Real Estate Crash thread

[cramer]

^^^^She is our future looking back at us in the mirror.

Not really, they are an island with natural disasters. I'll reiterate they are an island. I'm not sure how that economy or housing market remotely compares to one that can keep building east or west from the coasts. They are building towards the moon. We have tons of untapped land. They dont.

[liv2ski]

^^^Think about what you just said and supply and demand. If a case can be made for higher prices, it is in countries that are pretty much built out. However, bad economic policies can still fuck that up.

I found a new website that actually made the July numbers look pretty good. So now I am super puzzled why business is so slow this month. I guess they will tell me in 30 days if I work for the wrong company or in fact business did drop off a cliff this month.

http://www.dqnews.com/Articles/2013/...RCA130815.aspx
An estimated 48,118 new and resale houses and condos sold statewide last month. That was up 17.3 percent from 41,027 in June, and up 21.8 percent from 39,507 sales in July 2012, according to San Diego-based DataQuick.

Last month's sales count was the highest for any month since 51,054 homes sold in August 2006. It was the highest for any July since 66,929 homes sold in July 2005. July sales have varied from a low of 30,596 in 1995 to a high of 71,886 in 2004. Last month's sales were 3.8 percent above the average of 46,364 sales for all the months of July since 1988, when DataQuick's statistics begin. Last month was the first time California sales have been above average for any month since September 2006.

The median price paid for a home in California last month was $363,000, up 3.1 percent from $352,000 in June and up 29.2 percent from $281,000 in July 2012. July was the 17th consecutive month in which the state's median sale price rose year-over-year. In March/April/May 2007 the median peaked at $484,000. The post-peak trough was $221,000 in April 2009.

Of the existing homes sold last month, 8.4 percent were properties that had been foreclosed on during the past year – the lowest level since foreclosure resales were 7.6 percent of the resale market in July 2007. Last month’s figure was down from a revised 9.8 percent in June and 21.7 percent a year earlier. Foreclosure resales peaked at 58.8 percent in February 2009.

Short sales - transactions where the sale price fell short of what was owed on the property - made up an estimated 14.6 percent of the homes that resold last month. That was down from an estimated 15.7 percent the month before and 26.0 percent a year earlier.

[meatdrink9]

Well I finally sold out of Denver completely. Made more than I ever imagined I would with one property (sold for 51K over asking) and did pretty good on the other too. Buying a new investment property in Ogden tomorrow. Excited to be buying houses again. I had to put everything I had into the bar project the last couple of years, but now it's running well and we're already expanding. It's been a shit load of work the last few years, but its all paid off. I'm probably crazy signing up for another remodel right now, but I really enjoy rehabbing historic properties.

BTW, the market hasn't gone crazy out here, but it is stable again. Deals were tougher to find this summer, but a few have popped up recently. It will be interesting to see what comes up over the winter.

[cramer]

^^^Think about what you just said and supply and demand. If a case can be made for higher prices, it is in countries that are pretty much built out. However, bad economic policies can still fuck that up.

I found a new website that actually made the July numbers look pretty good. So now I am super puzzled why business is so slow this month. I guess they will tell me in 30 days if I work for the wrong company or in fact business did drop off a cliff this month.

http://www.dqnews.com/Articles/2013/...RCA130815.aspx
An estimated 48,118 new and resale houses and condos sold statewide last month. That was up 17.3 percent from 41,027 in June, and up 21.8 percent from 39,507 sales in July 2012, according to San Diego-based DataQuick.

Last month's sales count was the highest for any month since 51,054 homes sold in August 2006. It was the highest for any July since 66,929 homes sold in July 2005. July sales have varied from a low of 30,596 in 1995 to a high of 71,886 in 2004. Last month's sales were 3.8 percent above the average of 46,364 sales for all the months of July since 1988, when DataQuick's statistics begin. Last month was the first time California sales have been above average for any month since September 2006.

