Real Estate Crash thread

[iceman]

Should I pick up gas masks, iodine tablets and an assault rifle while I'm out?

[H0G]

Should I pick up gas masks, iodine tablets and an assault rifle while I'm out?

hurry before obama bans them. go out today and don't forget the duct tape.

[neck beard]

Should I pick up an assault rifle while I'm out?

No point. Ammo all sold out.

[cramer]

Don't forget that they're going to correct down to 2.5x gross income, which *right now* means a drop of 50% in residential RE

im going to have to call bullshit, hehe. I just paid only 2.x my income. They already did drop below 2.5x. Have you even looked at house prices?

[Platinum Pete]

These macro trend discussions are very interesting, but I am seeing some drastic differences between markets. Real estate is still all about location.

[coreshot-tourettes]

cramer, you ninny. Home prices are going to correct down to 2.5x gross income, which is AVERAGE home price divided by AVERAGE gross. Not you personally. Could I go find a decent house now for 1.5x my gross income? Sure. Does that mean home prices have corrected? No.

Again. Average home price divided by average gross (nationwide) reaching 2.5x or lower will signal we're close to a bottom.

2.5x to 3x income is simply the rule of thumb that's been around for years on how much house you can afford. Don't
ask why, it just works.

And it doesn't matter WTH my background is (though you might be able to tell I'm a safety engineer by my avatar). When various states' tax revenue crashes this year or next, do you think that living in a mountain town you're going to get dug out next winter faster or slower? Having 3-7 days of canned/dry food and water, flashlights, and other basic stuff is simple common sense and costs virtually nothing. Owning a gun depends on your own personal choices, sense of responsibility, and local laws - so of course it wasn't included.

Pete, I agree it's still about location, but my thesis is only that it's not going to correct until you see "home is simply a place to live and not an investment" become mainstream, "houses are an investment" cheerleading die, and average home prices correct nationally down to 2.5X average gross income. Correction down to 2.5x gross don't mean that rich people making $4M gross won't find great locations or markets to buy their $10M houses in, it means that it will be a $10M house instead of a $20M house.

[mock vomit]

...And if through all of this you've not even considered having 20lb of rice, 20lb of beans, 20 lb of lentils, 5lb of peanut butter, medical supplies, 1 month of cash, and 15 gal water (1 tsp bleach per 10 gallons) stored away in sealed containers, you're well behind the curve and need to start on that *now*. Not kidding. Go spend $60 at Costco. I'll sleep better...

...When various states' tax revenue crashes this year or next, do you think that living in a mountain town you're going to get dug out next winter faster or slower? Having 3-7 days of canned/dry food and water, flashlights, and other basic stuff is simple common sense and costs virtually nothing...

Ummm... OK.

Hey, can we have an admin change the thread title to "Real Estate Crash Thread & Survivalist Training" ASAP?

[H0G]

And it doesn't matter WTH my background is (though you might be able to tell I'm a safety engineer by my avatar). When various states' tax revenue crashes this year or next, do you think that living in a mountain town you're going to get dug out next winter faster or slower?

there is no need to get butt hurt about it. if your employment had anything to do with the real estate industry, your words would carry more weight.

being a safety engineer reveals a lot about you. you probably are very risk averse and tend to over analyze things. look at specific numbers vs the overall picture. averages, etc etc. real estate is about location, and the front range is starting to look ripe for investment.

I am in the real estate industry and in the trenches every day btw. you go off of reports and numbers that lag behind what is happening in the now.

there are still people making money out there despite what the news tells you, and people like to spend a little more on a better home. 2.5x earnings is a thing of the past.

[coreshot-tourettes]

mocwvmit, it's just common sense to have supplies around. It's a fact that tax revenues are going to decline, and public services like snow removal are going to get cut - hell, they've already started cutting snow removal in my state. So, thus endeth the thread drift. Back to the regularly scheduled crash thread.

[Platinum Pete]

Pete, I agree it's still about location, but my thesis is only that it's not going to correct until you see "home is simply a place to live and not an investment" become mainstream, "houses are an investment" cheerleading die, and average home prices correct nationally down to 2.5X average gross income. Corrections down to 2.5x gross don't mean that rich people making $4M gross won't find great locations or markets to buy their $10M houses in, it means that it will be a $10M house instead of a $20M house.

