tag:blogger.com,1999:blog-13164186.post115466402350686392..comments2024-01-27T19:26:32.604-05:00Comments on Bubble Meter: To Buy or Not To Buy That is The QuestionDavidhttp://www.blogger.com/profile/11169148764438565562noreply@blogger.comBlogger272125tag:blogger.com,1999:blog-13164186.post-1155313926877886212006-08-11T12:32:00.000-04:002006-08-11T12:32:00.000-04:00As for the homeowners whose mortage payments may r...<I>As for the homeowners whose mortage payments may rise? They've ALL been qualified for the worse case scenario that their mortgage can allow. So, they ALL can afford it barring some major calamity like a job loss stretching over a year or more ... since their savings and home equity can easily see them through. So, how many folks do you think are really going to be in a position of "having" to sell. -- Lance (August 09, 2006 8:12 PM)</I><BR/><BR/>First of all - an interesting article from the Wall-Street Journal (at another paper b/c of subscription requirements). It details the pain people who took out IO loans are current going through.<BR/>http://www.post-gazette.com/pg/06222/712559-28.stm<BR/><BR/>I think the claim that folks were financed for worst-case scenerios is dubious, at best. Have you any idea how much an even minor medical emergency, even with very good insurance, can cost someone? What tools are you aware of that calculate risk with such precision?<BR/><BR/>HAnonymousnoreply@blogger.comtag:blogger.com,1999:blog-13164186.post-1155274107621240102006-08-11T01:28:00.000-04:002006-08-11T01:28:00.000-04:00Robert said:"So they are offering units for as muc...Robert said:<BR/>"So they are offering units for as much as $200 more than the market will bear.<BR/>As renters refuse to pay such high prices, the units remain empty.-"<BR/><BR/>No, landlords will just have to rent what "the market will bear" and assuming that the costs are more than the rent as you stated, then they will have to subsidize their investment for the 12 to 18 months it takes for (a) the market to go back to current price levels and/or (b) for rents to catch up to outlay. But note that we've discovered that 82% of all non-primary residences (i.e., rental units as well as true vacation homes) are owned free and clear ... i.e., no underlying mortgage expense to affect cash outlays ... and even if you want to look only at recent buyers, we also learned that something like 32% of all non-primary residences are bought for cash ... i.e., without a mortgage. The population of your "can't afford it thesis" is getting smaller and smaller ...Lancehttps://www.blogger.com/profile/12216089306021385355noreply@blogger.comtag:blogger.com,1999:blog-13164186.post-1155266404149213962006-08-10T23:20:00.000-04:002006-08-10T23:20:00.000-04:00Lance said...“That said, how many investors do you...Lance said...<BR/>“That said, how many investors do you think you're going to have out there ready to sell to you at any price? All they need do is rent the place out ... and benefit from the rising rents.”<BR/><BR/>I guess Lance missed:<BR/><BR/>-The problem, Louis and others say, is that the new owners of the units want to cover their mortgages, taxes, insurance and maintenance costs. So they are offering units for as much as $200 more than the market will bear.<BR/>As renters refuse to pay such high prices, the units remain empty.-<BR/><BR/>“They've ALL been qualified for the worse case scenario that their mortgage can allow. So, they ALL can afford it barring some major calamity like a job loss stretching over a year or more ... since their savings and home equity can easily see them through.”<BR/><BR/>Forgive me, but I just love this 100% qualified buyer video:<BR/>http://abcnews.go.com/Video/playerIndex?id=1752600Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-13164186.post-1155266243170905132006-08-10T23:17:00.000-04:002006-08-10T23:17:00.000-04:00David wrote:"real dollar price declines will be be...David wrote:<BR/>"real dollar price declines will be between 25% to 60% from peak price."