The median price paid for a home in California last month was $363,000, up 3.1 percent from $352,000 in June and up 29.2 percent from $281,000 in July 2012. July was the 17th consecutive month in which the state's median sale price rose year-over-year. In March/April/May 2007 the median peaked at $484,000. The post-peak trough was $221,000 in April 2009.

Of the existing homes sold last month, 8.4 percent were properties that had been foreclosed on during the past year – the lowest level since foreclosure resales were 7.6 percent of the resale market in July 2007. Last month’s figure was down from a revised 9.8 percent in June and 21.7 percent a year earlier. Foreclosure resales peaked at 58.8 percent in February 2009.

Short sales - transactions where the sale price fell short of what was owed on the property - made up an estimated 14.6 percent of the homes that resold last month. That was down from an estimated 15.7 percent the month before and 26.0 percent a year earlier.

Thats kind of what i was getting at. There is no inventory in alot of areas now. Especially those in the hard hit areas like the east bay, sac, area's of LA, etc. First time buyers came out in droves due to government incentives and well, the only chance any of us would every have any opportunity to buy in this state. Now, you have all these people who lost their homes or foreclosed all qualified now to buy on an FHA loan. Problem is, no houses. So what are they doing now, building again. It seems to me like its a normal cycle down here. Prices will rise, interest rates are on the rise, its going to pull these people back in to buy before houses price and rates go up too much and they are priced out over the next 5 years. With all that said, the CA market is unique. People make alot of fucking money out here. Alot of the ones who lost their houses made a strategic decision. They got this 800K house now worth less than half, i'm walking and will start over again in a few years. I would have done the same. They made a terrible decision, lesson learned. Now they can come in as first time buyer at half the price and half the payments they were looking at as they actually had to start paying principle on their homes. With all that said, i'm just an IT dude, lol. But it does seem like a cycle down here. Historically, you can't go wrong getting a piece of property in CA, regardless of its location. Unless you bought from 2004-2007. Bad time to grab a loan.

[Sirshredalot]

The comparison is debt ridden guberments and the inevitable economic problems that creates. While the Japanese do save money to buy their debt, Amerika just hits Ctrl P. I wonder which will be more destructive of the countries currency/economy down the road? And as far as the Real Estate comparison, I sure hope Amerika doesn't follow in Japans footsteps. But how could we? With the unavoidable inflation associated with a declining currency, shit will just look more expensive

Wanna place a bet on inflation? Hedge yourself, my man.

[Sirshredalot]

Well I finally sold out of Denver completely. Made more than I ever imagined I would with one property (sold for 51K over asking) and did pretty good on the other too. Buying a new investment property in Ogden tomorrow. Excited to be buying houses again. I had to put everything I had into the bar project the last couple of years, but now it's running well and we're already expanding. It's been a shit load of work the last few years, but its all paid off. I'm probably crazy signing up for another remodel right now, but I really enjoy rehabbing historic properties.

BTW, the market hasn't gone crazy out here, but it is stable again. Deals were tougher to find this summer, but a few have popped up recently. It will be interesting to see what comes up over the winter.

I'm glad to hear that you're out of Denver with some coin and that the bar is doing well.

[Benny Profane]

If you're so convinced inflation will happen, take out a half million dollar mortgage at today's rates. You'll be smiling in ten years.

[4matic]

Historically, you can't go wrong getting a piece of property in CA, regardless of its location. Unless you bought from 2004-2007.

It took almost ten years for prices to recover from the 1988-89 peak. Look at pending foreclosures in just about any area and you'll see that supply is not really a problem. Combine that with stagnant incomes and rising rates and Real Estate prices are going to be much more volatile in the years ahead. Real Estate for most people now has the same risk as a Futures Contract, a ten percent move down and you're wiped out. Who knows what the long term impact private equity play in real estate will have but if you look at the IPO stocks of the those companies they are performing poorly and the market does not place an increasing value on the properties owned:

http://www.bloomberg.com/news/2013-0...-with-ipo.html

“The headline occupancy numbers for this space, roughly 50 percent, is not yet enough to give evidence that this business model works,”

[MontuckyFried]

Now, you have all these people who lost their homes or foreclosed all qualified now to buy on an FHA loan.

