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Old 01-15-2008, 11:58 AM   #81
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CFB, as I said, all is possible. The list of possibilities long with many a winding turn. And yes, equities were the subject of much lip flapping. I saw it as a buying opportunity much like I see housing now.

If a person wanted to purchase in 2006 and things were out of their price range, then today must seem like a great time for them. Will it drop further, I as an owner hope not, but I have no idea. And no "evidence" to support a prediction.

One worrisome thing to me is that my neighborhood was a very attractive place just a few years ago. I now see it looking a bit more shabby, kinda tacky with all the signs (some 3-4 signs) and unlived in homes. I took a renter that I would not have taken 2-3 years ago.

When I visit Ann Arbor to see old friends, housing is a hot but depressing topic. I feel happy for those who have done well. I have not and fear will not.
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Old 01-15-2008, 12:10 PM   #82
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Originally Posted by TBPu View Post

As far as supporting the OP, he presented a list and was met with a lot of skepticism until, yes, he was proven right. The list was valid and illustrated a situation that indicates that yes there is a housing problem in many areas.

As far as your own situation or attack on me, I have no comment.
Sorry, didn't mean to appear to attack you, just your reasoning. The only thing supported was that his list of prior sales and present list prices in a small locallity were valid. Talk about cherry picking. That he and you were able to make the huge jump to the conclusion that there is a housing problem in many areas is just that , a jump to a conclusion. The market is determined by the actions of both the buyer and the seller. Neither of you have presented any evidence of direct action by buyers. At best you could say that buyers are waiting on the sidelines, perhaps biased by all the misinformation spewn about. That's about it and there may be even other explanations.

Another poster presented an actual sale in the geographic region that did not support the OP claims. All cognitive dissonance aside I'll have to go with the facts.
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Old 01-15-2008, 12:11 PM   #83
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When will you guys stop arguing about house prices and start arguing about the economic fallout?

It should be clear by now that there are feedback loops related to housing. We saw several things happen as the bubble inflated:

1) Expectations of rising prices drove speculation.

2) The wealth effect of rising prices (and equity withdrawal) drove spending.

3) Employment went up due to (1) and (2). As much as 50% of job growth was directly related to housing in many areas.

Now all of that is unwinding. The unwinding of speculation will likely cause home prices to undershoot their "intrinsic value" on the way down. But I think the economic impact on consumers and employment will be more important going forward.

Keep in mind that if we simply "correct" to historical levels, that wipes $6 trillion of wealth away....
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Old 01-15-2008, 12:30 PM   #84
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Remember the motto of the hitchhiker's guide to the galaxy - Don't Panic.
Those of us who made easy money in the stock market and lost or broke even on real estate have one opinion based on personal history.
Those of us who did the opposite, have another.
Sounds like those of us who bought and didn't panic sell, whether houses or stocks, did ok.
Sorry for stating the obvious, but I wasted lots of energy freaking out over what a terrible mistake I made buying a house when I needed a place to live (which turned out to be a bad time to buy) and wish to allay that for others. Despite the market tanking and the neighborhood declining due to an unforeseen road project, it did not prevent my ER, because I could afford to hold on to the house and not sell at the bottom.
I just wish I knew how to dollar cost average into a house so I don't have to pick a specific time to make the commitment. That's "market timing" and it never has worked for me.
If this is the beginning of a huge depression, we're all screwed, but likely not nearly as screwed as those that have not socked away a nest egg.
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Old 01-15-2008, 12:43 PM   #85
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When will you guys stop arguing about house prices
All I was contesting was the ridiculous idea that we'd have to drop as far below intrinsic value as we rose above it, so as to maintain a level "mean".

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Keep in mind that if we simply "correct" to historical levels, that wipes $6 trillion of wealth away....
18.3 trillion lost in the market crash in 2001. What were the results of that.
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Old 01-15-2008, 12:53 PM   #86
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18.3 trillion lost in the market crash in 2001. What were the results of that.
Can you point me to the origin of that number? AFAIK, the NASDAQ peak-to-trough loss was on the order of $4 trillion, and that led to a recession.
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Old 01-15-2008, 01:13 PM   #87
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Whoops, my bad. 18.3 was the total market value of the NYSE and the Nasdaq at the peak in March of 2000. At the bottom in October of 2002 the total of both was 9 trillion, for a 9.3 trillion dollar loss.

Still, same point. What bad thing happened.

Most people had been in the market well before the drop, so they rode down what they'd already ridden up. Some idiots ran in late to the party and bought for the wrong reasons and lost their shirts. A couple of people tried fancy tax avoidance schemes and went bust.

No federal bailouts, no economic collapse, just a good reminder of diversification, rebalancing, not buying things when the valuation is implausible, and that money can be made on both ends of situations when people are acting like idiots.

This is a "loss" that most people never "gained" on paper, and most people in most places are standing right where they were 5 years ago, perhaps even better. Whether there is more downside to be seen and how far it goes is debatable, but no amount of "studying" will give one the knowledge to predict that outcome.

