I Hope The Housing Market Crashes

[Timetopay]

Thanks to VT and GD. There are many here that understand markets and post #55 is one of the best in this thread.

Went back and read this thread also and regardless of how im judged for posting this, Ill now post we are now in bottom 2nd inning of a massive collapse in real estate.

Alan Greenspan and the artificial interest rate cuts starting in 2001 fueled final blow off phase that created the condo flippers, no-doc loans, million dollar trailers, and at least a few million wannabe Donald Trumps.

If history books portray Greenspan as anything but the creator of the worlds largest bubbles, it would be a big fat lie.

Now there are millions of builders sitting on inventory for whatever reasons they believed they could sell to a greater fool for yet higher prices and more sooner than later, many of them will be bankrupt.

People overpaid for homes, thinking they would rise to the moon and thus every homeowner would become a multimillionaire.

Not only did they overpay, they borrowed massive amounts of money vs bloated and false appraised values, somehow thinking interest rates would never rise and their home value would rise to the moon.

Then the condo flippers came around thinking as dreamers throughout the centuries have that they had figured out how to turn lead into gold. As all bubbles and manias progress, doubters were dismissed as out-of-touch fools and that this time it was different.

Well, as we read this, we again have discovered, that in fact, although the faces may have been different, the game was the same.

:howdy:

I know you down on the market and I agree with the way this thing is headed.

I havent read this whole thing through so just wondering what you are sitting on as far as for personal use. You renting,paid off house,etc.

My house has easily dropped 20% and wanted to sell but none of my family wanted out of the house or neighborhood so how the f can you play a house like a stock.

I moved in 03 and family loved the house,kids made friends,etc. So I see house go up 30 percent but how do i dump it in 06?

 

[WCBias]

The great bubble debate. I live in Las Vegas, which has the highest foreclosure rate in the country. My neighbor just pissed away $100,000 on a house he bought less than a year ago because he couldn't afford the payments, newspapers are piling up on his doorstep. Bank notice on his garage.

Someone said 4th Inning, I think Woof referenced 2nd Inning. It really depends on what market you live in. Las Vegas for example. Most of the foreclosures are 2nd home buyers and investors from california, people who never even lived here. Of course there are some taken down by bad loans too, but the reality is the unemployment rate here is low, there remains a large demand for high paying construction jobs. So far the average median price is down about 10%-15%...but considering the market went up 50% and 30% in consecutive years...the average median price can drop another 30% and it is still substantially higher than it was just six or seven years ago.

How about San Diego? My agent friends there are busy as hell. Homes in some areas are selling within days of being put on the market. The average median price is generally holding, it has decreased some. But still a hot market.

Portland Oregon, San Francisco....no major bubble explosion yet.

This is the 3rd correction I've lived through, the other side resulted in huge appreciation in real estate values, especially the last two. Part of this was indeed low interest rates. The other part is simply the american dream, people like to own their homes.

I anticipate another two or three years of this. At that point I hope you all have a large cache of funds to invest in real estate, because the cycle will start again, like it has for about every ten years for 100 years.

This may also be a story of the haves and havenots....until the haves stop having, they are in little risk of losing their home.

 

[WVU]

agree with you WC Bias. There are plenty of people in 30 year fixed mortgages. As long as salaries do not decrease (very little chance) then plenty of people are in comfortable situations. There are also much more foreign money than ever before to help with demand. The property tax overhalls that are sweeping the country will also play a big part.

The ones taking the risk are those buying on arms and balloons. It is very possible that interest rates will reach double digits within 5 years. Then the shit will hit the fan for some, but not all.

 

[billsfan]

God forbid another major hurricane hits the Florida area. With the current state of affairs, it is very risky to be owning or buying housing in Florida, unless of course one is buying valued foreclosures.

 

[WVU]

God forbid another major hurricane hits the Florida area. With the current state of affairs, it is very risky to be owning or buying housing in Florida, unless of course one is buying valued foreclosures.