Why the hell a bank would qualify people who foreclosed within recent history is beyond me. People who have the mentality that they will walk if they lose the value of their homes AND the retard banks who lend to people like that both deserve to lose their asses.

Alot of the ones who lost their houses made a strategic decision. They got this 800K house now worth less than half, i'm walking and will start over again in a few years. I would have done the same.

So let me get this straight. People pretty much have to beg the bank to lend them money for a home loan and jump through many hoops to make that happen, WITH their signature that they promise to repay that loan. But when their home loses half its value, they don't think twice about jumping ship? You made a promise, buddy. Just ride it out until the markets come back, which WILL happen someday.

I understand that many foreclosures were circumstantial, like people losing their jobs and such, but I think a HUGE contributor to the glut in foreclosures has to do with attitudes like Cramer's. In many cases, foreclosures are due to a lack of personal responsibilities and ethics. I know, I know. People say, "well the banks are unethical jerks, so screw em!" Even though the banks ARE jerks, that still doesn't make it right to just walk when your home loses value in your retarded Californian market, which happens over and over, again and again. If you're not willing to take the ups and downs of a volatile housing market, then you have zero business buying a home in the first place, and I am shocked at how easily people get home loans who have a history of foreclosures, short sales, or financial troubles of any sort. Especially when I was a damn good borrower, with outstanding credit, no debt, no foreclosures or bankruptcies in my history, yet it was a complete PITA to secure my loan, which ALMOST fell through due to strenuous lending requirements almost causing us to miss our strict closing date with FNMA.

Then again, that's just my take on it.

[4matic]

foreclosures are due to a lack of personal responsibilities and ethics.

As discussed many times. You describe a mortgage as a one sided moral obligation. If that were the case then the lenders would have a moral obligation to renegotiate the contract when their morality partner got in trouble. That's absurd.

A mortgage says pay or turn in the keys. There is no moral contract. The problem was lenders giving loans with zero down and or low payments to people with poor credit. That is solely the lenders fault and liability.

Also, if you're credit was so great FNMA wouldn't have anything to do with your loan. It would have been privately underwritten and the administered or sold (possibly to FNMA).

[MontuckyFried]

As discussed many times. You describe a mortgage as a one sided moral obligation. If that were the case then the lenders would have a moral obligation to renegotiate the contract when their morality partner got in trouble. That's absurd.

A mortgage says pay or turn in the keys. There is no moral contract. The problem was lenders giving loans with zero down and or low payments to people with poor credit. That is solely the lenders fault and liability.

Umm, according to the note on my home that I signed, Section 1 is titled "BORROWER'S PROMISE TO PAY." It goes on to say "In return for a loan that I have received, I PROMISE to pay US $xxx,xxx.xx, plus interest, to the order of the Lender. The Lender is X Bank. I will make all payments under this Note..."

I made a PROMISE to pay the bank back according to the terms of the loan, for which I signed my name to. So what IS a promise? It's a pledge. Which boils down to once again, personal responsibilities and ethics. How is that NOT a moral contract?!

However, I do agree with you that lenders giving loans with zero down or low payments to people with poor credit was wrong, and shouldn't have happened. But it was not SOLELY the lender's fault, since the borrowers were more than happy to sign THEIR name on the dotted line. Nobody was putting a gun to their head to accept the loan, and the conditions therein.

Also, if you're credit was so great FNMA wouldn't have anything to do with your loan.

FNMA was the seller via Homepath. I was buying one of their properties. They were NOT fun to buy from, but I got the deal done.

[4matic]

Umm, according to the note on my home that I signed, Section 1 is titled "BORROWER'S PROMISE TO PAY." It goes on to say "In return for a loan that I have received, I PROMISE to pay US $xxx,xxx.xx, plus interest, to the order of the Lender. The Lender is X Bank. I will make all payments under this Note..."

