Real Estate Crash thread

[Benny Profane]

You're a bigger man than me. Good luck.

[meatdrink9]

You're a bigger man than me. Good luck.

I wouldn't say that. We saw different things at different times and different things through different eyes. Different locations and different ages. Reading the thread from the start now makes you look like a prophet.

Seriously. Thanks for this thread. I learned a ton from it. It was the reality check that was needed from time to time when the frenzy was first taking off here (right as you were seeing the crash). Made me second guess at times and it was needed. Tons of naive luck/timing followed by psychotic amounts of work. Inspector Gadget also gave me good advice via emails for safe lending strategies. Reading back through years of projects in this thread has caused me to wax nostalgic I guess.

[LeeLau]

swapping a stock bubble for a R.E. bubble? the real estate market on a macro level has been rising since Bush I was in office. I grant you that it has heated up over the past couple of years, but the Bay Area was en fuego in the late 90s but softened quite a bit after the internet stock crash. but to say people are swapping a stock investment/401k investment bubble for a real estate investment bubble is patently false. but, that must be why you read Paul "Enron will be bigger than 9/11" Krugman and agree with what he says.

you've left out the "Rich get Richer" spin.

This guy is a classic. Ex post facto comedy gold

[liv2ski]

Benny, I'll post up photos at some point. Keep in mind we will sink quite a bit in the remodel as well.

MD, I for one would love to see the before, rehab and after photos as you do some nice work and I am sure the place is awesome from your description.

And another classic quote from another thread on the values in second home areas

Land values here in the Teton Valley are now nearly back to where they were 12 years ago, long before we became the hottest real estate play in the West. 20 acre subdividable lots that used to be offered for a million are now down in the $150-200K range. Luxury 2nd home prices are down about 60%-70% off the peak. Bottom feeders are now paying around 400 grand for golf course mcmansions that were marketed as can't fail 1-1.5 million buck investments only three years ago. And we have the TETONS and a functioning resort with some of the best snow in the land. McCall is ok but it ain't shit compared to this area. Can you say schadenfroi?

I guess that explains what happened to that place in Truckee I like.

[Benny Profane]

Great research here: http://seekingalpha.com/article/2195...ard_macro-view Read both parts. Yes, the government is handing out nearly zero down loans to unworthy credit score drones, and, get this, enabling cash out refis to the same people.

[ass-to-mouth]

Dirt pimps win again.

Debts Rise, and Go Unpaid, as Bust Erodes Home Equity

By DAVID STREITFELD

Published: August 11, 2010

PHOENIX — During the great housing boom, homeowners nationwide borrowed a trillion dollars from banks, using the soaring value of their houses as security. Now the money has been spent and struggling borrowers are unable or unwilling to pay it back.

The delinquency rate on home equity loans is higher than all other types of consumer loans, including auto loans, boat loans, personal loans and even bank cards like Visa and MasterCard, according to the American Bankers Association.

Lenders say they are trying to recover some of that money but their success has been limited, in part because so many borrowers threaten bankruptcy and because the value of the homes, the collateral backing the loans, has often disappeared.

The result is one of the paradoxes of the recession: the more money you borrowed, the less likely you will have to pay up.

“When houses were doubling in value, mom and pop making $80,000 a year were taking out $300,000 home equity loans for new cars and boats,” said Christopher A. Combs, a real estate lawyer here, where the problem is especially pronounced. “Their chances are pretty good of walking away and not having the bank collect.”

Lenders wrote off as uncollectible $11.1 billion in home equity loans and $19.9 billion in home equity lines of credit in 2009, more than they wrote off on primary mortgages, government data shows. So far this year, the trend is the same, with combined write-offs of $7.88 billion in the first quarter.

Even when a lender forces a borrower to settle through legal action, it can rarely extract more than 10 cents on the dollar. “People got 90 cents for free,” Mr. Combs said. “It rewards immorality, to some extent.”

Utah Loan Servicing is a debt collector that buys home equity loans from lenders. Clark Terry, the chief executive, says he does not pay more than $500 for a loan, regardless of how big it is.

“Anything over $15,000 to $20,000 is not collectible,” Mr. Terry said. “Americans seem to believe that anything they can get away with is O.K.”

But the borrowers argue that they are simply rebuilding their ravaged lives. Many also say that the banks were predatory, or at least indiscriminate, in making loans, and nevertheless were bailed out by the federal government. Finally, they point to their trump card: they say will declare bankruptcy if a settlement is not on favorable terms.