Hurricanes are great for the economy. There is less risk of hurricane damage than there was years ago. Building codes have all been changed since Andrew in 1989 and again in 2001.

The housing boom that Florida enjoyed was largely due to hurricanes.

 

[billsfan]

A girlfriend of mine bought a condo two years ago and she is now paying more to insure it than I presently pay in rent. On top of that, the condo is not worth as much as when she purchased it.

 

[Dawoofdaddy]

I anticipate another two or three years of this. At that point I hope you all have a large cache of funds to invest in real estate, because the cycle will start again, like it has for about every ten years for 100 years.

If it were only to last 2 or 3 years, it wouldnt be nearly as great a problem.

However, I think this estimate is quite a bit shorter than whats going to happen.

First, the govt will keep printing money thinking thats going to fix the problems, when in fact, that is the primary source of the problem.

This recent housing boom was nearly completely artificial...mostly fueled when the fed cut interest rates to 1% from 2001-2005.

During that time, there was not been any massive job creation, no real wealth being created (outside the r.e. bubble itself), in fact, when the blowoff phase of this bubble happened, it was on tail end of another massive bubble bursting...the nasdaq crash (down 82% from 2000-2002).

Agree there are particular markets that are more insulated than overall national market.

This current American real estate bubble is arguably the largest in American history. Whats amazing is how many people this time are in on the gag and how tremendous it became before finally falling apart.

If a person is living in a house thats paid or paying and their job is safe, its not the end of the world.

Unfortunately, too many people overborrowed, leveraged to the stars, borrowed against their homes, and frankly they just dont understand that after factoring all costs and expenses (most importantly inflation), a house is a depreciating asset.

I remember sitting at a blackjack table in 2005 with poster redeye. Other than he and I, everyone else at the table was selling, lending, flipping, or going to become the next real estate tycoon.

To be frank, the party is over for a while. People that foolishly thought prices would never drop and would only rise to the stars are finally being awakened.

Post #55 from vaulted thouse does alot to explain the bubble.

 

[ppeter]

infrastructure costs are a big problem now in major cities. long ignored roads, sewer pipes, etc. decaying. In Honolulu, sewer prices just doubled last month (avg. home pays $70 a month now), to pay for a billion dollar replacement project uke1:

 

[WVU]

Dawoof, what does your current real estate portfolio look like?

 

[Anti-liberal]

I looked at some Henderson, NV properties online in the 300k to 350 range. Henderson makes Orlando seem like a bargain still.

 

[Timetopay]

Dawoof you mind answering my post. Thanks!

 

[Dawoofdaddy]

ttp and wvu

Dawoof, what does your current real estate portfolio look like?

I bought my house 15 years ago, own it with no mortgage. Its nothing special, as Im a 30 something single guy with no kids.

Used to own a duplex that I rented to college students. Sold it in late 90s for I believed I could earn higher returns elsewhere. Owned a bar and the piece of commercial real estate until 2003.

 

[Timetopay]

Well why didnt you sell and rent??? Regardless of its paid off or not why take a big loss?

Even if the house is 200k 20 to 50% drops is a decent size number so why did you stay in?

 

[Dawoofdaddy]

My house isnt 200k and if it was, I would have sold and rented. I live in Toledo, Ohio...not exactly among the high flying bubble markets like california, LV, and Florida.

The collapse here will have more to do with a flat to downward population and a disappearing manufacturing base, than condo flipping, interest only loans, and zero lot lined subdivisions.

500k+ here will buy a palace...not a starter home.

Ill buy myself a nice place after the dust settles and all these condo flippers are bankrupt and working at mcdonalds.

 

[Timetopay]

My house isnt 200k and if it was, I would have sold and rented. I live in Toledo, Ohio...not exactly among the high flying bubble markets like california, LV, and Florida.

The collapse here will have more to do with a flat to downward population and a disappearing manufacturing base, than condo flipping, interest only loans, and zero lot lined subdivisions.

500k+ here will buy a palace...not a starter home.

