Real Estate Crash thread

[365wp]

Well, #1, do you really want to live in SoCal?

And, did you pay property taxes? Replace the boiler? Heat the water? Landscape? Paint? Replace the roof? Do the kitchen? New Bathroom? Extension?

Pay interest?

There is/was a lot of flipping going on in my hood. My former neighbors bought their three family around 1999 for about $280/290k. I very much doubt they did any of those things. They sure didn't landscape.

They sold it two years ago for $770k. Oh, and they lived in this place for a couple years, so they didn't pay short term cap gains on the profits.

They owned 20+ properties in the area. They did well.

You can make a lot of money in real estate. You can make a lot of money in the stock market. Saying that nobody who buys real estate today is going to make any money makes no sense. Somebody will be smart, see an opportunity and make it happen.

The rent vs. payment disparity is one of the key indicators to a market's health, IMHO.

[mitch buchannon]

San Diego is nice.

Rentals are different. That's a business. Not what I'm talking about.

Clearly investing in your home is not a business.

Even if you're right, you're still a negative nelly.

[cranked]

Well, with my credit, my loan will be brutal anyway you look at it i imagine. At least mine will be a fixed rate and i wont be like all my friends and relatives who either A. lost their house, B. are paying like 4-5K a month for a house that ill be paying 2K a month for and their rates will still adjust.

as for buying now, im not sure. Can the houses go any lower? Ya, im looking east bay. I can get 4-5br/3ba with pool, updated kitchen/bathrooms 2000+ sq ft for like 250K. I just dont see them dropping any lower. These houses were like 500K. This is longterm and my first house. So 10 years from now, i would hope its worth 350K? I dont know, im no real estate genious. What i do know is that im paying 1745 a month in rent when i could be paying that on a mortgage. Seems to me its a no brainer to pay that a month on something i own and get a tax write off to boot. but im all ears to suggestions on waiting and why to wait longer. One thing i DONT want to happen is to get priced out of a house again.

ya im looking outskirts. Vallejo, american canyon, concord, livermore, brentwood, oakley, etc. I already commute, so not too worried about that. Just looking to get the biggest bang for my buck since it will be what i call "home" for the next who knows how many years. I work in concord, so pretty much anything east and north im willing to look at.

I dont know that city houses will ever drop. Look at san ramon, walnut creek, etc. They are a half hour out of city and they've hardly lost any value. That whole 680 corridor seems to have maintained values or lost very little compared to the 50%+ drops out in suburbia.

I can buy 250k around vallejo...as far as will they go lower? I don't know. From Vallejo to Stockton, that is one of the hardest hit parts of the country as far as foreclosures. If the houses were undervalued, you would see speculators snatching them up and turning them...right now, it seems like houses are still on the market for significant periods of time.

Why don't you get all your ducks in a row (preapproval, realtor, etc.) and start looking at places. If houses have been on the market for awhile, lowball the hell out of an offer. I know a person who lowballed in Berkeley and was told to F-off several times...ultimately they won after several months of just waiting.

It is scary outside of the cities right now...seems like a lot of crime and a lot of vacant bldgs are out there in the burbs. Speaking of, how are those communities going to support themselves with all that lost tax revenue...the suburbia landscape could be a lot different in ten years...who knows.

[liv2ski]

It is scary outside of the cities right now...seems like a lot of crime and a lot of vacant bldgs are out there in the burbs. Speaking of, how are those communities going to support themselves with all that lost tax revenue...the suburbia landscape could be a lot different in ten years...who knows.

Things were just as bad in San Diego around 1991-1995. It was foreclosure/short sale city with the demise of the defense industry. Out laying areas were rocked, but I know a guy that bought 3 new homes with 20% down each for about $125k each. They were new construction that had sold for $200k a year earlier.
Those areas are now totally built out compared to back then. Likely 10 times larger, but they are are still 1 hour from San Diego, so they are getting rocked again. His $125k homes have likely dropped to $400-450k today. They were more like $600k in July 06.
Still a nice return on $75k investment that had a minimal neg cash flow in the early years and a positive after 4-5 years. No maintenance at all as they were new homes. Well carpet and paint but BFD.
Point is, it will come back. Just do your homework and be ready for an opportunity that only comes around once every 20 years.