“I am not going to be a slave to the bank,” said Shawn Schlegel, a real estate agent who is in default on a $94,873 home equity loan. His lender obtained a court order garnishing his wages, but that was 18 months ago. Mr. Schlegel, 38, has not heard from the lender since. “The case is sitting stagnant,” he said. “Maybe it will just go away.”

Mr. Schlegel’s tale is similar to many others who got caught up in the boom: He came to Arizona in 2003 and quickly accumulated three houses and some land. Each deal financed the next. “I was taught in real estate that you use your leverage to grow. I never dreamed the properties would go from $265,000 to $65,000.”

[Benny Profane]

The mountain states crack.



"Foreclosure rates in Utah, Idaho, Illinois and Colorado rose in the second quarter compared with a year earlier, and rank among the 10 highest in the country."


http://www.bloomberg.com/news/2010-0...-illinois.html


“This is an off-the-chart, extreme financial event,” Ferguson said. “I wasn’t around for the Depression, but in the last half century there has been nothing like this.”

[skiballs]

That mountain retirement home gets cheaper by the day.

[Missing Sock]

That mountain retirement home gets cheaper by the day.

Would be interesting to see a county by count breakout. I can only speak for CO but I imagine the vast amount of of foreclosures in the state are going to be in the counties around Denver rather than in the high country. I think the stats in Summit County are something like 60% of the homes are purchased in cash and I would imagine towns like Aspen, Telluride, Vail etc etc are even higher than that. That being said my dad was just telling me about a foreclosure condo in Frisco that went for something like $175k at auction for a two bedroom not too long ago.

[liv2ski]

That mountain retirement home gets cheaper by the day.

It will be interesting to look back on this thread in two years and see where we are at. Unbelievably, I am thinking that $500k home I like may be in the $400k range or another 20% haircut.
It is interesting to look from area to area, as some areas are back down to 1999-2000 sales price levels, which I really thought would be the floor for prices. Others I look at are still in the 2004/2005 range and clearly have a ways to go down IMO.

[LeeLau]

It will be interesting to look back on this thread in two years and see where we are at. Unbelievably, I am thinking that $500k home I like may be in the $400k range or another 20% haircut.
It is interesting to look from area to area, as some areas are back down to 1999-2000 sales price levels, which I really thought would be the floor for prices. Others I look at are still in the 2004/2005 range and clearly have a ways to go down IMO.

My prediction is Vancouver (-10% or so)l Whistler ( - 20% or so). I only wish there was an indice on which i could buy naked puts but there isn't.

Ok - everyone else lay bets. Prize is Internet dick-waving rights. But this is TGR where this is valuable currency

[Shredhead]

Would be interesting to see a county by count breakout. I can only speak for CO but I imagine the vast amount of of foreclosures in the state are going to be in the counties around Denver rather than in the high country. I think the stats in Summit County are something like 60% of the homes are purchased in cash and I would imagine towns like Aspen, Telluride, Vail etc etc are even higher than that.

There were 35 foreclosures in Aspen alone, as a direct result of Bernie Madoff.
Lot's of people pay cash to close and then finance afterward.

[powder11]

My prediction is Vancouver (-10% or so)l Whistler ( - 20% or so). I only wish there was an indice on which i could buy naked puts but there isn't.

Ok - everyone else lay bets. Prize is Internet dick-waving rights. But this is TGR where this is valuable currency

says the guy who sold his whistler place right before prices jumped 20%! you should stick to shorting the market.

[flatlander#2]

My valley in the Evergreen area is 18 minutes to Golden, 38 to Loveland, so close to the freeway. From the top of the road to my house is 2.5 miles, there are 5 houses for sale in that span. One 9500sq ft they are trying to rent for $3500 a month, two never lived in. One just came on that has a barn almost the size of my house, it is right next to the 9500sq ft one and probably at least that size if not larger. One of them is still occupied, the others are empty, probably foreclosure. The one occupied is older owners that just wanted smaller, I think they can ride it out financially. There was one up behind me that went for sale, and I think sold. The dude that owned that had an R8, a Lambo and some crazy Mercedes thing he would drive. My wife and I are thinking about renting the big house for a kegger. It has a wine cellar and fitness facility. Nobody is going to buy these houses for a long time, and this is just one valley in the area. Bottom not yet.

