Showing posts with label Joe sixpack. Show all posts
Showing posts with label Joe sixpack. Show all posts
Thursday, March 27, 2008
Which Blogger works for Yahoo Finance now?
Economy Sputters With 0.6 Percent Growth- AP
The economy nearly sputtered out at the end of the year and is probably faring even worse now amid continuing housing, credit and financial crises.
The Bearish article
Oh... it looks like inflation is too much for J6P. The MSM is starting to report moroe realistic inflation numbers and ignoring the "core inflation." From the same link:
An inflation measure linked to the GDP report showed that overall prices increased at a rate of 3.9 percent in the fourth quarter. That was not as high as previously estimated but marked a big pickup from the third quarter's 1.8 percent pace.
Another gauge showed that "core" prices -- excluding food and energy -- grew at a rate of 2.5 percent at the end of last year. That was down from a previous estimate of a 2.7 percent pace but was up from the prior quarter's 2 percent growth rate.
The new core inflation figure is above the Fed's comfort zone -- the upper bound of which is a 2 percent inflation rate.
Got Popcorn?
Neil
Wednesday, December 26, 2007
Everyone is buying 'a year from now.'
I hope everyone had a Merry Christmas. :)
What I couldn't help but notice is that *everyone* whom is looking to buy is saying they'll buy in a year. Not a month more... not any less. Everyone expresses it as "one year." But not only that, aerospace transplants are coming home and bragging to their friends about their new standard of living; this will accelerate the transfer of people out of the bubble markets.
Now the 'one year' timeline seems to be the limit of how long the typical J6P can delay their thinking. My wife, god bless her, won't push out buying more than a year. But it keeps sliding. ;) I went over the math on how buying in a year lets us buy in our 3rd choice zip code while buying in two lets us buy in our 1st choice... Oh well, I have a year to work on it. ;)
Friends who were actively bidding on homes (rejected by greedy sellers) have decided to take a year off. Mostly as they're seeing REO's in their favorite neighborhoods. REO's priced to sell! Not many... but enough to make one realize the banks must be needing cash flow. One after another friend/aquantance told me how they'll wait to buy for a year.
But aerospace is going to continue their consolidation. Oh, there will be some counter-consolidation too. What? Well... I'm at the 3rd aerospace corporation that hires heavily from Pen State. We've finally decided to open an office near their campus! Easy recruiting. Less for the work there than to have a large sign advertising our corporate name. Where are the seed engineers coming from? LA and DC.
With how giddy the recent transfers to Denver have been (all are finally selling their old 'home market' homes and accepting they're in Denver for life), I see little resistance to shipping a few thousand more jobs out there in 2008.
My company has bought options on a large chunk of Houston land. Well... it looks like in the 3rd month of the year a few thousand will get marching orders to go there. But expect a delay. Big relocations take a long time to sell the old homes. A person gets the relocation offer, they then usually spend 60 days negotiating. Then the house is appraised and sold to the relocation company. Its generally six to nine months after the first notice that the home gets into the hands of the new owner. So patience... these will be long slow moves that will still be going on in 2009. Heck, the transfers in 2008 will only wet our appetites. In a year, we'll all know about more companies leaving the bubble markets.
So my predictions for 2008? Further slowing in home sales. More people getting fed up paying the bank rent on an underwater asset and thus more keys on the roof. But no bottom in home prices for a long time.
I'll do my real estate emotions later this week.
Got popcorn?
Neil
What I couldn't help but notice is that *everyone* whom is looking to buy is saying they'll buy in a year. Not a month more... not any less. Everyone expresses it as "one year." But not only that, aerospace transplants are coming home and bragging to their friends about their new standard of living; this will accelerate the transfer of people out of the bubble markets.
Now the 'one year' timeline seems to be the limit of how long the typical J6P can delay their thinking. My wife, god bless her, won't push out buying more than a year. But it keeps sliding. ;) I went over the math on how buying in a year lets us buy in our 3rd choice zip code while buying in two lets us buy in our 1st choice... Oh well, I have a year to work on it. ;)
Friends who were actively bidding on homes (rejected by greedy sellers) have decided to take a year off. Mostly as they're seeing REO's in their favorite neighborhoods. REO's priced to sell! Not many... but enough to make one realize the banks must be needing cash flow. One after another friend/aquantance told me how they'll wait to buy for a year.
But aerospace is going to continue their consolidation. Oh, there will be some counter-consolidation too. What? Well... I'm at the 3rd aerospace corporation that hires heavily from Pen State. We've finally decided to open an office near their campus! Easy recruiting. Less for the work there than to have a large sign advertising our corporate name. Where are the seed engineers coming from? LA and DC.
With how giddy the recent transfers to Denver have been (all are finally selling their old 'home market' homes and accepting they're in Denver for life), I see little resistance to shipping a few thousand more jobs out there in 2008.
