IHB needs a resident bull on board

NEW -> Contingent Buyer Assistance Program
<p>xsocal,</p>

<p>I for one am not looking for the top or the bottom. I just looking for "affordable", "reasonable", and "no need to eat Top Ramen for the next 10 years."</p>
 
<p><strong><em>At the peak of the market, what was the ratio of rent:own on SFH? Do you remember or have a guess?</em></strong> </p>

<p> </p>

<p>I would guess a 2 to 1 and even higher for the more "exclusive" areas. Not fun, not fun at all, its taken me alot of time and mistakes to finally lean some of the hard lessons about buying and selling rental property. But I do agree, in the long run most homes are safe, but you must ,"stay the course". That is the hardest part for the "instant gradification" generation.</p>

<p>Remember I said the best investment to do sometimes is to "save". If anything it gives you at least time to think about what you're going to do.</p>

<p>-bix</p>
 
<p>Is this a reason to be bullish?</p>

<p>Idea of Jumbo-Loan Guarantee Is Floated</p>

<p><a href="http://online.wsj.com/article/SB119455499562686966.html?mod=googlenews_wsj">http://online.wsj.com/article/SB119455499562686966.html?mod=googlenews_wsj</a></p>

<p>As an alternative to lifting that $417,000 cap, Mr. Bernanke offered a surprise answer to questions on Capitol Hill. He suggested that Congress could consider allowing the companies, known as "government sponsored enterprises," buy mortgages of as much as $1 million from lenders, pay the government a fee for guaranteeing them and then turn them into securities to be sold to investors.</p>

<p class="times">"That would be, I think, of some assistance to the mortgage market," the Fed chairman said. "From the federal government's point of view, it would be taking on some credit risk, which you may or may not be willing to do." He added, "It would be a good idea to make the GSEs ultimately responsible for some, any excess losses, or some part of excess losses, relative to the premiums that are paid."</p>
 
<p>Interesting post on the Jumbo-Loan idea from la land blog (<a href="http://latimesblogs.latimes.com/laland/2007/11/bernankes-big-i.html#comments">http://latimesblogs.latimes.com/laland/2007/11/bernankes-big-i.html#comments</a>) posted below</p>

<p>Freddie and Fannie can raise their loan limits to heaven for all I care. Raising the GSE's loan limits will be a minor cushion to the crash. The bottom line is affordability of the house. </p>

<p>It's math time class:


Purchase price: $1,200,000


Amount of loan: $960,000 (20% down, which will be a requirement for these loans. How many people have $240,000 lying around?)


Monthly principal and interest (30yr fixed @ 6%): $5755


Monthly Property Tax @ 1%: $1000


Insurance: ~$200


HOA and maintenance: Let's just say it's free to make it simple.


Monthly nut: $6955.


Monthly income needed to qualify (let's be generous and use 32% of gross for housing): $22,000 per month.</p>

<p>Raise your hand if you make close to $240,000 annually. Where do I sign up?</p>
 
<p>You know sometimes I hate myself for being ethical.... </p>

<p>Wow, when are these people actually going to find a<em> GOOD </em>idea.</p>

<p>-bix</p>
 
A couple bull arguments repurposed from Lansner's blog:





<p>1) Would anyone like to entertain the possibility that we may be approaching the bottom? First, lets talk about what the bottom means. To me it means things stop getting WORSE. Here’s what is does not mean: instant return to 20% YOY appreciation (or even 2% appreciation for that matter).</p>

<p>Here is a case that the decline is DECELERATING. Look at Lee’s (self-admitted) deceptive posting of the median SFR’s. Prices have been stable for a month. Foreclosure activity has been flat for a couple of months. Inventory levels are declining (thought much of this should be seasonal). Also, if you compare this downturn versus the 1990’s — the shakeout has occurred MUCH MORE RAPIDLY. SO maybe the bottom will be found more rapidly as well.</p>

<p>Lastly — all of the talking heads state its going to keep getting worse. Not just the typical Blowhards like Peter Schiff, but the entire investment community. The contrarian in me is screeming BUY! (FYI the rest of me is still a sissy and won’t).</p>

<p>1 last thing. When we do reach the bottom (whether its now of 5 years from now) I believe the median will CONTINUE to DECLINE even after prices start to increase. As the PLANKTON need to return before the big fish can start to get fat again.