Ill buy myself a nice place after the dust settles and all these condo flippers are bankrupt and working at mcdonalds.

So what state do you plan on moving too?

 

[WCBias]

The "hissing bubble" is just another word for correction. I'm sorry, we are not headed for another depression because of a correcting market that got overheated with a very small number (in relation to actual home owners) that played with monopoly money. The vast majority of homeowners can and will continue to make their payment, despite what happens to their equity. Just like the housing recession before, and the one before it. At the end of the day, the home they bought 30 years ago is worth hundreds of thousands more than when they bought it.

You can research real estate cycles and trends for the past hundred years. It will take a total collapse of the economy before real estate becomes a bad investment long term...and even then it will rise from the ashes.

As long as people are working and can afford their payment, they are not going to leave their home just because they have lost their equity, or worse, are upside down. Unemployment is a far bigger threat than rising interest rates. Again, the number of "investors" trying to make a quick buck is a marginal figure compared to long-term homeowners. Many of those investors are already out of the game, or are in the process of losing their ass as we speak (I know a guy with 27 homes all going back to the bank)

By the way, I've read completely contradictory data to that cited in Post 55. The sky is hardly falling in San Diego. I lived through the last recession and this one has a long way to go before it reaches the bottom in that city. I remember the chicken little stories well and how there had never been outmigration ever in the city and that there was a major oversupply of housing there. It took four years to rebound and when it did, prices averaged at least 10% growth for 10 years. It is an insulated market...at worst there is a price correction, and so far the correction has been minimal. San Diego has always been at the top of the least affordable index for a reason, people will always want to live there, only more so if and when prices drop.

As for Las Vegas, there is a rebound effect in any growing housing market when it comes to inventory. When you are building 5,000 new homes per month, there is a real good chance you are going to be hit with an oversupply of housing when the engine slows....and here we are. Regardless, the city continues to generate new jobs, and your average joe with a hammer is making at minimum $60,000, that makes it real easy to afford a $250,000 to $300,000 home. I expect another 20% to 30% price correction....At the end of the day I'm still over what I paid for the house, and when the market emerges prices will increase again.

Bubble...correction...call it what you want. The real estate market was due to decline and will continue to do so for a few more years. I expected it a few years before it really started.

At some point the correction will end and prices will rise well above what we see today. People still bought houses when interest rates were double digits, some near 20%...prices still rose. We are in a down cycle, but the sun will shine again. We as a people are always going to not only want, but need a place to sleep at night, to keep our shit. You can't sleep on a bond or a stock dividend.

 

[WVU]

Here is a question for both Dawoof and WC Bias:

How much would you guess a $500k property sold in south Florida today will sell for in 5 years?

 

[Dawoofdaddy]

The "hissing bubble" is just another word for correction.

This is not something that should be classified a correction.

Another question. Why wouldnt some of these people that grossly overpaid the past 5 years for homes in markets such as Las Vegas and the other extreme bubble areas walk away from their homes after they realize they are "upside down" in their mortgages...owe more than the home is supposedly worth? The reality is, they are going to walk away, which will further depress prices and sales.

There will be a time to buy again, but for now, any new buyers should hold off, as they should have been doing the past few years. Anyone that bought the past few years, should realize they bought the top.

This bubble is multiples larger than any previous bubble youve witnessed and any other American citizen posting here under the age of 80. Only Kermit could possibly recall stories from his early years.

This isnt permabear rambling...there will be a time to buy again, but not until after huge losses are realized. Still too many "this is only a correction" types out there for this to be close to running its course.

WVU, Florida is going to get smashed more than most areas. We should consider ourselves fortunate if it only drops 30%. The price drop depends on how the bubble pops over a 10-20 year period or crashes in a 2-5 years. A 50-80% drop during 2-5 year period would be much better than a 50-80% drop over 10-20 year period.

 

[WVU]

so do you think a $500k house today will sell for $350k in 5 years Dawoof?

 

[Timetopay]

Da woof where do you plan on living in the future? Thanks!