There were several weekend conversations that are worth blogging.
First, it was the opening weekend for USC football!
The organizer of our football group has now had his home on the market 9 or 10 months. (It was on the market a month or so before the Rose bowl!) He's holding off moving for a great promotion trying to sell. (Internal transfer.)
Another bought a condo (townhouse?) in Silver lake. She's renting that out (obviously a loss) but was able to find a rental on the east side of PCH in Malibu for less. So she brags about the rent difference but ignores the mortgage.
We sat across from a builder "marketer" at the beach cities tailgate (my favorite). He was noting how prices would continue to go down a little. He did gripe about a bunch of $4.6 million homes in the bay area with boat docks (for 46' boats, I guess they expect $100k/foot for the dock) that no one is looking at. He's worried; with a recently purchased Marina Del Rey condo, where is the income going to come from? He's fine today... but tomorrow?
Breakfast at my favorite diner is always fun. Next to us was a baby boomer bragging about his home sale and how cheap it was to rent by the beach. "I probably won't ever buy a home again" was heard by at least half of the restaurant. He was excited about a possible low cost Hawaiian rental too; he was trying to figure out a way to rent it in his name and "time share" it between his buddies at the table.
Dinner with family was fun. Lafite Rothschild (1975) wine also helped lubricate the conversation. One uncle listened and determined no area was safe from the downturn (the one who could afford to bring the name brand wine). Another uncle was arguing vigorously how prices will, at most, go down a little. (I decided to let it drop until his bought of unemployment goes away...) The first uncle understood job migration (he cannot hire staff for his office due to migration out of CA). The second was "people will always want to live here." The first uncle agreed with my comment that "we have to undo and redo three years worth of sales." The 2nd uncle just wasn't willing to accept any such possibility.
Basically, buyers have written off buying. Sellers... hope but fear. People whom consider their equity their pride and joy... will take a hit. I should note that the 1st uncle's home is a custom job designed for one purpose: sunset views during retirement with an elevator for when the knees go. Market price to him is something his executor will worry about. The 2nd uncle... I think his retirement planning is based on "cashing out" of high home equity...
I keep reading predictions of single digit declines in 2007, 10% to 20% in 2008, and then the floor falling out in 2009. We seem to be on track for that. At least emotionally. But I wonder, when will all the flips in bubble areas soak up too many funds for the mother markets? Not to mention, am I the only one noticing the number of retail and commercial "for lease" signs is abnormal?
Got popcorn?
Neil
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2 comments:
Observations from Arizona:
One friend bought at the peak and thinks he's saved because he put 10% down. Even hinting otherwise brings a tirade that puts Lindsay Lohan to shame.
Another is looking to move out of state. He's already underwater on his mortgage if you go by zillow's numbers (which are definitely high for the area). He still believes that he can sell, but the "profit is gone". I'm guessing that he believes that you can't lose money on RE (but he can never justify why). Either way, anything I say to help educate him is met with "that's your opinion". It's odd, because he's a smart guy, and he can see that I have strong arguments and he has only hope. Oh well.
Denial doesn't go away easily. For both of these guys, I just nod my head and keep quiet now. I figure that there's nothing I can do, so I'll sit back and watch. In all fairness, there are 3-4 other friends who openly acknowledge what's going on, and one who talked about selling and renting for a couple of years (but the wife won't hear of it).
One friend bought at the peak and thinks he's saved because he put 10% down. Even hinting otherwise brings a tirade that puts Lindsay Lohan to shame.
Good point. Sadly, we've all been there (unless you were wise enough to keep one's mouth shut).
I recall well friends bringing cash to closings during the 1990's. Sigh...
Got popcorn?
Neil
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