patrick.net

trying to time the housing market is a little bit like playing with fire.

I'd never sell my house because I expected prices to go up or down.
There are people who got the timing exactly right. There are also folks who sold "at the peak" in 2003
and sat and watched as prices continued to soar out of their reach.
Some ended up buying again in 2007. Others have been renting for the past 8 years still waiting for prices to come
down to the level they sold at.

for folks who did sell right at the peak it's not because they were smarter in most cases they just happened to get lucky.

Sat, 9 Apr 2011 at 5:34 pm Link Top Quote Email Flag Edit
>”There are people who got the timing exactly right. There are also folks who sold “at the peak” in 2003
and sat and watched as prices continued to soar out of their reach.
Some ended up buying again in 2007.”

Wow, you know people who did that? Any specifics on amounts or size of homes?

American in Japan says

Sat, 9 Apr 2011 at 5:34 pm Link Top Quote Email Flag Edit

>”There are people who got the timing exactly right. There are also folks who sold “at the peak” in 2003

and sat and watched as prices continued to soar out of their reach.

Some ended up buying again in 2007.”
Wow, you know people who did that? Any specifics on amounts or size of homes?

I know somebody that did that, then bought at the market peak and his house lost 50% of its "value".

I sold in June of 2006.

In my mind.

Because my partner would not go along with the idea. I told her we could sit tight on the 500K equity we'd get out and buy it back for cheaper but she would not go along with such a radical idea. Something about being a home"owner".

Some idiots bought one on my street in San Jose that same summer of 2006 for 630K. Smaller lot, smaller house, in deteriorated condition. Idiots they were, a whole household of adults working like dogs at low wage jobs to make the payments. (Of course they're not there anymore but that is a different thread). When I refinanced in 2009 the appraisal came in at around 330K.

Damn.

At least we still have our relationship and place to live that allows pets, because we are our own landlords.

And at least she doesn't argue with my financial ideas anymore.

klarek says

I know somebody that did that, then bought at the market peak and his house lost 50% of its “value”.

And there are plenty of others who purchased and still sitting on depressed values. Not defualted or shadow inventory.. Those homes will be hitting the market down the road.

toothfairy says

Some ended up buying again in 2007. Others have been renting for the past 8 years still waiting for prices to come
down to the level they sold at.

Many who sold didnt rent or buy around here. Many people I know sold off at peak and left the state to retire elsewhere.

sybrib says

And at least she doesn’t argue with my financial ideas anymore.

nearly 99.99% IMPOSSIBLE to argue with women about the 'nest'.

I heard (2nd hand) of one person who sold a house in the SF Valley around 2005 and then moved to Arkansas (bankng about 200k dollars)...

toothfairy says

for folks who did sell right at the peak it’s not because they were smarter in most cases they just happened to get lucky.

You can tell yourself that if it makes you feel better. But some of us were indeed watching this mayhem unfold, and quite rightly decided that the bubble had probably inflated itself to the max. Klarek and I debated this topic for months back in the winter of 2006-2007 and came to the conclusion that if he wanted to get out of the market, now was the time. He sold a few months later, and a year after that the property was 10% below what he sold it for.

You can call that, "just lucky, that's all" if you want, but in many cases these sales were calculated and carefully timed transactions. I find the people who call other's "lucky" for not getting raped by the market are usually the one's who also say things like, "No one can predict the future", or "No one could have seen the crash coming", and other inane statements which have no bearing on reality. Many of us correctly saw the bubble forming, and correctly predicted (within 18 months) when it would pop. Anyone who bought a house in 2007 who claims, "I didn't really see this coming" just wasn't paying any attention at all. It's not a matter of being smarter, it's a matter of being realistic and actually paying attention to what the data is telling you.

Or they are like one of Klarek's acquaintances, who in 2006 I believe absolutely railed against him at a party for suggesting to her husband that buying a condo at that time was not prudent and that they might want to seriously reconsider. I believe her retort was, "You're just jealous because of all the money we're going to make on this place." Currently I believe they are about 25% underwater, and most assuredly would be in the, "No one could have predicted this" camp, even though they were given this prediction by klarek on several occasions before they closed on the property. People believe what they want to believe much of the time. The people who quell this urge and try to accept congnitive dissonance as a necessary function of letting rationality and logic battle with the id, instead of letting the id win every time and then justifying it away, do indeed deserve credit for this quality. Not for being, "smarter" but for having more self-discipline.

