When the RE Music is Over...

[einreb]

Originally posted by EdT82SC
How many of us here are going to lose their shirts if real estate crashes? I bought a house six years ago that has trippled in value. My mortgage payment is about the same as a two bedroom apartment in the local area.

I suspect that there are lots of people in the same boat as you (certainly a good boat to be in!), but there are some inicators of a high % of people really stretching to 'buy in' to the current market.

[tabs]

Hey EDT you qualify as Old Joe who has lived in his house for 50 years... it won't effect you....your RE net worth will decline thats all...

What will happen to me here in LV if RE declines 25%....I still will be decidedly in the black on this house...

[tabs]

NOw that Interest Rates are RISING....meaning the Bull market in Bonds is over....your likely to LOSE principle if investing in Bonds..unless held to maturity....

RE...prices have reached the stratosphere.....and the coming indications according to PMI insureance is that ther is a High percentage of chance for decline instead of apprecaition.....

Collectables ...Cars, Guns Art have been running strong since 1998....and in some instances the market appears frenzied....

Commodities have run up in value...take a look at the price of oil, Gold, Silver all at multi-year highs

So where does the investor put his money to make a decent return...one where the risk of appreciation is greater than depreciation....

What asset class has been beaten up in the past 5 years...and the fundlmentals have become strong again....and this strenght has not been reflected with increases in price?????


and thats where the Money is going to go....and U will see a rise in those prices over the next 5 years or so....until it to becomes over priced and we begin the cycle all over again...

[Joeaksa]

Well, the boom may be over but my next door neighbour just came by and told me that his house sold today for $425k, down a bit but still double what they paid for it just 2 years ago.

They are moving on 1.5 acres or so 10 miles North. May just do the same thing to have a nice garage and room for all my toys!

JoeA

[einreb]

Originally posted by tabs What asset class has been beaten up in the past 5 years...and the fundlmentals have become strong again....and this strenght has not been reflected with increases in price????? [/B]

I hear what you're saying, but '65 to '83 always freaks me out...

http://finance.yahoo.com/q/bc?s=%5EDJI&t=my&l=on&z=m&q=l&c=

Thats a loooooong time. And the recent flat 5 years followed a seriously booming 15 years.

-bernie

[jyl]

Even in super-over-heated markets like NoCal, folks who buy a house now, with a conventional mortgage that they can comfortably afford at inception and after all adjustments, backed by stable income, and who stay in that house for decades, are not likely to lose money in the long term. They may - in my opinion, are likely to - lose money in the short or even medium term, and over the long run their homes may underperform other investments, but in the long run they are likely to be okay. The problem is, according to the data I've looked at, many current buyers don't meet that description.

[techweenie]

Originally posted by jyl
Edit: Sorry, techweenie, didn't mean to leave you out, you senile old nursing-home resident you.

Big toothless grin backatcha.

[CamB]

Originally posted by EdT82SC
How many of us here are going to lose their shirts if real estate crashes? I bought a house six years ago that has trippled in value. My mortgage payment is about the same as a two bedroom apartment in the local area. I don't plan on moving. If my house loses 2/3 of it's current value, taking me back to where I started I still have a mortage payment I can easily afford, and a decent amount of equity.

If you - and everyone - were in the same boat, I'd ask why the prices have gone up so far, so fast?

I think it because people have traded up, not caring about the cost because they've had their own house's equity go up at an atronomical rate (ie, taking on a larger mortgage which is a lower percentage). Its the new entrants (taking on unsustainable mortgages in anticipation of capital gains).

What gets me is that banks must have become (essentially) risk loving some time in the past couple of years. The rule of thumb here in NZ was that they'd only lend you 3x your gross income, maybe 4x max. That would make the average house price in my city about 30% lower by my guess (I'm adjusting for various factors).

They also lend against valuation, without (seemingly) making any judgement as to whether "valuation" - based on current market prices - is reasonable. This is not risk-averse behaviour.

