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Re: Sizing the Housing Bubble
Old 07-27-2006, 12:42 AM   #281
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Re: Sizing the Housing Bubble

Quote:
Originally Posted by Texas Proud


For all the people who say housing prices can not go down a lot have not heard about Houston in the '80s..* lot of overbuilding, lots of people buying houses with little down etc. etc...* then it went POP..

I bought my house in 1986 at half the price the last owner paid two years earlier... and it has only caught up to that previous value THIS YEAR..

And if you owned a townhouse in certain parts of town you could not even sell them for $5,000... and they sold for $45,000 a couple of years earlier... and since that area of town has gone downhill, they still are not worth what they sold for when new..

I do not believe that this will happen in any place as it was the worst housing decline in history... but, I do think that people who only see prices going up are looking through rose colored glasses..
I was in Austin at that time. I bought high...sold low. Took a beating on getting out of the house including taking a personal loan to cover the difference between what I owed on the mortgage and what the house was worth when I finally sold it. It was ugly and I had to start from scratch to save for a new house in a different part of the country. I would not wish that on anyone. Who knows how much better off I might be had I not had to start over again?
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Re: Sizing the Housing Bubble
Old 07-27-2006, 12:45 AM   #282
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Re: Sizing the Housing Bubble

All this housing issues make me believe:
1. There will be opportunity in a year or two window frame to buy/accummulate provided people don't get more scared than they are at the moment. If they are, price is going to get ugly.
2. Looking at geopolitical issues, slowing US economy, possible recession if things snowball, who knows what will happen to china if they can't sustain 10% growth p.a.....I should stay focus on my long term goal, that is to hold about 200K in cash.
3. Well, even if I don't do anything with it, I can earn 5.04% nett.

Real estate is not necessarily the best way to go about creating wealth unless one buys at the right time. It's got to be suck for people who buy at the top, only to lose equity and have to wait for at least 5 years to return to purchase price. We all know, factoring in inflation, this is already negative return. Just like the dotcom crash more than 7 years after it pops we're still at "discount" price.

Hang on tight to your cash, the world doom and gloom will be somewhat different than history.
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Re: Sizing the Housing Bubble
Old 07-27-2006, 12:49 AM   #283
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Re: Sizing the Housing Bubble

Quote:
Originally Posted by honobob
You seem to think that appreciation was recently invented. *Prop 13 in 1978 was the result of the skyrocketing appreciation in the early 1970s
honobob, I'm glad you remember the 1970's. * I don't. * I think I was listening to KISS and smoking something that my friends assured me wasn't a dried cow patty.

But my mommy tells me that in 1974, inflation was at 12%. * And in 1980, it hit 15%. * Surely, you understand the concept of inflation and that appreciation at the rate of inflation isn't a big deal. * In fact, I vaguely recall explaining to you that home prices have generally appreciated at the rate of inflation since WWII.

Starting around 1998 or so, houses stopped behaving the way they have for the previous 50 years. * They appreciated at a rate *much* higher than inflation. * Much higher than wage growth. * Much higher than at any other time in the history of the US.

You seem to think this will continue. * I don't. * Let's meet back here in 10 years and compare notes, eh?
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Re: Sizing the Housing Bubble
Old 07-27-2006, 01:04 AM   #284
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Re: Sizing the Housing Bubble

Quote:
Originally Posted by honobob
WAB
Have you ever purchased real property or invested in the stock market? Are you under 30? Your knowledge and experience seems to consists of what your (parents?) neighbors went through or some graph/ report from ...bubble.com. In my tract home subdivision the 1991 high sale was less than 9% above the bubble bust sale and recovered in less than 6 years.

Sorry, but this is how real property works.
The tenants have been paying my Taxes/Maintenance/principal/interest/insurance/maintenance for the last 24 years. Had positive cash flow from day one of rental. And since the mortgage was paid off in 1993 I've had all that exta money for other investments. I was paying more than renting when I purchased in CA but was able to refi shortly after at no costs at 9 then 7.5 then 5.25 and prop 13 keeps my taxes low so in just a few years PITI was even with renting and for at least 10 years I'm at least $700 a month UNDER the cost of renting not even considering the income tax benefit. My equity today from both is over $900K if I sell today or $810K if I sell ...(insert your bubble date here)......... or $1.8m sometime within the next 10 years.

You seem to think that appreciation was recently invented. Prop 13 in 1978 was the result of the skyrocketing appreciation in the early 1970s In Hawaii my property increased 300% from 1978-81. Ca. doubled from 86 to 88. Over 30 years of history are stacked against your guesses which are affecting your decisions HOW? Wait to buy? Higher interest rates could wipe out any savings if lower prices happen.