I made a PROMISE to pay the bank back according to the terms of the loan, for which I signed my name to. So what IS a promise? It's a pledge. Which boils down to once again, personal responsibilities and ethics. How is that NOT a moral contract?!

However, I do agree with you that lenders giving loans with zero down or low payments to people with poor credit was wrong, and shouldn't have happened. But it was not SOLELY the lender's fault, since the borrowers were more than happy to sign THEIR name on the dotted line. Nobody was putting a gun to their head to accept the loan, and the conditions therein.


.

Glad you got the house:

http://www.nytimes.com/2010/01/10/ma...ln-t.html?_r=0

"Mortgage holders do sign a promissory note, which is a promise to pay. But the contract explicitly details the penalty for nonpayment — surrender of the property. The borrower isn’t escaping the consequences; he is suffering them."

[cramer]

Why the hell a bank would qualify people who foreclosed within recent history is beyond me. People who have the mentality that they will walk if they lose the value of their homes AND the retard banks who lend to people like that both deserve to lose their asses.


So let me get this straight. People pretty much have to beg the bank to lend them money for a home loan and jump through many hoops to make that happen, WITH their signature that they promise to repay that loan. But when their home loses half its value, they don't think twice about jumping ship? You made a promise, buddy. Just ride it out until the markets come back, which WILL happen someday.

I understand that many foreclosures were circumstantial, like people losing their jobs and such, but I think a HUGE contributor to the glut in foreclosures has to do with attitudes like Cramer's. In many cases, foreclosures are due to a lack of personal responsibilities and ethics. I know, I know. People say, "well the banks are unethical jerks, so screw em!" Even though the banks ARE jerks, that still doesn't make it right to just walk when your home loses value in your retarded Californian market, which happens over and over, again and again. If you're not willing to take the ups and downs of a volatile housing market, then you have zero business buying a home in the first place, and I am shocked at how easily people get home loans who have a history of foreclosures, short sales, or financial troubles of any sort. Especially when I was a damn good borrower, with outstanding credit, no debt, no foreclosures or bankruptcies in my history, yet it was a complete PITA to secure my loan, which ALMOST fell through due to strenuous lending requirements almost causing us to miss our strict closing date with FNMA.

Then again, that's just my take on it.

Whoa whoa whoa....Lets not point the finger at Cramer here. I wasnt the fucking idiot like every person i know that bought a house they couldn't afford. I also wasn't the stupid fucking bank that handed out these loans. I was the guy that swooped in when everything fell apart. So lets be clear about that. Do you know how many years im wondering how my family, friends, neighbors have fucking bmw's, mercedes, etc sitting in their driveways? I make good money, why can i only afford a mazda 3 and a highlander? Well, because i knew what i could afford. Which wasnt more than 300K on a house. And that was a stretch on a monthly payment on a house. Thus why i bought something alot less than that.

I'm in full agreemant, everyone of my friends, family, coworkers, etc are all dirtbags. But how can i be mad? I'm the one who owns a house now due to their stupidity. The american dream happened for Cramer. What can i say? lol. Thanks nitwits!

Now on to why they should get loans. So i can put a pool in!

Either way, dude, i was pointing out the reality. Completely disagree like you on the morale thing. They should be holding their heads in shame. The problem is they all make a fuckload of money out here and really didnt give a shit. It was just like throwing away rent like i did for years. I personally would have loved to see everyone of them go down for their stupid decisions. Because i asked everyone of them how are you going to afford this 400-800K house depending on the friend. "we'll make it work". Well, they didnt. None of them.

Its sad too. I put my new floors in and one of my buddies, who lost 3 houses ill add, asked me why i did all that beautiful wood but left that shitty tile. My reply, ill do the tile when i can afford it. Just bitter fuckers...