<BR/><BR/>David, your hypothesis depends on people selling off en masse, and this won't happend if the price declines are in real dollar price declines vs. nominal price declines since the same devaluation of the dollar that will benefit prospective buyers will also benefit current mortgage holders. I know you can argue that those with adjustable mortgages won't benefit from the cheaper and cheaper mortgage payments they need to make each month as inflation devalues the nominal dollars with which they are paying, however even people with ARMs will benefit somewhat from the fact that their mortgages are capped by something like a 4% - 5% percentage point increase. In order to get the real devaluation that you are hoping for (the 25% - 60%) you would need inflation close to something like the 25% - 60% you are predicting ... And in an environment where inflation was 25% - 60%, what difference would the 4% - 5% ARM increase make? They'd still be paying some 20% - 55% less each year in real dollars ... which of course can't happen. What will happen is that these opposing forces will largely cancel themselves out --- as will the fact that everyone on the sidelines will be in the field trying to buy the minute the nominal declines are somewhere near 10% - 15% ... and this will lead to the soft landing I am a believer of. Now, as a mortgage holder it would definitely be in my interests for me to believe in YOUR scenario. Wouldn't I love to see my mortgage balance drop by 25% - 60% in real dollar terms over the course of 6 months to a year? ... you betcha! ... But it can't happen ... How would lenders have any money left to lend to you to buy if they were stuck with getting that much less back from me and the other mortgage holders? They'd have to fold up shop in such a situation ... and you would find yourself back at square one. Do you see why your bubble scenario if it really could happen would be YOUR nightmare scenario ... and a mortgageholder's most unreachable dream?Lancehttps://www.blogger.com/profile/12216089306021385355noreply@blogger.comtag:blogger.com,1999:blog-13164186.post-1155243393528031792006-08-10T16:56:00.000-04:002006-08-10T16:56:00.000-04:00Lance wr0te: "we're now at the point where it will...Lance wr0te: "we're now at the point where it will take a small temporary pause (or even a dip in some spots)"<BR/><BR/>The decline in the bubble markets will be much more then a 'small temporar pause' or a innocuous sounding 'dip.' In the bubble markets real dollar price declines will be between 25% to 60% from peak price.Davidhttps://www.blogger.com/profile/11169148764438565562noreply@blogger.comtag:blogger.com,1999:blog-13164186.post-1155182434520972742006-08-10T00:00:00.000-04:002006-08-10T00:00:00.000-04:00anon said:"They've never seen anything like this b...anon said:<BR/>"They've never seen anything like this before, and don't know what to do."<BR/><BR/>It sounds like you haven't been around very long if you don't know that real estate is cyclical and we're now at the point where it will take a small temporary pause (or even a dip in some spots) and then resume the normal 4%-5% (plus inflation) increase per year.Lancehttps://www.blogger.com/profile/12216089306021385355noreply@blogger.comtag:blogger.com,1999:blog-13164186.post-1155181863753207182006-08-09T23:51:00.000-04:002006-08-09T23:51:00.000-04:00It's not just the sellers that are in denial, but ...It's not just the sellers that are in denial, but their agents, as well. Neither group has yet come to grips with the fact that prices are falling, after so many years of rising prices. They are still scratching their heads as to why so many properties come onto the market and nothing seems to be selling any more. But it hasn't occurred to them that their properties are overpriced to attract any attention from potential buyers. They've never seen anything like this before, and don't know what to do.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-13164186.post-1155180088210542582006-08-09T23:21:00.000-04:002006-08-09T23:21:00.000-04:00If you don't have to sell, then stay put. Take yo...If you don't have to sell, then stay put. Take your house off the market. Houses are to be lived in. They were never meant to be piggy banks to be raided for plasma tvs today or for retirement savings tomorrow. If you do have to sell, for whatever reason, then you had better lower you price drastically right now.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-13164186.post-1155179569700088172006-08-09T23:12:00.000-04:002006-08-09T23:12:00.000-04:00Anonymous said... "The way to sell a house in this...Anonymous said... <BR/>"The way to sell a house in this market is to reduce the price $1000 a day until you get an offer. Gotta advertise that's what you're doing. A lot of agents won't go along, because their commissions get smaller every day.'