With fewer people being able to afford homes, Freddie Mac seeks widespread expansion of 3% down mortgages.
Low down payment mortgages are creeping their way back into the market like a cat sneaking up on an unsuspecting mouse. The only difference here is that the mouse is a million dollar crap shack with a 30-year mortgage attached to it. People forget that Freddie Mac and Fannie Mae, the massive Government Sponsored Entities were nationalized U.S.S.R. style during the Great Recession. Now that times are good all caution is being thrown into the wind and we are setting up the stage for Irrational Exuberance Part II. The U.S. economy is built for boom and bust cycles. Massive credit expansion is occurring and while people are working, their dollars are not stretching as far as they would expect. In San Francisco, you are now considered “low income†if you make less than $117,000 a year. That makes sense when a standard home sells for $1.5 million. So now we have Freddie Mac attempting to push 3% down mortgages on a much larger scale since many people are priced out. What can possibly go wrong?
Who needs a down payment?
There are costs associated with buying and selling a home beyond the mortgage or the down payment. You have closing costs and in many cases, there are commissions to pay out once escrow closes. These may range from 3 to 5 percent. So when you purchase a home with a 3 percent down payment, you are essentially putting yourself in a zero or negative equity position from day one if you needed to sell. Any little dip in the market can put you in a tough spot. Say prices drop by 10 percent and we have a modest recession. Then say you want to sell. Now you find yourself underwater and will need to pay to sell which was the case when we had our foreclosure crisis.
Housing values soared in practically all major US areas. Yet household incomes are simply not keeping pace and that is why affordability is so low. That is why California is becoming a renters paradise. So of course it is no surprise that Freddie Mac wants to make it easier to purchase homes with less money upfront:
Now the FHA already backs up low down payment mortgages but these are constrained to lower to middle income areas. Freddie Mac is looking to go even bigger:
The big difference here is that there will be no geographic and income limits. This is really interesting and shows how quickly we forget about financial prudence. The sentiment is clear that people want to jump on the bandwagon and purchase homes even if it means they will go into massive mortgage debt. They rationalize that home prices have soared and don’t want to miss out. At the same time, the stock market has also soared. Why not go back in time and buy Amazon or Apple stock?
The middle class in California has been slowly cut down and you view this through more and more households becoming renters. Housing prices continue to be high because of low inventory, NIMBYism, foreign money, investors, and a variety of other factors. But all of these hinge on a stock market and economy that has been in a bull run for nearly 10 years.
Look at US affordability:
The last time we saw numbers like this was in 2009. But look at the L.A. metro area:
Buying a home is very difficult and so is renting. So it is difficult for many households to save a healthy down payment to purchase a home. In comes Freddie Mac with a potential solution. And since everyone wants a piece of the pie, here we go.
Did You Enjoy The Post? Subscribe to Dr. Housing Bubble’s Blog to get updated housing commentary, analysis, and information
Did You Enjoy The Post? Subscribe to Dr. Housing Bubble’s Blog to get updated housing commentary, analysis, and information.
Subscribe to feed
558 Responses to “With fewer people being able to afford homes, Freddie Mac seeks widespread expansion of 3% down mortgages.”
Rent costs always appear to be the hidden driver to force people to make irrational exuberance decisions when buying crap shacks. Renters are doomed to become foreclosure candidates when the SHTF.
You nailed it!!!
Low down mortgages are a good thing … as long as the borrower has better than average credit. Otherwise, generations of regular folks would never have a shot at the American dream.
I thought mortgages provide for exorbitant prices, without them houses would have to be cheaper? Or allowed to be smaller?
I heard a while back that in South America, it’s custom to pay the entire price in cash for a home when buying, rather than getting a mortgage to finance your purchase, and that this is why houses in South America are priced so low relative to, say, the United States.
A cash- only regime, or at least one that required a substantial down-payment, would certainly keep prices low, and did so until until the post WW2 era was well-advanced. I grew up in the 50s and 60s, when low-down payment mortgages were available only for those who got FHA & VA loans, and those were mostly available only for new houses in the brand-new lower middle and middle class “bedroom” auto suburbs that were springing up around all our older cities in those years, and which were probably THE major factor in the decimation of our older cities. Most people still went “conventional” with a 20% or more down payment, which you had to if you bought an older house, or in an older city or suburban neighborhood. House prices stayed low relative to incomes in the 50s and 60s, and houses, new or older, tended to be much smaller, mostly 1200′ to 1500′ sq ft. Only affluent buyers bought houses with 2000 sq ft or more, or even multiple bathrooms.
Sadly, our population and the corporations selling them goods from houses to cars, boats, and other “aspirational” consumer goods, discovered the dubious joys of revolving credit during those years, but at least you were prevented from tapping your home equity to buy consumer goods that outlived their use long before they were paid for. The result was the massive credit expansion of the past 50 years, and especially the last 30, that has swelled real estate and other asset prices to levels unrelated to dwindling real productivity of the underlying economy and created the biggest overhang of consumer, corporate, and government debt as a percentage of GDP in history.
LOL. Yes by all means let’s emulate the great economic successes of Argentina and Brazil. Jezuz people, do you ever listen to yourselves speak? You know where houses are super duper cheap? Somalia. I guess that place my be a paradise, right?
Landlord,
The difference between Brazil now, and the U.S. in the 50s, is that here in the U.S., housing and other necessities remained cheap, while productivity and wages soared. The 50s and 60s were a true economic golden age in this country, and it was underwritten by SAVINGS, not easy credit. The same little cottages that are now 70 years old and cost $500K in the Inland Empire, were spanking new and cost $8,000 to $12,000.. and were inhabited by working-class and lower-middle class people. There was also almost no homelessness then- the only homeless people were “hobos” or “bums”. But people then also had more modest expectations across the board- one bathroom and one family car was considered sufficient for most people, and people saved a higher percentage of their incomes, greatly to the benefit of their baby boomer offspring.
Now we are truly becoming like Brazil. I never in my life saw so many homeless people, especially so many homeless families, or so many working people who work two or even three jobs but can still barely afford a 2 bed apt in any neighborhood, let alone a little “starter” house.
Sadly, the prosperity of the post-war era bore the seeds of our economic destruction. That is when we began to become complacent and careless. That is when we started to live on revolving credit, and when American manufactures, fat and complacent from their blazing success in the previous 30 years, started resting on their laurels, turning out ever shoddier products while comfortable in the belief that their defense contracts would keep them fat forever with no further need for improvement or innovation. American cars were becoming jokes by the early 70s, known for their short lifespan and shoddy manufacture.
Since that time, and since our departure from the gold standard, we’ve suffered rampant inflation, our money losing about 90% of its buying power since 1970, when you could still buy a comfortable, well-built house for $25K- $30K in most locales, and not too much more than that in CA. We were a creditor nation before then, and were a debtor nation by 1976, with a trade imbalance that has yawned wider every year. Before 1970, almost everyone was housed, if not very well, and we had a broad middle class that lived in modest comfort with one breadwinner’s wages, but by the 80s, housing and living costs were soaring, as was household debt, with more people living in deeply substandard conditions despite government housing assistance of various types, while still more others were grossly overpaying relative to their incomes to buy large, expensive homes that went way beyond necessity. Yep, we are becoming Brazil.
Mr, Landlord,
To a certain extent you are the one not listening. Debt has made every single thing more expensive since nobody shops price but monthly payment. Just look at the cost of college tuition which reveals in stark detail the reality of how once you can borrow to buy, the price skyrockets. Another thing that forces prices to rise is insurance. That’s why heath care costs for things you need as gone nuts while things like eye surgery and other cosmetic surgeries (those things NOT covered by insurance) have been dropping like a stone.
this insanity may last longer than I will be around BUT at some point what people actually earn will matter again…..I suspect that the grand kids of the boomers will bear the brunt of that reality. Since all the kids of boomers are getting their free house and they are going to squander that head start they have been given……I see it all around me ……….and there’s a lot more $35K a year earners then the $200K a year “professionals” you keep talking about
Since low down mortgages allow more people to buy homes, and remove more homes from the market, the effect is to increase the price of unsold homes. If I was a buyer who could actually afford 20 percent down, I would be against this handout to the real estate industry. But then again, people who can’t save, and want to buy a home they can’t afford, should be able to do so with the full backing of the American taxpayer, right?
@ JEM
Its a regulatory issue. Both at the banks and in the RE industry. Bubbles like this only occur when the regulators are incompetent or, more frequently, in on the scam.
What we have today is a sickening combo of both. Many of the regulators can’t wait to get their sinecures in industry once they leave office. They also, to extent, truly believe that the govt. shouldn’t get involved in the industry since somehow govt. is always bad at everything.
Its absolutely stunning to see the mistakes of the previous bubble get repeated in such a short time frame, everyone in charge lived through what happened back in 2004-2008 after all, but here we are I guess.
We are inching towards what might become a correction. I favor a crash to shake out the excesses, but that won’t be allowed to happen. Housing market has become a surrogate bond market. Investors want to be rewarded so a greater discount rate is applied to justify present values. If your ran a regression line that excluded the last few years rent increases, affordability would be even lower. The real problem is that all assets are now positively correlated so there is nowhere to hide. Home, share and bond values will all fall as interest rates increase. Fiscal stimulus this late in the cycle may push rates up too quickly. Recession is over-due and then the deflationary cycle will accelerate. Wash, rinse, repeat.
I just bought a home below market value south of the blvd that needed some work. We had 20% down but put down 10% and used the other lump of cash for renovations. We’ll see if it was right move.
@RE cheerleaders: we got another one who bought during the peak. Get your gear on and start formation. Let’s all cheer and congratulate this fellow to buying the American Dream!!! Great job buddy! Congrats! Don’t listen to the PermaBears! Go out and buy!!
Unless you have a crystal ball and also know everything about thiis persons situation you can’t really judge if this was a good move or not. Yes prices will go down eventually, but it could be years from now and maybe only drop 20% over a few more years after a 20% rise. By the time it hits bottom it could be 2025 and prices will be the same as they are today. Not everyone has the luxury to live with their parents until they’re 35 and speculate in declining crypto currency with their excess income.
Yes, i agree. Prices will collapse. 55-75% by 2020ish.
I wish my in laws or parents would live closer to work. I would move back in in a heartbeat. Renting a cheap apartment close to work and close to the beach is a great option too. Let’s me save a ton of money each paycheck.
@ Les.
South of which blvd? I assume that is the term used for South of Ventura Blvd? if so, does that mean Encino or Sherman Oaks?
Good move, considering you have to live somewhere, and rents on a 2 bedroom house are @ 2,500 and up. I bought S. of the Blvd in 2004 and LOVE it. Hills, trees, views, wild animals, etc. I’m in Woodland Hills, work in Sherman Oaks, so the drive is a breeze. Beach is 15 minutes away, and I swim in the ocean as often as possible. The west side folks rag on the Valley, but they have no idea how nice and quite it is here. Not to mention the tax deductions we have by owning. So no matter what happens to housing, you made a great decision. Congratulations !!!!!!!!!!!
My homes are all beach close … but I always liked Woodland Hills and some of the other cities south of the blvd. Frankly, I am surprised they are not much more expensive. That is the nicest spot in the valley. Very nice.
How much more of a tax deduction are you really getting now that the trump tax cut is in effect? The answer is not much.
I grew up in this area 91364 way back 30 years ago. Nice area and quiet. Like you said close to Zuma Beach too. Downside is Woodland Hills tends to be the hottest part of the valley in the summer. Great point for Santa Barbara getaway trips too.
Housing to tank hard!
There you go!!! You got it Jim!
2 peas in a pod. Lol.
Jim’s prediction of ‘housing to tank hard’ will be correct one of these decades.
Jed, absolutely. I couldn’t agree more with Jim. Housing to tank hard soon!
QE Abyss, exactly! No crash no purchase. All you need is patience!
Thanks Jim!
I am glad you are back! After 5 years of the same post, I think you are correct now.
Your prescience is guiding us all now.
Except, it used to be “Housing to tank hard soon!”
Did you forget the soon?
We all want to know.
Jim, today is July 1, 2018. The year is already half way over and there is NO TANKING IN SIGHT. Given the strength of the economy, stock market, housing market…your next good buying opportunity won’t come until some time in the 2020s. I hope everybody on the fence who didn’t buy is saving vast amounts of money for the next down turn.
Buying opportunity in 2020 is also my prediction. We are finally on the same page blankfein
When a market crashes, it is first unseen. Existing home sales fell 2.5% in April to a seasonally adjusted annual rate of 5.46 million and were 1.4% below the year ago level, the National Association of Realtors (NAR) Chief Economist Lawrence Yun.said. From January through April, home sales are down 1% from the same period a year ago.
Greenspan said in mid-2005 that “at a minimum, there’s a little ‘froth’ (in the U.S. housing market) … it’s hard not to see that there are a lot of local bubbles”. David Lereah, former chief economist of NAR, distributed “Anti-Bubble Reports” in August 2005 to “respond to the irresponsible bubble accusations made by your local media and local academics”.
It didn’t fall all at once, but national home sales and prices both fell dramatically by March 2007 — the steepest plunge since the 1989 Savings and Loan crisis. According to NAR data, sales were down 13% to 482,000 from the peak of 554,000 in March 2006, and the national median price fell nearly 6% to $217,000 from a peak of $230,200 in July 2006. Nonetheless, it wasn’t until June 16, 2010, that Fannie Mae and Freddie Mac would be delisted
In 2013, Jim promised a HARD TANK in mid March 2014.
Then he promised a HARD TANK before the end of 2014.
If we have a HARD TANK now, we’ll at most be reverting to 2014. Maybe 2015. Which would be no tank at all, from a 2014 perspective.
Son of landlord,
That doesn’t make sense. 2009-2012 was the buying opportunity. (Bust) followed by a boom. Now we are in the peak phase. Boom and bust cycles more in ten year phases. The market will crash soon and we will have a buying opportunity around 2020-2022.
Just have some patience!
Did you give up on the ‘soon’ part, Jim?
In your dreams Jim! I lost a lot of equity believing in your wildest dreams!
“Fewer people can afford to buy? freddie-mac-3-percent-mortgage-income-limits?â€
Impossible!! Our real estate cheerleaders have told us that pretty much everyone makes 200k!!! Houses are cheap! Buy now! But for some reason our real estate cheerleaders don’t buy….they want YOU to buy!
Weird isn’t it? If they all make above 200k why not add to your RE portfolio? After all, buying means the grass gets suddenly greener. All problems vaporize and happiness will overflow you. Just buy (now) and get richer!
Buying is the path to great riches…..but when it comes to prop 13 these 200k boomers who sit on all this wealth quickly flip the switch…..all of a sudden they hide behind poor grandma! We can’t afford to pay our fair share in property taxes! It will force us to move.
By the way….if everyone makes over 200k how come the median household income suggests otherwise? You see, realtards, lenders and RE cheerleaders hate date and statistics (unless it’s manipulated BS like inventory is low or any statistic coming from the NAR).
That’s the reason re cheerleaders don’t talk about rental parity and median household income. They rather make up fake stories and tell you it’s just YOU that can’t afford a house. Everybody else owns at least one. Lol. This blog has been so entertaining. Thank you realtards!
Millie,
I can’t speak for others but I have never said “pretty much everyone” makes $200K. What I have said is plenty of people do make $200K. And you should try to meet those people and learn from them instead of wallowing in your misery.
What’s happening in CA is the Brazilification of society. You have a small % of extremely wealthy white people that run things. Then you have a small chunk of mainly white upper middle class people that are the administrators for the rich. Those earning $200-500K as lawyers, doctors, IT execs, etc. And then the vast majority is non-white and dirt poor.
We’re not quite at favella style poverty in LA but we’re a lot closer to it today than we were 5 years ago. And it’s coming sooner or later. When you elect communists and import millions of illiterate peasants from Centra America, this result is inevitable.
Red state (when it was nice) – > Blue state (things fall apart) -> Brown state (collapse into failed state)
The poor saps in Clownifornia are in that last phase change. Smart folks without oodles of $ are gtfo’ing.
@Mr, Landlord
“I can’t speak for others but I have never said “pretty much everyone†makes $200K.”
You didn’t use those words but you tried to make the case that yes $200K/yr salaries were common and easy to get therefore housing prices are sane and sensible which is indeed BS.
And its BS because only around 7-8% of the population in CA makes $200K/yr or more. You can’t have a housing market that is sane and sensible when only 7-8% of people can afford it.
“What’s happening in CA is the Brazilification of society….. And then the vast majority is non-white and dirt poor.”
No duh. People have been saying that for years. Its as obvious as the housing bubble. And its more of a thing for the entire US rather than just CA right now…but what is your point?
Like if you know the US/CA are getting “Brazilificized” than how in the heck could you EVER possibly believe that housing prices over the last few years have been even close to sane?????
“When you elect communists and import millions of illiterate peasants from Centra America, this result is inevitable.”
Hhahahahahahahaha CA’s economy has been doing better than nearly all the states in the US right now and the current Dem leadership in CA are anything but Communist!! Most of them are essentially Clintonite Third Wayers still!! They’re pro-big business as all get out.
There are too many illegals in CA but that is more of an issue with the farmers and restaurants hiring practices at this point. If those illegals would stop getting hired they’d stop coming here you realize that right? Yeah the farmers/restaurants would have to raise their prices if they raised wages but other countries don’t have a issue with that and there is no reason to believe it can’t be done here either.
Oh FFS not the “if we stop hiring illegals lettuce may increase by 2% and that would mean the end of the world” argument. Somehow farmers hired American workers up until the 70s and 80s and people somehow managed to afford to eat. It’s a ludicrous argument. Same for restaurants. I know this may seem like crazy talk but there are places in this formerly great land of ours, where – GHASP – American citizens still work in restaurants. They bus tables, cook, clean, take out the trash, etc. They even work at McDonald’s. They work as landscapers too!!
It’s amazing how many Americans do the jobs Americans supposedly won’t do anymore.
And if you don’t think CA is becoming Brazil you’re either blind or not paying attention. It is exactly becoming Brazil….good weather, nice beaches, small minority of ultra wealthy white people with a somewhat larger but still relatively small administrator class, with a vast majority of poor brown peasants. And just like real estate is astronomically high in the nice areas of LA or SD, they are also astronomically high in the nice parts of Rio and Sao Paolo. Try finding an apartment under $500K in Rio that is in a livable area. Hint: you can’t. And if you want a house, better have 7 zeros in your bank account to even think of buying.
tts is a totally delusional slave living on the Democrat’s bankrupt Commiefornia plantation.
@Mr, Landlord
“Oh FFS not the “if we stop hiring illegals lettuce may increase by 2% and that would mean the end of the world†argument.”
That isn’t my argument. That is the argument the farmers and business in general uses when someone tries to shut down their access to illegals by actually enforcing the rules on the books and punishing the businesses doing the hiring too.
I’m perfectly fine with paying a little more for my veggies and I think most would people would be too once they saw how minimal the effect of higher wages on pricing of end products would have on farm labor and workforce labor in general.
Right now farmers would rather let crops rot in the fields and try to use expensive automation, which just a few years ago many would’ve claimed was too expensive to buy too, rather than raise wages.
https://www.independent.com/news/2017/jun/22/labor-shortage-leaves-13-million-crops-rot-fields/
https://mic.com/articles/8272/alabama-illegal-immigrant-crackdown-destroys-farm-business#.LEEFTrVVj
“And if you don’t think CA is becoming Brazil”
Where did I say that in my reply to you? You didn’t even read it if you think I did. Or you’re imagining something that isn’t there.
Personally I don’t care too much about the color of the people’s skin there though, brown white yellow or red is fine by me, that was a odd tack for you to take on this subject.
@ samantha
Heh you don’t know a thing about me.
I don’t even live in CA and haven’t for years. I also happen to live in one of the most Republican states in the US too though my own politics are quite different.
Next time at least try to read up on a given posters previous posts and put some effort into your trolling otherwise you just come off as lazy and knee jerk in your posting.
“And its BS because only around 7-8% of the population in CA makes $200K/yr or more. You can’t have a housing market that is sane and sensible when only 7-8% of people can afford it.”
Only a relatively small portion of California has truly crazy prices. You don’t need to make $200k to buy in most of the state. $500-700k virtually anywhere except the major metros, tech centers, and within a few miles of the coast will get you a decent place for a family:
https://www.zillow.com/homedetails/1276-Avenida-Amistad-San-Marcos-CA-92069/51077569_zpid/
That’s San Marcos, CA, with good (if not great) schools, a college town with tons of great suburban neighborhoods, and a 10-15 minute drive to the minor tech hub that is Carlsbad and the beach. With 20% down, that’s a $3,200ish PITI, which a $100k household income would (barely) qualify for. Overpriced, yes, but nothing like LA or the bay area and attainable by a young white collar couple who spent their 20’s being smart with money (and were maybe gifted the down payment, so blame the parents too). It also isn’t undesirable the way people imagine living “inland” to be. If you’re okay with an hour commute, or work from home, your choices are amazing at that price point.
People seem to be nearsighted about prices, or intolerant of anything except their idea of the ideal human culture (metro sardines). If their area has crazy prices, then “prices are crazy”, period. No thought of moving to places that are frequently far nicer and cost far less money. I’m thinking that what they really want is their stock option payday without having to live 4 geeks to an apartment. I guess it doesn’t work that way.
John, that house is 635k plus closing costs in an area where the median household income is 80k ish. But hey, you got schools there and the sun is still shining!
What a steal, the house is only 8X the median household income!!
Since everybody makes over 200k (except the 18year old fry cooks) this house should go quickly: Call today or it will be gone by tomorrow.
Wait, I am wondering why its sitting on the market since 82 days. You must have been the only gold digger discovering this treasure.
“John, that house is 635k plus closing costs in an area where the median household income is 80k ish. But hey, you got schools there and the sun is still shining!”
You can twist my words all you like, Millie. Everyone else got the point.
John,
“You can twist my words all you like, Millie. Everyone else got the point.â€
Exactly! Your attempt to make this house look reasonably priced can easily be ridiculed by breaking down your points and showing some data (median household income).
My point is that this house is massively overpriced. I’d buy it in the 300’s.
Only an idiot would think that buying at 8x the median household income is justified because of good schools.
And yes, we know your answer. Everybody makes 200k except 18year old fry cooks. And if a millennial thinks this house is overpriced he probably got a useless 250k degree or eats too much avocado toast.
https://newswars.com/san-francisco-logs-over-16000-feces-complaints-in-one-week
Is that a lot?
He said logs
“Your attempt to make this house look reasonably priced…”
On the contrary, I admitted it was overpriced, but I understand that reading comprehension isn’t your strong suit.
I also never mentioned median income: “…which a $100k household income would (barely) qualify for. Overpriced, yes, but nothing like LA or the bay area and attainable by a young white collar couple who spent their 20’s being smart with money…”
Keep trying, Millie.
What’s that like? Always being the dumbest, most obnoxious person in the room?
What you always do John….when cornered you start with insults.
Cornered? You blatantly twist the words of anyone you don’t agree with, because it’s the only way you can “win”. That’s insulting.
Do you even know what the term “Freddie Mac income limits” means? I’ve explained it more than once.
I’m beginning to think you understand less than a quarter of what you read, and to make up for it, you cherry pick sentences from people who don’t agree with you, put them wildly out of context, insert massive amounts of sarcasm, and voilà , there’s your “argument”. You make yourself look foolish every day, Millie. Every day.
Good point M…Its funny how people mistake luck for knowledge and fail to realize THEY are the ones forcing unsustainable market conditions through THEIR greed.. They’re the smart ones until it implodes, then its everyone else fault..
Ya, ya i know I nailed it again.
Conversation between RE cheerleader and a millennial regarding affordability:
Millie: I keep reading about affordability issues in California, historic low sales and historic low homeownership rates. Must be because of the huge disconnect between low income and overpriced crapshacks.
RE cheerleader: low income? Everybody makes over 200k here! Don’t count the illegals they are not part of the statistic. Fool!
Millie: but nobody I know makes over 200k.
RE cheerleader: son, you need to meet new people! You have loser friends!
Millie: so what kind of friends do you have and how do you even know how much they make?
RE cheerleader: son, you gotta learn a lot. Yesterday, I had dinner with ex-president bush, a surgeon named helga, an Astronaut (Sergei) and a 5 star general (Smith).
The conversations are normal: hey George, how are you, I make over 200k, haven’t seen you in a while! George: I make over 200k. I am good, just playing a lot of golf and bought my 30. House. Me: oh cool! So same old same old. How are you helga, do you know what you gonna order? Helga: I am going to get the steak. I make over 200k and I will get a beer! Me: sweet! Sounds like a plan. What is Sergei ordering? Sergei: i am ordering pasta! I love their pasta. I make over 200k. Me: great! Good choice! ….And so it goes…
Millie: but that doesn’t reflect like the normal circle of friends does it? If we all had these friends why is the median household income only 68k, or 75k?
Angry RE cheerleader: dude, just because you are a loser does not mean everyone is a loser!
Millie: okay, okay. I got it. You are doing well.
RE cheerleader: damn right! I bought real estate a long time ago. I made a killing!
Millie: that’s great. Don’t you think prop13 seems outdated? Boomers who bought a long time for a very cheap price have locked in property taxes based on that cheap house price from 20 years ago? Millie’s who buy today based on the highly inflated price have to pay 1.2% property taxes of that inflated price. Why should we finance these government subsidies that only benefit older people? It screws us and it seems you could easily afford to pay your fair share?
Very angry RE cheerleader: Poor grandma!! POOR GRANDMA!!!! POOOOR GRAAAANDMAAA
Millie: I don’t understand. All of you make over 200k, you sit on highly inflated houses but you can’t pay your fair share in property taxes because of poor grandma?
RE cheerleader: yes, yes, yes!!! You fool!!
Nice Mille. RE cheerleader = Mr. Landlord.
Anyone making less than 200K is a Loser in his Trump-loving eyes.
Millennial has no freaking clue what property taxes pay for.
Try paying property taxes for 30 years that build a community. That were at market rate and went up 2% per year to build the community.
“RE cheerleader: son, you gotta learn a lot. Yesterday, I had dinner with ex-president bush, a surgeon named helga, an Astronaut (Sergei) and a 5 star general (Smith).
The conversations are normal: hey George, how are you, I make over 200k, haven’t seen you in a while! George: I make over 200k. I am good, just playing a lot of golf and bought my 30. House. Me: oh cool! So same old same old. How are you helga, do you know what you gonna order? Helga: I am going to get the steak. I make over 200k and I will get a beer! Me: sweet! Sounds like a plan. What is Sergei ordering? Sergei: i am ordering pasta! I love their pasta. I make over 200k. Me: great! Good choice! …And so it goes…”
Things change in your 40’s, for some people. A more relaxed attitude about income when you’re comfortable with your life. It remains a taboo subject at the office, but I know what nearly all of my friends make simply because the wives all talk about it. The only exception being the wealthiest ones, but their net worth is obvious and I can make an informed guess – e.g., the head of cardiology at a chain of so-cal hospitals – $600k? 700? Enough that accuracy doesn’t matter. Not counting her engineer husband’s salary. They throw great parties.
“Millie: but that doesn’t reflect like the normal circle of friends does it? If we all had these friends why is the median household income only 68k, or 75k?”
The median includes 18-year-old fry cooks. We don’t hang out with 18-year-old fry cooks.
“The median includes 18-year-old fry cooks. We don’t hang out with 18-year-old fry cooksâ€
That’s so perfect! I’ll build that in next time! Thank you!
@John D
“Things change in your 40’s”
Millenials are rapidly approaching their 40’s and are all still much much poorer in general than their parents were at the same age.
I don’t think you and others really understand just how bad the situation is at all.
John D,
Even if the wives don’t blab about the income – and not all do – it’s not that hard to figure out. If you know someone’s profession, employer (or if they own a business), age and location you can make a pretty good educated guess about their income.
And also people over time self segregate. If you make $200K, chances are everyone you know socially also makes around $200K. People who make $200K don’t hang out with people who make $40K. Yes I know there are exceptions, but generally speaking your friends are a version of you.
@Millenial
you forgot the racism.
otherwise spot on.
tts,
I know they’re poorer. But it’s also their choice to take out outrageous and necessary student loans for useless degrees, move to a coastal town, and then complain about the price of real estate there. Meanwhile, in my neck of the woods (one of the nicest cities in the state, as far as I’m concerned) a nice condo goes for $330k-ish. Two people making a combined income of $70-75k would qualify for a 3% down loan on that including PMI. That’s $17-18/hour full time. A waitress makes that. So do construction workers and mechanics. No, a lone fast food employee would not qualify. Should they? The payment would not be as affordable as it was several years ago, but I just don’t see it as a huge problem. If a millennial in a coastal metro can’t afford it there, they need to either stop complaining and wait for a downturn, or move. The day they can’t afford a home in Ohio or Florida is the day they have a legitimate gripe.
I’ve got guys in my department who are single, in their 30’s, own property, and drive $70k cars. It’s all about how you choose to educate yourself and where you choose to live. People need to stop telling high school kids that they need a $250k education to be successful, and start telling them that living in a “hip” city is more likely to lead to disaster than anything else.
PREACH IT BROTHER JOHN D!!!!
It’s mind boggling how kids spend $50K+ a year to go to a no-name, never heard of it college for a teaching degree, or nursing or “general studies”. The same degree that can be had for $10K at a State U. That generic degree has the same value in the job marketplace. Unless you get into a top 20 college or major in something really specific that only a few schools offer, find the cheapest college option you can and go there.
