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There are a whole lot of "real estate clichés" being posted in this thread that have not been valid for decades. Interest rates may have gone up a tick, but mortgage rates are still the lowest they've been in 40 years! There is no good or bad time of the year to be buying or selling a house. The real estate business hasn't been "seasonal" since the 60s - at least not in the areas of the country considered "desirable."
And after stating those two generalizations, I would caution all to be wary of broad generalizations like "buyers are backing out because of the increase in interest rates" or "market momentum and sentiment is going down." Remember - on the internet everyone is an expert.

Old 07-19-2004, 04:11 PM
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Quote:
Originally posted by Leader
There are a whole lot of "real estate clichés" being posted in this thread that have not been valid for decades. Interest rates may have gone up a tick, but mortgage rates are still the lowest they've been in 40 years! There is no good or bad time of the year to be buying or selling a house. The real estate business hasn't been "seasonal" since the 60s - at least not in the areas of the country considered "desirable."
And after stating those two generalizations, I would caution all to be wary of broad generalizations like "buyers are backing out because of the increase in interest rates" or "market momentum and sentiment is going down." Remember - on the internet everyone is an expert.
I see. So you give that advice to the people refinancing their mortage, taking what they save to dump into a $50K renovation, while also praying that interest rates don't go up because they can barely survive a 500-dollar increase in their monthlies?

Or are you telling that to the first-time home buyer who daily is increasingly scared to pull the trigger because interest rates will go up?

I believe we'll see how "seasonal" things are after Nov. 2nd. But this comes from just another internet expert...
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Old 07-19-2004, 04:20 PM
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Well, the good thing about arguments like this is that there is eventually an answer - history will show who was right and wrong.

It will be interesting to see where the market is this winter, next year, and the year after that.
Old 07-19-2004, 04:22 PM
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I don't think anyone here has said the market is homogeneous, Brian.

And what you're seeing people post is largely what they've heard from people in the market. Certainly my comments came from several agents and people in the mortgage industry.

Just go to themls.com and look for homes on the West side of LA, Santa Monica, Venice, etc. for under $750K. Lots of teardowns and a few WWII era cottages. 60% appreciation in 3 years is just not sustainable.
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Old 07-19-2004, 04:47 PM
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I hate ot admit it, but our Tabs is astute and spot on. The homes in my neiborhood that used to sell in hours 4 weeks ago are now not moving at all. Nothing has sold in 2 weeks. Prices will start to drop on the ones where the sellers are impatient or in need. You know what's next.

About time.
Old 07-19-2004, 05:01 PM
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We like the Meyers data for new home projects. If this market goes the way previous years have gone, it will be financially influenced first (incentives before prices drop), then locational (some areas will go down faster than others), then market level (whatever price level is most influenced by rates will be affected the most)

There has been a lot of discussions about the "bubble" in/on all the real estate sites (Inman www.inman.com/ ) The conclusion thus far is no conclusion. I think refinancing at these historically low rates is ok, I'm not sure I would buy at this time.

http://www.meyersgroup.com/homebuilding/homebuilding.asp
Old 07-19-2004, 05:04 PM
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Ahhh for the good old days, when people bought houses in order to have something to live in, OR as a rental property that would eventually pad their retirement income. When those who "churn" enter the market? Those who buy, not caring about interest paid, expecting to turn a quick profit in a few moons? Bet on it...the market will turn south soon. Early churners make money...later ones lose. Big time. Just free advice from a guy entering his 6th decade given here...so value it for the price paid, right?

Last edited by pwd72s; 07-19-2004 at 06:31 PM..
Old 07-19-2004, 05:27 PM
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PWD - so true, so true...
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Old 07-19-2004, 05:29 PM
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This is why the only real estate I now care to own is the piece I live on. I can sell a stock, mutual fund, or bond I own tomorrow, by picking up a phone, or a click of the mouse. Real estate? Well, that's another story...despite the old saying that "God quit making land, while he keeps making people"...in real estate, first you gotta find a buyer if you want to sell. One of the happiest days in my life was when I sold real estate, bought as an investment, for more than I paid for it...after years of watching it's value plummet while it's tax burden climbed.
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Old 07-19-2004, 05:56 PM
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Please educate me. I was a real estate broker back in New York State, and when we sold a house, it was a general although not universal practice to "pre qualify" a potential buyer. Once this was done, a range of affordability was established beyond which we would recommend against purchase. Given average indebtedness, the monthly PITI was not to exceed 35% of gross income.

So, given even today's interest rates and, say, an annual income of $120k, this would result in a monthly of $10 k, and $3,500 available for the total monthly payment. Now, assuming a mortgage of $800 k on some of the houses that have been mentioned, an interest rate of 6% and 30 years, the principal and interest alone come to $4,796. Given the rule(s) of thumb, and only guessing at the taxes and insurance, the annual income for such a property would be in excess of $200k.

Are there actually that many people in that earnings range in California? Seems to me that this would put many people out of the race for home ownership. Using the example of 6% interest, then every $100,000 of mortgage for 30 years would be just pennies under $600 per month, so even a more modest mortgage of, say, $400,000 would be $2,400 not including taxes and insurance. Once again, that would require an income of $82,300.