My company has bought options on a large chunk of Houston land. Well... it looks like in the 3rd month of the year a few thousand will get marching orders to go there. But expect a delay. Big relocations take a long time to sell the old homes. A person gets the relocation offer, they then usually spend 60 days negotiating. Then the house is appraised and sold to the relocation company. Its generally six to nine months after the first notice that the home gets into the hands of the new owner. So patience... these will be long slow moves that will still be going on in 2009. Heck, the transfers in 2008 will only wet our appetites. In a year, we'll all know about more companies leaving the bubble markets.
So my predictions for 2008? Further slowing in home sales. More people getting fed up paying the bank rent on an underwater asset and thus more keys on the roof. But no bottom in home prices for a long time.
I'll do my real estate emotions later this week.
Got popcorn?
Neil
Sunday, December 23, 2007
The forecast is for a longer, deeper home-price slump
CNN Money Tell the World a little of what is happening.
I think its worth blogging when news is getting out to Joe Sixpack. However, this one, while quite bearish, is another one of those "it will turn around soon articles."
In a new survey, Moody's Economy.com says many metro areas will record losses of 20 percent or more during the downturn, with the national median price for single-family homes dropping 13 percent through early 2009. Factoring in discount offers from sellers, the actual price decline would be well over 15 percent.
Eighty of the 381 metro areas covered by the report will record double-digit losses, according to the report. Most of the worst-hit markets are in once high-flying areas, such as California and Florida.
The article goes on to describe how 'buying for investment' is adding to the flood of inventory. But what it doesn't go into is the change in the credit market.
On the housing bubble blog yesterday a poster was noting a radio add for a Jumbo loan on 'old school rules.'
1. 20% down
2. Required proof of 3 years of reserves (effectively another 20% down kept in the bank).
Wow! Its been since the 1970's since we've seen those rules. I was preparing for 30% down and some reserves. 40% (half down, half in reserves) would knock me out of the market for another year. A year where about two dozen people would qualify to buy in the big 'Jumbo Markets.'
I cannot think of anything that would knock down California or DC harder or faster than a return to strict Jumbo lending.
Enjoy your Christmas. January and February provide the best buyer's schadenfreude of the year. So ask that special someone for a popcorn popper! (Or, do it the 'old school' way, like I do, just on the stovetop in a pot.)
Got popcorn?
Neil
I think its worth blogging when news is getting out to Joe Sixpack. However, this one, while quite bearish, is another one of those "it will turn around soon articles."
In a new survey, Moody's Economy.com says many metro areas will record losses of 20 percent or more during the downturn, with the national median price for single-family homes dropping 13 percent through early 2009. Factoring in discount offers from sellers, the actual price decline would be well over 15 percent.
Eighty of the 381 metro areas covered by the report will record double-digit losses, according to the report. Most of the worst-hit markets are in once high-flying areas, such as California and Florida.
The article goes on to describe how 'buying for investment' is adding to the flood of inventory. But what it doesn't go into is the change in the credit market.
On the housing bubble blog yesterday a poster was noting a radio add for a Jumbo loan on 'old school rules.'
1. 20% down
2. Required proof of 3 years of reserves (effectively another 20% down kept in the bank).
Wow! Its been since the 1970's since we've seen those rules. I was preparing for 30% down and some reserves. 40% (half down, half in reserves) would knock me out of the market for another year. A year where about two dozen people would qualify to buy in the big 'Jumbo Markets.'
I cannot think of anything that would knock down California or DC harder or faster than a return to strict Jumbo lending.
Enjoy your Christmas. January and February provide the best buyer's schadenfreude of the year. So ask that special someone for a popcorn popper! (Or, do it the 'old school' way, like I do, just on the stovetop in a pot.)
Got popcorn?
Neil
Tuesday, November 13, 2007
Mortgage Woes to Sink Property Values
WASHINGTON (AP) -- An expected surge in home foreclosures will cause U.S. property values to sink by $223 billion, with the most severe impact in minority communities, a new report says.
From:
Article on Yahoo Finance
This will just start to give J6P some perception there is a problem. However, this "survey" is such fluff it totally misses the problem. But hey, its getting the news out.
We're one downgrade away from Countrywide going under. E-trade is in trouble and need I describe the debacle of the "super-fund" SIV bailout? Prices will go gown a bit in 2008 and a lot in 2009.
I am beginning to wonder if the slow sales rate (seasonal and mortgage driven) is artificially hiding price declines. Oh well. Its not like I didn't know to wait until 2010 anyway.
And California is hurting. "As California goes, so goes the nation." Its just going to be a matter of degree. Even some of the normally "anti-Aerospace/defense" publications are starting to wake up to the job bleed.
I wish I had more information today on aerospace job transfers. I'm unusually in the dark.
Got popcorn?
Neil
From:
Article on Yahoo Finance
This will just start to give J6P some perception there is a problem. However, this "survey" is such fluff it totally misses the problem. But hey, its getting the news out.