[timvwcom]

If you are a US tax payer... probably time to go shopping for some decent lube. Even with good stuff it's gonna hurt REAL BAD if you get bent over by a FAILURE LIKE THIS (yet another catastrophe triggered by the policies of the idiot chimp king).

Fannie, Freddie Shares Plunge as Unease Rises
Talk of Contingency Plans Sparks Sell-Off

By David S. Hilzenrath and Jeffrey H. Birnbaum
Washington Post Staff Writers
Friday, July 11, 2008; Page A01

Shares of Fannie Mae and Freddie Mac, two pillars of the nation's housing market, continued to plummet yesterday as investors and federal officials contemplated the possibility that the giants of the mortgage business could require a federal bailout.

On Capitol Hill, the Treasury secretary offered reassurance that they are still on firm footing, and the Senate moved on a housing relief bill that would give a regulator more power over them. On the campaign trail, the presumptive Republican presidential nominee vowed to do whatever is necessary to keep the companies functioning. In the financial world, some people had concluded that a painfully expensive rescue was probable, while others said it was unlikely. The speculation was taking on a life of its own, feeding a downward spiral.

Analyst Howard Shapiro of the investment research firm Fox-Pitt Kelton wrote that the prospect of the Washington area companies becoming insolvent was remote, but he added, "[W]e cannot account for the psychological impacts of this kind of talk, which can create its own reality."

On one point there seemed to be general consensus: The failure of Fannie Mae or Freddie Mac could be devastating, making it harder for people to buy and sell homes and sending ripple effects through the broader economy.

The meltdown of the mortgage business has left Fannie Mae and Freddie Mac the main sources of funding for mortgage lenders. The companies, which were chartered by the federal government to keep those funds flowing, pool mortgages into securities for sale to investors, guaranteeing that they will cover the payments if borrowers default. They also buy and hold mortgage investments.

Although the companies and the federal government deny it, the financial markets have long assumed that the government would step in to cover the companies' trillions of dollars of obligations if they were unable to do so themselves. The belief that the government stands behind them helps explain why Fannie Mae and Freddie Mac have historically been able to borrow money at low rates -- and why the demand for their mortgage securities did not dry up as investors abandoned other mortgage-related investments.

But confidence in the companies has eroded sharply this week. Fannie Mae stock tumbled nearly 14 percent yesterday, to close at $13.20, its lowest price in many years. Freddie Mac stock fell 22 percent, to $8; its shares have lost nearly 90 percent of their value during the past year.

Yesterday's sell-off came against the backdrop of jarring news reports. Bloomberg News quoted William Poole, former president of the St. Louis Federal Reserve, saying that the two companies were already insolvent. The Wall Street Journal reported that the Bush administration had stepped up routine planning as to what to do if either company failed, though the Journal said the administration did not expect that to happen.

Spokesmen for the White House and the Treasury Department declined to comment yesterday on any such planning, and Freddie Mac spokeswoman Sharon McHale said her company had not been involved in any such discussions. A Fannie Mae spokesman wouldn't comment on that topic.

"We are managing our business and maintaining a capital position that will allow us to fulfill our congressionally chartered mission now and in the future," Fannie Mae spokesman Brian Faith said in a statement.

As mortgage defaults have risen and home prices have fallen, the companies have reported billions of dollars of losses. They have also reported billions of dollars of unrealized losses -- paper losses that they have not included in their bottom line because they predict asset values will rebound. Freddie Mac reported that if it had been forced to liquidate its holdings at the end of the first quarter, it would have been left with a deficit of $5.2 billion.

If Fannie Mae and Freddie Mac faltered, mortgage interest rates could soar and home prices could suffer even greater declines. Many banks are sitting on large amounts of the bonds Fannie Mae and Freddie Mac issue to borrow money, and damage to the value of those bonds could indirectly undermine banks' ability to make loans of all kinds.

With the housing market in continued decline, many investors think Fannie Mae and Freddie Mac will need to raise fresh capital. That expectation has put downward pressure on their stock prices because selling more shares to raise money dilutes the value of current shares.

