Real Estate Crash thread

[LeeLau]

Hugh awesome



But the zombie of speculation is easily awakened. During the recent real estate boom, California City's population nearly doubled. Hundreds of homes were built in the city's core. Late-night infomercials hawked land in the distant "second community." Lots that had been selling for $3,000 fetched $20,000.

"People lined up to buy them," said Cheryl Hoffman, a local real estate agent. "They were being told, 'This is where you're going to make your fortune.' "

Now those lots cost $3,000 again.


hahahaha - you fucking idiots. Buying sand ... in a desert. hahaahaha

Whooops thought this was a Raging Bull OTC BB stock tout board.

Still you've got to see the humour in this

[mock vomit]

Getting a real bad feeling about the future several years of the real estate market now... I didn't feel we were likely to have much of a recovery for a couple years... but WAS hoping maybe we had come near the bottom. NOW, after doing a few MVAs the last couple days, and reading the economic news... I'm getting a pit of my stomach "been doing this for 26 years and this just feels REALLY REALLY BAD" feeling. Of course, we dirt pimps can sometimes find it hard to see the forest of the larger marketplace beyond the trees of our own current business, but...

-I'm thinking I need to dump my current property, even quicker/bigger price drops than my already moderately aggressive posture... I DO NOT want to be trying to sell anything during the next couple years. (And IMHO for those of you hoping to wait to sell until prices bounce back to close to their highs of several years ago... be prepared to wait a decade or even a good deal more!!!)

-And I'm seriously thinking 26+ years doing this business is quite enough. (I was already thinking about ejecting when my last rug rat is off to College in a couple years anyway) I've been bored for a while, and personally it's a good time to go pursue some of my other interests. Only problem, most of my other obvious fields of employment are also in the shitter right now.

Ughhhh!

[montanaskier]

Interesting graph from the Vail Valley

[Benny Profane]

That's pretty.

[Hugh Conway]

here's another to warm the cockles of your heart benny

[Benny Profane]

Yes, I've seen that many a time. That's what it's all about.

[liv2ski]

More good news from Bloomberg:

"With 14.6 million Americans out of work, homeowners are struggling to hold onto their properties. One in seven mortgages were delinquent or in foreclosure during the first quarter, the highest in records dating to 1979, according to the Washington- based Mortgage Bankers Association. Foreclosures probably will top 1 million this year, said RealtyTrac Inc., an Irvine, California-based data company".

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

Oooops, and this just in:

"Hello Double DIPression my old friend. 3.83 million sales on 4.65 million expectation. Previous 5.37 million revised to 5.26. The chart says it all: lowest sales since May 1995, months supply largest since 1999".

http://www.zerohedge.com/article/exi...pectations-134

May 1995 were some tough times in the CA Mtg business. Happy days are here again

[mock vomit]

Getting a real bad feeling about the future several years of the real estate market now... I didn't feel we were likely to have much of a recovery for a couple years... but WAS hoping maybe we had come near the bottom. NOW, after doing a few MVAs the last couple days, and reading the economic news... I'm getting a pit of my stomach "been doing this for 26 years and this just feels REALLY REALLY BAD" feeling. Of course, we dirt pimps can sometimes find it hard to see the forest of the larger marketplace beyond the trees of our own current business, but...

-I'm thinking I need to dump my current property, even quicker/bigger price drops than my already moderately aggressive posture... I DO NOT want to be trying to sell anything during the next couple years. (And IMHO for those of you hoping to wait to sell until prices bounce back to close to their highs of several years ago... be prepared to wait a decade or even a good deal more!!!)

-And I'm seriously thinking 26+ years doing this business is quite enough. (I was already thinking about ejecting when my last rug rat is off to College in a couple years anyway) I've been bored for a while, and personally it's a good time to go pursue some of my other interests. Only problem, most of my other obvious fields of employment are also in the shitter right now.

Ughhhh!

Yep.