We're one downgrade away from Countrywide going under. E-trade is in trouble and need I describe the debacle of the "super-fund" SIV bailout? Prices will go gown a bit in 2008 and a lot in 2009.
I am beginning to wonder if the slow sales rate (seasonal and mortgage driven) is artificially hiding price declines. Oh well. Its not like I didn't know to wait until 2010 anyway.
And California is hurting. "As California goes, so goes the nation." Its just going to be a matter of degree. Even some of the normally "anti-Aerospace/defense" publications are starting to wake up to the job bleed.
I wish I had more information today on aerospace job transfers. I'm unusually in the dark.
Got popcorn?
Neil
Wednesday, November 07, 2007
Neighbor's observations
I have a really nice neighbor renting the townhouse next to me. He told me his "renting story" yesterday.
In sum:
1. He was ready to buy in early 2006, but a relative's health problem consumed too much of his down payment.
2. He now recognizes that the home he was going to buy has "lost so much value" that not buying saved him more money than he paid for his realative's health care.
3. He is a J6P (Zero math or forecasting skills. I mean that in the nicest way possible... but its the truth.)
4. He'll renew his lease (yea! Good neighbor) and continue to save for his down payment.
Basically, if this guy knows the market is going to continue to drop for a year, everyone does. Now I should be nicer, his skill set pays more than mine. :) Hey, good for him. No one would buy a script from me! ;) And yes, this conversation came out as he discussed being on the picket lines. But a sad turn of events is all that kept him from being financially ruined. :(
Why does this matter to those of us that are not sheeple? Simple: The sheeple are going to the sidelines. When they do, they camp there at least 18 months. The first six months of their stay on the sidelines results in a moderate price drop. The last 2/3rds of their time on the sidelines? Fast price drop.
Don't buy in 2007. Don't buy in 2008. Heck, if you read my real estate emotions series, you'll see that previous patterns point to the greatest price drops occurring in 2009! Sit back, relax and make sure you
Got popcorn?
Neil
In sum:
1. He was ready to buy in early 2006, but a relative's health problem consumed too much of his down payment.
2. He now recognizes that the home he was going to buy has "lost so much value" that not buying saved him more money than he paid for his realative's health care.
3. He is a J6P (Zero math or forecasting skills. I mean that in the nicest way possible... but its the truth.)
4. He'll renew his lease (yea! Good neighbor) and continue to save for his down payment.
Basically, if this guy knows the market is going to continue to drop for a year, everyone does. Now I should be nicer, his skill set pays more than mine. :) Hey, good for him. No one would buy a script from me! ;) And yes, this conversation came out as he discussed being on the picket lines. But a sad turn of events is all that kept him from being financially ruined. :(
Why does this matter to those of us that are not sheeple? Simple: The sheeple are going to the sidelines. When they do, they camp there at least 18 months. The first six months of their stay on the sidelines results in a moderate price drop. The last 2/3rds of their time on the sidelines? Fast price drop.
Don't buy in 2007. Don't buy in 2008. Heck, if you read my real estate emotions series, you'll see that previous patterns point to the greatest price drops occurring in 2009! Sit back, relax and make sure you
Got popcorn?
Neil
Thursday, September 13, 2007
Hovnanian home sale this weekend
http://tinyurl.com/2ua5ye
or piece together:
http://money.cnn.com/2007/09/13/
real_estate/hovnian_discounts.ap/
index.htm?postversion=2007091317
These discounts are pretty impressive. (Not that I'm tempted). Any bets on how many they sell? I'm guessing a nice round 100 units.
My favorite quote from the article: "Skea said the sale would not be repeated, but an industry observer was not so certain."
As much as it is cheesy marketing tactics, do understand builders have to try to survive. If this marketing helps... so be it. I'm tired of trying to warn the sheeple; just good luck finding enough who qualify for the mortgage! ;)
This is just more knife catching.
Read this article (hat tip Sacramento landing):
http://www.usatoday.com/money/economy/housing/2007-09-12-affordability_N.htm
Or http://tinyurl.com/2mzprw
Look at the last table. Of the New Jersey/New York/Long Island home owners 21% are paying over 50% of income towards their housing. That is unsustainable.
Then look at the bay area at 23% and LA at 24%. Look at how much money the central banks are pouring into the banks (per below $383 Billion in August, an unprecedented amount).
http://www.minyanville.com/articles/
banks-chavez-cents-risk-debt-credit/index/a/14089
or
http://tinyurl.com/2rvdsp
Upping Freddie and Fannie's limits just will not do much. Foreign banks/hedge funds/governments are going to want reasonable security in their investments. We could make it bad enough that the GSE's cannot sell bonds... Oh wait... now when was Fannie's last Auction... Hmmmm...
And I'm sure J6P is happy oil is now over $80/bbl. Good grief! How are the airlines (an industry I love to follow) going to survive? Sigh... :(
http://biz.yahoo.com/ap/070913/oil_prices.html?.v=23
Got popcorn?