[XXX-er]

"If the Mortgage Bankers Association is against defaults, its members, presumably the experts in such matters, might take better care not to lend people more than their homes are worth. "

from the last link ^^ sums it all up, the morality of mortgage default should be entirely besides the point cuz the system should have worked, RE loans should have been secured, RE do but the american gov let the american bankers fuck with the game to make more $$$ and the american people bought it simple greed

Canadian bankers wanted to get in on the game but the liberal gov vetoed deregulation or we would be in pretty much the same pile of shit so we are no better ... its just the Canadian government saved us from ourselves

[Whiteroom_Guardian]

So I haven't had the time to read through this whole thread, but you guys seem pretty educated and I know meatdrink has been at it for a while.


I really like working on houses and have been doing it on and off for 10 years. I can do pretty much everything from laying block to hanging drywall, etc. I have worked on a couple flips for a guy who really didn't have much labor skill or motivation and it drove me freaking crazy knowing I could have done so much better than he.

Assuming I can get my hands on a good sized loan in 1.5-2 years where would you guys see as a good city/state with the right market for flips? I want to get back out west somewhere relatively dry for my GFs arthritis.

My understanding of the market, real estate law, etc is limited. I am more of a labor guy that could probably secure 50-75k cash to get started. My credit should be almost fully repaired by then. Debt free, etc. FWIW my sister is a realtor with over 10 years experience in NYC/NJ/PA so she is a could resource for some stuff, though I know everything varies by state.

Books I should read? Real estate classes?

[Foggy_Goggles]

Phish, is the $75K a "good sized loan"? True "fix and flip" investors are not financing in the conforming mortgage market. You know why, 'cause you can't. Those loans are for primary residences, not investments. I've worked on a ton of investment properties, you know what is needed? Cash.

Holding and transaction costs are killers. Look at the math. Remember that your closing costs, interest on your loan, and fees to the listing and selling realtor come out of your bottom line.

I know you fancy yourself as a contractor and sounds like you've got some skills. Answer me this, are you set up as a sub/general? Do you have experience running your own business? The gutter is filled with many skilled contractors who can't make it on their own for multiple reasons.

If you want to make it as a contractor, here's some advice in no particular order.

1. live somewhere that wages are relatively high. e.g. probably not a city. Full tooled up sub can have a hard time making $20. F that.
2. Don't hang your hat on new construction. Excavators, framers, concrete guys are subject to the new home market. Roofers, flooring contractors, plumbers, sparkys keep working.
3. Honestly ask yourself if you want to be a business owner or wage earner. It's not a simply question. As a business owner, if you are homeowner direct (not working for a general) you are on the clock pretty close to 24/7. People will call from about 7am to 8pm 7days a week. Wage earners get to peace out at 5pm Friday and not worry about it until Mon. AM.
4. If you want to be a wage earner, don't live near or do what undocumented labor does (get it?). Without getting into politics, if you are a framer, drywaller, painter etc. this is a threat to your way of life.
5. If your thinking about it as a career, honestly try and get away from the harder physical labor. I know plenty of tough MFers would once they got to about 40 y.o. just have a hard time doing in any more.

Bottom line, investing in real estate is not an easy route to keeping yourself busy as a contractor. It's a job in itself and requires capital.

[liv2ski]

WRG, I have 2 friends that were doing pretty good buying foreclosures on the court house steps (requires cash, no loans) and then fixing them up and flipping them up until the last 12 months. They said about 2 years ago everyone and their dog got into the flip game in Southern CA, so they haven't done many lately as prices are getting bid up higher than they believe/feel comfortable with. So the market is really frothy now and the prefect time to fuck a newbie.

You need $$$$ to do the flip game well, as you want to be buying homes at a big discount, that likely need some/a lot of fixing (so no lender will touch it). Find areas that cost less. MD9 has a sweet gig going in Ogden. Talk to him to get an idea of what is involved. Timing is everything in this game. You have to have the balls to buy when pretty much everyone else is running for the door and the discipline to step away (like my friends) once the market has gotten ahead of itself.

It is not an easy game. Most successful small builder I know has a few investors (for buying capital). In my town the guy buys up all the large lots he can find with a tear down on them, tears then down, builds a new 3,000 sq ft house, flips it, does it again.

