1. Thanks for the information and your contributions.
2. In line with your general observations about a slow down (across the economic board - not just housing) I wonder if some of the perma-bulls (or better yet, new home builders) will begin reconsider given both Greenspan’s commentary and the recent 500 point market plunge… which may result in further new home price reductions, and perhaps countless more flippers caught in the guillotine… I suppose that I don’t have much sympathy for them either.
-----
I agree wholeheartedly that people should *not* buy now. The artificial demand and price bubble created by elimination of underwriting standards and dislocation of risk premiums, is in the process of reversing. Once underwriting guidelines are again established within the next year, either via state regulations or investor appetite, housing prices will drop 30% in a matter of months. The late 2003/2004 surge in prices caused by 1.75% Fed funds rate is going to reverse.
That said, how can we knock some sense into bubble blogger readers, who are posting about making offers on homes? It just boggles my mind that long-time piggington readers are out there making offers on houses! This just indicates they did not own before because they were priced out, not because they had any superior understanding of bubbles of business cycles or real estate markets.
We need to do a serious education campaign, because our efforts have fallen short. What do you all think?
Posted by k.o. on 02/27/07 at 04:11 PM
Looking forward to all the information I’m getting from this and other sites; been recently looking around the OC area housing market even though I know I cannot afford anything right now. Keep up the good work!
Wow, between IrvineRenter and zovall I’m almost embarassed to post my strictly amateur, “out and about” observations. You guys are the best! I’ll see what I can do to step up my contributions. We’re in this for the long haul - originally I had thought 2008 would be a reasonable time to buy but now I’m pretty convinced that 2009 makes more sense for me. We shall see how the market behaves. I look forward to being educated, entertained, and continually fascinated by my fellow bloggers and forum members as we move forward. Welcome again, IrvineRenter! (and thank your kind wife for us all, please!)
Posted by EvaLSeraphim on 02/27/07 at 07:15 PM
Great stuff! I look forward to more. Congrats on joining the team!
I “used” to be a real estate investor here in So Cal and I look forward to your insights.
Posted by norcal jeff on 02/27/07 at 10:21 PM
Great post. I too sit on the sidelines, and not bitter As for people buying into a falling market, I agree and see it up here as well. I think it takes a while to correct behavior, it has a lot of momentum. People are used to making money on their homes, no matter what, and are used to the feeling that they MUST own a home. Either way, they will learn the hard way. This market is so unstable and crazy I don’t know why any one would choose to buy now. I believe the territory we’re in now is unprescedented and will get worse. And the 500 point drop in the stock market is only the beginning, and will have a negative impact on RE. And before any bulls chime in, no, stock investors will NOT flee to RE for safety. That’s just absurd.
Posted by biscuitninja on 02/28/07 at 01:13 PM
Umm, I didn’t know you were just a part timer… ha ha! I’m always late to the party…
-bix
Posted by Aneil on 02/28/07 at 02:15 PM
I’m really glad I stumbled upon your blog. My wife and I were out looking over the last week or so just to get an idea what the different houses/developments were and how much we could get for the money. It’s great to see you lay things out like this so we have a better idea of what’s going on at the ground level.
Thanks for putting this blog together!
Posted by Rob on 02/28/07 at 07:06 PM
Great post, and just heightens the hilarity of the NAR radio advertisements stateing that NOW is the time to buy! I seriously laugh out loud when I hear them on KFI.
Posted by Amateur on 03/01/07 at 08:46 AM
To Powayseller - it’s unfortunate, but no matter how much education and PR there will always be a number of folks who will buy “on the way down”. Unless of course they find a fantastic opportunity (e.g., 2001 price - haha).
To Irvinesinglemom - I was also thinking 2008/2009 - Don’t you believe it depends on the rate of increase in inventory? If the RE market panics (i.e., banks) - mid to late 2008 could be a great time for those who want to find a deal.
Does anyone think that REITs will be a popular instrument if they end up buying bulk REO-owned properties at discount? Also, who are the institutional buyers of REO props?
This expression always comes to mind: “You can lead a horse to water...” All we can do is give out unbiased facts. If people chose to buy, they can’t claim ignorance later.
Amateur,
Even with the panic which will likely happen, this will still take a while to play itself out. IMO, if you buy before 2010, you will spend some time underwater. 2012 is probably closer to the bottom.
BTW, I would like to answer your question about the REIT privately. I just happen to know where you might be able to invest in one that intends to buy properties over the next several years at rock-bottom prices.
Posted by red on 03/01/07 at 10:13 AM
IrvineRenter -
Seem like the bottom price can be a moving target. Say by 2012 rents increase by 20%, do you still expect 2002 price or is it closer to 2004 price?
I know many people like to pride themsleves as being objective and truthful but I think the only unbiased fact is none of us can really predict the future price.
“I know many people like to pride themsleves as being objective and truthful but I think the only unbiased fact is none of us can really predict the future price.”
