patrick.net

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.

Space Ace,

You might appreciate this commentary from marketwatch re: Web 2.0:

http://www.marketwatch.com/news/story/web-20-showing-signs-bubble/story.aspx?guid=%7B028C8E7D%2D4AA8%2D4746%2DBE28%2D6454EFD675CA%7D

"No boundaries. The economy is going to suck this year. I see all sorts of commercial for lease signs."

The economy will be OK, healthy profits this year so far. For lease signs have been around now for 6 years and not moving. City should rezone and add more homes off Central in SC to MT. so damn space wasted and plenty of builders ready to jump in.

You can expect rates to go up .... FED is still targeting the RE bubble.

skibum - I was as they say in the middle of the $4 Trillion Dollar B2B market. My company was valued at nearly $6 Billion dollars. There was
only 250 people there. Honestly we though our stock was manybe worth $20 bucks at best on a good day. Even us finance guys were wondering what Wall Street was smoking.

Space Ace,

the FED is not targeting the housing bubble, the FED is busy savings its own ass. The FED has long departed from its initial mission statement - fighting inflation.

I bet you anything that the only possible action for FED right now is the stay put, while keeping the hawkish comment on inflation alive. People around the world are already finding out that FED won't do anything about inflation, all it can offer is lip service. Either late 2007 or early 2008, FED will start cutting rate.

I am looking forward to the day when FED starts cutting rate, that will be a lifetime opportunity for us to profit.

"20 bil. Freddie bail-out?"

Dinor - they are extending 30 years to 50 years and giving 5% discount on montly payments. This is after it goes up 35% So instead of
paying 3x price after 30 years you get 4-5x price after 50 years.

What did the Economist call this The new Serfdom ... picture of peasent caring a home on his back...Financial Slavery... give me break...

@Mark,

Ha. She's deleted every post, including the non-combative ones (incl. mine). Oh well, it's her blog to do with as she pleases.

Y'know, I just noticed that EVERY thread on her blog has "0 comments". Hmmm... is she really that unpopular or just intolerant of dissenting opinions?

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.

I think my colleagues own places in Arizona - so i don't think they're actually going there to manage the properties.

Do property management companies take a big bite via fees?

People around the world are already finding out that FED won’t do anything about inflation, all it can offer is lip service. Either late 2007 or early 2008, FED will start cutting rate.

If the fed can only give lip service and not raise rates, then why would they cut rates?

http://www.mercurynews.com/realestatenews/ci_5459903?nclick_check=1

Man, there's a lot of sales from "Somename Trust" to "Average Joe".

OO,

I also believe FED want to bail themselves out badly but the real question is if there is room for them to cut rates further.
Wouldn't that make the dollar plunge even further and hurt the fiat currency system?
Also, if you don't mind me asking, how will you profit from that? Gold?

Man, there’s a lot of sales from “Somename Trust” to “Average Joe”.

It is not uncommon for people of moderate means to place properties under revocable living trusts. I think it is more of an estate planning thing.

I am not an expert.

Not estate planning advice.

eburbed,

Were you talking passive income in the tax sense, in that you have other passive income you need a corresponding write off for?

I only deal with single family homes, and screen my tenants well. So far I have been lucky (compared to others) in the "toilets and tenants" aspect. However, I only have one rental at this time. I sold the other 4 during the housing bubble, since the prices went to absurd highs and anyone with good credit wanted to jump on the buy bandwagon and not rent. I put all that cash into Treasuries and 6% Credit Union accounts, waiting for the right time to buy again.

If you are going to buy rentals in CA, you may have to wait awhile for the prices to fall low enough for you to buy such that rent will cover enough of the mortgage. It will happen. I've been around long enough to see crashes in Texas, Denver, Boston, DC, ABQ, Phoenix, Omaha, Florida, and Virginia. But maybe the SF Bay area is different......