Real Estate Crash thread

[Benny Profane]

http://techcrunch.com/2012/03/24/ent...not-buy-homes/

[cramer]

Compare earning potential to Eastern Washington sometime.

no cramer, the current "boom" is nothing like 15 years ago.

There will not be a boom like that i dont think ever again. but its been 5 years since the meltdown. All those folks are now starting to be eligible to buy again. As long as the banks dont fuck themselves and release thousands of homes on the market and do it slowly. I would like to hope the prices start to rise. I like what bofa is piloting. Renting the houses back out to who they foreclose on for a couple years. Being the biggest holder of home loans, they are also leading all banks in short sales. sadly, there is going to be another pretty big wave of foreclosures. Hopefully the banks handle it a little more strategically this time. lets also hope that the ones who made those huge mistakes before, make a better decision and buy something they can afford to live in.

[cramer]

http://techcrunch.com/2012/03/24/ent...not-buy-homes/

A) Cash Gone. You have to write a big fat check for a down payment. “But its an investment,” you might say to me. Historically this isn’t true. According to Robert Shiller from Yale, in Irrational Exuberance, 2nd edition, inflation-adjusted housing returned 0.4% from 1890 – 2004. And that’s just housing prices. It forgets all the other stuff I’m going to mention below. Suffice to say, when you write that check, you’re never going to see that money again. Because even when you sell the house later you’re just going to take that money and put it into another down payment. So if you buy a $400,000 home, just say goodbye to $100,000 that you worked hard for. You can put a little sign on the front lawn: “$100,000 R.I.P.”


(you might as well set this cash on fire)

Much better for an entrepreneur is to invest in yourself. Take 1/20th of the down payment amount. Start a business. Your investment might go to zero (which it might also do with a house) but it might also go up 10,000%. Eventually, as an entrepreneur, if you are persistent enough, you will get one of those 10,000% returns. And you will be able to be persistent because you didn’t waste all the money and time that a house would’ve cost you.

B) Closing costs. I forget what they were the last two times I bought a house. But it was about another 2-3% out the window. Lawyers, title insurance, moving costs, antidepressant medicine, therapy. It adds up. Two- to three-percent. Do you like flushing your money down the toilet? But, people say: isn’t that what you are doing with rent money? Absolutely not. See below.

C) Maintenance. No matter what, you’re going to fix things. Lots of things. In the lifespan of your house, everything is going to break. Thrice. Get down on your hands and knees and fix it! And then open up your checkbook again. Spend some more money. I rent. My dishwasher doesn’t work. I call the landlord and he fixes it. Or I buy a new one and deduct it from my rent. And some guy from Sears comes and installs it. I do nothing. The Sears repairman and my landlord work for me.

When you are an entrepreneur, two things: A) you need every last dime for your business. Not for your dishwasher. And B) you need every last second

Well A, B and C are all a crock of shit.

A. FHA lets you put 3.5 or 4% down. That isnt shit. I spend that on booze in a year. I'm not sure about the collective rest, im looking to live rent and house payment free when i retire. It has zero to do with investment.
B. The only closing costs that came out of pocket for me was my PMI. The rest was paid by the seller, which is very common these days, especially when you are buying an REO.
C. I pay 450 a year for home warranty. Unless a tornado hits my house, im pretty covered. 70 something a month for 5 months out of the year is quite affordable.

That arcticle is absurd. ya, throw away 200K in rent like i did for 10 years. Thats great advice. give me a break. Who the fuck cares if you lose your house. Oh no, your back to throwing money away on rent. At least i can do what i want with my place and get a nice chunk of change back every year. Advising someone not to buy in todays low interest rate market is nuts. If your house payment is the same as rent is going to be, why not go fha and buy a house. Minimal investmant ive tripled my money on in tax returns alone. Fuck if you bought back when i did, i was only 3K out of pocket at the time. I have a 7500 dollar loan that im paying off 500 a year at tax time. I took that money and put it right back in my 401K and paid my down payment off. Now my down payment is a zero interest loan from the feds. Dont buy a house? Thats terrible advice in my opinion. whats 10K loan out of your retirement going to do to you. Jack shit, thats what.

with all that said, if i was going to go conventional loan, whole different story. I would not put 20% down on a house right now. I dont know if i would for another at least 5 years or until i saw steady growth in house prices for a couple of years. if i was going to put 20% down on something, it would be a cheap ass condo so if i lost my house, i had backup plan, lol. I think the only way to go right now is fha. Minimal out of pocket investment, your payment is an extra 100 a month for the pmi, which is counting penny's when your already shoveling out 1600 or whatever a month.