A news article quote expanding on liv2ski's later comment;

Sales of existing homes plunged in July
Record drop of 27 percent to lowest level since 1995

By ALAN ZIBEL
updated 2 hours 3 minutes ago

WASHINGTON — Sales of previously occupied U.S. homes plunged last month to the lowest level in 15 years, despite the lowest mortgage rates in decades and bargain prices in many areas.

July's sales fell by more than 27 percent to a seasonally adjusted annual rate of 3.83 million, the National Association of Realtors said Tuesday. It was the largest monthly drop on records dating back to 1968, and sharp declines were recorded in all regions of the country.

The housing report worried Wall Street, briefly pushing the Dow Jones industrial average below 10,000 .

Sales were particularly weak among homes priced in the lower to middle ranges. For example, in the Midwest, homes priced between $100,000 and $250,000 tumbled nearly 47 percent.

As sales have slowed, the inventory of unsold homes on the market grew to nearly 4 million in July. That's a 12.5 month supply at the current sales pace, the highest level in more than a decade. It compares with a healthy level of about six months.

One reason the market is hurting is that buyers and sellers are in a standoff over prices. Many sellers are reluctant to lower their prices. And buyers are hesitating because they think home prices haven't bottomed out.

"It really is a self-fulfilling prophecy," said Aaron Zapata, a real estate agent in Brea, California. "If all buyers perceive that home prices are coming down, then they will stop making offers — and home prices will come down."

The housing market is also being hampered by the weakening economic recovery.

Unemployment remains stuck at 9.5 percent and many potential buyers worry they might not have a job to pay the mortgage.

Prices have fallen in part because foreclosures are running about 10 times higher than before the housing bust. Though the average rate for a 30-year fixed mortgage has sunk to 4.42 percent, many people can't qualify because banks have tightened their lending standards.

Home sales picked up in the spring when the government was offering tax credits. But the tax credits expired on April 30 and the market has been hobbled since.

The drop in July's sales was led by 35 percent plunge in the Midwest. Sales were down 30 percent in the Northeast, 25 percent in the West and 23 percent in the South.

The median sale price was $182,600, up 0.7 percent from a year ago, but down 0.2 percent from June.

The above comment about Buyer/Seller "stand off" IS DEAD FUCKING ON BTW!!!

[XXX-er]

I always thot it didn't matter if the price is high low or sideways ALL that an RE agent cares about is that RE moves cuz if it don't move ... no commish ?

[meatdrink9]

The above comment about Buyer/Seller "stand off" IS DEAD FUCKING ON BTW!!!

I've seen quite a bit of that recently as well. Right now a seller is buying an appraisal to convince his wife to lower their price to my buyer's offer.

I need to write a lengthy post soon and point out some of what I've been seeing (show some math). This is a really good time for rentals. The returns are nuts with rates where they are. Prices are great in my location as well. So many people afraid of buying means they're renting instead. More rental customers out there.

I'll try to write something in the next day or two.

[Benny Profane]

I've seen quite a bit of that recently as well. Right now a seller is buying an appraisal to convince his wife to lower their price to my buyer's offer.

I need to write a lengthy post soon and point out some of what I've been seeing (show some math). This is a really good time for rentals. The returns are nuts with rates where they are. Prices are great in my location as well. So many people afraid of buying means they're renting instead. More rental customers out there.

I'll try to write something in the next day or two.

Yeah, just heard a report that rental occupancy is down to 5% from 7%, and prices are holding steady. I see it a lot around here. I shopped seriously for a new place this Spring, and all the good stuff is still expensive and moves fast.

[meatdrink9]

I rented 3 places in under a week last week. All of the new tenants were upgrades from my previous tenants. I've had calls from two past tenants looking for places, but all of mine are full. They're going to fight it out for a friend's rental that should be finished next week (he does the same formula in terms of remodel/rental that I do).

[skier666]

here's another to warm the cockles of your heart benny

That would make a sick jump or nice line for steep turns....