Peter Schiff, president of Euro Pacific Capital, predicted that the companies would have a hard time raising capital from private sources. "That's like selling tickets for the Titanic after it's already hit the iceberg," he said.

Government leaders, including those at the Federal Reserve, take some solace in the large holdings of mortgage assets that the two firms have on their books. But selling those assets -- home loans and mortgage-backed securities -- could drive up mortgage rates, former Treasury official Peter Wallison said.

Short of lending them money or taking them over, one way the government could shore up faith in the companies would be to state explicitly that it stands behind them. However, that would run counter to the administration's long-standing position that companies must be held accountable to the market's checks and balances. Treasury Secretary Henry M. Paulson Jr. reiterated that philosophy in prepared testimony yesterday, saying: "For market discipline to be effective, market participants must not expect that lending from the Fed, or any other government support, is readily available."

Sen. John McCain, the presumptive Republican nominee for president, sent a different message. Fannie Mae and Freddie Mac "must not fail," he said, adding, "I will be looking at all the options that are, will be necessary" to keep them viable.

McCain said he didn't think a bailout was required, and Paulson noted that the companies' regulator "has made clear that they are adequately capitalized."

Fannie Mae and Freddie Mac tried to turn investors' anxiety to their political advantage, lobbying to make the housing relief bill that is moving through Congress more favorable to their interests.

[Nobody Famous]

A giant government-sponsored financial entity that issues stock and is owned by 'stock holders'. What did you expect, huge profits and to be crowned the best performing stock of the last 10 years?

[ColMan]

http://money.cnn.com/2008/07/09/news...ion=2008071011

"The doomsday scenario could cost taxpayers more than $1 trillion, says the S&P report. The report went so far as to say that a government bailout of Fannie or Freddie could force the agency to lower its rating on the creditworthiness of the United States."

[Toadman]

That's does it! I'm voting for McCain. He's going to lower my taxes, so I won't pay a dime for this crap.

[rideit]

Hey Benny...time for your morning Hard On.
Huntsman Springs is discontinuing all marketing efforts, (they are still building, though) and Teton Springs is discontinuing all landscaping/genera services to all homeowners involve in the lawsuits.

[Benny Profane]

Hey Benny...time for your morning Hard On.
Huntsman Springs is discontinuing all marketing efforts, (they are still building, though) and Teton Springs is discontinuing all landscaping/genera services to all homeowners involve in the lawsuits.

Erect and reporting in after lunch.

Those (well, maybe not around Jackson) will be the new ghost towns of the next decade or so. The developments far from any population center whose originators went belly up, and the individual owners are deserting like rats from a ship, if they can. I read there's some in Florida that are entirely empty, and rotting in the jungle heat.

[Squirrel99]

Heard a stat yesterday that foreclosures are up 70% in the Seattle market for the month of June- even though housing prices are up 4-5%.

Some people think it's a great time to buy - but as someone looking to buy in the area, I've been hesitant to take the plunge here b/c Seattle still really hasn't hit the bubble according to many other reports. Aside from the fact that the rental market is at 90%+ occupancy rate and it's still possible to find a great rental deal in a prime location that's signficantly less than what the mortgage / monthly tab would be on a new place.

[Purveyor of Slack]

11/21/07

Hmmmm.

I think people get annoyed when the government penalizes people by using tax money/further government debt/inflation to bailout the major banks/brokerage houses/Fannie Mae/Freddie Mac......etc-- they turn there back on bubbles and corruption until the big boys start actually losing money then WE pay to bail out the system-- MORAL HAZARD.

In the end this will lead to hyperinflation and then deflation. The commodity rich countries are going to own us.


Iran is always there for a appropriate distraction if things begin to unwind too quickly.

[Toadman]

Heard a stat yesterday that foreclosures are up 70% in the Seattle market for the month of June- even though housing prices are up 4-5%.

Some people think it's a great time to buy - but as someone looking to buy in the area, I've been hesitant to take the plunge here b/c Seattle still really hasn't hit the bubble according to many other reports. Aside from the fact that the rental market is at 90%+ occupancy rate and it's still possible to find a great rental deal in a prime location that's signficantly less than what the mortgage / monthly tab would be on a new place.

