Stuff like this will bring down the housing market!

[tabs]

I know the Condo development they bought in...its call the Green Felt Towers....at 711 South LV Blvd....

[TerryBPP]

Welcome to the era of people with NO money trying to delve into a big money game. Thats why there are so many unprofessional people in the RE business.

[on-ramp]

Inventory will bring down the RE market. When people start putting their homes up for sale fearing that it's losing value every day and they want to get out ,, then watch out

[GDSOB]

Originally posted by TerryBPP
Welcome to the era of people with NO money trying to delve into a big money game. Thats why there are so many unprofessional people in the RE business.

Those in the know are sitting on the sidelines accumulating cash. These suckers are playing hot potato.

[techweenie]

Nothing new here. They don't call them "liars' loans" for nothing.

Some of the luckier speculators have gotten out with $30K+ losses on their 'spec flip' condos. The ones who are now hesitating have the potential to spike foreclosure rates.

[Moses]

You want an eye-opener? Have a conversation with a mortgage broker. Many can't remember the last traditional loan they wrote. Everything is interest only, negative amortization, equity plus. It is a financial Titanic heading for the iceberg.

Foreclosures are on the rise? Duh!!!

[VaSteve]

There's a ton of homes in my community for sale. Like 5 open house per street every saturday/sunday. One guy has a sign out front, that said "FSBO: Price Reduced - Taking Offers". Another house in the 55+ community is running some kind of auction. Ug! Making the place look tacky. Maybe, I'll run out and take some photos.

[Moses]

Here's my homes "appreciation" since I bought 10 years ago. (Zillow.com) Look reasonable to you? These people who are buying at the top with nothing down will walk away when the prices start to reflect reality.

[Howard Agency]

Not that I would advise anyone to buy into this hyperinflated market as an investment, but owning the kind of home you want and can afford is a nice feeling.

It spiked up, and will certainly fall in the short run, but bet against CA real estate in the long haul and you will probably lose. Even the flippers and over extended types will win if they can hold out long enough.

And if you're lucky enough to be 'in' with Prop 13 taxes and an easy to service loan, the only time pricing will come into play is on your financial statement or the moment you decide to buy or sell.

The numbers are kinda funny here now. A $1mil home rents for ~$3500 per month, so capital cost sitting on a home like that with no mortgage is more than $5000 per month. Even with inflation, that would pay your rent for a long time.

Or, you could take that income and live year round on the world cruise on the QE2, or an all inclusive resort on the beach. Or use the capital to buy a small county in Podunk, hoard gold, dehydrated food and automatic weapons.

Moses, Wayne, etal, do you advise selling and investing elsewhere? I guess if I could find something as secure and enjoyable I might bite.

Just my .02

[CarreraS2]

Originally posted by Moses
Here's my homes "appreciation" since I bought 10 years ago. (Zillow.com) Look reasonable to you? These people who are buying at the top with nothing down will walk away when the prices start to reflect reality.

This supports my belief that prices will drop 40%.

If you draw a straight trend line on your chart, it would show normal, steady appreciation, putting your house at around $1 million right now. So down from the peak of the spike ($1.75 million) to $1 million.

Which sounds dramatic, but it isn't, really. All it does is cut out the bubble spike. Even at a drop to $1 million, the house will have had normal appreciation since Jan '96, and will still be worth more than it was worth in January 2005. So it isn't really dramatic at all.

An asset like a house can never have a spike like that stick. It is always going to "revert to mean" or a more normal long term appreciation line. Because there's no fundamental support for the spike. It's just supported by speculative air.

It's easy to say "it'll be ok in the long term," it's a lot harder to actually live it when you work for, earn, and bank $400K (a tremendous undertaking for most people) to put down on a house like the one in this example, only to see that money completely disappear in 2 years as the house drops in value. The house may go back up in value in 10 years, but it doesn't erase the fact that you tossed that $400K down the drain by buying at the peak.

I lived through that in the early 90s (on a much smaller numbers scale), and it wasn't very fun or satisfying.

[RANDY P]

I dunno if I believe that story or not. I say this is because:

1) - it's a condo. Typical "hard money" lender will not play with residential property, unless the loan to value is under 65% maybe 70% tops. Reason why is that residental property affords special rights that protect the consumer, and hard money lending practices are not compatible. In other words, it's not worth the hard money guys time. They like commercial properties.