WAB You are wrong. The problem is not buying at the top of the "bubble", it's selling at the bottom. Just say No!
No need to get condescending. I have it on good authority Wab is over 30. This may be a first for me, someone getting patronizing as they dispute statistical data with anecdotal evidence. So you got lucky, if you won the lotto would you run late night infomercials advising others to plan their retirement around powerball investments? Wab never said it wasn't possible, he's simply pointing out the averages. Your personal success does not a rule make!
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Re: Sizing the Housing Bubble
Old 07-27-2006, 01:32 AM   #285
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Re: Sizing the Housing Bubble

Laurence
I was not trying to be condesending.* I was trying to determine WAB's experience.* I've been pretty open about my qualifications/experiences so anyone can take my postings for what they're worth.* I still don't know if he has ever purchased real property or invested in the stock market.*

I don't think I got "lucky".* I wasn't the only person to buy real property in 78/86/94/2002/2004.* I was just "stupid" enough to not listen to a bunch of naysayers tell me to not buy that/there/then for how much?* I am a way conservative investor.* If I had done half of what I knew would be successful I could have over 3 times the net worth I have now.* Funny, I know alot of lucky people because what I've done has been accomplished by lots of people.* But it's a little like the lotto in that you gotta buy a ticket!
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Re: Sizing the Housing Bubble
Old 07-27-2006, 02:00 AM   #286
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Re: Sizing the Housing Bubble

Quote:
Originally Posted by honobob
I still don't know if he has ever purchased real property or invested in the stock market.*
I didn't answer since I didn't see the relevance.* *If you're a real estate investor, then you understand that prices are generally rooted in fundamentals.* *Prices have separated from the fundamentals.* *Pick a metric, any metric.* *Cap rates for SFR's?* *Income ratios?* Affordability indices?* Variance from historical mean?* Percentage of GDP?* *I don't care which metric you choose -- they all say the same thing: SELL!

As for me, I sold my real estate holdings in 2002, 2004, and 2006.* *Realized gains were, umm, LARGE.* My only remaining property is my personal residence.* *It's a little beach house that has roughly doubled in value since I bought it in 2004.* *Not sure what you can get from that, but there you go.

As for stock, I started investing around 1984.* *Initially bet a lot of my savings on Japan, so I became very interested in bubbles around 1990.* * *I guess I learned from Japan because I sold about 90% of my stock in 1999, and that allowed me to retire at the age of 40.

So, this will be my third GIANT bubble in just 15 years.* *Cool, huh?
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Re: Sizing the Housing Bubble
Old 07-27-2006, 06:47 AM   #287
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Re: Sizing the Housing Bubble

Quote:
Originally Posted by honobob
Quote:

My point is that when I purchased in the 70's 80's 90's or 2000's It was always "how can people afford to buy at these prices?!!" and I never heard "I should buy two cause they're half of what they sold last year"
In the late 70s my parents apartment in Chicago went condo. It was a beautiful two bedroom facing the lake on Lincoln Park West. They wanted $150K. My brothers and I (who couldn't afford the joint anyway) all said "that price is insane, who would pay that much for a lousy apartment." I have no idea what it is worth now, but it has to be truly insane.

It looks like we are ready for a long flat period with some local downturns like we have had before. But I will be very surprised if the place I am in isn't worth a fair amount more in twenty years.
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Re: Sizing the Housing Bubble
Old 07-27-2006, 06:53 AM   #288
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Re: Sizing the Housing Bubble

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Originally Posted by donheff

It looks like we are ready for a long flat period with some local downturns like we have had before. But I will be very surprised if the place I am in isn't worth a fair amount more in twenty years.
To quote my own quote, I forgot to add that I wouldn't buy into this market unless I was pretty darn sure I would be staying put for the duration. If you may need to move in a few years, today's market is downright scary. When we moved into our current house in 1982 we expected to stay put. We have and we will.
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Re: Sizing the Housing Bubble
Old 07-27-2006, 09:15 AM   #289
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Re: Sizing the Housing Bubble

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Originally Posted by NYC Guy
Average Manhattan 2 bed price is about 1.2 mill.

Prices are not going down at present.*
but the coops are nazis when you apply to buy into a building. even if you go the negative pledge financing route you still need to be able to afford the apartment since you can't buy unless the board lets you after looking at your finances

with a home or condo, a homeless person can buy it
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Re: Sizing the Housing Bubble
Old 07-27-2006, 10:18 AM   #290
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Re: Sizing the Housing Bubble

This message brought to you by the department of redundancy department.
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Re: Sizing the Housing Bubble
Old 07-27-2006, 10:27 AM   #291
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Re: Sizing the Housing Bubble

Quote:
Originally Posted by honobob
WAB
Have you ever purchased real property or invested in the stock market? *Are you under 30? *Your knowledge and experience seems to consists of what your (parents?) *neighbors went through or some graph/ report from ...bubble.com.
Rather than focusing on Wab's experience level, Bob, perhaps you could focus on your own while acknowledging that it's possible for your experiences to be different than his. When you have your numbers, great. When you dispute his national averages with your own and then use words like the above, not so great.