Hadn't heard about the foreclosures in Seattle. Just anecdotally, I see a lot of houses up for sale, and the prices are just slightly less than what I was seeing last year. Still see houses, like 3 bdrm, 1.5 bath, 9,000 sq ft lot advertised for mid $400's. Condo market is still strong here.

[liv2ski]

With the news on FNMA and FHLMC over the last 2 days along with a new announcement from mortgage insurance companies that they will not offer PMI over 90% LTV in CA, NV, FL and one other state, I am deeply concerned about credit market liquidity as a whole.
It has been 12 months now since shit hit the fan in the Mortgage industry and things continue to get worse as far as obtaining financing is concerned. The latest announcement by the MI Industry on lower LTVs becoming the norm, effectively screws millions from being able to refinance a high LTV loan. I am thinking just a snowball effect on foreclosures in the 4 states mentioned.
If FNMA and FHLMC stock gets hammered much further, so that there is a chance of insolvency with those agencies, good luck getting a home loan period. This has disaster written all over it if things get that far out of hand.
Thinks are looking very bleak to me. I just hope this is the "Darkest before the Dawn" part of the story.

[Hugh Conway]

Hadn't heard about the foreclosures in Seattle. Just anecdotally, I see a lot of houses up for sale, and the prices are just slightly less than what I was seeing last year. Still see houses, like 3 bdrm, 1.5 bath, 9,000 sq ft lot advertised for mid $400's. Condo market is still strong here.

On my run along the lake the same houses have been for sale for months now - the only one to sell was a cheap place up top in Lake City. The Bubble Blog agrees:
http://seattlebubble.com/blog/

[timvwcom]

...This has disaster written all over it if things get that far out of hand.
Thinks are looking very bleak to me. I just hope this is the "Darkest before the Dawn" part of the story.

I've heard it's also darkest while your eyes are trying to adjust to the dirt completely covering your head when it's being shoveled into the hole where your hogtied body is laying... As a Real Estate Agent, I sure hope it's not that kind of "darkness".

[cranked]

With the news on FNMA and FHLMC over the last 2 days along with a new announcement from mortgage insurance companies that they will not offer PMI over 90% LTV in CA, NV, FL and one other state, I am deeply concerned about credit market liquidity as a whole.
It has been 12 months now since shit hit the fan in the Mortgage industry and things continue to get worse as far as obtaining financing is concerned. The latest announcement by the MI Industry on lower LTVs becoming the norm, effectively screws millions from being able to refinance a high LTV loan. I am thinking just a snowball effect on foreclosures in the 4 states mentioned.
If FNMA and FHLMC stock gets hammered much further, so that there is a chance of insolvency with those agencies, good luck getting a home loan period. This has disaster written all over it if things get that far out of hand.
Thinks are looking very bleak to me. I just hope this is the "Darkest before the Dawn" part of the story.

The stock price doesn't actually affect liquidity...it is just a proxy for investor expectations. Right now, they are saying, even with a high quality loan book (vast majority of FNMA and FHLMC loans are prime, and good quality), you have no cash to back up your book (which i believe is required by the charter/overseeing agency) and people feel they won't be able to raise capital in this market. Kind of a perfect storm.

This entity was created so that people w/ no other means could grab a piece of the american dream...seems like it got abused a bit and is in quite the pickle now.

[woodstocksez]

as for buying now, im not sure. Can the houses go any lower? Ya, im looking east bay. I can get 4-5br/3ba with pool, updated kitchen/bathrooms 2000+ sq ft for like 250K. I just dont see them dropping any lower. These houses were like 500K. ...

ya im looking outskirts. Vallejo, american canyon, concord, livermore, brentwood, oakley, etc. ...

As I said in your lease thread, I also wonder how much further prices will fall in the areas in which you're looking. They have dropped a lot and, according to the real estate agent working with my dad (who is also looking to buy in that area), investors are beginning to move (back?) in.

I dont know that city houses will ever drop. Look at san ramon, walnut creek, etc. They are a half hour out of city and they've hardly lost any value. That whole 680 corridor seems to have maintained values or lost very little compared to the 50%+ drops out in suburbia.

