Real Estate Crash thread

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Originally Posted by grapedrink

sorry if this is a repeat

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A friend sent this to me this week. FUCKING PRICELESS!

Should be a hall of famer!!!!

Just got the appraisal for my refi. My home has appreciated approximately 25% in the past 3 1/2 years! No crash here.

where do you live.

Boulder.

Yeah, but who the hell would want to live in Boulder?:FIREdevil

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Originally Posted by Danno

Just got the appraisal for my refi. My home has appreciated approximately 25% in the past 3 1/2 years! No crash here.

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What it appraised for and what you could sell it for are two very different things.

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What it appraised for and what you could sell it for are two very different things.

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Depends on how many homes on the market there in foreclosure. Where i just bought (oakley, ca) that would be a correct statment. 80% houses listed on mls are foreclosures. :eek: A quick google seems boulder doesnt have a big foreclosure rate. I didnt dig that deep though. Appraisal is a pretty good guage at what your house is going to sell for in a market where most are private sellers not trying short sales, etc i would think.

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Originally Posted by rideit

Yeah, but who the hell would want to live in Boulder?:FIREdevil

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me! And that's all that counts. :the_finge

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Originally Posted by Dantheman

What it appraised for and what you could sell it for are two very different things.

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True, though that is much less the case these days, appraisers are being much more conservative. Regardless, the comps in my neighborhood are very good indicators, a home on my block just sold last month for basically the same price as mine was appraised.

I don't think your appraiser is very good if he/she doesn't take into account the local market. Mine definitely took a chunk out of my house's value based on number of REO/short sales for sale in my neighborhood.

Having had numerous refi appraisals on my Boulder houses I have never seen one that was not VERY conservative... in my *very limited experience* appraisals are generally low not high.

Right now though the RE market is plenty different than the last fifteen years I imagine.

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Originally Posted by Danno

Just got the appraisal for my refi. My home has appreciated approximately 25% in the past 3 1/2 years! No crash here.

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That's good news Danno... I have been assuming a flat market at best lately despite the spray from RE agents.

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Originally Posted by liv2ski

I read a piece this morning on Option ARMs that stated the subprime meltdown over the last few years was nothing compared to the Option ARM shit storm that will happen over 2009-2010.
http://www.msnbc.msn.com/id/28035238\

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won't this be at least somewhat mitigated because the indexes for many of these loans are at historic lows? if you at least payed the interest the reset isn't going to be nearly as painful as it would've if rates had stayed in the 5% range.. right?

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Originally Posted by DJMingus

That's good news Danno... I have been assuming a flat market at best lately despite the spray from RE agents.

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yeah, I was pretty stoked that the home 3 doors down sold for what it did. Zillow.com was off by $35k on my home value, if you use that site.

Of course, all bets are off if you're not in Boulder, I know outlying areas are not doing nearly so well.

Boulder quarterly appreciation from http://www.ofheo.gov/hpi_city.aspx
Year Quarter % appreciation
2008 3 2.38
2008 2 2.51
2008 1 4.47
2007 4 2.67
2007 3 3.02
2007 2 2.00
2007 1 1.27
2006 4 1.60
2006 3 0.
2006 2 2.65
2006 1 2.22
2005 4 4.34
2005 3 5.24
2005 2 5.14
2005 1 5.13

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Originally Posted by MashedPotatoes

won't this be at least somewhat mitigated because the indexes for many of these loans are at historic lows? if you at least payed the interest the reset isn't going to be nearly as painful as it would've if rates had stayed in the 5% range.. right?

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So many of these loans were done on the 1 Yr Libor Index + 3% = 5.625% today. Nice rate but, people that took those loans out have been paying at a 1% rate for the last 5 years. Once the loan has negatively amortized 110%, 125% or 5 years is up, the payments are recast based on the current rate, the remaining years, the current loan balance (way bigger than when they started). That payment compared to the 1% payment is a huge jump even at today's historically low rates.
Just think what will happen to those rates when foreign investors limit their purchases of US Bonds because the bailouts have added trillions to the national debt. There is much speculation that bond yields will go way up due to our huge deficit. But enough happiness for one day. Carry on.

Boulder definitely has some neighborhoods that will retain value. Ahh...the Rio...hangovers...Moe's...slutty campus hippie chicks...I kinda liked Boulder.

