patrick.net

"You know, you can always listen to the Tom Clancy audio book while reading the Playboy and at the same time watching CNBC for the next investment idea. "

Would that be on the big screen in your bathroom? No sushi bar in there, too?

I only read magazines in the bathroom. No electronics other than laptops.

I can't wait for LCD paint. Your whole bathroom wall can be a photogallery.

And I thought Peter P was the imaginator of dream bathrooms

Headset,

people's circumstances differ, and their strategy of taking advantage of the housing downfall may differ too. I bought a year before you did, and I was just out of grad school. If I didn't get assistance from family on dp, I would not have had time to save enough dp to take advantage of that bottom. If I graduated 3 years earlier, and I understood the bubble as well as I do today, I would have jumped in EVEN knowing that the price might go down further, because I might just want to get into a particular neighborhood at a semi-bargain price while I could still borrow, and I expected my pay to rapidly increase afterwards.

Therefore, I don't think there is an one-size-fits-all strategy for everyone. Someone may buy before it bottoms, and he knows it, someone may just wait for the perceived bottom. There are many reasons why one can't come up with a dp, and I don't want to speculate on it. If someone doesn't think for whatever circumstances he can come up with enough dp, then getting in just before the bank closes its door is not a bad thing.

Another consideration is the weakening of the dollar. I have more than enough to pay off my mortgage balance, but I choose not to, because I can make higher return on my savings than sinking it into a dollar-denominated loan that will only get cheaper to pay off as dollar tanks. Therefore, if you know what you are doing, acquiring a dollar-denominated loan and locking the rates down is the right thing to do, provided that you have that amount of money to begin with, and you can shift your own money to more lucrative uses. Money will one day get much more expensive, if there's some way that you can lock down the cheap rates of today and profit from money getting expensive in the future, why not?

I don't think one can universally determine if debt is bad (tax shield, arbitrage, dumb people pricing risk badly so that you get a good deal). Debt is a good thing if you know how to take advantage of it. Apart from FBs, there are also people who strategically get into debt as a financial tool to profit, and right now the window for getting ridiculously cheap debt is still open, that is all I am saying.

I only read magazines in the bathroom. No electronics other than laptops.

Probably smart from an electrocution standpoint.

Excellent debate, BTW to all.

You're very welcome. My observation is that almost everyone is remarkably considerate on this board.

Randy H,

Exactly, b/c MLS can provide a "base level" for some very good commissions they tolerate the rules just enough to keep from getting the boot.

And as much as it pains me to admit it, Malcom is correct that NO industry operates efficiently when the least significant player dictates the terms by which the game will be played.

After what's been said today, I doubt I can meaningfully contribute to the debate. However, here's an interesting link:

http://www.ftc.gov/opp/workshops/comprealestate/index.shtm

Click on the "Workshop Transcript" link if interested. It's hefty, but seems like (on cursory pass-through) a very interesting and relevant read.

And now in this group hug, I have to say that you guys have solid points about MLS business practices.

Whether MLS is a monopoly doesn't matter, in this world we are moving to more transparent information. Realtors need to show me apart from MLS data what other service they can provide, and what they can provide won't overlap with other alternatives I have (researching on the internet, advertising on craigslist, attorney, etc.).

If realtors cannot come up with a distinctive raison d'etre, they will become extinct fairly soon, or their commission structure will change drastically.

In both Japan and Hong Kong, after the bust, the realtor's commission structure came down significantly. In Hong Kong, for example, when I was growing up, BOTH buyer and seller used to pay realtors 2-2.5% for the transaction amount. Now, the standard has become 1%, and you can easily negotiate it down to .5%, in a buyer's market, the buyer doesn't need to pay, in the seller's market, the seller doesn't need to pay.

RE: the link I referred to, pages 263-267 of the meeting transcript are useful summaries from the FTC/DOJ representative at this meeting. I have to manually retype the PDF, so here's a brief excerpt (sorry about any typos):

*****

“Coming from and enforcer’s perspective, I believe that the single overarching story line of our program for many years probably has been this: From time to time conventional, full-price brokers have taken collective action to disadvantage innovative, reduced-service, lower-priced brokers. The particular actions that they have taken have changed over time, but the same intent resurfaces…

Dating back to the late 1980s and early 1990s, we brought cases involving local MLSs that were refusing to list houses that were being sold under “exclusive agency” contracts, or were treating such listings on disadvantatgeous terms. The underlying MLS rules were a form of private agreement, and we thought the agreements were anti-competitive on that particular point."

I have one modest request: when you use an acronym that can be translated multiple ways, please define it at least once.

Ex: is "IP" "internet protocol", "information provider" or "intellectual property"?

When there are no buyers around, all anti-competitive measures will just break down. The only reason why they are able to play the dirty games they play today is because there are too many buyers with too much cash flowing around.

If you leave an organized group of wolves to themselves with absolutely nothing to feed on, they will start chewing each other up.

OO,

Good analogy! I think we're already seeing that in markets like LV where buyers have cleared out faster than you can say "free buffet"!

It just seemed so bizarre b/c in an era of increasing transparency and ever better technology, NAR declared "full speed astern!" Thanks for taking a "little" of that frustration out of the equation for me.

Does anyone know the current status of the housing market in Atherton? A friend is going to list her house in Atherton next week. The realtor told her most places are going over asking, $500k or more over asking. I see 28 homes listed, with 2 sale pending. Just curious...it's not a market I track at all.

OO,

It's not just an over-supply of buyers. Aside from any anti-competitive underpinnings of the NAR, there is the issue of fear factor in the buyer and seller. Of course, it sounds like a great thing for discount brokers, FSBO and the like to gain traction, but when it comes down to brass tacks, most buyers and sellers will go to an agent. They fear being screwed by not using an agent to advocate for them in the RE transaction.