The city definitely holds up better than most other places in the Bay Area. You're not right about San Ramon and the I-680 corridor, though. Prices have dropped quite a bit in the last two years (though not as much as in Brentwood, etc.). San Ramon/Danville/Alamo is where we're looking to move and I'm figuring some time in the next 1-2 years. I don't know if that's the bottom and don't much care, since it's foolish to think you can identify that anyway. I do think that prices in that time frame will be near a (temporal) local minimum and we plan on staying in our next house for at least 20 years or so.

[cranked]

As I said in your lease thread, I also wonder how much further prices will fall in the areas in which you're looking. They have dropped a lot and, according to the real estate agent working with my dad (who is also looking to buy in that area), investors are beginning to move (back?) in.



The city definitely holds up better than most other places in the Bay Area. You're not right about San Ramon and the I-680 corridor, though. Prices have dropped quite a bit in the last two years (though not as much as in Brentwood, etc.). San Ramon/Danville/Alamo is where we're looking to move and I'm figuring some time in the next 1-2 years. I don't know if that's the bottom and don't much care, since it's foolish to think you can identify that anyway. I do think that prices in that time frame will be near a (temporal) local minimum and we plan on staying in our next house for at least 20 years or so.

The city is still so painful...2bd/2ba are still holding steady at around 850k with low inventory. We are holding out for a 3bd, but with the new lending tightness, not sure we will ever get in...ack. Oh well, at least you aren't responsible for sh1t when you are renting...

[liv2ski]

The stock price doesn't actually affect liquidity...it is just a proxy for investor expectations. Right now, they are saying, even with a high quality loan book (vast majority of FNMA and FHLMC loans are prime, and good quality), you have no cash to back up your book (which i believe is required by the charter/overseeing agency) and people feel they won't be able to raise capital in this market. Kind of a perfect storm.

This entity was created so that people w/ no other means could grab a piece of the american dream...seems like it got abused a bit and is in quite the pickle now.

Thanks Cranked for the distinction there between stock price and assets to back up your book of loans. I read today that FNMA has 30+ billion in reserves? Yeah, sounds like a lot of cash but between them, FNMA and FHLMC have $5 Trillion in mortgages. With foreclosures continuing to steam roll along and the prospects for raising additional capital slim and none as evidenced by their share prices. FNMA and FHLMC could be in deep shit in another 6 months and that would rock our world like a 9.0 Earthquake.
Read this: http://www.msnbc.msn.com/id/25641442/

[Egon]

It is scary outside of the cities right now...seems like a lot of crime and a lot of vacant bldgs are out there in the burbs. Speaking of, how are those communities going to support themselves with all that lost tax revenue...the suburbia landscape could be a lot different in ten years...who knows.

See what Youngstown, Ohio is doing.

[A-wreck]

Youngstown should be fine since its the home of Gil Mantera's Party Dream

[cranked]

Youngstown should be fine since its the home of Gil Mantera's Party Dream

Not to mention Kelly Pavlik will single handedly save it...

Mark my words, after Kelly beats Calzaghe, Y-town will be bigger than Vegas.

[cranked]

Thanks Cranked for the distinction there between stock price and assets to back up your book of loans. I read today that FNMA has 30+ billion in reserves? Yeah, sounds like a lot of cash but between them, FNMA and FHLMC have $5 Trillion in mortgages. With foreclosures continuing to steam roll along and the prospects for raising additional capital slim and none as evidenced by their share prices. FNMA and FHLMC could be in deep shit in another 6 months and that would rock our world like a 9.0 Earthquake.
Read this: http://www.msnbc.msn.com/id/25641442/

Pretty scary stuff...if those guys quit lending, it may be a 10.0 earthquake.

[meatdrink9]

The fannie/freddie scenario is beyond scary. Holding real estate and having the ability to offer seller financing might be a good niche to work as few will be able to get loans, but will still want their piece of the American Dream. I'm hoping to liquidate 1 property and refi 1 other. If that occurs I'll be ready for a serious shopping spree. I have been hiring out more work lately as contractors are cheap and hungry right now. You have to learn a new dance every day.