Real Estate Crash thread

[Benny Profane]

Lack of pretty houses? What a strange argument. Who is this Redfin fellow talking about? The 1% who are now our new entrenched wealthy class, and have the luxury to shop for pretty? This is an important segment away from the SF, DC, Manhattan, and other trophy neighborhoods? Let them eat cake and build a new outdoor kitchen, I guess.
The mowing down houses solution is quite cynical. Great for the haves, driving up their asset values. Kinda shitty for the new have nots, wouldn't you think? Hey kids, we know you're waist deep in student debt and are making squat compared to Mom and Dad when they were your age, but, we're going to make homes even more out of reach by destroying millions of fixer uppers. It's for the good of the economy, you understand. OK?
Besides, what happens to all of that paper that the banks and institutions own based on those unpretty houses that somebody is going to destroy? Oh, yeah, that's right, the taxpayer will cover it. Sweet.

Anyway, forget about "retirees" fueling any kind of new second home market. If that was going to happen, Florida would be filled with the Boomers turning 65 at the rate of 10000 a day. That ain't happening. Prices are still dropping down there. They don't have any money and can't sell their houses.

[iceman]

Jesus, Grampa, we know the depression and the war were tough times, but give it a rest for a minute, okay?

[gunit130]

The 'Boomers' are sedated on network television, multiple preventative health-impairment narcotics, an increasing fear of the unknown, and a diluted sense of well being.

Believe the stats, the 'Boomers' aren't buying second homes anymore. People are 'hunkering down', as they say, and are preparing for a retirement that is much more local than forecasted.

[liv2ski]

Benny, The demoing of properties is in really shitty neighborhoods, to make room for parks and open space for hopefully communal gardens for inner city dwellers in Detroit and Cleveland sounds like a good idea to me. I am pretty sure you could by one of these homes for a song if you wanted one.

Meatdrink. Do you have 10 financed properties? There are lenders doing up to 10 on a refi or purchase of a N/O property, so maybe if your primary residence (no financed property limit on a primary) has enough equity in it, refi it to pay off one or two other rental properties to stay under the 10 limit.

I would love to buy a 2nd home, bad news is the mtg business has been so inconsistent earnings wis for the last 4 years I am afraid to take on any debt in case shit really hits the fan.

[Benny Profane]

Well, yeah, Detroit is 90% hopeless. What worries me is some sort of movement by the homebuilders and financiers to start mowing down almost perfectly OK homes in other places as a way of having the taxpayer pay for their past mistakes and future profits. This could very well happen in Florida, because those homes go downhill fast with mildew problems if not air conditioned.

As far as a second home, I think I said it here, but, I'll repeat. The wealthiest person I know has never owned one and talks the concept down frequently. As a matter of fact, his nest just emptied, and he's talking about renting his primary for at least the next four years. Hey, if you have to travel, use hotels and/or rent. Besides, that market is totally screwed for years. Financing is five times as hard to get for a second home, and it's not as though people are going to be pulling equity out of their primary to buy for a long time.

[liv2ski]

As far as a second home, I think I said it here, but, I'll repeat. The wealthiest person I know has never owned one and talks the concept down frequently. As a matter of fact, his nest just emptied, and he's talking about renting his primary for at least the next four years. Hey, if you have to travel, use hotels and/or rent. Besides, that market is totally screwed for years. Financing is five times as hard to get for a second home, and it's not as though people are going to be pulling equity out of their primary to buy for a long time.

Your correct. I know it is smarter/cheapest to just go up with the ski club, use my timeshare and be happy with my 30 days a season, but I just want to live in Tahoe so bad, it makes me looney at times and it isn't summer yet.
I was just looking at a place in Tahoe today. Built in 2009, listed in 2010 for $1.2M. Today's asking price $695k. Fucking awesome place on top of a small mountain with 20 acres. Looks like my little slice of Heaven. O well, wife says it isn't in the plan
I agree that RE values will be soft for a few years, but I also know there are a number of areas that have been hammered down to below replacement/rebuild cost. That said, if you have investment capital, buying rentals in those areas is a good idea IMO. Why?? Because I am afraid of the USD depreciating on a much larger scale, which should lead to inflation, in which case rentals could be a good hedge against a worthless currency and inflating costs/rents.
So ya, fuck my 2nd home and just buy some cheap rentals down the road for cash flow.