Neil
or piece together:
http://money.cnn.com/2007/09/13/
real_estate/hovnian_discounts.ap/
index.htm?postversion=2007091317
These discounts are pretty impressive. (Not that I'm tempted). Any bets on how many they sell? I'm guessing a nice round 100 units.
My favorite quote from the article: "Skea said the sale would not be repeated, but an industry observer was not so certain."
As much as it is cheesy marketing tactics, do understand builders have to try to survive. If this marketing helps... so be it. I'm tired of trying to warn the sheeple; just good luck finding enough who qualify for the mortgage! ;)
This is just more knife catching.
Read this article (hat tip Sacramento landing):
http://www.usatoday.com/money/economy/housing/2007-09-12-affordability_N.htm
Or http://tinyurl.com/2mzprw
Look at the last table. Of the New Jersey/New York/Long Island home owners 21% are paying over 50% of income towards their housing. That is unsustainable.
Then look at the bay area at 23% and LA at 24%. Look at how much money the central banks are pouring into the banks (per below $383 Billion in August, an unprecedented amount).
http://www.minyanville.com/articles/
banks-chavez-cents-risk-debt-credit/index/a/14089
or
http://tinyurl.com/2rvdsp
Upping Freddie and Fannie's limits just will not do much. Foreign banks/hedge funds/governments are going to want reasonable security in their investments. We could make it bad enough that the GSE's cannot sell bonds... Oh wait... now when was Fannie's last Auction... Hmmmm...
And I'm sure J6P is happy oil is now over $80/bbl. Good grief! How are the airlines (an industry I love to follow) going to survive? Sigh... :(
http://biz.yahoo.com/ap/070913/oil_prices.html?.v=23
Got popcorn?
Neil
Wednesday, July 25, 2007
A tale of two meetings
Two meetings today, both turned into discussions on real estate.
First meeting: A group of mostly non-degreed support personnel.
It started with a discussion on why I haven't bought a home (everyone else in the meeting owned). After pointing out that the homes I'm looking at should drop $250k in two years... (no disagreement, they were willing to work 'on that theory') The comeback? "You missing out on the appreciation even if it declines."
"Not everyone has your prioritie; some people will buy anyway. Besides, with the weather here, how will prices ever go down?" (Note: every J6P agreed with this; despite the fact we had just talked about record foreclosures!)
I tried to point out that saving $1,200/month+ was enough to lease a new Mercedes every three years and pay all expenses on it... But somehow all of them were convinced buying now would improve my standard of living. ugh...
Group consensus: Buy now before you're priced out forever!
2nd meeting: A group of senior (lead) engineers, managers, and a senior manager. Half own, half do not.
"The middle class is priced out of the state. Since the company cannot afford raises, when can I transfer to Houston?"
"Foreclosures won't stop. We're going to see the 1990's crash again."
We then discussed a coworker who is selling his place... only to rent it back! Sadly for my coworker, the sale fell through (new info post this meeting). :(
Group consensus: Middle class is priced out of California. Don't worry about it; transfer out of state. My buying status never came into this conversation. The group quickly dismissed anyone who bought today as someone failing an IQ test. Homeowners were working up the guts to sell and rent (some have already). I'm the only bubble blogger in the group (I think...)
The first group would be Subprime or Alt-A buyers.
The second group was all the type who would have 20% down saved up, prime 30-year (or 15 year).
I'm very glad that I won't have to compete with the first group buying a home (soon... die subprime, die!). My purchase will be a happy one (for me). Some failed J6P will turn over their granite countered, 4 bedroom, with a partial view, as soon as this falls out. They'll have to pay to cart away all of their junk to close the deal with me... ;)
The intensity with which the 2nd group wants to move to Houston shocked me. These people love California! Oh... I didn't even have to tell the 2nd group that my company was holding onto land options for Houston. You see... in the 2nd meeting I didn't have much to say anything; I received an education into the 1990 recession (I *thought* that I knew every twist by now...) and previous job relocations from the company. It was also surprising to find someone who knew more about aerospace land options in other states than myself. They also knew about a few bond/currency/leading indicator markets that the housing blogs have been ignoring. Alas, nothing concrete (we did have to get to work...)
The 1st meeting ended with "everyone wants to live in California."
The 2nd meeting ended with a theoretical discussion into the likelihood that the epicenter of US aerospace would shift to Texas or Colorado.
Also of interesting note, a group of non-degreed engineers, who half own and half don't, have become rather vocal about never buying in California (or about to sell). As they put it, if real estate ever becomes really cheap in California, then its time to buy their retirement homes in XX state for tax purposes. (Lively lunch discussion on state taxes...) Some of them bought cheap land around an Idaho lake; they'll retire together as a group. Most are waiting for material prices to drop before initiation construction. (But they are paying for the plans, surveys, and doing contractor research today.)
I also found it very amusing to note that the two groups who are against buying now are the two groups who do not watch much TV. Its also the two groups with good credit and cash in the bank (even if they own a home).
