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Re: Sizing the Housing Bubble
Old 07-20-2006, 05:57 PM   #161
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Re: Sizing the Housing Bubble

The schadenfreude thing is part of it.* * And I would like more RE in my portfolio, because I like real assets with good supply/demand characteristics.

But the thing that's really driving my interest is that this seems to be one of those relatively rare moments when prices have separated from the fundamentals.* *I felt the same way with the stock market in 1999 (and sold about 90% of my stock).

Economics isn't an exact science, but for home prices to continue their upward trend would be like seeing pigs fly.* *It would be fun to see pigs fly, but it would make me question some fundamental beliefs.* *And I would have to get a new hat.
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Re: Sizing the Housing Bubble
Old 07-20-2006, 06:18 PM   #162
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Re: Sizing the Housing Bubble

Quote:
Originally Posted by wab
The schadenfreude thing is part of it. And I would like more RE in my portfolio, because I like real assets with good supply/demand characteristics.

But the thing that's really driving my interest is that this seems to be one of those relatively rare moments when prices have separated from the fundamentals. I felt the same way with the stock market in 1999 (and sold about 90% of my stock).

Economics isn't an exact science, but for home prices to continue their upward trend would be like seeing pigs fly. It would be fun to see pigs fly, but it would make me question some fundamental beliefs. And I would have to get a new hat.
Do they makes hats that small??
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Re: Sizing the Housing Bubble
Old 07-20-2006, 09:31 PM   #163
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Re: Sizing the Housing Bubble

I wouldnt bet on there being a "crash" but I think that an active investor will be able to find deals. Many people are in over their heads.
Where I invest in Ohio prices have been relatively stable. I did sell my Orlando investments. Missed out on some appreciation but we buy "right" so we made money on purchase.
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Re: Sizing the Housing Bubble
Old 07-20-2006, 09:54 PM   #164
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Re: Sizing the Housing Bubble

Quote:
Originally Posted by Alex
Do they makes hats that small??
And do they still call it a head when its that little?

Quote:
Originally Posted by wab
The schadenfreude thing is part of it. And I would like more RE in my portfolio, because I like real assets with good supply/demand characteristics.
Man, tell me about it. I'd LOVE to buy a big chunk of land with a little house on it in a cooler area near here. And they should be cheap...theres a bazillion acres and we're in the middle of nowhere. I'm really hoping for a price smackdown. New construction has just stopped dead in the water here, so maybe i'll get it. The only thing that might reignite it is a big drop in interest rates, and I cant see that happening soon.
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Re: Sizing the Housing Bubble
Old 07-20-2006, 11:33 PM   #165
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Re: Sizing the Housing Bubble

Wab

I think most people who are following the market agree with your basic premise that the real estate markets the have seen crazy run ups in prices over the past 5-10 years are potentially set for a correction or at least a stall.

But I have to agree with hobnob that in my limited real world experience real estate has be very good to my wife and I.

I have been working for the Fed Gov for 14 years and maxing out my tsp (401) contributions since my first pay check. My money has been in the stock based funds as diversified as possible in that program.

I made more money (not on paper in my pocket) on one $20,000 dollar investment in 24 months in real estate than I have in all those years investing in stock funds. The best part was that were we watching the value of the house go up each month as our tennant was paying us $400 more than our payment each month in rent, contributing to our principle and we were depriciating the house even though we sold in for $110k more than we paid.

Making 400% in 2 years is hard to do in stocks with out taking a lot of risk and I just don't know stocks very well.

My wife and I have been fortunate in the RE markets but we realize we are over exposed (not over extended) and we are actually trying to allocate more of our portfolio to stocks but quite frankly it is hard to do given the current state of things.

At least I know the value of my rental should be stable (compared to the crazy stock market) and the investments are paying for themselves plus giving me a nice profit each month.



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Re: Sizing the Housing Bubble
Old 07-20-2006, 11:57 PM   #166
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Re: Sizing the Housing Bubble

There is no question that an intelligent individual who does his homework can make money in real estate, but there's been a lot of anecdotal evidence thrown against Wab's arguments that sound alot like, "Oh yeah, well my grandpa smoked two packs a day and died when he was 90 of a hunting accident, what do ya say to that, Mr. Smarty Pants Surgeon General".

