Real Estate
08-18-2005, 11:50 AM
#11
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I think the bubble is close to bursting, except for a little spots in the country. I am investing in a house in Tampa and I think it was'nt that great of a deal 2900sq ft. for mid 500. A year ago it would of been 45% less, I also have a house in Huntington Beach Ca. which I bought for 800k almost a year ago but now I think I can sell it for mid 900, maybe more since a builder came in a block away with 12 new homes and presold for 1.8m. To me Florida is peaked but I still found a few areas in So Cal with lots of potential. Vegas still has much promise too.
08-18-2005, 11:56 AM
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Yes, it is a bubble, and yes, it will burst. Prices have been driven by the lowest interest rates in 50 years, the sluggish post-tech stock market, and the desire by Americans to invest in their homes (possibly a reaction to 9/11 and other world events).
Here's what's interesting. Rates have started to creep up, but prices haven't slowed down. What's cauing this? Unbelievably liberal mortgage loan underwriting. 100% financing, stated-income (no income verification), interest-only loans, and now negative-amortization loans (where the monthly payment doesn't even cover interest, so you end up with an even larger loan in a few years) are very recent developments - most of these buyers have zero fallback position in case of income interruption or depreciation in value. Remember, the U.S. personal savings rate is pathetic, so when there is a hiccup in the economy, thousands upon thousands of homeowners will lose their homes via foreclosure. This will accelerate the market decline. I've heard that 75% of all mortgage loans (purchase and refi) in California in 2005 have been interest only or negative amortization - basically these are people who can't afford these homes to begin with and are ill-equipped to handle any economic adversity.
Here's what's interesting. Rates have started to creep up, but prices haven't slowed down. What's cauing this? Unbelievably liberal mortgage loan underwriting. 100% financing, stated-income (no income verification), interest-only loans, and now negative-amortization loans (where the monthly payment doesn't even cover interest, so you end up with an even larger loan in a few years) are very recent developments - most of these buyers have zero fallback position in case of income interruption or depreciation in value. Remember, the U.S. personal savings rate is pathetic, so when there is a hiccup in the economy, thousands upon thousands of homeowners will lose their homes via foreclosure. This will accelerate the market decline. I've heard that 75% of all mortgage loans (purchase and refi) in California in 2005 have been interest only or negative amortization - basically these are people who can't afford these homes to begin with and are ill-equipped to handle any economic adversity.
08-18-2005, 05:15 PM
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I had the same situation like you, too, but end up with a something higher. 
Originally Posted by SteveHI' date='Aug 18 2005, 02:56 PM
Yes, it is a bubble, and yes, it will burst.? Prices have been driven by the lowest interest rates in 50 years, the sluggish post-tech stock market, and the desire by Americans to invest in their homes (possibly a reaction to 9/11 and other world events).
Here's what's interesting.? Rates have started to creep up, but prices haven't slowed down.? What's cauing this?? Unbelievably liberal mortgage loan underwriting.? 100% financing, stated-income (no income verification), interest-only loans, and now negative-amortization loans (where the monthly payment doesn't even cover interest, so you end up with an even larger loan in a few years) are very recent developments - most of these buyers have zero fallback position in case of income interruption or depreciation in value.? Remember, the U.S. personal savings rate is pathetic, so when there is a hiccup in the economy, thousands upon thousands of homeowners will lose their homes via foreclosure.? This will accelerate the market decline.? I've heard that 75% of all mortgage loans (purchase and refi) in California in 2005 have been interest only or negative amortization - basically these are people who can't afford these homes to begin with and are ill-equipped to handle any economic adversity.
Here's what's interesting.? Rates have started to creep up, but prices haven't slowed down.? What's cauing this?? Unbelievably liberal mortgage loan underwriting.? 100% financing, stated-income (no income verification), interest-only loans, and now negative-amortization loans (where the monthly payment doesn't even cover interest, so you end up with an even larger loan in a few years) are very recent developments - most of these buyers have zero fallback position in case of income interruption or depreciation in value.? Remember, the U.S. personal savings rate is pathetic, so when there is a hiccup in the economy, thousands upon thousands of homeowners will lose their homes via foreclosure.? This will accelerate the market decline.? I've heard that 75% of all mortgage loans (purchase and refi) in California in 2005 have been interest only or negative amortization - basically these are people who can't afford these homes to begin with and are ill-equipped to handle any economic adversity.
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Guess I will just have to wait until the price is within my range.
08-18-2005, 05:47 PM
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I wouldn't blame the mortgage industry - they are taking a calculated risk that default rates for residential mortgages will continue to be the lowest of any type of consumer debt out there.
I would blame our consumption-driven culture and a fiscal policy which is absolutely dependent on heavy consumer debt levels for economic growth. Low interest rates drive property values, which increases available capital by way of home equity borrowing. This money is being used for home improvement, car purchases, vacations and other luxuries. This consumption results in short-term positive economic indicators. And for most Americans, these items are not bought with savings, but additional debt.
The numbers are frightening. I can't say when the down cycle will start, but I believe it's going to be severe when it does and drawn out for a number of years. Our elected officials depend on strong economic numbers for re-election and don't care about the long-term negative impact of today's policies.