Interesting times ahead...
Got popcorn?
Neil
First meeting: A group of mostly non-degreed support personnel.
It started with a discussion on why I haven't bought a home (everyone else in the meeting owned). After pointing out that the homes I'm looking at should drop $250k in two years... (no disagreement, they were willing to work 'on that theory') The comeback? "You missing out on the appreciation even if it declines."
"Not everyone has your prioritie; some people will buy anyway. Besides, with the weather here, how will prices ever go down?" (Note: every J6P agreed with this; despite the fact we had just talked about record foreclosures!)
I tried to point out that saving $1,200/month+ was enough to lease a new Mercedes every three years and pay all expenses on it... But somehow all of them were convinced buying now would improve my standard of living. ugh...
Group consensus: Buy now before you're priced out forever!
2nd meeting: A group of senior (lead) engineers, managers, and a senior manager. Half own, half do not.
"The middle class is priced out of the state. Since the company cannot afford raises, when can I transfer to Houston?"
"Foreclosures won't stop. We're going to see the 1990's crash again."
We then discussed a coworker who is selling his place... only to rent it back! Sadly for my coworker, the sale fell through (new info post this meeting). :(
Group consensus: Middle class is priced out of California. Don't worry about it; transfer out of state. My buying status never came into this conversation. The group quickly dismissed anyone who bought today as someone failing an IQ test. Homeowners were working up the guts to sell and rent (some have already). I'm the only bubble blogger in the group (I think...)
The first group would be Subprime or Alt-A buyers.
The second group was all the type who would have 20% down saved up, prime 30-year (or 15 year).
I'm very glad that I won't have to compete with the first group buying a home (soon... die subprime, die!). My purchase will be a happy one (for me). Some failed J6P will turn over their granite countered, 4 bedroom, with a partial view, as soon as this falls out. They'll have to pay to cart away all of their junk to close the deal with me... ;)
The intensity with which the 2nd group wants to move to Houston shocked me. These people love California! Oh... I didn't even have to tell the 2nd group that my company was holding onto land options for Houston. You see... in the 2nd meeting I didn't have much to say anything; I received an education into the 1990 recession (I *thought* that I knew every twist by now...) and previous job relocations from the company. It was also surprising to find someone who knew more about aerospace land options in other states than myself. They also knew about a few bond/currency/leading indicator markets that the housing blogs have been ignoring. Alas, nothing concrete (we did have to get to work...)
The 1st meeting ended with "everyone wants to live in California."
The 2nd meeting ended with a theoretical discussion into the likelihood that the epicenter of US aerospace would shift to Texas or Colorado.
Also of interesting note, a group of non-degreed engineers, who half own and half don't, have become rather vocal about never buying in California (or about to sell). As they put it, if real estate ever becomes really cheap in California, then its time to buy their retirement homes in XX state for tax purposes. (Lively lunch discussion on state taxes...) Some of them bought cheap land around an Idaho lake; they'll retire together as a group. Most are waiting for material prices to drop before initiation construction. (But they are paying for the plans, surveys, and doing contractor research today.)
I also found it very amusing to note that the two groups who are against buying now are the two groups who do not watch much TV. Its also the two groups with good credit and cash in the bank (even if they own a home).
Interesting times ahead...
Got popcorn?
Neil
Tuesday, May 15, 2007
Real Estate emotions May update
Folks, this will be my last posting until a mid-June post honeymoon. :)
I like to update my "real estate" emotions about once a month. This has been tracking the investment emotion cycle.
Without further comment:
A review of investment emotions.
1. Optimism
2. Excitement
3. Thrill
4. Euphoria (market price peak) Peaked in late 2005/early 2006
5. Anxiety (I'm a long term investor, not a speculator.)
6. Denial (Reached in October of 2006 until mid-May of 2007)
****7. Fear (Reached in mid-May of 2007). *****Just entering****
8. Desperation Predicted for July/August 2007
9. Panic
10 Capitulation Could it be summer 2008?
11 Despondency (start of market price bottom)
12 Depression (end of market price bottom) Not before summer 2010
13 Hope (hey, this investment has picked up off its bottom)
14 Relief (Its almost what I paid for it...)
15 Optimism (cycle starts again)
I haven't updated a single time frame. I'm happy at the previous predictions.
Here is the last real estate emotions thread:
http://recomments.blogspot.com/2007/04/real-estate-emotions-update.html
Basically, Joe Sixpack is getting a bit worried that he's stuck with what he bought. It might be an investment... it might be an overpriced primary residence. It doesn't matter... he's worried.
The media has now bombarded him with just enough press to create a sense of doubt.
Don't mistake this for Desperation or Panic. Every coworker, when told real estate has entered fear, started to describe the later states.
Fear is marked by a willingness to discount a home a small amount.
Fear is marked by buyers hesitating a few more weeks before making an offer.
If you read the HBB, you consider Fear not even a good start. You might even consider a late stage of denial (well... it is!).