Here in San Diego, the Real Estate community finally ran out of ways to massage the numbers and admited prices fell over the last year. Combine that with near 4% inflation and that's some real value loss. And it's only the beginning, IMHO. But the strong hands comment is very valid. I ain't selling, I can afford my mortgage (at 5% - yay!) it's academic to me unless it begins dragging down the economy as a whole when Hummer sales tank because nobody has any more equity to suck out of their house....
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Re: Sizing the Housing Bubble
Old 07-21-2006, 07:50 AM   #167
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Re: Sizing the Housing Bubble

Not sure if this has been mentioned yet, but I found the data here fascinating: http://www.benengebreth.org/housingtracker/

Market in my 'hood has stabilized, but not crashed. The odd thing is that there is a house in my immediate cul-de-sac that got bought about a year ago for $600+k after it was on the market for about a year. One of the biggest and most expensive houses in the area: 2+ acres of land that backs up to a lake (50 feet below the house and no risk of flooding), 6 beds, etc. But it needed a lot of wrork. I think it sat because anyone who could afford the house would probably choose a ritzier area. Well, the buyers must have decided to flip it, because it is back on the market after a LOT of work was done. Asking price: $895k

I don't think they will get anywhere close to that price.
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Re: Sizing the Housing Bubble
Old 07-21-2006, 08:52 AM   #168
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Re: Sizing the Housing Bubble

Just some random thoughts of what I have seen in Japan.

The bubble popped about 1990. Property didn’t exactly crash and burn in a ball of flames but I have read it is 1/10 of its peak. But it isn’t done deflating. Our property assessment fell again in April. Tokyo is starting to see some life but there is none down here in Kyoto. Part of this is because of the economic concentration in the Tokyo area which is increasing. Other parts of the country like Osaka are definitely falling behind.

In Kyoto, the price is ‘too low’ for people to sell and the amount of housing coming onto the market is restricted. What is available isn’t really priced to sell. The size of the housing market is nothing compared to a US city the same size. The permanent population is definitely skewed towards the elderly more than the national average. When parents die, a lot of kids are turning the houses into parking lots to take advantage of low tax rates or letting houses sit empty. According to our realtor, when anything interesting does come up it sells within hours but that only happens a couple of times a year.

In the meantime it is hard to price homes. We bought our apartment for 240,000 two years ago. The guy above us sold his for 620,000 last month. Although his place is a third bigger, there really isn’t that much difference. It is hard to see how the market will come back without a lot of new families moving in or people start forgetting about breaking even.
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Re: Sizing the Housing Bubble
Old 07-21-2006, 08:58 AM   #169
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Re: Sizing the Housing Bubble

Quote:
Originally Posted by mikew
In Kyoto, the price is ‘too low’ for people to sell and the amount of housing coming onto the market is restricted.
Interesting. When you say the amount of housing entering the mkt is restricted, do you mean the quantity that can be sold is regulated by the govt (ie - take a ticket and we'll call you when you can sell) or is it people owing way more than their place is worth and prefering to pay the mortgage instead of come up with a huge wad of cash? I guess there's also the holdouts who are waiting for the mkt to come back.

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Re: Sizing the Housing Bubble
Old 07-21-2006, 09:50 AM   #170
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Re: Sizing the Housing Bubble

Sorry maybe I am using restricted wrong.

I meant mainly people who don't see a reason to sell so they sit on their property. Although there are a lot of people underwater.
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Re: Sizing the Housing Bubble
Old 07-21-2006, 09:51 AM   #171
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Re: Sizing the Housing Bubble

Quote:
Originally Posted by mikew
Sorry maybe I am using restricted wrong.

I meant mainly people who don't see a reason to sell so they sit on their property. Although there are a lot of people underwater.
Gotcha, thanks!
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Re: Sizing the Housing Bubble
Old 07-21-2006, 10:12 AM   #172
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Re: Sizing the Housing Bubble

Quote:
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Although there are a lot of people underwater.
Well, it is an island!*
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Re: Sizing the Housing Bubble
Old 07-21-2006, 02:05 PM   #173
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Re: Sizing the Housing Bubble

Quote:
Originally Posted by brewer12345
Not sure if this has been mentioned yet, but I found the data here fascinating: http://www.benengebreth.org/housingtracker/
already have looked at this & just noting here that you might want to be careful with their numbers. first (and it does mention) it quotes asking, not selling prices.

but also i checked out the so-called "miami area" where they make it look like every house is for sale. they are including all the way down to homestead which is right before the florida keys, all the way out west to the everglades and all the way north past, even, the county line. i'm only surprised they didn't go all the way east to the bahamas (a similar distance away as homestead). i'm pretty sure not everyone there would consider themselves to be the miami area.

more likely, many probably moved to those areas to get out of the miami area.
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Re: Sizing the Housing Bubble
Old 07-21-2006, 08:41 PM   #174
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Re: Sizing the Housing Bubble

They also included property in broward.
lots of new inventory. Plus I have to thing the zillion dollar property they are trying to sell must effect the numbers.
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Re: Sizing the Housing Bubble
Old 07-21-2006, 11:04 PM   #175
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Re: Sizing the Housing Bubble

In today's LA Times business section, the chief economist for the Calif Assn of Realtors who has been describing the housing mkt as experiencing a "soft landing" says she is no longer comfortable using that description.

