Join Early Retirement Today
Reply
 
Thread Tools Search this Thread Display Modes
Re: Psychology of the Housing Bubble (and its collapse)
Old 12-23-2006, 10:11 AM   #41
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
kcowan's Avatar
 
Join Date: Jul 2006
Location: Pacific latitude 20/49
Posts: 5,720
Send a message via Skype™ to kcowan
Re: Psychology of the Housing Bubble (and its collapse)

Most people will not move at Christmas. Realtors head south or to visit family. So the listings expire and are not renewed until the spring.
__________________

__________________
For the fun of it...Keith
kcowan is offline   Reply With Quote
Join the #1 Early Retirement and Financial Independence Forum Today - It's Totally Free!

Are you planning to be financially independent as early as possible so you can live life on your own terms? Discuss successful investing strategies, asset allocation models, tax strategies and other related topics in our online forum community. Our members range from young folks just starting their journey to financial independence, military retirees and even multimillionaires. No matter where you fit in you'll find that Early-Retirement.org is a great community to join. Best of all it's totally FREE!

You are currently viewing our boards as a guest so you have limited access to our community. Please take the time to register and you will gain a lot of great new features including; the ability to participate in discussions, network with our members, see fewer ads, upload photographs, create a retirement blog, send private messages and so much, much more!

Re: Psychology of the Housing Bubble (and its collapse)
Old 12-23-2006, 11:15 AM   #42
Thinks s/he gets paid by the post
2B's Avatar
 
Join Date: Mar 2006
Location: Houston
Posts: 4,330
Re: Psychology of the Housing Bubble (and its collapse)

Quote:
Originally Posted by tryan
At the risk of repeating myself, it'll take a deep recession to find a real bottom. We've got time.
I'll chime in here with my experience in a couple of real estate collapses. When the market "slows," people won't sell if they don't have to move and people will do alot to avoid moving if it means eating a big home loss. The market is then made up of divorces and repos. As long as the jobs hold up, the amount of repos is small and only the froth comes out of the market. When job losses mount, it's time to watch the toilet flush. In my experience a market "readjustmet" takes about 2 to 3 years to be fully felt and then the new real estate base is formed for prices to start to move up. Full recovery may take a decade or more.

Right now we are in a boom economy despite what various political factions want to say. Employment is high and if someone gets strapped there are second jobs available to make a little extra. We'll see the bubble burst when the economy shifts. We haven't seen anything yet.
__________________

__________________
The object of life is not to be on the side of the majority, but to escape finding oneself in the ranks of the insane -- Marcus Aurelius
2B is offline   Reply With Quote
Re: Psychology of the Housing Bubble (and its collapse)
Old 12-23-2006, 02:02 PM   #43
Thinks s/he gets paid by the post
 
Join Date: Sep 2006
Posts: 1,318
Re: Psychology of the Housing Bubble (and its collapse)

Quote:
Originally Posted by 2B
I'll chime in here with my experience in a couple of real estate collapses. When the market "slows," people won't sell if they don't have to move and people will do alot to avoid moving if it means eating a big home loss. The market is then made up of divorces and repos. As long as the jobs hold up, the amount of repos is small and only the froth comes out of the market. When job losses mount, it's time to watch the toilet flush. In my experience a market "readjustmet" takes about 2 to 3 years to be fully felt and then the new real estate base is formed for prices to start to move up. Full recovery may take a decade or more.

Right now we are in a boom economy despite what various political factions want to say. Employment is high and if someone gets strapped there are second jobs available to make a little extra. We'll see the bubble burst when the economy shifts. We haven't seen anything yet.
Do you think it will take 3 years for the RE market to get back to 2005 levels? We have been thinking about downsizing from our current single family house in the Boston suburbs to a townhouse or a condo in the same area. We are now thinking about buying the condo and wait a year or so before attempting to sell the house to get maximum value. But three years may be too long to cover expenses for two properties.
__________________
Corporateburnout is offline   Reply With Quote
Re: Psychology of the Housing Bubble (and its collapse)
Old 12-23-2006, 03:29 PM   #44
Thinks s/he gets paid by the post
tryan's Avatar
 
Join Date: Mar 2005
Posts: 2,449
Re: Psychology of the Housing Bubble (and its collapse)

Quote:

We are now thinking about buying the condo and wait a year or so before attempting to sell the house to get maximum value.
Since it's largly a lateral move (house to condo) it's more a life style change than a financial decision.... right?