I know the answer to that too though - the banks have made record profits over the last few years on the back of our local real estate exuberance.

[CamB]

...I met one speculator, with a limited net worth and a day job as an accountant that earned him approximately $100,000 per year, who owned/speculated in two of those units (100%-financed by four separate interest-only loans that were supplied by the financial institutions without any income or net worth documentation). ...

...Over 50% of the brokers' trailing 12 months' loan production were interest-only loans. Neither has written a fixed mortgage loan in the last 45 days!...

So not good. Banks = risk loving? Taking an uncertain $ in place of a certain $?

[tabs]

Lucky Lucky Lucky that the Speculators have left LV to Greener Pastures like Phoenix....

New housing data shows a 2.9% dip over June but still is 4.7% higher than July 2004...

Also inventories are growing....with a 4 to 6 month supply on the market....

This is truly the begining....when inventories stack up the Desperate will lower their prices which starts the cascade...as buyers say I'll wait awhile and see what happens maybe I'll get a better deal next month....and beofre U know it...POP GOES THE WEASEL....

[tabs]

BTW....My Financial person in Tucson...says it's over....she told me Boston is allready in trouble 2 weeks ago....

I don't think every market is gong to craswh and burn...but certainily the high flying ones will correct to a more reasonable norm...

That being said the overall effect on the economy will not be so bad...after all the Stock Market was flyin high in the 90's when RE was in the toilette....and when the Market crashe in 87 housing was booming along with Ferraris and Art....

[dd74]

Originally posted by tabs
...and when the Market crashe in 87 housing was booming along with Ferraris and Art....

So should we hold onto our Kincaides?

[LeeH]

Originally posted by SoCal911SC
Here's an email I got forwarded today, interesting:

Just curious, but what was the source of this article? There's quite a bit of fluff there. Sold out BMW and MB dealerships? Please! How many of the "facts" in this article are as exagerated?

[tabs]

Originally posted by dd74
So should we hold onto our Kincaides?

As U know DD74 Kincaids are quiet the investment....for a person interested in art it is a fool proof investment...my recommendation to U DD is to buy as many Kincaids as U possibly can... I guarntee that you will get a lesson in art you will never forget...

[dd74]

Sorry Tabs, but I stand behind my taste in art; not value, if any. Of course, the first lesson learned about taste is it's all in the mouth. The wallet is a foil and rids "those collectors" quite quickly from the market. Fortunately...

[1967 R50/2]

It's not over yet boys...

http://biz.yahoo.com/ap/050824/economy.html?.v=15

[azasadny]

Housing isn't doing very well in Michigan right now. With all of the jobs leaving, many, many homes are on the market and in our little town of 28,000 people, more than 200 homes are for sale. Our realtor told us the average time to sell is 5 - 7 months and getting longer.

[tabs]

1967....U need to read your news reports....the Median price of a home is DOWN to 203K from 212K a year ago......sales are up prices are DOWN.....

[nostatic]

devil is in the details. I still think parts of LA will not crash. There just are too many people and not enough houses, especially in "desirable" areas which have short work commutes.

Ed, you are somewhat in the minority I think. Our *last* house was that situation...we bought in Pasadena in '99 and had a mortgage that could easily be handled on one salary. We moved in '02 because of nightmare commutes. The problem is to get close to her work, we had to jump way up in purchase price, and now have a mortgage that cannot be handled by one salary alone (the mortgage can, but not all the other bills). That is a main complication in the divorce actually. If we still had the "cheap" mortgage, it would be much easier to parse.

[1967 R50/2]

Originally posted by tabs
1967....U need to read your news reports....the Median price of a home is DOWN to 203K from 212K a year ago......sales are up prices are DOWN.....

I did read it. That level of price drop means nothing....certainly nothing in the north east where prices continue to rise.

The median price of 203k still astonomical AND demand is still very, very strong.

And you know it is all supply and demand. Until that demand goes away, prices will stay high.