Feeling like 2006... (rental, credit, loans)

[Electrician4you]

Originally Posted by crabtrees

From what I'm seeing down in south orange county, properties are staying on the market longer than they have the past two years, despite what I consider an extreme shortage of units on the market. Using my condo complex as an example, it was practically the norm for any condo that hit the market to be in escrow within one week. Now, very nice updated units that are listed at top price are sitting for weeks. I guess I have no way of knowing if they are receiving offers, but there doesn't seem to be a mad rush to buy like there was the past 24 months.

We're just slowing down a bit. Sometimes people have to catch up with prices or re-evaluate. Unless its grossly overpriced it will eventually sell. The higher the price the smaller the buyer pool.

[crabtrees]

Originally Posted by Electrician4you

We're just slowing down a bit. Sometimes people have to catch up with prices or re-evaluate. Unless its grossly overpriced it will eventually sell. The higher the price the smaller the buyer pool.

There are 2 units on my street competing against each other. I believe they are priced $10k-$15k more than they are worth (both priced a bit below $500k). But you have a good point, I have gotten so used to seeing units sell so quickly that it now seems odd when a home is on the market 3-4 weeks, which is still probably considered a quick sell when compared to historical time on the market.

[Electrician4you]

Originally Posted by crabtrees

There are 2 units on my street competing against each other. I believe they are priced $10k-$15k more than they are worth (both priced a bit below $500k). But you have a good point, I have gotten so used to seeing units sell so quickly that it now seems odd when a home is on the market 3-4 weeks, which is still probably considered a quick sell when compared to historical time on the market.

It's either gonna take a little while to find a buyer willing to pop for the additional 10/15k or one of the sellers is gonna wanna sell it and drop the price to meet a buyer.
If I was selling and I had competition I would
1. drop the price a bit to go below my competition to make the property more attractive to get the buyer and create competition for my property.
Or
2. I could offer a good amount to help with closing costs right off the bat.

Ultimately it's a game on attracting buyers.


That's what I do when I list a rental. I look at the going rate and go a bit below (100-150 bucks). I do it because it gets more traffic and I can get it rented faster because it becomes more desirable. And I tend to have higher acceptance requirements and applicants that meet those requirements are who I want to attract. So the lower price and the exceptional condition I keep my rentals in I'm looking to attract tenants with high incomes, great credit, no background isssues and are not problematic.

[Coldjensens]

Wait.


I look back at the history of our house in Santa Ana. In the early middle 1990s, it was appraised at $350,000 and listed for $275,000. Then a down cycle came. We bought it for $175,000 in 1996 during a market recession. We did a lot of work on it and spend some money on upgrades/restoration but less than $100,000, probably less than $50,000. The value climbed steadily with seemingly no end in sight. We sold it in 2005 for $757,00. In about 2008, it was listed for around $650,000 (after the buyer put $200,000 into it, much of which actually de-valued it, some of which improved it). Eventually it was foreclosed on and sold for $454,000 (about 2009). Later it sold I think for somewhere in the mid $500,000s. Then it sold for $629,000 in 2014 and Redfin has it currently estimated at $729,000 (Zillow says $764). I Certainly wouldn't (and couldn't) buy it now. It will cycle back down. Probably not to $454 and certainly not to $175,000, but likely to the $500K range. Remember you have to pay taxes based on your purchase price. It always cycles. People, especially realtors who want you to buy now when it is high and commissions are huge always say "Not this time. This time is different" Then it cycles again, ragains value and they say "Not this time" . . . The general trend is up but within that trend it will cycle several times over the years or decades. Waiting can save you hundreds of thousands.

Of course they could be right. This may be the one time in history real estate does nto cycle like it always has and just keeps going up forever. Maybe something is different this time (except it isn't).

[payutenyodagimas]

that's why there is Economic Cycle for a reason. that's just fact. when? we don't know but it will come.


and if the downturn comes during Trumps reign, too bad. you are only 1-term prez. it will also reinforce the observation that Repub prez inherit a good economy only to ruin it. but in reality, its just economic cycle working.

[CaliRestoration]

Of course real estate is cyclical. No one is saying that there won't be a downturn in real estate in any major California Metro. That's EXPECTED.

But let's look at actual data. Let's use the the Bay Area which is probably the hottest real estate market in all of California at the moment.

Using the Case Shiller we see 3 downturns.

- 1990 peak, bottoms out in 1996
- 2001 Dot Com peak, bottoms out late 2002.
- 2006 Bubble Peak, 2012 bottom.



After each peak, we do indeed see a downturn, but almost on point, we also see a corresponding rise in prices where the NEW peak actually exceeds the last peak, and we also see the next "downturn" is actually HIGHER than the previous peak. The only time we don't see this in the past 40 years is during the 2006 bubble where low-end homes crashed a lot harder than mid-tier and higher-tier homes since lower-tier homes were inflated more due to subprime loans.

So no, prices won't rise "forever", but they won't fall back to a place where "affordability" is better than the previous cycle. We have decades of data that supports this conclusion.

Real estate is nearly ALWAYS a good buy if you are holding long. If you're a flipper, or a pure investor, then you have to time your entry and exit in finer terms. Primary home? Buy when it makes financial sense to you, and hold more than 10 years? You will be just fine.

[Electrician4you]

Originally Posted by payutenyodagimas

that's why there is Economic Cycle for a reason. that's just fact. when? we don't know but it will come.


and if the downturn comes during Trumps reign, too bad. you are only 1-term prez. it will also reinforce the observation that Repub prez inherit a good economy only to ruin it. but in reality, its just economic cycle working.

Unfortunately it was a "good" economy because of the MASSIVE influx of money and low interest rates. They threw everything they could at it to get the economy going. Because it sure took a long time to get it moving.
So don't go giving Obama too much credit. It took DOUBLING the national debt. Personally I think if they would of let it crash completely we would be better off now. You don't now he's a 1 term. It's only been what 4 months? He's got a long way to go

[CaliRestoration]

Originally Posted by payutenyodagimas

that's why there is Economic Cycle for a reason. that's just fact. when? we don't know but it will come.


and if the downturn comes during Trumps reign, too bad. you are only 1-term prez. it will also reinforce the observation that Repub prez inherit a good economy only to ruin it. but in reality, its just economic cycle working.

At what cost? What did Obama have to do to create a "good economy"?



Obama is the BIGGEST national debt creator in the history of the country.

[payutenyodagimas]

Originally Posted by Electrician4you

Unfortunately it was a "good" economy because of the MASSIVE influx of money and low interest rates. They threw everything they could at it to get the economy going. Because it sure took a long time to get it moving.
So don't go giving Obama too much credit. It took DOUBLING the national debt. Personally I think if they would of let it crash completely we would be better off now. You don't now he's a 1 term. It's only been what 4 months? He's got a long way to go

am not giving him too much credit. as ive said, economic cycle. and if the downturns occurs in your watch, you know what happens. happens to carter, Bush, W Bush although it happens late in his watch.

[OpenRider]

Consumer debt pushing to record levels is something to keep an eye on, at least that's what I keep reading. When home prices were getting close to the peak of 2006-2007, I remember new home buyers, coworkers of mine, saying real estate prices are just going to keep going up. Their advice was "Buy Buy Buy! Hurry!" Well we saw how that turned out. The catalyst for a drop will be different this time, but something tells me we're going to see one before too long, even if it won't be as much as before. That consumer debt is probably going to be a part of the puzzle.