As a financial move: No better time than the present. It's all down hill from here, IMHO. I don't believe we'll see the mid 2005 highs until we recover from the next recession.
__________________
FIRE'd since 2005
tryan is offline   Reply With Quote
Re: Psychology of the Housing Bubble (and its collapse)
Old 12-23-2006, 03:41 PM   #45
Thinks s/he gets paid by the post
2B's Avatar
 
Join Date: Mar 2006
Location: Houston
Posts: 4,330
Re: Psychology of the Housing Bubble (and its collapse)

Quote:
Originally Posted by Corporateburnout
Do you think it will take 3 years for the RE market to get back to 2005 levels?
It all depends on the economy. What's happening now is just a little froth being taken out of the market. If that's all it is, the market will "recover" when the supply and demand get back in the same balance or building costs rise to that level.

The other possibility is that this is the peak of employment for your area and unemployment goes to 15%. Suddenly, people that are perfectly happy to stay in their homes become unemployed. They become "motivated sellers" or their mortgage company forecloses and does it for them. Then, it may take 2 or 3 years for the prices to hit bottom. Recovery may take over a decade.
__________________
The object of life is not to be on the side of the majority, but to escape finding oneself in the ranks of the insane -- Marcus Aurelius
2B is offline   Reply With Quote
Re: Psychology of the Housing Bubble (and its collapse)
Old 12-23-2006, 10:05 PM   #46
Recycles dryer sheets
 
Join Date: Feb 2006
Posts: 403
Re: Psychology of the Housing Bubble (and its collapse)

Quote:
Originally Posted by newguy888
many of those homes were taken off the market and have not sold. That has happened here in NJ.
This is what I thought at first too. However, I called to follow up on several properties, and all had actually sold. In one case, the seller had to bring a $30k check to the closing table. I thought for sure she would pull it off the market, as renting would only have put her down about $750 a month, but I guess she bit the bullet. I agree with what 2B said (wise advice). In order to really see a bottom, people need to lose their jobs and burn through their savings. They need to be unable to pay. The economy around here is still going full speed ahead.
__________________
macdaddy is offline   Reply With Quote
Re: Psychology of the Housing Bubble (and its collapse)
Old 01-21-2007, 09:09 PM   #47
gone traveling
 
Join Date: May 2006
Posts: 1,036
Re: Psychology of the Housing Bubble (and its collapse)

I'm in the SF East Bay and two comparable homes have sold for $30K more than what I thought our peak value was. The news just confirmed that year over year prices are 5% up. My 20 year average annual increase in value has been 10%. I'm not inclined to call that a collapse.

I've looked at 1 bedrooms in the under $700,000 range in the city and anything good is snapped up and the thousand or so new highrise units being built are gone. Most of them were well over $700K and new towers are planned for 2008/2010/2012.

Even Honolulu prices are still on the rise and Trump sold his units in a day!

If I'd sold scared of a bubble I'd be sitting in an apartment with about $100K less in net worth waiting for a deal in SF Fresno!
__________________
honobob is offline   Reply With Quote
Re: Psychology of the Housing Bubble (and its collapse)
Old 01-22-2007, 03:48 PM   #48
Thinks s/he gets paid by the post
SteveR's Avatar
 
Join Date: Jul 2005
Posts: 2,803
Re: Psychology of the Housing Bubble (and its collapse)

A recent newspaper article looked at the housing climate here. The average increase in house sales prices was up 25% from 2005 to 2006. Some areas as high as 38% but none were below 15%. The projection is around 10-15% for 2007.