The same dipsticks were running around in 2002 and 2003 proclaiming the end of the universe and the arrival of the bear market in equities that they'd been predicting since 1935 42 46 55 69 79 85 94 98 2000.

Its also not necessarily that bad economically. Its also possibly a buying opportunity.
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Old 01-15-2008, 01:23 PM   #88
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OK, let's go with the idea that the Nasdaq crash and the housing crash will be the same order of magnitude dollar-wise. In terms of immediate economic repercussions, we saw corporate earnings get cut in half. I think we can expect something like that this time as well.

In general, stock markets crash when there's a recession. An average of 28% drop, I believe. So, this time, we'll have a housing market crash, followed by a stock market crash, coupled with a recession.

And the job losses won't be limited to geographically concentrated dot-coms.

And it's global this time.

So, yeah, houses and stocks will go on sale. And eventually they'll recover and become good investments. I just think it's way early to even consider buying right now.
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Old 01-15-2008, 01:24 PM   #89
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You might want to post the parameters of Schiller data. For most metropolitan areas the information is useless.
Useless? It beats anecdotal evidence or NAR "data" any day of the week.

I'm not sure what you mean by parameters. Shiller data is based on actual SF same-sales numbers. It's not based on new-home sales or condo sales. It's the most thorough metro area analysis done today for the single family housing market.
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Old 01-15-2008, 01:25 PM   #90
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honobob, no worries, and yeah, I would love to point out a "buy" but in my area there are no "buys" so no evidence but darn sure seems strange to consider the housing market robust or anything close (not that you are suggesting that).

And by the way his list is a factual list of what owners/sellers feel the market is and that appears to be down about 30-40% from peak.

And hey, do you know if that property on Steiner was sold after a 1/2mil in renovations. That area is fairly well heeled but it has many old buildings still getting refurbs. Just saying one example positive or negative does not a comprehensive study make. Joking of course.

twaddle, now we are talking. Yes, this is gonna be a macro economic study for the ages. The ripple from bloated housing fueled many spend thrifts. And now with plastic cards with $20k limit available to anyone, just wait for the CC collapse of 2010.

My former neighbor put his home up for sale about 3 years ago and needed the cash. He then got a HE loan for $65k and spent about $30 on finishing his basement, building a deck and other reno. He bought a new Jeep, and a new car for the wife. I collected his mail for him while he was on vaction to Europe. He asked me to give any financial stuff to his daughter. He literally got 4-5 bank, credit card, or department store bill nearly every day. No that is only anecdotal evidence and this being an internet forum, it might even be a lie. But regardless. Is that not a portending of things to come.

People will not do without. My neighbor will achieve the American dream no matter how much it costs me.
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Old 01-15-2008, 01:36 PM   #91
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Well, let's take a look at what that really means. 1990 $200,000 purchase of home with 20% down ($40,000). We won't even look at those smart guys like Alex with their no down VA loans. That home will be worh $458,404 in 1997 if it is an AVERAGE home. Now if I put $40,000 in stocks in 1990 and make 10% every year (everybody I know who has bought stock has lost money in the stock market) I'll have $202,179.

Real Estate $458,404
Stock Market $202,179
Right, that's one advantage of buying real estate. The leverage is immense.

Of course, to be fair, one could margin out stocks at 50% and get to ~303,000 since 1990. The loan would be smaller too.

Real estate has a place in a portfolio. Like stocks, you have to buy low and sell high.

The point is, in many markets, it's sucking wind and will continue to do so for at least this year. Countrywide being bought out isn't a fluke.
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Old 01-15-2008, 01:55 PM   #92
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Whoops, my bad. 18.3 was the total market value of the NYSE and the Nasdaq at the peak in March of 2000. At the bottom in October of 2002 the total of both was 9 trillion, for a 9.3 trillion dollar loss.

Still, same point. What bad thing happened.
The difference between the housing industry and the stock market decline of 2000 I feel is the stock market is primarily held in long-term retirement accounts and not used on a daily basis as a means of consumption. The housing industry gains have been used to support home equity loans which have supported spending and now that portion of support for spending will have been greatly curtailed. Therefore for an equal loss the housing will have a greater impact on the economy than did the stock market decline of 2000.

Also in general stock market shareholders are wealthier, higher educated and less diverse than homeowners. The decline is why you are already seeing politicians such as Hillary Clinton trying to get a 5 year freeze on variable home loans.
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Old 01-15-2008, 02:05 PM   #93
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honobob, I'm confused again.

Yes, in 1997 someone told them the house was worth $454,000 but that is paper (pipe dream) value. AND, someone forgot to mention that there is still the little niggling matter of 23 more years of $800 per month mortgage. Minor detail.

Not to mention that the if we fast forward to 2008 that $454,000 is likely gonna be very illiquid and worth $350,000 in nearly every area of the US except a couple of posters. SF and NYC are certainly exceptions to any rule.

So the home owner is still in debt for 23 years and nearly $200,000 still owing.