The spring buying season was mostly a flop. Some areas did ok, but people are worried the contagion will spread to snob hill.
I reiterate that anyone who reads housing bubble blogs who buys before Fall of 2008 is insane. The only question is will the bottom be in 2009, 2010, or 2011? I'll admit there is a chance of 2009... but my vote has shifted to 2010 or 2011.
Sit back, relax. Heck, even ignore the housing blogs for a bit. The weather is great. The advantage to us... is to do *nothing* but rent. :)
Now what quantifiable things changed?
1. See coworkers retire at an even faster rate (to cash out home equity)
2. Retirements are at rather young ages. (42?!? Ok... one exception)
3. The cockiest "real estate always goes up" a**holes have finally moderated their comments.
4. The complete lack of fear in "non-buyers."
5. Coworkers/friends are talking about buying... in 2009 or 2010. (Non-HBB'ers.)
With 14 distinct emotional states I admit the lines get blurred.
But sometime in the last week we left denial. I still do not expect more than Desperation in 2007. Cest la vie.
At T-minus 4 days to my wedding, I'm signing off for a month from the blogging world.
Got popcorn?
Neil
I like to update my "real estate" emotions about once a month. This has been tracking the investment emotion cycle.
Without further comment:
A review of investment emotions.
1. Optimism
2. Excitement
3. Thrill
4. Euphoria (market price peak) Peaked in late 2005/early 2006
5. Anxiety (I'm a long term investor, not a speculator.)
6. Denial (Reached in October of 2006 until mid-May of 2007)
****7. Fear (Reached in mid-May of 2007). *****Just entering****
8. Desperation Predicted for July/August 2007
9. Panic
10 Capitulation Could it be summer 2008?
11 Despondency (start of market price bottom)
12 Depression (end of market price bottom) Not before summer 2010
13 Hope (hey, this investment has picked up off its bottom)
14 Relief (Its almost what I paid for it...)
15 Optimism (cycle starts again)
I haven't updated a single time frame. I'm happy at the previous predictions.
Here is the last real estate emotions thread:
http://recomments.blogspot.com/2007/04/real-estate-emotions-update.html
Basically, Joe Sixpack is getting a bit worried that he's stuck with what he bought. It might be an investment... it might be an overpriced primary residence. It doesn't matter... he's worried.
The media has now bombarded him with just enough press to create a sense of doubt.
Don't mistake this for Desperation or Panic. Every coworker, when told real estate has entered fear, started to describe the later states.
Fear is marked by a willingness to discount a home a small amount.
Fear is marked by buyers hesitating a few more weeks before making an offer.
If you read the HBB, you consider Fear not even a good start. You might even consider a late stage of denial (well... it is!).
The spring buying season was mostly a flop. Some areas did ok, but people are worried the contagion will spread to snob hill.
I reiterate that anyone who reads housing bubble blogs who buys before Fall of 2008 is insane. The only question is will the bottom be in 2009, 2010, or 2011? I'll admit there is a chance of 2009... but my vote has shifted to 2010 or 2011.
Sit back, relax. Heck, even ignore the housing blogs for a bit. The weather is great. The advantage to us... is to do *nothing* but rent. :)
Now what quantifiable things changed?
1. See coworkers retire at an even faster rate (to cash out home equity)
2. Retirements are at rather young ages. (42?!? Ok... one exception)
3. The cockiest "real estate always goes up" a**holes have finally moderated their comments.
4. The complete lack of fear in "non-buyers."
5. Coworkers/friends are talking about buying... in 2009 or 2010. (Non-HBB'ers.)
With 14 distinct emotional states I admit the lines get blurred.
But sometime in the last week we left denial. I still do not expect more than Desperation in 2007. Cest la vie.
At T-minus 4 days to my wedding, I'm signing off for a month from the blogging world.
Got popcorn?
Neil
Thursday, April 26, 2007
One is a tragedy, a million is a statistic
With a coworkers permission, I'm going to blog about his mother-in-law. No, it has nothing to do with my wedding (soon), but instead real estate.
Let's head down to Oceanside to a near ocean condo.
The statistics:
Year of purchase: 1995
Purchase price $64,000
Current mortgage: $350,000 (after 7 cash our refi's)
It was purchased to fix future housing expenses at 1995 rent levels at her son-in-laws request. It also had the benifit of moving the mother-in-law closer to retail, nicer location than her previous apartment, and get her into a slightly larger place of her own back when price/rent screamed BUY!
The other details really don't matter. What does is this woman called her daughter to see about getting some help with a new cash our mortgage. Since the daughter is a Realtor (tm), she helped mom by arranging to have a good appraiser sent over to the place to do a really quick look at the properties values. Daughter even got in touch with a mortgage broker who could set up the mom with a good and fair cash our refi. They check the mother's income (mother-in-law of co-worker) and its fine for this level of loan (not my standards, the mortgage company's).
The appraisal came back: $284,000.