"Maybe we need something new. That's all I'm prepared to say," Appleton-Young said Thursday.

The association lowered its sales forecast to a 16.8% decrease instead of the earlier 2%.

Wow. The CA Assoc of Realtors as housing bear.
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Re: Sizing the Housing Bubble
Old 07-22-2006, 12:32 AM   #176
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Re: Sizing the Housing Bubble

Interesting...housing as other hot items for the moment won't crash, rather going down slowly for number of years. It will screw people with mortgage up to their chin if something were to happen, they would have to choose which bills to pay, which possessions to let go, etc..etc...I'm sure in another five years someone will come to sum up performance between market and housing compared to inflation...well, as usual.

Here in Shanghai housing market has its own life. Shanghainese or whoever bought believe china will surpass hongkong, shanghai's property price is only a fraction of that in HK therefore upside is big or so they thought. The truth is chinese in general prefers brand new house, some believe it's bad luck to live in used house, previously owned market is not as established as it is in US unless they are special such as the shikunmen - the old lane houses. Besides, newer properties have better design, cleaner, better amenities...maintenance here is an issue, within 3-4 years the buildings can look worn out. Developers are trying to finish as soon as they can, use cheaper materials, cheap lobby...fat margin, I suppose.

As for comparison, recent apartment about 1800 sf that I know of within Grade A office location recently is sold for 600K while renting there is only $1,750 a month....go figure. Believe it or not, elevators and lobby have no AC!! Compare to the same location in another far east country, Indonesia, for 700K you will get private elevator, 3500 sf, marble and granite finish. Oh my......
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Re: Sizing the Housing Bubble
Old 07-22-2006, 07:01 AM   #177
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Re: Sizing the Housing Bubble

Quote:
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Wow. The CA Assoc of Realtors as housing bear.
So instead of BUY!BUY!BUY! it is SELL!SELL!SELL! Realtors make money when transactions happen. The higher number of sales, the more the commissions. CA Assoc of Realtors is probably scared of losing half its members to "reductions in force" when the market volume slows down.
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Re: Sizing the Housing Bubble
Old 07-22-2006, 09:21 AM   #178
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Re: Sizing the Housing Bubble

Housing prices are primarily a function of "affordability".* *We had a "one time step change" increase in affordability due to new/exiotic loans and low interest rates.

Future affordability is going to depend primarily on wage growth.

The wage growth is going to have to offset the negative influence of higher interest rates and the pressure for House price/income ratios to revert towards mean.

Anybody have any good predictions of US future wage growth ?

I'm pessimistic.* *The difference in US wages verus rest of world, offshoring, US manufacturing "hollowing", percent of GDP eaten up by debt service and medical costs, etc.

Affordability just has to come back in line.* *It's never "different this time".
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Re: Sizing the Housing Bubble
Old 07-22-2006, 10:21 AM   #179
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Re: Sizing the Housing Bubble

We got a huge bump in new housing starts the last few months, and that was seen as a positive. Since I drive by a half dozen new home construction sites every day, I think I see what happened. All the builders are going like hell to finish up as many homes as possible as the prices are dropping. They're throwing in upgrades. Big discounts. A bunch of homes just bought and never lived in just went up for sale. My favorite is the guy who taped a 2x3' piece of white construction paper on his garage door with "for sale, 3 bed 2 bath, never lived in" and his phone number.

Several of the most recently sold homes have foreclosure notices on the door and big signs in the front window "construction/bank personnel only". Looks like they walked away from their deposit.

So i'm guessing the rise in new home starts is going to bottom out in a month or two. None of these builders have poured any new foundations and the interiors are just about done...then it looks like they're going to stop and wait.
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Re: Sizing the Housing Bubble
Old 07-22-2006, 12:42 PM   #180
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Re: Sizing the Housing Bubble

Fed Chairman Bernanke calls the RE downturn 'orderly' and expects a 'safe landing'. I agree with him that this is the most likely scenario.

The 'Affordability index' does not factor in existing home equity or size of down payment. 2/3 of families in this country are homeowners - 90% of all homesales are from exisitng homeowners. These people have equity $$$ for large downpayments. The affordability index does not factor this in. Like I have stated previously - unless you are forced to sell, a real estate downturn will probably not effect you.
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