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Old 12-07-2015, 06:07 PM
 
Location: Downtown SJ
176 posts, read 235,448 times
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My advice, wait until the bubble bursts. These prices are unsustainable, the bubble will burst, don't know when it will be though.

Last edited by Ultrarunner; 12-07-2015 at 10:28 PM.. Reason: Bad Link
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Old 12-07-2015, 10:30 PM
 
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Real Estate has always been cyclical... I've been through several corrections and it always comes back stronger... really, at least in the SF Bay Area.

Of course on big natural disaster and all bets are off...

I do think it is a little different so far this go around... 40% of homes around here were purchased for cash and others with big down payments...
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Old 12-09-2015, 01:23 AM
 
Location: Madison, WI
1,044 posts, read 2,649,031 times
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Quote:
Originally Posted by Ultrarunner View Post
Real Estate has always been cyclical... I've been through several corrections and it always comes back stronger... really, at least in the SF Bay Area.

Of course on big natural disaster and all bets are off...

I do think it is a little different so far this go around... 40% of homes around here were purchased for cash and others with big down payments...
We've been hearing for a while that we won't have another crash because lending standards are much tighter. But then we have articles like this one, which seem to suggest that subprime lending is back in full force:

After subprime collapse, nonbank lenders again dominate riskier mortgages - LA Times

Quote:
PennyMac, AmeriHome Mortgage and Stearns Lending have several things in common.

All are among the nation's largest mortgage lenders — and none of them is a bank. They're part of a growing class of alternative lenders that now extend more than 4 in 10 home loans.

All are headquartered in Southern California, the epicenter of the last decade's subprime lending industry. And all are run by former executives of Countrywide Financial, the once-giant mortgage lender that made tens of billions of dollars in risky loans that contributed to the 2008 financial crisis.

This time, the executives say, will be different.
The article goes on to discuss a couple who bought a $500k house with a whopping $17k (3.4%) downpayment.

History may not repeat, but this certainly rhymes with what I recall of 2006:
Quote:
Irvine's Impac Mortgage, a publicly traded nonbank lender, nearly went bust during the housing crisis because it specialized in Alt-A mortgages, loans extended without proof of income or assets. Now it's back in the lending business, largely originating standard, government-backed loans.

But about a year ago it started offering "AltQM" loans, as in: alternative to qualified mortgages. These higher-rate mortgages might feature interest-only payment periods, adjustable rates or exceed debt guidelines.
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Old 12-11-2015, 12:00 AM
 
423 posts, read 556,613 times
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Bubble, crash, collapse, etc. Media, renters, disgruntled home buyers love to use these words. But these loaded words don't represent the reality, don't help anyone plan, and just add unwarranted fear.

If a buyer is keeping the property longer term, if it is more cost effective to buy than rent (including tax benefits), if buyer has stable job and sufficient income, then that buyer should buy.

There are always ups and downs in any market and investment. If market is going up, waiting just cause buyer to lose out. If market will go down, maybe the buyer might save 10%, 15%, etc in sale price. Do the calculation what does 10% reduction in sale price mean. You get to save 2% in downpayment and slightly some monthly mortgage payment. Then do the same for 15%; whoopie, you save 3% in downpayment.

Bottomline, if buyer plans to keep the property 10-15-20 years, these near term variations are irrelevant.
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Old 12-11-2015, 12:35 AM
 
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Quote:
Originally Posted by jk88cal View Post
Bubble, crash, collapse, etc. Media, renters, disgruntled home buyers love to use these words. But these loaded words don't represent the reality, don't help anyone plan, and just add unwarranted fear.

If a buyer is keeping the property longer term, if it is more cost effective to buy than rent (including tax benefits), if buyer has stable job and sufficient income, then that buyer should buy.

There are always ups and downs in any market and investment. If market is going up, waiting just cause buyer to lose out. If market will go down, maybe the buyer might save 10%, 15%, etc in sale price. Do the calculation what does 10% reduction in sale price mean. You get to save 2% in downpayment and slightly some monthly mortgage payment. Then do the same for 15%; whoopie, you save 3% in downpayment.

Bottomline, if buyer plans to keep the property 10-15-20 years, these near term variations are irrelevant.

Logical except the last go around proved there are a lot of emotions when it comes to Real Estate.

There was at least one foreclosure on every residential block in my city... homes that I personally knew and had been tracking dropped as much as 80%... yes 80%.

Mass panic set in and people bailed... an entire generation believed Real Estate would not come back in a generation...

Since 2012 property here has appreciated anywhere from 50% to double... and I'm in the SF Bay Area.

As with most things... staying the course and keeping a level head is sound advice.

I knew a few that did strategic defaults... these professional people that bought replacement homes and then bailed... some of the homes were in the 1.3 to 1.6m range and they bought equivalent or better for 800 to 900k...

I'm will always be an owner... it is important to me... even if it means owning a shack...

Plenty of others will choose to rent because renters can almost always afford to rent a better home/neighbor short term than buy...