Some of the boom was due to the increased economic picture here and a lot of it was driven by speculation with develpers buying houses long before they were even built and then flipping them for a tidy profit. Individual got into the act too adding to the flames. But, there are still some very real drivers for the market to continue to rise this year.

One of the biggest "problems" here is our unemployement rate. We are at 1.9%. Companies cannot find enough people to fill open jobs. The economy is booming but is now starting to fall off because of the open jobs and businesses have to cut back because they can't make/do more without more warm bodies.

This is starting to affect other segments of the economy. New jobs and filling exiting open jobs has created a climate of job hopping for minor changes in hourly rates or minor benefit upgrades. Overall, the effect is inflationary and there is no end in sight. Housing is also being stressed in both rental and purchased units. My house price on zillow (taken with several grains of salt) indicated a 8% increase in value in the past 30 days.

Areas like Park City are going up even faster. The develpment there has been out of control and shows no stopping. Prices are still going up 10-15% a month in some favored areas there.

Bubble? What Bubble? (spoken tongue in cheek). I only hope to skim of some capital gains from my vacation home before it all comes crashing down. But, as long as the economy keeps expanding and there is more demand for housing with the increase in jobs I don't see a reversal anytime soon.

The only negative I have seen so far is in the higher end home market where the big ticket homes are moving slower. The stuff at the mid range is moving in a few days or even hours. A couple of houses near us have been on the market for months so that says a lot about who is buying and what they are willing to pay for some of these McMansions around here. Spring will be a good indicator of how the rest of the year will go; once this place thaws out.
__________________
Work? I don't have time to work....I'm retired.
SteveR is offline   Reply With Quote
Re: Psychology of the Housing Bubble (and its collapse)
Old 01-22-2007, 05:41 PM   #49
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
dex's Avatar
 
Join Date: Oct 2003
Posts: 5,105
Re: Psychology of the Housing Bubble (and its collapse)

Quote:
Originally Posted by SteveR

Areas like Park City are going up even faster. The develpment there has been out of control and shows no stopping. Prices are still going up 10-15% a month in some favored areas there.
What I don't understand is: Where are all these people coming from?
__________________
Sometimes death is not as tragic as not knowing how to live. This man knew how to live--and how to make others glad they were living. - Jack Benny at Nat King Cole's funeral
dex is offline   Reply With Quote
Re: Psychology of the Housing Bubble (and its collapse)
Old 01-22-2007, 05:45 PM   #50
Thinks s/he gets paid by the post
 
Join Date: Jun 2005
Posts: 4,005
Re: Psychology of the Housing Bubble (and its collapse)

Quote:
Originally Posted by dex
What I don't understand is: Where are all these people coming from?
California. They sold their 3 BR/2BA's, became instamillionaires, and now they can afford to buy the bargain basement $700,000 mcmansions in Salt Lake City. Why not double their money while they can.
__________________
justin is offline   Reply With Quote
Re: Psychology of the Housing Bubble (and its collapse)
Old 01-22-2007, 05:49 PM   #51
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
haha's Avatar
 
Join Date: Apr 2003
Location: Hooverville
Posts: 22,385
Re: Psychology of the Housing Bubble (and its collapse)

I am not too sure about this bubble crashing either. Apparently it hasn't done so in the UK or Ireland or France or New Zealand or any of the other places where prices went wild.

I tend to agree with the idea that well entrenched delusions die hard. It will take a meaningful recession to get the idea across, at least in markets where people are mainly buying for a place to live.

Ha
__________________
"As a general rule, the more dangerous or inappropriate a conversation, the more interesting it is."-Scott Adams
haha is offline   Reply With Quote
Re: Psychology of the Housing Bubble (and its collapse)
Old 01-22-2007, 05:57 PM   #52
Thinks s/he gets paid by the post
 
Join Date: Jun 2005
Posts: 4,005
Re: Psychology of the Housing Bubble (and its collapse)

I don't think the bubble crashing is a necessary requirement for folks to get burnt bad.

