Psychology of the Housing Bubble (and its collapse)

[Sam]

Google and friends do have an effect in Palo Alto. AFAIK, there is no instant down-payment machine in SoCal and other off-the-chart areas.

Yes, the effect is there but it's very small. And I think it's properly reflected in pricing. SoCal is still 10 to 20% cheaper than the Bay Area.

 

[wabmester]

Yes, the effect is there but it's very small. And I think it's properly reflected in pricing. SoCal is still 10 to 20% cheaper than the Bay Area.

Interestingly, the bay area has appreciated at a slower rate than places like OC. Stanford, Berkeley, VC, and the tech machine have always driven the bay area.

What drives places like OC? Real estate! It's self-feeding. Something like 40% of the job growth. It'll be self-destructive as well.

 

[Sam]

Sorry, if you're talking about the S&P500 then I'm trying very hard not to be invested in either one.

Sell!!

Oops! Did I misunderstand again? S&P is not the same as S&P500?

 

[Nords]

Oops! Did I misunderstand again? S&P is not the same as S&P500?

There's the S&P500 (large cap), S&P400 (mid-cap), S&P600 (small-cap), and S&P1500 (total market).

Our ER portfolio is about 12% in the S&P600 small-cap value ETF (IJS).

Never found a REIT I cared for. When they were starting to go up we were distracted with our own "dream house" purchase, landlording, and home improvement. Somehow we never found the time to look at REITs...

 

[Sam]

So which one did your friend refer to when he/she said S&P?

 

[Nords]

So which one did your friend refer to when he/she said S&P?

S&P500. And that's the index that Trump's real-estate investments have also lagged over his career.

 

[lazygood4nothinbum]

damn. i was out gardening so this is late. tough crap. i'm printing anyway...

"sarcasm: the last refuge of modest and chaste-souled people when the privacy of their soul is coarsely and intrusively invaded." ~~fyodor dostoyevsky

i was never sure what that means but i think he was being sarcastic.

ok, i'm done now, you can all go back to your cyphering and bickering.

 

[yakers]

Big increase in California mortgage default notices:

http://tinyurl.com/23fyj8

 

[honobob]

There you go again with that cipherin'. Why are cap rates important when they are dwarfed in significance by 25% capital gains every year?

(yes, this is sarcasm too)

Cap rates plus reversion!!!!!!!!! You're only talking half the story. And I don't know where except in this little world where people use cap rates for single family homes. If you're going to look at them as income producing at least use a GRM or GIM.

And it is a history of 9 & 10% gain not in capital gains buy in YOY appreciation. There is a big difference! Why you talk apples and oranges?

 

[honobob]

My good realtor buddy George Stott was taking many $20K deposits from people who were dying to get into the tower, but neither he nor his family were buying. They're selling their Hawaii properties and 1031'ing into Mainland commercial & residential TICs.

A quote from the Stott Team Oahu Update..

"None of our 19 buyers were able to purchase a unit they wanted. Among those that missed out were Mike and Donna Stott and one of our clients that that (sic) paid for five of the $20,000 fees. We went into the first day expecting at least 4-5 sales from our 19 clients, an estimate supported by the Trump sales staff. However, it was not to be."

Nords, how is this discussion fair if you are going to be untruthful? And is this a case of you and your good buddy experiencing sour grapes? Were you one of the 19?

Also, isn't Stotts son and DIL (1/4 1/8 of the Stott Team) relocating to the
mainland. That could explain some interest in real estate there. I don't think Honolulu real estate is going to hell because of a loss of two real estate agents.

 

[honobob]

Honobob, I've underestimated you. You are a genius. You've discovered the top-secret winning technique called leverage! Based on your leverage, you've made 25% on your money!

Now, tell us your closing costs. Add this year's principal, interest, tax, insurance, and maintenance. Add to that what your selling costs would be.

OK, got all those numbers?

I thought I explained all this before. I am way more interested in how you will make up your $500,000++ loss from leaving the table early. You have a plan, right? I know I would get more education learning how you use that cash thing to make that kind of return. I asked before. Would you please share?

 

[Nords]

Nords, how is this discussion fair if you are going to be untruthful?

Pretty strong words there, Bob.

Although I could be wrong, I interpret Stott's text as brokers trading for their customers. I object to your "untruthful" characterization.