[meatdrink9]

Things are picking up in my neck of the woods. Last year inventory was 3 years plus. We've been at a 9 month inventory for the past couple of months and I expect it will get even shorter as we get into summer. Prices aren't climbing massively, but there's been a small bump in the right direction. We've also been getting outbid a fair amount lately. We had an offer submitted in under 24 hours of an REO coming online and we were the third offer in. Hopefully we'll get it on the highest and best round. We're not flippers, we're holding long term/renting and cash flowing in the double digit percentages.

I have one client who took his Roth IRA and did some sort of self-directed thing with it and is now buying houses with his Roth. All of his rental cash flow is 100% tax free. He's been buying more turn key places (less remodel work needed) and is probably averaging 10-12% so far. He's buying 10+ homes with the fund and keeping all the incoming rents in the Roth. All new stuff to me, but it sounded like a smart way to get a lot of money into a Roth and then live on the cash flow tax free in the future (also no cap gains).

[Benny Profane]

Things are picking up in my neck of the woods. Last year inventory was 3 years plus. We've been at a 9 month inventory for the past couple of months and I expect it will get even shorter as we get into summer. Prices aren't climbing massively, but there's been a small bump in the right direction. We've also been getting outbid a fair amount lately. We had an offer submitted in under 24 hours of an REO coming online and we were the third offer in. Hopefully we'll get it on the highest and best round. We're not flippers, we're holding long term/renting and cash flowing in the double digit percentages.

I have one client who took his Roth IRA and did some sort of self-directed thing with it and is now buying houses with his Roth. All of his rental cash flow is 100% tax free. He's been buying more turn key places (less remodel work needed) and is probably averaging 10-12% so far. He's buying 10+ homes with the fund and keeping all the incoming rents in the Roth. All new stuff to me, but it sounded like a smart way to get a lot of money into a Roth and then live on the cash flow tax free in the future (also no cap gains).

Good article about self directed IRAs. Be careful - you are essentially letting someone have control of your money as a custodian, and theft has occurred, but it's been rare. Choose s reputable custodian.

http://www.nytimes.com/2012/04/21/yo...pagewanted=all

[mcsquared]

Things are a bit crazy in my hood (NW Denver) right now. Anecdotal evidence is the Dirt pimp I overheard in the hallway of my kids daycare breaking the news to his clients that their offer of $11k over asking price wasn't good enough and they better move fast on another place if they don't want to miss out on that one too. I tend to think its all a temporary head fake of sorts. Everybody who bought in 2005-2008 is selling and mostly breaking even. The wife and I were shopping for a new place recently and stuff was getting bid up just like the old days. So we may wait until winter or pop the top on our current place instead.

Meatdrink, did you ever sell your place in Whittier? This summer might be a good time. Even prices up there are kind of crazy.

[Flexon Phil]

In NW Reno, I am seeing less houses for sale and on the market shorter and even some "new construction" that was dormant for a year when I moved here. All good signs.

[meatdrink9]

Meatdrink, did you ever sell your place in Whittier? This summer might be a good time. Even prices up there are kind of crazy.

We've still got it. We actually have a couple of places there. Our agent in the area has urged us to sell and is claiming a sub 3-month inventory (seller's market). I'm on the fence. I'd love to move the cash to Ogden, but I've got great tenants right now and I don't want to shake up their lives (showings, potential of leaving/buying out their lease, etc...). Selling a tenant occupied house is a pretty rough scenario. If I could sell it smoothly I would. Otherwise I'm cool to keep cash flowing it and watching the area improve.