The flippers/weekend landlords that buy some of these inflated pieces of property can get burnt too. Buy the place, pay many thousands per month in carrying costs, while bringing in $1300/month in gross rent (once you find a tenant!). Some folks even try to pull a GM and make up for their losses with volume. (Why lose $2700/month on one rental when I can lose $5400 on two rentals!).

Then there's the honest hard working folks who naively step into a $700,000 zero down adjustable rate negative amortization mortgage on their nice new 4 BR mcmansion (just what we need for our growing family : ). These buyers were banking on the place appreciating to $800,000 or $900,000 before rolling the negative equity into a fixed rate loan once they have a handle on their finances.

Seriously, the prices could stay high for a long time. Although if the price increases start to stagnate, folks might not view homes in the hot markets as investments any longer and more as places to live and the money drains that they are.

I'd guess stagnation in these hot markets is just as likely as a crash.
__________________
justin is offline   Reply With Quote
Re: Psychology of the Housing Bubble (and its collapse)
Old 01-22-2007, 08:01 PM   #53
Recycles dryer sheets
 
Join Date: Dec 2005
Location: San Diego
Posts: 468
Re: Psychology of the Housing Bubble (and its collapse)

I agree prices in formerly hot areas may very well stagnate rather than tumble dramatically. I'm still a little surprised, though, at the opinions out there that we'll go through a little flatness for part of 07 then everything will start appreciating again by late this year.

Sunday article in the Real Estate section of the LA Times has quotes like:

"The first two or three quarters of this year will be the tail end of the ugliness," said Ryan Ratcliff, an economist at UCLA Anderson Forecast. "Things will pick up before the end of 2007."

John Karevoll of DataQuick thinks we're in a market in which sales and prices are in the "middle of the grid historically."


How can we be "in the middle of the grid historically" after home prices doubled in several years? The article does quote another economist, though, who predicts a fall of about 5% from last year. That I can buy.

__________________
califdreamer is offline   Reply With Quote
Re: Psychology of the Housing Bubble (and its collapse)
Old 01-22-2007, 08:23 PM   #54
Moderator Emeritus
Nords's Avatar
 
Join Date: Dec 2002
Location: Oahu
Posts: 26,617
Re: Psychology of the Housing Bubble (and its collapse)

Quote:
Originally Posted by honobob
Even Honolulu prices are still on the rise and Trump sold his units in a day!
Quote:
Originally Posted by SteveR
... and a lot of it was driven by speculation with develpers buying houses long before they were even built and then flipping them for a tidy profit. Individual got into the act too adding to the flames.
I'd hold off on that Honolulu prediction, Bob, until someone actually moves into Trump Tower. Very few local residents, if any, got into it-- sheesh, they just broke ground last week!
__________________
*
*

The book written on E-R.org, "The Military Guide to Financial Independence and Retirement", on sale now! For more info see "About Me" in my profile.
I don't spend much time here anymore, so please send me a PM. Thanks.
Nords is offline   Reply With Quote
Re: Psychology of the Housing Bubble (and its collapse)
Old 01-22-2007, 08:50 PM   #55
gone traveling
 
Join Date: May 2006
Posts: 1,036
Re: Psychology of the Housing Bubble (and its collapse)

Quote:
Originally Posted by Nords
I'd hold off on that Honolulu prediction, Bob, until someone actually moves into Trump Tower. Very few local residents, if any, got into it-- sheesh, they just broke ground last week!
Nords. I didn't make any prediction! Just stating the facts. It was reported that $700M worth of Trump sold in 1 day so they had to cancel the second day because that was it! It was also recently reported that the median price of condos was up YOY. Don Ho said he would have bought an entire floor if he could.

I'm still up 9% average annual over 28 years and my purchases in the last few years in Waikiki and Diamond Head are up 15% each year.