2)Take a look at the last “crash”: </p>

<p>Year Home Pr % Chg.


1980 $99,550 N/A


1981 $107,710 8.2%


1982 $111,800 3.8%


1983 $114,370 2.3%


1984 $114,260 -0.1%


1985 $119,860 4.9%


1986 $133,640 11.5%


1987 $142,060 6.3%


1988 $168,200 18.4%


1989 $196,120 16.6%


1990 $193,770 -1.2%


1991 $200,660 3.6%


1992 $197,030 -1.8%


1993 $188,240 -4.5%


1994 $185,010 -1.7%


1995 $178,160 -3.7%


1996 $177,270 -0.5%


1997 $186,490 5.2%


1998 $200,100 7.3%


1999 $217,510 8.7%


2000 $241,350 11.0%


2001 $262,350 8.7%


2002 $316,130 20.5%


2003 $371,520 17.5%


2004 $450,770 21.3%


2005 $522,670 16.0%


2006 $556,640 6.5%</p>

<p>The median home price in CA wend down from $200,660 in 1991 to $177,270 in 1996 - an 11.7 percent decline over five years. Some around here have stated that this amount of decline has “already happened”. Let’s say, for sake of argument, that this is true. This is probably due to better access to information for buyers, and sellers have had to reduce prices more rapidly than before.</p>

<p>The bottom is already here.</p>
 
<p>The argument against the one above is that graphs and past trends aren't always exactly the same. The key questions would be, what happened, and why did it happen? What is happening now, and why is it happening now?</p>

<p>If you read Greenspan's book, it quickly becomes apparent that it's not precisely the same pattern over time. The decades before him and under him each had their own forces at work, which caused rather different symptoms (ex. deflation? high inflation? stagflation?). There are certain underlying prinicples as to what affects what, but the end result is not exactly the same every time as the causes aren't exactly the same every time.</p>

<p>If it was that easy to predict housing (or stock for that matter) prices, then everyone who went out and bought a $50 tracking program would be rich ....</p>
 
Just because *you* can't afford a home doesn't mean other people can't. People that buy million dollar homes don't live paycheck to paycheck. lol.
 
<i>"Prices have been stable for a month. Foreclosure activity has been flat for a couple of months. Inventory levels are declining "</i><p>


Am I the only person who doubts any of the above statements?<p>


<i>"People that buy million dollar homes don't live paycheck to paycheck. lol."</i><p>Oh? Really?
 
Eh, yeah, Lansner's blog. Is it just me, or does it seem funny to discuss CA prices on the OC Register blog? Here are the CAR SFR prices for OC:





1990 $257,300


1991 $246,900 (-4.04%)


1992 $238,700 (-3.32%)


1993 $221,500 (-7.21%)


1994 $215,800 (-2.57%)


1995 $213,300 (-1.16%)


1996 $211,100 (-1.03%)





Cumulative total (-19.33%)





Adjusted for SoCal CPI inflation total (-36.42%)





The ten year run up to the peak in 1990, had a cumulative total of 94.25% or 46.37% adjusted for inflation.





The ten year run up to the peak in 2006, had a cumulative total of 118.95% or 87.45% adjusted for inflation.





Foreclosures were up in October, and the notice of trustee sales have continued to increase. So, expect more foreclosures to continue to increase.





The bottom is no where near here. This is biased self-attribution hard at work here. Got tulips?





Gaergoedt: "You can hardly make a return of 10% with the money that you


invest in your occupation [as a weaver], but with the tulip trade, you can make


returns of 10%, 100%, yes, even 1000%.


Waerrnondt: " . . . . But tell me, should I believe you?"


Gaergoedt: "I hill tell you again, what I just said."


Waermondt: "But I fear that, since I would only start now, it's too late, because


now the tulips are very expensive, and I fear that I'll be hit with the spit rod,


before tasting the roast."