As for the hip city, I’d advise the yuuutes to spend a few years in NY or LA or SF out of college. At 23 and single it’s a good place to be. I spent the first 10 years of post college world in coastal cities. But at some point in my early 30s I realized walking distance to 21 Ethiopian-Asian fusion restaurants kinda loses its appeal after a while.
The smart play is live on the coast when young, save money, get established in a career, then move somewhere cheaper. Either work for an employer that allows remote work or work for yourself. For in demand professions, employers will accomodate those situation. Give me a high speed connection, a cell phone and a reasonably sized airport and I could live anywhere in the world.
And the other thing I will never understand is why a teacher or nurse or what have you would ever want to live in a high cost city. Those jobs can be had anywhere as well. Yeah pay is somewhat higher in LA vs Topeka, but relatively to cost of living Topeka teachers are much better off. As are nurses, cops, firefighters, etc. You read all these sad stories in the MSM about the poor teacher in LA that can’t afford to buy a home. Easy solution…MOVE OUT OF LA!! Problem solved.
Great points Millenial!!!
Hey mr landlord have you tried to enroll in any classes at one of theses “affordable†schools lately? The minute open enrollment starts the classes are full like a Black Friday sale! Every other school is $200,000+.
I know and interact with A LOT of people in the real world and never meet theses large populations of $200,000+ earners. The only people under 40 I know “getting†houses are literally having it all sorted out by mommy and daddy or granny and Grampy. Then they just rent out rooms just like they already did as renters and still have the same shit income jobs as before. I know multiple millennial “winners†who do exactly this. Basically same scenario as when they rented but now landlord doesn’t get to decide to just fuck them over whenever and impose their personal bullshit on them.
Oh yeah and most people I know can’t even get a home in antelope valley much less LA. So the whole “all the under 40’s are trying to live in expensive cities†is a bullshit false story. Try again.
Millennial gets it.
I know plenty of dual income with close to $200,000 annual income since I’m in the medical profession. Most already over leverage to buy 500k-$1 million dollar home with little down payment and high monthly mortgage rate. I can’t imagine paying 30 years mortgage $3000 to $4000/month for 30 years.
My wife and I make combined salary of $300k+ with $300k for down payment living rent free. We refuse to buy in this market. I’ll wait until there is a market correction to buy.
I know plenty of dual income with close to $200,000 annual income since I’m in the medical profession. Most already over leverage to buy 500k-$1 million dollar home with little down payment and high monthly mortgage rate. I can’t imagine paying 30 years mortgage $3000 to $4000/month for 30 years.
My wife and I make combined salary of $300k+ with $300k for down payment living rent free. We refuse to buy in this market. I’ll wait until there is a market correction to buy.
It just feels like a Ponzi scheme. Everyone is using their inflated housing to buy more inflated housing. Our neighbor is crap – cars everywhere, people liking three families to a houses, schools that are threes. Yet the condos are 800-1.2 million and houses are 1.6 million or so.
We can’t afford a house with a 325k income and 400k in savings. Who is buying the houses is beyond me. I never see anyone move into the recently sold houses.
We are easily the top 1% of income in our neighborhood. Most people are undocumented (earning 50k) or H1bs (earning 80-100k). I have yet to meet a single person who could buy the houses on income alone in this neighborhood. How can this be sustainable?
The 20% down payment in the old days was proof of the ability to save and mange money. Now it is not required. People with no savings and no ability to live within their means are given mortgages. If they break a shoelace, they default. If the market, which is now at the peak, drops back one iota, they are underwater, owing more than their house is worth.
This is wrong on so many levels.
Amen Roddy. I never bought a piece of property without having to endure a wide scale anal alien probe and 20% down even with a gold standard FICO, savings and 10 years at the same job.
Plus having to write a letter declaring fealty to my debt vehicle.
I did, however, buy what I could afford over the long term and as something to live in, not as an investment play and never used the equity for anything but improvements in the structural aspects of the house like windows and electrical.
Grateful to be off the credit, mortgage and automobile debt wheel.
Being prudent with money takes a little skill, a lot of delayed gratification and some luck.
“The 20% down payment in the old days was proof of the ability to save and mange money. Now it is not required.”
I wouldn’t exactly say “not required”. At the $453k loan limit, 3% down with closing costs could be $20-30k+. Their credit and length of employment is proof of the ability to manage money, and their income allows them to qualify.
The changes now allow people with higher incomes in more areas to use this program. It doesn’t allow poorer people to buy. They still have to qualify. The only problem here is having a larger number of buyers speculating because they don’t have as much skin in the game. However, losing $30k is still a tough pill to swallow. We’ll see how it plays out.
You’re not wrong but you have to remember the old saying, “If I owe you a thousand dollars and can’t pay, I have a problem. If I owe you ten thousand dollars and can’t pay YOU have a problem.”
I read that $117,000/yr story on cbsnews. The article also goes on to illustrate that teachers, police, firefighters, emergency responders, etc. will no longer be able to afford to buy in the Bay Area and are beginning to fill those positions closer to their homes outside the immediate Bay Area vicinity. But I’m sure cbs news is fake news right? 🙂
But I’m sure cbs news is fake news right?
Well, yes. CBS is full of fake news.
People insult Fox News. Yes, it’s trash. But no more so than CBS, the New York Times, or any other mainstream news source.
Nice attempt at false equivalency. But if you actually read the New York Times, or any newspaper for that matter, you’d pretty quickly see the difference between them and Fox News. But you’re probably not interested in learning anything outside your narrative.
Chris, you are a brainwashed goofball. The NYT is partisan trash owned by a Mexican billionaire who hates Trump and staffed with liberals who are masters at propaganda. At least Fox owns their conservative bias; The NYT is WILDLY biased towards the left and LIES about it. Anyone who reads it is a complete dope.
Fox News: Gives both sides of the story with a slight right tilt
CNN, NYT, WAPO, CBS, etc…gives only one side of the story with a communist tilt.
CBS isn’t lying but they are forgetting that the average firefighter and cop in SF makes 1.5% of his yearly salary in OT. If they are getting 100K they are getting an additional 1.5 in OT.
I know many cops/paramedics/firefighters in Chicago also earn at least 100% of their base yearly salary in OT as well.
3 to 5 percent commission….for the BUYER? I’ve bought close to 20 houses in my life and I have never paid a commission as buyer. Typically closing costs on the buy side is 1-2%, which includes pre-paid items which aren’t really costs since it’s still your money just in an escrow account.
I think he is referring to cost to sell; so, once the buyer is in with minimum down they are upside down on day 1 due to the selling costs. Of course that assumes you sell immediately or value drops as opposed to considering some appreciation and principal pay down.
This is so funny. Every day here and elsewhere we are told how incredibly rich Californians are. And as I have been saying forever, it’s all BS. $100K in coastal CA is barely middle class. Turns out I was wrong. It’s not even middle class, it’s working poor. Someone making $100K in SF has a lower standard of living that someone making$ 40K in Indianapolis or Cleveland.
And not only is your standard of living barely above a burger flipper, you also are taxed as if you are “rich” (according to Democrats anyway). So you are effectively paying $100K taxes for a minimum wage job.
But hey man, 5th largest economy in the world and stuff!!!! LOL
Mr. Landlord,
Yes, and a big problem nowadays is that our federal and state systems assume that the cost of living is roughly constant around the country. In CA 100k income means you can barely get by. But you are taxed as if you are wealthy, because in most parts of the country that would be true.
$100K isn’t wealthy anywhere in the US. But yeah, the tax system is kind of messed up when $1 earned in SF is treated the same as a $1 earned in Cleveland. Ideally there should be some cost of living adjustment for tax rates. But if that were to happen, there’d be so much fraud, you’d have everyone “living” in Cleveland somehow.
Next time you see an RV on the highway, look at its license plate. There is a good chance it will be from S. Dakota. Why? Because SD has nod/wink attitude that allows people to claim residence there in order to register RVs at a fraction of the cost of their home states and pay a lower sales tax. So magically 1/2 the retired people in America with RVs “live” in South Dakota. I have an uncle who did this. He’s got one of those $250K RVs and he saved $10K in sales tax and saves about $1K a year by having it registered in South Dakota. Of course he’s actually only ever spent about 2 hours in the state, but details, details, he “lives” in SD technically.
I can only imagine how many millions of people would suddenly “live” in South Dakota or Wyoming or middle of nowhere New Mexico if the feds started taking a cost of living approach to income taxes.
The tax system isn’t assuming anything about the cost of living, not at least anymore since the personal exemption was eliminated.
If the standard of living relative to the cost becomes a poor value–as is currently the case in coastal California–people vote with their feet and leave.
The tax system shouldn’t need to account for this as the market will take care of it.
*As a side note, some claim it’s only the poor leaving California, but that is a lie.
That is the reason I always repeated on this blog that what you make is irrelevant. Those in Zimbabwe are all billionaires (I always use this example to create a clear picture for those who do not get it). What counts is purchasing power after ALL the taxes. By that metric, most in coastal CA a dirt poor. Yes, there are few pockets of super rich people, but those are in the top 0.01%.
High income means very high taxes at state and federal level (tax donkeys). With the crumbs left, people fight incredible high cost of living. That is a sure recipe for poverty and a miserable standard of living.
5th largest economy with the highest supplemental poverty rate in the nation.
It’s sort of like crowing over the 5th largest turd in a toilet. It’s just a number.
California is not the fifth largest economy. It only looks like that because CA is part of a much larger economy. Should CA be independent it’s economy would decline greatly as it would have to pay for a lot of needs it now receives being part of a larger government.
It’s like bragging you make a million dollars a year as CEO of a company, when in reality it’s your father’s company, and similar jobs would go for a lot less.
Moving to SOCAL next year, hurry up and tank realestate, otherwise im a renter till it does.
It is probably best to rent in an area first that you intend to buy.
That way, there are no surprises.
The last RE bubble peaked in 2007. It took until 2011 to hit the bottom and 2013 to start rising again.
Even if it crashes next year, 2019, you probably shouldn’t buy until 2023.
My crystal ball is broken but based on the last crash, 2023-2024 will be a good time to buy.
Disclaimer:
Jim Taylor has much more experience than I do at this prediction stuff.
Here is from 3 years ago, 2015.
http://www.doctorhousingbubble.com/california-housing-history-real-estate-market-trends-30-years-of-data/
I think the doctor is getting a little ahead of himself with the doom and gloom thing. While more people putting 3% down is not a good thing, it doesn’t mean those buyers can’t afford the loan. And implying that people will be putting 3% down on $1m+ homes is misleading – for most of the country, the Freddie Mac loan limit is $453k. Those people also still have to meet strict income requirements. In other words, at the time of purchase, they can afford it. What they do with it once they discover they’re underwater is another story. Those who considered the purchase an investment may walk, but I don’t believe that those who consider it a home are much more likely to walk than someone who put down 20%.
We are still a far cry from the loose lending standards of the last bubble.
In my area, $467k (highest you could go with the loan limit) gets you a very nice 4/3 home in a great neighborhood, with a PITI of around $2,700, for a house that would rent for $2,400-2,500. That’s not ideal, but not exactly what I would call dangerous.
EXACTLY John D.
He’s got it.
Stop with the scare tactics of lending to everyone and ohhhh only 3% down on a million dollar home. THIS IS A LIE!
That is NOT the case. Absolutely correct as I posted below; the MAX loan amount is 453,100 on these 3% down mortgages which translates to 467k price point. Anything above requires 5% down. Don’t forget these have higher rates and higher PMI factors which means a higher overall payment BUT the buyers still have to qualify with the debt to income ratio.
This isn’t PRAVDA or CNN; let’s stop with the mis-information please.
And of that $2700, around $2K is interest/property tax which means it’s tax deductible. For someone in the 22% tax bracket, that $2700 PITI is really $2300 after the deduction. . And the other $700 is principal payback, ie equity. Which makes the effective payment is in the $1600 neighborhood.
$1600 to own vs $2400 to rent.
“$1600 to own vs $2400 to rent”
I’ve owned a house that is basically just renting from the bank and the fucking payment is only half the fucking battle………talk about cherry picking numbers……I’ll take that $2,400.
LOL, what battle? It’s simple math. $2400 is more than $1600. I guess you mean maintenance and repairs? Not sure where you lived, but nobody is spending $800/mo on maint/repairs for a $2400/mo rental.
I suppose if the house is 200 years old or something, maybe $800/mo can happen. For a typical division tract house built in the last 20 years, it’s more like $80/mo.
My credit union does a 100% loan up to 1 mil.
Name please?
Dan,
Navy Federal. 100% no MI (non VA). There is a 1.75% funding fee but you can roll it into the loan (101.75%LTV).
So Cal Guy,
Thx; I did check it out and you are right they do offer that program on a case by case basis. No set guidelines, but, essentially looking for the strongest borrowers; high ficos, stable employment, low DTI’s.
1mil @6% (which is what it comes to with a good credit score and buying out origination fees) PITI = $7,100
So, you need to make around 250k/yr to get in the game on this loan. Guess it’s been around for awhile, just the 1st time I have heard about it so they must have a pretty high decline rate. In any case, good heads up as I always like to keep myself informed on all available credit options in this market.
Dan,
It’s definitely not for weak borrowers. I have my loan through Navy Fed (not the 100%) and the underwriting was really smooth. They actually allow up 40% DTI on the 0 down program plus give you a rebate if you use their real estate purchasing program. Rates have gone up but they were around 5% just a few years ago. The advantage is you can deduct the interest versus PMI. Not a bad deal in my opinion if you can afford the higher payment.
Best post on topic, hands down! Everyone, back to topic!
That being said, I’ve always maintained that the real estate crash was three teired.: A working class debacle, a middle class bad slump and a wealthy adjustment. This news won’t lead to a new crash in Beverly Hills, just Riverside.
No wonder people will risk it all to buy a house with a low down payment.
After all, you too can rent a 2 bedroom apt for only $2500
https://la.curbed.com/2018/6/27/17509640/los-angeles-apartments-for-rent-silver-lake-north-hollywood
I have no problem with low- or even no-downpayment mortgages, as long as that mortgage isn’t backed explicitly or implicitly by the taxpayer. That’s where the problem comes in, having the taxpayer subsidize risky mortgages and hold the bag whenever there’s a downturn. That’s just bad policy.
Sounds like a Dumbacrat policy
Almost all home mortgages have been at least implicitly backed by the taxpayer since the 1930s, when the GSEs (government-sponsored enterprises) like FNMA, and later, FMCC (established by the government to keep FNMA from becoming a monopoly) were founded by our government, to buy mortgages from lending banks and S&Ls, to free up their capital for more mortgage lending. Without Fannie Mae and Freddie Mac, as they’re called, 30 year mortgages would almost not exist and mortgages either would require 50% or higher down payments, as the did before 1938, and longer term mortgages for 25 years or more would scarcely exist. The government guarantee was always implicit, else this type of lending would have been judged to be far too risky for most investors.
Actually, the entire financial system is backed by the feds. Trust me. If any financial problem ever appears that is large enough to damage the financial system, the feds will show up and carry the water needed to fix it. That is life in America and you have to accept that because the alternative is a disaster.
The fact that there are 30 year fixed rate loans that exist is scary. The rest of the world does not lock in that long.
What will the banks do when all of the sane people who refinanced down to loans between 3% and 4% and Savings accounts are paying a 6% savings account rate.
Our Millennial will have missed out but all of us GenX, Late Boomers, and sane Millennials who bought a house will be safe and secure until we retire and pay off the loan while collecting 6% in savings and only paying 3% on our mortgages.
Don’t laugh, that is what my parents did in the 70’s and 80’s with their 6% loan while banking with CDs reaching 15%. Now we are at 3% for loans??? Crazy.
I am waiting for my bank to offer me a deal I can’t refuse to give up my 3.5% 30 year mortgage
your parents home cost 10,000 dollars…..strike….
Seen it all before, Bob,
“The fact that there are 30 year fixed rate loans that exist is scary. The rest of the world does not lock in that long.”
Total BS. Look at Europe, 30y mortgages are common.
“What will the banks do when all of the sane people who refinanced down to loans between 3% and 4% and Savings accounts are paying a 6% savings account rate.”
Sell the loan. collect the fees. Behind Fannie/Freddie stands the taxpayer.
“Our Millennial will have missed out”
Missed out on what exactly? On buying at the peak? You probably not know that it is better to buy a lower priced house at a higher interest rate instead of buying an overpriced house at a lower interest rates.
Since this probably confused you already, just remember, its all about the price of the house not the interest rates. Interest rates change and you can refinance later. You cannot change the price you paid for the house.
“but all of us GenX, Late Boomers, and sane Millennials who bought a house will be safe and secure until we retire and pay off the loan”
Yep, just like last time when we had 7Mio foreclosures.
“while collecting 6% in savings and only paying 3% on our mortgages.
Don’t laugh, that is what my parents did in the 70’s and 80’s with their 6% loan while banking with CDs reaching 15%. Now we are at 3% for loans??? Crazy.”
I am looking forward to higher interest rates. I am sitting on cash and wouldn’t mind parking some at a higher paying CD.
Millennial, everything I say is true.
Canada, Europe, and Australia have longer term loans but they are more like longer term ARMs since the interest rates adjust after 5-10 years. Unlike the US where interest rates on fixed loans are locked in for 30 years. It is almost impossible to get a fixed rate 30 year loan for a low rate anywhere other than the US (unless you pay an extremely high rate). Look it up.
I don’t know how the bank is going to sell my 3.5% 30 year fixed mortgage when savings rates hit 6%. Maybe they will sell it back to me for the true amount of the worthless loan. I’ll have to be prepared and figure out what my 3.5% loan is worth when I am making 6% with an insured bank account.
Unless you have a lot of cash and can avoid a mortgage, taxes, housing prices and interest rates control the cost of housing PMI. In 2007, interest rates were over 7% and housing prices were almost to the same level as today.
Here is what wiped out renters who wanted to buy in the early 1980s. Interest rates went from 6% to 15%. Inflation led or followed so housing prices were flat with a slight increase. Housing prices followed inflation. Housing prices rose with inflation but incomes lagged. Housing never crashed. People who bought were lucky to pay 15% for a mortgage and were later lucky after 10 years to refi as rates dropped. It could happen again. Or maybe not. In summary, houses were rising with inflation 15%/year and interest rates were rising also. Not a good time to buy a house. Great if you already owned a house with a leveraged 6% mortgage. It could happen now if inflation increases.
Bob,
“Millennial, everything I say is true.
Canada, Europe, and Australia have longer term loans but they are more like longer term ARMs since the interest rates adjust after 5-10 years. Unlike the US where interest rates on fixed loans are locked in for 30 years. It is almost impossible to get a fixed rate 30 year loan for a low rate anywhere other than the US (unless you pay an extremely high rate). Look it up.”
Lets play a game. I provide two websites from Europe referencing 30+ years of locked in rates and you provide one website in return saying that it is not true what my websites are referencing?
Fair?
here we go. I picked Europe’s largest economy so this is in German:
This is a private lender.
https://www.nowofinanz.de/40-jahre-zinsbindung/
“Wir können Darlehen mit einer Zinsbindung bis zu 40 Jahren vermitteln.”
Darlehen=loan, Zinsbindung=fixed interest rates. They even exceed 30 years and add 10 on top!
Die Welt is one of the main newspapers i believe:
https://www.welt.de/finanzen/immobilien/article151968189/Zinsbindung-fuer-zehn-15-oder-gleich-40-Jahre.html
“Zinsbindungen von bis zu 40 Jahren sind möglich”
means: fixed rates up to 40 years are possible.
Bob,
once you come back with a website saying this is all baloney i will come back with two websites from another European country.
Hey Millennial,
Good Challenge. Especially when your post is in German.
means: fixed rates up to 40 years are possible.
Are possible? Are you kidding me? Everything is possible at a 15% mortgage rate.
Here are some of the rules of Fixed Rate for Europe but in English.
Borrowers will need to be prepared for some less-than-appealing loan terms as well. In many countries, repayment periods tend to be shorter, often ranging from three to 15 years. With interest-only mortgages, borrowers are often able to renew the loans—which often have repayment periods of five to seven years—at the end of the term, although most lenders in Europe require mortgages to be repaid by the time the borrower is 70.
https://www.marketwatch.com/story/buy-a-home-in-europe-get-a-lower-interest-rate-2013-03-22
My statement is correct. NOBODY in the world offers an affordable 30 year fixed mortgage other than the US.
You could also look at the Wikipedia site.
https://en.wikipedia.org/wiki/Mortgage_loan
I can keep going until you wave the white flag.
Bob,
“Until I wave the white flag obviously You don’t know me. Have a feeling this will go on for a while.
“Are possible? Are you kidding me? Everything is possible at a 15% mortgage rate.â€
I am not kidding. Yes, it’s in German….which is no problem I can translate it for you. But numbers don’t need to be translated. If you open that first website you see that they offer 2.25 % for 40 years.
I went straight to the source and provided the detail and you are still sticking to your story because you read a marketwatch article?! You want more proof? Here you go. This is Sparda bank, from what I researched and learned while I was in Germany this is similar to a credit union here. On the conservative side:
https://www.sparda-west.de/baufi_konditionen_145668.php
Even that “union bank†is offering 25 years fixed rates at 2.49%.
Yeah, I know. The US is soooooo amazing with 30 year 4.5% loans. Nobody in the world is offering it. Except europe is offering almost half the rate. So your point is….America is great, buy now?
Dear Millennial,
Please post your backup in English so we can all read the fine print.
You are correct, on the English sites, there are loans available at 15% rate for 25 years.
All of the others have 25 year loans with 4% rates BUT with a loan that adjusts after 5-10 years.
Please provide backup that we can all read.
Backup?
Dude, don’t let the facts go in the way of a good story! After all you have done all the research! You read Wikipedia! Just stick to your story. America is great. Buy now because we have 30year loans at 4 percent. Everybody else in the world has 15 year loans and 15% interest rates. That a great line. We need to buy now to secure this deal! It’s a gift!
Millennial, if you don’t have any English sites to prove your point, I’ll take that as a white flag.
My point was actually related to 30 year fixed loans in the US at ridiculously low (below 4%) rates.
My Silent Generation parents won the lottery with their 6% mortgage rate in the 60’s while they kept their cash in the 80’s Reagan era 18% CD’s . Same incentive not to sell or move as now. Prop 13 was just icing on the cake.
If you don’t buy now and inflation repeats like the 80’s, you will miss out.
Or as you predict, housing will crash 70% and you win as all of the recent buyers in this blog panic and foreclose. It is hard to see 50% of your net worth disappear in a year and then continue to fall for the next 3 years without panicking and dumping a bad investment. You and all of the other rental REITs out there are waiting.
If only my crystal ball hadn’t fallen off the shelf during the Northridge Quake.
Sorry Doc, but I need to clear up a lot from your article as someone who writes Fannie Mae and Freddie Mac mortgages on a daily basis.
There is NOTHING new about this Freddie 3% down program! NOTHING. Fannie has had this identical program for the past few years. It’s just that Freddie is catching up and Freddie’s version used to be 3% down was tied to income limits in certain geographic locations.
I.E. Corona = 90k max income limit
And it would vary by census tract.
All Freddie did was lower the income limit on this program to be inline with Fannie version (called Home Ready) and create this other “new” Freddie 3% down program without limits. This new program literally does NOTHING for homebuyers nor does it extend credit to really any new buyers. Actually; since the other program Freddie had (which was 3% down but tied to income limits) was cheaper (lower rates and lower PMI) the reverse argument can be made that the lowering of income limits on that program (called “Home Possible”) has actually REDUCED THE AVAILABILITY OF CREDIT to potential buyers.
Furthermore, let’s talk LOAN LIMITS!
All the 3% down conventional (Fannie and Freddie) programs, cannot exceed a LOAN AMOUNT LIMIT OF $453,100. So, that means that in order to ONLY put 3% down on a purchase; the MAXIMUM PRICE you can go to is $467,000! Anything above this price point will require 5% down on a conventional loan.
So, for those readers that think these buyers can go out and only put 3% down on an 800k house, that is simply NOT TRUE.
Don’t believe me? I can send you links to Fannie and Freddie guideline books and you can see for yourself. Or, call a (good) mortgage loan officer.
Also, remember you must qualify with certain debt to income ratios and the PMI on these loans become astronomical if you do not have good to excellent credit.
So, ask yourself, how much house can you buy at $467k? B/c if you want more house, then you need 5% down conventional or need to go FHA.
Now, on to FHA; you say” Now the FHA already backs up low down payment mortgages but these are constrained to lower to middle income areas.”
I am unsure what you mean by “constrained”? FHA does not have income limits whatsoever and plenty of people use FHA that have higher than “middle incomes”. There are times where FHA is cheaper and makes more sense than a conventional mortgage.
Doc what you may be referring to is the max loan limits calculated for FHA per county as calculated by FHFA’s income survey. I.E. Orange county loan limit = $679k vs Riverside county loan limit = $406k
The loan limits are derived from median income county surveys so I am guessing that is what you were referring to; but, to clarify; FHA does not have buyer INCOME LIMITS for qualifying purposes.
I love the reading different viewpoints and debating on RE; however, hate when I see mis-information or lack of education on lending, so, I hope that I can provide some clarity in that arena as that is my main business and what I do each and every day.
If you can get a 5% down with higher loan limits, you have to go for it.
Another excellent post from someone who knows something.
What is not being mentioned is with a 3% down payment your going to have to pay mortgage insurance which will increase your monthly payment anywhere from $167 on up depending on the price of the home.
If your credit score is below 700 there is no point in taking a conventional 3% down loan due to the PMI cost one would rather go with FHA.
FHA interest rates are lower and the FHA PMI rates will be lower than conventional with an under 700 credit score
It is just not realistic for a family putting 3% down to then have a $4k monthly mortgage, especially since you then have to pay PMI due to not having 20% down. We lost our home in 2008 and have never recovered. So sad what’s happened to the American dream.
A lot of people with good financial planning lose their homes in a recession, especially when an unfavorable life event hits during a recession. You can not take it personally. Often, it is a case of bad luck. Don’t let it get you down. You have to move on. Remember, if you are alive, and you have good family and friends, you are winning at life. Material things are secondary. Good luck.
They wouldn’t have a $4k monthly mortgage with 3% down these days. Limits wouldn’t allow a loan that size. Maybe it’s possible with horrible credit and a high enough rate and PMI, Dan would know better than I.
Just curious – if you’re willing to tell, why did you lose your home? Variable rate reset? Job loss?
You didn’t lose your home. You signed a contract with a lender agreeing to pay back a loan. The penalty for not paying it back was forfeiting your home. Your home wasn’t lost or stolen or taken away. I hate it when people who willingly broke a contract they agreed to play the victim card.
Heather,
Your #’s are way off. As i’ve said, max price point with 3% down (conventional) is 467k and therefore with 3% down even with terrible credit (assuming you got approved) wouldn’t get to $4k.
To say the mortgage (without PMI) would be $4k shows you don’t know what you are talking about.
Anyhow; if the credit is not very good it’s flipped to FHA where 3.5% down is needed and the PMI is cheaper than conventional anyways.
Doctor, you should do a story about IRS 1031 Exchanges.
This allows the owner of a business property (e.g., a rental) to sell it, use the assets to buy a “like kind” business property (another rental), and defer all capital gains taxes on it.
I’ve come across two sellers who, I was told by the realtors, are doing 1031 Exchanges. One listing said that “buyer cooperation on a 1031 Exchange” was a requirement for any offer.
I suspect this program is ripe for abuse.
You own a house. You convert it into a rental, for the required period of time. Exchange it for another rental, for the required period of time. Then convert back into a home for yourself. Home for home, all capital gains tax deferred (i.e., not paid).
I’m wondering if you can get away with renting to a relative? Your kids? Your spouse? Or even to yourself? You place the house into trust, then you rent it from from trust, which is technically a different person.
I’ve done searches and discovered that maybe half the condos in my building are owned by family trusts.
As long as you live in a primary residence for 2 out of 5 years, you get a $250K (single) and $500K (married) capital gains tax exclusion. This has been the case since the 90s. For non-investors, capital gains taxes on real estate is almost non-existent.
I’m well aware of capital gains exclusions. But …
I saw a house in Santa Monica this year that’s listed at $1,150,000 over the previous purchase price in 2013.
A capital gains of $1,150,000.
That’s one of the sellers planning a 1031 exchange.
I remember another Santa Monica house last year that was sold at a capital gains of over $1,000,000.
And those aren’t the only examples. I’ve seen many Santa Monica and Brentwood homes that were purchased during the recession, whose current list prices are well above the capital gains exclusions.
Dan, you said:
“A week ago …, you said that there are for sale properties everywhere in Mission Viejo …. Now one week later you put your house on the market as a for sale by owner not even on the MLS and had an open house with interest and one day on the market already receive an offer! I don’t know Gary, it kind of sounds like there is buyer demand and it seems like if there were so many properties for sale on your street and in your neighborhood you wouldn’t get an offer on the same day your property went on the market.”
“What are your thoughts?”
“Care to share the approximate price range you have it listed at?”
“Furthermore you stated that all five of the couples were professionals which to me sounds like they can afford to purchase your property and make good money which doesn’t jive with a lot of the Perma Bears on this site that say they don’t know anybody that makes more than 50 to 100 thousand per year.”
“As I have said before you really have shown courage to put your money or property where your mouth is and I think you are getting a taste of a strong buyer demand what are your thoughts on all of this?”
Dan, I got two offers within 24 hours of my open house. One was low, the other was good. However, my potential buyer is having trouble closing his current home’s escrow so it doesn’t appear that the deal will go through. If the deal falls through, I may take my home off the market and wait until next spring to sell. I now believe that prices will be at least 5% higher next year.