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Originally Posted by liv2ski

So many of these loans were done on the 1 Yr Libor Index + 3% = 5.625% today. Nice rate but, people that took those loans out have been paying at a 1% rate for the last 5 years.

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well, choosing to pay 1% for 5 years maybe not the best idea.

OTOH, if your Option ARM is indexed against treasuries, you're paying sub 5% right now and going lower. if you were responsible with your loan you're in pretty good shape at least fot the short term..

http://www.moneycafe.com/library/mta.htm

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well, choosing to pay 1% for 5 years maybe not the best idea.

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it would have been 7 years ago and you sold your house 3 years ago, hehe.

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Originally Posted by MashedPotatoes

well, choosing to pay 1% for 5 years maybe not the best idea.

OTOH, if your Option ARM is indexed against treasuries, you're paying sub 5% right now and going lower. if you were responsible with your loan you're in pretty good shape at least fot the short term..http://www.moneycafe.com/library/mta.htm

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Nope all Libor and a few COSI from World/Wachovia. Euros don't like treasury indexed loans so that product was 90% Libor index based. The majority of the people that took those loans paid at the 1% payment rate and have racked up huge negative amortization. With falling values, those loans are going to blow when the people discover that they can't refi out of the recast payment. There are just so many reasons out there for values to get hammered in 09, wish I could talk the wife into unloading a property or two. I will need to look into shorting the best segment of the Case Shiller indexes.

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Originally Posted by yonskion

^^^^^If you are serious about the Islands. My family has some of the finest properties avaliable Big Island and Maui....PM if you are for real.

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Sorry, wrong Islands. Hawaii would be nice, but I can fly my own plane to the Bahamas. Hawaii would be a push in a single.

maybe a Wall Street CEO is looking...looks like another banner year for bonus money!
WTF
http://bankimplode.com/blog/2008/12/...-bailout-plan/

It wasn't just Fannie/Freddie and lying lenders.

http://www.nytimes.com/2008/12/19/bu.../19tax.html?hp

Ryan J. Wampler had never made much money selling his own homes.

Starting in 1999, however, he began to do very well. Three times in eight years, Mr. Wampler — himself a home builder and developer — sold his home in the Phoenix area, always for a nice profit. With prices in Phoenix soaring, he made almost $700,000 on the three sales.

And thanks to a tax break proposed by President Bill Clinton and approved by Congress in 1997, he did not have to pay tax on most of that profit. It was a break that had not been available to generations of Americans before him. The benefits also did not apply to other investments, be they stocks, bonds or stakes in a small business. Those gains were all taxed at rates of up to 20 percent.

The different tax treatments gave people a new incentive to plow ever more money into real estate, and they did so. “When you give that big an incentive for people to buy and sell homes,” said Mr. Wampler, 44, a mild-mannered native of Phoenix who has two children, “they are going to buy and sell homes.”

By itself, the change in the tax law did not cause the housing bubble, economists say. Several other factors — a relaxation of lending standards, a failure by regulators to intervene, a sharp decline in interest rates and a collective belief that house prices could never fall — probably played larger roles.

But many economists say that the law had a noticeable impact, allowing home sales to become tax-free windfalls. A recent study of the provision by an economist at the Federal Reserve suggests that the number of homes sold was almost 17 percent higher over the last decade than it would have been without the law.

Vernon L. Smith, a Nobel laureate and economics professor at George Mason University, has said the tax law change was responsible for “fueling the mother of all housing bubbles.”

By favoring real estate, the tax code pushed many Americans to begin thinking of their houses more as an investment than as a place to live. It helped change the national conversation about housing. Not only did real estate look like a can’t-miss investment for much of the last decade, it was also a tax-free one.

Together with the other housing subsidies that had already been in the tax code — the mortgage-interest deduction chief among them — the law gave people a motive to buy more and more real estate. Lax lending standards and low interest rates then gave people the means to do so.

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Originally Posted by Benny Profane

It wasn't just Fannie/Freddie and lying lenders.

http://www.nytimes.com/2008/12/19/bu.../19tax.html?hp

Ryan J. Wampler had never made much money selling his own homes.

Starting in 1999, however, he began to do very well. Three times in eight years, Mr. Wampler — himself a home builder and developer — sold his home in the Phoenix area, always for a nice profit. With prices in Phoenix soaring, he made almost $700,000 on the three sales.