[liv2ski]

I've seen quite a bit of that recently as well. Right now a seller is buying an appraisal to convince his wife to lower their price to my buyer's offer.

I need to write a lengthy post soon and point out some of what I've been seeing (show some math). This is a really good time for rentals. The returns are nuts with rates where they are. Prices are great in my location as well. So many people afraid of buying means they're renting instead. More rental customers out there.

I'll try to write something in the next day or two.

The thing is, rental properties are very cut and dry in my opinion. If you can buy at 10X gross annual rents (or less would be nice) then rentals are great, as they should cash flow.
Bad news is, in So Cal, my duplex would sell for closer to 18X gross annual rents today When I bought it, it was about 12X, so I am waiting for depreciating values to bring it back down

[powder11]

I've seen quite a bit of that recently as well. Right now a seller is buying an appraisal to convince his wife to lower their price to my buyer's offer.

I need to write a lengthy post soon and point out some of what I've been seeing (show some math). This is a really good time for rentals. The returns are nuts with rates where they are. Prices are great in my location as well. So many people afraid of buying means they're renting instead. More rental customers out there.

I'll try to write something in the next day or two.

yep, I just had a rental come up after a 3 yr lease and was worried I might have to drop the rent. My ad hadn't even hit the paper before I had someone who knew it was vacant show up at my house and beg to rent it.

[meatdrink9]

The thing is, rental properties are very cut and dry in my opinion. If you can buy at 10X gross annual rents (or less would be nice) then rentals are great, as they should cash flow.
Bad news is, in So Cal, my duplex would sell for closer to 18X gross annual rents today When I bought it, it was about 12X, so I am waiting for depreciating values to bring it back down

I finally started writing the lengthy info. It still needs lots of supplementing and way more time to continue to write more along the way, but I throw out some math on real world examples for rentals in the second post. It's basically how I've been operating since those initial flips roughly 4 years ago.

[ame="http://www.tetongravity.com/forums/showthread.php?t=198662"]Teton Gravity Research Forums[/ame]

[Benny Profane]

Great rant from an NYT response to an article about Home ownership:

"Home ownership is a similar to falling in love. You develop a borderline delusion initially and see mainly the good points. Then love sooner or later comes face to face with reality. But it's too late to walk away without incurring lots of pain. At least it's easier to change houses than to switch wives (unless you are the movie star type). Still, the next time around you meet reality again, facing all the pain in maintaining the relationship---in this case the house. Just sit down one day and go over a decade or more of receipts covering housing costs. All you have done is provide an avenue for someone to tax you, earn interest off you and sell you every product from A-Z that makes you feel so special as a house owner. In the long run it's all crap and self delusion. Worst of all is buying someone else's crappy house.
We remodeled our ranch and felt it was an extension of our egos--well, somewhat. We left the basement alone till moisture and water back up problems were solved. A basement consultant stopped short of giving us a final report, wanting to see behind the drywall installed several months before we fell in love with the house and its potential. We balked at removing drywall for his examination. That was a decade ago. Recently another sewer backup that struck hundreds of homes in the Milwaukee area. I declared war and took down everything I could from basement ceiling and walls. Lets just say what I found was dreadful. I will never forget discovering a long plywood wall covered in wall paper and sandwiched between drywall and a cheaper particle board. There was mold galore, as the plywood and wall paper wicked water and mold easily stayed hidden. Similar findings in damp basement wall areas where drywall and insulation just created a lovely environment for mold. But fool that I am in a house without a mortgage this past decade, I started a parade of repairmen whose cost will easily outstrip the insurance payment. I have the illusion water and dampness can be sufficiently eliminated and something like an entertainment area can arise like the proverbial phoenix. This is madness conjuring madness--the home owner type. Once again I'm the conduit for all manner of products meant to give me eternal household peace. It ain't going to happen, but I'm too much in love to give up. See what i mean. Rent, and let someone else have the pain of owning a house."