In an case, I am still impressed the strength of the market and now believe that the real estate top is probably about a year away. The low inventory of homes for sale and the quickness with which homes appear to be selling suggest that the top is not real close.
Also, my nephew, who is the CEO of a small California home builder, currently sees no sign of a real estate top. He said that 80% of the new homes being sold in Orange Co. are being sold to Asian buyers. However, he worries about what those buyers might do if prices turn down. Are they speculators or long term investors? Will they run for the exit at the first sign of a downturn?
Gary
I think you just made Millennials head blow up.
Surprisingly high demand and low inventory
Professionals who are the buyers that make good money
And gasp, Asian buyers!
All three are myths according to mr. Millennial.
Not one “Taco Tuesday Baby Boomer” comment? I don’t think this was written by the Doctor.
Hi, Enjoy your Columns / Articles. Even if we do see home ownership increase , people are still
limited by the increasing , ” GIG Economy” where people are having to accept non – full time , single employer . I feel this will still limit people whom can buy a SFH since society is moving away from this
and at this time , no provisions for society to purchase a home .
It should be interesting to see how GSE ( Fredie, Fannie ,ect) adopt to qualifying buyers in the GIG economy >
Mitch,
Gig economy?
You permabear! America is great again and the housing market could not be hotter! I am a RE cheerleader and everyone in close proximity makes over 200k, easily!
People keep talking about teachers, firemen, policeofficers not be able to afford a house?!? First off all, who needs these low-income people anyways?? If you don’t make over 200k don’t even talk to me. I am so fed up with these freeloaders and the whining. All of my friends own many multi dollar homes and pay next to nothing in property taxes!
That’s what you get when you have your MBA!
People who don’t have a doctor title or MBA should be grateful they don’t have to live in containers like in the good old Soviet Union!
Stop whining, go back to school and get your MBA. Next thing you know you make 200k and buy your first two houses. Once you bought ten houses you might get a chance to join my club! And I swear if I hear rental parity or median household income one more time Iam going to explode!
LOL.
The only thing I can say in mild defense of the pro-housing crowd is that more people do have the option of working from home now, and rich people who can work from home will choose coastal CA.
Is this all you have left, Millie? Taking pieces of other posters’ comments out of context and surrounding them with your own lies and sarcasm, all with third grade grammar? It’s funny, but not in the way you’re hoping for.
John,
All I have left? I am just getting started!
Yep, it’s pretty funny…..just not to everybody…..unless you can laugh about yourself.
Oceanbreeze you have it backwards. “Rich†people who can work from home are increasingly moving out of high tax areas such as coastal California. It’s those who have to come into the office everyday that are being forced to stay.
https://www.zerohedge.com/news/2018-06-28/us-housing-unaffordability-remains-near-all-time-peak
RE will crash hard
One man’s foreclosure is another man’s opportunity for a flip.
There is this myth out there among the perma bears that anyone can walk into a lender’s office with $0 in their pockets and walk out with $1M loan. This is a fantasy. I was talking to my lender earlier this week about lining up a mortgage for another property I’m looking to buy. Keep in mind this is a bank I’ve been doing business with for years and have several mortgages with already that has never had even so much as a day late payment. And my FICO score is in the high 700s with income well above $200K (which according to Millie doesn’t exist, I know). And this is a small local bank, where I know the mortgage broker personally. It’s not like BoA or Wells Fargo where I’m one of 20 million customers and deal with some call center rep from India who doesn’t know me from Adam.
And still, for this new property I have to go through the same rigorous underwriting process as always…tax returns, bank statements, proof of assets, the works. And I need to put 25% down as I have had to do for all the investment properties I’ve purchased.
So one of those things is happening…1. I need to find a new bank since this bank is the only one that has lending standards anymore. Or, 2. the idea that lenders just hand out $1M loans to anyone with a pulse (as Millie and Co. seem to believe) is nonsense.
I’m leaning towards #2.
My bank started giving me my FICO score, and my Wife’s credit card company gives us her score. We haven’t been below 800 yet. And our total income is nowhere near $200K/yr. You must be in hock up to your eyeballs.
I say Apple and you say Orange! What does your reply to do with Landlords factual statement?
He is referring to purchasing another investment property and everything he stated is correct. 20% minimum down payment and income verification via tax returns, w2s, pay stubs, verification forms etc…
So bc your bank says you have a high credit score you get to skip the rest when purchasing a property? Haha. Too funny
Another lending assumption akin to the sub-prime is back crowd where you can now buy a million dollar house with no income verification, 0 down and a 500 credit score. Laughable.
My reply was mostly tongue in cheek. I am not planning to buy any more real estate (I own property out of state that I’m stuck with in the current market). He mentioned his FICO score, and I found it funny that mine with half his income is way higher. I can only suppose that it is due to my lack of debt. Can you think of another reason?
I don’t doubt his description for financing rental property, nor do I doubt his honesty as to his financial condition.
Your bank gives you a fico score, therefore I am in debt up to my eyeballs? LOL. OK I guess, whatever you say man.
Joe,
Sorry I didn’t read the reply to Dan.
As you probably know, lenders use all 3 credit agencies and then take either the average or the mid point. I think last time they ran all 3 highest was 810, lowest was 775 and the middle one was 790. Why one is 810 and one is 775? Who the hell knows. I don’t really care since 760 is essentially the best it can be as far as lenders are concerned. 760 or 790 or 810 gets the same interest rate.
And no, other than mortgage debt I have no other debt other than credit card debt which is paid off every month. I use that cc for everything for the cashback. So on paper, I have a lot of credit card debt, even though in reality I have zero credit card debt. One of the many reasons fico scores are kinda dumb. Someone with $15K spread out over 5 credit cards at 15% interest, who only makes the minimum payment has the same “debt” as someone who spends $15K a month and pays of $15K every month and pays 0% interest.
No car loans/leases, no student debt, nada. Just a ton of rental properties with LTVs averaging 40-50% and my primary home’s mortgage. I took out that loan in the doldrums of the crash where loans were practically free. You wouldn’t believe me if I told you what my fixed loan interest rate is on that house.
I will say though that owning rentals is addictive. They’re like that commercial for Lays chips. You can’t just have one, before you know it, the whole bag is gone. I’m always looking for opportunities. I have my real estate agent looking for me as well. It has almost become a full time job, but it’s fun and very profitable.
Owning out of state real estate in a remote area isn’t addictive at all, but is a slow moving nightmare. If I put the place up for sale, it is hard to keep it rented and an empty house miles from a big town is a tempting target for druggers. So I’m stuck with a rental agency until I retire and can move there for a Spring and Summer while I fix it up and sell it, probably at a loss. When my other family members lived way out there, it was more manageable, but death and economic necessity moved them on. People in this generation are not dropping out in massive numbers and moving to the sticks. Own rentals where a lot of people want to live, and own a mountain cabin for yourself as a hobby.
REAL HOMES OF GENIUS
you too can live in the coveted ‘Mid Cities’ for a mere $950K dollars.
why not buy the most expensive home, in a lousy neighborhood?
Sold in 1996 for $150K
Sold in 2010 for $458K
Sold in 2011 for $295K
Sold in 2012 for $390K
listed now (remodeled) for $950K
https://www.trulia.com/p/ca/los-angeles/2304-carmona-ave-los-angeles-ca-90016–2077217068
Looks like someone missed a 2006 payday.
We have a house guest this week who lives in Silicon Valley. She’s a teacher and now very proud and secure that the house she bought in 2011 for $280K is now worth $1.3M.
A millionaire public school teacher within 6 years. It is better than the lotto.
I think there are many people like this. As many as there are houses in coastal CA.
Maybe it is just me, but I would sell and actually be a millionaire instead of just one on paper.
Since I’ve seen it all before in 2007 when houses dropped in half or more in 2 years, I’d take my million and run.
What goes up 5X in 6 years will more than likely fall 10X in 2 years. Crazy
+1
The market in California will easily fall by 55-75% during the next crash.
I wouldn’t personally remotely consider selling that house. With the high rents she could undoubtedly charge, it’s a cash cow that will give her stability for the rest of her life, without the hassle of owning the equivalent in flyover rentals.
John D,
I agree but only as long as Facebook and other Tech stocks are flying high.
My lesson learned with Lucent in 2001 is that both the Chicago and NJ Lucent sites became relative ghost towns when Lucent stock plunged from 120 per share to 3 per share in 2001. Good luck selling a house.
My co-workers also commented in 2010 that Silicon Valley traffic was pleasant during that time and my friend the high school teacher picked up a house for 280K that is now worth 1.3M. That was only 8 years ago. Both scary and highly profitable times if you own a house in Silicon Valley.
It is true with a 240K mortgage, anyone is likely able to make money there by renting it out. I hope.
From the ~million dollar crap shack listing: “In Real Estate location is everything… This is the perfect house no family should miss.” In today’s other news from literally down the street: http://abc7.com/1-person-shot-killed-in-robbery-at-mid-city-gas-station/3696859/
“Hey honey, the baby needs some diapers can you run to the convenience store”…. better get some life insurance….
Ugh. Bowling alley style remodel with all the designer cliches. Surprised it wasn’t painted Soviet grey.
In this article, you’re speaking of a 10% correction during a recession. Sounds normal and manageable. We bought 18 months ago with 10% down, and we are up $50k on property value as well. As long as we stay employed, and give our tax return to loan principal every year, home will be paid off in 19 more years. That’s not bad. Dont care what happens to the markets, I care about my monthly nut and retiring early as well.
Some RE experts (me included) believe there will be 55-75% correction. It will be sweet, I should be able to buy my dream home in all cash at that point.
55-75% drop makes sense because than you have rental parity. Why buy now and waste your money if you can rent the same box for a bargain?
LOL. You are about as far from an RE expert as it is possible to be.
And we’re still waiting for one (just one) source quoting an actual RE expert who thinks a 75% crash is possible.
Too bad “experts†such as yourself won’t pinpoint the timing of said drop.
Oh that’s right, you don’t know what’s going to happen. That’s why you won’t put a date on anything. You saw how moronic Jim Taylor looked putting random dates on things and decided it’s better to promote unprovable rhetoric by leaving out the most important metric — timing.
Mille is an expert in RE? Now I’ve heard it all!!!
“Millenial” is 22 years old and lives at home with his parents. He owns 5 litecoin that he bought at $200’s per coin after his friend jimmy told him to. He bought the 5 litecoin using the money he earned working at Walmart last summer. It was originally meant for new tires on his monogoose road bike but after seeing 25% returns on his litecoin investment in 2 months he decided he would wait for RE to crash and hope his 5 litecoin will appreciate 15,000% by 2020. What a silly little billy.
Mille, are you really a 22 year old poser/liar? Is your whole being a sham? Have you been punking us and trolling us this whole time? Be truthful now…
Of course Our Millennial is semi-trolling us. What he says could happen and did happen only 10 years ago.
“Those who cannot remember the past are condemned to repeat it.” George Santayana
I admire him for his willpower to follow the sage advice of buying low and not buying high.
However, both Our Millennial’s and my crystal balls are broken. Since housing is a long term investment that has always paid off over 10 years, his retirement clock is ticking and in order to live a rent-free retirement, Millennials who are approaching 35 now will have to buy soon to retire rent free at 65.
Lordt B,
i dont even remember Jim Taylor used to put dates on his posts. For the past years he has been saying “soon” which i agree with. He is actually spot on. 🙂
“Soon” means for me within the next few years. I understand some people must be anxious about the timing. To me it doesnt matter if it crashes next year or the following year. Waiting to buy for a few years or decades means you live a flexible, debt free life.
You can save a ton of money by renting, make a killing by investing and just buy when the market crashes again. Its all about boom and bust cycles. Just have some patience and have your war chest ready when the bubble pops.
If you really want a date, how about this one: August 21, 2020, 3pm?
Let me ask you, are you in a hurry? If so, why? The last few years (especially 2017) have been very profitable (crypto, stocks). Not a bad thing.
Charlie Lee?? THE Charlie Lee? Why do you always take so long to answer my twitter questions? 😉
Seriously though, i am forever grateful for creating LTC and your post (6month ago about selling your LTC’s) so many were upset about. LTC went up over 5,000% in 2017 and when the founder of LTC sells his stake i decided it was a great time to follow suit. (I know it was for very different reasons).
Unfortunately, i am not able to talk about the amount of LTC i am still holding on my nano s but here is a little fun fact:
I own more Litecoin than the founder of Litecoin!
(in all fairness, all LTC holder can say this)
Jed,
“Mille, are you really a 22 year old poser/liar? Is your whole being a sham? Have you been punking us and trolling us this whole time? Be truthful now…”
Well, I sometimes wish I still had the body when I was 22years old. I am still very active but back when i was 22 years i could eat whatever i wanted and would not gain a pound. Now, that has changed. Especially with all the good micro breweries around me.
I would describe myself as a RE expert who shares his knowledge for free on this blog. I found this blog a few years ago along with other, similar blogs. I almost bought and i am very thankful that educating myself with the help of these kind of blogs prevented me from buying high. That allowed me to save a lot of cash by renting a cheap apartment and investing in the stock market and crypto market. I am sitting on a very large cash balance waiting for a buying opportunity in real estate. If i would have bought high, i would have missed out on these investing opportunities. My cash would have been tied up in an overpriced condo that is doomed to lose half of its value during the next bust cycle.
While I do make a little bit of fun of RE cheerleaders and their hilarious statements (“price doesnt matter”, “buy now or be priced out forever”, “be a man,take the risk and buy”, “this time is different”, “Everybody makes 200k except 18year old fry cooks”, “Interest rates will never go up again in our lifetime”, “If you dont buy soon you will never own”, “Bitcoin will go to zero”, “your downpayment is making you 10%”, “paying principal is paying yourself”, “rental parity means paying 200k down AND 1,500 more a month as a renter”, “15 dollar avocado toast is the reason you dont have a downpayment”, “this is the year when millennials will go out and buy in droves” etc.) I am also here to return the favor to others who are on the edge of buying.
“I found this blog a few years ago along with other, similar blogs. I almost bought and i am very thankful that educating myself with the help of these kind of blogs prevented me from buying high.”
But a few years ago wasn’t ‘buying high’ now, was it? Look at the horizon, see that boat you missed? No worries, the next one will come around ‘soon’.
Goudey, if I would have tied up my cash a few years ago in massively overpriced real estate I would have missed out on great investment opportunities (stocks , crypto). These are more favorable investments than real estate. You can sell stocks and crypto with very low fees and very fast. There is actually a word for it. Opportunity costs. You can google it and find further explanation. But don’t worry about it, you just keep buying real estate. Someone has to.
As far as buying high goes. A few years ago was a terrible time to buy real estate. 2009-2012 was a good time. Since 2013 it’s overpriced. Right now is a great time to watch and enjoy the show. The great crash is coming fast and I can’t wait to invest my cash in real estate once the market crashes by 55-75%.
The coming correction will be more than 10%. This “correction” will the 4th I’ve witnessed in California and it has NEVER ever ever ‘only’ corrected 10%.
every single time it’s been over 50%……no exceptions, this will be no different.
Many coastal areas only dropped 30% (nominal) in the last one. The bay area dropped 27%. Los Angeles metro dropped ~42%. San Diego metro dropped ~43%. Orange county as a whole dropped ~45%. Of course there were examples in all that dropped more, or less.
John D,
I just looked up on Zillow the house I sold in ’05, it dropped ~58% by ’11 AND the best part…….or the worst depending on your perspective is it just sold again this year BUT for LESS than in ’05.
BTW that bottom price was within $20K of what I paid for it in 1991……..the price in ’11 is WHAT THE PROPERTY IS REALLY WORTH……not this bubble 2.0 price it sold for in Feb ’18……..$440K…….in ’05 it sold for $459K
It’s going to be another blood bath.
Interesting,
dont waste your time.
I mentioned a nearby condo complex. same thing, over 50% discount during the last bust.
John D, who believes everyone makes 200k except 18year old fry cooks says this is just one data point and not valid. You cant fix …..
“I mentioned a nearby condo complex. same thing, over 50% discount during the last bust.”
So you understand the concept of a single data point, with no understanding of the uselessness of it. You both picked single properties to show how bad the drop was. That only shows how bad the drop was for those properties. The median and averages show the big picture. See the difference? Properties are above or below those lines, and rarely by much for a given area. I’m sure if I looked hard enough, I could find a property that went for a 70% discount in an area that averaged 50%. It would probably be a ghetto teardown with a massive unpaid tax bill, but regardless, it doesn’t mean “that area dropped 70%”. That would be a really stupid thing to say. But here you are.
We could post examples all day long. It won’t matter. A RE cheerleader is unable to accept the facts and will come up with some bogus answer/explanation. That’s why arguing is a waste of time. Making fun of the cheerleaders is entertaining though. Especially, because there seems to be a never ending stream of hilarious lines you guys come up with.
“A RE cheerleader is unable to accept the facts…”
So you’re saying the median housing price data is all a giant lie, and the only “facts” are single properties that you pick out. LOL. Do you ever read the garbage spewing out of your keyboard? It’s wildly out of touch with reality.
“So you’re saying the median housing price data is all a giant lie, and the only “facts†are single properties that you pick out.â€
That’s right.
You can’t believe anything the NAR, lenders or RE cheerleaders publish.
If buying would make sense financially you wouldn’t need the propaganda and the made up stuff.
Housing market data isn’t just based on MLS (realtor) numbers. When you sell a house, the law requires the specifics of that sale to be sent to the county assessor and recorder offices. Freddie Mac, the Census Bureau, and S&P/Case-Shiller all compile and report on that data. It would be awfully strange if the MLS data didn’t match it, but of course it does. Your conspiracy theory doesn’t hold water.
You can’t believe anything that is published by the NAR. They got caught lying countless times.
https://www.irvinehousingblog.com/2011/02/24/national-association-of-realtors-caught-lying-about-home-sales/
When you meet a realtard, the only words that are not lies are “how are youâ€. Well not even that. He doesn’t care how you are doing, the only thing he cares about is to sucker you into overpriced real estate.
I wouldn’t trust the NAR as far as I could throw them, but taken as a whole the MLS data is extremely accurate. The NAR merely took a sample of MLS data and extrapolated, and by doing that you can obviously pick the data that suits you. The simple solution is to not listen to the NAR – there are plenty of other organizations that accurately report on the MLS and government records.
If you want an accurate market chart, include Case-Shiller in your search. For a realtor/broker, reporting an inaccurate number to the county is a crime that is guaranteed to be found out, considering legitimate copies of the contracts are in the hands of the buyers and sellers, and tax assessments are based on the county’s recorded data. I’m sure all those new owners would enjoy receiving a tax bill based on a bogus sales price.
I know you don’t believe it, but usually agents don’t have to lie. People start talking with an agent because they’ve already decided to buy. I’ve personally worked with a lot of agents (20 years of looking at houses), and have experienced maybe two that were the used car salesmen type. The majority called it as they saw it, which usually matched my attitude – “don’t buy unless you plan on staying for 10-20 years.” I asked one (who sold our previous home) what she thought of the market last year. She said “we’re selling,” meaning much of their commercial holdings. She understands the difference between a home and an investment.
So you dont trust the NAR (National association of realtards) but you trust that realtards are submitting accurate data to the MLS? LOl
https://therealdeal.com/miami/2016/03/08/mls-manipulation-now-carries-a-5k-fine-miami-association-of-realtors/
http://blog.franklyrealty.com/2007/01/mls-data-fudging-by-realtors-watch-out.html
google MLS manipulation.
I’ve witnessed 3 real estate bubbles burst in Southern California, and 2 in the Denver area during my 40 years as a property owners. Thankfully, like stocks, they have always come back. But, the trick is to have the where-with-all to survive those troughs. I’ve seen people survive, and I’ve seen many who gave someone else or the lender a nice home at a greatly discounted price because they were forced to sell or walk away! I’m not sure people really factor in the fact that there is no such thing as job security anymore and when that job goes and you can’t find another one right away … the goes the home!
If you can’t stick to the subject, why do you bother? Again, it’s because it’s the only way you can “win”, but the only people who think that you come out ahead in these arguments are dumber than you are, which is to say no one else who visits this blog.
MLS manipulation of listings has been going on for as long as there’s been an MLS. They do it to try to sell properties. We were actually discussing median prices, remember? That means closed sales. If you want to confirm that, you could go back and read your own posts.
The closed sale prices put into the MLS are the same as those recorded with the government. When escrow closes, there is no longer any incentive for a sales agent or broker to fudge the numbers.
I was talking about examples of houses that dropped by like 50% in price during the bust. This is normal for California. Happens every ten years.
It’s huge progress that you admit that the NAR and realtards cannot be trusted. You are on the right track!
You guys will appreciate this article:
https://www.ocregister.com/2018/06/29/the-new-american-dream-leasing-your-house/
More and more people renting homes instead of owning.
Millennial, Prop 13 actually amount to very little if the property tax rate is 1% or less. Whether one pays $8,000 taxes on a $800.000 home or $4,000 is he bought the same house 15 years ago is insignificant compared to the costs of buying a $800,000 home. There is only about $100/month difference in property taxes.
Yes Gary but remember that that the owner bought that 800k home for 150k. They likely don’t make enough to buy an 800k home, so if property tax increases significantly they will probably have to sell.
Gary, I agree! But that’s not what I am talking about.
What about my relative who inherited a multimillion dollar home (3mio) and pays 2,300 dollars per year in property taxes since it has been in the family for a while?
If i buy next door for 3mio my property taxes would be ~36,000 a year!
What would be so bad if we change the law have him pay 18k for his and I pay 18k for mine? If that would make him move due to increased taxes….great. He can sell and make 3mio minus transaction costs and taxes!
I do love this guy but use him as one of the examples how prop13 pulls in from the wrong side and favors the rich and boomers.
I’m starting to realize that people in California will be in for a rude awakening early next year when they realize the new SALT regulations kick in. Married professional couple pulling in 220k, paid 15k in state tax and 6k property tax on their new 600k house, with 22k in mortgage interest the first year. Instead of a 43k deduction, they will get a 32k deduction (only can deduct 10k of state and property tax, so missing 11k in deductions). Maybe these people can afford this with such high income but it is quite a difference. No additional deductions for automobile (property) taxes either which has risen in California so can add that in too…
Losing 11k deduction in CA for a couple like that is an increased payment of 3-4k… significant but I don’t think it is enough to make a huge difference in housing prices.
That’s the point I’ve been making since I started posting on this site. I’m trying to get my sweetie to wait at least until next April, when people in California actually see how little their write-offs are going to be worth, to buy a house. Already in my county (Sonoma, CA), prices in the range we’re looking at are down approximately $75,000 on average just in the last 4 months. Sellers are up here adjusting quickly, and dropping their prices. If they don’t, their house sits.
I hope your right, we are looking to move to socal, dana point, san clemente around april next year, i’d love to see a drop in prices by then. Ive notice on zillow, plenty of houses for sale, and some are dropping prices, just not enough to justify moving now.
Yet you’re aware of the new SALT regulations. Why do you assume that others won’t be aware until next year?
Son of a Landlord~
It’s one thing to theoretically understand the new tax law, yet quite another to get your actual tax bill. My sweetie knew, for example, that he might get hit with the AMT last year, but when he actually calculated the amount of his penalty, there was shock, dismay, and quite a bit of cursing that ensued. It went on for days.
Some will lie by either claiming the amounts don’t matter or AMT negates the difference.
It’s not a matter of being able to afford it. Relative value is what matters.
The truth is that nearly everyone cares about the value of their own dollars spent. In fact, many wealthy people demonstrate an extreme amount of concern over value received.
Another fact is that the value of living in California is objectively reduced by the new tax regs for those who are snared by it.
Add a soon to be tax and spend socialist governor–we will quickly see how people who can “afford it” will be voting with their feet to other states.
yeah, but there is a significant tax break that will negate loss of deduction.
And if you were under AMT, then you win even more.
Surge is correct.
I posted a calculation awhile back as a comment to Surge.
You can go to an online tax comparison calculator between 2017 and 2018 and check your situation.
It is true that state income and property tax deductions are capped $10K but Trump lowered the tax brackets such that even if you have more than $10K in taxes paid, most will still pay less taxes next year. Eliminating the AMT will also lower taxes for many this year.
In summary, losing the property tax deduction will have no effect on most current homeowners. They will pay less in taxes compared to last year. No homeowner will be forced out their homes due to higher taxes.
However, owning a home is less of an advantage compared to renting since renters will have the same tax brackets as homeowners so renters will pay even less in direct taxes next year for the same income. Of course, renters will still pay the landlord’s property taxes indirectly along with the landlord’s profits.
the day they put Mel Watt in and replaced DeMarco, this was easy to see coming. Mel Watt is a crook of crooks, Banker shill. Time to shut down both agencies, they are in receivership. He is another of the politician banker shills from congress that was fed money to enable debtpushers…
What a crock all of this is. So many plates spinning in the world, US and in Real Estate its unreal. When are they reinstating FASB-157?
Debt pushers are much worse than drug pushers.
I would really appreciate it if some of the older/more experienced commentators that have lived through downturns/recessions could offer me some advice. What did you do and have in place to survive those times? Maybe you were unlucky. What do you wish you had in place that would have made things better?
The best piece of advice I can give to survive a downturn:
1. Work hard and show your value to your boss. As long as you are the most valuable on your team you likely won’t be let go.
2. Have at least 6 months in living expenses saved. 1 year is better. I am conservative and keep 2 years in cash.
3. Have your resume ready to go and keep your interviewing skills sharp.
We rented and stayed in the stock market – didn’t panic sell. It paid off. Regardless of the state of the real estate market, the best thing you can do is buy what you can easily afford. Don’t stretch to the maximum debt-to-income ratio that you would qualify for. When we bought in 2009, we only used one of our incomes to qualify, in case of job loss in what was still an uncertain economy. Similar with our 2016 purchase – we put $200k down, and that plus the rental income from the casita means our effective housing expense is only $1k/month for the 3,200sf of the main house. We would actually be worse off in a 1-bedroom apartment, which go for $1,500/month in our area.
Crom: get out of debt and stay out. Forego gratification. Pay yourself first [put money into savings as if it was a monthly bill]. Buy what you can afford when the time comes. Keep reading and learning.
Exactly what NoTankinSight and John D said.
1) I would stress the having 1-2 years cash available so you aren’t forced to sell if you lose your job.
2) Don’t overextend yourself now so you can have the cash to ride out a downturn.
3) Don’t EVER panic and sell low (Our Millennial is waiting for you to panic). I have a couple of coworkers who did not panic and did not sell in 2010 when their houses dropped to half their values. They had jobs and could pay their mortgage but advice from many at the time was to walk away from their houses because of the 300K-400K losses. The temptation of falling rents at the time was hard to resist. They held in there and one is selling at this peak and is a lottery winner, the other is comfortable to ride it out again even if Bubble II pops.
Thanks for the comments everyone.
I am going to build up a 6 month emergency fund.
https://www.attomdata.com/news/market-trends/foreclosures/foreclosure-starts-jump-153-percent-in-houston-increase-in-43-percent-of-local-markets/
A shadow inventory of homes for sale is increasing. This is just another sign that the end of this bubble is near. The bubble will likely pop in another year.
Foreclosure starts decreased nationwide in May, but 43 percent of local markets posted year-over-year increases in foreclosure starts, counter to the national trend, according to an ATTOM Data Solutions analysis of record-level foreclosure data.
Markets with increasing foreclosure starts included Houston, Texas (up 153 percent from a year ago); Los Angeles, California (up 14 percent); Miami, Florida (up 4 percent); Dallas-Fort Worth, Texas (up 46 percent); and Atlanta, Georgia (up 7 percent).
Prop 13 is not a factor in these crazy home prices.
As I posted years ago, of what was to come, what’s driving the insane pricing is Red Chinese flight cash.
PERIOD.
The Red Chinese government has created the world’s most astounding credit bubble — larger than EVERY other central banker on Earth. Yet its economy is not remotely of such a scale.
At some point there will be a fantastic credibility implosion radiating outwards from Beijing.
It’s the way of the Chinese. The Mandate of Heaven will be lost.
A trade war with the USA figures to be the most likely trigger, for Red China is quite addicted to exports. America is not addicted to imports. (eg Crude oil.)
Such a credibility implosion will trigger a currency crisis and credit implosion.
It will take all other markets down, too.
That’s the fundamental problem with Globalism.
Every economy starts to behave like a school of fish.
Blert is back after a several year absence. Didn’t you insist that Obamacare would implode the economy? How did that prediction work out?
Prop 13 is absolutely a factor. You’re wrong.
FULL STOP.
To Lordt B:
Bullshit.
It’s a combo of many issues. Dirty money from overseas, zoning laws preventing construction, prop 13, weak state law mandating housing construction, desirability of coastal CA…
I agree with you, blert. I bought a cookie-cutter Plan 3 house, with pressboard siding and a tiny yard, in 1998 (a 3/2 with 1525 SF) for $285,000. The Chinese took the area over, and now that same house is worth over a $million.
For those looking to survive downturns, etc.. First, buy smart. Buy for the long term, and don’t stretch the old finances too thin. Always keep a good reserve stash for unexpected expenses. Put your mindset into patience and persistence mode. You’ll need it. Lock in a good rate on a 30 yr. loan to fix your mortgage costs. If you’re a newbie only sign up for a cosmetic fixer, nothing too extensive. Learn how to do basic maintenance yourself. And be able to stomach the ups and downs of the market. It can be both exhilarating and depressing. Most of all, stay in the market over the long term. That’s where you’ll make your money. Timing short term cycles is almost impossible and generally not too lucrative for the small investor. This is general investment advise you’ll get for almost any asset, stocks, bonds, and RE. Easy to say, more difficult to execute.