So, the question...Who in Hell is buying these homes and with what?
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Old 07-19-2004, 06:20 PM
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Quote:
Originally posted by pwd72s
Just free advice from a guy entering his 6th century given here...so value it for the price paid, right?
You're 600+ years old? Damn, you're old.

While you had a bad experience with real estate as an investment, I've had spectacular luck. Those data points and 25 cents will get you pretty much nowhere.
Old 07-19-2004, 06:24 PM
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Turbo:

From what I have been able to ascertain, right coast and left coast real estate are two totally different animals. Different mindset, different income levels, you name it.

Personally, I think your end of the continent is the saner one!!!

Of course I leave Long Island and Conn out of the equation. Those folks are plain nuts!!
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Old 07-19-2004, 06:33 PM
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Quote:
Originally posted by turbo6bar
You're 600+ years old? Damn, you're old.

While you had a bad experience with real estate as an investment, I've had spectacular luck. Those data points and 25 cents will get you pretty much nowhere.
HOOT! Mistake edited...it's just that sometimes, 6 decades feels like six centuries. Hey, I made a profit on that real estate..even after nearly two centur...er, decades of paying taxes, insurance, escrow & broker's fees, not to mention interest paid to the lender. So, overall, it wasn't a bad experience, just lengthy and tiresome. On the other hand, 109 % gain, made in 1999 alone, on my IRA, was fantastic. Especially since, on Cindy's advice, after she got naked, went out back, smeared herself with wood ashes, and then studied chicken entrails, we dumped our equities in January of 2000...not getting back in until March 11th of 2003. Long time in between, making only bond and money market interest. Hey, to each his own...me? Nevermore money into real estate other than the piece I live on. Contrary to what a real estate salesman will tell you, real estate values can, and will, fluctuate. It's only that the real estate up & down cycles last longer.
Old 07-19-2004, 06:45 PM
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Quote:
Originally posted by Moneyguy1
Given average indebtedness, the monthly PITI was not to exceed 35% of gross income.
Someone will chime in, but I expect you will find that the banks are being a little more "flexible" than in the past.

My private opinion (very much 2 c worth) is that the housing markets in many parts of many countries will suffer somewhat of a correction that, if it is cause by, or coupled with, any other economic issue affecting home affordability (higher interest rates, unemployment, stagnant wages) is going to hurt the banks. Or whoever holds the mortgages - I never quite understood the whole Fanny Mae/Freddie Mac thing.

Banks in NZ/Australia (they're pretty much all Aussie) have spent the last few years growing profits at a huge rate on the back of home lending. They have further earnings growth expectations from their investors, and so they are chasing more and more mortgages.

Especially the "revolving" mortgages - for many people they end up becoming not much more than an interest only mortgage...
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Old 07-19-2004, 06:53 PM
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"Especially the "revolving" mortgages - for many people they end up becoming not much more than an interest only mortgage...


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P.T. Barnum was right....
Old 07-19-2004, 07:00 PM
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Interest only mortgages are really not that much less expensive per month than a declining balance mortgage. The interest only would be in our example of 6% and $100,000 loan amount $500 a month. A declining balance mortgage for 30 years would be $600 a month. Over the course of the thirty years, the individual would have paid out $180,000 in payments and have 0 equity. The declining payment would have paid $216,000 total but own the property free and clear.

The banks being "flexible" of course works to their advantage. If the individual defaults, there is always foreclosure. Our guidelines were constructed to reduce the potential that the individual "bit off more than they could chew".
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Old 07-19-2004, 07:05 PM
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Bob: many buyers of million dollar properties are 'trading up' from $750K properties in El Lay. But $750K properties aren't necessarily luxury homes.

Take a look at this little bitty thing on half a Venice lot (you have to enter fromt he alley) probably 60 x 45 feet. A half million bucks.

http://guests.themls.com/photos_addl.cfm?mls=04-078746&p_type=0&addr=2416%20WALNUT%20AVE

Down the street in a very nasty neighborhood, is a full-sized house on a 'normal' 4300 square foot lot needing total rehab for only $780K.

Wacky.
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Old 07-19-2004, 07:24 PM
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Yeah, I think the point I am making is that they encourage people to keep borrowing more (which is why the bank likes them) - in other words, they take any of the compulsory savings regime out of a mortgage.

This is fine when prices keep going up, but means that a much broader number of mortgage holders are likely to be in a difficult position if prices go south.

In particular, this is an issue when the mortgage has been topped up to buy holidays, cars and big screen tvs ---> the ready availability of the cheap credit is too big a temptation for a lot of people.
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Old 07-19-2004, 07:27 PM
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Quote:
Originally posted by techweenie
Take a look at this little bitty thing on half a Venice lot (you have to enter fromt he alley) probably 60 x 45 feet. A half million bucks.

Wacky.
What would it rent for?
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Old 07-19-2004, 07:30 PM
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Cam, that little place might bring $12-1400 a month.

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Old 07-19-2004, 07:37 PM
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