[powder11]

keep plugging rentals Benny... you tenants are the ones who cover my mortgages and improvement expenses

[liv2ski]

I finally started writing the lengthy info. It still needs lots of supplementing and way more time to continue to write more along the way, but I throw out some math on real world examples for rentals in the second post. It's basically how I've been operating since those initial flips roughly 4 years ago.

Teton Gravity Research Forums

Meatdrink: While a good primer for the novice, your areas values are likely in the lower 50% percentile. Bottom line on rental properties, a duplex gets the same good financing as a SFR where as 3-4 unit property rates are a bit higher, but units always cash flow better than 1 unit properties with the same down payment. Best financing on N/O loans typically requires 25-30% down and to get that elusive positive cash flow when looking at PITI, vacancy and repairs is required, especially in high cost areas. Most investors will need to start with a 30 year loan to get the property to cash flow (in a high cost area) in the beginning, but hopefully, over time rents go up and you can start to apply that to principle reduction to pay off the loan sooner.
For the newbies, I would save my money if a FTHB (first time home buyer) for a few more years of property price doldrums. If the world hasn't imploded in 2012 look at buying a duplex/2 on 1 with one unit O/O and the other a rental. Save your money for a few more years, then buy that nicer SFR as an O/O property to get good financing and save the duplex as a rental and your on your way.
Unlike Benny's above article, I believe RE is a great hedge against inflation and as a highly leveraged investment, can give you great returns in a normal economic cycle over the long haul. Now isn't a normal economic cycle for many of us, so be patient.

[Benny Profane]

keep plugging rentals Benny... you tenants are the ones who cover my mortgages and improvement expenses

Funny thing. When all of this shit went down, the logical train of thought was to say that rentals would rise as defaults and foreclosures rose, but, it didn't happen. Now, a few years later, it finally is. Rental REITs are way up, and occupancy is getting tighter. Makes sense. Still wouldn't want to be a landlord, though. And, if you want to make money on the deal, it's all about tax avoidance, which tax free retirement funds ignore. So, hey, have fun with the trash! Hope they don't "trash" your asset!

[liv2ski]

Funny thing. When all of this shit went down, the logical train of thought was to say that rentals would rise as defaults and foreclosures rose, but, it didn't happen. Now, a few years later, it finally is. Rental REITs are way up, and occupancy is getting tighter. Makes sense. Still wouldn't want to be a landlord, though. And, if you want to make money on the deal, it's all about tax avoidance, which tax free retirement funds ignore. So, hey, have fun with the trash! Hope they don't "trash" your asset!

The above comments are misleading as they combine residential rental and commercial REITS into the same comments.
IMO, residential rentals may experience some softness in areas adversely impacted by people leaving the area due to the economic downturn or because RE prices have dropped dramatically, allowing new investor buyers to offer lower rents while maintaining cash flows over investors that bought a few years ago. As many have mentioned, we/landlords are often surprised to see strength in the rental market based on all the other bad news out there.
Commercial is another thing entirely. The recent run up in REITs is retarded as over all vacancies are way up on commercial properties as are delinquencies. Just look at that post by the commercial appraiser. His comments just reinforced so much of what I have read about commercial property. Maybe a few REITs that have been around forever, that didn't buy anything 2002-2009 are in good shape to snap up properties at bargain prices, thereby supporting a higher value, but I would be very careful investing in REITs at this point. Read the prospectus for sure

[khakis]

Great rant from an NYT response to an article about Home ownership:

"Home ownership is a similar to falling in love. You develop a borderline delusion initially and see mainly the good points. Then love sooner or later comes face to face with reality. But it's too late to walk away without incurring lots of pain. At least it's easier to change houses than to switch wives (unless you are the movie star type). Still, the next time around you meet reality again, facing all the pain in maintaining the relationship---in this case the house. Just sit down one day and go over a decade or more of receipts covering housing costs. All you have done is provide an avenue for someone to tax you, earn interest off you and sell you every product from A-Z that makes you feel so special as a house owner. In the long run it's all crap and self delusion. Worst of all is buying someone else's crappy house.
We remodeled our ranch and felt it was an extension of our egos--well, somewhat. We left the basement alone till moisture and water back up problems were solved. A basement consultant stopped short of giving us a final report, wanting to see behind the drywall installed several months before we fell in love with the house and its potential. We balked at removing drywall for his examination. That was a decade ago. Recently another sewer backup that struck hundreds of homes in the Milwaukee area. I declared war and took down everything I could from basement ceiling and walls. Lets just say what I found was dreadful. I will never forget discovering a long plywood wall covered in wall paper and sandwiched between drywall and a cheaper particle board. There was mold galore, as the plywood and wall paper wicked water and mold easily stayed hidden. Similar findings in damp basement wall areas where drywall and insulation just created a lovely environment for mold. But fool that I am in a house without a mortgage this past decade, I started a parade of repairmen whose cost will easily outstrip the insurance payment. I have the illusion water and dampness can be sufficiently eliminated and something like an entertainment area can arise like the proverbial phoenix. This is madness conjuring madness--the home owner type. Once again I'm the conduit for all manner of products meant to give me eternal household peace. It ain't going to happen, but I'm too much in love to give up. See what i mean. Rent, and let someone else have the pain of owning a house."

while I agree with these comments to some extent, I think the author is (and many first time homeowners are) stupid. Would you buy a rattletrap shitbox of a car (even if it's your "dream" car) if you didn't know shit about working on cars? No you'd buy a newer car that you don't have to fix and maybe even one with a warranty, because (in general) mechanics are crooks and you will lose your ass paying someone to maintain your car for you. Not to mention that it's very difficult to get a loan on a rattletrap shitbox of a car. (because banks are smart when Fannie/Freddy aren't there to buy their mistakes). So why would you buy a shitbox of a house that needs a ton of work if you don't know how to do any of the work yourself? I guess partially because TV says you can play GC with no experience and come out alright. But it's still stupid.

[Benny Profane]

while I agree with these comments to some extent, I think the author is (and many first time homeowners are) stupid. Would you buy a rattletrap shitbox of a car (even if it's your "dream" car) if you didn't know shit about working on cars? No you'd buy a newer car that you don't have to fix and maybe even one with a warranty, because (in general) mechanics are crooks and you will lose your ass paying someone to maintain your car for you. Not to mention that it's very difficult to get a loan on a rattletrap shitbox of a car. (because banks are smart when Fannie/Freddy aren't there to buy their mistakes). So why would you buy a shitbox of a house that needs a ton of work if you don't know how to do any of the work yourself? I guess partially because TV says you can play GC with no experience and come out alright. But it's still stupid.

Yeah, but, if you're old enough, you know how love trumps stupidity many a time over. I think that's the point of the rant. Home "ownership" is not a business decision. It's a capitulation to love. And, that's why the downside will be with us for so much longer. Love hurts.

[khakis]

Ah...thought that the love BS was just a literary liberty. WhoTF falls in love with a stupid house? It's a roof and walls to keep you and your sh1t from being rained on or stolen, whether you buy or rent. I mean I like my place and all, but...

And I don't think I've ever heard anybody rationalize falling in love (the regular kind) as a good investment.

[Benny Profane]

Ah...thought that the love BS was just a literary liberty. WhoTF falls in love with a stupid house? It's a roof and walls to keep you and your sh1t from being rained on or stolen, whether you buy or rent. I mean I like my place and all, but...

And I don't think I've ever heard anybody rationalize falling in love (the regular kind) as a good investment.

Well, if you want to differentiate commercial real estate investing from residential, that's the key. Emotion. Millions and millions of Americans are so tied to their houses for very irrational reasons right now, and that will take a long time to work through. The commercial guys easily know when to cut and run. If they don't figure that shit out early enough, they are out of biz.