I 100% agree RickA.
Buy your long term house in the location you want to live.
The key to happiness is never look at the value of your house for the next 20 years. Just enjoy it.
Patience is power; with time and patience, the mulberry leaf becomes a silk gown.
(Chinese Proverb)
Dan said’
“It’s always next quarter, next year, next decade etc…..”
“After awhile they started disappearing, I mean you can only be wrong so many times before it becomes embarrassing. I will hand it to you though, at least you had the stones to pick a date unlike delusional millennial who is waiting till next decade and beyond to buy or inherit. Hope it doesn’t get too the point where he is seen on Dateline in a Menendez type story.”
“In any case desirable parts of the state are still in very high demand, and no matter what China does with capital controls, the money flows.”
Yes, I have changed my mind recently and decided that the evidence suggests that the California real estate top is now likely to occur in 2019–at the earliest. What is missing is real evidence that the top is occurring like increasing inventory, increasing interest rates, a major crash in the Housing Index and an inversion of interest rates (i. e. 2-years Treasury rate is above the 10-year rate).
If the major stock market averages go to new highs, which I now expect, that would suggest that a recession and housing crash are at least a year away. There are hints of trouble coming but no real evidence of a real estate top. It was wishful thinking on my part to predict a real estate top in the Fall of 2018. I will go by the evidence from now on.
I have been an avid reader of this blog since 2006 when I pined to purchase a property in Los Angeles, but, knew it was overpriced and waited instead. Since then I have kept up with this blog, mostly to read the comments. This is my first time commenting and I wanted to tell my story.
-2006, 27 years old, had my first high paying job, wanted to buy a home, but, knew it was overpriced and something felt off and so I waited.
-2009, got married and the Great Recession just happened, was told not to catch a falling knife. Tired of living in the valley and commuting to Santa Monica, moved to Marina del Rey and rented. Lots of bank foreclosures and short sells, looked at a lot of condos on the westside, but, nothing felt right.
-2010, found a town house in Playa del Rey for $525k, 2bed 2bath, 1300 sq ft. Airport noise was atrocious, but, decided that it wasnt too bad for a young married couple in their 30s, plus lots of cool bars and eateries around. Put in an offer at $500k and it was accepted.
-2014, first (and only) kid is born, itching for a backyard.
-2015, SILICON BEACH mania starts, found a nice newly remodeled from studs up house (4bed and 3bath, 2300sq ft) in Hawthorne Del Aire area, Wiseburn school district taking off, decided to buy at what I felt was the peak and transfer my equity from my PDR townhouse. Sold PDR townhouse for $630k and bought new house for $940k. Rates still low, but, man did the property taxes hurt…
-2017, husband laid off… Still have my job though.
-2018, got sick of Los Angeles with its high taxes, homeless population and never ending liberal rhetoric. Plus, husband was never able to find another job, but, doing okay with one income. Husband originally from Mid-west with family still there, kid now 4 years old and starting kindergarten soon. Private school is so expensive in LA and hard to even get accepted, local school district is okay, but, wanted a better place for my kid to grow up. Got a decent paying job in mid-west, but, current job countered and said I could work remotely from mid-west at the same pay!!!
-Present day, bought a beautiful 4 bed 4 bath house in mid-west for cash with proceeds from previous house. Sold Del Aire house for $1,076,000. So far happy with the decision. Life is good here, so much green, love the community feel. Best part, still get to go out to LA every quarter for work!
– Ask me in January how I am doing with the winter…
I tell my story just so you can know one person’s experience with the LA housing market. I know I was/am very lucky, to have a high paying job (over $200k my all in alone), get the timing semi-right on the sell of previous houses and getting the hell out of Los Angeles!
Left, thanks for sharing. Welcome to the mid-west. Take it from a lifetime Minnesotan: the winters are worth the (relative to CA) stress-free living.
Congrats you did well. I wish I had bought 2-3 yrs earlier than last summer bc I would’ve had an extra 10% equity and a rate 0.5% lower.
Mortgage free life must feel pretty awesome! Hoping to be there soon.
Can you share you recent experience on selling your property?
How long did you have it listed? What initial price point and final sales price? Amount of offers? Any cash offers?
Curious
Experience with selling previous property: First we were greedy and priced it way too high for the neighborhood, had two open houses with tremendous traffic, but, no offers. Didn’t wait long to cut the price by 12.5% and had multiple offers on the house (including 1 all cash offer), accepted an offer 25k over reduced asking price. I wish we would have reduced the price earlier, but, it took 30 days on the market to go pending.
Almost all of the offers that we received were married couples in their 30s with kids that had money given or lent to them by family.
Wow, I didn’t realize Del Aire was that expensive! I think Del Aire and Holly Glen get a lot of overflow from the South Bay beach cities. One of my big gripes for both Del Aire and Holly Glen would be proximity to both the 405 and LAX flight path. You are literally a few blocks from one of the busiest freeways in the world, that can’t be healthy.
The South Bay and Westside beach cities have become almost unaffordable in a very short period of time. I remember in the mid 90s you could buy crap shacks in Venice (Abbot Kinney), Manhattan Beach, Hermosa Beach for 250K all day long. Now these are considered wealthy enclaves. Save your money for the next buying opportunity!
“Almost all of the offers that we received were married couples in their 30s with kids that had money given or lent to them by family.†THERE IT IS!!! It’s all mommy and daddy’s money. This is reality. This is the ONLY scenario in which I see first time “home receivers†getting their new homes/toys they want in their 30’s.
In childhood they were the types that needed air Jordan’s to play basketball at recess. Then they needed new ford mustangs in high school. Then they needed condos that their mommy and daddy’s paid the rent every month on while they partied in college. And now… they want their houses in order to store their new toys (kids).
I’ve posted this before but since my crystal ball is broken and all I have is historical data that we all have seen before, here is what may happen.
1) Since housing has gone up 5X in 6 years in Silicon Valley, it is likely it come crashing down 50%-70% within the same time frame or faster if the economy turns. That is what happened in 2008-2012. The economy does not look like it is turning down imminently.
2) The alternative might be what happened from 1974-1994 when inflation rose prices and wages 3X and housing rose 4X. If inflation gets out of control (it is already rising), we may see housing prices flat (or slightly rising) for many years and no crash. There were slight ups and downs from 1974-1994 (20 Years) but no major housing crashes. Even the housing recession in 1990 caused a price drop of about 3%. From 1994-2018 (28 years) inflation pricing has only risen 0.7X but housing has risen much more and we’ve already seen one 40-50% crash.
Inflation is a homeowner’s friend both with payments and CA property taxes. That 50K house purchased in 1974 was worth $200K in 1994. The loan was locked in at 50K and the Prop 13 taxes would have been only increased to $750/year by 1994 due to the 2% cap. Wages were keeping up with inflation during this period so all of those Silent Generation and early Boomers who bought houses in 1974 were making out like bandits. Thanks to inflation and the Prop 13 cap.
One more note.
If inflation rises as fast as it did from 1974 to 1994, that 1M house today will be worth 3M-4M in 2038.
If Our Millennial buys that 1M house today, his Prop 13 taxes will be 10K per year. By 2038, the Prop 13 taxes will be capped to about 15K.
If he waits and Carter/Reagan era inflation happens again, that same house will be selling for 3-4M in 2038 and the taxes will be 30K-40K per year.
If the same inflation happens again, our Millennial should buy now so the Gen Z’s and Gen Alpha’s can complain about him not paying his fair share when he paying 15K-25K less per year in taxes.
Millennial doesn’t worry about the dollar losing its purchasing power, because his currency is in crypto.
Son of landlord, i sold an enormous portion of my crypto last year. That cash is sitting in the bank/cds. Dollar cost avg. is your friend, so I am investing in crypto and stocks on a regular basis.
As far as inflation goes. It’s a nothing burger. The house that’s 1mio today will be less than 500k during the next crash. That’s when I buy.
Of course you need a back up plan.
No crash no purchase. My in-laws and parents own several houses. 2/3 of their real estate was obtained through inheritance. This will all be handed down to me because my parents don’t live forever (unfortunately). I am not Mormon so I don’t have to share with 18 other siblings.
You see, there really is not one single reason to buy high. I know RE cheerleaders are coming up with a lot of reasons but it can be categorized as funny or BS.
Millennial, I know you are having fun semi-trolling usyou may end it .
Millennnials are stereotypically ironic so being piled on to buy while having the belief to not buy now while in an enormous bubble while on a Housing Bubble Blog is both ironic and humorous.
However, if tax laws and Prop 13 change before your in-laws pass into the great CA sunset, you may end up with nothing. Hope is not a strategy.
And shame, shame for being racist against those hard-working extremely conservative LDS people. 🙂
Bob,
You seem like a nice guy. I read your post twice. Either I am too tipsy to understand or you were drunk when you posted it. Can you simplify it for me? I have no fuckin clue what you are saying. 😉
Darn Smart Phones with small buttons. I am traveling this week.
Us Boomers haven’t evolved like Millennials yet to use them.
My point is that don’t count on your parent’s inheritance with Prop 13.
When the tax laws change when Millennials elect Bernie in 2020, he will MAGA by moving us from the inheritance tax laws of Feudal Europe. I hope you parents live a long time but don’t expect a large inheritance like Prop 13 and what the US tax laws allow today if Millennial voters have their way and Prop 13 and estate tax laws are revoked.
Buy your house when you can afford it in a location you want to live for 20 year.s.
Don’t count on Prop 13 or tax laws for your future.
Absolutely, prop13 is the first on the list that needs to go. Repeal and replace!
It’s designed to screw new buyers and to benefit the rich and old.
Housing going up 5X in 6 years in Silicone Valley? Bull. Actually super bull.
Maybe a slight exaggeration, but at least 4X if you can walk to Facebook HQ.
2010: Zestimate 370K
2018: For sale for 1.5M.
https://www.zillow.com/homes/for_sale/15582274_zpid/globalrelevanceex_sort/37.486454,-122.143486,37.458151,-122.182195_rect/14_zm/
I don’t know what that zestimate is … 340K? Joke.
Now, the real data for Menlo Park
2013: 1.4M, 2018 2.1M.
That is about 8.5% per year.
No big deal,
Try “stagflation” in your equation. Different than inflation with a whole different outcome regarding housing and asset prices.
Please describe the outcome of stagflation. I haven’t seen that before.
But….you’ve seen it all before?? investors like you you’ll fall the hardest..
JHK II,
The only time according to Google when we had stagflation was under Carter when inflation rose and wages were relatively flat. Carter called it a Malaise.
Housing did not crash and remained relatively flat. Our Millennial won’t like this.
If you make a statement and you don’t know anything about it, you should probably hold your opinion.
Question to the Perma Bears….
Let’s say your fantasies come true and prices drop 50% back to 2010 levels. What have you really gained by renting all this time vs having bought in 2010? You could have built up equity over that time and had the tax deductions too.
The problem with being a perma bear is no matter what you will always think more bad news is coming. So if prices fall 10%, you’ll wait for 20%. If they fall 20, you’ll wait for 30 and so on. So even if prices do fall 50, you’ll wait for 60, and miss out on buying yet again, only to show up on a blog like this in 2029 predicting a 50% drop in 2033 when you will finally buy.
Meanwhile your landlord(s) will have several paid off house sin 2033 that you paid for all these years.
That’s the problem and the advice I tried to give Millenial. I know a successful investor and this is what he told me, “I bought when prices were high, I bought when prices were low and I bought when prices were normal. I kept buying as long as the numbers worked for me and that’s how I accumulated my porfolio”.
Millenial could have bought a property in the past 5 years, then refinanced and bought 2 more when his crash occurs and in 10 years he could own 10 properties using leverage and be a landlord and retire comfortably. Not easy to do but it’s doable.
Johnny,
It’s ironic that Millie talks about dollar cost averaging a few threads above, but doesn’t realize that doing the same works with real estate. Buy high, buy low, buy medium. Eventually it evens out in the long run and you end up a paid off portfolio of real estate.
That’s a decent line:
Just start buying now, you will own ten houses soon!
Not a top ten candidate but decent.
Mr. Landlord, I have recently become less bearish on California real estate. I have stopped trying to guess when the top will occur and am waiting for some evidence to appear that the bubble has popped. So far, there is no evidence of a top.
The inventory of homes for sale is low in most parts of the country including Orange Co. where I live. In April 2018, the average days on the market before a homes sells was only 64 days in the U.S.–the lowest since the housing recovery began. It was 137 days in April 2010. Interest rates remain near record lows.
Gary
Interest rate on a 30year fixed went from 4.15% to 4.65% this spring and the perma bears acted as if it had gone to 15%. By historic standards, as you say, we’re still ridiculously low. And that’s what the perma bears never seem to realize. Interest rate on a mortgage is what counts, not the amount. A $500K mortgage at 4.5% is cheaper than a $300K mortgage at 9%. And all those “conventional wisdom” things like home prices should be 3X income are from the 9% (and in many cases much higher than 9%) mortgage era of the 70s-90s. They have zero meaning in today’s low interest rate environment.
Let me give you a real life example. I sold a house in 2005 for $720,000. In 2010, 5 years later, the identical house (it was a development with 4 prototypes) had dropped to under $500,000, a drop of just over 30% (much less than 50%). During those 5 years, I was renting a townhouse for $1700/month, and so paid out $1700 x 12 x 5 = $102,000 in rent. That included my landlord’s property taxes, HOA dues, maintenance, and mortgage interest. If I’d bought it back in 2010, right off the bat I’d have an extra $220,000 – $102,000 = $118,000 sitting in the bank, plus I was spending an average of $5,000/year in maintenance (= $25,000), $135/month in HOA dues (=$8100 over 5 years), $4400 in property taxes every year (which rose a lot every year). So I’m already ahead almost $175,000, and that doesn’t even include the mortgage interest I was no longer paying.
You also have to remember that the lower price you buy at, the lower the starting point is for your property taxes, which helps a lot in a high tax state like California. You get locked into that base number until you sell your place.
And before you ask why I didn’t buy back in 2010, I invested my profits in something that went up even more than my house had, so there’s also the opportunity options you lose when all of your money’s tied up in a house. Now I AM waiting for a downturn, and in my area in Sonoma County, CA, asking prices in the type of house I’m looking for have dropped approximately $75,000 in the last 4 months. I’ve never seen prices drop this much this quickly in the previous two busts, but it may be because of the decreased write-offs under the new tax law. Who knows, but it’s worth waiting for. The trick is to buy at the right time. You can’t buy at exactly the bottom, but a good way to get close to that is to wait until it’s a buyer’s market again, and houses aren’t moving. Then you get in when you start seeing a firm uptrend again. Houses aren’t like stocks in that they don’t drop in value overnight, so you’ll have plenty of time to figure out when the situation looks good to jump into.
“Then you get in when you start seeing a firm uptrend again.”
That’s a good time to buy, but a miserable time to shop. The really good properties will have dozens of offers, many all cash and well over asking. You’re forced to either compromise with a less than ideal property, or make an offer they can’t refuse on a gem.
Karin,
You have a great story.
You are very much like Our Millennial who is waiting for his first chance. You took advantage of your first chance and did well. You missed the second chance and are now waiting for your third chance.
I wish you both well.
However, investments in 2008 crashed in tandem. The stock market crashed 50% with “safe” index funds. The speculators lost 90% in some cases.
I couldn’t even look during that time at my 401K since I know I was burned in 2001 because I owned JDS Uniphase and Lucent in 2001 when they went from $120 per share to $3 per share. I had bought at $6 per share and thought I was very wealthy until I was not. Stocks crash harder and faster than houses. Houses historically come back. Stocks may not. Lucent and JDSU never went above $20 after that.
Some of the people in the book “NomadLand” were speculative stock investors in 2008. They lost everything in the market and then lost their houses. Living in a van at 60 is not where I want to be. It happened fast due to the market plunge for them and then it happened slowly as they foreclosed.
That is why I have a nice cash reserve and I don’t pay too much mind to the wild Trump stock market gyrations.
Paranoia is a bad trait but it has served me well since 2001.
Karin,
Also, my brother lives in Healdsburg and refi’d to take some money out to add an addition to his 2 BD house.
He must of got lucky since the house he bought for 200K in 2003 was appraised at 850K 3 months ago. He was happy for the easy refi. I was shocked that values were 4X from 2003
It means that you may be waiting for a 75% drop to restore sanity
Go Millennial (and Jim Taylor)!
Karin, Millenial and all others waiting for the big crash:
My advice regarding home buying is buy when you can comfortably afford it. Trying to time the market is next to impossible. We have people on this blog who have been waiting for the big pullpack for 5, 6, 7 years. How did that work out? Unless you have the most accurate crystal ball in the world or you have plenty of dumb luck, timing markets is usually a no win situation. Proceed at your own peril.
John D ~ the key word here is when you START seeing a firm uptrend. We had bottoms in our area (East Bay in CA) from around 1994-1997, when most were too scared to buy. I bought that same house in December 1998, when the market had been heating up for a year. It was starting to get hard to find listings, but the prices had not yet really taken off. Again, housing is not like the stock market, in that prices do not crash or skyrocket overnight. You have plenty of time to notice a trend, especially when you look at the cookie-cutter developments where floor plans are identical. As for multiple offers, I sold a house I inherited not long ago, and received 17 offers on it. Most of the bidders waived inspection contingencies, took the house ‘as is’, took the mandatory sewer inspection and upgrade (in a buyer’s market, I would have had to pay up to $15,000 to do that), etc. I vowed never to be in that position, because you as a buyer are helpless. When the highest bidder on this house issued an addendum asking for $10K back at closing, and for additional repairs of items called out in my inspection report, I had 3 firm backup offers waiting. I gave them a 24 hour notice to vacate the contract, and said ‘next’. The high bidder quickly got back in line. I’m waiting for a cooling off in the market because I never want that to happen to me as a buyer. And a cooling will happen, as RE is highly cyclical.
Bob~
My second chance was what I invested my house proceeds in, which took off even more than my house had. I did NOT invest in stocks, but in hard assets which have never gone to $0. I had previously invested in stocks the same year I bought that house back in 1998, and I closed my account right after I sold my house. I’m still writing off the losses, $3000 per year. Never again.
Anyway, none of this is like Millennial’s strategy. To wait for RE to drop 55-75% means that basically you are never going to buy.
More to Bob (I just saw your next comment)~
Healdsburg is unique. From what everyone up here tells me, it was once a peaceful and small agricultural town. It has, in the last few years, exploded with the trendy set, and prices have skyrocketed. It’s more like the East Bay than any other town up here, including the town of Sonoma, which is a tourist magnet. The restaurants are exceedingly overpriced, the traffic is heavy, and parking is impossible in downtown Healdsburg. It is also the only town in Sonoma County that fluoridates its water. In short, it’s exactly what I was escaping from when I left Oakland/Alameda behind. I can’t stand Healdsburg, but it attracts East Bay types with too much money to throw around. Your brother got lucky, but if I were him, I’d sell and move to a more sane town.
Hi Karin + Other Perma Bears, not to be a downer on your perma-bear parade, but I figured I would chime in with some market data. I often read these posts which reference heresay, opinions or zerohedge articles. Check out Redfin Data Center (https://www.redfin.com/blog/data-center) for close to real-time data on Sonoma County. A few facts for those citing opinions and anecdotal evidence.
– Prices have never been higher. Median price in Sonoma County $650k in May vs. $585k in May ’17 vs. $530k in May ’16.
– Inventory has never been tighter. Inventory of new homes in Sonoma County in May (956) down from 1,299 in May of ’17 and 1,375 in May of ’16.
One of the largest tax cuts in our nation’s history was just pushed through which will be large-scale fiscal stimulas for the next two years (ending 2020).
Hi Market Realist~
I’m tracking houses that are 3/2, 1500+ SF, and 7500+ SF total lot size in Santa Rosa, Sebastopol, Forestville, Windsor, and a few other neighboring towns. Since March, the average asking price of comparable houses has gone down around $75,000. That’s in 4 months. I visit the open houses, instead of just looking at photos. I’m also working on my third ‘fixer’ (my sweetie’s house), and I know what I’m looking at. For example, there’s a gated community in Santa Rosa that I like, except for the fact that it has an HOA. These houses were mostly built in 1987/89 (and are well-built), and the community is prestigious. In January of this year, one of the properties, a 3/3 with 2272 SF on 0.66 acres listed for $939,000, and closed for $1,010,000 two weeks later. It had old wallpaper on nearly every wall, and the kitchen and adjacent living room had built-in bookcases that had been painted Forest Ranger green. But they had a bidding war. Now, just last month, another property, a 3/2 with 2118 SF on 0.72 acres was listed. The walls were stripped off paper and textured, had many updates throughout the house, and it has a killer back yard. The asking is only $834,000, but it’s still sitting there. It’s astounding to me how fast asking prices have been dropping around here – I’ve never seen anything like it. But perhaps the memory of the last bust is still fresh, and people want to get out while they can.
As for the tax bill, go back in our discussions. It may be a boon for the economy, but not for real estate in states with high state income and property taxes like California.
Karin,
Both Healdsburg and Windsor are within 15 miles of Santa Rosa where 5,000 homes burned down last year.
I sure the 5000 former homeowners are also driving up demand and prices. For now.
“Both Healdsburg and Windsor are within 15 miles of Santa Rosa where 5,000 homes burned down last year.
I sure the 5000 former homeowners are also driving up demand and prices. For now.”
Bob, then why are prices going down in the past 4 months? Also, very few homeowners have been able to start re-building. As in the Oakland Hills in 1991 (which I also experienced firsthand, with the fire stopping 4 blocks from my house), most people were underinsured. Here it appears to be worse, as the many new codes and regulations have added enormous costs to a re-build. Most of what I’m seeing is contractors buying up lots for sale, and then building several at once within the same tract. However, their pricing appears to be overly optimistic, as the houses remain sitting.
Here’s an example. I fell in love with 250 Darbster Place in Santa Rosa a year before the fire. I have never before or since seen a floor plan I liked better, but the yard was too small (we grow a lot of veggies, and have several potted fruit trees and berry bushes that need a permanent home). A year after we reluctantly passed on it, it burned to the ground, so we dodged a bullet there. Every other house in that development also burned to the ground. Over 8 months after the fire, all the owner has done is have the lot cleared. However, the lot next door (260 Darbster) was bought by a contractor who is currently putting the finish work in. It’s been listed for 32 days with no offers:
https://www.trulia.com/p/ca/santa-rosa/260-darbster-pl-santa-rosa-ca-95403–2085045651
Where are those 5000 homeowners? Most are still in temporary housing, or have left the area. Why aren’t they buying this house? The facts speak for themselves.
In 2010 perma-bears either had no cash/job or were too fearful to buy. Not just perma-bears, but general populace.
If prices drop again by 50%, same thing will happen…our perma-bear friends just won’t buy because well they won’t be able. (Remember, prices will drop because buyers are wiped out).
I was one of them. In late 2008, I was convinced it had much further to go, and did what Millie is doing now, which is ignore the long term trend. Luckily my wife was nesting at the time. A lot of lessons learned.
Actually, it’s about boom and bust cycles. Right now is the peak phase. Mentality of “price doesn’t matterâ€. Once we crash and enter capitulation (people buying high losing their homes or walking away because they are seeing how they massively overpay ) it will be the right time to buy.
My educated guess is a drop of 55-75% compared to today’s prices.
One issue nobody ever talks about when it comes to housing costs is materials. When material prices increase, finished product prices increase as well. Right now building materials are skyrocketing in price. Which means new home prices will continue to increase in price for at least the rest of this year and probably into 2019. Sorry Mr. Taylor, your hard tank just got postponed another 6 months.
“The U.S. Bureau of Labor Statistics producer price index for construction materials increased 2.2 percent from April to May, marking the largest monthly price increase since May 2008, according to a press release from the Associated Builders and Contractors. Similarly, a press release from Associated General Contractors of America says those price index figures rose 8.8 percent from May 2017 to May 2018—the steepest price increase since July 2011.”
Yes, the real estate crash does appear to have been delayed until at least next year–at the earliest. Coming months will give us a better idea of when the bubble will burst, but there is no evidence of a top at this moment. It appears that the powers that be (TPTB) may want to delay the next recession until after the November 2020 election. If that recession began in the last quarter of 2020, no one would know it until Jan. 2021.
My husband and I recently started looking into purchasing our first home. We have wealthy parents, but they will not help us with the down payment, so we were going to get a 3% conventional mortgage. As we started looking for a new home we quickly realized the only thing we could afford was Corona and further out. We immediately got spooked because #1 Anytime we tried to put an offer on a house they had several offers over asking price, basically asking for a bidding war #2 The neighborhoods we could actually afford were really bad! We rent in a nice area near Yorba Linda and we do not want our kids going to a school with 2 or 3 ratings. #3 Everyone seems to be in this sort of feeding frenzy, where they are pushing you to buy houses that are clearly not worth the price. It just didn’t seem right to us. I don’t want to pay $450k to live in some crappy house in a bad area just so I can say “I’m a homeowner”. I will wait my turn until the housing market corrects to a more decent level.
Racoomes,
In My humble opinion based on experience:
1) Buy in an area you plan to stay for at least 20 years. Housing is a long term investment My first house I sold after 6 years and broke even for taxes but likely would have come out ahead renting.
2) Don’t buy if you don’t have 1-2 years of cash in reserve for any downturn like we saw in 2008. It happened and may or may not happen again Ride it out and don’t walk away or sell and you will be OK. Our Millennial is waiting for you to walk away with a 500K loss. That should be enough incentive.
That’s outdated thinking. Suggesting someone plan for 20 years is foolish advice. Hardly any home buyer today is going to stay in a house for 20 years.
Perfect Weather,
You really should read the book “The Perfect Storm”.
That is what is coming.
If you don’t buy for the long term, you will drown.
Bob,
You should put down the stories and try reality.
That’s what’s already here.
I’m with Bob on this. The real estate market is cyclical, but you cannot predict when the cycles will happen unless you are part of the manipulation. What I’m referring to is the insiders with the Federal Reserve and their cohorts in crime. My parents bought my childhood home right after the JFK assassination, for less than $20,000 (I think it was $18K, but I can’t find the records for it). Its current estimated value is $800,000. It’s not that the house is worth more, though. It’s because the dollar is worth less. But that’s a whole other topic.
Millie is actually not that far off Bobby Boo..markets and actions are complex. Next down turn will be more complex in scope and depth than 08-09. Butt you probably haven’t seen that either. Here is a taste of what may happen Eyes Wide Shut Bobby-
https://www.zerohedge.com/news/2018-07-13/weekend-reading-renter-nation
But JHK II,
If we have stagflation like we did under Carter in the 70’s, housing won’t crash at all.
You should know that.
Racoomes – this is an easy one. Don’t buy in a bad area or stretch yourself too far for a good area. Either could lead to heartache. So wait and rent. And whatever you do, don’t put your kids in a bad school. That’s just one more thing to beat yourself up about in the years ahead.
Damn it, so close! If you would have said you are looking to buy soon the RE cheerleader could have gotten their gear on and start their favorite cheer. Last thing they want to hear is a potential buyer waiting for a correction! What a disappointment!
Yeah people just buy a home and worry about schools later on. Most people in bad areas are thinking charter school or something like that. The thing is for the kids the schools will make the biggest difference since they will be spending a huge amount of time there. Either than or sleeping. Awake time at home isn’t really that much, even for adults if you are planning on being active and not just sitting at home all day.
Well said.
Why wait when you can move out of state? California is an overrated bad deal and there’s no guarantee of a significant price reset.
You able to save more money for a larger down? Remember, closing costs are on average 2%.
The “expert” Millennial will laugh at this, but others who also claim to have some financial expertise predict that Bitcoin is doomed to become worthless: https://nypost.com/2018/07/04/why-bitcoin-may-be-soon-worth-nothing/
ROFL
For the 200. Time we have heard bitcoin is dead. Meanwhile they are working on getting Crypto ETF’s approved. Keep dreaming.
It’s interesting (if that’s the right word) how Millie is convinced real estate is in a bubble but thinks a worthless “currency” worth $6K per unit is a great investment. Worst case scenario, your house drops 50% in value, you still have a place to live. Worst case scenario, Bitcoin goes to $0…..you just lost all your money.
Each to their own I guess.
That’s right landlord. I see huge upside for crypto the next few years but a big correction for housing.
It’s also interesting how Millie justifies Bitcoin as a sound investment because Wall Street is pushing Crypto ETFs. The same people also sell REIT ETFs that will crash and burn if his real estate collapse prediction comes true. You think they care? They see suckers dying to part with their money and they’re designing a vehicle to make it happen. They make commissions off the fees just like the “realtards†he vehemently despises.
Millie, Bitcoin could go to the moon or it could go to zero. It could be Google or it could be AltaVista. It’s so high risk I wouldn’t even call it an investment. I suppose if you loaned a crackhead a hundred bucks that says he’ll pay you back double next week that could be considered a investment as well.
You are a gambler, not an investor. You scratched off the winning ticket. You have no skin in the game, therefore you are part of the peanut gallery.
I equate this to a hot table in Vegas a couple of weeks ago. The shooter was on fire. People were screaming and yelling across the casino. Naturally, it got my attention. I put down a few bucks, let it ride a few throws, then took my earnings. The guy craps out a couple throws later and wiped everyone out. This is essentially your Bitcoin “investment†story. I won that day but I’m not dumb enough to think that makes me a great “investor†when I gambled on some plastic chips that have no value outside that casino’s doors.