Yeah, I think getting housing prices closer aligned with incomes is happening broadly, but I think the "home as investment" thing is not entirely going away either. Look at how shitty americans are at saving now -the government has to push housing as an investment - and their support of it through tax incentives proves my point (no way is that changing). I don't think we're going all the way back to Glen Beck's chart of "since 1890" or even all the way back to the 1950s - the US economy itself has changed and consumer behavior leads more than ever, that's how this is going to settle in. I don't have the specific predictions that many folks have, but I do know that people will still want to own houses, rent houses, and move from home to home for various reasons - and nobody wants to get fucked in their pocketbook during any of those phases.

[coreshot-tourettes]

there is no need to get butt hurt about it. if your employment had anything to do with the real estate industry, your words would carry more weight.

being a safety engineer reveals a lot about you. you probably are very risk averse and tend to over analyze things. look at specific numbers vs the overall picture. averages, etc etc. real estate is about location, and the front range is starting to look ripe for investment.

I am in the real estate industry and in the trenches every day btw. you go off of reports and numbers that lag behind what is happening in the now.

there are still people making money out there despite what the news tells you, and people like to spend a little more on a better home. 2.5x earnings is a thing of the past.

"2.5x earnings are a thing of the past."

"DOW may go to 36,000!"

"The subprime mortgage defaults are contained."

See a pattern?

I know there are people out there that are still making money, I'm one of them. Shorting REITs, whee! 2.5x earnings is what I've targeted as I think we're going to overshoot to the low side as layoffs hit, salaries fall, rents fall, and people reach debt saturation points. If you as a realtor can get people into houses, you make money anyway (regardless of if they can pay the loan). So you're fine and will continue to be fine, they saved your butts when they jammed the $250K FDIC limit and stimulus through to get LIBOR down and prevent a bond market dislocation. If that had blown up, house sales would be settling in cash on the barrelhead right now.

[grrrr]

These macro trend discussions are very interesting, but I am seeing some drastic differences between markets. Real estate is still all about location.

That is what the realtors around here were touting. House prices were holding, but the length of time on the market was getting longer and longer. That has now translated into falling prices. A 1 bedroom condo in glacier was listed at 179k 2 years ago, then 189k a year ago, now listed at 114k. Long market times = denial about falling prices.

Some markets are holding up better than others. Many just took longer to start falling.

[coreshot-tourettes]

Yeah, I think getting housing prices closer aligned with incomes is happening broadly, but I think the "home as investment" thing is not entirely going away either. Look at how shitty americans are at saving now -the government has to push housing as an investment - and their support of it through tax incentives proves my point (no way is that changing). I don't think we're going all the way back to Glen Beck's chart of "since 1890" or even all the way back to the 1950s - the US economy itself has changed and consumer behavior leads more than ever, that's how this is going to settle in. I don't have the specific predictions that many folks have, but I do know that people will still want to own houses, rent houses, and move from home to home for various reasons - and nobody wants to get fucked in their pocketbook during any of those phases.

I somewhat agree, but also note the most excellent turnaround in the USA savings rate (from negative to +4%) as people stop spending. They haven't fully realized that with interest rates at near zero and stimulus money getting stuffed in, inflation is going to diminish the value of their savings anyway.

[coreshot-tourettes]

That is what the realtors around here were touting. House prices were holding, but the length of time on the market was getting longer and longer. That has now translated into falling prices. A 1 bedroom condo in glacier was listed at 179k 2 years ago, then 189k a year ago, now listed at 114k. Long market times = denial about falling prices.

Some markets are holding up better than others. Many just took longer to start falling.

Exactly. If your local market has some desirability, it's going to take longer to fall. We're just seeing this start now in desirable areas like NYC and CO.

[Platinum Pete]

I somewhat agree, but also note the most excellent turnaround in the USA savings rate (from negative to +4%) as people stop spending. They haven't fully realized that with interest rates at near zero and stimulus money getting stuffed in, inflation is going to diminish the value of their savings anyway.

the inflation bit is going to get to people, and fold back onto the consumer behavior, and the general populations long term habits with savings - then blam-o people will want to get back into making money wi9th their money again. Here comes "owning a place of my own, not throwing money away on rent" mind set rushing back in. My view on the bubbles in the stock market or real estate market are like a person getting huge fat - they go through a miserable crash diet and get skinny again, but the capacity is still there and they creep back to that bloat. We'll see this again and it won't feel so bubblicious - look at the Dow, we're at the levels of 97, 98, 02 - and this is being called the depths of the worst crash since 29.

[coreshot-tourettes]

the inflation bit is going to get to people, and fold back onto the consumer behavior, and the general populations long term habits with savings - then blam-o people will want to get back into making money wi9th their money again. Here comes "owning a place of my own, not throwing money away on rent" mind set rushing back in. My view on the bubbles in the stock market or real estate market are like a person getting huge fat - they go through a miserable crash diet and get skinny again, but the capacity is still there and they creep back to that bloat. We'll see this again and it won't feel so bubblicious - look at the Dow, we're at the levels of 97, 98, 02 - and this is being called the depths of the worst crash since 29.