Schizlor is right IMO. Most people beilieve what they want regardless of facts. Its hard wired.

Most of you probably believe in some insane fictional religion (everyone believes something different and ALL claim to be right! Logically, everyone is wrong there is no other sane truth! lol) anyway we are just monkeys chattering away at each other.....

I sold at the peak and I was obsessed with that decision, turned out I was correct in my 'crazy doomster housing bubble predictions' mostly thanks to this blog as it was one of if not the very first 'bubble blogs'.

The rise of the bubble blogs mirror the bubble 2003 to now. Crazy days.

Schizlor says

Currently I believe they are about 25% underwater

What their place is worth now is about 60% of what they paid. Don't know what their loan balance is, but I'm pretty sure they're not making the big bucks from it that she thought they'd be making.

And the quote is almost word-for-word what she said. Talking somebody out of buying a house back then was as simple as finding somebody with a room temperature IQ (or above) and an open mind. f they bothered looking at the numbers, they'd at least have had some doubt about jumping into the shark tank. "You don't know anything; my realtor said" was another common angry retort to a person that was only trying to help ffs.

PockyClipsNow says

I sold at the peak and I was obsessed with that decision, turned out I was correct in my ‘crazy doomster housing bubble predictions’ mostly thanks to this blog as it was one of if not the very first ‘bubble blogs’.

The thing that gets me is that those very same people still want to call us "Doom and Gloomers", as if we just try and shit on parades and revel in people's misery, instead of actually trying to prevent misery by steering people away from bad decisions.

First they say, "You're all just doom and gloom". Then, when our predictions were correct they say, "It's not like you could have actually known what you predicted would come true (ie, no one can predict the future)". These are the same people who now make the laughable claim that, "It's people like you with your doom and gloom that are partly responsible for the depressed housing market." People resent being told what to do. They like being told, "I told you so" even less. But to now make the claim that your misery is being prolonged by the person who told you not to do it in the first place? Comical.

klarek says

“You don’t know anything; my realtor said” was another common angry retort to a person that was only trying to help ffs.

That was the #1 comment made to me the minute I tried to suggest to any prospective buyers that buying now was not prudent because of overall market fundamentals and what the data was indicating.

"Yeah, but this area ......blah blah blah........... Our realtor did a lot of research on this neighborhood."

(I bet it was Suzanne. She's dynamite at research)

I ran into this attitude also back then. But I also thought in 1999/2000 real estate was in a bubble. ( I was horribbly wrong, I did not see 9-11 and the money printing tsunami/perpetual ZIRP coming at us).

Who could have predicted 9-11 and the feds response (money printing and ZIRP?). No one. BUT it was not that hard to see house prices triple in 5 years is an unsustainable situation when wages were basically flat.

Looking back at the last 10 years I will say this: Bin Laden won the war on terror or at least made a huge dent in our ass. How much longer can the feds sustain 10,000 military bases and all the Wars On Everything? Were gonna find out.

of course everybody has 20/20 vision in hindsight. You knew exactly when the bubble would peak.

I can probably pull up a few examples of houses selling at 2007 prices
or higher. Others have lost half their value. it all depends on location.

toothfairy says

of course everybody has 20/20 vision in hindsight. You knew exactly when the bubble would peak.

Um no, it was about whether there was a bubble or not. A fucking LOT of people saw it, but if you tried warning somebody who was intentionally ignoring it, they lashed out at you like you were trying to stop them from making a winning bet at the tracks. There was a lot of hostility and condescension from people who prided themselves on the sheer volume of money they were borrowing for a purchase they did zero homework on. That's not a hindsight observation, it was obvious and rampant.

@klarek

>LOT of people saw it, but if you tried warning somebody who was intentionally ignoring it, they lashed out at you like you were trying to stop them from making a winning bet in their tracks.

Not everyone, but yet all too often true this was (many can vouch for that on this site).

Sold in 2005 but had no support about the decision from my husband. The home we sold was sold again in 2006 for an increase of $100,000. The ONLY place I could come to was patrick.net with like minded people. No one, and I mean no one, was selling their home and renting.

The home we sold is now worth about 35% less and we are still renting. Big dilemma is where to buy. Thinking of going outside of the U.S.

klarek says

A fucking LOT of people saw it,

I agree. I have a Business Week magazine from 2005 with a small article suggesting that people put away more savings(like follow normal six months of expenses in the bank guidelines) because the housing market couldn't reasonable go up at the rate it was going up at the time.

robertoaribas says

EVERYONE said I’d gone crazy, including my now ex-wife. It set off a lifestyle change as well, and I sold my bmw convertible and bought a honda civic. I started riding my bicycle to work and eschewed all signs of wealth or success. f everybody who thought you had to own a home in a certain place or drive a certain car.