Whether or not this advocacy is needed, this psychology clearly exists. As a result, discount brokers and dissolution of the MLS as we know it will be long in coming, but when it does, it will accelerate and transform very quickly as the mass psychology changes, IMO.

Hum! Prices down 8% in 30 days.

http://www.housingtracker.net/askingprices/California/SanJose-Sunnyvale-SantaClara/

Hum! Prices down 8% in 30 days.

Ur... I believe this was due to the apparent data glitch on 03/19/2007. Check out the inventory and/or price data on that day.

Here is a great story of obsolescence. My friend goes and gets his real estate license. His neighbor across the street is also a real estate agent. Another neighbor on the street decides to sell his house. He asks the more experienced realtor
"hey I want to sell my house can you make a deal with me?"

The agent says "I'm not doing anyone any favors."

So my friend gets the listing, and the other agent is left watching a newbie walk in and make $7,000 which would have been easy money. That was just the listing side.

skibum,

You would think so wouldn't you? Maybe full service brokers were telling buyers that these discounters had gone out (or would soon go out) of business? In 2005 alone $60,000,000,000 in commissions were generated by NAR.

(I'll bet there are a lot of people that wish they could have some of that back now!)

We are heading into some bad times.

The US dollar situation is disturbing.

We need a rate hike. Fed rate should be in the 6% range at the minimum.

We are heading into some bad times.

We as in conservative people.

No boundaries. The economy is going to suck this year. I see all sorts of commercial for lease signs. I think this housing situation is really going to be a big burp for the economy. I am really encouraged by the thought of getting off of foreign oil though, that will help loads.

GC, normally anything which increases costs on the providers of a commodity results in corresponding price increases.

www.USHomeAuction.com
S. Calif auction coming up for 300 foreclosed homes

No but being a former landlord I can just help with the concept. Even the landlords with fixed costs enjoy a movement like interest rates because competitors have to react to them so the price moves accordingly. Also lines of credit are affected.

Lower dollar could actually help cushion the price free fall especially by foreign investors.

OO,

If you actually work the numbers, you can determine what is best. Most people do not do that, they merely look at monthly payments, and use abstracts they've heard like (weakening dollar, always goes up) to justify the decision.

I am not saying whether one should use a dp in this market. I am saying that if down payments become required again, we may have an initial hurt, but then house prices will come down to the point where down payments will be affordable. I see no reason to have the next gen of citizens spending 75% of their paycheck for dwellings.

If you have a 4% mortgage I would agree that buying Treasuries at 5% instead of paying off the mortgage is wise. And I agree that many businesses prudently use debt. But I disagree with the idea that one should borrow while they still can to justify consumer spending, citing tax advantages and cheapening dollars. This is the style of thinking, prodded by high commission easy loans, that created this bubble.

In my situation, I like paid for real estate. It protects me from both inflation and deflation. Heaven help the man with the "wise use of debt" on his property if deflation sets in.

Maybe I could have done better by mantaining mortages and investing, but I am not good at finding these opportunities. I have had people tell me about their great returns in a mutual fund or other investment, but when I looked at it in detail, the investment paid less than a savings account. Many people just believe their broker and do not know how to calculate an ROI.

In 1995, I bought a house for $138,000 cash. The rate at the time was 7.5% I then put the money that would have gone to paymets in the bank. In 10 years, I had my $138,000 back. Remember also that I did not have to pay loan closing costs and the builder gave a 6% discount for cash. Remember also that the PIT on that size loan barely beats the standard deduction.

I had no family money to pay that $135,000, just my 15 years of Air Force pay, and a couple of rental properties I bought on credit and paid off as quick as I could.

Rates going up can push prices down on houses. Obviously if the payment is critical rate going up means price comes down. The other thing from the supply side is that a landlord who can get a better return on investment with higher interest rates may sell the unit also pushing housing prices down with increased supply.

With some cash saved up, you will have your pick.

Anybody have the article on the 20 bil. Freddie bail-out? I saw it a minute ago now I can't find the damn thing! Anybody? TIA

GC,

Thanks, that's the 1!

DinOR

I had no family money to pay that $135,000, just my 15 years of Air Force pay, and a couple of rental properties I bought on credit and paid off as quick as I could.

Maybe this is a question for FAB, but how hard is it to get into the landlord game as a side business?

I'm a typical Bay Area professional working 50-60-70 hours a week. I'd really like to get some sort of passive income stream going on. Some of my coworkers own rental properties, but they bought them a long time ago - so it's hard to compare.

What's a good strategy moving forwards?

A buddy of mine purchased a nice twice the home for the same amount in 1995. What some poor idiots do these days.
And of course another idiot paid $950K for 1000 sq ft. 200% overvalued.

2266 Plummer Ave. $950,000, 1,112 SF, 4 BR, 1994:$180,000
http://www.mercurynews.com/realestatenews/ci_5459903

I just saw the ad on TV and thought I would pass it along. I hate it when they stick reserves in there.

eburbs - either out of state or wait in california.

It's not a spending problem, it's an income problem.

I’d really like to get some sort of passive income stream going on. Some of my coworkers own rental properties, but they bought them a long time ago - so it’s hard to compare.

eburbed,

As FAB has shown many times here by example, owing rental properties is in no way "passive income." The maintenance work involved, dealing with renting and tenants, that's all pretty darn active. My parents own several rental properties too (for decades), and I've been "asked" to help with the maintenance work throughout my youth. Nothing passive there.