And thanks to a tax break proposed by President Bill Clinton and approved by Congress in 1997, he did not have to pay tax on most of that profit. It was a break that had not been available to generations of Americans before him. The benefits also did not apply to other investments, be they stocks, bonds or stakes in a small business. Those gains were all taxed at rates of up to 20 percent.

The different tax treatments gave people a new incentive to plow ever more money into real estate, and they did so. “When you give that big an incentive for people to buy and sell homes,” said Mr. Wampler, 44, a mild-mannered native of Phoenix who has two children, “they are going to buy and sell homes.”

By itself, the change in the tax law did not cause the housing bubble, economists say. Several other factors — a relaxation of lending standards, a failure by regulators to intervene, a sharp decline in interest rates and a collective belief that house prices could never fall — probably played larger roles.

But many economists say that the law had a noticeable impact, allowing home sales to become tax-free windfalls. A recent study of the provision by an economist at the Federal Reserve suggests that the number of homes sold was almost 17 percent higher over the last decade than it would have been without the law.

Vernon L. Smith, a Nobel laureate and economics professor at George Mason University, has said the tax law change was responsible for “fueling the mother of all housing bubbles.”

By favoring real estate, the tax code pushed many Americans to begin thinking of their houses more as an investment than as a place to live. It helped change the national conversation about housing. Not only did real estate look like a can’t-miss investment for much of the last decade, it was also a tax-free one.

Together with the other housing subsidies that had already been in the tax code — the mortgage-interest deduction chief among them — the law gave people a motive to buy more and more real estate. Lax lending standards and low interest rates then gave people the means to do so.

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I assume they're talking about the $250K/$500K exclusion. Without thinking this through at all, I really wonder how much fuel that supplied. Prior to that tax break, there was a similar one. My addled brain is forsaking me a bit, but I think you could defer gains indefinitely as long as you used the proceeds from the sale of your house to buy a new house. Or something like that. In any event, that tax break they're talking about wasn't completely new; it replaced something similar. Also, the $250K/$500K exclusion comes attached with conditions that inhibit how readily you can use the exclusion. Finally, buying and selling houses comes with some pretty hefty transaction costs that tend to restrict (relatively) rapid-fire buying and selling of homes.

Nevertheless, I'd be in favor of eliminating tax preferences for home ownership. It's not gonna happen, though.

I don't know. I think I'd lay the blame for the housing bubble initially on the wealth created during the dot-com bubble (at least around here), then, after a short break at the beginning of the decade, on the breakdown in lending standards in the middle of this decade.

Word on the street is that Real Estate of Jackson Hole is filing for bankruptcy....ahh, schadenfreud.

Just heard that REJH is closing it's doors.
too bad.
So sad.

Ha Ha [/end Nelson Muntz]

too funny that Chris johnston bought it 2 years ago, and lost $1MM this year in the deal.
All the brokers flee to other firms with their listings and REJH evaporates overnight.

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The brokerage listed 70 real-estate agents on its Web page Monday. Some agents planned to move their licenses to other valley firms and continue to market property.
Real Estate of Jackson Hole President Bob Graham, who founded the company in 1972 and remains a stockholder, planned to move his real-estate team — Graham 4 — to a new firm.
“We will be back in business,” Graham said Monday afternoon. “We have made commitments to market and sell property, and none of that will change going forward.”

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wow

http://www.jacksonholenews.com/article.php?art_id=4045

Macmansions in the burbs go down.....

http://www.nytimes.com/2008/12/28/re...te/28zone.html

"Likewise, in New York State, the inventory in outlying boroughs and counties is very large compared with that of Manhattan and Brooklyn. Westchester County has the next-largest inventory to Long Island, at 18 months. Orange County’s inventory is nearly 18 months, and Rockland’s is 14.5. Mr. Otteau foresees a “structural shift” in housing demand that will come into sharper focus in the region when the overall market improves.

“Right now we are all focusing on how bad it is,” he said, “but what we are also seeing is a historic reversal of home-buying demand away from suburban and rural areas to cities and inner-ring suburbs that are more walkable than driveable.”

Mr. Otteau says the shift was partly because of higher energy prices. But the dominant reason is that the number of households with children living at home is on a persistent decline.

“In 1985,” he said, “50 percent of households had children at home. In 2000, that was down to 33 percent. Today it is 29 percent, headed to 25 percent.