[schuss]

Not yet, but its heading that way again. Silicon valley is on fire again. rents and home values on fire again in that area. Pushing people out to other areas to rent and buy. Its the same thing down here every 10-15 years. Its a pretty vicous cycdle unless you cop a home and sell it for a big profit and leave california. Thats the big problem down here is you can come out big, but you either have to buy bigger or invest that monetary gain in a business. My buddy hit it big in 2005 and ended up having to buy a subway franchise. They only give you 30 days i think he said or capital gains tax. buying another house wasnt an option for him. Thats when the houses in BFE started hitting like 600K+

When a small 2 bedroom down the street from me is $721k, I think prices are stupid. I know it's a desirable area, but the prices are truly just silly.

[LeeLau]

Vancouver's got a little bubble going here and people are blaming immigrant investors ie the subtle bigotry of rich Chinese coming over and buying everything.

Nice little letter summing up the hypocrisy of the objections

http://www.vancouversun.com/story_pr...01944&sponsor=

"On the border: Controlling the flow of people


VANCOUVER SUNAPRIL 23, 2012


Re: Race is the unspoken issue surrounding real estate prices, Column, April 3

There is a lot of debate in the Vancouver real estate discussions these days about how much "offshore" money is driving the market.

It isn't about race or prejudice or anything of the sort. People in Vancouver (in particular) simply have to get used to the fact that we are being "colonized" by people who have far more money than most of the local population will ever see.

People tend to forget that we "western European descendants" have been buying (or simply declaring as ours) property in all sorts of exotic locales for a variety of reasons over the past century and into the distant past.We Canadians and Americans have gone into the Caribbean, Mexico and other exotic locales. The Brits buy in Spain, Italy, Greece, South Africa, Thailand. The local/indigenous populations haven't always appreciated the "influx" of 'foreigners,' and it always drives real estate prices skyward.

I regularly hear these new "purchasers" often don't bother to live in the newly bought properties; they simply show up once or twice a year to "visit." Well, some of us locals have also bought properties that sit empty until we arrive for our vacations or rent them out to friends/tourists, so, why can't others do the same in our backyard? Does it sound like a collective, hypocritical double standard?

There is no denying that local people working at local jobs are not responsible for the lack of affordability in Metro Vancouver. The money and power on this small sphere we call our planet is shifting - has shifted to other locations - get used to it.

Gerard Charlton Vancouver

[GiBo]

Holy shit. Watched Frontline last night. I've read about credit swaps and all that before, but to see a comprehensive, detailed chronology of how and why all that shit went down was eye opening. It was interesting to see how the credit market created both the housing crisis and the stock market crash of '29. But greed blinds. We're just monkeys with Ipads. When it comes down to it, we'll ignore any facts if we're getting lots of bananas.

So the bottom line is people like me who didn't do anything crazy- just bought a house I could afford because I needed a place to live- got screwed by a bunch of greedy assholes doing all kinds of crazy shit with the credit market.

Again, not anything all you finance geeks didn't know, but to see it all laid out like that was pretty jaw dropping to me. Worth the time to watch.

http://www.pbs.org/wgbh/pages/frontl...r-wall-street/

[Benny Profane]

And don't forget, nothing has been done to prevent another blow up of some important institution since 08. Dodd Frank is a pathetic joke, the TBTF banks are even bigger, and the derivatve market is trillions larger. The whores in DC want you to believe that government incentives for home ownership are the root of the problem, and less regulation and transparency will make us all rich again. I'm talking about both parties here - name me a banker Obama has even indicted, let alone put in jail for crimes upon the people.

[Dantheman]

Holy shit. Watched Frontline last night. I've read about credit swaps and all that before, but to see a comprehensive, detailed chronology of how and why all that shit went down was eye opening. It was interesting to see how the credit market created both the housing crisis and the stock market crash of '29. But greed blinds. We're just monkeys with Ipads. When it comes down to it, we'll ignore any facts if we're getting lots of bananas.