He has been a builder for 30+ years and has had the market hand him his ass before. That is why he has investors now to diminish some of the risk/reward. Good luck.

[RootSkier]

I made a PROMISE to pay the bank back according to the terms of the loan, for which I signed my name to. So what IS a promise? It's a pledge. Which boils down to once again, personal responsibilities and ethics. How is that NOT a moral contract?!

Yeah, BoA and other scum-sucking banks are highly concerned with the moral aspects of your bargain. Keep spewing that nonsense, maybe you'll convince another sucker someday.

[Benny Profane]

Yeah, this flipping and rental thing only makes sense to me if you want an income stream from cash. Even at today's low rates, you're not going to make a lot of money if you borrow.

[mud]

So I haven't had the time to read through this whole thread, but you guys seem pretty educated and I know meatdrink has been at it for a while.


I really like working on houses and have been doing it on and off for 10 years. I can do pretty much everything from laying block to hanging drywall, etc. I have worked on a couple flips for a guy who really didn't have much labor skill or motivation and it drove me freaking crazy knowing I could have done so much better than he.

Assuming I can get my hands on a good sized loan in 1.5-2 years where would you guys see as a good city/state with the right market for flips? I want to get back out west somewhere relatively dry for my GFs arthritis.

My understanding of the market, real estate law, etc is limited. I am more of a labor guy that could probably secure 50-75k cash to get started. My credit should be almost fully repaired by then. Debt free, etc. FWIW my sister is a realtor with over 10 years experience in NYC/NJ/PA so she is a could resource for some stuff, though I know everything varies by state.

Books I should read? Real estate classes?

The flip market is very thin out west, it's been picked over and the best investments now are buying houses you can cash flow the rent immediately and hold on for 10 to 15 years. There are a lot of good deals if you know where to look but you better be sure it's a desirable place. I have no problem renting out my places in Nederland or Frisco but my friends that have homes in Colorado Springs, Thornton, and Castle Rock are struggling to find good renters. At this point I'm clearing $6K a month after taxes and insurance and within 20 years it will be twice that or more once the mortgages are paid off.

When I moved out west I picked up a bunch of trade jobs and worked my way up from painter to carpentry then eventually GC. I got into brokering mortgages when I turned 30 and never looked backed. Forget flipping. buy and hold is the smart move. Investment property rates have been hovering between 4.500% and 5.000% depending on the loan amount and good credit. Stay away from condos and town homes. Buy land they are not making it anymore.

[Bobby Finstock]

LOL...Shitshow is gonna start flipping? That's the surest sign yet this echo bubble is getting ready to pop.

[Hugh Conway]

and the best investments now are buying houses you can cash flow the rent immediately and hold on for 10 to 15 years.

buy and hold for rental cashflow = the new easy money everyones chasing. not pointing a finger at you particularly (don't know shit) but there's so many maggot slumlord threads for each and every dumbfuck who thinks they are entitled to a fat rental income stream without doing shit just because they own a place that the "rent and hold for cashflow" gotta fall next. Or something else has to give when each and every desirable mountain town property is owned by slumlords renting to people who'll be stuck renting forever because all of the owners refuse to develop more property in town to make their shit more valuable and close the door on everyone else while talking a really good line about paradise.



if you read md9s posts over the years, he seems to manage costs agressively, puts in lots of leg work to find and buy at the right price, puts in lots of hardwork in planning value added attractive renovations (and has in the past done them himself, might still, dunno), and is flexible whether to rent or dispose of. It would appear he does it better than most, even others here who've tried. I wouldn't try to imitate it unless you think you can do all of that well.

[Benny Profane]

Stay away from condos and town homes.

Why? Sounds like it's easy, if it's rentable. Maintenance is just a monthly check.

[RootSkier]

Until you get a $50K special assessment.

[zion zig zag]

I really just want to sell my house, but I may end up renting it out since it won't move for what I think it's worth.