As Landlord said (and what I tell everyone) your primary home is not an investment per se (unless you treat it like one)- it’s a place to live. Having a roof over your head is not likely to go out of style. You can’t live inside a crypto coin, or a stock, or a bar of gold. If my home drops 50% tomorrow guess what? I don’t plan on selling so who cares. Do you really think in 20 or 30 years from now you will lose money?
If you really believed in the nonsense you spew, why would you ever buy a home? Prop 13 will eventually go away and the home you bought at a 50% discount will drop even more. You should just reinvent your “fortune†in that new Crypro ETF and go play golf with Elon Musk on the weekends in a couple years. ROFL!
Crypto is becoming another asset class. Don’t believe me? Wait and see.
Buying a house is likely your biggest purchase. Putting money on a monthly basis in stocks or crypto is just part of the diversification. Housing is extremely high at the moment. I got cash and will buy during the next crash for a large discount.
Crypto: dollar cost avg. is your friend.
We have seen nothing yet. They will blow the crypto bubble up like a motherfu….
I don’t need to provide more reasons for it. Marketwatch and co will do that for me with their headlines. Once that thing is set up the masses will chase the profits.
The whole you need a roof over your head argument is invalid. What about renting and saving a ton by doing so? Nobody ever needs to buy an overpriced house?
Son of a Landlord, Interesting as I do not know who created this currency; or what metals are used to mint it.
haha this guy clearly doesn’t get decentralized currencies
Karin, you are omitting one big detail…for how much you bought your home initially (<300k). Once you include all that detail, all your further "analysis" is just noise. You will never be able to buy a home for that price, not even close. Good luck.
Surge~
This is true, but 1) since my profits were invested in something else that then more than doubled, I’m way ahead of where I would have been had I held onto the house. And 2) I never wanted to stay in that area. Once I retired (i.e., now), I would have sold anyway and lost the lower property tax, which is not transferrable due to the fact that my situation doesn’t fall under Prop 60. I can buy a better house up here for what I sold that house for (and on a much bigger lot), and have tons of cash left over.
I live in the Cloverdale Dell Web development and the prices are way up and the houses appear to be selling quivkly. With 8,000 structures burned to the ground last year and the big increases in lumber prices boomer are taking their insurance money and down sizing up here paying all cash. I don’t look at data but anecdotally prices seem to be up 20%ish since the fire, not that I care.
I live in the Cloverdale Dell Web development and the prices are way up and the houses appear to be selling quivkly. With 8,000 structures burned to the ground last year and the big increases in lumber prices boomer are taking their insurance money and down sizing up here paying all cash. I don’t look at data but anecdotally prices seem to be up 20%ish since the fire, not that I care..
Dan~
I’ve noticed Cloverdale going through the roof, and figured it was due mainly to the fire refugees, as housing up there is much cheaper. Cloverdale, though, while being a very nice town, is super hot in the summer, and it’s an hour’s drive to the coast. My sweetie was seriously thinking about moving there, but I told him he’d do it alone. I couldn’t handle the heat. Plus, we judge every house by how far it is from Andy’s Produce in Sebastopol, and forget Cloverdale.
Update on my bay boomer inheritance;
(I am 58 yrs old and my mother was 86 when she died a few months ago)
My sister, brother and I inherited a house, in the ‘North of Montana Ave’ neighborhood a few months ago. the home was last sold in 1955 to my grandparents for $16.5K. My siblings and I decided to rent it out. We rented it out in under 1 week for approx $9,000 per month. Tenant had good financials and paid 6 months rent up front on a 1 year lease.
All 3 of us will split the $9K per month and keep some on reserve for the inevitable repairs, taxes, etc.
Because of Howard Jarvis (aka: Prop 13) the tax base which we inherit is $3.5K per yr.
I recall the following market prices for our inherited home as follows
1975 value was approx $70K
In 1990 value was approx $700K
In 2013 value was approx $1.8M
Land value today is $3.3M and we plan to sell in 1 or 2 yrs.
Home price escalation as you can tell in this neighborhood is significantly higher than the normal ‘westside’. We have decided to take the ‘risk’ that home prices will continue to increase in this neighborhood for a couple more years, but are willing to risk that values drops as well. in the meantime, collect rent.
There must be tons of other boomers out there (age range 40’s – 60’s) who are inheriting homes with enormous value over what their parents paid for in the 60’s and 70’s.
Congratulations again on winning the CA Prop 13 and US tax system housing lottery.
As long as she didn’t have over $11.2M in assets including the house, you can avoid the US Estate Tax.
I am very sorry about your mother.
If you haven’t already, get an appraisal for value of the house when your mother passed away. That 3M will be the new basis when you sell. You’d hate to miss out and have the basis stuck at 16.5K and pay Capital Gains on the difference
Sorry about your mother but no one cares about your inheritance.
QE,
Wow, that’s amazing!
Curious; can you expand on the “good financials”? What does someone make where they can afford 9k/mo. in rent? That’s a serious outlay.
For our Bay Area friends: you are number one! You run the biggest shithole in the country!
https://www.google.com/amp/s/www.inquisitr.com/4972351/san-francisco-residents-make-16000-feces-related-complaints-to-city-including-20-lb-bag-of-poop-on-sidewalk/amp/
Read it and enjoy the pictures. Can you imagine the smells? Does that not increase your appetite to buy a 1mio crapshack in the midst of the biggest crap hole?
That’s also true about Oakland. People just squat on the streets in broad daylight and drop one. It seems that the more crowded and trendy and disgusting an area is, the higher the home prices. Go figure. You couldn’t pay me to live in the East Bay anymore.
It also happens in Santa Monica, another very wealthy, liberal town, full of homeless.
One morning, around 6 a.m., I was walking along Wilshire Ave. I passed an alley, and saw a big, black woman squatting to take a dump. She gave me a big grin.
Another time, early one morning, I passed a homeless man lying on the sidewalk, on 5th Street. He tossed a cupful of urine past me. It missed me, thankfully.
+1
Millenial,
Yeah it does seem like just a matter of time before reality catches up to perception here. Yeah you still have the nice weather and diverse culture, but you also have homeless literally everywhere defecating, getting into fights, stealing, chasing people, screaming, etc.
Quality of life is higher where the weather is worse but you do *not* have homeless camps everywhere.
One would have to assume at some point Common Sense would Prevail and the voters would elect someone willing to roll back these ridiculous protections and actually do what is needed to clean up the streets. Crazy liberals that supported these ideas are now facing the consequences and I’ll bet they’re not very happy. On paper it may have seemed like a good idea (to their ideology) but they’re also some of the worst NIMBYs around, so, maybe, hopefully, something can be done to clean up this major problem which is now a health hazard.
I’m waiting to see if Gavin Newsome wins the governorship. If yes, he will be Jerry Brown on steroids. White people not welcome, unless you’re the ruling class. So great, just see what happens when we all leave. Where’s your money gonna come from then, fools?
Yeah Dan…. I really feel badly for these people though. I think we need to build shelters quickly and then require them to go there and also get mental help and services.
It’s so sad; I used to love going up to the bay area on weekends. Have lots of friends that lived there, but, most have now gotten married and moved out to the suburbs.
One of my friends just closed on a property in San Jose; I did the loan. Went way over asking price (1.2mil), waived appraisal contingency and we had a 7 day lonly loan contingency. Crazy competition up there from Asians (this is NOT a myth). I wouldn’t want to live up there if you offered a million dollar house to me for free; I love socal too much.
Boooring!
well being that I grew up up in S. Calif and own in the city, I can tell you honestly that Los Angeles is a shithole without culture and now has litter filled beaches and water. The beach is the only thing LA has….the mountains are a bunch of deserts with bark beetle trees and the desert.
Knowing RE real well by being a market timer based off economic data. Enjoy your gains but 19-20 will be a different story all together. I tell all my friends down there to enjoy your shit hole, its just getting shittier…
cd either provide details or your predictions are as useless as Millennial’s
The biggest mistake long term homeowners admit to making …. when they purchased their home, they should have purchased a more expensive home in a better location. If they would have stretched their fiances a little farther, they would be in a much better financial situation today.
95% agree. This strategy requires belief in yourself, but will reduce want/need to move in the future and doing all the unnecessary selling/buying.
5% of my disagreement is because I never agree 100% with anyone on anything…there are always special cases, and there always people that stretch their finances way too thin…
But generally, this is a great way to approach buying a home.
I am a new buyer in Orange County. I have about 200k to put down but am scared of the market. Are interest rates going up? What would the value of a 1 Million dollar house be worth if rates go to 7% ?
$812,455.69, unless you were born during an eclipse. Then all bets are off.
Looking to move myself, just waiting for the correction to hit, possibley by Spring 2019. Rates going up will definately make home values go down, higher payments shrinks the buying pool which makes sellers lower the price. Irvine, Dana Point, San Clemente, Lagua Nagel, watch these markets closely, aready seeing home lingering on the market longer, and some small price drops, just to reduce the perception that the house is over price and newly listed to fool dumb buyers.
Be afraid–be very afraid. Orange Co. real estate is still going up and will likely go up for another year, but look out below. By 2020, prices will likely going down hard. The top and bottom will not be that hard to identify despite what Mr. Landlord and others say.
Baron Rothschild, an 18th-century British nobleman and member of the Rothschild banking family, is credited with saying that “the time to buy is when there’s blood in the streets.” Rothschild made a fortune buying in the panic that followed the Battle of Waterloo against Napoleon.
Buy when you are scared to buy because of falling prices rather than scared to buy because of rising prices.
Gary~
Yes, Rothschild did make a fortune after Waterloo. In fact, that was the seed money that catapulted the Rothschild family into being one of the top capos in the evil empire of families that control the world. But what you neglect to mention is that Rothschild manipulated the panic. Napoleon lost at Waterloo, and Rothschild sent one of his agents back to England to spread the rumor that Rothschild was selling bank annuities, implying that England had lost. A panic developed, and as British annuities plunged in price, Rothschild began buying them back for pennies on the pound. He made a fortune, and wiped out many. He probably had a good laugh about it too, the evil bastard.
Anyway, don’t just buy when no one else is buying, because there might be a reason they’re not buying. For example, a neighborhood such as Detroit may have gone terminal, and may not turn around again in your lifetime. Instead, wait for the bottom, then buy when you start seeing a firm turn-around. You don’t have to buy at the absolute low, as long as you buy near the bottom, or somewhere on the way up.
“Yes, Rothschild did make a fortune after Waterloo. In fact, that was the seed money that catapulted the Rothschild family into being one of the top capos in the evil empire of families that control the world. But what you neglect to mention is that Rothschild manipulated the panic. Napoleon lost at Waterloo, and Rothschild sent one of his agents back to England to spread the rumor that Rothschild was selling bank annuities, implying that England had lost. A panic developed, and as British annuities plunged in price, Rothschild began buying them back for pennies on the pound. He made a fortune, and wiped out many. He probably had a good laugh about it too, the evil bastard.”
What is your source on this? Genuinely curious. When I look into it, all I find is a vast conspiracy theory that gets nuttier the more I read.
This is from his wiki page:
“Research by the Rothschild family [yeah I know – I wouldn’t call them a good source either] and others [Niall Ferguson] has shown that this story originated in an anti-Semitic French pamphlet in 1846, was embellished by John Reeves in 1887 in The Rothschilds: the Financial Rulers of Nations, and then repeated in other popular accounts like that of Morton and the 1934 American film directed by Alfred L. Werker, The House of Rothschild. Many of the alleged facts are clearly untrue. For example, the size of the market in government bonds at the time could not have supported a gain of anything near one million pounds.”
And then there’s articles like this:
https://rense.com//general88/hist.htm
…no surprise that there are many mentions of the Illuminati. When I try to research the crazier pieces of it, nothing pans out, or it turns out to be 99% fiction with a tiny grain of truth. Like the quote:
“I care not what puppet is placed upon the throne of England to rule the Empire on which the sun never sets. The man who controls Britain’s money supply controls the British Empire, and I control the British money supply.”
Turns out there is no evidence whatsoever that he ever said that, and it flat out isn’t true anyway, but it’s repeated ad nauseam on the web. Sorta like Dan Quayle quotes being attributed to George Bush. May as well just make stuff up.
Interesting, at least.
“You don’t have to buy at the absolute low, as long as you buy near the bottom, or somewhere on the way up.”
I’d also add somewhere on the way down near the bottom. It’s virtually impossible to time a top or a bottom of any market. Which is why the perma bears never capitalize. In 2010 housing in most parts of the country had stabilized. Let’s say a house that was $500K in 2006 could be had for $400K in 2008, $325K in 2009 and $300K in 2010.
At this point, investors started buying at $300K. There was no way to know if $300K was the absolute bottom. It could have gone to $290K or $280K. But the general trend could be seen that $300K was more or less the bottom. No sane person thought it would go to $150K. The rate of decrease had flatlined. And there was huge upside potential. And sure enough by 2012 that same house was selling for $350K. And in 2018 it’s worth $600K.
But the perma bears, being perma bears, didn’t buy at $300K. They were convinced it would fall forever and ever. I remember people predicting $100K beach houses in CA and Dow Jones under 1000. Just insane stuff like that.
Smart investors risked losing another $10-20K in order to potentially make $300K. From a risk/reward perspective that deal is crazy good. And that’s how you make money, whether in real estate, stocks, art, collector cars, annuities, whatever. You look at trends and buy/sell based on those trends, not trying to squeeze out every last dollar from a deal.
Mr. Landlord~
Yes, but you never know when you have hit bottom. People have lost fortunes thinking that something can’t go lower, which is why you need to make sure you’re seeing a firm recovery before you buy.
I bought I don’t know how may shares of Calpine at $12- $14 right after 9/11. It had come down from 70 (maybe higher, but that’s when I started watching it). I had put in a buy at $14, and my sweetie said I’d never get it at that price. It kicked in by the next day. Years later (and not many), I sold at $0.22/share. I’m still writing off the losses. With stocks, they call it ‘averaging down’. I call it complete stupidity.
Interesting. This site took my entire reply regarding conspiracies and Rothschild’s manipulation of the market after Waterloo, and deleted it. Is this site controlled by the bankers that run this country? Don’t want the truth out?
Am I now on a watch list? Will my posts be banned?
Karin,
You are not the only one. I tried to post sometimes few times and it did not work. I also had posts regarding TPTB and they also disappeared. It always happens when you hit to close to home. I know; by accident!!!….:-))))like Seth Rich.
Flyover~
Well, at least I’m not the only one. The Rothschild manipulation after Waterloo is old history, but I notice they’re still protecting their cover story of how they manipulated the market. Funny, because their influence appears to have dwindled considerably in the last few decades. However, the TPTB’s use of the term ‘conspiracy’ to psychologically manipulate people into not looking into the facts, and to end discourse on ‘sensitive’ issues, still works. The CIA came up with the term ‘conspiracy nut’ right after JFK, and it’s still working for the people that control this country 55 years later. It’s amazing how few people have figured this out.
Guys,
Don’t start looking for reasons not to buy. Don’t listen to the perma-bears who are saying there will be another downturn. It’s all about maga now. Also, there is an upcoming pot boom in California. Legalizing pot means housing will skyrocket. This time is different. The Asians are coming with buckets filled with cash ready to buy. This is also the year when millennials will go out and buy in droves. We have rental parody. I meant parity. Just make your down payment x in your equation and it will always match your rental rate!
Contact your local real estate agent and lender. My bet is they will tell you right now is a great time to buy. Because it is! Interest rates are still low. Rates will never be this low again. Take advantage! You are also a man if you buy and no longer a boy! Be a man! Buy now, take the risk! Wait, what risk?? There is no risk. Just look at it long term. Who gives a flying burrito if the market goes down after you purchase a home? After all you have a home! The grass will be greener and happiness will start overflowing you. Don’t waste your time looking at rental rates, median household income, days houses sit on the market and political stuff. Just buy. You will be fine. Prices don’t matter that much after all. I probably forget a lot of reasons why buying is a great idea. Why? Because the reasons to buy are endless. Also, if there is a good school nearby you must buy. Why? Cause good schools are a great reason to buy. They are rare nowadays. Maybe one day we won’t have any good schools anymore? No way! There will always be a school that’s a little bit worse than the school that’s in close proximity to your house. Is the house you look at unique? It’s is??? A unique house? Holy guacamole! If you have the chance to buy a unique house you must buy! Again! Rare!!!! Hope my tips help. If not, I have many more!
You have a LOT of spare time on your hands. Always retyping empty phrases that you’ve typed dozens of times before.
And don’t forget
A) Everyone wants to live here.
B) The entire states of Michigan and Ohio are preparing a mass migration.
C) Weather here is always great.
D) There may be a bubble in ______, but not here.
E) California population is growing.
F) USA economy (based on RE market and equity-fueled
consumer spending) is strong. – 1,000 maids are
being hired in hotels each day.
G) They aren’t making any more land.
H) Housing had reach a new permanent plateau.
I) Prices are reflection of buyer’s demand.
J) You had to buy now or be priced out forever.
K) Prices will rise 20% for ever.
L) Foreign buyers will keep buying.
M) Low interest rates will stay low forever.
N) Renting is for losers.
O) Real estate NEVER goes down in value.
P). David Learah said………
lol.. this is so true… there’s always some reason they say prices will stay high or go up.
An asking a real estate agent whether it is time to buy is like asking a used car salesman if the car is reliable.
Millie,
You are a national treasure. Don’t ever change.
Ha! Good one, oceanbreeze. And Millie, you’re getting a little boring. Come up with something new. Please!
Last time average 30 year fixed mortgages were 7% was in March 2002. Anything can happen of course, but the probability that after 18 years, suddenly mortgages will spike up again is very unlikely.
The only way that happens is if inflation starts going up. And there is no indication that is happening. Wage growth is 1-2% right now, even with full employment. People don’t appreciate the tech revolution we’ve had in this country (and the world really) in the past 25 years. We are so much more efficient at everything, that the old rules of inflation simply no longer apply. What used to take 100 employees to do can now be done by 10 employees. That’s a huge factor in the economy and it’s never mentioned. And I’m not just talking robots taking over assembly jobs. I’m talking logistics, marketing, customer service, health care. Everything we do now is done much more efficiently that in was done even 15 years ago. And that efficiency is the thing that has kept inflation in check and willc continue to do so for the foreseeable future.
All that being said, if you’re scared to buy, don’t buy.
And when Amazon starts same-day delivery using drones, people won’t have to leave their homes to go shopping.
Still about 50% wrong Mr. Dreamlord
Learn about inflation before you write about it..
https://www.theinvestorspodcast.com/blog/jim-rickards-inflation-can-return-much-faster-than-you-think/
Wrong answer, back to economics 101 for you….Zero wage growth vs PPI released today just debunked your theory. Also, if your counting on 4% 30 yrs for the next 4 years, your screwed….most people can’t see past the trees in the forest….
Jonathan,
You ask an impossible question; nobody knows what rates or prices will do tomorrow, next week or next year.
What is your motivation for buying a 1 mil house? Urgent family need? How are your finances? PITI on an 800k loan will be around $5200/mo. After the 200k what’s your reserves looking like?
There are so many moving parts to this simple question; it’s impossible to know. If it makes sense for you financially based upon your income and assets; and not looking to speculate (i.e. flip or short term buy) then go for it. If it drops 10% in the short term do you really care on that “paper loss” if you are playing the long game? On the flip side; every month you are paying down principal.
Lots of variables to consider and don’t listen to the extremes on both sides.
RE will crash 75% vs RE never goes down (although very few on here say that).
If it makes sense for you and your family, I say go for it.
5th largest economy! Perfect weather! Oh wait. . . Heat wave sparks major power outages around Los Angeles, officials say . . . http://www.latimes.com/local/lanow/la-me-ln-ladwp-heat-outage-20180707-story.html
I enjoyed it; waded in my pool all day with my kids and had quite a few beers.
That’s the same thing people do in the rest of the country. The California lifestyle really isn’t anything special.
And pool weather isn’t really THAT much longer in LA than elsewhere. Pool weather lasts May-Sept in most of the country. What is it in LA April-Oct? So you get an extra couple of months with the pool compared to everyone else.
Other than S. Florida and maybe parts of Arizona, there really isn’t a lot of year round pool weather in the mainland US.
I think Dan was just mentioning he escaped the heat wave by enjoying his pool. You generally get heat and humidity like this for a few weeks of the year in socal. The same can’t be said for the rest of the country…they get this weather for a few months. And that is one of the reasons you pay the premium. Perfect weather!
Crazy how many people argue about their crap shacks being worth 1.5 million … even if the house is new in California, the wooden piles of crap that are called homes are built so bad they should depreciate like a car instead of appreciate in value. I think soon we will see an adjustment which will be painful for decades.
Just for fun I looked at some higher-end properties in my area:
https://www.zillow.com/homedetails/30425-Via-El-Delora-Temecula-CA-92592/18174838_zpid/
That’s located in what is considered a “just okay” school district in Temecula (5/8/8 Great Schools ratings), although a perfect location for everything else.
And then I compared it to one in a “desirable” part of LA:
https://www.zillow.com/homedetails/4157-Beethoven-St-Los-Angeles-CA–66/20445791_zpid/
LOL
Even better:
https://www.zillow.com/homedetails/41725-Avenida-Ortega-Temecula-CA-92592/69278163_zpid/
A little out of the way, but better school district. I showed it to my wife and she wants to buy it. I talked her down.
To John D re: 41725 Avenida Ortega in Temecula – imagine trying to maintain that on Jerry Brown’s 55 gallons/day/person water restrictions.
That is an awesome house. If your wife doesn’t buy it, I just might. Although for that price, I would expect a swimming poo. Offer $75K less for a pool allowance 🙂
I’d worry about security in a place like that. Seems isolated. What if a gang of home invaders broke in?
I suppose if you have a large family, with several adult sons, and guard dogs and guns and electronic security, it’d be okay.
Son,
What’s more likely? Gangs from LA/SD driving an hour plus to the desert to rob a place, or driving to Beverly Hills, La Jolla, Pasadena, etc to rob a place? And besides in a place like that, much better chance someone has a gun (or two or 3) vs the ultra lib residents of BH, LJ, Pasadena who think guns are icky and have GUN FREE HOME signs on their front lawn. You’re a criminal….which option sounds more appealing to you?
Landlord, agreed – fruit trees everywhere but no pool? They had weird priorities. It’s been sitting for a while so maybe they would take less.
Karin, you are allowed water corresponding to the amount of landscaped area. Probably not enough for a lawn, but at least they’re acknowledging that some people have land. A bigger fight would be with rabbits. They’re the bane of large lots out there. I know a guy with 2 acres who stands outside in the dark with a night vision scope on his air rifle. If I bought that place, I’d rip out most of the fruit trees and go all succulents and palms. I have no desire to be a farmer.
Mr Landlord you have to understand the mindset of the Santa Monica crowd. They lack perspective on what it’s like to live outside of a collectivist locale. They are so frightened by the prospect of independence that logic can’t get due consideration.
John D~
Yes, but the inside of the house only gets 55 gal/day/person. Imagine trying to clean that entire interior when a shower and one load of laundry exceed your limit.
@ John D…“It is hot as hell during the summer,â€
Your reply: ‘Not really. Compared to the coast, it’s hot. It’s nothing remotely like Phoenix. But we also don’t get four months of June gloom. I’ve lived in both and much prefer the inland climate.’
Much prefer the inland climate? Not the beach weather? Said no one ever!
“Much prefer the inland climate? Not the beach weather? Said no one ever!”
I just said it. “Beach weather” is too cold for me for much of the year. I grew up inland, mostly in the water, but lived on the coast for many years. The best part about inland climate is the warm evenings. Through July and August you can go for a swim in 87 degree water at 8pm and not be chilly. On the coast, it starts getting unpleasant at 6pm even in late summer. With the constant breeze we get in Temecula, it’s perfect sleeping weather without AC. When I lived in Del Mar it was miserable at night – still, muggy air, even though it was supposedly slightly cooler.
I now work in Carlsbad, so I experience your “ideal” climate every day. Obviously it’s better than Temecula during the day, but only in the summer, and I’m in a climate-controlled office anyway, so it doesn’t matter what it feels like outside. I happily trade the better summer daytime on the coast for warmer evenings and better sleeping. Not to mention outdoor parties nearly year-round – 90 degrees (average summer high) is perfect when you’re sitting under an umbrella by (or in) the pool with a breeze and a cold drink.
“I just said it. “Beach weather†is too cold for me for much of the year.”
What he said!
I live close to the beach and boy am I cold. I cant even drive anywhere close to the beach without turning my car heater on to the max. I bought an extra 12 volt seat heater for my car. The seat heater that came with my car just didn’t cut it. That addition makes it somewhat bearable during these cold summer beach days. And why do these beach people do that to themselves anyways? You know what I am talking about. All these weirdos walking on the beach in their their winter jackets, beanies and gloves. And you hear these stories of some people actually going INTO the water!! Nuts!
BTW, that term ocean-breeze needs to be changed. Everybody knows that this is actually an IE-breeze. You know the CONSTANT Inland Empire breeze. That’s how it works folks. That ocean-breeze is actually more like a strong Siberian wind at the coast. But in the IE it feels every nice. That’s why they don’t have/need AC’s in the IE. Some older people living in the IE still remember the good (bad) old AC’s days. But these days are loooong gone. I mean, why would you pay more for electricity just to be cold?
No wonder there is an exodus happening. Normal people who are constantly cold at the coast and sick of the muggy weather and bugs want to live in a pleasant and warm climate. These normal people are moving to the IE in droves. Only the weirdos will remain at that Siberian cost with their winter gear.
Yes, you might make a few bucks more at the (Siberian) Cost compared to the dream land (IE) but that’s actually a disadvantage. People who live close to their high paying jobs are missing out on the downtime (the 2 hour round trip each day). Who doesn’t like downtime?
“I live close to the beach and boy am I cold.”
It’s exactly like being in a room full of adults and having a 10-year-old walk up and try to insult you.
We all have our heat preferences.
My wife wears a sweater when the house is 75 Deg. I am in shorts and a t-shirt.
I grew up in Santa Barbara for high school and college.
We escaped the June (and often May/July) Gloom by driving 1/2 hour over San Marcos Pass to the Red Rock swimming pools on the Santa Ynez river. It was just the right temperature and sunny.
August, September and even October were good times for the beach.
It was too cold for us wimpy high school kids during the June Gloom months when we had sunny alternatives inland.
December-April was cold flood season (way back when it rained) so we broke out our down jackets and walked on the beach. 🙂
Temecula is booming. Big houses on big lots w/ nice neighborhoods going for 500k-600k. Lots of people are commuting to SD from there.
Some Chinese money launderer will buy the “desirable” one soon enough.
The price on that LA house is a typo. Nobody in their right mind would pay more than 130k for that shitbox.
It’s legit. These are in the same area:
https://www.zillow.com/homedetails/12430-Caswell-Ave-Los-Angeles-CA–66/20448742_zpid/
https://www.zillow.com/homedetails/4125-Mildred-Ave-Los-Angeles-CA–66/20446552_zpid/
https://www.zillow.com/homedetails/3867-Lyceum-Ave-Los-Angeles-CA–66/20449087_zpid/
https://www.zillow.com/homedetails/12222-Greene-Ave-Los-Angeles-CA–66/20447192_zpid/
Touche! Love it.
WOW- what a contrast! What would that little palace in Temecula cost in a desirable L.A. County area? The price difference could pay for a good private school for one or two kids, easily. If it wouldn’t mean an excessively long commute, and there are good private schools in the area, a family might want to consider it.
The way I look at it is this – would I want a 5-minute commute home to that LA house, or an hour to the Temecula house? I’ll take the hour and consider it downtime.
temecula is boom bust 101 town, hotter than the Sahara, allergies up the ying yang, no water, a virtual desert now with a bloom of over-sized homes that most people will lose in the next 5 years….
Sitting in traffic = downtime!! ROFL
I almost fell out of my chair.
That needs to be advertised!
Can’t afford to live close to your high paying job at the coast? Move to the inland empire. Where the AC is your friend and the 2+ hour round trip each day is the most relaxing/rejuvenating time in your day. After all, who doesn’t like to get in the car for an hour each morning and night……kick back, put your feet up and listen to your favorite music and rest your eyes. And when you wake up you are in the IE in 110 degrees! Call now, our overpriced DESERT homes go fast these days! As a bonus….we have schools!!
“hotter than the Sahara” and NO WATER… no wonder Temecula is so cheap relative to the coastal cities. Might as well be in the outer suburbs of Chicago, where at least you don’t have water use restrictions.
John D,
Not everyone commutes to work every day. This is one of the big misconceptions I keep reading here and other housing blogs. OMG that’s like 2 hour commute each way, that’s 10 hours a week in your car!!! Yeah it can be. Or maybe you work from home and it doesn’t matter where you live. Or maybe you telecommute and only go into the office 3 days a week and can show up at 10 and beat a lot of the traffic.
The majority of people still do the 9-5 M-F at the office thing, I get that. But it’s nothing close to 100%. There are millions of people all across the land who rarely if ever drive to an office.
And the other thing is, everyone always assumes everyone works where they work. I work downtown, therefore, everyone else must work there too. Well, not really. In this case, maybe you work in Temecula or Oceanside or Escondido. I know it may be shocking to some, but there is a wold outside of LA and SD. There are all sorts of people who own businesses in those towns or are teachers or nurses who work in local schools/hospitals or have a law practice or CPAs, etc. Yeah there isn’t a Fortune 500 company in Temecula, but not everyone works for a Fortune 500 company. Few people ever get rich working for a corporation, it’s the last thing you want to do long term.
cd – “hotter than the Sahara”?