Sorry, Laurence, I take back everything I said about consulting Bob on the Diamond Head condo market!
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Re: Sizing the Housing Bubble
Old 07-27-2006, 10:28 AM   #292
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Re: Sizing the Housing Bubble

This message brought to you by the division of redundancy division of the department of redundancy department.
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Re: Sizing the Housing Bubble
Old 07-27-2006, 10:54 AM   #293
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Re: Sizing the Housing Bubble

Please see: http://early-retirement.org/forums/i...8498#msg158498

and after that see and follow the instructions on

http://early-retirement.org/forums/i...8523#msg158523
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Re: Sizing the Housing Bubble
Old 07-27-2006, 07:11 PM   #294
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Re: Sizing the Housing Bubble

Quote:
Originally Posted by wab
I didn't answer since I didn't see the relevance.* *If you're a real estate investor, then you understand that prices are generally rooted in fundamentals.* *Prices have separated from the fundamentals.* *Pick a metric, any metric.* *Cap rates for SFR's?* *Income ratios?* Affordability indices?* Variance from historical mean?* Percentage of GDP?* *I don't care which metric you choose -- they all say the same thing: SELL!

As for me, I sold my real estate holdings in 2002, 2004, and 2006.* *Realized gains were, umm, LARGE.* My only remaining property is my personal residence.* *It's a little beach house that has roughly doubled in value since I bought it in 2004.* *Not sure what you can get from that, but there you go.

As for stock, I started investing around 1984.* *Initially bet a lot of my savings on Japan, so I became very interested in bubbles around 1990.* * *I guess I learned from Japan because I sold about 90% of my stock in 1999, and that allowed me to retire at the age of 40.

So, this will be my third GIANT bubble in just 15 years.* *Cool, huh?
WAB Thanks for the information. I thought the RE info was relevent to determine your perspective. You say your beach house doubled in value from 2004 to 2006. Isn't that great! Isn't in great just to say the words "Beach House"? I think it's even better than saying "I'm driving up to the cabin", although it's hard to find fault with either phrase. But doesn't that also mean that you lost the 100% appreciation on the property you sold in 2004? Say $400K minimum in 2004 so $400K loss.
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Re: Sizing the Housing Bubble
Old 07-27-2006, 07:36 PM   #295
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Re: Sizing the Housing Bubble

Quote:
Originally Posted by honobob
You say your beach house doubled in value from 2004 to 2006.* Isn't that great!
I can honestly say it's not that great.* *I plan to stay here for a while, so there's very little upside to seeing the value increase.* *If there were another place I'd rather live, then it would be great.* *Consider the side effects:

1) Since it's waterfront and appreciated faster than non-waterfront, my property taxes are increasing faster than the rest of the area.

2) My neighbors are cashing out and the character of the neigborhood has changed considerably.* *This area used to be dominated by artists, farmers, and pretty Swedish maidens.* *Now I'm surrounded by lawyers, doctors, oral surgeons, and developers.* *I prefer the maidens.

3) I'm lulled into a false sense of asset value, so I'm spending more on remodeling projects than I would if the area were more reasonably priced.

4) I know that the rate of appreciation is unsustainable (virtually all of it is due to in-migration from places like California and Boston, and eventually we'll run out of the smart equity-rich people who recently cashed out).* *I'm not a big fan of roller coasters.

Quote:
But doesn't that also mean* that you lost the 100% appreciation on the property you sold in 2004?* Say $400K minimum in 2004 so $400K loss.
I rolled my real estate profits into more real estate.* *I basically moved my investments from high-appreciation areas to areas with more growth potential.* *I like real estate as an investment, but now I'm out of the market since I don't see any value any place I look. (BTW, I purchased our current waterfront place during the dead of winter from an out-of-town owner who used an out-of-town agent. Instant equity!)

I'll be back in the market. I'm guessing sometime in the next 3-10 years depending on how quickly things play out.
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Re: Sizing the Housing Bubble
Old 07-27-2006, 07:39 PM   #296
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Re: Sizing the Housing Bubble

Sorry for the second post. my computer is fighting me. *But to continue it seems it would make logical sense that on the property you sold in 2002 you lost the 100% appreciation from 2004-2006 plus whatever increases between 2002-04. *You continue to hold your principal residence despite your claims that there will be a giant bubble. *That doesn't make sense to me.