So the bottom line is people like me who didn't do anything crazy- just bought a house I could afford because I needed a place to live- got screwed by a bunch of greedy assholes doing all kinds of crazy shit with the credit market.

Again, not anything all you finance geeks didn't know, but to see it all laid out like that was pretty jaw dropping to me. Worth the time to watch.

http://www.pbs.org/wgbh/pages/frontl...r-wall-street/

I saw it last night too, looking forward to part 2. A lot I already knew, a lot I didn't, eye opening and infuriating regardless.

[4matic]

And don't forget, nothing has been done to prevent another blow up of some important institution since 08. Dodd Frank is a pathetic joke, the TBTF banks are even bigger, and the derivatve market is trillions larger. The whores in DC want you to believe that government incentives for home ownership are the root of the problem, and less regulation and transparency will make us all rich again. I'm talking about both parties here - name me a banker Obama has even indicted, let alone put in jail for crimes upon the people.

Down payments have increased and bank leverage ratios are 1/3 what they were in 07/08.

[Benny Profane]

Down payments have increased and bank leverage ratios are 1/3 what they were in 07/08.

This is not about mortgage financing. It's much, much bigger. And, you have no idea what bank leverage is these days. Nobody does. Chris Whalen scratches his head and laughs about how opaque the bank reports still are. Moynihan couldn't tell you What the state of BofA leverage is if you had him tied up by the thumbs, I'll bet.

[ColMan]

Things are a bit crazy in my hood (NW Denver) right now. Anecdotal evidence is the Dirt pimp I overheard in the hallway of my kids daycare breaking the news to his clients that their offer of $11k over asking price wasn't good enough and they better move fast on another place if they don't want to miss out on that one too. I tend to think its all a temporary head fake of sorts. Everybody who bought in 2005-2008 is selling and mostly breaking even. The wife and I were shopping for a new place recently and stuff was getting bid up just like the old days. So we may wait until winter or pop the top on our current place instead.

Same deal in the SE Denver area. Homes are selling like crazy. I had 3 offers on my place in less than 24 hours of it being listed. Went way above the asking price. My neighbor ended up in the same situation recently (2 offers on the first day). It really has turned into sellers market (for now), even in the 500-800k range. My guess is very low inventory (40% less vs. last yr in the Denver area) and low interest rates are driving it. The summer like weather doesn't hurt as well.

[Benny Profane]

Same deal in the SE Denver area. Homes are selling like crazy. I had 3 offers on my place in less than 24 hours of it being listed. Went way above the asking price. My neighbor ended up in the same situation recently (2 offers on the first day). It really has turned into sellers market (for now), even in the 500-800k range. My guess is very low inventory (40% less vs. last yr in the Denver area) and low interest rates are driving it. The summer like weather doesn't hurt as well.

What exactly do you mean by southeast Denver?

[ColMan]

What exactly do you mean by southeast Denver?

Washington Park/Platt Park/Bonnie Brae

[Hugh Conway]

Vancouver's got a little bubble going here and people are blaming immigrant investors ie the subtle bigotry of rich Chinese coming over and buying everything.

Nice little letter summing up the hypocrisy of the objections

http://www.vancouversun.com/story_pr...01944&sponsor=

"On the border: Controlling the flow of people


VANCOUVER SUNAPRIL 23, 2012


Re: Race is the unspoken issue surrounding real estate prices, Column, April 3

There is a lot of debate in the Vancouver real estate discussions these days about how much "offshore" money is driving the market.

It isn't about race or prejudice or anything of the sort. People in Vancouver (in particular) simply have to get used to the fact that we are being "colonized" by people who have far more money than most of the local population will ever see.

People tend to forget that we "western European descendants" have been buying (or simply declaring as ours) property in all sorts of exotic locales for a variety of reasons over the past century and into the distant past.We Canadians and Americans have gone into the Caribbean, Mexico and other exotic locales. The Brits buy in Spain, Italy, Greece, South Africa, Thailand. The local/indigenous populations haven't always appreciated the "influx" of 'foreigners,' and it always drives real estate prices skyward.