Average high in August is 91 and there is a constant breeze.
“Sitting in traffic = downtime!! ROFL”
Grow up, Millie. Would I rather have a 5-minute commute? Of course I would. I would also rather live in a 4,100sf house with a resort back yard than a 1,500sf house on the coast. The house won out. So I buy fun cars and subscribe to Spotify. I also rarely sit in traffic – I choose my own hours and there are all kinds of back roads.
Landlord,
“Few people ever get rich working for a corporation, it’s the last thing you want to do long term.”
Why would working for a large corp. be the last thing you want to do long term??
I have been working for a large corp. since 7 years and it has been fantastic. Long tenured employees typically accrue extra vacation time. That alone is a significant benefit for staying at your company. The avg. american gets what…..10 days paid vacation a year? At a larger corp that is very different…plus you typically get sick time, floating holidays and work-from-home days.
Besides that, larger corporations offer more opportunities to move within the company and most even encourage to move within departments. You build your network and get approached by peers or directors that know you from projects etc. If you build your brand/a good reputation, you are sometimes just a lunch away from your next step (sure, you still have to do the HR formalities but if the right person wants you its pretty much a done deal).
I am curious to hear why you think this is a bad idea to stick with a larger corp long term. Even if you move on after 15-20 years and show a progressive career at a large corp. you pretty much can get in anywhere after that.
The way i see it, your career builds the foundation. It pays all the bills and the excess cash you generate from your career is to invest and build passive income. Key is to keep your overhead costs low. Dont sign up for a bunch of stuff that your have to pay for monthly (I pay for used cars and used phones in cash). Dont lease-you lose track.
Rent cheap or live with your parents. Pretend you are much poorer than you actually are. Its amazing how people instantly open their hands if they find out how much cash you have.
Dont marry the wrong partner and divorce. That must be one of the biggest cash burners besides buying overpriced real estate. Stream your shows/movies and cut the cord. Wait for a nice market crash in real estate and buy your house for a 55%-75% discount. Buy very low and rent out a couple of rooms.
Milli: Dont marry the wrong partner and divorce.
That advice is about as useful as “don’t get cancer.”
Well, duh. Sure, it’s bad to get cancer, or a divorce. But it’s not something people can choose to avoid.
I’ve come across dozens of men over the past decades who’ve told me they were surprised when their wife hit them with divorce papers. These men never cheated or abused their wives. They thought they did everything right. They thought their wives had strong traditional values and would never file for divorce. And yet, they did.
You can’t “choose” a wife who will never divorce you, Milli. You can only choose a wife who will never divorce you, until she does.
(PS: Women file 70% of all divorces.)
I speak as a man who’s avoided divorce the only sure fire way. I never married.
Millie,
You kind of made my point for me amigo. You’re giddy that you have accrued some extra PTO over 7 years. Wow!! Way to live large man!! That’s small ball thinking, oooh I’m so lucky I have paid sick days. Come one man, dream a little. You think the Bezos and Gates and Zuckerbergs of the world were figuring ways to get extra sick days? Obviously not everyone can be a Bezos. But most people who spend 30-40 years in a cube moving up the corporate ladder can certainly do better. What’s the end goal $150K a year and 20 sick days a year? 25 sick days? ooooh la lah!!! You will never be rich working for someone else. You may be comfortable. But is that really all you want out of life, comfortable? Not me. That’s what I meant by my statement.
And FWIW, the best vacation plan I ever had was at a small startup where there was no vacation plan. Employees just took time off whenever they wanted. Nothing accrued, no use it or lose it by Dec 31 nonsense, no asking for time off 3 months in advance to be approved by 3 sets of managers. You wanted a week off, you took a week off. Done and done. And the company also paid 100% of health insurance costs for employees and family members. Good luck finding that at Big Corp, Inc.
Agree with you on finding the right partner, that is very important. Leasing gets a bad rap because people get ripped off. A car lease is pretty complicated, lots of moving parts. You have msrp, residual, money factor, capitalized cost, capitalized cost reduction and so on. To the average American, it’s all a jumble of numbers so they get bent over by car salesmen. To someone like me who worked in finance for 10 years, it’s basic math. Which is why I lease a $60K car for less than what most people pay for a Honda Accord. Deals are always out there whether for cars, real estate, whatever. You just need to go find them. But for people like you who are content with accruing PTO days until you retire at 70, those deals are never acted on.
“Milli: Dont marry the wrong partner and divorce.
That advice is about as useful as “don’t get cancer.—
Why? Getting cancer is kind of out of your control, no? Marrying the wrong partner is very much in your control.
I saw many couples that got married and there were red flags from the beginning.
For example, if you are like me, a cheapskate, who buys assets low, who always bargains and always looks for a deal, who does not spend much on luxury….well, in that case you probably dont want to marry someone with expensive taste.
Here is some wisdom…..if your partner has some bad habits, expect those bad habits to get worse when you marry him/her. Marriage is like a constant game of finding a compromise but you still always feel like you are giving more than you take.
Of course, someone who has never married, has no idea what i am talking about. So you take some weird examples of failed marriage to justify that never getting married is somehow better than staying single. Thats fine.
What do i know. I am only married since a few years. Maybe one day i wake up and the divorce papers are laying next to me in the bed and the wife is missing. Well, I will let you know how it goes. Just stay on this blog for the next 20 years or so.
Milli: Getting cancer is kind of out of your control, no? Marrying the wrong partner is very much in your control.
No, marrying “the wrong partner” is not “very much” in your control.
Yes, you can improve your odds of avoiding divorce, a bit. Just as you can improve your odds of avoiding cancer, a bit.
But are you familiar with the manosphere? I can direct you to sites where dozens of men say they married women claiming to be “good Christians” who “didn’t believe in divorce.” Who said they didn’t care about worldly goods, only about their standing with Jesus. Men who were married for 15, 20, even 40 years (sic!), and then were hit with divorce papers.
No, women’s feelings are not “very much” in any man’s control. Women change as the years, and decades, roll by, in ways no man can predict.
You have delusions of being able to predict, and prepare for, the world around you. You imagine you can predict the real estate market, crypto currency futures, and how your wife will feel about you 10 or 20 years from now.
You keep saying, “It’s easy!” and then present a few surefire rules to getting rich and staying happy.
You know what they say. If you want to hear God laugh, tell him your plans. And God is having a ball listening to you.
Landlord,
So, working for a large Corp long term is bad because we have to think big (zuckerberg, bezos) and because start ups have no vacation policy! Got it!
How is the “think big thingy†working out for you?
Let’s see, you live in Spokane and drive a leased car. It sounds like you are just inches away from being the next zuckerberg!
What do you do again for a living besides running rental units?
Son of a landlord,
Somehow I doubt that you find the other side of the story on these manosphere websites. You claim women change and that is up in the air if women will divorce men. These men that you mentioned that were hit by divorce….. they are claiming they did nothing wrong right? Wouldn’t it be interesting to find out what the women have to say about that?
Also, the change of feelings doesn’t explain a divorce. Love is a choice not a feeling.
Milli: Wouldn’t it be interesting to find out what women have to say about that?
No, the reasons are not “interesting,” but banal. The two most common reasons given by women for filing divorce are either “emotional abuse” or some passive event like “The marriage just came to an end.” Both those reasons translate to, the woman just didn’t feel it anymore.
(Women file 70% of divorces, BTW.)
the change of feelings doesn’t explain a divorce. Love is a choice not a feeling.
Sounds like you’ve been listening to KFI-AM’s The Jesus Christ Show. The host is very big on “love is a choice.”
But that’s a very rational, masculine outlook. For women, it they don’t feel it, they don’t feel it. I’ve yet to meet, or hear of, a woman who, if she doesn’t already love a man, or has stopped loving him, can “choose” to love him.
You think you chose a wife wisely because she’s frugal. But that’s no guarantee of a woman’s long term commitment. If her feelings change, she might decide to cash out of her marriage and go be frugal with another man.
You keep saying, never say never. By that same token, never say you’ll never end up divorced.
“No, the reasons are not “interesting,†but banal. The two most common reasons given by women for filing divorce are either “emotional abuse†or some passive event like “The marriage just came to an end.†Both those reasons translate to, the woman just didn’t feel it anymore.”
Dude, are you just trolling or do you actually believe this?
You just told me that on Manosphere some dudes say they just got hit with divorce papers out of the blue and have no idea why. And your explanation is the women didnt feel it anymore. So no reason to find out what the women have to say about their marriage?
You dont even give yourself a chance to look at this from an unbiased perspective. Thats your first mistake.
Your second mistake is that you think love is just a feeling that can come and go (if you are a woman). You make it way to easy for yourself.
A feeling can obviously come and go. When i look at investing in a coin (for instance a privacy coin that cannot be tracked) i might feel good about this coin because of the privacy features. On the other hand i look and the upside potential and the “hype factor” and might feel different about it because i dont see it going up in value as much as other coins like Cardano, Litecoin or big daddy (BTC). Same with micro breweries. I might feel really good about a new micro brewery because it has that one or two beers i really like. Well, these micro breweries pop up like weeds, so next week i might forget about that one and “fall in love” with another one because they have specials at the beginning. Thats very different than a marriage and loving someone. You dont just walk away. If marriages fail, there was a process. Maybe, these dudes, couldnt see it or they were not willing to change one bit. Maybe the women gave them many chances but gave up after many years of frustration. Maybe the dudes were abusive but are not willing to disclose that. Maybe they were drunks, gamblers or porn addicts? Maybe they were RE cheerleaders always wanting to buy high? Maybe the woman wanted to wait for the cycle to end and buy at 50% less?
“Sounds like you’ve been listening to KFI-AM’s The Jesus Christ Show. The host is very big on “love is a choice.â€
i have not listed to that show. I dont know what KFI-AM is. But the host seems smart already.
“You think you chose a wife wisely because she’s frugal. But that’s no guarantee of a woman’s long term commitment. If her feelings change, she might decide to cash out of her marriage and go be frugal with another man.”
Thats extremely bullish for crypto currencies! Think about it….how do you cash out of something that you dont know where it is stored or even exists?
Lets, say you are a dude who wants to protect his cash. He puts his money in big daddy and converts it into a privacy coin. He stores it on a offline hard wallet. Over time the value goes up. One day, his wife decides, you know what, i dont feel it today. here are the divorce papaers. I want the house and half of the crypto value.
He says, okay, here is the house. But the crypto thing might be an issue. Her lawyer asks why? we have the bank info, you put 50k in bitcoin in 2012. We want half of that bitcoin holding. (millions).
The dude says: Well, i got hacked. Remember the big exchange hack that was in the news a couple years ago. All my crypto is gone.
The lawyer contacts a crypto detective and by tracking down the bitcoin address he sees that the dude must be lying, th coins were not on that exchange during the timeframe the exchange was hacked. However, at a certain point, the crypto detective cant see anymore movements. The bitcoins were converted into a privacy coin. The transactions are not recorded on the blockchain. No way to prove that the money still exists, where it ended up or what the value would be. Brilliant?
My advice for you is dont get married but if you do and you are afraid of the wife wanting to cash out, hide your money in a privacy coin.
One of the main reasons why partners get into fights is due to financial issues. If you partner forces you to buy high you might have a big problem when he or you lose the job during the next recession. You can easily avoid that by marrying someone who does not have expensive taste and always has to buy expensive things for instant gratification. If both partner understand that buying high during a bubble is a very bad idea you already made a big step in the right direction.
One issue you may not have considered is hormones. Childbirth and menopause change women. There is no way of knowing how much or in what way until it happens, but it will happen. Apparently I got lucky – my wife only became a neat freak. We just passed our 11th anniversary, kids are 8 and 10, and she’s still perfectly level-headed and talks about living out our retirement together. Others I know weren’t so lucky. It happened to my brother-in-law – after the birth of his daughter, his ex was an entirely different person who had no interest in him or having a family. I know this guy well and in fact he’s temporarily living in our guest room after a move from AZ – he’s smart, funny, kind, set for life with a huge 401k and $5k/month pension on top of working full time. He’s clean and sober, didn’t cheat (gets along fine with the ex). There is literally nothing wrong with him and he’s the same person he was when they were first married.
“Apparently I got lucky – my wife only became a neat freak.”
It not luck my friend. You live in Temecula! Great climate. You dont need AC because of the mysterious constant breeze. Woman love a great climate. Chose a place with better climate, you find better woman! Dont forget the wine! As you said, some of the best wines are from Temecula. Of course they are! What woman doesnt love wine? better wine, better woman. Divorce rates must be way below avg in Temecula. ( I helped you out a little with the Temecula shilling. You are welcome.)
Alright, so i learned something. Woman change and there is no way you can predict the outcome. All these poor perfect dudes, just got hit with divorce papers. No reason to ask more questions because its ….you know….women! either the feeling went away or the hormones changed. Or worse….both together!
Now i understand the recent conversation i overheard at yoga. (i dont pay for yoga classes – they are free at our work)
Gertrud meets Svenja.
Gertrud: Hey Svenja, is it true? You are getting a divorce?
Svenja: Did Mathilda tell you? Gosh, she cant keep a secret.
Getrud: Yes, she did. But she told me NO details. I am dying to here all of it.
Svenja: Okay, Yoga starts in 2 minutes. What do you want to know.
Gertrud: He is having an affair? This son of a b.! Right? This asshole is having an affair!
Svenja: naah, thats not it.
Gertrud: Wait…what. Is he….no….is he hitting you???? hitting the kids? he is hitting the kids!!!
Svenja: nope. not it.
Gertrud: well, then tell me. I. cant. even. right now. just tell me.
Svenja: I started menopause last weekend.
Gertrud: Ah ok!
Svenja: yep. Getting the kids and the house and the nicer car.
Gertrud: That worked out great. Gosh, i wish i would have my menopause.
Svenja: Yeah, i know. The judge was female too and she totally understood how i am like a newborn now. Totally changed. I am dealing with enough already, so she thought its just fair that i get a little bit more than half of the assets.
Gertrud: cool. Are you coming to Bingo this Friday?
Svenja: Yep, and i am going to town. In my fifties and single. I cant wait to start the dating life again.
Gertrud: man, so jealous! I wish there would be pill i can take to get menopausi. Btw, how is your ex dealing with this? I mean, you were married to him 25 years.
Svenja: What do i care. His perfect brother went through the same thing last year. He didnt do anything wrong but his wife had a change in feelings/hormones. So my ex should have known this can happen any second.
Gertrud: You are right. And his brother is perfect. I just saw him the other day.
Svenja: Oh ya? Is he still single? Maybe i should give him a call!
I would like to chime in. I own multiple rental properties in Temecula/Murrieta area. It is a VERY fast growing area with lots of potential. Property values and rents are increasing rapidly. There is even a proposed stop in Murrieta on the second leg of the Bullet-Train between LA and San Diego. IMO it’s a fantastic area of opportunity for investors but I don’t think I would want to live there. It is hot as hell during the summer, traffic is horrendous, and there are very little job opportunities outside of retail, service industry (restaurants), and healthcare. Majority of the people living in the area commute to San Diego county and that can take hours because of nightmarish traffic. Weekends in Temecula/Murrieta are even worse with more traffic and lines at all the local restaurants. City planners did a poor job of planning for the increased growth. With hoards of people moving to the area from LA & Orange County it’s easy to see it becoming a congested mess of over-population and strip malls.
“It is hot as hell during the summer,”
Not really. Compared to the coast, it’s hot. It’s nothing remotely like Phoenix. But we also don’t get four months of June gloom. I’ve lived in both and much prefer the inland climate.
“traffic is horrendous,”
True of the north and northwest parts of the city. The south (Temecula pkwy and below) is full speed everywhere, all day every day. You learn shortcuts to go north and back which bypasses that traffic. They are working on improving things by expanding 15 onramps and exits, and putting in a shortcut to the 215 to the north. Luckily I live in the south anyway.
“Majority of the people living in the area commute to San Diego county and that can take hours because of nightmarish traffic.”
With a fastpass San Diego is one hour away.
John D, we differ.
Temps have to get down into the 50s outside before I can enjoy it. Once it hits 60, it’s hotter than I’d like.
And I’m fine with 20 degrees. I live winter walks in 20 degree weather. I wouldn’t mind if it was that year round.
Once it dips below 20, I start to dislike it. I remember walking in NYC on a January night in 9 degrees, and that was colder than I’d like.
I’d like to keep temps at 20s to 50s year round.
I live in Santa Monica, and it’s WAY TOO HOT for my tastes.
I have a friend who is considering retiring in Temecula. He is moving back to CA from the East Coast. He sees the area as affordable with a half hour drive to the beach.
It is also the new wine country. He thinks it is a great area.
I’d retire there but I would not want to commute daily to SD or LA.
Plan on staying for 10-20 years.
According to Zillow this house was half-off in 2011 from the peak in 2007 and from the value now.
You have to have nerves of steel to watch 600K of your retirement evaporate in a few years.
Maybe if Our Millennial is correct, I will retire there.
“It is also the new wine country.”
The Temecula wine country still has a bad rap due to a disease that wiped out half the crop many years ago. They had to outsource. Now that they’re back to growing their own, they’re producing some of the best cabs I’ve ever tasted.
John D,
As they say on HGTV, it is a Forever Retirement House.
I could live in Temecula for 30-40 years after I retire. Sipping my life-extending wine on a pool deck and occasionally driving 1/2 hour to the beach during off-peak traffic times.
It sounds like heaven before I actually get there.
Around 2010 I sold a triplex in the Hawthorne area. Later I regretted selling too early while watching prices rise. My biggest salvation was that I had also done an AITD into an 8 unit in Long Beach which also rose in price. It’s penciled out well, but I just saw that Long Beach rents rose around 15% in the last year! Praise the Lord! I think I’ve entered the land of milk and honey.
1. Invest in crypto.
2. Repeal prop 13
3. Wait for 55-75% correction
Lather, rinse, repeat.
He mentioned above that he sold a bunch of the crypto already.
Extremely accurate. Very impressive.
Not much to add.
Dont ever buy high. Harming yourself (jumping from a cliff) would be much better than buying high. Buying high is probably the worst mistake one can make in life.
Save, Save, save and do the opposite of what realtards, lenders and RE cheerleaders say. You will win.
Wait until prices normalize. 55-75% drop compared to todays prices would be a good buy signal.
Rent cheap or live with your parents/in laws.
dollar cost avg in stocks and legit money (crypto).
read on housing blogs and join the fun (ridiculing RE cheerleaders statements)
And yet you still won’t provide any dates. Because you’ve got nothing, not even a house to call your own.
Keep forgetting the date. Depending on the day my calculations show August 21 2020 3pm and July 28 2020, 7pm.
That’s great, we now have you on record for a 55%-75% price drop from Summer 2017 prices to be completed by Summer of 2020.
We’ll assume you’re referring to the Coastal California market since you didn’t specify a locale.
On the record. I signed it. No turning back. It’s in the books and sealed.
There has been talk here about the decimation of the Aerospace industry. That was true back in the 80’s, 90’s when so many of the Aero companies were closed or relocated or gobbled up by Boeing and moved to Washington.
However, these days, Aero industry is still here.
Mind you, these companies hire high salary engineers and scientists. Many are in South Bay, between El Segundo (El Stinko) and Torrance.
https://siteselection.com/issues/2018/jul/why-aerospace-companies-are-thriving-in-california.cfm
Ever head of Rocket Lab in Huntington Beach. A rocket for small sats. Mainly worked done in New Zealand. Also, Palmer Lucky has started a new company in Irvine for high tech defense and border security.
I think what most people forget is that the fed bulk purchase hold times are now coming to an end, inventory is rising, up 12% this month. PE, hedge and banks are unloading into the top, they are much better at this than anyone on the comment board..
I look forward to watching while I sit in my overpriced paid off house….I could care less but will pick up some cheap stuff later.
Also Millenial, Your crypto perspective is much like a gold rush miner, none of them made money, where crypto will shine is individual verticals that could use the transferable ledger. A lot of things will happen on that front. The coins will be much lower, 4K I might buy but I’ll watch at that support line. Always be the supply shop owner, pick manufacturer etc in a rush…..much more money to make
As I mentioned in previous posts, the inventory of homes for sale here in Mission Viejo appears to be going up rapidly. I wonder if the bubble top has already been reached or more likely this is just a temporary occurrence. I wonder if the smart money is selling.
Gary, same thing is happening in Sonoma County, CA. My realtor just e-mailed me that the seller’s market is turning, and he’s seeing a ton of homes coming to market lately. I know the asking prices have tanked just in the past 4 months.
I have no clue why anyone would see a house now in So. Cal if they wanted to stay here…and on the flip side, I have no idea why anyone would BUY a house right now with prices so crazy and inventory so tight. I have a rental house that gets high rent, but still way below the cost of buying and maintaining a house.
Mom, you and I both. No idea why someone would massively overpay for renting from the bank (“buyingâ€) if you can just live in the same box for half the cost by renting from a private landlord. It must be people with a very low IQ or people who are terrible with math, numbers and finances.
taking a loan and paying an interest to the bank is not the same as renting.
That’s right surge. It’s better during a RE bubble to rent than to buy. You save a ton of money by renting. Once the market crashes I am ok with buying (at 55% discount)
I have no clue why anyone would see a house now in So. Cal if they wanted to stay here…and on the flip side, I have no idea why anyone would BUY a house right now with prices so crazy and inventory so tight. I have a rental house that gets high rent, but still way below the cost of buying and maintaining a house.
A. You are renting it for too little.
B. You are not factoring in the principal pay-down and tax deductions one gets from paying a mortgage vs renting. Say your house is $3K rent and a PITI $4K on it. Accounting for principal payback and tax deduction of interest and property tax, it’s cheaper to buy.***
In either scenario your statement is not correct.
And if what you say truly is the case, why do you bother? You’d be better off selling it and putting the money elsewhere would you not? The fact you own that rental is a de facto statement by you that owning real estate is a good investment.
*** Yes I know, Karin will be here to tell us how the new tax law killed the real estate deduction, even though she very well knows it did nothing of the sort. All it did was change thd old limit from $1M mortgage to $750K. And given that the vast, vast, vast majority of people have a mortgage under $750K( mortgage value, not home value mind you) this change is a blip on the overall housing market. The only people affected are those with mortgage between $750K and $1M, and even there, they lose only the portion between $750K and $1M, everything under $750K stays the same. And if you are at a financial point in life where you’re taking out $750K+ mortgage, the tax deduction isn’t a make it or break it any more.
Mr. Landlord~
Despite the fact that I specified the portion of the tax code that will affect real estate prices several times, you have quite a short term memory. Never did I say that the new $750K limit would be one of the causes for a downturn in prices in the California market, since that affects very few buyers. The problem, to state it for perhaps the tenth time, is the $10,000 deduction limit on local (state and property) taxes in states like NY & California. To qualify for the average house in the Bay Area in CA, for example, your income needs to be high enough to be paying around $10K and up in state income taxes. Simultaneously, your property taxes will also be around $10K or higher. What that means is that combined, your entire write-off is capped at $10K, or half of your total expenditure in state income and property taxes. And as for lower cost housing, your total Schedule A deductions must exceed $12,000 before you get any tax advantage at all, since you get the $12K standard write-off automatically, even if your deductions are zero.
How many times do I have to repeat this? I’m starting to feel like Donald Trump dealing with fake news.
Karin,
OK you win. Because everyone will pay less in taxes, it means everyone now wants to rent.
Karin, you feel like that because you ignore simple fact that new tax code will put a lot more money in everyone’s pocket. Mortgage and State deduction advantage will shrink, but lower tax bracket will mean everyone just get a tax break.
This means – no homeowner is truly impacted.
It still eludes my why you chose to ignore this simple fact
Mr. Landlord~
I didn’t write that, and neither did you. What we were both addressing, as you wrote, was “how the new tax law killed the real estate deduction”, which it has. And as you’re lately seeing, it’s all over the media that the real estate bubble is starting to burst. That means prices will overall come down, particularly in high income and property tax states like NY and California. This also means that a heckuva lot of home owners will be paying more Federal taxes, not less, in these states.
Surge~
You have to run the calcs for your individual situation. In high state income and property taxes like NY & CA, it’s entirely possible that the write-offs you lose will not be compensated by the decrease in Federal income tax, especially if you are a high earner and/or own a house, especially a high end home with high property taxes.
“Buy now or be priced out forever”. I remember that phrase. When I got out of college in the 1990s, all the old people who where real estate wealthy told me that. So, I listened to them and purchased a bunch of run down beach close tear downs with nearly no down loans. It was a lot of work, like years of work, getting those places fixed, but it was worth it.
Good thing I did what I did. Because, if I had not bought, I would have been priced out forever and would have been a life long renter. Instead, I am retired in my late 40s. Although, I am working 25 hours a week fixing my rentals … so perhaps not totally retired, but I enjoy fixing houses much more than working 50 hours a week and paying rent.
JT gets it! Follow him!
If you don’t buy now (or tomorrow- but that’s your very last chance!) you will never, ever be able to buy in your life! You better call now. Don’t wait any longer or you will regret this for the rest of your life.
If you buy now, you will retire early, hang out at the beach and count the millions on the table. Great riches await you. All you need to do is grab it. You are just one signature away from paradies but you have to do it now. Next week will be too late.
If you have any last doubts, remember: renter=loser,
buyer=rich, wealthy, sexy, retires early, financial freedom and gets 70 virgins.
Ouch. Looks like you might already be priced out forever. What were you doing 4 or 5 years ago when those little south redondo homes on quiet streets with big yards were in the 700s? They are now twice that.
Dang it! I might be priced out forever! Lol. And I thought I can still buy today and will be fine.
See how it works folks?
Don’t be me! Don’t save, make six figures, have no debt and a 800+ credit score. In today’s market you need to disregard price, debt, income etc. all it matters is to buy now! Tomorrow you might find yourself priced out forever! What are you waiting for? As a bonus, real estate prices double within few years. And we all know real estate prices can only go up, up and up! So buy two houses and get rich fast! I can’t make it easier for you than that!
I know you’re just trying to be cute, but it doesn’t change the reality. Priced out forever is a lame mantra but you could be waiting a really long time.
Lol, @jt, you are a pretty silly guy, but really lucky I would say.
Some luck without question. Around 2001, I had a few renters move out and I did not have much cash to cover the problem. Almost lost everything … I was down to taking credit card loans. Christmas 2001 was tough.
But, the 2007 downturn was no problem because so many people walked away from their home … there were renters everywhere.
JT and the other “lucky” people here depend heavily on the ability of others to pay for the their life of luxury. When this recession hits the renters paying them will struggle and eventually break… it’ll be funny listening to JT running around looking for money instead of fixin his “properties”…too cute bro
Am I living a luxury life? No. I live in an older but well maintained home near the beach. And, I drive older, but perfect, Hondas and Toyotas. If I wasted money on a luxury lifestyle, a serious recession might wipe me out. Not worth taking that chance. I will continue to live a middle class lifestyle.
My parents bought the house in which I grew up, for $180K back in the 80s. Today it’s worth $1.2-1.3M. Even adjusting for income inflation, there’s no way today’s version of my parents could afford to live in that house or in that neighborhood. So yeah priced out forever is most definitely true.
“ ist most definitely trueâ€
Yep, just like
“This is the year when millennials go out and buy in drovesâ€
“Every tech employee in California gets stock optionsâ€
“Every one makes 200k here except 18 year old fry cooksâ€
“Bitcoin will go to zeroâ€
“Principal is paying yourselfâ€
“This spring Season housing will skyrocketâ€
@Millie
LOL at the stock options… yeah everyone thinks that all tech workers get super rich off those… hahaha… they are often worth zero or very little… making big bucks off them is rare (I did for a few years, but not enough to buy a 2 mil home lol)
Ocean,
Tech workers working for the right companies have made out like bandits. A lot of it is good timing and luck of course. But that is the reason – or one of the reasons – Bay Area r/e is as insane as it is. As I’ve said numerous times here, I worked for 2 start ups and did very well with options both times. Some people get really lucky and are employee number 28 at facebook and walk away with $50M or whatever. That’s rare, sure. But what isn’t rare is to join a startup get a few thousand options and walk out the door with $250K a few years later. Not FU or money by any means, but puts a nice downpayment on a $1M house. And this happens all the time. Virtually everyone I know professionally in tech, in my age group has worked for a at least 1 – many times several – startup that either went IPO or was bought by a company, which for the purpose of stock option cashing out is the same thing. That’s the name of the game, startup, cash out, rinse, repeat.
But the Millies of the world don’t do that since their #1 priority is accruing sick days while working in a cube at Big Megacorp, Inc. Millie is the kind of person that is out the door at 5:01pm. And as I noted before, you will never get rich this way. The two startups I worked at, often meant out the door at 10:01pm. I worked like a dog, but the payoff was worth it. Some people have what it takes to do that, others, like Mille, don’t. And that’s why now, I am retired in my 40s, while Millie will be working well into his 70s, accruing all that sweet, sweet sick day gold!
Landlord,
accruing more PTO (and sick days) than the avg American is a good thing from my perspective. Also, I don’t leave usually at five. I start at 7 and leave at 4pm. Sure, there are times where I worked until late night (many) but that’s not my usually day. No need. I got several promotions the last few years. There is a lot of playing the game and politics involved too and knowing the right people. The company sends me on business trips pretty often. It’s fun. At least once a week I work from home. Frankly, I decide on my own hours. As long as I meet my deadlines and get projects done successfully there is lots of flexibility. I can see myself working at that company for a looong time. Sure, if you go to a startup you might end up getting a nice paycheck but going to a startup is a risk I don’t need to take. I am more than happy where I am at. Especially financially after that crazy 2017 stock market and crypto year. Plus I make over 100k at my job.