I will probably cash out at some point as part of a plan to liquify even though I expect future appreciation in real estate. *If that's your reason I can understand. *The only reason I can see for your call to "SELL" is that you hope that panic selling will benefit you since you seemed to sell out to soon.

WAB *Never meant to be offensive. *I apologize if you felt I was.


Nords...Man I'm sure not feeling the Aloha. *If you read my original post I only claimed to be talking about N. CA. pulling in Hawaii and Vegas onlybecause they supported *my contention that a smart real estate purchase is never wrong in the 70/80/90/00's in three different metropolitan areas. *WAB was the one that doubted my claims (it seemed he was calling me a liar) that my initial $7K investment was now worth $900K. *I was curious about his experience since he seemed to say the same things that I've been hearing from 30 somethings for the last 12 years. *I truly was hoping he could educate me in how to accomplish the same thing through the stock market.

Reading this Board has really helped me see some things in a totally different perspective and has made my life better in just the last few months. *I've offered my experiences only that someone may benefit from them or be warned by them or maybe just process their own beliefs a little differently. *I am a firm believer in the knowledge of experience.

Aloha
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Re: Sizing the Housing Bubble
Old 07-27-2006, 09:16 PM   #297
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Re: Sizing the Housing Bubble

honobob, I appreciate your bullish viewpoint.* *I just don't buy it.*

If we ignore the PITI and maintenance for your principal residence (I didn't catch how you offset that), then you got a 19% annualized return on your investment.* *That's a high bar to clear.* *So, if you're convinced you can sustain that rate of return going forward, I agree that you should stay fully invested in real estate.

Aloha!
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Re: Sizing the Housing Bubble
Old 07-27-2006, 10:27 PM   #298
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Re: Sizing the Housing Bubble

Quote:
Originally Posted by wab
1) Since it's waterfront and appreciated faster than non-waterfront, my property taxes are increasing faster than the rest of the area.
You got a higher % increase than I did?* Too bad, so sad.* * Seriously, waterfront property will sustain it's value better than others in a down turn.

Quote:
Originally Posted by wab
2) ...*This area used to be dominated by artists, farmers, and pretty Swedish maidens.* *Now I'm surrounded by lawyers, doctors, oral surgeons, and developers.* *I prefer the maidens.
'Don't mind the doctors, oral surgeons and developers but the laywers can be a pain.

Speaking as a Norse, if you hook up with a Swedish maiden you have made a BIG mistake.* You will have a LOT MORE FUN with Danes, Finns and Norsk of whatever age.

Quote:
Originally Posted by wab
3) I'm lulled into a false sense of asset value, so I'm spending more on remodeling projects than I would if the area were more reasonably priced.
Take the kid to the library and loose the hammer.

Quote:
Originally Posted by wab
4) I know that the rate of appreciation is unsustainable (virtually all of it is due to in-migration from places like California and Boston, and eventually we'll run out of the smart equity-rich people who recently cashed out).* *I'm not a big fan of roller coasters.
If the market remains stable we will all be OK.* If you sell then buy in the same relative market condition you will be OK.

Quote:
Originally Posted by wab
(BTW, I purchased our current waterfront place during the dead of winter from an out-of-town owner who used an out-of-town agent.* *Instant equity!)
Sigh!!

None of us knows what the future may bring.* I agree that appreciation should slow/stop.* However, if we get a bunch of folks with stock options shopping for waterfront or view properties ..... come on to my house, my house'ie come on, come on to my house...
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Re: Sizing the Housing Bubble
Old 07-27-2006, 11:34 PM   #299
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Re: Sizing the Housing Bubble

Tanya the dark haired one - long Hungarian last name,

In the land of dirty blonds - the one eyed jack - er ah or something.

Didn't make the high school reunion - too bad.

heh heh heh - neither did my old buddy Jimbo - he had an 'outstanding' Italian wedding in the Finn Hall. Sons of Norway, Swedish Hall and Vasa Hall were all within three blocks of each other in those days - as well as my favorite Happy Day's style drive - Captain Yobi's.
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Re: Sizing the Housing Bubble
Old 07-28-2006, 12:22 AM   #300
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Re: Sizing the Housing Bubble

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Originally Posted by unclemick2
Tanya the dark haired one - long Hungarian last name,
Ethnically and linguistically: Most Hungarians descended from Finns who couldn't sail...

Quote:
Originally Posted by unclemick2
my old buddy Jimbo - he had an 'outstanding' Italian wedding in the Finn Hall. Sons of Norway, Swedish Hall and Vasa Hall were all within three blocks of each other in those days - as well as my favorite Happy Day's style drive - Captain Yobi's.
Yup, in the early days they each had their own Halls.*
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