2) In order for any lender to acknowledge an increase like that, there have to be comparables in the same building that have SOLD for the highest value quoted within the last 6 months so, the unit (and other units in the same development) was probably worth $630K legitimately back in 2005 and the buyers simply fell into a good deal. That would explain the "hard money" approval - They used an easy lender to secure the property QUICKLY since it was legitimately undervalued and everyone knew it, and then took their time going with a traditional mortgage to get cash out.

One of the hardest things to inflate are condos and homes in developements - in order for an appraisal to stick in value, there have to "identical" properties that have sold within the last 6 months that match the value you claim. So, in a condo situation, if the neighbor unit, which is also 1,000 sq. ft just like yours for instance, on the same level - just like yours, on the same side of the building sold for $445K, there is no way to go and say your place is worth $600k if it's identical or similar. That simply doesn't work. If you try the lender will use your appraisal for firewood kindling.

rjp

[nostatic]

here's my soon-to-be-ex house:



we bought at the dollar sign icon. Looks like most of the correction has already happened to it. This is a nice house in a very desirable neighborhood (you can walk to Century City offices). I don't think it will drop much more...

[techweenie]

oh, man. Good going, Todd.

Be happy that you didn't sell too soon.

The first $ sign below is my sale. The second is the resale. Ouch.

[RANDY P]

Originally posted by tabs
I know the Condo development they bought in...its call the Green Felt Towers....at 711 South LV Blvd....

I'll post the data I find.

EDIT: it's not pulling - address must be wrong....anyone?

BRB...


rjp

[red-beard]

This was my House in So-Cal



I bought at the 1st $ and sold at the second $.

[Jims5543]

Mine looks funny. But, it represents well what has happened here abiet a little off timewise.

I knew my home value spiked up to 350K+ in late 2003 but I ignored it. 250K seems a little low. I think homes are still selling,...slowly.. for 275-300K in this area. The spike shown in this graph is not truly representative. The prices did not drop that low and pop back up. They just steadily fell over about a 6 month period that would bring us up to right now on the time line.

Looking at that graph more its way off time wise.

[Moneyguy1]

I know a mortgage broker whose attitude is simplythat he is not responsible for people's bad judgement, unlike a financial consultant who is, (supposedly) interested in the client's welfare. This mortgage broker is young, living large, spending like a drunken sailor (Hummer, BMW roadster, huge travel home, boat, million dollar home, you get the picture). In the area that he has his business, the number of defaults has doubled in the past 18 months. Nationally, the default rate is increasing as well (not surprising), and will continue. Add in the uncertainty of the stock market due to mixed signals from the Fed, leading to higher interest rates, and the trouble on the horizon is getting closer and closer.

A very successful investor once told me "Always leave a little for the next guy". No one can accurately predict trends in economic markets to the degree required to get in at the absolute bottom and out at the absolute top.

Randy: Respectfully...in an inflationary market, an appraisal from 6 months ago is also tinder. The rules are out the window since there are no true "comparables". I have the National Institute of Appraisers certificate and can tell you that appraisals are a crapshoot and can change to suit the client. Seen it, been there (never done it; try to be at least honest in my approach). The creative aspect of financing today actually results in overvaluation in many cases, and there always seems to be some individual or consortium that the mortgage broker can convince to buy the loan.

Keep your eye on the defaults over the next 12 months.

[JeremyD]

Here's my house... not quite the drop that some other areas have - yet anyway...

[legion]

Originally posted by Moneyguy1
I know a mortgage broker whose attitude is simply that he is not responsible for people's bad judgement...

I don't disagree with that assessment. No one looks after your money like you. I don't think he has any obligation to the people he writes loans for...but I still think creative financing can be unethical. The purpose of having lending standards is to protect the lender from the likelihood of default. Many creative loans have even violated that basic premise.

[Moneyguy1]

Legion

We are on the same page. While ethics seem to be no longer mandatory in business, the individual goes to the "expert" for what the individual hopes is good advice. A mortgage broker who at the very least does not disclose the negatives as well as the positives of a borrowing scheme is worse than unethical, they are bordering on criminal and I would not be surprised to see lawsuits as the market goes into a slide. I hope my young friend has "Errors and Omissions" insurance.