But I'm glad to see that you're reading George's newsletters, which I've always thought were more reasoned fact than commission-generating cheerleading.

And is this a case of you and your good buddy experiencing sour grapes? Were you one of the 19?

Er, no. I don't have any desire to live in Waikiki. Gosh, we don't have the money for that type of real estate either. Have you been reading my earlier posts about why we own the real estate we do?

Also, isn't Stotts son and DIL (1/4 1/8 of the Stott Team) relocating to the mainland. That could explain some interest in real estate there. I don't think Honolulu real estate is going to hell because of a loss of two real estate agents.

I'm not trying to link Stott departures to Hawaii RE prices either. I think they got a chance to run their own show instead of Dad's business, but that's just my conjecture.

I think George's original idea of investing in the TIC was just chasing yield. He mentioned one investment, about $200K of TIC shares in an apartment block, that was pretty much wiped out by Katrina. (They're insured for the reconstruction, of course, but not for the lost revenue.) Admittedly that's probably less than 10% of his retirement portfolio and he's bird-dogging for the company that he's investing with.

Look, I'm not trying to get into a pissing contest. I've based my conclusions on my motivations for owning our own real estate and on comparisons with an equity index. I've quoted guys who I feel know about real estate. The fact that you feel obligated to stoop to a personal attack isn't helping to strengthen your thesis, either. You seem to feel that you know the Oahu real estate market better than anyone on the island, so I hope that's working for you and that this time it really is different.

You have a nice life now.

 

[califdreamer]

I have no dog in this fight regarding Hawaii real estate or investing in condos. I would, though, like to share a few thoughts about what makes investing in apartment buildings compelling for growing equity. I've never been into investing in SFRs and condos and I suspect now may be a particularly poor time to do so.

Apartment buildings in most areas have not seen the amazing run-up in prices that SFRs have. They're steadier. It's easier to have multiple units cover your costs than single tenants, obviously. Property value is based on income generated. Not so much with SFRs.

Let's say we invest 250K in a 1M apt property. If we buy at a 6.5 CAP and our 30 yr loan has a rate of 6.25% we should cash flow 9,584/yr or about 4% of our down payment. If we have purchased in an area that will see 5% annual appreciation for a five year hold time we will take away 486,912 (appreciated value less 7% real estate cartel selling costs and loan balance after five years). Just based on appreciation and equity paydown we would earn a bit over 14% compounded annually. Throw in tax protected cash flow and assume 1031-ing into the next property and you have a tidy return.

I don't believe you can find a building in California or southern Florida, for instance, and get that kind of appreciation. I do think it is entirely possible in some other regions.

 

[honobob]

I have no dog in this fight regarding Hawaii real estate or investing in condos.

I had hoped for a discussion and perhaps a sharing of experience. I apologize if any of my post has seemed antagonistic. I know I hate it when Mommy and Daddy fight.

Thanks for sharing your info. I don't follow apartment sales generally but I know in the bay area that the 4-8 units generally just provided the owner a nice apartment and some income although here the money during the booming years is in converting to condo's where possible.

And I also remember some large complexes (400+) in the east bay (Fremont and Dublin/Pleasanton) changing hands at record per unit prices in the last year or so.

5% appreciation still? Sunbelt area? Good job.
14% Does that beat the market ?

 

[2B]

Pretty strong words there, Bob.

You have a nice life now.

Wow.... This is the first time I've seen Nords become less than mellow. He's still my model of how I should post but even though he didn't bring up Hitler or other similar topics says he's still in control and far better at this than me.

FWIW. DW finally signed a contract to sell her parents home in Houston. It was only on the market a little over a week but it took forever to get her to list it. The selling price is just over $900K. If you are familiar with the Houston market your jaw just dropped. The property has been owned since 1953. My DW and SIL were all bubbly about what a great investment their father made. I pointed out that the 53 year investment return returned barely over 10% and that didn't include the cost of building the house (since it was going to be torn down). With the house, the return was under 7%. He could have been much better off in the S&P -- so much for bursting their bubble.

I've never really made much in real estate although I had some nice transactions. If I was an aggressive in the commercial market, it might be a different story. Making real money in real estate is IMHO a game for the professionals. Dumb luck home buys don't count. Doing great for 10 years in one market doesn't count either. It's still dumb luck unless you get out well before the market tanks.

 

[honobob]

Pretty strong words there, Bob.

