Real Estate Crash thread

[liv2ski]

PS - Can't speak to Boulder, but the housing recovery in this part of the foothills lasted all of 4 months. Prices are now dropping again.

That seem to be the case in many areas I have been following. There are exceptions to every rule, but gravity has a way of catching up to every lofty thing eventually. As I said, feel free to buy today, watch it depreciate by 2015, then hopefully be a double by 2025. The guy is young, so fuck it. Time is on his side.

[Hugh Conway]

Kevo, ignore the advice of people who don't know this market. Boulder values never went down in 2008, and there is no bubble here either (well, the Boulder bubble but that is different). Surrounding communities, the really close ones, are also solid. I wouldn't wait, because prices aren't going to go down and inventory isn't going to increase. That said, inventory is absurdly low and has been all year. So start looking, figure out the markets and what your $ will get you, and be prepared to JUMP when you see what you want. Don't feel like you need to wait till you have 20%, I bought in 2005 with 5 down and I'm damn glad I did.

This is the kind of stupid shit people type when there's a bubble.

"ignore anyone who doesn't think Boulder is the best place evar"

[mud]

Reading fantasy novels much?

No but apparently your ignorance of how the marketplace works keeps you in a fantasy world.
Here is some reality for yah. 30 Year Fixed interest rates rise and fall based on the price of Mortgage Bond coupons.

Mortgage bond and currency markets tend to react more to the economic news than the stock indices. Mortgage Bond markets are concerned with the pace of economic growth and inflation. Stock indices are concerned with earnings, which are driven by economic growth and the asset allocation implications from changes in interest rates. Currency markets are concerned with the pace of economic growth, inflation, and foreign trade imbalances.

Market reaction to economic indicators is determined by: consensus - the market consensus forecast, revisions - how significant data revisions are in any previous periods, reliability - the reliability and comprehensiveness of the specific economic indicator (breadth in coverage, depth of detail, and timeliness) and policy makers - how important the indicator is thought to be to the policy makers (is Bernanke looking at it?)

Home prices and sales have no influence over what a Mortgage Bond investor buys and sells. Inflation and economic growth is the driving factor on weather rates rise and fall.

[4matic]

Home prices and sales have no influence over what a Mortgage Bond investor buys and sells. Inflation and economic growth is the driving factor on weather rates rise and fall.

Let's say a mortgage bond was sold on a $500k property and that property is now worth $300k. What is the market value of that bond? What is the market value on that bond if it is non-performing? If prices are falling what is the willingness of an investor to pay face value for a new bond? Isn't that why Fannie and Freddie have a large majority of current mortgage underwriting?

Your analysis of interest rates with regards to currency, and economic activity is not complete. Sentiment plays an equal and probably more significant role in determining market interest rates.

[grrrr]

uh, yeah, you're getting it backwards. Home prices don't influence interest rates. Interest rates influence home prices.

You didn't say home prices don't cause interest rates. You said "there is no correlation". That is wrong.

[Benny Profane]

No but apparently your ignorance of how the marketplace works keeps you in a fantasy world.
Here is some reality for yah. 30 Year Fixed interest rates rise and fall based on the price of Mortgage Bond coupons.

Mortgage bond and currency markets tend to react more to the economic news than the stock indices. Mortgage Bond markets are concerned with the pace of economic growth and inflation. Stock indices are concerned with earnings, which are driven by economic growth and the asset allocation implications from changes in interest rates. Currency markets are concerned with the pace of economic growth, inflation, and foreign trade imbalances.

Market reaction to economic indicators is determined by: consensus - the market consensus forecast, revisions - how significant data revisions are in any previous periods, reliability - the reliability and comprehensiveness of the specific economic indicator (breadth in coverage, depth of detail, and timeliness) and policy makers - how important the indicator is thought to be to the policy makers (is Bernanke looking at it?)

Home prices and sales have no influence over what a Mortgage Bond investor buys and sells. Inflation and economic growth is the driving factor on weather rates rise and fall.

Oh, man, really? Mortgage rates, or, should we say, present day rates, are actually determined by the market? Wow. Have you been following what's been happening over the past five years? If it wasn't for the Fed buying an enormous amount of mortgage backed securities (#1), and the treasury, Fannie/Freddie, and, most important, the FHA enabling cheap subprime loans, your supposed "market"would be a fucking disaster for anybody not holding cash. As it is, considering the amount of said government intervention, the "market"still pretty much sucks in 90% of the country.

I almost bought a condo in one of the richest towns in one of the richest counties in America, but I ran into either a neurotic owner or a scam, I still don't know yet. But there's ten others at that price, and I'll be back after the holidays, because they sure aren't moving fast, even with today's still low rates. It's a sign to me that many people are still in big financial trouble, and that ain't going away for years and years. And this is in a metro area where a lot of people make a lot of money.

[mud]

Prices were rising back in the'80's when rates were double digits and they are rising now with rates at record lows.

Prove to us how interest rates influence home prices.

[4matic]

Prices were rising back in the'80's when rates were double digits and they are rising now with rates at record lows.

Prove to us how interest rates influence home prices.

Easy. Interest rates peaked in 1981 so, in fact, they were DROPPING throughout the 1980's and the subsequent 30 years:

http://www.google.com/imgres?imgurl=...ed=0CC8Q9QEwAg

That's why an adjustable rate mortgage has been the best choice for the last 30 years.

[grrrr]

They are not rising now, they have turned around in response to a small increase in interest rates, at least here.

Supply and demand.

I'm in the market for a house right now. The controlling factor in what I will pay for a house is the monthly payment. As interest rates rise, I can afford less house.