<BR/><BR/>What wishful thinking from you bubbleheads! Didn't you read the post from the guy from Phoenix on the thread further up where he said he just refinanced with 30 yr fixed rates and is just going to hold the properties until prices go up again? Earlier I posted a link where it substantiated that something like 82% of all non-primary homes are owned free and clear. That is all vacation homes, second homes, and rental homes. It additionally said something about most new investment houses being bought by investors were bought for cash. That said, how many investors do you think you're going to have out there ready to sell to you at any price? All they need do is rent the place out ... and benefit from the rising rents. As for the homeowners whose mortage payments may rise? They've ALL been qualified for the worse case scenario that their mortgage can allow. So, they ALL can afford it barring some major calamity like a job loss stretching over a year or more ... since their savings and home equity can easily see them through. So, how many folks do you think are really going to be in a position of "having" to sell. I would bet it's gonna be far less than the number of bubbleheads out who will be running over each other trying to be the first to buy a discounted property ... and thus driving prices way back up. Get your finances in order and quit waiting around like a vulture hoping to profit from the bad luck you are wishing on people who had more balls than you have.Lancehttps://www.blogger.com/profile/12216089306021385355noreply@blogger.comtag:blogger.com,1999:blog-13164186.post-1155177482759775092006-08-09T22:38:00.000-04:002006-08-09T22:38:00.000-04:00The way to sell a house in this market is to reduc...The way to sell a house in this market is to reduce the price $1000 a day until you get an offer. Gotta advertise that's what you're doing. A lot of agents won't go along, because their commissions get smaller every day. But it is a good way to find the REAL market value today - not what Louie down the street got for his last year. Forget Louie. Louie knows when to get out. You probably thought Louie was an idiot when he sold last year, instead of allowing his home to skyrocket in value forever like you planned to do. Louie probably sold his stock in pets.com at the right time, too. The Louies of the world know how to make money. They make their money from clueless losers who don't know what they are doing, except following a crowd of other clueless losers. Forget Louie. You just need to get out NOW, while you still can. Knock about 20% off your asking price, and be glad you at least got something. Others won't get anything except foreclosure notices.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-13164186.post-1155140783959105202006-08-09T12:26:00.000-04:002006-08-09T12:26:00.000-04:00"Fannie Mae, the country's largest source for home..."Fannie Mae, the country's largest source for home mortgage funding, estimates that nearly one-third of the total outstanding mortgage debt is set at an adjustable rate."<BR/>-- Newsweek <BR/>http://www.msnbc.msn.com/id/14251743/<BR/><BR/>An interesting addition to the numbers circulated in this thread.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-13164186.post-1155125912706966052006-08-09T08:18:00.000-04:002006-08-09T08:18:00.000-04:00Lance never responds to any arguments except to sa...Lance never responds to any arguments except to say "Buy! Buy! Buy!".Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-13164186.post-1154983906163079742006-08-07T16:51:00.000-04:002006-08-07T16:51:00.000-04:00Oh, Lance can handle himself without me.Oh, Lance can handle himself without me.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-13164186.post-1154983394928339672006-08-07T16:43:00.000-04:002006-08-07T16:43:00.000-04:00a_investor said..."Good job Lance!"thank you ... g...<I>a_investor said...<BR/>"Good job Lance!"<BR/><BR/>thank you ... glad you are back!</I><BR/><BR/>Glad to see you back, va_investor. Poor Lance was having to fend off several of us bubbleheads at the same time.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-13164186.post-1154983348687035212006-08-07T16:42:00.000-04:002006-08-07T16:42:00.000-04:00Robert,I think many investors are trying to sell a...Robert,<BR/><BR/>I think many investors are trying to sell and this is seen in the inventory numbers. Others are "given a number" by an agent and then just close their eyes. The rent "number" is never investigated or questioned by these "quasi" landlords. Foreclosures will follow for those that have no assets at risk.