Yes! Really happy reading this description of your choices. Really cool. Being outside social norms is often viewed as "crazy" by those in the norms.

Aren't Hondas great!! I park a purple one in a lot filled with new BMWs every day I drive, insread of walk, to work.

Saw the whole housing market collapse coming in Sept '05, put house on the market that month. Sold in Jan '06 for $465K, paid $186 in '98. Rented back from buyer as they needed to sell property in northeast before they came west. That was supposed to be a year, turned into 3 years and they lost the house to forclosure. I bought it back at the Trustee Sale for $173K. It pays to read the blogs, I have a masters degree in this housing mess due to smart people that are willing to share their knowledge.

MountainMan, are you saying you bought your house back at a price lower than what you bought it at in 1998? Did the banks suspect fraud since you were the original owner?

MountainMan57 says

smart people that are willing to share their knowledge.

Good for you. I assuming this must be an inland area as it is now way below 1998 price.

robertoaribas says

klarek: unless mountainmain short sold his home, there is nothing to prevent him from buying it back.

Not disputing that, but look at it from the bank's perspective. Previous owner becomes tenant, renting from new owner, and new owner can't keep the place which gets sold back to the tenant at a price below what he paid over a decade ago.

I have no problem with it, I think it's great. Just knowing how banks get conned daily by people short-selling to their friends and family, and was curious if this guy had to deal with any diligence from the banks.

I was asking him a question, not making an accusation.

a old landlord of mine sold her house in 2006 in San Francisco.

a shitty house in Sunset, on 41st Ave for 850K.

She is a RE broker. she said "i think the price has stopped rising".

She was right.

yes, fortunate to sell. I am still renting. The home I sold is at least worth $600,000 less than I sold. that is a 30% drop

one for the road says

yes, fortunate to sell. I am still renting. The home I sold is at least worth $600,000 less than I sold. that is a 30% drop

Hmm, but I heard RE is a very good investment?

Wanted to sell in 2005 for what realtors conservatively estimated at a sale price of $750,000; wife didn't want to move but eventually convinced her and sold November 2007 for $525,000. We bought the house June 1999 for $225,000. Since moving we have been renting a much larger home in one of the most desirable neighborhoods in our region.

lungdoc says

Wanted to sell in 2005 for what realtors conservatively estimated at a sale price of $750,000; wife didn’t want to move but eventually convinced her and sold November 2007 for $525,000. We bought the house June 1999 for $225,000. Since moving we have been renting a much larger home in one of the most desirable neighborhoods in our region.

Perfect example of how large the bubble was. A house bought during a fair market (1999) for $225k would fetch $750k during bubble (2005, not even the 2006 peak). That's a price increase of 3.3 times. By 2007, the price increase was only 2.3 times. Yet, most people resist the idea that the price will ultimately return to it's pre-bubble level of 1.0 times because that implies another 43% decline.

Dan8267 says

Perfect example of how large the bubble was. A house bought during a fair market (1999) for $225k would fetch $750k during bubble

Interest rates were over 8% in 1999.

In 2005 it was possible to get 1% teaser-rate mortgages. That's a significant reduction in the cost of money -- 8% of $225K is $18,000, more than 2% of $750K.

Suicide lending was about 80% or more of the cause of the bubble peak, 2004-2005. Things plateaued after the summer of 2005 tho.

The fraud was immense with this. That's how a strawberry picker could borrow $700,000 to buy a house in Hollister during the peak.

In what rational world does a strawberry picker walk out of a bank with $700,000?

Troy says

In what rational world does a strawberry picker walk out of a bank with $700,000?

a) strawberry picker is a bank robber
b) strawberries are made of gold
c) 1) bankster loans out money it never intends to receive back, since the bondholder is on the hook anyway
2) find patsy who can state enough household income
3) ???
4) PROFIT!

You are my hero. I pretty much did exactly that.

I sold my condo 2005, cashed in, rented for 5 years. Now bought a SFR in late 2010. This one single decision increase my networth by $250k+. Also bought a rental property with positive cashflow (all cash) during this time.