Gaergoedt: "It's never too late to make a profit, you make money while


sleeping. I've been away from home for four or five days, and I came home


just last night, but now I know that the tulips I have have increased in value


by three or four thousand guilder; where do you have profits like that from


other goods?"


Waermondt: "I am perplexed when I hear you talking like that, I don't know


what to do; has anybody become rich with this trade?"


Gaergoedt: "What kind of question is this? Look at all the gardeners that used


to wear white-gray outfits, and now they're wearing new clothes. Many weavers,


that used to wear patched up clothes, that they had a hard time putting on,


now wear the glitteriest clothes. Yes, many who trade in tulips are riding


a horse, have a carriage or a wagon, and during winter, an ice carriage, . . . ."
 
<p>awgee Re:</p>

<p>"Inventory levels are declining "</p>

<p>Acutally they are for Irvine, in the very short term (http://www.altosresearch.com/research/CA/IRVINE) which I'd like to write off as a seasonal change (although I do worry about it, since I can't find a longer term inventory graph showing the yearly cycles).</p>

<p> </p>

<p>"People that buy million dollar homes don't live paycheck to paycheck. lol."</p>

<p>Oh? Really? </p>

<p>There's a whole lot of green dots on Redfin in the really expensive ($1 Million +) areas that were built 2004 and later ....</p>
 
<p>agwee,</p>

<p><em>"People that buy million dollar homes don't live paycheck to paycheck. lol."</em> </p>

<p>Oh? Really? </p>

<p>Answer: Moved-up people (buyers). A brand new Tustin Ranch home built in 1997 (2600 sq. ft. SFS) was selling for about $275K. Interest rate were around 10%. In today depreciated same home would sell for about $900K. Salary would have been double in 2007 and interest rate has been lowered to 6.5%. You do the math for this potential Million dollar buyer. </p>
 
There are many million dollar house owners who are living paycheck to paycheck. Many of them are drs, who are mostly really terrible with money. Lots comes in, but they can't be bothered to budget it. It just pours thru their hands.
 
In the past, prior to the bubble, I believe it was true that million dollar homes were not purchased by people living paycheck to paycheck. However, during the bubble, when people could finance whatever they wanted to, ordinary working-class folk began to purchase these properties. Remember the post I did on Shady canyon recently where the owner used 90% financing on a $4,000,000 home. Who does that? It used to be people buying at those price ranges would put at least 50% down or even pay cash.
 
There is doubt that they are people who bought million dollar homes actually have no business of doing so. However, I don't believe it is a trend. I know many people who have million dollar plus homes, and none of them live paycheck by paycheck.
 
<p>Just because you finance something doesn't mean you can't afford it. There's something called opportunity cost. When I didn't have money I never understood it. Now that I have money I understand it. Rich people always finance things they <strong>can</strong> afford. The only difference in the past few years is poor people started financing things they <strong>can't</strong> afford.</p>

<p> </p>
 
The few very wealthy people I know don't carry personal debt. They often use debt as part of their investment strategies (which is something I see because the wealthy people I know invest in real estate), but they rarely if ever personally guarantee any of the debts they use in their investments. I know my boss uses his AMEX card, but he never carries over a balance month to month. To my experience, the use of personal debt to finance consumption is the exclusive purview of those who want to pretend their rich but really aren't. The truly rich don't need personal debt: they have cash.
 
I can't contain myself...just HAVE to share. My ex and his wife closed on a $1.2 mil house in the slums of Coto earlier in the year. I'm sure that combined, they easily make well over 250k. Neither one is remotely associated with finance or real estate, either. However, I also know something about his interest in keeping up with the Joneses. They have three luxury cars, expensive hobbies, and I am quite certain they are struggling...or are going to be struggling very soon. I tried to warn them but backed off VERY quickly, as the ex is a big boy and never took my advice when we were together, anyway. And the last thing I want is to piss him off. I'd be enjoying the show, eating Neil's popcorn, if I weren't so concerned about the possible impact on my little boy if his father experiences financial problems.
 
So, you think there aren't folks buying million dollar homes who are living paycheck to paycheck? Enter any million dollar zip in foreclosure.com and tell me again.
 
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