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Old 11-25-2008, 10:22 PM
 
Location: Los Angeles, CA
419 posts, read 929,449 times
Reputation: 165

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Why the high end will fall, and why it happens last. Told through a listing in one of the highest end developments in Irvine, the coastal community of Turtle Ridge.
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Old 11-26-2008, 01:41 AM
 
Location: Living on the Coast in Oxnard CA
10,577 posts, read 14,071,950 times
Reputation: 12210
Quote:
Originally Posted by edwardius View Post
Chris Cagen has demonstrated that over the course of the real estate cycle, prices correct in all area of the community. The price corrections don't occur at the same time at all price points, but no area is immune from a correction. see the diagrams on pg 11 -28 here.

http://www.facorelogic.com/uploadedF...eBurn_1104.pdf
I noticed your boy's information was from three years ago. He stated that prices couldn't go down much further. From what I saw 2005 - 2006 was the top of the market. Maybe I read the article wrong but he seems to have told people that 2005 was a great year to buy. Try telling that to people that bought in 2005. Many of the homes that sold in 05 are now bcak on the market. Problem is that they are short sales, REO's, and forecloser properties.

My point on the upscale communities is that when you live in a multi million dollar spread, chances are you have the ability to survive a downturn in prices and remain at the home untill things get back to a favorable condition. Maybe there are some that bought into a community like Sherwood Country Club, Brentwood, Hidden Valley, or some other place that could swing the entrance fee for a multi million dollar place and are now having problems. The number of those people is slim though. To live in many of these places you need a heavy supply of cash. Those that have it could care less that people in Palmdale are losing homes, or that values have declined by half in Oxnard. They have the scratch so it doesn't nessasarily affect them. They are not in the mood to sell so it doesn't affect them.
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Old 11-26-2008, 09:09 AM
 
Location: Los Angeles, CA
419 posts, read 929,449 times
Reputation: 165
Quote:
Originally Posted by SOON2BNSURPRISE View Post
Those that have it could care less that people in Palmdale are losing homes, or that values have declined by half in Oxnard. They have the scratch so it doesn't nessasarily affect them. They are not in the mood to sell so it doesn't affect them.
Not exactly true. The issue is the gridlock created when homes don't sell causes price erosion upstream. And if Palmdale is full of short sales, that prevents those folks from moving up to SCV, which prevents the moveup to SFV, which pauses the westside, etc. Sounds hokey but 100% true - this is why the high end is among the last to fall - it's the last in the chain.
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Old 11-26-2008, 03:14 PM
 
1,020 posts, read 681,279 times
Reputation: 394
Quote:
Originally Posted by SOON2BNSURPRISE View Post
I noticed your boy's information was from three years ago. He stated that prices couldn't go down much further. From what I saw 2005 - 2006 was the top of the market. Maybe I read the article wrong but he seems to have told people that 2005 was a great year to buy. Try telling that to people that bought in 2005. Many of the homes that sold in 05 are now bcak on the market. Problem is that they are short sales, REO's, and forecloser properties.

My point on the upscale communities is that when you live in a multi million dollar spread, chances are you have the ability to survive a downturn in prices and remain at the home untill things get back to a favorable condition. Maybe there are some that bought into a community like Sherwood Country Club, Brentwood, Hidden Valley, or some other place that could swing the entrance fee for a multi million dollar place and are now having problems. The number of those people is slim though. To live in many of these places you need a heavy supply of cash. Those that have it could care less that people in Palmdale are losing homes, or that values have declined by half in Oxnard. They have the scratch so it doesn't nessasarily affect them. They are not in the mood to sell so it doesn't affect them.
The wealthy have a higher level of income volatility because they often own there own business and/or have lots of investment income both of which varies depending on the strength of the economy.

During boom periods they may have to spend lots of cash to outbid each other for the right to trophy properties, but during busts, it can be difficult for them to find anyone who has the means to buy their property.

During the last real estate bust, Barbara Striesand had trouble finding anyone able to buy her mansion in Malibu. It was on the market for more than a year unsold. Instead what she did was give it away to the Santa Monica Mountains Natural Conservancy. Because she was touring that year, she had a huge reported income and the tax deduction for the donation was going to be greater than what she would have recieved if she had sold it. There was a minor controversy over the high assessed value the property recieved for the donation, but she was a major political donator with pull locally and nationally and the cause was giving the property to charity so she got it away with it.

You Can Tour Barbra Streisand's Mansion

But properties on the high end can get pretty illiquid.
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Old 11-26-2008, 09:43 PM
 
Location: Below the fray
412 posts, read 1,078,400 times
Reputation: 283
Please quote the law that compelled banks to give loans to people who couldn't pay them back. Is that the law of greed?
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Old 11-26-2008, 10:54 PM
 
Location: Los Angeles, CA
419 posts, read 929,449 times
Reputation: 165
Quote:
Originally Posted by Cubancoffee View Post
Please quote the law that compelled banks to give loans to people who couldn't pay them back. Is that the law of greed?
Actually, the law is called the Community Reinvestment Act. Taxpayers subsidized low cost loans to folks who would otherwise not quality for a mortgage.

Fannie and Freddie provide explicit guarantees for this sort of paper through the FHA.

These sorts of interventions "privatize the profits, socialize the losses" and are the furthest thing from capitalism. All with the best of intentions.

Where was the OFHEO regulator in all this? Oh wait... they were WARNING Congress...

ps Are you SURE you want more government involvement ?
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Old 11-27-2008, 04:51 PM
 
Location: Below the fray
412 posts, read 1,078,400 times
Reputation: 283
Did the law require lenders to disregard (and in some cases encourage) fraudulent income documentation from prospective borrowers? Or did the lenders say "Hey, government program! Free money!" and just ignore the rules?
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Old 11-27-2008, 07:43 PM
 
Location: Los Angeles, CA
419 posts, read 929,449 times
Reputation: 165
Quote:
Originally Posted by Cubancoffee View Post
Did the law require lenders to disregard (and in some cases encourage) fraudulent income documentation from prospective borrowers? Or did the lenders say "Hey, government program! Free money!" and just ignore the rules?
I think the same "law of greed" was invoked by the hundreds of thousands of specuvestors and flippers who were given government-backed liar-loans by greedy, lying mortgage brokers. Those loans were packaged into CDOs, which were rated "AAA" by greedy ratings agencies then sold to greedy investors, who were paid a higher yield than lower-than-normal treasury instruments (thanks Mr. Greenspan).

Everyone was in on it, and greed drove the whole thing.

Same greed you will no-doubt invoke when you go to sell your place....
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Old 11-28-2008, 08:27 AM
 
Location: Living on the Coast in Oxnard CA
10,577 posts, read 14,071,950 times
Reputation: 12210
All I know is I sure would love to have the problems that those in high end communities have with reguards to buying or selling their homes.
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Old 11-28-2008, 06:44 PM
 
Location: Below the fray
412 posts, read 1,078,400 times
Reputation: 283
Sold my house more than a year ago, thanks, to someone greedy to get into it.
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