I certainly agree with that statement. IMO, the 2002 prices are closer to current fundamental valuations, but as you point out, rents will probably rise somewhat, so reaching 2002 prices may not happen. Also, rents have flattened in previous housing downturns, but some of that was likely due to the corresponding economic downturns that accompanied them. That being said, if the number of foreclosures is large enough, we may overshoot fundamental valuations to the downside. Personally, I think this likely.
Posted by Enzo on 03/19/07 at 03:11 PM
I currently rent in Woodbury and wouldn’t buy there. Why pay 5k mortgage when I can rent for half of that?
I think prices will continue falling as more people are forced to sell due to relocations, arm adjustments and foreclosures. Prices rose way too fast in the speculative market. There are not that many
people who can truely afford a million dollar home, but there are plenty of million dollar listings and not that many takers. Prices must go lower.
I see at least a 10-20% price decline in real estate over the next few years in areas that appreciated quickly like South Florida, California, Vegas, & Phoenix. Most of those areas are way overpriced at the moment. Salaries haven’t risen much at all. I do think the full extent of the decline depends on the stock market though.
The recent stock market woes though will force many investors back into the real estate game. As real estate prices dip a bit more, investors will jump at the chance and purchase more real estate at bargain prices and I believe the market will slowly decline, but level off by the end of 2008 in most markets.
Sub prime is not doing well we hear. To me, this is almost laughable. People that have bad credit are not paying their bills - no shit, that’s why they’re called sub-prime in the first place. This issue is over hyped. Sub prime foreclosures are up a few percentage points. We are at a record high, but the previous high was in 2002 right in the middle of the boom, so I’m not that worried about sub prime.
Once the real estate prices adjust downwards, general population growth and immigration over the next few years will even any sub prime issues out.
I am contacting you in regards to buying Bank REO’S. I am in direct contact with these Banks (CEO’s) who are wanting to sell these off ASAP!
I would like to know what you requirements are and location so that we may cater to your wants. If you have any interest in buying bulk reo’s please, fill free to contact me with any question or comments.
Thank You,
Ed. McGowin
Financial Note Advisor/Investor
Charter One Funding and Investors
205-567-2434 Bus.
205-833-8799 Fax
Posted by Shark on 02/27/07 at 03:34 PM
Nice summary! Looking forward to more blog posts..
Posted by GrewUpInIrvine on 02/27/07 at 12:49 PM
Irvine Renter -
1. Thanks for the information and your contributions.
2. In line with your general observations about a slow down (across the economic board - not just housing) I wonder if some of the perma-bulls (or better yet, new home builders) will begin reconsider given both Greenspan’s commentary and the recent 500 point market plunge… which may result in further new home price reductions, and perhaps countless more flippers caught in the guillotine… I suppose that I don’t have much sympathy for them either.
-----
Posted by powayseller on 02/27/07 at 03:38 PM
I look forward to more of your writing.
I agree wholeheartedly that people should *not* buy now. The artificial demand and price bubble created by elimination of underwriting standards and dislocation of risk premiums, is in the process of reversing. Once underwriting guidelines are again established within the next year, either via state regulations or investor appetite, housing prices will drop 30% in a matter of months. The late 2003/2004 surge in prices caused by 1.75% Fed funds rate is going to reverse.
That said, how can we knock some sense into bubble blogger readers, who are posting about making offers on homes? It just boggles my mind that long-time piggington readers are out there making offers on houses! This just indicates they did not own before because they were priced out, not because they had any superior understanding of bubbles of business cycles or real estate markets.
We need to do a serious education campaign, because our efforts have fallen short. What do you all think?
Posted by k.o. on 02/27/07 at 04:11 PM
Looking forward to all the information I’m getting from this and other sites; been recently looking around the OC area housing market even though I know I cannot afford anything right now. Keep up the good work!
Posted by irvinesinglemom on 02/27/07 at 07:10 PM
Wow, between IrvineRenter and zovall I’m almost embarassed to post my strictly amateur, “out and about” observations. You guys are the best! I’ll see what I can do to step up my contributions. We’re in this for the long haul - originally I had thought 2008 would be a reasonable time to buy but now I’m pretty convinced that 2009 makes more sense for me. We shall see how the market behaves. I look forward to being educated, entertained, and continually fascinated by my fellow bloggers and forum members as we move forward. Welcome again, IrvineRenter! (and thank your kind wife for us all, please!)
Posted by EvaLSeraphim on 02/27/07 at 07:15 PM
Great stuff! I look forward to more. Congrats on joining the team!
Posted by Mr Vincent on 02/27/07 at 08:22 PM
Welcome aboard and nice intro.
I “used” to be a real estate investor here in So Cal and I look forward to your insights.
Posted by norcal jeff on 02/27/07 at 10:21 PM
Great post. I too sit on the sidelines, and not bitter
As for people buying into a falling market, I agree and see it up here as well. I think it takes a while to correct behavior, it has a lot of momentum. People are used to making money on their homes, no matter what, and are used to the feeling that they MUST own a home. Either way, they will learn the hard way. This market is so unstable and crazy I don’t know why any one would choose to buy now. I believe the territory we’re in now is unprescedented and will get worse. And the 500 point drop in the stock market is only the beginning, and will have a negative impact on RE. And before any bulls chime in, no, stock investors will NOT flee to RE for safety. That’s just absurd.
