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Re: what's ahead for home values?
Old 01-14-2006, 01:41 PM   #21
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Re: what's ahead for home values?

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Originally Posted by Jarhead*
You're a self-confessed mulit-millionaire, so why get involved with homeowner "arbitrage".?
Because thats how I got that way!
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Gabe seems to be happy where he's at.!
And thats the most important factor!
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Re: what's ahead for home values?
Old 01-14-2006, 01:47 PM   #22
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Re: what's ahead for home values?

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Originally Posted by Nords
Pththththbbbbbbbb... he must've researched the heck outta that one.

Hawaii & Japan were fueled by the same buyers (the same class of "investors" who bought Rockefeller Center). *Hawaii's worst excesses were caused by one buyer-- Gensiro Kawamoto, who literally bought over 200 local homes via a limo tour. *He rented them back out (in many cases to their former owners) but lately has been in considerable hot water over landlord neglect.

The Japanese & Hawaiian RE booms both ended on the day Kuwait was invaded and fuel prices took off. *I sure hope that's not cyclical. *I think the Japanese banking corruption had a lot to do with it too, although that probably IS cyclical.

"Scarcity" does not necessarily apply to an island. *Hawaii underwent record development during the '80s (the joke was that the state bird should be changed to the building crane) so values were further suppressed by all the new homes completed right at the top of the market. *Substantial areas of Oahu are undergoing legislative building approval now, including one "neighborhood" for over 7000 homes. *When those go on the market 5-10 years from now, then it'll be time to start bottom-fishing.
I think you and Campbell are on the same page. *It is precisely the manic buying mentality of a Kawamoto (or today, homeowners who "have to get in now") that bid house prices to an overvalued state. *Then when any bad news comes along (war, increase in oil prices, job losses, etc.) the "air" in the overbid values is squeezed out. *

There's no question builders, aided by the lenders who funded them, built too much during the 80s real estate boom. *They, too, were part of the manic mindset that created that bubble. *
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Re: what's ahead for home values?
Old 01-14-2006, 03:49 PM   #23
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Re: what's ahead for home values?

Q: What's ahead for home values?

My A: I agree with those who said it depends on location.

I have no first hand experience with the bubble markets .... well, I guess I should include all the times I very seriously considered moving from eastern New York to Boston or NYC. I have friends and opportunities in both places, and they beckoned.

But every single solitary time I ran the numbers, I said I'd have to be a fool.

My region of the US has pretty much always been behind the trends, and often never experienced the trend before it ended. I think it's very likely the home values here will keep moving up steadily, some years more slowly than others. I don't personally know anybody who considers a house more than a place to live, which is good enough for me.

The downside, of course, is not being able to move to the "bright lights" without spending a good chunk of savings and forgetting ER. When I line it all up, I find myself content to stay. Boston and NYC are two and a half hours away and I can visit. The mountains -- my love -- are much closer.

This is just my take on things. From what my aunt in SF says, it's very different out there. Location is everything.

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Re: what's ahead for home values?
Old 01-15-2006, 11:29 AM   #24
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Re: what's ahead for home values?

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What I'd like to hear more about from the real estate experts that are renting large numbers of properties is what they think will happen with rents on these over the next few years. Will rents slowly or quickly rise to meet property valuations? Will everything go sideways pricewise and rentwise for the next 10 years until inflation levels the playing field? Or would they expect valuations to drop suddenly or slide over a long period of time.
Speaking for the east coast, rents have been flat for the last 3 years. I was able to push through 5-10% increases every year from 1997-2002. But now the tenants are simply tapped out. Landlords will try listing a vacancy $200 over market rent (they may have no choice given what they paid for the place) but then settle back to market rent after a couple/few months vacancy. Tenants simply don't have the cash to play along with the housing boom; so lots of new homeowners are taking a bath in negative cash flow.

Personally I think prices will reset before wages rise enough to close the rental gap. Home prices are simply alot more dynamic/volitile than wages.
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Re: what's ahead for home values?
Old 01-15-2006, 11:34 AM   #25
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Re: what's ahead for home values?

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Originally Posted by Martha
Our current thought is to sell the place and rent for a while.
This is what I considered doing last March when I almost sold my house. *In the end I decided against it. *The probelms with selling, renting and then jumping back in to buy are: *it's difficult (or just lucky) to sell at the absolute peak, commissions and other selling costs are a big chunk, moving is a real pain, it's likely living in the rental will not be as nice as living in your home and it's difficult (or just lucky) to get back in at the right time. *

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Re: what's ahead for home values?
Old 01-15-2006, 04:21 PM   #26
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Re: what's ahead for home values?