CFB, I understand your point and yeah, housing will come back. But in Oct 2002, my stocks seemed like virtual decaying things but a lot of these houses are in actuality going to have to be either gutted or torn down completely. Most foreclosures are nearly worthless after 2-3 years vacancy. Plumbing, appliances, furnace, mold and mildew and the yard is a dig up and replace project. I suspect that many ( I won't hazard a number) will be torn down. A one week drive around Michigan will give the story of this state and it's bleak. Especially the smaller towns that depend on auto workers. In Frankfort, we depend on summer tourists and they are by and large auto related folks. It looks bleak here.

Just saying that the market downturn and this housing downturn seem like different animals.

Not everyone's desire in life.
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Old 01-15-2008, 02:22 PM   #94
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Ah. To quote a regional real estate report put out by Hendrick & Partners "while Oregon has escaped much of the lending crisis, the number of foreclosures rose sharply in the third 1/4 of 2007. In Marion and Polk counties the number of foreclosures increased 28.6% and 84% respectively year-over-year, compared with the same 1/4 in 2006. ... signifigant for the local apartment market in that those who are forced out of their homes may have to turn to an already tight apartment market. If such is the case, apartment owners will continue to exert pricing power". Third 1/4 vacancy rates 2007 of 0.8%-3.6% vs. 2006 third 1/4 rates of 1.3% -6.9%.

Think i'm seeing this - as lower rent people lose their jobs and move on down the road our units are filling really fast for more rent with people with better furniture. So as a landlord, things are looking financially rosy. Hendricks reports 7 2007 third 1/4 sales at $51,722/unit versus 11 third 1/4 2006 sales at $57,457 per unit. Still want to downsize our number of units but just because i'm tiring of doing the landlord thing.
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Old 01-15-2008, 02:28 PM   #95
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We have a guy trying a fix-and-flip down the street. He bought the place for $560K a few months ago, probably put about $50K into the remodel, and is asking $915K. It only takes one buyer, I guess. At the same time, there's a place for sale for $1M not too far from the flip. But it's on a lot 8 times as large. And the house is 3 times as large. And it's bank owned. Tough to compete with the banks.
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Old 01-15-2008, 02:57 PM   #96
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Useless? It beats anecdotal evidence or NAR "data" any day of the week.

I'm not sure what you mean by parameters. Shiller data is based on actual SF same-sales numbers. It's not based on condo sales.
Their purpose is to measure the average change in home prices. Not very helpful for investing purposes. Well they do use information from 20 MSA's. Funny, they don't even include the area where I've made most of my money. Hell, they don't even include my property type. How can you report on the market like NY or SF and not include coops or condos? I would have to point out that that their 5 county description of the SF MSA doesn't refine the market very well. But they sure seem to exclude a lot of sales for various reasons. They sure seem picky!

I'll agree about the NAR "data" and anecdotal evidence. That's sure not where I get my information. I'm much closer to the source.

So for a superficial overview of the average change in single family home prices in a large geographic area I'd agree they're probably as good as anything else.
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Old 01-15-2008, 03:10 PM   #97
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We have a guy trying a fix-and-flip down the street. He bought the place for $560K a few months ago, probably put about $50K into the remodel, and is asking $915K. It only takes one buyer, I guess. At the same time, there's a place for sale for $1M not too far from the flip. But it's on a lot 8 times as large. And the house is 3 times as large. And it's bank owned. Tough to compete with the banks.
Clueless Mr. Bestwifeever asked me if someone we knew was still working on "flopping" a house--and indeed that house will be flopping....
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Old 01-15-2008, 03:24 PM   #98
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honobob, I'm confused again.

Yes, in 1997 someone told them the house was worth $454,000 but that is paper (pipe dream) value. AND, someone forgot to mention that there is still the little niggling matter of 23 more years of $800 per month mortgage. Minor detail.

Not to mention that the if we fast forward to 2008 that $454,000 is likely gonna be very illiquid and worth $350,000 in nearly every area of the US except a couple of posters. SF and NYC are certainly exceptions to any rule.

So the home owner is still in debt for 23 years and nearly $200,000 still owing.
TBPu
I was only using Cho Oyu figures that he was complaining about. Using his figures for appreciation you're still almost $300,000 to the good but he again was using "average returns". And that would be tax free profit!

And it would only be 13 years left of mortgage, but for the real answer to that see post 78 and get back to me.
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Old 01-15-2008, 03:36 PM   #99
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Funny, they don't even include the area where I've made most of my money. Hell, they don't even include my property type.
We're not talking about how much money you've made in real estate or about how you're a real estate genius. We're talking about the general state of real estate in America. Regardless of your personal experience, it's not looking good in much of America.
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Old 01-15-2008, 04:01 PM   #100
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We're not talking about how much money you've made in real estate or about how you're a real estate genius. We're talking about the general state of real estate in America. Regardless of your personal experience, it's not looking good in much of America.

Well, I thought we were talking about the shortcomings of the Case-Shiller Home Price Indices? Just because you don't have any support for your initial assertation is no cause for name calling. And when did you get to call the topic? And what are you calling "the general state of real estate in America"? Is that just the real estate non investors, the real estate losers, a combination of both of just your little circle of friends?
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