You mentioned in one of your post that working for a large Corp is the LAST thing you want to do long term. So I asked what you meant. Maybe I was missing something. After your responses I feel quite happy with working for a large Corp. Your “think big – become the next zuckerberg and startups don’t have vacation policy†argument did not really cut it for me. So, thanks!
Millie,
If you’re happy making $100K with lots of sick days, cool. For me that’s settling. Let’s face it making $100K these days is the equivalent of a high school diploma. Put in just a bit of effort and anyone can do it.
And no I don’t expect everyone to be a Zuckerberg. I sure as hell am not. But the point was you should at least try to be something more than a cube drone ands Big Corp, Inc.
Is there some risk at a startup? Yeah maybe. But so what? Startup fails, big deal, you go to the next one. That’s what made this once great nation great….taking risks, going into the unknown, moving cross country without knowing anyone, etc. Now we’re slowly turning into a nation of SoyBoys who need “job security” and sick days, cuz God forbid you take a little risk with your life.
Mr L the thing with guys like this is that they aren’t risk takers. They’re afraid of risk. Too afraid to buy, too afraid to move. Pussies, all of them. That’s why they missed this boat and they’ll miss the next one. The market will turn back up before it gets anywhere remotely close to a pulled-out-of-the-ass >55% price correction.
Landlord,
“If you’re happy making $100K with lots of sick days, cool. For me that’s settling. Let’s face it making $100K these days is the equivalent of a high school diploma. Put in just a bit of effort and anyone can do it.â€
You live in spokane right? If 100k is equivalent of a high school diploma and anyone can do it…. how come the median household income in Spokane is less than 40k???
AAAA I forget! Everyone makes 200k in Spokane except the 18 year old fry cooks!!
The BS to the side. I am more than proud of making over 100k plus bonus at my age. Accumulating lots of sick days is nice but I am barely sick anyways. What’s nicer is the PTO. I know… I got to explain what that means. As you stated you worked for a start up and they had not vacation policy. Okay, here it comes. PTO stands for Personal Time Off. At our company that translates to paid vacation!! Yep, that’s what you get when you work for a decent company. Here is the kicker. The avg American gets about ten days of paid vacation. Make that double in my case ( I worked there almost ten years now) you accrue more over time…. 🙂 🙂
Lord,
“Mr L the thing with guys like this is that they aren’t risk takers. They’re afraid of risk. Too afraid to buy, too afraid to move. Pussies, all of them. That’s why they missed this boat and they’ll miss the next one. The market will turn back up before it gets anywhere remotely close to a pulled-out-of-the-ass >55% price correction.â€
I took risk by buying bitcoin, litecoin, cardano, eth etc.it paid highly as trump would say. With crypto you have a big reward waiting for you if you are willing to take the risk. Buy low and wait until it moons.
Housing is different. Buying at the peak is not a risk it’s stupidity. Why buy something that’s highly inflated and will lose half of its value soon? If you think otherwise why are you here? Go out and buy a house?! It can only go up right? So why miss out? Why tell us about this great buying opportunity but not make a move?
Let me guess, you bought a long time ago and want US to buy high so the bubble keeps going?
Economy is sooo great everyone has a side hustle?? Except the smartest man in the universe JT…and SlumLord…and…well we know who they are–
https://www.zerohedge.com/news/2018-07-17/trouble-ahead-housing-market
Great article! I can’t wait for the crash. It’s going to be beautiful!
Dude, I seriously can’t keep up anymore with looking at all these houses for sale. I am being bombarded with listings. My circle of realtards i deal with got smaller. Some gave up and found a real job and some don’t like hearing me saying the same thing (I look at an open house once the market tanks).
Btw, Whoever claimed inventory is low deserves a few beers. That joker must be fun to hang out with!
Collecting rent checks the 1st of every month is my side hustle.
According to CNBC, expect more Chinese millionaires to buy up L.A. homes: https://www.cnbc.com/2018/07/05/more-than-a-third-of-chinese-millionaires-want-to-leave-china.html?recirc=taboolainternal
More than a third of rich Chinese surveyed “are currently considering†emigrating to another country …
Buying overseas real estate has become a popular way for the Chinese rich to offshore their fortunes. Foreign exchange deposits and “immovable property†are the most popular overseas investment options. They spend an average of $800,000 on buying a property, the report said.
Los Angeles was the top city for Chinese millionaires to buy property, followed by New York, Boston and San Francisco.
It was the fifth year in a row that Los Angeles dominated the list, although New York rose from third to second place, displacing Seattle, which is now tied for fourth place.
In your dreams. Same was said about the Japanese back in the eighties. They lost their shirt. Same will happen with the Chinese.
Overpaying for real estate never works out. No matter if you are yellow, white or black.
https://www.nytimes.com/1995/06/09/business/japanese-are-in-rush-to-sell-their-real-estate-in-the-us.html
And they will keep coming and buying up property for the foreseeable future. And I don’t think they really care if r/e takes a hit price wise. The goal for them is to get money out of China and into something tangible. Buy a $1M house and it falls to $800K…meh. They still have $800K out of China. It’s almost like drug lords who put $1M dirty money in a bank and came out with $750K clean money out the other end. It’s the cost of doing business. And this is one more reason why all the nonsense about median income ratios mean nothing. A guy from China with $1M to launder doesn’t give a f**k about median incomes or traffic or any of it. He just wants somewhere to park his money.
When will they put a stop to this garbage? So tired of citizens, including veterans, sleeping on the sidewalk while Chinese investors buy up all the housing and rent it out at exorbitant rates.
What makes you believe that being a citizen (just a random chance being born on this soil) automatically entitles one to protection from sleeping on the street.
Military is a career in this country.
Chinese investors are often US citizens or have children who were born on this soil
Racism is so ugly.
US citizens come in all races, and all are being hurt from the dirty money being laundered by Chinese criminals.
Thanks Obama along with congress, the fed and treasury…
https://www.zerohedge.com/news/2015-12-20/obama-abruptly-waives-1980-foreign-investment-real-property-tax-act
Americans middle class, home buyers and young people should be up in arms about this but forgot because they only care to bring up trump….
the housing market as a whole was “fixed” like the libor, penalizing the saver, the non speculators. While the spec assholes were saved….
Some day their will be a war here and it will be over this….picking scum winners and turning the middle class into the poor……Banker shill Obama, scum bankers and Reit PE playas need to tarred and feathered…..
sheeple home owners here are just full of hopium
https://www.gibsondunn.com/president-obama-signs-appropriations-bill-exempting-non-u-s-pension-funds-from-firpta-taxing-reit-spinoffs-and-making-other-important-changes-to-the-taxation-of-u-s-real-property-investments-by-no/
Really?
https://www.silverdoctors.com/headlines/world-news/the-summer-doldrums-real-estate-are-signaling-the-housing-market-collapse-has-begun/
I know son of a… yours is bigger eh?? You’re so cute living the American dream..only its not..hubris and luck, all you have frendo-
That’s an interesting article, JHKIII. I’ve also seen a few prime Sonoma County properties going, as it states here, “past their offer review date” without a single offer. If China is also tightening against foreign investment, that is going to hit the East Bay hard at some point. It’s going to be interesting to kick back and watch what happens here. Even when a house goes pending (Sonoma Co.), I’m noticing that it’s often taking over two months to close (vs. ~ 2 weeks just 4 months ago), indicating that the buyers have more control and are probably being more picky about the condition of the home.
LOL. Silver Doctors is one of those THE WORLD IS ENDING!!!!!! type websites that is always predicting doom and gloom. They don’t just cry wolf, they’re on a megaphone screaming at the top of their lungs about wolves 24/7.
I also love the logic that a decrease in new homes being built, means less supply, which means prices will fall. Cuz as everyone knows when supply shrinks prices also shrink.
We now have Millennial on record claiming a 55%-75% price drop from Summer 2017 prices to be completed by Summer of 2020.
This would be for Coastal California market.
Signed. 100%
I thought it was always 55-75% off “today’s prices”? 55-75% off 2017 prices would make it even more of a drop today – like 60-80%. Or 65-85% if it continues up for a while. Let us know when you realize how ridiculous that is.
Yep, 55-75% is a given during the next downturn. Just have some patience.
“Priced out forever” is not exactly true but has some ring to it.
As population grows, ratio of attractive homes (larger lots) is decreasing.
There will be more competition for such properties.
So, no, you are not priced out of buying RE, but affordability will become limited so instead of SFR, one will settle for townhome or condo.
US is gravitating towards high density of Europe.
So, while not priced out of buying RE in general, more and more people will be priced out of buying desirable SFRs/larger lots/locations.
Of course, anyone can get out of “priced out” predicament by simply earning more money, but of course for the most readers of this blog is not a viable option
Exactly correct Surge.
As I said above, my parents today could not afford to live in the house in which I grew up. They would have been priced out forever from that house/neighborhood had they not bought when they did. That’s not to say they couldn’t buy SOME real estate today. However they could not buy the desirable real estate today, that they bought 30+ years ago.
And I think you make a good point about us Europeanizing ourselves. There is a big push by the left to get people out of SFH and into cramped apartments. The Soviet model where everyone lives in apartment blocks. And just like in the old Soviet days, the only people who will be allowed to own homes (and eventually cars) will be the elite members of the party. Careful what your wish for with “affordable housing”, you just might get it some day.
https://www.thenation.com/article/the-way-home/
“This organizing, though, goes well beyond rent regulation—it aspires to the truly radical. Movement leaders and thinkers are strategizing for a future in which the private market is diminished and noncommercial, community-controlled housing plays a central role in American life. In this alternative reality, public housing is massively expanded and cooperatives, mutual-housing associations, and other nonmarket ownership models take root in cities large and small. Social housing, in all its varieties, thrives.”
Mr. Landlord~
This is absolutely correct. The move to Europeanize us has been in the works for a lot longer than you think, as in centuries. If the rulers can cram everyone into stack-’em-and-pack ’em housing, they can more easily control the population. One of the more common names for this is ‘Agenda 21’ (agenda for the 21st century), and it is no conspiracy. Also, if people have no land on which to grow fruits and vegetables, and instead are dependent on ‘on-time delivery’, they effectively become food-dependent, which has historically been the best way to bring a population to its knees. Look at what Stalin did to the farmers, and what Mao did as well in China by taking away land for growing food. In fact, China has been driving farmers off their land for years in recent times.
It is not because somebody is trying to “europize” US…stop laying blame. This is a natural problem, simply because population grows (birth rates, immigration). Nobody has control over it, it is evolution.
Surge~
This is in the news all day, every day, if you just take time to look into the issue. This has all been planned:
Revealed: UN Plan to Flood America With 600 Million Migrants
By 2050, 73% of population would be immigrants or their descendents
A 2001 UN strategy document is getting fresh attention in light of the migrant crisis because it outlines the need to flood America and Europe with hundreds of millions of migrants in order to maintain population levels.
Entitled Replacement Migration: Is It a Solution to Declining and Ageing Populations?, the plan seeks to “offset population decline and population ageing resulting from low fertility and mortality rates.â€
It contends that mass migration to the west is needed for governments to maintain “many established economic, social and political policies and programmesâ€.
The strategy document sets out six potential scenarios for each country or region of the world necessary to meet this goal.
Under the most severe scenario, large numbers of migrants will be required to “maintain the potential support ratio†(of a population) at the highest level.
In the case of the United States, under the most extreme scenario, the report states, “It would be necessary to have 593 million immigrants from 1995 to 2050, an average of 10.8 million per year.â€
“By 2050, out of a United States total population of 1.1 billion, 775 million, or 73 per cent, would be post 1995 immigrants or their descendants,†adds the report.
In Europe’s case, the document asserts that at least 159 million migrant workers will need to enter by 2025 in order, “to maintain the current balance of 4 to 5 workers for a pensioner.â€
Under the worst case scenario, 1.4 billion migrants would be needed by 2050, an average of 25.2 million a year. This means that by 2050, Europe’s population would be 2.3 billion, of which 1.7 billion, almost three quarters, would be migrants or their descendents.
Given that Europe is already having huge problems integrating significantly fewer numbers of migrants, the numbers in this report are obviously fantastical, yet the document does indicate that mass migration to “replace†the host population of America and European countries has been on the UN’s agenda for decades.
It also echoes a plan French President Macron announced recently wherein he argued that mass migration was Europe’s “destiny and that that hundreds of million of Africans will continue to flood into the continent “for many years to come.â€
The document is receiving fresh attention in light of the migrant crisis in Europe, which has seen over 2 million migrants enter the continent over the last few years.
The argument that millions of migrant workers are needed to pay tax and fund pension liabilities is a complete misnomer because large numbers of migrants do not find employment and only end up on government welfare.
…or just wait for the crash
“by simply earning more money”
why would you need to make more money? I dont understand that. You simply dont want to buy stuff that is heavily overpriced. No matter if you have the money or not.
Take me for instance. I could easily buy now. I have a large downpayment sitting on the bank. But why waste the money by buying at the peak?
It much better to buy stuff at a discount than to think you have to make more money.
Take cars or groceries for instance. I always look for deals. You get more for your buck.
Hoe dumb is it to think you need to make more money to buy overpriced stuff if you can get the same product by just waiting or looking for a deal.
Man, there is something seriously wrong with your thinking.
Two reasons:
1) money is a vector. It has no meaning in absolute terms.
2) Yes, you can look for deals. But you can leverage your intelligence in much more meaningful way, instead of “clipping for coupons” (that means looking for deals which takes time) you can spend this time earning a lot more money, making “clipping for coupons” obsolete.
The more you save, the more you spend.
BTW, it does not mean you have to be wasteful and absolutely throw your money at everything. You should always negotiate. Home should be always bought with cash flow fully analyzed of course w/o stretching the budget.
It’s just focusing too much on saving/making a best deal (or waiting for a crash for that matter) is often counter-productive. Not that price does not matter, it just needs to be considered in tandem with time.
Frugality does not really pay off that much in modern age.
Yea, there are a lot of websites who tell you otherwise, but they are really there for a reader to bask in his/her own impotence
Surge has obviously not heard of work smarter not harder!
There is a name for people who keep buying high: bag holders.
The rest of us saves during good times and buys assets during bad times ( with a 55-75% discount). Why overpay and make sellers rich if you can just wait until housing corrects to it’s true value?
“You should always negotiate. Home should be always bought with cash flow fully analyzed of course w/o stretching the budget.”
Absolutely!
When purchasing a home, that is the analysis needed. But sadly in today’s world of howmuchamonth, nobody does that stuff anymore. All about the payment. For houses, cars, everything. SAD!
Millie, yes smart people buy crypto and wait for 55%-70% price correction in home prices.
Landlord, don’t think it’s SAD. It has always been that way. Just a reality. In the end, who gives a shit. Take care of your own finances and do not pretend to be sad for the world’s state of affairs.
There are some principles that are true 99% of the time…for the sake of the this blog is RE going up long term. Long term. All the other stuff, like trying to share zerohedge article, find peak/bottom, complaining about politicans – all bullshit and noise.
What is disgusting is lack of evolution and narrow range of responses in a lot of commenters here. People are non imaginative and parrot same ideas over and over
Millie,
I don’t get out of bed for less than $1,500/day (or more). Sorry to cut my post short, I just spotted a dollar off a loaf of bread coupon. And it’s double coupon day! Good thing I didn’t pick up an extra day of work or I would have missed out. Besides, now I can spend the afternoon cleaning the kitchen and scrubbing toilets. Damn maid is charging me $75 when I know the neighbor pays $65. I hate overpaying!
Socalguy,
Since I make over 100k plus bonus I would get out of bed for less than that.
Coupons. I don’t need to use coupons for groceries. I am shopping at the best food market in the world (Aldi) everything is a deal there. No coupons needed. Even beats Walmart.
Cars and houses. Def buy that during a recession/downturn. You save 55%. These savings can be invested in crypto. Litecoin made 5,000% in 2017!
I like that Millie is smart with his money in terms of not overextending himself. Too many of our yuuuuthes just blow every dime they have on $16 avocado toast sandwiches and $1000 phones. So while I disagree with Millie on many thing, I applaud him for frugal lifestyle. Cheers Millie!
Who incepted this avocado toast idea into you, people? You just love to pick up dumbest ideas from journals and parrot them around
‘buy now or be priced out forever’, definitely has some ring of truth. Have you looked at homes prices West of La Cienega…. none under $1Million. And do people actually think this will change much in 5 yrs? 10yrs? ie. prices will be less? not unless there is an ‘act of God’ as the insurance companies call it.
We live in OC; and we went to about 10-12 bdays this year for our kids friends and family. (Kids bdays).
Every single one was at a kids venue such as bounce house, park, trampoline place, etc…..
We are having a pool party at our place. Pool, and renting an inflatable water slide. We have a huge lot that makes this possible, but, i agree in the high density comment as the reason kids bdays are out of the house and at venues is due to the lack of size of both house and lot. I absolutely love the fact that we are lucky enough of our friends and family that can provide a home bday that is super fun. Instead of cramming everything into a 2hr limit and then sending everyone packing; we are going to have a 1-7pm party.
So, a big lot is key in my opinion.
On the flip side I drive by Newport and Irvine via the 405 near John Wayne airport and there are probably 5-6 huge new buildings going up that will be luxury condos. Definitely a divide that I see happening.
Dan,
I stopped doing the kid b-day parties at home long ago. Even though I have more than enough space, it’s a lot easier to outsource that stuff. This year one of my kids did a gymnastics party the other one did a paint ceramics party. Both cost about $250 and well worth the money considering the time I would otherwise have had to spend getting things ready and cleaning up pre and post party.
I think the real problem is this notion of a theme party every time. Back in the olden days, a b-day party was invite some friends over, run around, have some cake, go home. Total cost: $10 for the cake. Now it has to be elaborate themes, or renting bounce houses or having Cinderella show up for an hour, etc. The cost ends up being about what you’d pay for an event center anyway, without having 15 kids messing up the house.
Real question here for the bears (other than the 1-2 fanatics who we can predict the reply):
If there is no 55-75% crash, which is a pipe dream to a few on here; what do you believe the pull back or drop will be for CA?
10%? 20% ? 25%? How long do you think it will play out? 1yr? 2? 5?
Back to 2012 prices, IMO.
Thanks for asking. For me (I am not a perma bear by any stretch) , the market cycle will tend to repeat history. During the last three busts houses in California could be bought for half than during the previous bubble peak. This is normal for California.
Undesirable areas like the IE usually drop the hardest (up to 75%). In Desirable areas (closer to the coast) a 55% drop is a given.
One thing I noticed here on this blog. The perma bulls denied for years that another crash is coming. This has now changed. We are now discussing how hard the drop will be. Some fanatics predicted after trumps election that housing will skyrocket, same people also predicted that 2018 spring selling season will be epic. And now just open the news.
Inventory is up. Sales are down. Interest rates are going up gradually and we are due for a recession. It’s all playing out as many experts have expected. Keep your powder dry. I hope you saved lots of money during this boom cycle!
IMO 20% max and maybe about a year-long downturn. The Trump and the Fed will pump this bitch like we ain’t never seen before.
“This is normal for California. Undesirable areas like the IE usually drop the hardest (up to 75%). In Desirable areas (closer to the coast) a 55% drop is a given.”
Bullshit. Flat out untrue. I would say “show us the data you’re basing this on,” except we all know you’re not basing it on data, because the data says otherwise.
“The perma bulls denied for years that another crash is coming.”
Name one. Every bull here acknowledges there will likely be a correction at some point.
“The Trump and the Fed will pump this bitch like we ain’t never seen before.â€
Yep! Just like when trump became president. “Housing to skyrocket! Trump is a real estate guy!â€
Wonder how long we going to hear that trump will make this housing market great again! One thing is for sure. he has a loyal base.
Some food for thought!….
https://www.zerohedge.com/news/2018-07-18/housing-market-collapse-20-has-begun
May-July in Seattle is peak sales for homes (normally)….!!!!
I better liquidate all my property!!! Seriously, ZeroHedge has no credibility, if they are ever right about a downturn someday, it will be by shear luck and the fact that they’ve been mindlessly repeating the same Jim Taylor phrase for a decade while everyone else has been making money. New starts and permitting being down will only drive prices higher, unless something comes along to cause a demand shortage, this train will keep rolling. At least three of my idiot friends have bought this summer at record high prices, focused on nothing more than getting into a SFR because they got engaged and the woman was nagging about settling down.
ZeroHedge has been predicting a catastrophe much longer than Jim Taylor.
I read it, because someday it is bound to be correct, However, I never repost just because they laughed at me 10 years ago when I did and they have been wrong ever since.
Your rebuttal does not hold any water. You attack the messenger instead of attacking the message. Check the MLS numbers for Seattle and King County. Or you don’t believe those because realtors are members of NAR!???!!!!….The number os SALES are down ; that is a FACT. Every year, May-July is peak season for Seattle sales – that is also FACT.
I just presented the FACTS. I did not make any predictions. You look at the numbers and do whatever you want with them. By the way, the economy is booming in the Seattle area. So, it look strange to have the disappointing numbers in a booming economy. What does it mean for when the economy slows down eventually????!!!!…
Just facts and food for thought; no prediction. I don’t understand why have you been triggered that zerohedge presented some data.
I thought we all pretty much realized there are really very few times in LA history that buying a home is not a good idea, DEPENDING on life circumstances more than outer economic circumstances. Age of buyer, salary, whether or not one plans to live in LA for a long period of time… etc.
Yep, the majority of us who follow the market (boom and bust cycles) expect the market to correct. A 55-75% drop is a given during the next downturn. The million dollar home can be bought for much less hab half.
Market is waaaaaay overheated. This ship is sinking. Expect prices to collapse by 40%.
My friend is a substantial realtor in suburbs north of Chicago. He is telling me that market seems to be slowing fast. Hope that slowness does not spread to SoCal beach cities. I thought I saw a slowdown in SoCal beach cities, then another sales surge just hit.
JT, you are correct, the slowdown is here. RE cheerleader thought this spring epic season is going to be epic. Instead sales are slowing down, new construction happening everywhere you look. buyers are absent.
Most potential buyers are asking. Why waste your money by buying if you can rent the same house for half the cost? Just wait for a crash. Smart!
Millie…SlumLord and friends are the smartest most forward looking investors around…no one can do what they do! It’s hard using other people’s money, buying something then over charging someone else for the same product. Way more complicated than inventing/improving blockchain.
https://www.zerohedge.com/news/2018-07-23/existing-home-sales-suffer-worst-losing-streak-2014-price-hits-record-high
No, it’s easy. Everyone works for tech companies and gets stock options worth 250k. After a few companies they all have millions to put as a home downpayment. And if you call out the Chinese criminals laundering money in the US you will just be called a racist and that will shut you up to keep the money flowing.
Not everyone, but enough people to make RE unaffordable to you
Housing goes up like 10% a year? Laughable….crypto is taking off like a rocket ship once the ETF gets approved. Flood gates are open soon. Mark my words.
The Death of the US Real Estate Dream
Housing-Market / US Housing
Jul 22, 2018 – 12:52 AM GMT
By Harry_Dent
Housing-Market
A rise of “dyers†(sellers) has been offsetting the rise of Millennial buyers.
Now let’s look at the U.S. bubble – or our double bubble.
Our first bubble peaked after peak demand from Boomers (2003) in early 2006 on a 41-year lag. Ant it crashed. The demographic downturn we predicted set in after 2007. Right when the sub-prime lending crisis blew up.
It took six years to build, and six years to crash into 2012. That’s down 34% versus Japan’s whopping 70% over 13 years.
https://economyandmarkets.com/wp-content/uploads/2018/07/ENM-07-19-18-Chart-Two-DownsideRiskInUS-1024×768.png
Massive QE and ultra-low mortgage rates created a second – now artificial bubble – that has recently eclipsed the first one. And it looks almost identical in its size and buildup time – six years from 2012 into 2018.
This bubble will burst sometime in 2019.
Its target is the low of 2012. That creates a 40% to 50% downside in the next six years, into 2024-2025 or so.
So, what has happened since the first serious real estate downturn since the one from 1925 through 1933?
According to a study by the online apartment service RENTCafé, since 2007 ownership has dropped by 3.6 million and renters have gone up by 1.9 million.
Yes, that means more Millennials living with parents, and rising homelessness.
The causes are obvious: Much tighter lending standards, remarkably low supply – especially of affordable, less profitable starter homes – along with soaring prices and valuations…
Home prices have gone up 35%, while rent is up only 20% in the last five years, making home prices 75% more expensive than rental prices. Both are way above wage gains, which have been near nil.
Overall, the bubble and crash thus far are not nearly as bad as Japan.
Our demographics aren’t as unfavorable, but still very much so given the new model of subtracting dyers from peak buyers.
In this case, peak buying in the future is at age 42 for the U.S. and age 78 is the peak selling age for dyers, as we don’t live as long as the Japanese on average.
So, even if we hit a bottom by 2025 when the highest numbers of Boomers die, prices will still be likely flat to down a bit into 2039 or so.
Source: http://www.marketoracle.co.uk/Article62748.html
Harry Dent also predicted the DOW would crash to 3000 in 2013 (stated in his book written in 2011).
Gotta love fear mongers. When times are good they predict impending doom. When times are bad they scare you into thinking how much worse it can get.
If you want some amusement, read the comments on this blog circa 2010-2011. People were scratching their heads if they should buy a SFR in Venice for $400K due to the “dead cat bounceâ€.
That’s how these fear mongers work. They predict doom and gloom for 15 years. Then an economic downturn happens in year 15, and they claim to be great prognosticators. Meanwhile had anyone listened to them for 14.5 of those 15 years they would have lost out on hundreds of thousands or even millions of dollars in profit.
The business cycle is just that, a cycle. So yeah there will be up times and down times. It doesn’t take a genius to know that at some point in the future, there will be a correction. There is always a correction. But simply saying DOOM AND GLOOM 24/7/365 and then saying “I predicted this” when it finally happens is not a prediction, it’s a broken clock which is right twice a day.
Had people taken his advice about Dow 3k in 2008/9 they would still be in cash today earning 0.25% interest while stocks rose 400% in the same time period. And let’s say the Dow “crashes” back to 20K. This doofus will be out there saying “SEE, SEE, I WAS RIGHT THE MARKET DID CRASH JUST LIKE I PREDICTED!!!”.
I thought it was pretty common knowledge that Harvey Dent is the boy-who-cried-wolf doomsdayer.
https://www.zerohedge.com/news/2018-07-25/housing-prices-hit-breaking-point-leading-collapse-demand
It can’t be..more bad news?!! Nooooooo! Please save us SlumLord/SeenB4Blob..Millie can’t be right he buys crypto!!!
Mr. Landlord~
I called the downturn 5 months ago, in February, on this blog. And here it is (see below). I didn’t use a 15-year window. And btw, I picked the 2005 peak in my town (Alameda, CA) in April/May of that year, and I hit it dead on there as well. I sold my house right after, and watched the comp on my house go from $740K (two sales of the identical plan) to under $500K by 2011/2012. I think the sweet spot to buy back in will probably happen sooner this time, in 3-4 years, although I don’t thinks it’s going down as far as Millie predicted:
Home Sales Data Show The Bubble Is Bursting
http://news.goldseek.com/GoldSeek/1532548453.php
https://www.calculatedriskblog.com/2018/07/california-home-sales-stumble-inventory.html?m=1
Note the last paragraph:
“Statewide active listings improved for the third consecutive month, increasing 8.1 percent from the previous year. The year-over-year increase was slightly below that of last month, which was the largest since January 2015, when active listings jumped 11.0 percent.”
What happened in 2015? Was there a real estate crash? No, prices keep on increasing for many years. The same thing may happen again. There are just a few more people willing to sell now than a few months ago when prices were lower. Soon buyers will adjust to the higher prices and overwhelm sellers in a few months. There is still probably another year to go in the current real estate bubble. When the top comes, it will be very obvious.
Gary~
A lot of people are posting articles about the housing market starting to come down. And check this out:
https://www.infowars.com/international-buyers-exit-us-housing-market/
The number of properties listed for sale up in Sonoma County, CA, where I live, has more than doubled in the past 3 or 4 months. I’m seeing some nice properties that would have been snapped up not that long ago just sitting there for months now.
“The number of properties listed for sale up in Sonoma County, CA, where I live, has more than doubled in the past 3 or 4 months. I’m seeing some nice properties that would have been snapped up not that long ago just sitting there for months now.â€
Impossible! The RE cheerleaders on this blog have told us many times there is NO inventory! Plus we are building no more land! This is also the year when millennials go out and buy in droves!
How can listings for sale have doubled????!!!! There shouldnt be a single one for sale!! We have no inventory?!!!!
https://www.cnbc.com/2018/07/24/southern-california-home-sales-crash-a-warning-sign-to-the-nation.html
DumbLord are you fun’n with us?!! This can’t be true cuz anyone who’s sees this coming is a fear monger!!!
One thing regrading home prices that I have so far not seen anyone bring up is the impact of Chinese investors in the California real estate market. I live in the I.E. and the last five years or so have sporadically seen tour buses filled with 10 to 15 Chinese accompanied by Chinese guides shopping around small, non tourist neighborhoods and strip malls. I’ve been told that Chinese see these areas and small 2-3 bedroom homes as untapped gold mines. I know of a handful of homes in my local area where the 30+ year home owner has sold and the house has become a rental filled with Chinese. This post is not meant to be racist, just stating what I have seen. When we are trying to predict if real estate prices will drop, isn’t it fair to bring up the importance of the Chinese market and how Chinese companies are inflating the market? And if there is a trade war with China, will Chinese leave and create a downturn?