Why are you such a naysayer? Oh, weren't you in the market for a condo?
Ummm...........prices are way inflated..next seasons bathing suit fashion in a 1910 retro.....Sell while you can for whatever you can get....See me to avoid that realty commission!
__________________
honobob is offline   Reply With Quote
Re: Psychology of the Housing Bubble (and its collapse)
Old 01-22-2007, 09:27 PM   #56
Thinks s/he gets paid by the post
lazygood4nothinbum's Avatar
 
Join Date: Feb 2006
Posts: 3,895
Re: Psychology of the Housing Bubble (and its collapse)

south florida seems to have dropped hard and fast. our hope is that we are at bottom or at least on a plateau strong enough & long enough to sell mom's house. my brother doesn't want to sell but i don't see that i have a choice and he doesn't have enough to buy me out. i could draw more money (early) from my ira or pay more taxes than i'd care to on the inherited ira if i wanted to hold on to the house. don't know yet how much non-ira $s there will be. real estate taxes since mom died will have shot up about another $15k/yr. if i saw the market returning to where it was i'd hold but i just don't see it. so i signed with a realtor today. he gets 2% to sell, 3.5% if also gets buyer. buying realtor gets 3%. this guy sold two or three houses for my brother already & says this is the only 2% commission he's taking.

according to firecalc, the lower value on the inherited house means that unless i get stellar portfolio performance i'll have to sell my house in 5 years and add $150k of that to the portfolio to give me enough to live in the middle class style i've become accustomed to (minus all that w*rking) plus $10-$15k/year for travel money. i was planning to sell at age 55 anyway but would have been nice to have the option rather than the mandate. i suppose it could have been worse. i could have been counting on, say, an enron company pension, or like many of my friends, had all my money tied up in stocks in the early 2000s when that went bad. odd how i don't recall anyone gloating them.

new construction in south florida not looking as good as existing housing stock. year over year, fort lauderdale area (entire county) new project are down about 30% single family, dead even on multi-family. miami area down 25% on sf & down 27% on mf. west palm beach area down 56% sf & down about 20% mf. but commercial construction is way up in all these areas.

the sky is falling headlines are starting to subside. florida seems to be putting forth good effort to control some housing costs. homesteaded real estate tax savings should become partially portable in 2008. and just today "Florida Legislature passes bill to lower insurance rates". article here: http://tinyurl.com/2dxatq

edit: you'll note in the article that this so far deals mostly with our problem by offering state issued reinsurance as an option for insurance companies. but on a future table is an idea for citizens to sell other insurance besides just wind. you know, the easy money. if the choice is a state competing with the private market or the private market fleecing the public, guess where i'll put my money?

edit: my figures on new projects are for new construction starting, not for sales of new projects.
__________________
"off with their heads"~~dr. joseph-ignace guillotin

"life should begin with age and its privileges and accumulations, and end with youth and its capacity to splendidly enjoy such advantages."~~mark twain - letter to edward kimmitt 1901
lazygood4nothinbum is offline   Reply With Quote
Re: Psychology of the Housing Bubble (and its collapse)
Old 01-22-2007, 10:21 PM   #57
Thinks s/he gets paid by the post
cube_rat's Avatar
 
Join Date: Jul 2005
Posts: 1,466
Re: Psychology of the Housing Bubble (and its collapse)

good grief. It's not the people who have owned their homes in the bay area for 10+ years, it's the people purchasing outrageously priced real estate using ARMS and negative amortization that puts the whole RE market at risk. ARMs amd negative amortizations have become too commonplace in this market.

I just had a family member (in their late 20's) who just bought a 800K 2 bdrm, I bath fixer upper with less than 10% down. Both loans are interest only and is comprised of almost 75% of their month income. This type of financing has become very popular and too common. People think nothing of utilizing negative amortizing options thinking that their equity will continue to escalate. These are the same people who never lived through a down market (see family member scenario above) and do not know what it's like to be upside down on a loan.

I pulled out when I did because my property was bought in the hot market, I fixed it up and sold it two years late for handsome profit while the opportunity was available.

