patrick.net

“I really think that real estate will not go down,” she said. “At the very least, it will stay the same. In the meantime, I need a place to live. So the worst-case scenario still isn’t that bad.”

This is the problem with youth fortunate enough to have been spared the worst-of-times. For them, the "worst-case scenario" is merely the absence of the good-to-best-case scenario.

This will not end well for many people. I know my opinion that many of the victims will be genuinely naive, and not really deserving of scorn and ridicule isn't very popular around here. But, we were all young once. In many ways the total lack of any real adversity coupled with parents and educators unable to or unwilling to teach them fundamental fiscal values has hobbled these kids and all but guaranteed their coming suffering. They're about to reap the "everyone's a winner" beliefs planted in them as young children. No. Not everyone's a winner. You can and will lose sometimes.

Heartwarming Appraisal Story
This is one more in my series of Heartwarming RE (TM) stories... or the way they did things in the old days (circa 2000). The appraisal came up short for our 80-15-5 loan, and guess what everyone said -- "Show me the money". So we ended up having to increase our downpayment as the 80-15 portion was based on the appraised value (we overbid by, I think, 10% and the property was a bit unconventional as I have mentioned before). Evidently, things are not done this way anymore (but I sense a change may be in the air :-) )
A new national survey found that 90 percent of appraisers reported that mortgage brokers, realty agents, lenders and even consumers have pressured them to raise property valuations to enable deals to go through. That percentage is up sharply from a parallel survey conducted in 2003, when 55 percent of appraisers reported attempts to influence their findings and 45 percent reported "never." Now the latter category is down to just 10 percent.
http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2007/02/04/REGS1NTAH51.DTL

This is the problem with youth fortunate enough to have been spared the worst-of-times. For them, the “worst-case scenario” is merely the absence of the good-to-best-case scenario.

The worst-case scenario is getting hit by a bus on the way to cash-in your 300M super lotto ticket.

Let me cover but a handful of those worst case scenarios that perhaps neither of the Hyman's thought of just to see how they grab you guys, ok?

1. There's something about that extasy fueled night in Rio that Daniel's been reluctant to share w/Lucianna for fear she might not understand?

2. Daniel doesn't really work at CSFB and actually makes about 45K a year cold calling insurance leads from a boiler room out on Long Island.

3. ???

Yeah, it can get worse, A LOT worse!

BTW, if you have a really radioactive, toxic loan, there’s no way your woman wants to divorce you and run with the money.

But your woman may want to run away and disappear.

GC,

That's the "MEW based relationship" astrid* spoke of concerning a certain Binky McBling. (I'll take that to mean sex up front based on "appreciation" tomorrow?)

I cannot imagine these people could rent that apartment for anywhere near the PITI. At 10% down their loan should be around $790,000. Using a basic fixed rate of 6% gives us $4740 per month excluding taces, maintenance and any HOA type dues. Nobody will rent for that!

You have to realize that this is in Manhattan. A friend of mine who was a grad student was renting a studio near NYU for $2400 a month. I had another friend who rented a larger 1 bedroom and then hired someone to build a wall to section the living room to rent out.

It's not insane, just slightly above risk.

I have a tough time feeling out whether Manhattan is bubblicious or not. At the end of 2001, prices really took a dive for obvious reasons, so the increase was bound to happen. And it's not like Modesto/Fresno where no one has any real jobs.

And it's actually got culture, unlike Cupertino. Granted, Manhattan doesn't have 99 Ranch or the Flint Center...

I have done quite well my with house and condo, but it is simply because I was born five or ten years before many people on this blog. I was fortunate in that real estate had PLUMMETED (in Prime Pacific Heights) just as I was getting out of graduate school and my husband was starting to make some money (1994). Had the prices been what they are today I would probably be renting in the city, and there is a slight chance I would buy in the country because the value of gardening and orchards and outdoor space for the kids is high to me.

If I bought a house and was house poor (as a few friends of mine in recently purchased multi-million dollar houses are right this minute) I would feel that I had missed the opportunities that don't arise that often in life. Not travelling with my kids, not having a great meal and wine with friends now and then, not being able to purchase a piece of art that I love if I see it for sale? Just because I wanted the big house and was afraid I'd miss the boat if I didn't over extend myself? No way. I'm seeing one of my friends with the stress of living beyond her means having marital difficulties and not be able to go to restaurants with friends, travel with her kids, etc. Just to have the house with the right address.

All kinds of opportunities present themselves everyday. Live your life, enjoy your friends and great food, don't get an ulcer worrying about your mortgage readjusting. I'm confident that real estate will return from the unsustainible levels it is now. It might not be today, but it won't be forever. Live well, seize the opportunities that present themselves to you, save for when the house opportunity is not something that will harm you, and don't buy into the hype that you are only a successful or realized person if you own the largest, most expensive piece of property that you can swing the financing on.

And it’s not like Modesto/Fresno where no one has any real jobs.

Are you saying that those illegals do not have real jobs?

not be able to go to restaurants with friends, travel with her kids, etc.

I wish you could talk to my SO, her family, and my family. They feel that the most important thing in life is to pay mortgage so that eventually you "own something". Anything else is just being wasteful.

:(

And it’s not like Modesto/Fresno where no one has any real jobs.

Are you saying that those illegals do not have real jobs?

Are you saying that there are only illegals in Modesto/Fresno?

Are you saying that there are only illegals in Modesto/Fresno?

Bap33, is this true?

2. Daniel doesn’t really work at CSFB and actually makes about 45K a year cold calling insurance leads from a boiler room out on Long Island.

Not likely. But even better for them, after a few years though, Mrs Hyman could be making nearly $90k through teaching public school.