[Benny Profane]

That said, if you have investment capital, buying rentals in those areas is a good idea IMO. Why?? Because I am afraid of the USD depreciating on a much larger scale, which should lead to inflation, in which case rentals could be a good hedge against a worthless currency and inflating costs/rents.

Inflation won't happen. Isn't happening, except for pockets in commodities, which are now resisting at their top. Not saying oil will be cheap again, but, with the developed world deflating and paying off credit, and absolutely no pressure on wages to the upside (shit, watch the middle class and poor get poorer - wages are now lower on average than 1998 in the US), inflation just won't happen like some are predicting. This isn't the 70s with a very strong UAW and growing public unions - quite the opposite. Look what four dollar+ gas did to the economy - slowed it right the fuck down again.

I'll bet you 50 bucks right here that place in Tahoe is in low the 500s next year. Extremely limited demand. Sure, somebody may get lucky and sell to somebody shopping for "pretty" with cash burning a hole in their pocket, but, I'll bet not.

[liv2ski]

Inflation won't happen. Isn't happening, except for pockets in commodities, which are now resisting at their top. Not saying oil will be cheap again, but, with the developed world deflating and paying off credit, and absolutely no pressure on wages to the upside (shit, watch the middle class and poor get poorer - wages are now lower on average than 1998 in the US), inflation just won't happen like some are predicting. This isn't the 70s with a very strong UAW and growing public unions - quite the opposite. Look what four dollar+ gas did to the economy - slowed it right the fuck down again.

I'll bet you 50 bucks right here that place in Tahoe is in low the 500s next year. Extremely limited demand. Sure, somebody may get lucky and sell to somebody shopping for "pretty" with cash burning a hole in their pocket, but, I'll bet not.

Inflation isn't what we have today, what we currently have is stagflation. Everything I buy is/has been getting more expensive for years without a corresponding boast in wages. If the FED keeps printing and monetizing US debt, the USD will not be worth shit, prices will go screaming higher for everything and owning rental RE may be an excellent hedge against a future USD collapse.
As far as the place in Tahoe for $500k. That would be below replacement cost. It is about 2500 sq ft and was likely about $300 a sq ft to build in 2009. The 20 acres is likely worth $200k at least, so $500k is a real stretch Benny. The dood that built this place is obviously financially fubar to be selling that place at the current price, as it is obvious to me he is getting hosed.

[Game Over]

was likely about $300 a sq ft to build in 2009

a house that cost $300 a sq foot in 2009 will cost a LOT less to build now.

[4matic]

a house that cost $300 a sq foot in 2009 will cost a LOT less to build now.

Building supply and labor costs have not changed. Only the margin has changed.

[liv2ski]

In Case You Didn’t Get The Memo, The US Is In a Real Estate Depression That Is About To Get Much Worse

Yes, we are in a balance sheet based, real asset depression. If you take a look at it from an empirical perspective there should be no surprise in this statement, but since most derive their information from the mainstream media media and the sell side of Wall Street (both of whom have a preternatural proclivity for the positive spin) this may come as a bit of a shock to a few. Let’s ponder the term “depression” as outlined in Wikipedia with some Reggie edits:

In economics, a depression is a sustained, long-term downturn in economic activity in one or more economies. It is a more severe downturn recession, which is seen by economists as part of the modern business cycle. than a

Well, we have had a severe downturn in real estate in much of the EU, the middle east, the UK, Japan, and definitely the US. See “The Inevitable Has Finally Been Admitted In Europe: The Macro Experiment Has Ignited Inflation Without Commensurate Growth & Rates Will Spike” for a series of graphs that compare real estate markets in several of these countries.

[Note: The chart below has a typo that was carried over from the Japanese CRE chart, which is down 72%.]
http://boombustblog.com/reggie-middl...et-much-worse/

MIND NOT BLOWN YET: http://boombustblog.com/reggie-middl...es-guess-what/

[45hill]

So you're saying I shouldn't get involved with a house in a ski town, with views to the resort, and other mountains for 42% of the cost a year ago?