In other words, LTV is currently at: 123%
Even a subprime Heloc will max out at 125%
Once refinancing fees are considered, there is no-equity to extract in any form from this property. None.
The daughter freaks out. Not at the appraisal (she knows it is fair), but at her mom's debt. She daughter also knows the place appraised for much more a year ago. (I'm unsure of the past appraisal, so we'll leave it at "more" for now.)
My coworker is resigned to having the mother in law move in.
The mother in law? She's livid! "My place will be worth $1million one day and they have to give me my money!" "How am I supposed to pay for X, Y, and Z without my money?"
I loved the mother-in-laws exit strategy. "Oh, I'll just sell the place and rent again."
I'm serious folks... this isn't made up.
Its sad... someone will lose their home due to "buy it now" greed. Not a bad person... Just someone who didn't watch their spending and was caught up in this mania.
Got popcorn?
Neil
Let's head down to Oceanside to a near ocean condo.
The statistics:
Year of purchase: 1995
Purchase price $64,000
Current mortgage: $350,000 (after 7 cash our refi's)
It was purchased to fix future housing expenses at 1995 rent levels at her son-in-laws request. It also had the benifit of moving the mother-in-law closer to retail, nicer location than her previous apartment, and get her into a slightly larger place of her own back when price/rent screamed BUY!
The other details really don't matter. What does is this woman called her daughter to see about getting some help with a new cash our mortgage. Since the daughter is a Realtor (tm), she helped mom by arranging to have a good appraiser sent over to the place to do a really quick look at the properties values. Daughter even got in touch with a mortgage broker who could set up the mom with a good and fair cash our refi. They check the mother's income (mother-in-law of co-worker) and its fine for this level of loan (not my standards, the mortgage company's).
The appraisal came back: $284,000.
In other words, LTV is currently at: 123%
Even a subprime Heloc will max out at 125%
Once refinancing fees are considered, there is no-equity to extract in any form from this property. None.
The daughter freaks out. Not at the appraisal (she knows it is fair), but at her mom's debt. She daughter also knows the place appraised for much more a year ago. (I'm unsure of the past appraisal, so we'll leave it at "more" for now.)
My coworker is resigned to having the mother in law move in.
The mother in law? She's livid! "My place will be worth $1million one day and they have to give me my money!" "How am I supposed to pay for X, Y, and Z without my money?"
I loved the mother-in-laws exit strategy. "Oh, I'll just sell the place and rent again."
I'm serious folks... this isn't made up.
Its sad... someone will lose their home due to "buy it now" greed. Not a bad person... Just someone who didn't watch their spending and was caught up in this mania.
Got popcorn?
Neil
Thursday, April 05, 2007
Real estate emotions update
I like to do about a monthly update on my take of real estate emotions. Since foreclosure sales have been reported to be climbing in California, now seems to be a good time to post.
This is my last post on the real estate emotions topic:
http://recomments.blogspot.com/2007/02/record-home-price-slump.html
Let's see how things have changed (or not changed):
A review of investment emotions.
1. Optimism
2. Excitement
3. Thrill
4. Euphoria (market price peak) Peaked in late 2005/early 2006
5. Anxiety (I'm a long term investor, not a speculator.)
****6. Denial Reached in October of 2006 Current state persisting****
7. Fear We're not there yet, but in we'll cross that line within 45 days.
8. Desperation Predicted for July/August 2007
9. Panic
10 Capitulation Could it be summer 2008?
11 Despondency (start of market price bottom)
12 Depression (end of market price bottom) Not before summer 2010
13 Hope (hey, this investment has picked up off its bottom)
14 Relief (Its almost what I paid for it...)
15 Optimism (cycle starts again)
I am making one timeline changes since 2/15/07 post. After reading blogs on real estate time lines it now is obvious to me that the bottom will not hit before mid-2010. OK, I noted that the next step fear will be achieved by mid June. Otherwise, we seem to be right on track.
If you want a pretty bearish analysis of Irvine home prices:
http://www.irvinehousingblog.com/2007/04/02/how-bad-could-bad-get/
However, at those prices my grandmother would be buying three or four homes for her grand kids in OC. So I'm not thinking we'll dive that far or that long. Don't get me wrong, I really like the analysis IrvineRenter performed. I agree with the numbers up to October of 2008. There I disagree. I think late 2008 will be a little worse than IrvineRenter's prediction. But I think the bottom in 2010 will be up at about $330k.
Neat thing... We have 16+ months to discuss and change our minds. There is absolutely no rush. Its just a debate on when the optimal buying window will be.
I still think anyone who buys before Fall of 2008 is throwing away money. Only at that point will there be enough selection for it to be worth picking up a property; only one that is so special its worth leaving $100k+ on the table. (There are those properties.)
Also, because of tax advantages, I'm not going to fret about the last $50k of the drop. :) Remember, I place a higher utilization value on a home than most housing bears, so when the optimal buying window is for you might be different than for me.
