Real Estate Crash thread

[iceman]

can you tell the difference between Ohio and upstate NY?

Well there've been two winter olympics just up the road from Saratoga and Whiteface has over 3300' of vertical, so yeah, I guess I could.

[Schmear]

Ha Ha. My next purchase will be an office in Downtown SLC, or a house downtown that can be used as an office. May not happen for a little while though. After that, it's the purchase of a house or property in Eden. With 3 ski resorts in that little valley and 2 of 3 with big expansions in the works I have a feeling that place will blow up soon.

There were people who still made money when the stock market ate shit, there are people who find ways to lose money when things are up. I think if you invest wisely regardless of huge overall trends you'll always come out alright.

BTW, Real Estate freaking rules. I should've quit my job long ago and focused on it more. I've made more from my Denver houses (part-time efforts) than I ever did working 40 hours a week for the man. No way I'll ever go back to work for someone else again.

My inlaws just bought a little house in Eden. They couldn't resist the price, and they love Snowbasin. Looks like I'll be paying you a visit soon.

And yes, real estate rocks. The demand for housing in Seattle is so high that most properties sell in a weekend with multiple offers, regardless of interest rates, and this will probably be the case for quite a long time.

[Benny Profane]

Reuters 6/1/2006

U.S. construction spending unexpectedly dipped 0.1 percent in April, its first decline in 10 months, due to a sharp drop in outlays on residential building, a government report showed on Thursday.

Construction spending declined to a seasonally adjusted annual rate of $1.196 trillion in April from March's record pace of $1.197 trillion, which was revised slightly downward, the Commerce Department reported.

Wall Street economists polled by Reuters forecast April construction spending to be unchanged from the originally reported March rate of $1.199 trillion. The decline in total spending was the first month-on-month drop since June 2005.

Private construction fell 0.1 percent to an annual pace of $933.3 billion as private residential construction fell 1.1 percent to a $657.1 billion rate after hitting a record high in March. April marked the biggest fall for residential outlays since a 1.4 percent drop in January 2004.

Economists have been expecting a slowdown in the overheated U.S. housing market for some time and have anticipated that business spending would help to offset this drag on the economy.

[sea2ski]

it's not negative in Summit, Garfield, Pitkin, or Eagle counties. but I'll keep you posted.

That would be because Wall St. types like my parents have been putting their money into housing instead of the stock market since 2001-02. Vacation homes are always the first to feel the pinch(which is a large portion of Summit and Eagle counties). You may not go negative but you certainly will see a bigger supply of available housing, longer times houses are on the market and a slow down of new building in the next year or two. Things like this always take a little longer to reach the heartland but the returns in the various financial markets are getting to where real estate is no longer the place to get the best ROI. Also understand that the real estate boom was a worldwide trend so it just wasn't US dollars driving the bus and world destinations like Vail recieved the benefits. Like any bull market they always have a problem going beyond 6 to 7 years.

[Benny Profane]

"UCLA Anderson Forecast Director Edward Leamer said all the speculation about what the central bank and its new chairman, Ben S. Bernanke, should do about rates was folly because of a real estate slowdown that was well underway.

"I don't think the Fed, at this point, has much control," Leamer said.

"We have a sick sector, the housing sector, and there's not a whole lot of medicine the Fed can provide."

Leamer's group sees declining home sales contributing to a broad economic slowdown that bottoms out at 2% growth and stays there for at least a couple of years.

"It's been a drunken party for several years," he said. "Now, we have to deal with the hangover.""

http://www.latimes.com/business/la-fi-jobs3jun03,1,7162941.story?coll=la-headlines-business

[Cono Este]

That would be because Wall St. types like my parents have been putting their money into housing instead of the stock market since 2001-02. Vacation homes are always the first to feel the pinch(which is a large portion of Summit and Eagle counties). You may not go negative but you certainly will see a bigger supply of available housing, longer times houses are on the market and a slow down of new building in the next year or two. Things like this always take a little longer to reach the heartland but the returns in the various financial markets are getting to where real estate is no longer the place to get the best ROI. Also understand that the real estate boom was a worldwide trend so it just wasn't US dollars driving the bus and world destinations like Vail recieved the benefits. Like any bull market they always have a problem going beyond 6 to 7 years.

For along time I agreed with this position. I put off buying a cabin in Tahoe in 2000 only to watch them double Obviously this had alot to do with lower rates, but when I moved there temprorarily in 2004 I realized that like myself, so many people can now work from these locations now. Tahoe at least, is no longer just a vacation destination. Plus all the retired people. Shit I know sales people now who work out of Maui. THE INTERNET changed alot. Whats a couple of hours drive once or twice a week to able to live in Summit county these days. Its worth it to many.

Still alot of second homes though, I hope I am wrong.

[Danno]

Just asked my processor since he knows more than I. He said most are 10 year interest only. At that point you are essentially looking at a traditional 20 year amortized loan. Essentially you are paying $ for the sake of paying $ to live in a house. You make no headway into your debt at all. The shorter the term a mortgage is amortized over the less interest you pay, but the higher the payment(obviously).

So, those poor bastards who got into a house for the sake of getting a house and have their financial picture set using their interest only loan are in for a painful wake up call when they start eating into the principle.