[AdironRider]

You can do whatever your little heart desires, but you should think about if that little ski house is going to depreciate another 58% next year as well.

If your going to stay in it for the rest of your life, have at it, but I wouldnt recomend real estate purchases to anyone unless you plan to be there for at the very least 15 years.

[45hill]

Kids are still young and I plan on being here until they all graduate high school in 11 years. I never bought a house during the rise because I knew prices were way to high. I rented, saved money, and am now in a position to buy.

[iceman]

In Case You Didn’t Get The Memo, The World Is Going To End April, errrr..., October 21!!!

This just in: people need to live somewhere. There's more people all the time. Costs below replacement cost are not going to last forever. But hey, buy a tent if you're convinced. Or pay rent.

[montanaskier]

I'll be the first to admit I wish I wouldn't have bought where I did when I did. I like where I live but not sure I want to be there for 15 years. It'll be what it'll be however.

[AdironRider]

Kids are still young and I plan on being here until they all graduate high school in 11 years. I never bought a house during the rise because I knew prices were way to high. I rented, saved money, and am now in a position to buy.

I think youd be in a good position then to buy as well. The whole point is if you want to get any money back when you do sell, after closing costs and all that interest you pay servicing the loan, you need to think of the place as a home, not as an investment.

Im personally buying to hold, I dont plan on ever selling a single piece of real estate I buy in my lifetime, Id rather have renters cash flowing than take the money and capital gains hit.

[TNKen]

Condo on Broadway in NYC we bought for $1,050,000 and sold for $980,000 is now listed for $650,000. Covers about a 5 1/2 year span from our purchase to today.

We sold two summers ago and glad to be out of it. With all the defaults in the building, I hate to think what CAM charges would be now.

Ken

[liv2ski]

Kids are still young and I plan on being here until they all graduate high school in 11 years. I never bought a house during the rise because I knew prices were way to high. I rented, saved money, and am now in a position to buy.

Is the total mortgage payment (PITI) lower than rent? If yes, than it would be tough to argue against for a long term hold and get it paid off. We live in very odd times and history could pan out a number of ways. Look at Japanese RE over the last 20+ years as one possible example. Most of my RE is paid off or darn close to it. Given a choice, I would have sold it all a few years ago, as stated back then in this thread. (Wife isn't on board with that) The USD scares the shit out of me, so again, RE may be a better place to store wealth than in a bank acct. Also, as has been mentioned by others and myself, many properties are now priced below construction replacement cost. That is pretty fuckin cheap. Really, it is a crap shoot. Think about it and do what feels right. Like they say, "no guts, no glory".

Edit: A page back is a home I would love to buy in Tahoe. Present asking price $695k reduced from $1.2M, so almost a 50% drop in 12 months. Benny thinks it will be at $500k next year. So who really knows? I would sell my place at the beach for that home, I can tell you. Now would I buy it if I had to make mortgage payments, not likely.

[Benny Profane]

Condo on Broadway in NYC we bought for $1,050,000 and sold for $980,000 is now listed for $650,000. Covers about a 5 1/2 year span from our purchase to today.

We sold two summers ago and glad to be out of it. With all the defaults in the building, I hate to think what CAM charges would be now.

Ken

The drop in high end around NY seems to be a result of the new bonus payments which are now much more deferred. I'm playing my tiny violin.
http://www.bloomberg.com/news/2011-0...on-market.html

[AdironRider]

My fiancee likes watching the show "Selling New York". I cant believe people in NYC and how they go about buying things.

[cramer]

If your going to stay in it for the rest of your life, have at it, but I wouldnt recomend real estate purchases to anyone unless you plan to be there for at the very least 15 years.

Thats pretty sound advice and that ultimately lead me to the decision to buy. My daughter was 3 when we bought and i was looking at the long term picture of her staying in same school district, etc.

[snowsprite]

Recap and update: Times are still tough. Really tough. Real estate right now is iffy, at best.

FML I wanna sell 8 months from now.