[XXX-er]

says the guy who sold his whistler place right before prices jumped 20%! you should stick to shorting the market.

IMO you don't wana think about what you lost , you wana think about how much $ you made before the jump ...you take your profit & you be happy

I seen more than a few greedy people who fuck themselves up in the end ... greed will hurt you

I think the big party from the olympics & the US situation is over and the hangover may be just about to start

Are amenity migrants to vancover propping up the prices,I think they have up here ,by definition anybody buying in a ski town is an amenity migrant ?

FWIW In the north RE has dropped 20% from IT'S peak which was 2 or 3 yrs ago ,I sold out at the peak but that was entirely a fluke ,I think RE will slowly go lower ,there are lots of listings on the market and jobs that will handle the mortgages are scarce

[montanaskier]

I'll speak for the Vail Valley. Lots of things for sale, the ones that have money aren't really lowering price, just saying they don't have to sell and will sit tight on price until things rebound. Locals trying to sell are taking BATHS if they bought in the last 5 years.

I bought my 3 bdr 3.5 bath condo at what I thought was the bottom for 460k. Another unit went into foreclosure, a dude bought it for nothing, spent 100k doing an awesome remodel (mines newly remodeled too), and is selling the unit which is the same size as mine for 389k! FUCK. To make it worse, he is getting ZERO calls.

[Missing Sock]

There were 35 foreclosures in Aspen alone, as a direct result of Bernie Madoff.
Lot's of people pay cash to close and then finance afterward.

35? do you have a link or anything to this story? Sounds like an it would be an interesting read.

[DerJaeger]

My prediction is Vancouver (-10% or so)l Whistler ( - 20% or so). I only wish there was an indice on which i could buy naked puts but there isn't.

Ok - everyone else lay bets. Prize is Internet dick-waving rights. But this is TGR where this is valuable currency

What timeframe are we talking? I would surprised to see Vancouver (as in downtown, West of Main St, etc) houses lose only -10% in the next 5 years. Apartments, even more so. The real estate prices there are so out of whack with people's ability to afford the properties, that something has to give.

[liv2ski]

Fuck, to bad I am such a tech jong, as I wanted to embed a video from CNBC. Funnier than shit to watch the shouting match between the guys that say the Federal Reserve should do whatever it takes to prop up RE values and the one lone voice that said "that is fucking crazy".

Bottom line in the US, is the Fed/Congress has done their best to prop up values forever. It has kind of worked recently, as it slowed down the decline in values for the first two quarters of 2010 and in my area (San Diego) even boasted values a bit. However, values are slipping again.

Bottom line is people need to make incomes to afford homes. IMO, once the cost of starter homes for a FTHB are over 3 times their annual income, it gets tough to afford a place. If the FTHB can't buy your place, how are you going to use the equity to move up? And on it on it goes. That is why the government has always tried to support low down payment mortgages as a way to get the FTHB in the game so everyone else can move up, but at some point wages/employment but a stop to how high prices can go.

Due to Stated income loans in 2002-2007, the above comments were thrown out the window and everyone qualified no matter how high prices went. Well now those loans have gone the way of the Doo Doo Bird and people can't really qualify to refi their ARM loans. Defaults start, prices start to go down, now people have no equity so banks won't lend whether you qualify or not, so more defaults and on and on it goes until we get down in value where people bought with normal qualifying loans and still have equity (didn't do a HELOC) so that they can refi or sell. That level is likely 1999-2001 depending on your area, so the FED can do whatever the fuck they want to do to support the appreciation that occurred between 2002 and 2007 but good luck keeping it there as people don't qualify on real income at those value ranges as they were artificially inflated by Stated Income loans available at that time. Not to mention very lose lending standards that aren't available anymore either.

So my prediction is, your neighborhood will eventually be back to a 1999-2001 level (if it isn't already), very likely in the next two years. Here is praying they don't slip further due to weak employment or other financial (stock market crash) issues.

[skiballs]

So my prediction is, your neighborhood will eventually be back to a 1999-2001 level, very likely in the next two years.

Depends on the neighborhood.
The folks that live around DC have jobs and a growing industry (government).
DC suburb unemployment rate is around 6%.
The rest of the country, well good luck.

[skier666]

I like liv2ski is pretty pessimistic about RE values. The economic data and numbers just aren't there.