I think that's a simplistic way to look at it. The interest only loans can be bad, but they also can be good. And the 30 yr fixed ones (with 10 yrs of I/O) are most surely not the ones you need to worry about. They have certainty attached to them, unlike the shorter I/O loans. I have one of them, I should know.

I know exactly what I will be paying for the next 10 yrs, and I know exactly what I will be paying for the 20 after that. I expect that in 10 years time, the additional payment will be manageable at worst (assuming I don't refi before that). I grew up in the 80's, when interest rates were in double digits. I'm protected if that happens, my rate is fixed.

it's not negative in Summit, Garfield, Pitkin, or Eagle counties. but I'll keep you posted.

don't believe it's negative in Boulder either, at least not city of boulder. And I do not belive a place like Boulder will ever "burst", it's simply too desirable a place to live for that to happen (snicker all you want ). Not saying it won't flatten, as it did when tech stuff crashed, but it's not going to burst.

[Cono Este]

I was looking at a duplex in shit. louis where I now live. (sorry Karl). Anyway, with the 30 yr up a point the GRM was way too low for what people are asking. Like 7. Unless rent rises they need to shave 10-15% off the ask. MOst of these were bought and fixed up by flippers. Im waiting a year, I might be right for once out of the last 7 yrs

The people who bought to hold and re financed down over the last few yrs are still lookin mighty good.

But the people who are in the hot markets, who bought for the appreciation, have a negative cashflow, and did not lock in are gonna feel it.

[Cono Este]

I remeber buying my house in California, back around 9/11. I saw a house where a guy paid about 30% more than he was now listing it for. He had only owned the house for 2 yrs! All his equity, gone.

Granted, it was dot.com related. But that sucks.

IF rates keep rising, wages must rise as well, or the prices have to come down. jUst look at it from a first time buyer perspective. That payment is now 20% higher. Its gonna cut of the people new to the market, for sure. And rates are still cheap.

[mrryde]

BTW, Real Estate freaking rules. I should've quit my job long ago and focused on it more. I've made more from my Denver houses (part-time efforts) than I ever did working 40 hours a week for the man. No way I'll ever go back to work for someone else again.

^^^^^This WILL be me next year.^^^^^

Great stuff MD9. We are super focused on this biz right now and now that I finally got a website and some private money investors we are sure in full vulture mode!!!

Had one closing on a sell last week and 2 buy closings this week, the market here is ripe.

[sea2ski]

For along time I agreed with this position. I put off buying a cabin in Tahoe in 2000 only to watch them double Obviously this had alot to do with lower rates, but when I moved there temprorarily in 2004 I realized that like myself, so many people can now work from these locations now. Tahoe at least, is no longer just a vacation destination. Plus all the retired people. Shit I know sales people now who work out of Maui. THE INTERNET changed alot. Whats a couple of hours drive once or twice a week to able to live in Summit county these days. Its worth it to many.

Still alot of second homes though, I hope I am wrong.

I wouldn't disagree with your statement about more people working from areas like Summit County and I definitely agree with you statement about retiring baby boomers being a driving force behind the real estate market in resort areas.(That was one of the factors in my parents decision) However, I will say these areas have a different pricing structure than say suburban NY, SF, Chicago or just about any other major metropolitan area.

What my comments are based on is a lot of the spending on housing was based on low interest rates and money that might normally be put in the stock market going into vacation homes. I saw this type of thing happening on the Jersey Shore resort communities. I will also say what is now happening is a lot of the people who bought those vacation homes are now selling them because they didn't really use them that much and don't want to pay for the maintenance. They are taking that money and placing it back into the financial markets. This in turn is increasing the available housing and preventing prices from rising.

The pricing on the vacation homes is different than primary housing where prices are less flexible because most people look at their house as a retirement nest egg and will be more likely not to sell below a certain price. This isn't the case with someone who looks at a piece of property as an investment and has already made lets say 60% on their intitial investment in a vacation home over a three year period. A twenty percent annual return on your money is pretty good and the seller would be much more willing to sell at a lower price, because they are already ahead of what that same money would have returned in a financial market.

Understand for a Wall St. type, home buying is done for sheltering income from the tax man as much as it is done because the buyer has fallen in love with the idea of owning a home in a particular location. That is very different reason for owning real estate than the reason most people have for owning real estate.

[Cono Este]

What causes me to be skepital is my memory from the early ninties. I had a friend who kept playing the leverage game, he and his fmaily parlayed that shit into about 25 mil. Then they went for one last push and lost it all.

It happens.

But if done conservatively, and if implemented like md9 suggests, its still a great investment. But like anything, it not always up and up, and you have to be prepared to ride it out soemtimes.

With rates looking the way they do, you have to play it conservatively.

[sea2ski]

Oh you are so right about real estate not always going up. The condo I currently live in I bought for about half of original asking price when it was newly built. Of course it's tripled in value since I bought it six years ago.

Like with any boom you always hear the successes and not the failures.

[Benny Profane]

http://web-xp2a-pws.ntrs.com/content//media/attachment/data/econ_research/0605/document/dd052506.pdf

http://bigpicture.typepad.com/commen...state_dat.html

[Cono Este]

Here is a place for you to put your money benny, tailor made just for you. Short that is.

http://www.usatoday.com/money/perfi/housing/2005-11-09-home-price-futures_x.htm