around how exactly it is that GE and the likes are going to re-accelerate earnings and take a leadership role? In the end I guess I'm just a "widget" company guy. Last I looked Schering Plough is trading at like $19 a share? If you can deal with it call up a 10 yr. chart on SGP. Although I don't recommend it. It's too depressing.

MA, there are ETFs on S&P/Barra indexes:

http://finance.yahoo.com/etf/education/09

You may want to take a look.

not investment advice

However, SmallCap value has been outperforming LargeCap growth for quite a while:

http://finance.yahoo.com/q/bc?t=my&s=IJS&l=on&z=m&q=l&c=IVW

Is it possible that the turning point is near?

The Four Seasons Mexico City is great, has enormous rooms for families, and is super cheap on weekends. The breakfast is also very, very good.

I have never been to Mexico City. How was the food in general? I never had luck with Mexican food. :(

Well they say they have a "non-gaming atmosphere" but it's RIGHT ON the Strip!

One thing I HAVE learned about marriage over the years though is sadly gambling is infinitely cheaper than shopping! It can take 12 HOURS to burn through a couple of hundred bucks at penny slots! My buddy played a marathon session at the Silverton with "Lil' Lucy" and after about 14 hours he's UP six bucks?

Let's be honest here, how long does it take going shopping (no, not Walmart) to go through say 2/300 bucks?

When it comes to excess, how much worse is a casual gambling habit (bet's on the 49'ers) than a CHRONIC shopping condition?

So you guys like small caps, I was worried that I had made a mistake, the price of the fund I have has been tanking and I was considering cutting my losses and reducing the percentage I gave it in the portfolio, unfortunately it's in a 401k plan and I don't get much choice about which funds I can pick. Also I read in a Money magazine that traders were getting out of small caps - although that was a few months ago now. They seem to give a big weighting to large caps, but I'm not so sure. What do you think about mid-caps?