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The probelms with selling, renting and then jumping back in to buy are: it's difficult (or just lucky) to sell at the absolute peak, commissions and other selling costs are a big chunk, moving is a real pain, it's likely living in the rental will not be as nice as living in your home and it's difficult (or just lucky) to get back in at the right time.
Yeah, timing the market with the primary residence is a fools game. There's a quality of life issue.
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Re: what's ahead for home values?
Old 01-15-2006, 05:03 PM   #27
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Re: what's ahead for home values?

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Originally Posted by tryan
Speaking for the east coast, rents have been flat for the last 3 years.* I was able to push through 5-10% increases every year from 1997-2002.* But now the tenants are simply tapped out.* Landlords will try listing a vacancy $200 over market rent (they may have no choice given what they paid for the place) but then settle back to market rent after a couple/few months vacancy.* Tenants simply don't have the cash to play along with the housing boom; so lots of new homeowners are taking a bath in negative cash flow.

Personally I think prices will reset before wages rise enough to close the rental gap.* Home prices are simply alot more dynamic/volitile than wages.
I'll second that, also from the east coast.
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Re: what's ahead for home values?
Old 01-15-2006, 09:10 PM   #28
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Re: what's ahead for home values?

The individual residential real estate investor seems to have either never learned or forgotten a very basic rule that is well understood in commerical real estate investing. Rents are the basis for value. The residential values are so disconnected from appraising at a rental/income basis, and so over valued at a pure market comparaison approcah to value that they are bound to adjust to what a rental income to the property would justify. And rents are based on demand, and one large element of demand is prevailing wages. I said elements, as this is never a perfect equaition). If wages do not increase in a given location, and the borrowing costs remain about the same, the home prices will tend to lower to meet the wage scale in that market. There are of course other issues that contribute to price, but renting (or its equivalent value in residential ownership) is about one of the best long term value indicators. A 500,000 dollar home price will not stay at that level of appraised value if the pool of renters is too small to create a demand that services that rate of capital investment. Investors will move on to where they can best obtain a higher return on capital. That last investors in will eventually be holding the "air filled bag" from the speculative "auction fever" and be forced to sell at the discount to real rental income. This situation is as real as any piston driving the value cycle.
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Re: what's ahead for home values?
Old 01-16-2006, 04:29 PM   #29
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Re: what's ahead for home values?

Quote:
Originally Posted by tryan
Yeah, timing the market with the primary residence is a fools game.* There's a quality of life issue.
That's a blanket statement. I sold, and am renting a house about 100 times better than the old house. The family hasn't been this happy since before we bought the last house. Worked perfectly for us, and I believe it will only get better.

When the old house was overvalued about 60% from what I thought it should be valued, I knew it was time to sell.
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Re: what's ahead for home values?
Old 01-16-2006, 04:37 PM   #30
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Re: what's ahead for home values?

Here's an option for those playing the sell-house, rent for much less arbitrage. This applies if you are worried about rental rates shooting up as the housing prices crash (don't know if this will happen). When you negotiate your lease wherever you rent, get a long term lease (3-5 years) or a 1-2 year lease with annual options to renew for 3 years. Offer an annual rental rate increase so the landlord agrees to it. You may be forced to pay increases in your rent this way, but at least you will know what they are going in to the agreement. Setting up this kind of deal would require a flexible landlord willing to take on a long-term renter at a predetermined rate.

This still leaves you unprotected 5 years out in the event housing prices keep going up. You won't have the money to buy back into the housing market, plus rents might be significantly higher. As always, it is a trade-off between risk and reward.
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Re: what's ahead for home values?
Old 01-16-2006, 07:32 PM   #31
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Re: what's ahead for home values?

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Originally Posted by tryan
Yeah, timing the market with the primary residence is a fools game. There's a quality of life issue.
You're right, but if I was to rent I could go from an 1800 square foot house on 1/4 acre that I can sell for ~$430k (bought for $250k) and rent a 2500 square foot house on 5-10 fenced acres near a lake for ~$1400 a month. Aside from the huge el crappo task of moving, and the small el crappo task of figuring out where to invest nearly a half million additional dollars...not such a big hit on QOL.