“That means that 75 percent of home buyers over the next 15 years will have childless households — and within that group are empty-nester baby-boomers, or couples or singles buying a first house. And that means that three out of four home buyers will have no interest in a house in the suburbs with a good school system, which is pretty much what we’ve created over the last 50 years.”

Mr. Otteau cited a new study from Virginia Tech projecting that a nationwide surplus of 22 million suburban homes on lots larger than a sixth of an acre will be languishing on the market by 2025."

January 26, 2009, 9:54 am
Real Estate Deals in South Florida, Bring Cash
Dawn Wotapka reports:

The housing boom fueled condo mania across South Florida, with buyers lining up to pay top dollar for waterfront views. But, now the market’s spectacular bust is fueling foreclosures and all-cash deals.

The region’s bank-owned property count soared a whopping 160% last year, according to a report by Condo Vultures LLC, which taps clerk of court and circuit court records for data. Miami-Dade, a poster child for the condo bubble, led the repossession list, with 12,059 properties returned to lenders, compared with 4,539 in 2007. Broward came in second with more than 10,000 real estate owned homes (REOs), up from 3,686 in 2007, followed by Palm Beach County’s more than 4,000 last year. In 2007, it saw 1,862 REOs.

“To understand the magnitude of the increase, consider that Broward County alone had as many REOs in 2008 as did the entire tri-county South Florida region for all of 2007,” said Peter Zalewski, a Condo Vultures principal who is also a real estate broker.

That’s turning into a pricey problem for banks, which pay at least $30,000 - $60,000 per foreclosure. The expenses include everything from property maintenance to brokers’ commissions, according to the Mortgage Bankers Association.

But there’s a silver lining for buyers in the form of “unprecedented discounts on any and all residential product along the South Florida coast,” Mr. Zalewski said. Luxury units with granite countertops and Jacuzzi baths are fetching pennies on the dollar. In Miami-Dade’s upscale Brickell Avenue neighborhood, a two-bedroom apartment that sold for $700,000 in 2006 is now going for $110,000. Similar deals are available on single family homes.

Fans of new building are also in luck. Miami ’s downtown area has 5,000 units underway or just finished. Of the 17,500 condo units built since 2003, 30 percent are empty, according to Condo Vultures. “The people who are risk takers are buying right now — all cash,” Mr. Zalewski said. Bank financing, he added, is much harder to get.

If you ever dreamed of having a place in the Tetons, this summer is going to be the time to pull trigger.

I fucking hope this summer is the bottom. $900 in dues due tomorrow, fucking AWESOME, since that's $900 more than I've made on any real estate deals since October. I had a pretty damn good year up until August, though. Damn. It went bad in a hurry around here.

Our local ageny/commission, TBOR, is such a scam. Why doesn't MLS just do agent-direct?

It's pathetic.

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Originally Posted by rideit

If you ever dreamed of having a place in the Tetons, this summer is going to be the time to pull trigger.

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Hmmm, do tell...

I have a Jackson based realtor buddy who did deal for $1.5M last summer, I talked to him the other day and he is doing a short sale for half that on the same property right now. :eek:

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Originally Posted by liv2ski

I read a piece this morning on Option ARMs that stated the subprime meltdown over the last few years was nothing compared to the Option ARM shit storm that will happen over 2009-2010.
http://www.msnbc.msn.com/id/28035238
"The first wave of home foreclosures that hit in late 2006 and early 2007 followed the resetting of subprime adjustable mortgages with two- and three-year "teaser rates" written during the height of the lending boom earlier in the decade. But pay-option ARMs — which often don't "recast" for five years — have a longer fuse. Unless defused by aggressive public and private foreclosure prevention programs, the bulk of these loans will explode to higher payments in 2009 and 2010.

The scope of the problem was highlighted in September in a study by Fitch Ratings, one of the bond rating agencies that assesses the risk of defaults on mortgage-backed investments. Of the $200 billion in option ARMs outstanding, Fitch estimates that some $29 billion will recast in 2009 and another $67 billion in 2010. That could cause delinquencies on these loans to more than double, Fitch said.

To make matters worse, only 17 percent of option ARMs written from 2004 to 2007 required full documentation. Many of the borrowers who took out these loans also took out a second mortgage, which means they likely have little or no equity in their home, according to the report. That means many could owe more than their house is worth when the loan recasts to unaffordable payments."

