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thenuttyneutron
@
2006 Oct 20, 10:20pm
As the RE crumbles, we will move our speculation to Tulip Bulbs. They will appreciate YOY at 10000% for 10 years and become worthless overnight. At that moment, all of those FBs who started Tulip farms on the properties that they paid too much for will be ruined. I can then buy a good home, Tulips and all, with a McDonalds Happy Meal containing a Beenie Baby toy.
When enough people can't afford basic rent and the tent cities spring up like during the Hoover administration the goverment won't be able to ignore the problem. We have to many rich elitist and politicians who like ostriches have thier heads in the sand. If they don't see it firsthand it must not exist... In fact alot of the country has that kind of thinking.
I'm in the "Or another example" crowd.
Post Election? All bets are off.
Care for an accident? No thanks, just had one. I was talking to a SoCal mortgage broker last week and he puts 07's foreclosure rate at 10-14%. Uh, that's not for sub-prime loans, that's across the board!
Toasty.
If anyone (bull or bear) can devise an exit script, please feel free to share. Outside of "re-negotiating" purchase price (then "refinancin") show me how we're going to contend w/gushing negative equity? Uh...... let's see, I bought in August 2005 w/zilcho down at 475K, I'd be lucky to get 375k, I'm two months behind and my teaser period is set to expire next month! Other than that I'm in good shape. Here at Patrick.net we love to toss ideas around and I'm fine w/that but could someone please explain to me how "lenders" are going to deal w/this and still have some semblance of dignity? Some semblance of "standards"?
I got no where to go and all day to get there.
An unidentified threadmaster posted What’s Next?
> 1. Rents go up = Wages go up. Wage inflation slows
> job growth. Puts brakes on population-driven rent
> increases. Rent vs. Buy adjusts a little, not a lot.
For the last 300 years (going back 100 years before the US was founded using records from GB) the cost to rent has always been close to the cost to buy (after making a down payment). Like all things this will revert to the mean (the cost to buy should actually drop after a few years of the media hammering us with stories of people that lost it all owning RE).
> 2. Higher rents = People move out of area. Rents
> stabilize, maybe fall. Rent vs. Buy doesn’t change a
> lot, and demand for both rental and for-sale housing
> softens. Prices continue to slide.
Rents are related to one thing… “supply and demand†(I grew up hearing my parents talk about how to rent apartments and homes every night). We have had an apartment bubble just like a residential bubble and we will have a lot of apartments go through foreclosure and the new owners will “lower†rents to fill them (this happened in TX and AZ in the early 90’s and CA in the mid 90’s and it will happen again this time).
> 3. Higher rents + refis = help to bail out a few homeowners,
> reducing the overhang of potential FB’s. Could cushion
> the landing a little.
Rising rents are not going to help the people that barely qualified for the $1mm loan at 3% interest only when the payments were $2.5K a month when their loan resets and the payment jumps to $7K a month…
> 4. Rents keep going up 10% per year = Creative renting
> strategies (home sharing, warm-bedding, etc.) become
> common, but overall renting becomes an expensive
> proposition. People continue to do whatever they can
> to buy, keeping nominal prices high. Rent vs. Buy is
>mainly adjusted by higher rents.
Nothing “keeps going up by 10% a yearâ€â€¦ Sure rents are up (some by more than 10% for the year) but rents are still lower than they were whey you could still by pets.com and webvan stock. Unless you have a huge growth in high paying jobs (like we did in the dot com boom) rents go up very slowly since when rents go up more and more people get roommates or move back in with their parents. In the real estate boom the number of mortgage brokers, loan processors and real estate agents in California doubled and today there are about 500,000 MORE real estate agents, mortgage brokers and loan processors than we had back in 2001. There are also about another 500,000 people involved with real estate construction, staging, inspection and rehab that we don’t need any more (I was recently talking to a bunch of illegals outside the Home Depot in Sacramento in Spanish before I hired a couple to help me build a fence at the Sac. apt.) and they said that it has become a lot harder to get work and many were thinking about going home to Mexico…
@allah,
I love how that forclosure "article" uses the perspective of a RENTER getting screwed by his landlord's foreclosure. Couldn't they have just kept the story to foreclosures screwing FB's? NOOOOO. The MSM has to throw in the "despite all this, it still sucks to rent."
Let's not forget that yes, that renter dude has to move, but at least his credit rating is still intact.
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Start with any generally observable and credible premise. Example: "Rents are up 10%." Or "Inventory is up 135%."
Assuming the premise is true, what impact will this have on the Bay Area housing market?
For instance:
KCBS reported rents are up 10%. Most anecdotal evidence suggests anywhere between 7% to 15% increases. If this is true, it could have the following consequences:
1. Rents go up -> Wages go up -> Wage inflation slows job growth -> Puts brakes on population-driven rent increases -> Rent vs. Buy adjusts a little, not a lot.
2. Higher rents -> People move out of area -> Rents stabilize, maybe fall -> Rent vs. Buy doesn't change a lot, and demand for both rental and for-sale housing softens -> Prices continue to slide.
3. Higher rents + refis -> help to bail out a few homeowners, reducing the overhang of potential FB's -> Could cushion the landing a little.
4. Rents keep going up 10% per year -> Creative renting strategies (home sharing, warm-bedding, etc.) become common, but overall renting becomes an expensive proposition -> People continue to do whatever they can to buy, keeping nominal prices high -> Rent vs. Buy is mainly adjusted by higher rents.
Or another example.
Premise: Punch bowl gets thrown away after Nov. 8 elections.
FB's rush to the exits -> No buyer confidence -> Inventory spikes up -> Prices fall FB's put unsaleable houses for rent, driving rents down.
The above are just examples. You can start with any other credible economic premise and expand it to assess impact on the HB. And even those outside the Bay Area can contribute their own crystal ball visions. And if this turns out to be too arcane, feel free to start a new thread.
SP
#housing