I regularly hear these new "purchasers" often don't bother to live in the newly bought properties; they simply show up once or twice a year to "visit." Well, some of us locals have also bought properties that sit empty until we arrive for our vacations or rent them out to friends/tourists, so, why can't others do the same in our backyard? Does it sound like a collective, hypocritical double standard?

There is no denying that local people working at local jobs are not responsible for the lack of affordability in Metro Vancouver. The money and power on this small sphere we call our planet is shifting - has shifted to other locations - get used to it.

Gerard Charlton Vancouver

Half full - it's not the outright bigotry and racism that Oz has going on now (as they all make money selling raw materials to the Chinese)

[retirwntm]

This is not about mortgage financing. It's much, much bigger. And, you have no idea what bank leverage is these days. Nobody does. Chris Whalen scratches his head and laughs about how opaque the bank reports still are. Moynihan couldn't tell you What the state of BofA leverage is if you had him tied up by the thumbs, I'll bet.

It's like listening to two guys at a barber shop argue. Neither of you are going to let a few facts get in the way of your opinion

FWIW, the leverage question that was such an unknown pre-crisis is now much more known within each firm and publicly. This was done by degrees. First, during the crisis, banks split off into good bank / bad bank. All assets that were either worthless, toxic, deemed non-core went to bad bank holding cos. Second, many of the deals wound off or down and some of the longer deals that didn't expire were brought back on balance sheet. Again, what was unknown is now known. Third, those short term funding sources that enabled additional leverage are gone - i.e. Citi funding with SIV's or Lehman funding in the repo markets. Fourth, new deals. There aren't any so your on balance sheet liabilities became your old legacy leverage minus bad bank write downs. Fifth. Write downs across all asset classes.

If Whalen doesn't know what is in these banks, he's either a sensationalist looking to continue to fan the flames because he duh! Duh! Duh! Owns an independent risk advisory firm!!! Or he's too fucking busy eating cheeseburgers to do his homework. Man that guy has a marshmallow face. Come on Benny, you're better than that.

[retirwntm]

I'd argue the only major unknown now at the big banks is legal. For instance, how much is BofA on the hook for all it's and Countrywide's collective pos mortgages should there ever be a class action suit or continued investigations and fines by state and US AG's the DOJ, etc.

[Benny Profane]

what was unknown is now known.

Oh, really.

OK, tell me how in the world they can put any sort of market value on residential real estate right now right here. And, you know very well that good bank bad bank shit never happened, because, they didn't know and still don't know what their so called assets are worth, as per my first sentence. Let's not go near the games they're playing with CRE. Nobody has a clue to CDS exposure, because they probably have instructed a VP not to tell them just in case they're asked in front of Congress or a similar tribunal in the future, and have to lie. They're just fucking floating on a pool of shit, and raising a drink every day to Hank Paulson, Timothy Geithner, and Ben for paying their bonus, again.

[4matic]

Heard from the realtor about my short sale bid in el barrio. He said inventory is very low and multiple offers are now the norm. I realize this won't make prices accelerate but stabilize...probably.

[Hugh Conway]

I'd argue the only major unknown now at the big banks is legal. For instance, how much is BofA on the hook for all it's and Countrywide's collective pos mortgages should there ever be a class action suit or continued investigations and fines by state and US AG's the DOJ, etc.

water carrier

[meatdrink9]

Oh, really.

OK, tell me how in the world they can put any sort of market value on residential real estate right now right here.

Sales comps? Homes are selling. Gross Rent Multiplier? Homes are renting. Cost to build? Less action in this area, but why would you build right now?

BTW, our inventory for SFR's in Ogden is now under 6 months and we did lose the bid I mentioned earlier. We bid all cash, over asking, closing in a week (bid was placed under 24 hours of home being listed). Things are picking up. Again, I don't see major price increases coming this year, but I do see stabilization and a bump in the right direction. This is just my POV in my neck of the woods. I'm hoping real estate will go back to being local again. In my case we're competing against investors vs owner occupants. Investors do seem to be waking up.