[Benny Profane]

Easy. Interest rates peaked in 1981 so, in fact, they were DROPPING throughout the 1980's and the subsequent 30 years:

http://www.google.com/imgres?imgurl=...ed=0CC8Q9QEwAg

That's why an adjustable rate mortgage has been the best choice for the last 30 years.

And, at the same time, a massive demographic wave of Boomers were entering the market.

Now they're all dying off in their MacMansions.

[mud]

They are not rising now, they have turned around in response to a small increase in interest rates, at least here.

Supply and demand.

I'm in the market for a house right now. The controlling factor in what I will pay for a house is the monthly payment. As interest rates rise, I can afford less house.

That is your problem and not the markets and certainly doesn't influence what a mortgage bond investor pays for bonds.

[4matic]

Now they're all dying off in their MacMansions.

McMansion neighborhoods are ghettos of the future when multi generational immigrant families populate the big boxes with 20-30 people.

[4matic]

That is your problem and not the markets and certainly doesn't influence what a mortgage bond investor pays for bonds.

You've convinced me that you don't know anything about credit risk.

Here's a chart of the Mortgage REIT index. Basically the value of companies that own and service mortgages (bonds). If what you are saying is true the value should not have been affected by rising rates if property values are the same and shouldn't have declined 20% since rates started rising:

http://finance.yahoo.com/echarts?s=M...rce=undefined;

[Benny Profane]

McMansion neighborhoods are ghettos of the future when multi generational immigrant families populate the big boxes with 20-30 people.

I agree. This already happened in small cities all over the northeast in the large homes that were built in the best neighborhoods, that are now low income ghettos.

[grrrr]

Or housing markets.

[skier666]

New Condo building around the corner of my house in SF just listed their first units...

1 bed, 1 bath, no parking @ 616 sqft with $478mo HOA - $635K

[4matic]

New Condo building around the corner of my house in SF just listed their first units...

1 bed, 1 bath, no parking @ 616 sqft with $478mo HOA - $635K

That's Lower Haight? Incredible.

[Danno]

Go back and reread what I wrote.
I said values went down on crappy 1 BD condos between 2008 and 2010, not the whole city.
Inventory is going up on Jay Road and out in Gunbarrel and there are a few other projects lined up in south Boulder. Just trying to offer advice since I've been doing this for 20 years in Colorado. He is not going to be able to afford a SFR unless he is willing to pay $2K a month.

???

I wasn't disagreeing with you, I know that you know the market. Look at liv2ski's comment, telling him to wait because the market will soften. Do you really believe the Boulder market will significantly soften (barring some nationwide collapse)? I know that there will be a small jump in inventory, but it won't be much, and it won't really change the whole ballgame locally. The "best" that he can hope for is that it flattens, and I think even that's unlikely. And unless you know something I don't, we don't really know what he can afford. Based on his median income statements, he may be able to afford a SFR.

ETA: I'm not talking about the extreme ends of the market; the very expensive homes or the 1 BR condos. I'm talking the family homes that could reasonably be purchased by a 1st time homebuyer. I'm no rah-rah nothing can go wrong guy, FFS the whole place can get destroyed by flooding, but anyone who looks at the prices, inventory, and the history here and the overall regional economy cannot expect that the middle of the market in Boulder will likely suffer any significant downturn barring a nationwide collapse as bad or worse than 2008. Anyone who spouts otherwise is a fool who knows little/nothing about this market.

[skier666]

They are classifying it as Hayes Valley even though its more Castro/Lower Haight.

Found a link on Redfin....

http://www.redfin.com/CA/San-Francis.../home/49883472

[4matic]

http://www.redfin.com/CA/San-Francis.../home/49883472

Looks like a public housing project.

[Benny Profane]

Boulder is on the list of places in America that will prosper well in the new class divide, along with places like Manhattan, SF, certain parts of SoCal, Austin, and where ever else it's cool for rich people to live.

[Hugh Conway]

Boulder is on the list of places in America that will prosper well in the new class divide, along with places like Manhattan, SF, certain parts of SoCal, Austin, and where ever else it's cool for rich people to live.

meh - Boulder is just another hippie haven that long ago sold out to soulless assholes who's main goal is strip mining whatever dubious culture remains. It just has mindshare in a bunch of middle-class and upper middle class zombies heads for people who like to act outdoorsy (see TGR).

Manhattan is a different league.

[Danno]

I will also add that an additional way Boulder home prices could fall in the near-term, in lieu of a nationwide collapse, is if interest rates spiked dramatically. But in the context of Kevo's question, that's irrelevant, because even if the sales price went lower, the interest rate would make his effective cost the same or worse.

[Benny Profane]

meh - Boulder is just another hippie haven that long ago sold out to soulless assholes who's main goal is strip mining whatever dubious culture remains. It just has mindshare in a bunch of middle-class and upper middle class zombies heads for people who like to act outdoorsy (see TGR).

Manhattan is a different league.

Yeah, but, it's the coolest town closest to the Co. Ski hills and a major airport. I still don't understand why everyone gets all excited about the crappy road biking, though.

[Benny Profane]

I will also add that an additional way Boulder home prices could fall in the near-term, in lieu of a nationwide collapse, is if interest rates spiked dramatically. But in the context of Kevo's question, that's irrelevant, because even if the sales price went lower, the interest rate would make his effective cost the same or worse.

For once and for all, interest rates will not "spike"anytime in the near or not so near future. Not only our economy, but the entire world's would collapse. Everybody is pointing to a slowdown in our new housing bubble as evidence of that, but the emerging markets almost went into a free fall from just a little "taper talk". We live in delicate times.