But here's what I can add to this thread.

In SF, a friend of ours in a 2009 built Marina condo just got her placed appraised for 9% more than she paid in 11/09. So, she refinanced. I'm looking into doing the same. I follow the sales of SF real estate and EVERYTHING has gone down. If you went back in this thread, the big cities like NYC and/or SF were holding strong when others were tanking, but that has changed. Of course, not an endless nose-dive like Vegas, but still. For ex, a nice Victorian home in Cow Hollow just closed at $750 sq/ft, peaked at $1,217 sq/ft in 2007 with a low of $681 sqft in 2001.

In the apartment rental business, a 264 unit complex in Campbell, CA (west of San Jose) built in 1973 was bought by a REIT and just closed at $42m. Just today I read that a 226 unit complex sold in North San Jose for $50.3m.

On contrast, I noticed a 300 unit complex was purchased in Denver near 84th & I-25 for $7.9million. From what I read, its more of a lower income and distressed complex.

So, it seems that big REITs are snapping up incoming producing properties as people get weary of buying and continue to rent.

[liv2ski]

My prediction is Vancouver (-10% or so)l Whistler ( - 20% or so). I only wish there was an indice on which i could buy naked puts but there isn't.

Ok - everyone else lay bets. Prize is Internet dick-waving rights. But this is TGR where this is valuable currency

My money is on Lee's prediction in the next 2 years. http://www.chpc.biz/Major_Cities_Summary.htm

[Benny Profane]

It will be interesting to look back on this thread in two years and see where we are at.

That's a big milestone in my life. I'm going to accept what is, and look forward. I'm just guessing that Colorado will stay expensive for some reason, but, you never know. Denver has a pretty stable economy these days, and it attracts young and smart people, so it has a decent future.

I'm reminded of the Warren Buffet "You find out who's swimming naked" metaphor when I see the ski market change. I think the trick is to nail something that somebody has to throw over the side to survive. Three bedrooms, two bath, ATTACHED DOUBLE GARAGE, solid association finances, and maybe, maybe, a hot tub on the deck. Please.

I can only speak for CO but I imagine the vast amount of of foreclosures in the state are going to be in the counties around Denver rather than in the high country. I think the stats in Summit County are something like 60% of the homes are purchased in cash and I would imagine towns like Aspen, Telluride, Vail etc etc are even higher than that. That being said my dad was just telling me about a foreclosure condo in Frisco that went for something like $175k at auction for a two bedroom not too long ago.

Well, I'm guessing that a lot of those "cash" buyers are down in Denver, dealing with the major shitshow of their little real estate empire crumbling because the "cash" they used to buy the mountain retreat/rental income machine was actually leverage in the form of a HELOC on the downslope palace. Now, they're looking at the rental market maybe drying up, and one of them is out of work, and there's a second kid coming, and, and............

[Hugh Conway]

From the next big thing file, California City. They sold 52,000 lots through the 70s, today 14,000 people live there
http://www.latimes.com/news/local/la...,2325763.story

Reporting from California City, Calif. — California's third-largest city by size exists largely in the imagination. Drive its wide boulevards and cozy cul-de-sacs. Listen to squealing children splashing in backyard pools. Watch men glide by in their steel behemoths and stay-at-home moms push strollers along tree-lined sidewalks.

It's all a mirage.

In 1958, Nathan Mendelsohn, a Columbia University sociology instructor turned developer, acquired 82,000 acres of desert in eastern Kern County, 100 miles from Los Angeles.

Mendelsohn called his vision California City and, despite the fact it was 10 miles from any highway, he believed it would become the state's next metropolis. The next San Fernando Valley.


Today a mere 14,000 souls call California City home. Most are clustered at one end of the massive tract. It's a sleepy outpost with its own school district and public bus service but no hotel or chain grocery. The police chief is also the director of parks and recreation, and the Rite Aid is the busiest place in town.

[LeeLau]

says the guy who sold his whistler place right before prices jumped 20%! you should stick to shorting the market.

Dude - I know you don't take my rants seriously but I would short a housing index in a heartbeat if the spreads were not so illiquid.

Like xxx-er said i took sunpeaks and whistler profits and ran like hell. Crystal ball said i should have put it all on naked puts on every too big to fail financial but there you go - can't cry over every lost 20 points

derjaeger - 2 years