I also thought about selling my lexus and replace with a hybrid. But then, it's not cost effective to do so... so I am now still keeping my 10 years old lexus. Good, reliable and trouble-free.

toothfairy says

reach

robertoaribas says

I sold my north scottsdale home in 2005 for twice what i’d paid for it 3 years before. I moved into one of my prior rental properties, and sold one other rental property shortly after that. $300k after taxes out of the market.
EVERYONE said I’d gone crazy, including my now ex-wife. It set off a lifestyle change as well, and I sold my bmw convertible and bought a honda civic. I started riding my bicycle to work and eschewed all signs of wealth or success. f everybody who thought you had to own a home in a certain place or drive a certain car.

masayako2456 says

I also thought about selling my lexus and replace with a hybrid. But then, it’s not cost effective to do so… so I am now still keeping my 10 years old lexus. Good, reliable and trouble-free.

Good decision. I never understood the people who replaced late-model SUVs with slightly more fuel efficient new large/mid-size cars as an overreaction to gas prices at $4.

Let's say you drive 15,000 miles/year, the prior gas price was more like $2.50, and the SUV gets 15 mpg vs. 25 mpg for your new car. That means you need 1000 gallons/year for your SUV and 600 gallons/year for your new car.

At $4, your new cost is $4000/year for the SUV vs. $2400/year for your new car. If your SUV is 3 years old, even assuming you would have kept it for 7 more years for a total of 10, you'd probably be better off with the SUV. You could have easily lost $11,200 between trading in your SUV at the bottom of the market for used SUVs (trade-in prices are typically several thousand below private party or retail Blue Book) and the instant depreciation hit your new car took (could easily be 20% on a $25K car), plus in many states, sales tax (nearing 10% in parts of California). If you planned to keep it fewer years, the calculation is even more in favor of keeping the older car.

Reminds me even if someone put in a repair/maintenance of say $300-400 a year that's still less money than buying something new. Nothing wrong with a hybrid but to jump ship just because an extra $1 a gallon just isn't worth it.

Reminds me someone I used to work with is on welfare. He had a new Rav 4..not a bad car..for some reason he traded it for a three year old H2 hummer..I have no clue why (it was a even trade). So now he gets half the mileage he had because...

Despite some repairs I would never buy a new car. Fewer problems? Well ford had 8 recalls on the focus when it came out. Reminds me cash for clunkers wasn't exactly a good idea. the new cars only had 0.8mpg more on average then what was turned in.

mdovell says

Reminds me even if someone put in a repair/maintenance of say $300-400 a year that’s still less money than buying something new.

Even if you have a high mileage car that requires $1000/year in maintenance, that'd be far less than something new. I've had cars I basically ran into the ground that probably only required about $500-800 in maintenance/repair per year. Even when I dropped $400 on a big repair, it wasn't a big deal.

Thanks for all stories so far! Most people did very well if they didn't purchase again soon afterwards (no surprise)...

in 2005, my parents sold two properties (one in san pablo, ca, one in the sonora, ca). they did very well. but then to defer paying capital gains, they did a 1030 exchange and bought in elk grove, ca. it's become an albatross.

i thought about buying circa 2007 in elk grove, ca - it was a 3/2 SFH that was listed for 300K. that same house would probably fetch ~120K right now.

Wow, so the Elk Grove decline is about 60%!

Bought in 1999 for $330K @7.5%, sold in 2008 for $620K (might have gotten an extra $30-$40K the year before, but I rented the place for a year for $22K in profit). The place we sold is now worth maybe $500K. One down the street is pending at $350K.

Rented a big place for four years and bought again this past summer for $799K. Just refinanced today at 4.25% 30 year mortgage. Saw the bubble coming, but I've been fortunate with timing.

we sold our home in the east foothills of san jose in July 0f 2004 and have rented ever since. At first we rented private homes but were forced to move twice because the owners wanted to sell. (both homes have foreclosed since new owners purchased in 05 and 07) We now rent an apartment and feel very fortunate and free. The home we sold in 04 also just foreclosed.

Bought in 2003, and sold in Jan, 2009. If the bidding was truely a confidential process then why was all three bids over asking in a market that was already falling. They were all basically the same bid, so definitely something funny was happening. Crazy people and realtards. I check every now and then to see if the new owners are going to resell or default. They would be down about 100K at this point. Sucks for them, but good timing for me. I bet the realtor got deleted from their speed dial.

I've rented ever since and will continue to rent until Patrick tells us he bought. ;)