<BR/><BR/>One HAS to be hands-on with a rental. At least as far as determining FMRent and rental bonus.<BR/><BR/>I do not forecast any significant drops in rents based on the 90's.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-13164186.post-1154982520844231402006-08-07T16:28:00.000-04:002006-08-07T16:28:00.000-04:00va_investor,What I wonder about is more rentals co...va_investor,<BR/><BR/>What I wonder about is more rentals coming on the market. With a cooling market and more inventory, investors can not get these homes off their hands. So, they try to rent them out ($200 above market no less) and no takers. As more and more investors do the same (flood the rental market) would they not have to price their rent even more competitively?Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-13164186.post-1154980524613268852006-08-07T15:55:00.000-04:002006-08-07T15:55:00.000-04:00Robert,It is always amazing to me that some landlo...Robert,<BR/><BR/>It is always amazing to me that some landlords are so penny wise and pound foolish. They want that extra $200 per month even if that means their unit will be vacant for 6 months. Stupid, stupid, stupid.<BR/><BR/>6 times 2k equals 12,000. Divided by 12 months equals 1,000 per month. Why they don't lower the rent 200 and get someone in their is beyond me.<BR/><BR/>The only amswer I come up with is Rental Agents. They make nothing and are worth nothing. They will not give you any practical advice.<BR/><BR/>I ALWAYS offer a bonus to the renting agent. That, with a slightly below market rent will end vacancies - a landlord's worst enemy (along with turnover).Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-13164186.post-1154978967805858892006-08-07T15:29:00.000-04:002006-08-07T15:29:00.000-04:00http://www.heraldtribune.com/apps/pbcs.dll/article...http://www.heraldtribune.com/apps/pbcs.dll/article?AID=/20060807/BUSINESS/608070439/1007<BR/><BR/>-The problem, Louis and others say, is that the new owners of the units want to cover their mortgages, taxes, insurance and maintenance costs. So they are offering units for as much as $200 more than the market will bear.<BR/>As renters refuse to pay such high prices, the units remain empty.-<BR/><BR/>-Another way to solve the oversupply problem would be for landlords to drop rents.<BR/>"Instead of making money, landlords will see money going out." Holmes said. "It's called an alligator, and it will eat you every month.<BR/>"Eventually, rents will go up and you'll get to the point where you make money. In the meantime, getting half a loaf is better than getting no loaf at all."-Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-13164186.post-1154976803054909002006-08-07T14:53:00.000-04:002006-08-07T14:53:00.000-04:00va_investor said... "Good job Lance!"thank you ......va_investor said... <BR/>"Good job Lance!"<BR/><BR/>thank you ... glad you are back!Lancehttps://www.blogger.com/profile/12216089306021385355noreply@blogger.comtag:blogger.com,1999:blog-13164186.post-1154975610064193542006-08-07T14:33:00.000-04:002006-08-07T14:33:00.000-04:00"Hence your small part in the escalation of housin...<I>"Hence your small part in the escalation of housing expenses."</I><BR/><BR/>I can't have any influence on the escalation of home prices because I'm not buying real estate. One cannot push prices up when they aren't involve in the market.<BR/><BR/>I am helping to increase rents, though, because I rent my apartment.<BR/><BR/><I>"viewing your home as an assest vs. the expense it is, has the changed the market dynamics"</I><BR/><BR/>Lance,<BR/>I think you need to take an accounting class.<BR/><BR/><I>"Don't you see where unlike your decision to treat an expense like an assest is an individual voluntary one, determining where supply meets demand is not?"</I><BR/><BR/>Anyone who buys helps to increase demand. Anyone who doesn't buy helps to lower it. It doesn't matter what their motivation is. It is the act of buying that increases demand.