That said, every investment bank seems be be predicting a moderate national price drop in 2007 and a bigger one in 2008. Since I have a down payment saved up and do not believe rates will go up much more... I'll wait until enough serial refinancers have handed back the keys to the bank to drive prices down. The tidbit that 75% of foreclosures are older "seasoned" purchases that had 3 to 5 equity withdrawls is.... interesting. Its going to open up a lot more inventory for us that are patient.
Step 10 will have the steepest price drop. Wait for that step to at least be well along.
Got popcorn?
Neil
This is my last post on the real estate emotions topic:
http://recomments.blogspot.com/2007/02/record-home-price-slump.html
Let's see how things have changed (or not changed):
A review of investment emotions.
1. Optimism
2. Excitement
3. Thrill
4. Euphoria (market price peak) Peaked in late 2005/early 2006
5. Anxiety (I'm a long term investor, not a speculator.)
****6. Denial Reached in October of 2006 Current state persisting****
7. Fear We're not there yet, but in we'll cross that line within 45 days.
8. Desperation Predicted for July/August 2007
9. Panic
10 Capitulation Could it be summer 2008?
11 Despondency (start of market price bottom)
12 Depression (end of market price bottom) Not before summer 2010
13 Hope (hey, this investment has picked up off its bottom)
14 Relief (Its almost what I paid for it...)
15 Optimism (cycle starts again)
I am making one timeline changes since 2/15/07 post. After reading blogs on real estate time lines it now is obvious to me that the bottom will not hit before mid-2010. OK, I noted that the next step fear will be achieved by mid June. Otherwise, we seem to be right on track.
If you want a pretty bearish analysis of Irvine home prices:
http://www.irvinehousingblog.com/2007/04/02/how-bad-could-bad-get/
However, at those prices my grandmother would be buying three or four homes for her grand kids in OC. So I'm not thinking we'll dive that far or that long. Don't get me wrong, I really like the analysis IrvineRenter performed. I agree with the numbers up to October of 2008. There I disagree. I think late 2008 will be a little worse than IrvineRenter's prediction. But I think the bottom in 2010 will be up at about $330k.
Neat thing... We have 16+ months to discuss and change our minds. There is absolutely no rush. Its just a debate on when the optimal buying window will be.
I still think anyone who buys before Fall of 2008 is throwing away money. Only at that point will there be enough selection for it to be worth picking up a property; only one that is so special its worth leaving $100k+ on the table. (There are those properties.)
Also, because of tax advantages, I'm not going to fret about the last $50k of the drop. :) Remember, I place a higher utilization value on a home than most housing bears, so when the optimal buying window is for you might be different than for me.
That said, every investment bank seems be be predicting a moderate national price drop in 2007 and a bigger one in 2008. Since I have a down payment saved up and do not believe rates will go up much more... I'll wait until enough serial refinancers have handed back the keys to the bank to drive prices down. The tidbit that 75% of foreclosures are older "seasoned" purchases that had 3 to 5 equity withdrawls is.... interesting. Its going to open up a lot more inventory for us that are patient.
Step 10 will have the steepest price drop. Wait for that step to at least be well along.
Got popcorn?
Neil
Thursday, February 15, 2007
Record Home price slump
The above is a photo on cnn finance. So how much of this will Joe and Jane sixpack need to see before they realize that the real estate market is unhealthy and going to be in deflation for a bit? Peronally, I think we're still on the previous "emotional timeline."
My latest comment on it:
http://recomments.blogspot.com/2007/01/pattern-is-locked.html
The original timeline by yours truly:
http://recomments.blogspot.com/2006/10/market-cycles-time-to-buy-2008-or-2009.html
We're approaching fear. Not there yet... (denial is a persistant emotion), but soon. July or August remains my prediction for desperation.
A review of investment emotions.
1. Optimism
2. Excitement
3. Thrill
4. Euphoria (market price peak) Peaked in late 2005/early 2006
5. Anxiety (I'm a long term investor, not a speculator.)
6. Denial Reached in October of 2006
7. Fear
8. Desperation Predicted for July/August 2007
9. Panic
10 Capitulation Could it be summer 2008?
11 Despondency (start of market price bottom)
12 Depression (end of market price bottom) Not before summer 2009 or Later???
13 Hope (hey, this investment has picked up off its bottom)
14 Relief (Its almost what I paid for it...)
15 Optimism (cycle starts again)
Here are the mainstream articles I found very interesting and bearish today:
http://money.cnn.com/2007/02/15/real_estate/home_prices/index.htm?postversion=2007021518
http://biz.yahoo.com/ap/070215/housing_slump.html?.v=11
What's this, posted before the weekend? Will they persist (stay on the front pages)? That I don't know.
Time to do some more apartment hunting (before signing, new discounts were found, so we're checking out new complexes). Now... three new complexes in Santa Clarita with all the amenities... Does anyone else think these were built for sale and then dumped into the rental market? Its amazing how many spare units there are!
Got popcorn?
Neil
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