Oh yes, that's hard to believe, especially amongst Californians - but a lot of public schools out in Long Island pay unbelievably well.

eburbed,

Oh you're probably right and it was mean thing for me to say but it always grinds me when someone/couple is glowing (radioactive or not) about their new ridiculously overpriced POS. Kind of like all the happy people the BMW dealership snaps a picture of when the service dept. delivers their new payment, I mean car!

This is one of those polaroid moments and not in any way indicitive of what real people (or real marriages) are like as per SFWoman's post. It's a marathon, not a sprint. :)

Granted, Manhattan doesn’t have 99 Ranch or the Flint Center…

What about Fry's ? How could you forget that :-) (Honestly, I also consider Fry's to be BA's one major positive aspect.)

Hey ... nice graphics ... do I thank HARM as usual ?

Regarding the NYT article, I found it interesting that with all the analysis being done by the quants, there was seemingly no historical analysis. Lots of talk about looking at comps, but nothing about whether comps make sense in the first place. Hedge funds and I-banks supposedly hire the best and the brightest, but also the youngest, b/c you can't make really big bucks unless you pay no attention to history and are willing to risk ruin with OPM (and sometimes theirs).

I shouldn't read too much into it though. This was really more of a lifestyle article. I am sure the author had a story in mind ahead of time and sought out people who fit that profile.

“But the stock market can lose value.” — So can a home, believe it or not.

Yeah that's the tough one - my circle lost a lot of money in stocks. A lot.

On the other hand, they can go to zillow and see that their houses have doubled/tripled in value.

No amount of Excel is working. I show numbers, they're just "funny biased math".

My dad sort of kinda "gets it" from time to time when I point out the gaping rent/mortgage chasm - it's like there's a flicker of understanding - but inevitably the filament will immediately burn out and its back to "Rent is throwing away money."

Argh.

"it's like there's a flicker of understanding - but inevitably the filament will immediately burn out and it's back to"

That's been the most frustrating part about the HB. A great many people even today only give you half an ear b/c you're their friend, son etc. The only thing that will top that level will be when people you've been warning for years run up to you breathless b/c they just discovered the HB!

Oh yeah! :)

RE: very common fallacy

Common fallacies are good. Just see through them and exploit them.

Do you really want every person to be as intelligent as you? Do you really want fair competitions?

StuckInBA Says:

Hey … nice graphics … do I thank HARM as usual ?

Yes, and you're quite welcome!

What is financial analysis anyway? Who cares?

sleepless_near_seattle,

I thought the message of the article was:

Isn't it wonderful to be young, in love, well employed and (think) you have money/a future?

Also notice they are sitting on what appears to be a stack of fake hardwood flooring? So I guess at those prices you'll be installing your own pergraniteel?

I'd love to get an estimate on what percentage of that gotta gotta have it granite counter tops across America is buried under empty Top Ramen styrofoam cups, DiGiorno's pizza boxes and three months worth of unpaid bills.

Jon,

That's true, and funny. The consensus is that the RE market ran out of GF's at the end of summer 2005 (yet it took another YEAR) for sentiment to turn.

GC,

Affording a gym membership and actually using it are two different things. My point was that for all our slavish devotion to pergraniteel once people have moved in and actually started "using" their home they look totally different then when they bought them.

Why should any of us get obsessed with a counter top that's usually covered with "stuff"? Personally I couldn't live like that but look how many people do?

Cupertino has the Blue Pheasant, enough said. Be sure to go by on a Friday night around 9:00.

Report from NYC. House prices are dropping fast as flippers just want to get out.
Fixing up a house or doing any home improvements is so much better when you find the right contractor. These guys did a great job and were always looking to save us money.

www.123source.com

Hmm, is that a Housing Bear Bubble Bot?

SP -

The Blue Pheasant bar is uh, an "interesting" place. There are a lot of older men there and women "pursuing" them. Most (but not all) of the women are older and Asian, many dressed in clothes that are way too young for them. I'm guessing that the men have some money, or at least these women think that they do. My friends (we're all in our thirties) joked about going there, I didn't get it, we went, it freaked me out.

lunarpark,

How much "older" are the women? Are we talking Wendi Deng Murdoch wannabes or Empress Cixis in waiting?

Empress Cixis in waiting

Huh? Ewwww

Sorry, I was having troubling thinking of an older Asian lady stereotype...maybe the friend's mother in Eat Drink Man Woman???

astrid,

I think many of these women were pushing 50. But it's hard to tell with the botox and make-up, etc. I'm a poor judge of age really.

The men who wore suits got most of the attention. It was a fascinating spectacle.

astrid, don't worry...

I also associate Cixis with exotic imperial food.

Peter P,

BTW, you shouldn't mock Empress Cixi too much, she was a major patroness of the culinary arts.

Peter P,

It's funny that we ended up making so many food related connections to the Blue Pheasant. I think something about older Asian Woman automatically leads to thoughts about food.

I think something about older Asian Woman automatically leads to thoughts about food.

Perhaps.

Well, Blue Pheasant is a restaurant, right?

Alexander's Steakhouse in Vallco is pretty good though.

There were older people dry-humping on the dance floor. AGH, my eyes! At least I had a lot to drink that night so there are parts I do not remember...

Ah... the "Hey Buyer, F-ck You" house of Campbell.

They've already dropped the price once before:

http://www.burbed.com/2006/09/08/31-price-drop-seriously-check-out-this-campbell-house/

Used to be $800,000.

Frist mortgage interests are dedcutible.

But you cannot get deductions beyond your AMT rate (which is probably lower than marginal rate), right?

Not tax advice