No, this isn't a crash, but I'd hate to see what a sharp rise in interest rates would do.

Oh and try and run numbers on let's say, a 4 unit building here in the bay area. Unless you can put >50% down, the numbers do not work on the positive cash flow side. Sure there's a tax benefit, but who wants to be negative every month? I don't.

Signed,

Sitting on a pile of cash
__________________
fuzzy? cute?
cube_rat is offline   Reply With Quote
Re: Psychology of the Housing Bubble (and its collapse)
Old 01-22-2007, 10:46 PM   #58
Thinks s/he gets paid by the post
wabmester's Avatar
 
Join Date: Dec 2003
Posts: 4,459
Re: Psychology of the Housing Bubble (and its collapse)

Quote:
Originally Posted by honobob
The news just confirmed that year over year prices are 5% up. My 20 year average annual increase in value has been 10%. I'm not inclined to call that a collapse.
Call it whatever you want, but do you think your house will appreciate over the next few years at a faster rate than say, CASH?

I have no idea how long the mean-reversion will take, all I know is that it has always happened historically. We've never been this far off the trend line before, so I guess that means it should take longer to revert than any historical correction. My guess is that you're looking at 10-15 years of lousy returns going forward. It doesn't have to crash to hurt.
__________________
wabmester is offline   Reply With Quote
Re: Psychology of the Housing Bubble (and its collapse)
Old 01-22-2007, 10:48 PM   #59
Thinks s/he gets paid by the post
bright eyed's Avatar
 
Join Date: Jan 2007
Posts: 1,891
Re: Psychology of the Housing Bubble (and its collapse)

Quote:
Originally Posted by cube_rat

I just had a family member (in their late 20's) who just bought a 800K 2 bdrm, I bath fixer upper with less than 10% down. Both loans are interest only and is comprised of almost 75% of their month income. This type of financing has become very popular and too common. People think nothing of utilizing negative amortizing options thinking that their equity will continue to escalate. These are the same people who never lived through a down market (see family member scenario above) and do not know what it's like to be upside down on a loan.
yes! yes! halleluja, you can start a church here in Cali and knock some darn sense into everybody - the prices would not have jumped if people didn't walk straight into the quicksand w/ both eyes open.

but hey, they can just by a deeply inflated life insurance plan to cover their unpaid debt and keep screwing the rest of us by floating the bill and never even planning on living responsibly...
__________________
If i think of something clever to say, i'll put it here...
bright eyed is offline   Reply With Quote
Re: Psychology of the Housing Bubble (and its collapse)
Old 01-22-2007, 11:01 PM   #60
Full time employment: Posting here.
Alex's Avatar
 
Join Date: May 2006
Posts: 696
Re: Psychology of the Housing Bubble (and its collapse)

Quote:
Originally Posted by wab
Call it whatever you want, but do you think your house will appreciate over the next few years at a faster rate than say, CASH?

I have no idea how long the mean-reversion will take, all I know is that it has always happened historically. We've never been this far off the trend line before, so I guess that means it should take longer to revert than any historical correction. My guess is that you're looking at 10-15 years of lousy returns going forward. It doesn't have to crash to hurt.
. You have been calling for the collapse of real estate for at least the last year. maybe some humble pie is in order
__________________

__________________
Oh, you hate your job? Why didn't you say so? There's a support group for that. It's called EVERYBODY, and they meet at the bar.--Drew Carey
Alex is offline   Reply With Quote
Reply


Currently Active Users Viewing This Thread: 1 (0 members and 1 guests)
 
Thread Tools Search this Thread
Search this Thread:

Advanced Search
Display Modes

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

BB code is On
Smilies are On
[IMG] code is On
HTML code is Off
Trackbacks are Off
Pingbacks are Off
Refbacks are Off


 

 
All times are GMT -6. The time now is 04:35 AM.
 
Powered by vBulletin® Version 3.8.8 Beta 1
Copyright ©2000 - 2017, vBulletin Solutions, Inc.