Posted by biscuitninja on 02/28/07 at 01:13 PM
Umm, I didn’t know you were just a part timer… ha ha! I’m always late to the party…
-bix
Posted by Aneil on 02/28/07 at 02:15 PM
I’m really glad I stumbled upon your blog. My wife and I were out looking over the last week or so just to get an idea what the different houses/developments were and how much we could get for the money. It’s great to see you lay things out like this so we have a better idea of what’s going on at the ground level.
Thanks for putting this blog together!
Posted by Rob on 02/28/07 at 07:06 PM
Great post, and just heightens the hilarity of the NAR radio advertisements stateing that NOW is the time to buy! I seriously laugh out loud when I hear them on KFI.
Posted by Amateur on 03/01/07 at 08:46 AM
To Powayseller - it’s unfortunate, but no matter how much education and PR there will always be a number of folks who will buy “on the way down”. Unless of course they find a fantastic opportunity (e.g., 2001 price - haha).
To Irvinesinglemom - I was also thinking 2008/2009 - Don’t you believe it depends on the rate of increase in inventory? If the RE market panics (i.e., banks) - mid to late 2008 could be a great time for those who want to find a deal.
Does anyone think that REITs will be a popular instrument if they end up buying bulk REO-owned properties at discount? Also, who are the institutional buyers of REO props?
Posted by c@park on 03/01/07 at 09:04 AM
Expect your posings
Posted by IrvineRenter on 03/01/07 at 09:06 AM
Powayseller,
This expression always comes to mind: “You can lead a horse to water...” All we can do is give out unbiased facts. If people chose to buy, they can’t claim ignorance later.
Amateur,
Even with the panic which will likely happen, this will still take a while to play itself out. IMO, if you buy before 2010, you will spend some time underwater. 2012 is probably closer to the bottom.
BTW, I would like to answer your question about the REIT privately. I just happen to know where you might be able to invest in one that intends to buy properties over the next several years at rock-bottom prices.
Posted by red on 03/01/07 at 10:13 AM
IrvineRenter -
Seem like the bottom price can be a moving target. Say by 2012 rents increase by 20%, do you still expect 2002 price or is it closer to 2004 price?
I know many people like to pride themsleves as being objective and truthful but I think the only unbiased fact is none of us can really predict the future price.
Posted by IrvineRenter on 03/01/07 at 12:13 PM
Red,
“I know many people like to pride themsleves as being objective and truthful but I think the only unbiased fact is none of us can really predict the future price.”
I certainly agree with that statement. IMO, the 2002 prices are closer to current fundamental valuations, but as you point out, rents will probably rise somewhat, so reaching 2002 prices may not happen. Also, rents have flattened in previous housing downturns, but some of that was likely due to the corresponding economic downturns that accompanied them. That being said, if the number of foreclosures is large enough, we may overshoot fundamental valuations to the downside. Personally, I think this likely.
Posted by Enzo on 03/19/07 at 03:11 PM
I currently rent in Woodbury and wouldn’t buy there. Why pay 5k mortgage when I can rent for half of that?
I think prices will continue falling as more people are forced to sell due to relocations, arm adjustments and foreclosures. Prices rose way too fast in the speculative market. There are not that many
people who can truely afford a million dollar home, but there are plenty of million dollar listings and not that many takers. Prices must go lower.
I see at least a 10-20% price decline in real estate over the next few years in areas that appreciated quickly like South Florida, California, Vegas, & Phoenix. Most of those areas are way overpriced at the moment. Salaries haven’t risen much at all. I do think the full extent of the decline depends on the stock market though.
The recent stock market woes though will force many investors back into the real estate game. As real estate prices dip a bit more, investors will jump at the chance and purchase more real estate at bargain prices and I believe the market will slowly decline, but level off by the end of 2008 in most markets.
Sub prime is not doing well we hear. To me, this is almost laughable. People that have bad credit are not paying their bills - no shit, that’s why they’re called sub-prime in the first place. This issue is over hyped. Sub prime foreclosures are up a few percentage points. We are at a record high, but the previous high was in 2002 right in the middle of the boom, so I’m not that worried about sub prime.
Once the real estate prices adjust downwards, general population growth and immigration over the next few years will even any sub prime issues out.
Nazz
Posted by Ed McGowin on 04/27/07 at 03:49 AM
Hello,
I am contacting you in regards to buying Bank REO’S. I am in direct contact with these Banks (CEO’s) who are wanting to sell these off ASAP!
I would like to know what you requirements are and location so that we may cater to your wants. If you have any interest in buying bulk reo’s please, fill free to contact me with any question or comments.
Thank You,
Ed. McGowin
Financial Note Advisor/Investor
Charter One Funding and Investors
205-567-2434 Bus.
205-833-8799 Fax