I would blame our consumption-driven culture and a fiscal policy which is absolutely dependent on heavy consumer debt levels for economic growth. Low interest rates drive property values, which increases available capital by way of home equity borrowing. This money is being used for home improvement, car purchases, vacations and other luxuries. This consumption results in short-term positive economic indicators. And for most Americans, these items are not bought with savings, but additional debt.
The numbers are frightening. I can't say when the down cycle will start, but I believe it's going to be severe when it does and drawn out for a number of years. Our elected officials depend on strong economic numbers for re-election and don't care about the long-term negative impact of today's policies.
08-19-2005, 11:58 AM
#16
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If it crashed, there'd be another nightmare depression. It's even worst than the first one. People will be homeless, banks have no money. If you were a politician, what are you going to do about it to avoid the burst?
When the windshield is hot, don't pour water on it. Let it cool down by itself or it'll be cracked. Same here. Let it cool down by itself. Raising more interest rate will be catastrophic. It's a tough equation for Greenspan right now, and that's why he keeps asking for resinging to avoid the blame later on. Also, crude oil price contribute to the bond price which will increase long term interest rate. How do we stop that?
When the windshield is hot, don't pour water on it. Let it cool down by itself or it'll be cracked. Same here. Let it cool down by itself. Raising more interest rate will be catastrophic. It's a tough equation for Greenspan right now, and that's why he keeps asking for resinging to avoid the blame later on. Also, crude oil price contribute to the bond price which will increase long term interest rate. How do we stop that?
08-19-2005, 05:02 PM
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In this capitalistic country you can't blame politicians for inevitable bubble burst of anykind. Eventhough, Federal Reserve controls the interest rates, it's the mortgage industry that underwrites the risky loans.
I remember when I first bought my house in 1999, the the bank asked me thousands of questions and made me write a letter saying, how I was going to afford a monthly payment of $2,500 from $650 monthly rent that I was paying at the time. They were very careful and they made sure I had all my ducks in row. Not to mention, they had me buy a PMI to cover themselves just in-case!!!
Now their standards are very low, they don't care...anyone who is breathing and legal age can get a loan....regardless of their ability to repay loan in the future when the interest rates rise to more realistic levels.
Yes, we still have people in this country, who we can't trust to handle their finances...Chapter 7, Chapter 13 comes to mind. I obviously don't blame people who have medical problems and they have no choice but to file bankruptcy.
I remember when I first bought my house in 1999, the the bank asked me thousands of questions and made me write a letter saying, how I was going to afford a monthly payment of $2,500 from $650 monthly rent that I was paying at the time. They were very careful and they made sure I had all my ducks in row. Not to mention, they had me buy a PMI to cover themselves just in-case!!!
Now their standards are very low, they don't care...anyone who is breathing and legal age can get a loan....regardless of their ability to repay loan in the future when the interest rates rise to more realistic levels.
Yes, we still have people in this country, who we can't trust to handle their finances...Chapter 7, Chapter 13 comes to mind. I obviously don't blame people who have medical problems and they have no choice but to file bankruptcy.
08-21-2005, 06:39 AM
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Originally Posted by ericdbs' date='Aug 17 2005, 11:06 AM
i heard that sand diego county is the one to watch...if it goes down so does others.... thats just what i heard...
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San Diego is already on its way down - the bubble has burst there, and OC is suffering a bit as well. LA County will be later. It's over, that's why my investment property is already on the market - too bad I didn't do it 2 months ago.
08-21-2005, 06:45 AM
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wow!!...my bro is selling his house in long beach... was about 610..is probably 580..he is planning to sell and take the equity then buy another house in ventura county.... i thought it wasnt a good idea...told him he should be lucky that he has a house and...able to live comfortably...
08-21-2005, 07:22 AM
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Originally Posted by my530i' date='Aug 19 2005, 12:58 PM
If it crashed, there'd be another nightmare depression. It's even worst than the first one. People will be homeless, banks have no money. If you were a politician, what are you going to do about it to avoid the burst?
When the windshield is hot, don't pour water on it. Let it cool down by itself or it'll be cracked. Same here. Let it cool down by itself. Raising more interest rate will be catastrophic. It's a tough equation for Greenspan right now, and that's why he keeps asking for resinging to avoid the blame later on. Also, crude oil price contribute to the bond price which will increase long term interest rate. How do we stop that?
When the windshield is hot, don't pour water on it. Let it cool down by itself or it'll be cracked. Same here. Let it cool down by itself. Raising more interest rate will be catastrophic. It's a tough equation for Greenspan right now, and that's why he keeps asking for resinging to avoid the blame later on. Also, crude oil price contribute to the bond price which will increase long term interest rate. How do we stop that?
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Historically and globally, real estate markets don't crash like stock markets or other equities, as it is a real investment, not a paper investment, so there will always be demand as it has its main usage still intact - shelter. Likely the prices will just remain stagnant to slightly lower for an extended period of time to let the market 'catch up' with realistic and sustainable levels. Those wanting to sell will have to put their house on the market for 3-4 times as long as it would normally and will have to settle for less both in price and net amount because real estate brokers will be suffering, so no discounts on commissions will be had.