We bring it up all the time. Just read this
https://www.wsj.com/articles/chinese-real-estate-investors-retreat-from-u-s-as-political-pressure-mounts-1532437934?redirect=amp
The Asian money thing is nothing new. Back in the eighties, people were saying the Japanese will buy all of the real estate in the US. Google it
Years later the market turned and the Japanese investors lost their shirt. Wait and see. Same is happening now. If you are in the IE there is not much you can do now. The IE usually represents boom and bust 101.
Queue the bears, who will say Chinese buyers don’t exist.
China needs us more than we need them (numerous other Asian countries make the same products), so I don’t think they will let it get to the point where it seriously hurts their economy, which means it probably won’t stem the tide of Chinese investors.
Trump should have limited foreign investment before screwing with imports.
It’s mentioned above. Mr. Landlord called me a racist for pointing it out.
Bro,
My tongue was firmly placed in my cheek. I guess that doesn’t always come across in writing. I apologize.
House prices are totally insane.there is no way I pay for an over inflated house that much of my hard earned money. Moving back to my parents!!!!
Glad to see there are still sane people. If you have the chance to save money by living with your parents, by all means, you got to do it!
That’s the perfect solution to come ahead during this severe bubble. The worst thing you can do during a bubble is to buy RE. The second worse thing is to rent an EXPENSIVE place. The best thing is to live rent free with your parents or in laws.
See, that’s one of the reasons I never had kids. More and more, you have to support them until you die, while they wait for their inheritance from you.
Don’t blame the victim
When people write “no way I am paying†means they choose not to pay
Something tells me its not choice but rather lack of ability
https://www.wsj.com/articles/chinese-real-estate-investors-retreat-from-u-s-as-political-pressure-mounts-1532437934?redirect=amp
http://dailycaller.com/2018/07/24/california-heat-wave-electricity-use/
What do you get when you mix scorching heat with rolling brownouts? Perfect weather in the 5th largest economy! No big deal because everyone can cope by spending the entire day in the pool with the kids. Be sure to call into work and put all other plans for getting anything done on hold. Don’t forget to keep telling yourself on the good weather days it’s always like this and imagine those visions of being in a pool when stuck in crawling freeway traffic.
Perfect weather……reminds me of the IE shills on this blog…..telling us that the coast is too cold and that they don’t have AC in the IE because of a mysterious, CONSTANT breeze. Also, the traffic/commute is a plus….considered DOWNTIME!! And they all make over 200k. Except the 18year old fry cooks.
Funny thing is, anybody who knows the IE feels for them, especially during summer, heat waves. High 90’s /low 100’s. AC runs 24/7.
Did some of you notice how IE Shills will always come up with reasons to make the IE look desireable? The IE usually trails behind in terms of appreciation rates. And the IE is usually the first area that loses the most value during downturns. The IE shills must be getting desperate to sucker in the last buyer before it all crashes down again.
Post something besides this sort of thing, and others might begin taking you seriously. Otherwise the only thing you’re convincing us of is that you were dropped on your head as a baby.
bbbbut CA is the 5th largest economy in the world full of super smart people and stuff!! And still they can’t keep the power on when it gets hot. LOL. Heat waves happen every year in CA and yet each time the power people are all “huh we had no idea something like this could ever happen”. Heat in LA? In July? That’s like a 1 in a billion chance of happening right? Give it a few years and LA will be like Paris where 1000 people die every time temps go above 90. Ain’t socialism awesome?
Mr Landlord,
The power crisis in CA is an after-effect from the Enron crisis.
Nobody says Enron was a problem with socialism. Just the opposite.
Did it ever occur to you that the power grid is not being maintained on purpose?:
Plan to Burn up Northern California Disclosed
https://www.youtube.com/watch?v=DHKIBN2my2Y
Oh, and before you bring up that tired accusation of ‘conspiracy theorist!’, do some research on this.
If only CA had some engineers who could invent something to harness the massive energy that Trump is firing at CA from space-based satellite weapons.
Here we go again. Elections are coming and the Democrats want to pick up seats in congress. So, get ready for a bunch of “Real estate is crashing” stories to be published by the MSM. They did this for Obama, and it created a panic which hit home values hard. But, Democrats love to win elections even if they have to crash your home price to win. You see crashing home prices hurt the party in control.
This time, I bet people will reject the hysterical “Real estate is crashing” stories. CNBC got the ball rolling with the Southern California Real Estate Market is Crashing story on Tuesday. The pattern for years has been higher prices on lower sales. All of a sudden, that is a crash. So unamerican … Fool me once, shame on you. Fool me twice, shame on me.
OK, we all agree that home prices will drop, so what; it happens every +/- 10 yrs in SoCal.
The question is WHY will it drop.
With unemployment in the 3% range and with stock market of 25,000 AND with NINJA loans being nearly non-existent, what is it that will cause housing to drop OTHER than simply buyers realize the market is overheated – and we see a 10% – 15% pullback in prices. That would not be a crash. Further, are there ANY bloggers here that are going to go out and buy if prices drop 15%. No, because they will arrogantly think that a bigger and better crash is around the corner, just like they did in 2010-2013.
What say you?
California real estate crashes every ten years. Why are you so afraid of it!? It’s just the normal cycle here. Keep your powder dry and buy when it’s down55%!
“It’s happens every ten yearsâ€
Exactly!!!
“Further, are there ANY bloggers here that are going to go out and buy if prices drop 15%. No, because they will arrogantly think that a bigger and better crash is around the corner, just like they did in 2010-2013.”
PERMA bears gotta PERMA.
QE Abyss~
1) the Chinese are pulling out, leaving mostly American residents to shore up the real estate market;
2) prices are at nose-bleed levels;
3) tax write-offs for residential real estate in high local income tax states are severely restricted under the new Federal tax laws;
4) interest rates have risen ~1% in the past year;
5) more and more code regulations apply to new housing, increasing the expense and hassle to build them (CA: sprinklers inside the home required since 2011, solar panels mandated in 2020 [expected to add $8-$12K to the cost of a home]; landscaping must be approved by local agencies to make sure they’re drought resistant, etc.). Real fireplaces are also outlawed in CA, making new homes less desirable. Plus, we have severe water useage restrictions coming in 2022.
As for buying when the market is down, older people that have seen how RE is cyclical do have enough hindsight to make a decision to buy at the right time. But again, most don’t have the smarts and the balls to do it. People’s psychology generally induces them to wait to buy until everyone they know is buying. However, the best time is after the market has bottomed for 2-3 years, AND after a recovery is firmly in place. What happens then is that the number of sales starts increasing noticeably, but the huge price increases lag at the beginning. At the top, it reverses. The number of sales drop, but the prices don’t fall until much later. This is what’s happening now even in the hot areas, like the SF-Oakland area. In Sonoma County, though, people have been noticeably dropping their asking prices, and if they don’t, the properties sit.
Millie~
In the East Bay in CA, RE peaked in 1989/1990. 1998, 2005, and now in 2018. That’s not exactly every 10 years.
“Millie~
In the East Bay in CA, RE peaked in 1989/1990. 1998, 2005, and now in 2018. That’s not exactly every 10 years.â€
Yep. That’s close enough though. +/- a couple years is no biggie
bbbbbut bbbbut 5th largest economy in the world!!! Yeah great. And in this 5th largest economy in the world, 1/4 of the population lives in poverty. YEAY SOCIALISM!!!! Hey I know what will fix the problem….more taxes, more regulation and no more enforcement of immigration laws. What could go wrong?
“Researchers from PPIC and Stanford University, who believe federal poverty guidelines fail to capture true hardship in the state, adjusted their criteria to include things like the cost of living. When they did two counties stood out: Los Angeles and Santa Cruz, each with a roughly 24% poverty rate. Santa Barbara County isn’t far behind, nor is San Francisco.”
http://www.latimes.com/politics/la-pol-ca-road-map-poverty-report-20180729-story.html
Millie~
One cycle was 7 years, and the next was 13, nearly double the previous. That’s not consistent. In a human being’s lifetime, there’s a big difference between waiting 7 years and waiting 13 for a good buying opportunity. Neither shows a consistent 10-year cycle, other than in your mind.
Karin,
I totally agree. 7+13=20
20:2=10
It does not matter if it takes 7 years or 13. For some people it might matter. I can wait a long time. No crash no purchase. I don’t need instant gratification. I am
Happy when I buy a great deal. Paying 50% less on your dream home equals several hundreds of thousands of dollars. I had to sell a lot of crypto coins to get to that cash balance. Why would I blow it on heavily overpriced houses if I can just wait a few years or ten?
The MSM is basically the propaganda arm of the Democrat party, there’s that. But it also makes money by scaring people.
Look at Facebook. Last night, the MSM was all “STOCKS WILL PLUMMET TOMORROW”. It’s the end of the world. Everyone run for the hills. And today, what happened? Dow is up 170 as I type this.
Every day there’s some article about how milk or bananas or bagels or whatever is going to give you cancer. On Monday there was a story on CBS News about how 200 people in 45 states, over 6 months got salmonella from their backyard chickens. So in a country of 330M people, 200 people got sick over 6 months. EVERYONE PANIC!! And of course the tone of the story was how this is national epidemic and something needs to be done about it. FOR THE CHILDREN!!
Why anyone listens to anything the MSM says anymore is beyond me.
If you can stomach it, you listen to the MSM in order to find out what everyone is listening to, because most people buy into their propaganda. It gives you insight into why most people have no idea what’s really going on.
My crystal ball says will be a relatively small market correction. Tons of morons will proclaim it’ll be the drop of the century and the end of the Trump. While they’re busy not paying attention the Trump will pump steroids into the financial system which will help him get re-elected and the whole thing will quickly roar back up unto the end of his second term.
Lol. So political. Here a fact most of you don’t get. No matter of who is in charge the housing bubble will pop at some point.
Once the mainstream media picks up the story it’s already too late. The next phase is to watch for the bankruptcies of non bank lenders who set up as an intermediary between commercial banks and borrowers.
When some of the medium to large non bank lenders start to BK it will ripple into the entire banking system.
Great article
https://www.google.com/amp/s/seekingalpha.com/amp/article/4189254-irresponsible-mortgage-lenders-created-second-housing-bubble
Inventory is up, sales are down, rents are falling.
I have been saying this for quite some time. The RE cheerleaders did not acknowledge these facts. Now, it’s everywhere in the news.
They were too long set on the mindset that rents had to go up and that there is low inventory. Maybe it was wishful thinking on their part or maybe they are part of the propaganda because they profit from the housing bubble. Reality hurts sometimes and it will be interesting to see how they respond to the downturn. The media is also shifting towards a negative outlook for the real estate market – especially in California. The next months and years should be fun. Get the popcorn ready.
Yes, good article.
“I’m not predicting the end of the world. For property prices to go down an inflation-adjusted 15-20 percent from peak to trough is a perfectly normal market cycle. It does sting, though, if you put 10 percent down on a two million-dollar home and have to turn around pay money at closing when selling 3 years later.â€
The writer predicts over a 20% fall if rates rise 2-300bps. I find that plausible as well. Remember, most people aren’t crypto millionaires like you. If a house falls from 650 to 500K, the average non crypto millionaire isn’t going to pay cash anyway. And that house that costs 650K today was probably 500K just a couple years ago. The only people who get burned are those who buy at the very peak and sell at the very bottom.
I’m still waiting to see the article on the 75% crash. I’m guessing it involves zombies, the state falling into the ocean, and aliens invading (not the ones from the south) or some combination thereof. Anything is possible with the right catalyst. But I don’t wake up everyday thinking how the world might end either.
If you are really soooooo convinced, why is your fortune rotting away in a bank account? You should take every cent you have and short every REIT, housing stock you can. Actually just buy options. Seriously, max out all your credit cards, forget savings, straight into the market, inverse ETFs, you name it. It’s inevitable the market is going to tank. Next month, maybe 2025. You can buy 10 homes for cash during the downturn.
Methinks you are full of sheeeeeet. You live in your parents basement, play fortnite and work for the Geek Squad.
I find it hard to believe Millie is married. Just can’t see it.
SoCal guy,
Rotting away? Last I checked all the funds were still there in the bank. Nothing missing.
So, can you explain to me what makes you think my money in the bank is rotting away? Or, to make it easier on your part, what do you think is the current inflation rate?
I bet a portion of a bitcoin you won’t answer the question.
“If you are really soooooo convinced, why is your fortune rotting away in a bank account? You should take every cent you have and short every REIT, housing stock you can. ”
Yup. All the perma bears love to type away on their laptops predicting all sorts of doom and gloom. Yet they never put their money where their mouth is. Wonder why that is. Oh right cuz they’re a) cowards who take no risks (see Millie accruing sick days) and b) deep down they know they’re full of shyte.
Millie,
I was writing a longer response but the page refreshed so excuse the double post if it occurs.
IMHO, the true rate of inflation is somewhere around 6-10%. This is further compounded by the lack of wage growth. The official number is around 2-3% per the BLS. The problem is they operate in secrecy- no one knows what prices they use to come up with the CPI. Some things are excluded like housing (I guess people don’t have to live anywhere). I’m not a conspiracy theorist but I do know the government has a large incentive to underestimate inflation because that affects benefit payments (social security, food stamps, etc).
Here’s what I do know. My son turns 2 in a couple weeks. I’m opening a 529 savings account for college. For him to attend 4yrs in-state tuition at my school (UC) including expenses will be $350K! (Based on 6% annual tuition increase). When I attended (luckily had scholarship) tuition was about $4K/yr. My old apartment was $520/mo (actually $505 but $15/mo fridge rental) across from the campus. Today the estimated costs are $34K/yr (based on 9 mo academic year, I’m not sure what you are supposed to do for 3 months). I just looked up my old apartment and it rents for over $2K (I know, rents don’t go up). I lived with my GF, worked a part-time min wage job. I was able to split the bills, put gas in my car, eat/have fun. You think I could do that today? You think my son will have any chance? No freakin way. My old Honda Civic I got in HS stickered for $9K. The same car today is $20K. Interestingly, the new one does not get any better gas mileage and over doubled in price. Gas then was a $1.25/gal. I used spare change to put in a couple gallons enough for the week. I graduated college <20 yrs ago.
My parents were immigrants. My father was a self-employed blue collar guy who spoke mediocre English. I have two older siblings. We lived in a typical 3/2 near the beach. We all went to school including my sister who went to a private college. We got cars, took vacations including going to Europe in the summers. We went out for nice dinners a few times a month. My mom always took me school clothes shopping where I got nice clothes and I burned thru $100 basketball shoes every couple months (I had the pumped up kicks). My parents sacrificed for us.
There is no way my parents could provide that lifestyle today. My old house is well over a million today. Even with your 50% correction they couldn’t do it.
You started making some money and live frugally, good for you. But the reality is you’re broke. Aside from your crypto lottery winnings, you’d need a 50% correction just to afford the avg crap shack. $100K income is equivalent to about $65K anywhere else. Forget housing. Try having a family and doing the things I described on that income. I didn’t grow up in the 50s either. I’m talking about the 80s/90s. And it’s only getting worse.
What’s the bank paying you? A couple points? You are also paying taxes on that interest income so your real rate of return is a little over a point. On the very low end of the spectrum you are losing 5% a year- in reality it’s likely more. It’s further compounded by the loss of potential returns. You must be 30-40 yrs from retirement. You have time to ride the ups and downs.
And again, if you are so sure about the impending collapse, short the market. You could double your investment in a few years by your estimates. It’s guaranteed according to you. Homes drop 50%, your investment doubles. You could buy two houses for cash! One could be a pure rental and set you up with a nice pseudo pension for retirement. What are you waiting for?
So that’s what I mean by rotting away in the bank. Aside from that, you are full of sheeet and a troll. Do you get to take the Geek Squad van home at night?
Jed,
You are probably still young. Here is some wisdom, getting married is not hard. Finding the right partner is the trick.you need a partner that is smart and understands you need to put instant gratification on hold if you want to be successful long term. Save money in good times and buy assets during downturns for a killer discount. Play it smart. Don’t take silly risks. The last thing you want to do is get married and buy and overpriced house.
There are people though that think getting a divorce is like cancer. It can be years away or just around the corner. As we have learned woman can change their feelings any second and cash out of the marriage. Or they get menopause and leave you because of that. Don’t get discouraged Jed. I can give you more tips if needed. For instance, when you date, don’t drive a very expensive car. If the woman dates you because of your money you got yourself a problem. Always pretend you are poor or poorer than you are.
SoCal guy, thanks for your detailed post.
No matter what I think I am not going to play with my large cash balance. I play it as safe as I can. Putting 100k in a cd gets you almost 4%. Yes, i still have some in stocks and dollar cost avg back into crypto. The majority is rotting in the bank acct. I am always open to new possibilities but with the majority of my funds I will take no risks.
While I totally agree that millennials have it much harder compared to boomers I don’t agree with 6-10% inflation rate. But it depends on your situation and spending habits etc. I live a very frugal life style. Almost no monthly payments except rent, car insurance internet and some streaming apps. I don’t feel or see inflation. Gas price peaked 2008 at just over 4 bucks a gallon. In 2018 its still not back to that price. I paid zero tuition fees ( I studied in Germany and England).as I mentioned many times before, my rent has not gone up once. But, I don’t rent from a professional rental company. I rent from a nice old private landlord. Groceries are getting cheaper and cheaper with more competition. At Aldi you can buy a dozen eggs for less than a dollar. What else did I forget? Traveling! Credit card churning and manufactured spending gets you a shit ton of spending on your credit cards=points. To be fair, you have to play that very smart betweeen you and your wife, be disciplined and research a lot. It comes without saying I pay my cards off right away. You need to watch the amount of cards you open and closely monitor your credit score. As long as I maintain well over 800 I keep opening new accounts. Also, a lot of banks offer you to open a checking or savings account and pay you a nice bonus when you move 50-100k. Yeah, it’s not game changing but as I said I like to play it very safe at this point. If the market goes down I am ready to jump in.
Good article. This is also what I’ve been saying since I posted:
“U.S. Home Prices, 2012-2017. Core Logic
“The general mood is that the market is softening right now, especially at the high end. As interest rates continue to rise beyond buyers’ ability to qualify for mortgages, listings will pile up further and prices will fall. Also, the effects of last year’s tax bill will start to be noticed among consumers, many of whom have yet to figure out that they won’t be able to deduct the majority of their state and local income/property taxes. SALT is now limited to $10,000. Consumers have noticed their paychecks are bigger, but if I know the American consumer like I think I do, that money is being spent and not socked away to pay their higher after-tax deduction property bill.”
Even people that know about the $10K limitation are not going to freak out until they actually see, on their tax returns, how it has directly affected how much they owe the Feds. Next April, expect a lot of screaming and crying.
Karin,
The majority of the upper middle class and wealthy who pay more than the 10K in property and state taxes will do what they always do every year and turn over their pile of W2’s,1099’s, etc over to their tax preparer.
They will look at the final return and be extremely happy that they are paying less this year in taxes compared to last year because Trump lowered tax brackets and eliminated AMT. The fact that they can no longer deduct more than 10K will never enter their minds or cause outrage. It is a don’t care because compared to last year,
Trump has lowered their taxes.
My moral outrage is that we are borrowing money from China to pay for these tax cuts. My children will pay the deficit bill Trump is creating so Trump can be loved today.
Bob~
Not everyone is going to pay less in taxes. For many middle to upper class taxpayers and homeowners in states like NY & CA, their loss in write-offs will exceed their gains via lower tax rates.
GDP grew 4.1% last quarter.
ZeroHedge hardest hit, lol.
More food for thought:
https://www.cnbc.com/2018/07/26/the-anything-goes-list-price-strategy-is-no-longer-working-in-housin.html
https://www.bloombergquint.com/business/2018/07/26/american-housing-market-is-showing-signs-of-running-out-of-steam#gs.KlEX0mI
https://www.msn.com/en-us/money/finance-real-estate/international-buyers-are-dropping-out-of-the-us-housing-market/ar-BBL67ta?li=BBnbfcN
Notice few things:
1. I did not use Zerohedge
2. All sources are left MSM
3. I did not make any prediction. My crystal ball broke a long time ago. I could say that MSM is trying to set the GOP for falling in November, but regardless, the FED started last year (first year of the new president) to raise the rates and at the same time to mop the liquidity from the market via QT at faster and faster pace – about $40 billion per month?!?….
4. It looks like the FED under Trump is doing exactly the opposite of what they were doing under Obama – raise rates vs. ZIRP and QT vs. QE. Are the prices going to go opposite given these 2 powerful drivers???!!!!……remains to be seen.
You’re right, the articles are ALL lefty MSM. Housing cycles are not entirely natural. They are manipulated by the press. In the past month or so, MSM has started the drumbeat that housing is falling, which will only accelerate the fall as this does induce the population to believe what they are told. I’ve seen this happen over and over again in RE.
Free market is net composite of all manipulations out there: mainly regular folk being greedy and stupid, investors, banks, large investors, politicians. Everyone is contribution to manipulation, net result is free market.
You should know this simple truth by this stage of your life
Surge~
The entities that are manipulating the press (and who own the press, btw) are also the entities that control our financial markets, as well as our politicians. The average Joe believes what they’re told on the MSM. Simply believing what you hear is not manipulating, by definition. The average Joe is instead BEING manipulated. If they act according to false beliefs they are fed, it is not done to manipulate others, but out of ignorance of the facts.
Surge, you have a weird way of twisting things around to suit your belief systems. The problem with trying to twist reality with people like myself is that I’m old enough (62) to have amply refined my bullshit detector over the decades I’ve resided on this planet. And you do come up with a lot of BS sometimes. Not always, but certainly enough.
The only ones manipulating press are the readers -the publishers are just following and amplifying what readers are responding too. Conspiracy theory sites exist because people want to believe in them
Only high 90’s in Temecula today. Good thing there is a constant ice cold breeze going through town. No need for an AC!
Temecula, LOL
Who needs an ice cold breeze when you have a cool pool and ice cold beer to sip all day during your retirement years. 90’s for a few weeks in the summer means more pool time.
If I wanted hot, I’d retire to Phoenix for the 120 Deg days.
If I wanted June Gloom, I’d retire to Portland or Seattle.
Temecula is a good compromise IMHO. ie Perfect Weather and if I got bored with Perfect, I’d make the short trek to the gloomy overcast beach for a day in May, June and July.
August and September are good beach days but they are also good pool days in Temecula.
The job commute for 200K jobs in Temecula would be horrible. If I was retired, I wouldn’t care.
If I wanted June Gloom, I’d retire to Portland or Seattle.
I wish. I’m in Seattle right now. Temps in the 90s, HOT and SUNNY.
Not enough June Gloom for me in Santa Monica, or Seattle, or Portland.
And good thing there is a scenic coastline and ocean nearby. Plus, it is very close to jobs!
“Only high 90’s in Temecula today”
You have (arguably) better weather for two months out of the year. You’re all of 9 degrees cooler at the high today. Shall we compare crime stats? Or the vagrant population? How about potholes? Or schools? Or parks? Or utility rates? Or air quality? LA today – “Sensitive people: Reduce long or intense outdoor activities. If you experience coughing or shortness of breath, take it easier.” lol
You live in the armpit of So-Cal, Millie.
Good news after good news.
https://www.google.com/amp/s/www.yahoo.com/amphtml/finance/news/housing-market-slowing-thats-bad-sign-economy-103833729.html
Housing market is slowing down. Lower home prices are great for potential buyers.
Given all of the doom and gloom perma-bear articles about the housing crisis, I thought I would run my own set of #’s on the national housing market.
Some markets clearly experienced a substantial decrease in sales (CA down 8%), but nationally the June volumes were only down 3.2%. I think what I lot of folks are missing is that figures on a monthly basis are pretty volatile. Better to look at YTD figures and annualize them.
If you annualize the YTD sales through June ’18 (2.82mm sales nationally) and compare it to last years sale #’s (2.88mm) you see volume declined nationally by 1.9%. Meanwhile prices have on average gone up 5% nationally. This is hardly a cause for concern.
My view, people are still feeling rich from the stock market bull run over the past 5 years. A lot of hopeful permabears are reading into one month of volume data, but housing prices have generally followed the overall equity market. Until we see a bear market, my bet is we see similar volumes with increased pricing especially in competitive markets.
*Data from redfin data center. Go https://www.redfin.com/blog/data-center if you want to check out primary data for yourself vs reading fake news.
Perma bears gotta perma. In February they were orgasmic when stocks “plummeted”. Remember how that was the end of the bull run? It was the end of Trump? It was the start of the mostest greatest depression ever? Millie was getting ready to buy his 75% off homes. And here we are 5 months later and nobody even remembers the “crash”. Nsasdaq is about 3% higher than in February and the S&P500 is just about where it was pre-“crash”. In any market there will always be short term fluctuations. Long term it is nearly impossible to lose money investing in both equities and real estate (in the US at least).
In February? Lol, what are you taking about. Nobody cared about a small dip in the stock market. We all buy stocks on our bi-weekly paychecks. A small dip is nice to let you buy in cheaper. That has nothing to Do with the upcoming RE crash when house prices will correct by 55-75%.
I haven’t posted in a while. Was the same old crap here getting recycled. Millennial Vs. Mr, Landlord, par for the course.
But things have changed. Three days ago was a huge market shift IMO. Obviously the leading indicators have been flashing amber for a while that this froth-fest was coming to a head. But in the last several days MSM is finally tracking it. The narrative has changed with house jockeys too (realtors.) They are finally opening up to me (I’m a full-time RE investor) when pressed and admitting a shift has occurred. The optics have changed. Let’s admit that the market is actually cracking. Jim Taylor, are you here???
This applies to your beloved Spokane Mr. Landlord, which I follow very closely and have invested in–it is a total bubble bath there, so overpriced. 6X median household income and other abnormalities. It isn’t even debatable, but you still may try, you’re quite the battle axe, bra 🙂
If you want to buy (and does not mean you have to buy or always makes sense to buy), the strategy must be not to time anything but be impervious to other people’s bullshit, metrics, etc…
“ the strategy must be not to time anythingâ€
Says the guy who bought high (2005) and who thinks rental
Parity means 200k down plus 1.5k more a month than rental rate. If people start following your advice they will make money soon – NOT.
NorCal, good to see you my friend. Always enjoy reading your nonsensical rants. Bubble baths can be fun. Especially in groups.
I know math is hard for socialists like you but come on man. 6X median income? HH income for Spokane Co is $53K. Median home price is $228K. Sounds like you leaned math the common core way. SAD!
I never was good at math, but I am great at making money! And I could throw a football 45 yards while resting on my knees so I made it through an awesome college that I wouldn’t have gotten into otherwise.
That being said, your number is light for median sales in Spokane. Even your beloved local Spokesman rag called it $240k in a June 7th publication. And MTM numbers for price appreciation were up so you are partially correct, it isn’t six, it is closer to 5X median HHI. My bad. Circling 5 is still a bubbly figure.
Hopefully that Amazon plant (a glorified fed ex shipping center) everyone is bragging about really drives prices from here out! I’m sure the guys slapping shipping tape onto cardboard are going to be putting a lot of upward pressure on prices up in Rockwood soon! Actually based on its projected opening date I don’t know if it will ever happen, that should be in the heart of the recession.
Totally agree about baths with hot chicks though!
If there is any weakness in the RE market, it can be contributed to the following:
1. Tax reform limiting tax benefits for principal residence.
2. Overall affordability. (Median CA home now costs $500K+)
3. Lack of inventory, especially in the lower-end range.
4. Lack of new construction.
5. Increased mortgage rates.
I don’t know about LA and San Fran, but in Riverside county good properties are still flying off the shelf for top dollar and rents are increasing steadily.
What? It can’t be!! The RE cheerleaders told us the Chinese are waiting in line. Ready to buy. What happened???!
https://www.wsj.com/articles/record-drop-in-foreigners-buying-u-s-homes-1532632676
And How come this article is not even from zero hedge?? It must be Obama’s fault.
“Home purchases by overseas buyers have fallen 21%, dealing fresh blow to housing market
That 21% decline was the largest on record, the NAR said.â€
Even the NAR says that?! Holy cow! Sentiment is turning quickly. This is going to be fun to watch the next months and years!
If you are trying to sell your house, boy…..lower your price dramatically before it’s too late. You might end up holding the bag while others can purchase the house next door for half of what you wanted originally.
Except that you denied there were any foreign investors at all. So which is it? There were ~$150b in homes purchased by foreigners and it’s declined 21% from there, or there never were any? Make up your mind, Millie.
I see a lot of posts claiming the great housing crash is here. Not so fast. Historically, housing crashes only occur leading into recessions. At this point, the GDP is decent, although it is a little backwards looking. Furthermore, the job market has a lot of strength. The media is in a desperate attempt to tear Trump down in the midterms, so they are out pumping negative housing stories, but no housing crash without a recession.
In my opinion, we will be looking at higher inflation due to tariffs. If inflation really gets out of control, we could see big rate increases that would trigger a recession. But, we are not there now. If we go down that route, it will take time.
Western economies are in secular deflation which the central banks and government have been trying to defeat. Technology is advancing too fast and birthrates have fallen too low (hence the welcoming of millions of unskilled immigrants). While they have done a great job of propping up asset prices with money printing the deflation wave will win.
The GOP tax cut has only delayed the inevitable by allowing people to take on just a tad bit more debt before the mass defaults.
Certainly seeing a slow down around here. I stopped at 2 open houses yesterday and they were both empty. I’m getting alerts more frequently from Redfin regarding price drops.
Leave a Reply