Hell, there are some people calling for a fall to Dow 3,000 levels. I think it would take a major Black Swan to get us there, and that event isn't tradeable.

[H0G]

"
See a pattern?

yeah i do. I only said one of those things. I need to start quoting your posts bc you keep changing them every time you find a new figure on the interwebs.

Prices in Denver have been falling for quite some time now. Some areas are even on the rise. It just depends on the location. I am not a realtor btw, but thanks for playing. But I did sleep at a holiday inn last night.

[DictatorShooter]

If you're actually trying to profit by shorting REITS (whee!), then you're a big part of the fucking problem. Stop spending your time trying to propogate fear on the Internet and make sure someone's hand doesn't get caught in a machine.

[montanaskier]

If I decided to take a complete bath and low ball my house and get the fuck out.....how would/could I come up with the money to pay the amount I would be upside down?

House was bought for 260k....gave up trying to sell it and rented it when the price fell to 230k roughly. I don't have 30k or more sitting around that I can just write a check for...(see: bought a house in Vail). I really want to be done with the thing but don't want to go broke just to be done with it either.

[coreshot-tourettes]

snip

If I change something, it's because I doublechecked my data. How's your 401k doing, BTW? If someone's book is up 20% instead of down 40% (not me, but a guy I follow), that's a pretty solid indication that they understand the way things are swinging better than permabull "old rules don't apply anymore" realtors.

We're all just shouting into the wind anyway. Best of luck to you.

[4matic]

Housing starts are running 400,000 annual rate this year. That's less than half the long term average. Prices may stay low but at that rate there will be a shortage in a few years.

[coreshot-tourettes]

If you're actually trying to profit by shorting REITS (whee!), then you're a big part of the fucking problem. Stop spending your time trying to propogate fear on the Internet and make sure someone's hand doesn't get caught in a machine.

REITs were going to go crunch anyway, why not profit from it? Virtually everyone knew it was coming since 2007, if not 2005, (except the realtors. My "short like hell" signal was the premiere of the show "Flip This House!").

If you're upside down on a positive cashflow house, keep it. Asset's an asset. Upside down, negative cashflow, keep it if you can ride it for 10 years. Rents may bounce back or they might not. Otherwise, your lender might be amenable to a reduced principal if you have to sell, so call them and
try to get a principal reduction, I don't know if CO has that program in place. Also try and find out if it's a recourse loan.

Word on the last. My test run just finished. Out.

[woodstocksez]

2.5x to 3x income is simply the rule of thumb that's been around for years on how much house you can afford. Don't
ask why, it just works.

Shouldn't this depend on prevailing interest rates? Sorry for asking why.

Also, I don't eat lentils. Am I fucked?

[grrrr]

Housing starts are running 400,000 annual rate this year. That's less than half the long term average. Prices may stay low but at that rate there will be a shortage in a few years.

Housing starts are zero in my community. Literally. I have been tracking it to try to figure next years tax projections. Last month the building division in this county of 190,000 issued zero building permits. Zero.

There are 206 houses on the market in a population of 8600. There will only be a shortage if all those prices fall to where the current market can bear them, and somehow lending in the next few years returns to easy money allowing the rental crowd to start buying. While the first might happen, I really wouldn't count on the second occurring in any big hurry.

[Spats]

Hey, can we have an admin change the thread title to "Real Estate Crash Thread & Survivalist Training" ASAP?

20 pounds each of beans and rice won't last you a month. All c-t is advocating is that when state and local governments are literally broke, we should all be prepared for short-term disruptions to public utilities and government-provided services, including infrastructure.

Let's say the water stopped running in your house for a week. What would you drink?
Let's say the electricity in your area goes off for a week. What do you do about all the food in your refrigerator? Can you cook food? Can you heat your house?
Let's say that there's a financial dislocation and credit cards and ATMs stop working for a week or two. How do you feed yourself?
Let's say the local supermarkets stopped getting food deliveries for a week or two. What would you eat?

And let's say you're prepared for minor disruptions like this. Most people in your area won't be. What do you think they'll start doing once they get cold and hungry and thirsty? How will they act once they realize that you're not?

We're not talking about complete societal collapse AT ALL. We're just talking about what might happen when we have to start dealing with the sort of short-term disruptions the rest of the world has to deal with all the time. You know, the stuff you see when you're a tourist in the Second or Third World.