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-13164186.post-1154973121878619592006-08-07T13:52:00.000-04:002006-08-07T13:52:00.000-04:00va_investor,I think you perhaps misunderstand my p...va_investor,<BR/><BR/>I think you perhaps misunderstand my position. I'm but one of many people who were saving for a reasonable down payment when prices skyrocketed beyond imagination. Wages, despite substantial increases over several years, could not keep pace with a reasonable down payment, and I hesitated to take out a risky loan for a variety of reasons. Mostly because I felt they were being used - successfully for some - to buy homes that were beyond reach; also because I felt like interest rates were at a historic low, so the reset was likely to come when they were on the way up (a gamble, in my opinion). With a growing family, it was a chance I was unwilling to take, especially since I have a nice SFH to rent that is affordable.<BR/><BR/>So for me, it has never been about an investment (beyond the fact that *any* purchase of this size is an investment of one type or another... anyone planning to *lose* money on such a purchase is making a poor decision, I think we can agree). I think people should put their money wherever they think it is safe - hopefully diversified enough to cover many potential outcomes.<BR/><BR/>My point has been, is, and remains this: I can do the math on my family income, see what I can afford, and know that I would rather rent an affordable home (there are many, in my experience) than purchase a home that came with a number of unreasonable demands common during the "boom": ranging from escalation clauses, to snap decisions on a home and its neighborhood, to interest-only loans, to no inspections, to skyrocketing prices that, in many cases, carried little rationale (no improvements, longer commutes, "as is" purchasing). The list could go on.<BR/><BR/>So, let me be clear. I think real estate was a wise investment 5 years ago. Congratulations to those who managed to sink their teeth into it. I speak as a first-time buyer, with a family, who can rather dispassionately say that the market has been too expensive, and when things settle down, I will happily purchase a home. Currently, there are enough cautionary signs to make renting a perfectly happy alternative. Those flags have been discussed in detail, and I know you are familiar with them, so no need to rehash them here. All general indications, however, point to the fact that deals are out there to be had, and that the boom, for all intents and purposes, has lost its bang. If prices adjust down, bully for me, I can look for deals. If they continue to modestly increase, I simply will keep saving, or I will move to an area I can afford. Either way, I lost out on the big increase, so there’s little more for me to lose by waiting. <BR/><BR/>Or, in short form: the worst reaction to missing out on something because you were by nature rather more conservative with your finances than you could have been is to simply take chances for the sake of taking chances, or because you are afraid of "missing out." I’m quite practical about the fact that I did miss out in 2001, and I’m also quite practical about the fact that there’s a lot of real estate inventory, and that can only mean good things for me at this point. <BR/><BR/>HAnonymousnoreply@blogger.comtag:blogger.com,1999:blog-13164186.post-1154971041482373782006-08-07T13:17:00.001-04:002006-08-07T13:17:00.001-04:00H,Do you thinks stocks are safer? Where would you...H,<BR/><BR/>Do you thinks stocks are safer? Where would you have people invest their money? C.D.s?Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-13164186.post-1154971031266979872006-08-07T13:17:00.000-04:002006-08-07T13:17:00.000-04:00I would point out that 35-37% seems to be lower th...I would point out that 35-37% seems to be lower than the "nearly 40%" from the 2001 link, and stand by my original question, which was "with the increased use of ARMs, and the rise in home ownership, what are the numbers in 06?"<BR/><BR/>But thanks for the sleuthing. Interesting adjustments for home-equity loans. I wonder if lines went up or down in the 3 following years. Anyone have any solid numbers?<BR/><BR/>HAnonymousnoreply@blogger.comtag:blogger.com,1999:blog-13164186.post-1154970770174140982006-08-07T13:12:00.000-04:002006-08-07T13:12:00.000-04:0035-37% in 2003? Ok, thanks.H35-37% in 2003? Ok, thanks.<BR/><BR/>HAnonymousnoreply@blogger.comtag:blogger.com,1999:blog-13164186.post-1154970616618922402006-08-07T13:10:00.000-04:002006-08-07T13:10:00.000-04:00Good job Lance!Good job Lance!Anonymousnoreply@blogger.com