With homes like mine renting out for $1100-1200 a month at BEST, and selling in the low to mid 400's...somethings gotta give. Theres no huge high earning workforce around here. No big white collar employers. No raft of super shopping and fine dining. No lakes or other big recreational draws. Lots of sprawling farm land, rice paddies, wide open swaths of space. In short, no restrictions on building like crazy and no big draws to support real estate this expensive.

I cant see people that are renting able to take 100%-200% upward movements in rent, or people holding onto a half million dollar piece of real estate they can only rent for a grand a month, or people continuing to buy a house then can rent for far less than half the mortgage cost.

If I was single, I wouldnt be writing this cuz i'd be packing...but with a wife and 1 yr old, we're gonna stay put for now.
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Re: what's ahead for home values?
Old 01-16-2006, 07:52 PM   #32
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Re: what's ahead for home values?

I tell you, I've gone round and round with this whole home equity thing. I eventually end up deciding that I really like where I am, I enjoy the house and neighborhood, so I'll just stay and not worry about employing the big fat 400k. Then I start looking at my balance sheet and think, hmmm, how nice it would be to put some of that to work. Then I'm back in the whole cycle of indeciciveness.

Maybe I should just be happy that I live in a nice home in San Diego. Ten years ago that would've sounded just fine. Oh the curse of home equity
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Re: what's ahead for home values?
Old 01-17-2006, 06:19 AM   #33
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Re: what's ahead for home values?

Welcome to the joys of analysis paralysis. I suffer from that on occasion.

cheers,
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Re: what's ahead for home values?
Old 01-17-2006, 06:43 AM   #34
 
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Re: what's ahead for home values?

A Man buys a House, a Woman buys a Home.

The Nesting instinct will always beat the Investing Common Sense, don't fight it, that's just the way it is.
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Re: what's ahead for home values?
Old 01-17-2006, 07:45 AM   #35
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Re: what's ahead for home values?

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Originally Posted by Howard
A Man buys a House, a Woman buys a Home.

The Nesting instinct will always beat the Investing Common Sense, don't fight it, that's just the way it is.
So you're saying to forget about ever cashing out unless your wife is tired of the house and wants to move?
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Re: what's ahead for home values?
Old 01-17-2006, 08:58 AM   #36
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Re: what's ahead for home values?

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Originally Posted by Howard
A Man buys a House, a Woman buys a Home.
The Nesting instinct will always beat the Investing Common Sense, don't fight it, that's just the way it is.
I was single when I bought my "house/home". I am still single, and now, I am selling my investment property.

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Re: what's ahead for home values?
Old 01-17-2006, 10:56 AM   #37
 
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Re: what's ahead for home values?

Jay, Yup, unless she wants to move, you are staying.

I have always trusted my wifes' instinct on Housing, I believe that women ,in most cases , are better in this area.

They look at South facing gardens, schools,etc etc.

We have owned 7 homes in our life so far, a $20,000 hovel I owned as a bachelor to a $500,000 we sold at retirement, to this new one we built.

She made the decision, with my input, I looked after paying for them.
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Re: what's ahead for home values?
Old 01-17-2006, 11:41 AM   #38
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Re: what's ahead for home values?

Quote:
Originally Posted by Howard
I looked after paying for them.
Ain't that the truth.
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Re: what's ahead for home values?
Old 01-17-2006, 12:35 PM   #39
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Re: what's ahead for home values?

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if you are worried about rental rates shooting up as the housing prices crash (don't know if this will happen).
Unlikely .... when the last housing boom cycled down in the early 90's, rents tanked with home values. Figure your neighbor bought for less than you did and can rent for less. This - of course - excelerates the fall of home values as each vacancy causes a new negative cash flow homeowner (and the smart tenants force rent reductions by threatening to leave).
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Re: what's ahead for home values?
Old 01-17-2006, 01:57 PM   #40
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Re: what's ahead for home values?

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Originally Posted by tryan
.... when the last housing boom cycled down in the early 90's, rents tanked with home values.
Campbell and Norris (the two prognosticators I've paraphrased on this thread) both say, contrary to popular thinking, landlords do not get a pricing advantage when house prices go down. Many people think landlords have it made because people are selling their homes and, therefore, must be looking for a place to rent. In reality, rents go down.

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