Sprite

[meatdrink9]

Meatdrink. Do you have 10 financed properties? There are lenders doing up to 10 on a refi or purchase of a N/O property, so maybe if your primary residence (no financed property limit on a primary) has enough equity in it, refi it to pay off one or two other rental properties to stay under the 10 limit.

I just wrote a huge response and apparently it took too long as TGR sent up an error message about time length and axed my response. That sucks, but yes we have hit 10. I have pulled a HELOC on one property and used it buy another house outright. The interest is roughly $200 per month, but the house rents for $800 per month.

[liv2ski]

http://seekingalpha.com/news-article...mes-fell-in-1q

Foreclosure sales, which include homes purchased after they received a notice of default or were repossessed by lenders, hit the highest share of overall sales in a year during the first quarter, foreclosure listing firm RealtyTrac Inc. said Thursday.

"It's an astronomically high number," said Rick Sharga, a senior vice president at RealtyTrac. "In a normal market, you're looking at the percentage of homes sold in foreclosure to be below 5 percent."

The pace at which homes are entering the foreclosure process has slowed in recent months amid bank and court delays. But distressed properties remain a fixture of a housing market still searching for a sustained recovery. The properties, often in need of repair, typically sell at a discount, weakening prices for other types of homes.

As a slice of all home purchases, foreclosure sales peaked two years ago at 37.4 percent. In the first quarter, they rose from 27 percent in prior quarter, but fell from 29 percent a year earlier, according to RealtyTrac.

Sales of foreclosure properties didn't fare much better than other types of homes, however.

In all, 158,434 homes in some stage of foreclosure were sold in the first quarter, down 16 percent from the last three months of 2010 and down 36 percent versus a year ago. Sales of all other types of homes also declined sharply, according to RealtyTrac's figures, which differ from other home-sales estimates.

While the number of bank-owned properties sold declined, they grew as a share of all home sales. Bank-owned homes accounted for nearly 19 percent of all sales, up from 17 percent in the fourth quarter and up from 18 percent a year ago, the firm said.

That's not good news for the housing market.

RealtyTrac estimates there are 872,000 homes that have been repossessed by lenders, but have yet to be sold. At the first-quarter's sales pace, it will take three years to clear the inventory of 1.9 million properties already in some stage of foreclosure.

For bank-owned properties alone, that amounts to a 2-year supply.

"Clearly, the housing market is not out of the woods," Sharga said.

Homebuyers who purchased a bank-owned home in the first quarter saved an average of 35 percent versus the average price of other types of homes, RealtyTrac said.

That discount is unchanged from the previous quarter, but up from an average of 33 percent a year ago.

Buyers who snapped up other homes in the foreclosure process, including short sales, got an average discount of 9 percent, the firm said. That's down from an average of 13 percent in the fourth quarter and an average of 14 percent a year ago. In a short sale, the seller and their lender agree to sell the home for less than what is owned on the mortgage.

The biggest foreclosure discounts were to be had in Ohio, where foreclosure properties sold for an average of 41 percent less than other types of homes, RealtyTrac said.

The average sales price of a foreclosure property was $168,321, down 1.9 percent from the fourth quarter and 1.5 percent from the first quarter last year, the firm said.

At a state level, Nevada led the nation with foreclosure sales accounting for 53 percent of all home sales, RealtyTrac said. That was down from 59 percent the year before.

The state has the highest foreclosure rate in the nation and an inventory of nearly 28,000 bank-owned properties on bank's books. Buyers scooping up foreclosure properties there in the first quarter got an average discount of nearly 18 percent compared to the average sales price of other types of homes, RealtyTrac said.

In California, foreclosure sales accounted for 45 percent of all home sales in the first quarter, down from nearly 48 percent a year earlier. The average foreclosure property sold for nearly 34 percent less than the average sales price of homes not in foreclosure.

In Arizona, foreclosure sales represented 45 percent of all home sales for the quarter, down from 47 percent a year earlier.

Several other states had foreclosure sales that accounted for at least one quarter of all home sales in the first quarter: Idaho, Florida, Michigan, Oregon, Virginia, Colorado, Illinois, Georgia and Ohio.