One home I tracked in zip 94602 sold for 510k in 2007 and later sold for 80k in foreclosure... a year later sold for 160k and recently for 350k... real numbers in a SF Bay Area city...
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Old 12-11-2015, 01:30 PM
 
Location: Palo Alto, CA
901 posts, read 1,090,127 times
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Agree totally with Ultrarunner and jk88Cal above. It is very, very difficult for many people to understand that if their time horizon for owning is only 10 years (i.e. that if they have to selll within 10 years) -- or worse, less than 10 years -- even in the SF Bay Area, even today, it's possible that they could lose a ton of money. In the long run, they're likely to for it to be an OK investment.

People see the math and get it wrong, "my property doubled in 6 years, or 10 years" and they think they doubled their money. They did not. People think it's easy to get rich, just buy real estate. It is not.
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Old 12-11-2015, 03:24 PM
 
423 posts, read 556,613 times
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Quote:
Originally Posted by Ultrarunner View Post
One home I tracked in zip 94602 sold for 510k in 2007 and later sold for 80k in foreclosure... a year later sold for 160k and recently for 350k... real numbers in a SF Bay Area city...
Using data for 94602 for example.
94602 Home Prices & Home Values | Zillow

In 2007, peak was $680k. It went down to $470 in 2012. But today, the price has recovered to more than the previous peak. Yes, there are ups and downs, just like any market, and there will continue to be ups and downs. As long as buyer has the means to continue to pay the mortgage, they will be OK in the long run.

It's unfortunate that people lost their homes because they cannot pay the mortgage, and their house is below water. Others are able to continue live as normal, although it doesn't feel good when their "investment" is down.
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Old 12-11-2015, 03:44 PM
 
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The home was 4 houses into 94602... with cross street of Brookdale.

This block is still below peak but catching up.

One was recently listed for $628k which is a pipe dream...

http://www.realtor.com/realestateand...2_M28429-97280

I know at least 40 homes that went to foreclosure/shortsale... about half were simply the owner deciding to walk... they still had the same good jobs working in Hospitals/Clinics... simply decided they could cut housing expenses 50% by renting.

I picked up 3 very good tenants that walked away from their homes... one owned across the street and was paying $3800 per month PITA... this family rented the identical home from me for $1375 at the time...

Now there are others... the clerk at the local Safeway bought 4 homes in 18 months... one was a townhome he lived in and 3 were single family homes in Tracy, Salida... he lost all 4 and has not recovered... teaser interest rates... not being able to refi... tenants not paying rent... did him in.

Here is a more typical link showing a 510k sales price in 2007

http://www.realtor.com/realestateand...2_M27963-03054
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Old 12-11-2015, 04:48 PM
 
Location: Downtown SJ
176 posts, read 235,448 times
Reputation: 287
Quote:
Originally Posted by jk88cal View Post
Bubble, crash, collapse, etc. Media, renters, disgruntled home buyers love to use these words. But these loaded words don't represent the reality, don't help anyone plan, and just add unwarranted fear.

If a buyer is keeping the property longer term, if it is more cost effective to buy than rent (including tax benefits), if buyer has stable job and sufficient income, then that buyer should buy.

There are always ups and downs in any market and investment. If market is going up, waiting just cause buyer to lose out. If market will go down, maybe the buyer might save 10%, 15%, etc in sale price. Do the calculation what does 10% reduction in sale price mean. You get to save 2% in downpayment and slightly some monthly mortgage payment. Then do the same for 15%; whoopie, you save 3% in downpayment.

Bottomline, if buyer plans to keep the property 10-15-20 years, these near term variations are irrelevant.
Sure, if you have a long term time horizon, you'll probably be fine. But, if the housing market drops 30-40% next year, wouldn't you rather buy then than now? Even if you plan to live in it for >10 years. I know I would. Of course no one knows what the future holds, but it's a sure bet that the current rate of real estate price escalation is not sustainable. Most likely it is already over priced and will have to correct sooner rather than later. Sure it will recover, but why buy at the peak? Assuming we we are at, or near, the peak now. I think we are there, or darn close to it. I'm sure others will disagree, especially real estate agents, whos income depends on convincing people that "now" is a good time to buy. They will always say "now" is good.

Interest rates rising, slowdown in Chinese investment, inflated stock valuations, are all forces stacked against real estate valuations. No one knows, but I say it's far more likely to go down than to keep going up.

http://seekingalpha.com/article/3730...2-in-one-chart
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Old 12-11-2015, 05:30 PM
 
28,005 posts, read 60,764,838 times
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I've lived through several boom and bust periods here in the East Bay... seems to roughly come in 7 year cycles...

Of course... on Natural Disaster will impact us all.

I've never pushed owning... in fact... I love renters because they keep me in business.

That said... some would rather own just about anything as opposed to renting and others will only accept neighborhoods and homes they have no chance of buying.

I've never fit the mold as a buyer... and the only way was to be creative which has worked out well.

As a kid... I was exposed to a lot of well off individuals... just about all of them owned real estate and the collective advice from those willing to give advice was they only wished they would have started earlier and I took this to heart buying the least expensive home on the Oakland MLS and getting it for even less... much to the shock of my family...

Here's the stats of another home I have been following...


Date Event Price Price/Sq Ft
03/17/2009 Sold $79,000
02/06/2009 Delisted —
11/11/2008 Listed $74,900
04/25/2005 Sold $350,000
01/05/2005 Sold $255,000
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