Although I could be wrong, I interpret Stott's text as brokers trading for their customers. I object to your "untruthful" characterization.

But I'm glad to see that you're reading George's newsletters, which I've always thought were more reasoned fact than commission-generating cheerleading.

If by strong you mean truthful, then yes. Sorry to "Galt" you but you did say that the Stott Team wasn't buying "Trump" but if Mike and Donna Stott are related (I may be out on a limb here) then the only reason is because they couldn't get in!

And I don't read his newsletters normally. I just hadn't thrown that one out so I took a chance to see what was there. I can't say for a fact but I am under the impression that he is not a "player" on town side of Honolulu which may account for the fact that neither his family or clients got in on the Trump deal. It is a small town so you might want to ask him if he appreciates his name being thrown around the internet.

Dude, you're the Nords and you have alot of goodwill on this forum. If you want to quash any contrary thought YOU have the power. I have gotten some good info here and have tried to input where I thought I had some knowlege or experience.

Never claimed to be the Oahu Oracle but I think my almost 30 years experience in Waikiki and Diamond Head with 4 of my own units plus my real estate education and background maybe "Trumps" yours IMHO.

Oh and Stott says you (MIlilani) are up YOY .3% sales and 8% UP on Median sales price! STFU!

Luv ya like a realtor BRAH!

 

[cute fuzzy bunny]

Wow.... This is the first time I've seen Nords become less than mellow.

I've seen the "You have a nice life now" a couple of times.

It doesnt come out all that often, but when it does, its usually something special.

 

[honobob]

I've seen the "You have a nice life now" a couple of times.

It doesnt come out all that often, but when it does, its usually something special.

Wait a minnit! In what context are you calling me "Special"?

 

[cute fuzzy bunny]

I suppose in a Church Lady kind of way?

 

[honobob]

2) What is the effect of leverage when Bob's property experiences negative appreciation?

NEGAtive ApPreCiAtion Huh?

That's what she said! ..reaching for the Grey Goose.............(not a San Francisco boomer term) or could it be?


In my defense, the dogs are egging me on.

 

[honobob]

I suppose in a Church Lady kind of way?

Well thank you! That seems kinda cute....and fuzzy

Back atcha guy!

 

[spideyrdpd]

Why do guys that say its so important not to try to time the market. Think they know how to time the real estate market

The likely reason why people dont post any real estate comments may have to do with the way they are treated ??

 

[honobob]

The likely reason why people dont post any real estate comments may have to do with the way they are treated ??

Spidey, I couldn't have said it better. But perhaps Peter Parker could, "With great power comes great responsibility"

Ok..."It's clobbering time!"

 

[wabmester]

I have gotten some good info here and have tried to input where I thought I had some knowlege or experience.

Could you point me to some of that shared knowledge, bobo?

Since you've registered here, I can only recall:

1) "There is no bubble. Real estate always goes up."

2) "Everybody loves Realtors(TM)."

Did I miss anything?

 

[honobob]

Could you point me to some of that shared knowledge, bobo?

Since you've registered here, I can only recall:

1) "There is no bubble. Real estate always goes up."

2) "Everybody loves Realtors(TM)."

Did I miss anything?

Well I thought my info on title holding for community property states to allow Zero capital gains was informational to quite a few.

Then there was the ability to 1031 AND take the $250 or $500 capital gains exclusion.

Maybe assorted "caregiver for 8 years of my father with Alzheimers"



Sorry not up in your league of ...

I'm the real estate guru of everywhere anytime

Real property only tracks inflation oh , wait you flipped on that or did you flip back?

How's that real estate commission get split?..Go figure

Disclosures!? Ya gotta disclose what ?

No way $2000 turned into $400,000

$5,000 to $600,000? Only if you did some kind of weird financing.

Both of the above that you could have done ($7,000 turned into $1,000,000) in the stock market..Oh wait, you never did explain how you could do that.


I got a lower assessment!!! Dude, yeah you paid too much! Might want to keep that quiet.

How I cashed out and gave away over $500,000 in net worth. But am making it up in cash and costal property.

"And leverage is even worse if it's negative." Sorry, but I do quote that in the bar when I want a laugh,


And excuse me but it's Mr. bobo to you.




P.S. Are you in charge of all the Salem trials for the board?

If you're going to talk crazy get a sense of humour.