Throw in unemployment at 9-10% at that time and this is going to get real ugly IMO. Good time to sell if you don't have a shit load of equity and a long (10+yrs) ownership window for prices to come back to 2004-05 levels??

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That is an awesome article. Truly the American financial system is ingenious.

Do you have geographical breakdowns for Option ARM resets by region? Case-Shiller indices are regional - tickers here if anyone is interested (http://en.wikipedia.org/wiki/House_price_index)

It would seem that a good shortsell would be regionally targeted?

EDIT -
I dont think the CaseShiller index is shortable unless I'm misreading the S&P summary - its just a monthly index

But there are futures on the CaseShillers which are regional

http://housingderivatives.typepad.co...fact_sheet.pdf

http://www.cme.com/files/housing_faq.pdf

Here are the regionals - see last column

http://4.bp.blogspot.com/_nSTO-vZpSg...-apr2008TC.png

Nice little tool for extracting historical data - http://paper-money.blogspot.com/2007...-tutorial.html

and also here http://www.zoyzoy.com/realestate/caseshiller.php

Note these Futs aren't exactly liquid

From that article: "In Nevada, one in every 74 homes was hit with a foreclosure filing last month."

:eek: :eek:

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Originally Posted by Benny Profane

Fans of new building are also in luck. Miami ’s downtown area has 5,000 units underway or just finished. Of the 17,500 condo units built since 2003, 30 percent are empty, according to Condo Vultures. “The people who are risk takers are buying right now — all cash,” Mr. Zalewski said. Bank financing, he added, is much harder to get.

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Condo Vultures is an awesome name for a company that snaps up short sales.

im not sure where these people live with these loans. There is more houses without people than with people in my neighborhood. I guess the 10 who live on the street are going to lose their houses? geez....I took a look on the street right before mine, it was astonishing. I'll post a pic this weekend. All you can see down the whole street was real estate signs. Last weekend they had the "never before lived in houses". I guess i shouldnt be suprised. Mine was built in 03 and the neighbor next door moved into his in 06. He said noones lived in this one since he moved in. Whats crappy about that is this house was sold in 06. Whoever bought it last time probably did as investmant and just walked i guess? I probably would have too, he paid 520K. I paid less than half that.

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Originally Posted by RootSkier

...I had a pretty damn good year up until August, though. Damn. It went bad in a hurry around here.

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That sounds familiar!!! Though luckily I've seen it pick up a little bit around these parts. Some of the increase is bargin takers snapping up the discounts... values down maybe 20 to 30 percent from their peaks on average? I ran a bunch of stats to put together graphs for my web site to show how our Beer Town market has been affected.

This first analysis is calculated by date of accepted offer, which leads the actual closings by about 30 to 60 days on average. We are just now seeing the national and local media pick up on this increase in units under contract/closing. I also ran 9 subgroups by price for the whole metro area... except for the sub $100K group, all were down signifigantly for 2008, with those above $350K or so hit the worst. Interestingly almost all groups showed a December bounce back, leaving Oct and Nov 08 as the bottom. I assume the December increase was interest rate driven? Sure hope that keeps up!!!

http://www.timvw.com/whooohooo/2008_..._me_blurry.jpg

Then did additional individual analysis for my "home area", a group of 3 western suburbs. They all show a roll back to prices from the 2004 time frame... Here is the ratio of sold price per square foot for one of them;

http://www.timvw.com/whooohooo/elm_g..._me_blurry.jpg

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Originally Posted by mocwvmit

...We are just now seeing the national and local media pick up on this increase in units under contract/closing.

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The News Corp. minions at the WSJ have it as lead story today, link. Along with a nice graphic in the print edition, ... that I can' find on the interweb edition.

The apartment rental market in Silicon Valley has shown a slight decrease in rent. I've lowered rents just below market to keep vacancy rates extremely low. I've seen forecast presentations for the region and from what I've read its going to be tough to really kill the market in the area. There are so many hot industries in the region from major IT companies & Bio-Nano/LifeScience/Medical/WEB 3.0, & major Clean Tech, all added to a large banking and legal infrastructure, highest percentage of college grads, and proximity to venture funding to allow business to spin its wheels. And don't forget the access to a long ski season :)

Its definitely going to slow but I don't see prices falling like the Condos in Florida. :tongue: