Staying on the sidelines the best investment!

Asked by per, San Francisco, CA Thu Jul 17, 2008

As per the April '08 Case-Schiller Index (published on June 24) the Bay Area real estate market has declined over 24.6% since May '08. And according to a research firm, SF real estate prices are down 27% Y-o-Y to the lowest levels since 2004: http://biz.yahoo.com/ap/080717/ca_california_homes.html. In theory, that means that anyone that bought over the past 4 years are now in the red.

I'm looking to buy within the next 12-24 months but want some real data showing a confirmed bottom before I spend my hard earned money. Right now I'm saving 50% per month (net tax deductions) renting compared with owning at a 0% yearly appreciation (which is very conservative since we have negative growth). My monthly gross rental payment is 1/3 compared to owning. So while the market is declining I'm building equity fast at zero risk. Life is good!

When do *you* think the market capitulation will happen?

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Answers

41
John the Bru…, Home Buyer, Connecticut
Thu Jul 17, 2008
BEST ANSWER
Jed, I read the other thread and I certainly don’t think that you “won.” Case-Shiller is far and away the best measure of the state of the RE market today.

Capitulation. It’s coming. To some places sooner than others. It will come to every market as the cheap and easy money that fueled this mania was a nationally scoped phenomenon.

I think many markets will experience their capitulation moments come this fall when the summer-sales season passes their houses by without interest or offers. Facing the prospect of carrying a depreciating asset through the slow winter-sales season - and perhaps an ARM adjustment - will be too much for many a seller.

Will this sit well or will they cut their asking prices to get into line with micro and macro-economic reality in what could turn into an interesting “no mas” moment?

It will be an entertaining show, you can bet on that. Sit back and enjoy.
6 votes
per, , San Francisco, CA
Wed Jul 23, 2008
Peter - good post!

My investment approach has always been to look at the general conditions before I look at the local or micro conditions. Case-Schiller and the renting vs buying ratio are excellent data points to understand the general trend. Once these are aligned it's relevant to dig deeper. Until that happens I can build equity faster via a savings account than the residential real estate market in the shorter term.

Thoughts:
1. I think it will take another 12-18 months before we see a bottom in the Case-Schiller index. The $300BN credit loss is just the tip of the iceberg. Roubini argues that it could end up costing us $1-2 trillion dollars. The rental versus buying ratios needs to come down as well. The SF peak was at 35 and we are now down to 26 compared to historical averages of 10-14. I'd say 20 is a fair SF target given the markets premium.
2. If 70% of all americans own a home how can we have so many buyers on the sidelines? I have one friend out of 50 that is renting. If you bought during the past 2-3 years you are in the red and cannot afford to move. We won't see market capitulation until all of the optimists are worn down and the fear is high. A year ago everyone said that the July/Aug stock market plunge was only a *healthy* pullback...

The real estate market is going through the same process as the tech bubble (or any other bubble for that matter) in 2000: re-pricing of assets, flushing out excess, more transparency et cetera. It's going to take time before we see a bottom and we are never going to see yearly double-digit appreciation again. That's not to say that I won't be a great investment in the longer term (5+ years).

I'm looking forward to this fall to see how buyers and sellers are interacting. My take is that the sellers will be lining up to get out but the buyers will hold off which will eventually push down the prices further. Paying more than 20X yearly rental is insanity and not sustainable in this economy.

Every investor knows that the smartest deals are the ones you never make... ;)
3 votes
per, , San Francisco, CA
Thu Jul 17, 2008
http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2008/07/17/… (trulia might truncate)

It's humorous that I'm getting the same response from all real estate agents: dissect the data better, find other data, learn how to *read* the data... It's actually really insulting and bloody arrogant. I understand the methodology and that's why I'm staying on the sidelines. So far all key data points for the SF real estate market is pointing to a continuous decline. Many of my friends who are residential and commercial real estate investors are saying the same. Mind you, these are professionals!

I don't know how fluent you are in making sound investments but there are two key rules: don't catch a falling knife and only go for the meat of the run. I don't *care* if I miss the bottom. A *confirmed * bottom tells me it's safe to get back into the waters again. Until then I'm building equity through other asset categories (crude has been very good to me, tech is weathering the storm really well).
3 votes
Peter Brunton, , San Francisco, CA
Sat Jul 19, 2008
Per......just to be straight I'm a realtor with a finance background; so I look at things from both sides.

I guess my main point would be that yes the market for the most point is falling; but the majority of those declining markets are in places where easy money was granted to people who really were not qualified. There is definitely a widening gap between the haves and have nots, but the haves will be buying real estate in the wealthy areas (aka, places like San Francisco). This will keep the San Francisco real estate market in high demand.

My second point would be that the average San Francisco homeowner in "A" class sections of town is extremely qualified. Most of the owners are financially stable and are absolutely horrified to keep the market from falling. Therefore, they will continue to hold on to their properties, thus limiting supply and keeping demand (aka, prices) high.

My third point is based on the market in general. Prices will continue to fall throughout the year no doubt. However, places like Daly City are prime examples of the rest of the country. Realistically, there are a lot of buyers like yourself who are on the sidelines who want to buy in areas like this, but are still afraid of the falling prices. However, when mortgage payments truly start to equal rental payment there should be an influx of buyers to the market. Therefore, all these bank owned and short sale properties will actually start to have actual prices that the banks can begin to value. Granted, these loans will probably only be worth 55-60 cents on the $, but at least banks will know what they have and they can begin accurately valuing their portfolios and clean up all the mess. Once this happens, credit will get easier and prices will go up.

The Case Shiller index is an accurate report......but like Jed was saying it can't truly give you an accurate reflection of individual neighborhoods. The central part of San Francisco (the noe valley, mission dolores, nopa, russian hill, marina, pacific heights type areas) have not dramatically fallen and in fact in some areas have continued to appreciate.

So, staying on the sideline might very well be the best bet.......but who really knows.
2 votes
J R, , New York, NY
Sat Jul 19, 2008
The latter means that if you are putting down $1MM to buy a place you'll forgo 3.3% or $33K (E*Trade) in interest every year compared to renting.
~~~~~~~~~~
Putting down $1MM?! You rental proponents are probably lucky if you can put down $1,000. Anyone who can put "down" a million probably already OWNS something.
2 votes
per, , San Francisco, CA
Fri Jul 18, 2008
Mark - both renting and owning carries a cost. In the case of renting it's simple, it's just the rent. For ownership it's either the monthly net payment or the opportunity cost (if you paid in cash). The latter means that if you are putting down $1MM to buy a place you'll forgo 3.3% or $33K (E*Trade) in interest every year compared to renting.

The only way to make money on ownership is to have asset appreciation which the RE market hasn't seen since 2006.
2 votes
per, , San Francisco, CA
Fri Jul 18, 2008
Jed - this is an open forum to discuss the RE market and share perspectives. Every time I share data you show up, bash my perspective and insult me. That cannot be good for business and is not in accordance with the community guidelines: "The community is made up of many types of people, with different backgrounds, knowledge and beliefs; please be considerate of others and do not attack other community members. Be respectful at all times. "

Cheryl - you are confirming my point. A real estate agent will always advice you to buy or sell independently of market conditions by using the tactic of fear (hope you are not too late, timing the market is impossible) and emotion (no evil landlord to argue with). I still remember NAR's Q206 newspaper campaign "It's a great time to buy or sell a home". Do you think I could get that printed on a t-shirt?

http://www.realtor.org/home_buyers_and_sellers/buy_now_ad

But I agree, everyone is not so fortunate that they can time the market (i.e. have the advanced knowledge, just forced to switch to ownership due to a family situation or lack of rental properties). That's when you start running the numbers and in my mind you should put 20%+ down and not using more than 25% of your disposable income for monthly net payment. There is no reason to go house broke just to satisfy the emotion that is ownership.

The fact is that the RE market is in a reprising process after the burst of the bubble. This takes time, both to descend, bottom out and start the ascend. There will be lots of time for anyone to get into the market once the bottom is confirmed. Remember when the bubble burst last time in 1989? It took 5-7 years to get back to break-even.

John - I think we'll see capitulation within the next 12 months, ceteris paribus.

SF is a fantastic place and I'm looking forward to re-enter the RE market once the excess has been properly flushed out! Right now we live in a rent controlled pad in SF and I cannot tell you how glad I am to have the lowest burn-rate in the universe. People are saying that owning your own house is freedom. Well I disagree - having a strong positive cash-flow and a long runway beats anything. :D
2 votes
J R, , New York, NY
Thu Jul 17, 2008
I'm looking to buy within the next 12-24 months but want some real data showing a confirmed bottom
~~~~~~~~
Since you don't care if you miss the bottom, you'll know it's there when things go back up.
2 votes
Cheryl Bower, Agent, San Francisco, CA
Thu Jul 17, 2008
Per,

As Jed mentioned, no one knows when we've hit bottom until it's already passed-then one is buying on the upswing. Buying real estate is a buy and hold investment of 4-7 years.

Rather than time the market, if the numbers make sense, the mortgage payment is affordable, & one can make a commitment of owning a specific property for ~4-7 years, then that is the time to jump in regardless of what the market is doing. Not to mention the added benefits of tax deductions and the luxury of not having to ask a landlord permission to hang towel rods or paint the interior.

Interest rates are still at historical lows. No one has a crystal ball to see where interest rates and appreciation levels will be in the next several months but in my opinion and based on my 20 years of purchasing S.F. real estate, I don’t think there’s any better place to live and own real estate! We live in a world class city with excellent weather & culture.

As for your comment on agents recommending that you dissect the data, you’re hearing this because the media tends to incorrectly portray the market conditions with a broad stroke approach. San Francisco (& other Bay Area markets) have several micro-markets, so to properly understand how a neighborhood is performing, we have to study the data: days on market, price reductions, amount of inventory, etc. Properties that are well located, show well and are competitively priced are still receiving multiple offers!

Personally, I'd rather invest in something tangible, that I can manage & make improvements to rather than trust a financial advisor on which stocks/bonds to invest in & hope that those investments are well managed & profitable. That arena has certainly had its’ share of problems.

Good luck with your investment plan-I hope it works out for you. Hopefully, you won't be jumping into the market at the same time as other market timers.
Web Reference:  http://www.cbower.com/
2 votes
Jed Lane, Agent, Petaluma, CA
Thu Jul 17, 2008
Per,
Your link has expired and we've been through the Case Schiller report many times over the past months. Do more research into the methodology of the study and the data set used to achieve their surmisal. If your happy then stay on the side line but when you see the bottom line it will already be history.
Good luck to you
2 votes
per, , San Francisco, CA
Mon Sep 8, 2008
Steve - I could not agree more. It took 7-year to create this bubble and we are just 2 years into the real estate bear market.

There is enough evidence available that shows that housing prices will keep going down. The relative strength we have seen in Manhattan and San Francisco will turn into weakness very soon. The bubble is still bursting!
1 vote
Steve, , Rohnert Park, CA
Thu Sep 4, 2008
"Most professionals agree that we are 12-18 months away from a bottom in the housing market."
------
I agree with much of what you say, but think you're underestimating the duration of this fall. In non-liquid markets the burst of a bubble will almost always take far longer than the rise. 24 months down the road might represent the bulk of devaluation, and perhaps an opportunity to buy with less risk, but I think we have a long, LONG road ahead. The chart linked below, showing Japan's prior bubble in comparison to ours to-date, seems a more realistic scenario to me.

There are so many negatives headed forward it's frightening.

Disposable income - the most accurate measure of home price forecasts - is fading, and fast. Energy and food costs rising taps into it. The massive debt accumulated by the population over the last decade taps into it. New 'essentials' (i.e. broadband internet, cellphones) tap into it. Health care costs are rising. By most accounts we're entering into a recession and most likely period of (hopefully) moderate stagflation. That'll tap into disposable income.

Baby boomers are aging rapidly, taking the share of US population 55+ from 21% in 2000 to 30% in 2020. These folks will have to sell (to tap into their nest-egg, or for more morbid biological reasons). They won't be buying something else. These are the homes that are actually paid off, with much of that 'savings' spent to sustain standard costs of living. It's the next generation that will need to buy up those homes. And that's a generation that a) isn't big enough to fill the void to begin with, b) arrives to the marketplace with more of their own debt than any previous generation and c) has no confidence Social Security will exist for their future (translated: they'll actually save for their retirement = less disposable income)

It's going to be a bleak 10-15 years for housing, as it's doubtful appreciation will come close to outpacing carrying costs. The days of consumers dropping 45%+ of their gross on housing is gone for the foreseeable future. I think condos (with modest HOA dues) have a chance to bottom in 24 months or so, whereas other homes will just find themselves in a gently sloping trough for another decade. I actually think condos could start to see real demand. Large homes destined to be the SUVs of the housing market. Not many are going to want to handle the carrying costs of a 2,800s.f. home in a long-term flat/declining market when a 1,300s.f. condo with less exposure will suffice adequately (and allow them to set aside some of that income). Even if the public doesn't want that, the mountains of debt already accumulated is not sustainable and will force the issue. McMansions are going to get decimated.
Web Reference:  http://xrl.us/oqag7
1 vote
Daniel, , Baton Rouge, LA
Fri Jul 18, 2008
only if you are living with your momma!

How can paying rent be better than paying down a mortgage?

If rent is 1000.00 / mth, 24 month, 24,000 wasted!
1 vote
NonRealtor, , 23456
Fri Jul 18, 2008
Jed,
You should have sold your house in 2005-2006. On the bright side, renting is maintenance free and half the cost of owning.
1 vote
Jed Lane, Agent, Petaluma, CA
Thu Jul 17, 2008
Thank you for thinking of me as "all real estate agents" . Since you only had one response and felt it was enough to jump to a conclusion I don't see any reason to continue the discussion. Come back and let us know when you feel the knife isn't falling and it's what did you call it the fat of something. Sounds like investment advice from a pig farmer.
But really let us all know when in your wisdom it's OK to buy. We are all (royal we) waiting for your sage advice.
1 vote
per, , San Francisco, CA
Mon Aug 24, 2009
Isa - sorry for really late reply. I'm still on the sidelines 12 months after I started this thread. A year ago I was looking to get back into real estate between this (2009) and next fall (2010) and that is still the plan - if I find what I'm looking for and the key metrics I'm looking at are indicating a good entry point.

I think we are seeing the first of many attempts for the real estate market to bottom out. I believe this is a head fake and that we have another 10-20% down within the next few years. It depends if the government and the Fed will keep propping up the market and asset prices artificially with tax credits, lower interest rates, dough for dumps programs et cetera.

In my mind real estate will be flat or descending until all the foreclosures and the excess supply is gone. We also need to see the unemployment decrease as that is the core demand driver. There is *no* data supporting a bullish case at this time. There are a few *green shoots* but nothing any serious analyst would use as an argument to buy real estate.

Two years ago I told some friends here in San Francisco that in a few years you'll be able to get a great 3-bedroom for under $800K. They laughed. Just saw the first ones on the market a few months ago.

Since real estate will most likely experience a L shaped recovery at best there is ample time to find the dream house / pad over the next few years. Cash is king as I think a lot of people have realized by now, especially as we are still in a deflationary and de-leveraging process.

I'm bullish on real estate in the long-term (10-15 years) but it's all about timing as everything else in life - either by chance or by choice. I prefer the latter. :)

I will be monitoring the September real estate activity with big interest here in San Francisco. There are tons of sellers ready to get their "Money Pit" off their hands and I'm sure that there are tons of buyers if the price is right. Volume and price will be very interesting.

PS. If you are planning to buy for the longer term make sure you get a good deal. It's a buyers market and will be for a long time. Any argument that a house is *worth* what the current seller bought their house for back in 2003-2007 should be treated the same way as believing that Yahoo!'s stock price will get back to $125 (split-adjusted): with a big laugh! :p
0 votes
Isa, Home Buyer, San Francisco, CA
Fri Apr 24, 2009
Per

It's April 2009. Your observations are proven right. Can you share more on your thoughts on the market AFTER the 30th of June 2009 the supposed Bottom of the Crash?

Thanks in advance
Isa
0 votes
NBW, Both Buyer And Seller, Los Angeles, CA
Tue Sep 9, 2008
No problem per. Thanks for the clarification Luke!
0 votes
per, , San Francisco, CA
Tue Sep 9, 2008
My apologies. I reacted in haste and misread. Thanks for clarifying and for the support. :D
0 votes
Luke, , Nashville, TN
Tue Sep 9, 2008
Per,
I think you need to re-read NBW's post. He was referring to the unethical statements that "ME" made towards you. He said he wanted to notify the NAR about the post that he made. NBW is a solid contributor to this forum and was actually looking out for your well being. Also, I think Truila should take some sort of actions towards "ME" because of his post.
0 votes
per, , San Francisco, CA
Tue Sep 9, 2008
NBW,

I think you are confusing me with someone else. I'm not the one that works for the real estate industry. I'm just a private investor, monitoring the real estate market, looking for a low risk entry point. I think an apology is in order!

Best
0 votes
NBW, Both Buyer And Seller, Los Angeles, CA
Tue Sep 9, 2008
2011 is going to be the turn around in my estimation. At this point, it's not about time, it's simply about when prices return to where they were in 97-98.

Me, I think it's a great idea to post per's email address. I'll make sure and email him to find out who you are so that I can contact the real estate firm you work for, as well as NAR to discuss your lack of professionalism.
0 votes
per, , San Francisco, CA
Tue Sep 9, 2008
"Me",

I'm just sharing my opinion and the supporting data that investing or *flipping* real estate in the current economic conditions is a very bad idea. Regular people are being told that you cannot time the market, that you have to buy-and-hold and that real estate is always a good long-term investment. That is simply not true.

The current bubble was created by very loose lending standard, a herd mentality driven on by the realtor organizations and a government + fed (low rates) with the mission of increasing homeownership. Now that house of cards, just like the tech bubble in the 90s, savings and loans in the 80s et cetera, is coming down.

Bubbles bursts and the smartest thing is to stay on the sidelines and wait until all the dust has cleared. That means that it's unlikely that you'll be able to pick the bottom, but it guarantees that you won't be in the red for several years risking your solvency.

Example: Let's say you buy a house today cause you'd like to get into the market. If the market keeps going down (which has the best odds at this time) you have to follow the market down and then up just to get to break-even. 10% down in SF would probably take another year which means that with a historic appreciation it would take 2 years to get back to that price level and another 1-3 years to break-even (including taxes, payments, real estate commissions, alternative cost et cetera). It would take you 5 years to just get your money back. That is about what real estate agents recommend you to hold your property to make money.

The alternative is to wait until we have a confirmed bottom by buying once the prices have proven to appreciate again for 3-6 months. It's very hard to forecast when that will happen so why gamble? Wait until we are out of the woods. The counter argument to this is that you'll have to pay more than at the bottom and that is true. That problem is that we don't know when the real estate prices will find a bottom so why gamble. If you are off with 10% on the downside that will, as per my example, be very, very expensive and take a long time to recover.

I think people have been taught that the dollar, market and the real estate prices will always appreciate and now learning the tough lesson that what goes up will eventually come down. I feel for all the millions of household in foreclosure and in mortgage debt and the only thing I can do to help is learning from their mistakes. The quicker the market resets and flushes out the excess the better for everyone.

Good luck!
0 votes
Steve, , Rohnert Park, CA
Mon Sep 8, 2008
... you made me waste hours of my precious time and you're still doing the same to my fellow Realtors, you're still sticking to the same old story about you being an investor, wanting to wait, bla, bla, bla.

Next time I see your postings anywhere, I will reveal your email address and your name, "per" "pre"
------------------

Just a heads up... you forgot to put the little (r) registration mark next to Realtor (REALTOR ??) when posting your bizarre threat.
0 votes
Me, , San Francisco, CA
Mon Sep 8, 2008
Hello Preston,

That is your name right? you're still on the market after many months... you made me waste hours of my precious time and you're still doing the same to my fellow Realtors, you're still sticking to the same old story about you being an investor, wanting to wait, bla, bla, bla.

Next time I see your postings anywhere, I will reveal your email address and your name, "per" "pre"
0 votes
J R, , New York, NY
Mon Sep 8, 2008
Steve, even grated the fact that when older people die they won't be buying something else doesn't mean there are going to be thousands of empty houses. Even us boomers have procreated and our children have had grandchildren, so there will be buyers. As tothe fall of prices, I agree they will probably continue to fall, possibly for 2-3 years, but I don't agree they will continue to fall, there will be a period where prices are flat.
0 votes
per, , San Francisco, CA
Thu Sep 4, 2008
Most professionals agree that we are 12-18 months away from a bottom in the housing market. And as the dollar strengthens it becomes more expensive for foreigners to buy US real estate. The reality is that we'll soon enter another leg down as sellers are forced to decrease their prices to increase transactions. Very basic economics that seems to have escaped the city college educated real estate pumpers! :p

"U.S. House Price Decline Could Be Worse than Great Depression, Economist Shiller Says"
0 votes
Jed Lane, Agent, Petaluma, CA
Tue Aug 26, 2008
Jim writes;
Real estate is a complex market with many inputs. For you to quote only the data which supports your pessimistic view doesn't do anything other than to further your agenda. With your original question on July 17th (nearly 4 weeks ago), perhaps now is the time for you to come clean and editorialize your views rather than the drip, drip, drip we've seen so far.
~~~~~~~~~~~~~~~~~~~~~~~~
Yet "per" still likes to put out the drip.

Who are you going to vote for in Novemner "per"? Give us your nuanced, well researched and thoughtfull view on that topic.
0 votes
per, , San Francisco, CA
Tue Aug 26, 2008
The real estate market is acting as forecasted:
- S&P/Case-Schiller is down again across the US an all major cities: http://biz.yahoo.com/ap/080826/home_prices.html
- Existing home-sales grew due to seasonality and foreclosures but prices fell

The bottom is about 9-18 months away at this point - ceteris paribus. Smart buyers are on the sidelines, saving equity (as opposed to losing it in the real estate market) to feast once the prices are down another leg. G/L!
0 votes
Jim, Home Buyer, 94131
Sun Aug 17, 2008
Your Trulia name suggests that you're looking in San Francisco, yet you compare this market to the nation. I feel your desire to see a huge discount before stepping off your porch might only serve as schadenfreude than common sense.

I'll refer you to (2) reports regarding SF's unique nature, which you should begin to consider more closely:

The first is a 2006 paper from Univ. of Pennsylvania Wharton School and Columbia University titled "Superstar Cities". This paper highlights the unique nature which SF represents (high desirability without high growth in housing inventory). If anything, this SF proves to me a market unique to itself.

The second recommended reading are two from SFGate. On Tuesday, August 12, 2008, an article looking at areas in SF which have held their value during this downturn: http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2008/08/12/… .

Please compare the map with the SFGate map in separate reference regarding 2007/2008 homicides in San Francisco: http://www.sfgate.com/maps/sfhomicides/ . One might wonder if there's a connection between the level of crime in a neighborhood and the ability of neighborhood home values to hold up in a downturn?

Real estate is a complex market with many inputs. For you to quote only the data which supports your pessimistic view doesn't do anything other than to further your agenda. With your original question on July 17th (nearly 4 weeks ago), perhaps now is the time for you to come clean and editorialize your views rather than the drip, drip, drip we've seen so far.

-SFGoethe
0 votes
per, , San Francisco, CA
Thu Aug 14, 2008
Ouch...

"The value of existing U.S. single-family homes in metro areas fell 7.6 percent in the second quarter compared with the same period in 2007 with homes in the West tumbling 17.4 percent, the National Association of Realtors said on Thursday."
0 votes
Mr. M Soliman, , Los Angeles, CA
Wed Jul 30, 2008
You say in your answer that “If 70% of all Americans own a home how can we have so many buyers on the sidelines?”

The current efforts to remedy the delinquency issue in domestic housing are significant and concerning. 1 in 6 is in foreclosure I believe. However, the liquidation and methods for disposing of the institutional "bad" assets (REO) are more problematic and requires further review. With confidence I offer that as much as 30% of all housing should be labeled as impaired due to negligent and or fraud related borrower lender circumstances - who ever or whatever, doesn’t matter. Add another 7 % to 10% of the population of consumer SFR 1-4 housing should be classified as 120 days out to becoming delinquent. ...impacted due to job loss or other regional economic problems making long range earnings unlikely.

That said consider the data that is out and what is happening with in the SFR housing sector of banking. The data we are using for arguing forecasts is failing to divulge the real foreclosure numbers which are far too conservative given the real numbers being withheld and the anticipated reserve requirements that otherwise will cause further banking failures and untimely further government response or "bail outs'. The capacity for the market to absorb the excess units coming on line over the next 24 months at depressed prices are the real overbuilding that was guised as controlled growth. The balance was not in line with the markets capacity as realtors and brokers made a market out of low to moderate income families moving from outhouse to penthouse under unethical and deceptive lender programs and practices. (Not the agents fault - - it’s the CDO markets (joke, what a mess really) and their demand for yields that filled inventory with unqualified borrowers. The distressed assets or percent of housing inventory lenders call REO is backlogged 6 months in this draconian and archaic foreclosure process. Is domestic banking feeling the crunch of added reserves, losses and weak earnings to date? Add in the added cost added for each REO whereby 6 more months of accrual is added to your basis in the assets required under GAAP when booking combined capital cost and cost to carry. Of over 1 trillion in originations considered excess and artificial or synthetic, institutional balance sheets will carry these assets at twice the value of the Real Estate. Wake up friends. There are no traditional models that can truly quantify the problems without rethinking the calc's. or adding to it a variance for these extraordinary factors. Again, it’s the Streets algorithmic that never came to fruition in the CDO and derivatives securities models which threw in a phony or make believe assumption for housing supply and absorption relative to the population of homeowners, affordability, capacity and low teaser start rates which distorted real economic capacity.

My finely tuned and intellectual friends! Your models are too sterile! As for the comment "I have one friend out of 50 that is renting”. Throw a total of 100 pennies into the air and watch at least another 34 come down tails.

MSoliman / Stop Predatory Lending / http://www.borrowerhotline.com
Web Reference:  http://borrowerhotline.com
0 votes
Maureen Mason, Agent, Pacific Grove, CA
Tue Jul 29, 2008
The problem with recognizing the "confirmed bottom" is that this is historical data. So, by the time the sales statistics are compiled from MLS data, you're half way into the month following your "confimed bottom". Perhaps a better approach would be to get a trustworthy long-term local agent to help you also analyze the supply-demand curve in the areas of the City that interest you. The agent could also let you know what properties are getting multiple offers and track that increase/decrease in activity for you. Finally, keep saving your money for the down because, as lending continues to tighten, the 20% down loan will begin to be replaced by a minimum of 25%-30% down.
I hope this is useful to you.
0 votes
per, , San Francisco, CA
Tue Jul 29, 2008
I don't think anyone is arguing that over the long-term real estate has been a profitable investment. The question is when it's safe to get back into the market and most experts agree that it will take another 12-18 months until we see some positive price / volume movements.

The sellers of this condo started out above $1MM about 3-6 months ago, then lowered to $950K and is now trying to sell it for $875... I feel for them!
0 votes
Jed Lane, Agent, Petaluma, CA
Tue Jul 29, 2008
Per,
Here is an article quoting Mr Case and Mr. Schiller on the subject that appeared in Barrons "Bottom's Up: This Real-Estate Rout May Be Short-Lived "
http://online.barrons.com/article/SB121581623724947273.html?…

I think the most important part of the article for this discussion is the fact that housiing has appreciated 70% in all 20 major markets since 2000, even after the recent declines.

Sitting on the sidelines now might be OK but sitting out since 2000 was a mistake.
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J R, , New York, NY
Tue Jul 29, 2008
per you realize your state has more foreclosures than 40 other states combined? No wonder Californians feel the way they do about the housing market.
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per, , San Francisco, CA
Tue Jul 29, 2008
C&S keeps dropping in May '08: http://news.yahoo.com/s/ap/20080729/ap_on_bi_ge/home_prices. The community seems to agree that a bottom for the housing crises will take at least 12-18 months...
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Mr. M Soliman, , Los Angeles, CA
Sat Jul 26, 2008
There is no crystal ball to gauge bottom and housing values. SFR housing is something that could work using an asset “dollar cost average” method. That’s if you bought a home once a year. (If you miss bottom but bounce up in year three and move up from there, you’re on track and positioned buying way ahead of the speculators).


Of course -- only if you have the financial capacity or understand the game of syndication (use a PPM under a REIT structure). The volume of REO and back log of delinquency over 120 days and not in foreclosure is wrong bizarre and unethical (loans that can never be cured) yet again , the consumers and press are being mislead, duped and fed incorrect delinquency numbers. (Lender faux assistance programs, fix it pal offers and modifications offers that are out of reach are all delay tactics to try and manage the tsunami due to hit shore by year end!) It’s again unfathomable. Sarbanes Oxley will kick in (Enron law) after the election and law makers will discover the deceitful withholding of real delinquency figures and misstating the numbers. Why….Hmmmm. MAYBE TO KEEP THEIR CAPITAL LIMITS IN CHECK AND DOORS OPEN! This will be SOME administrations first “man of the hour” good deed.

But here is your best gauge. It's been long forgotten in terms of decades when purchasing property and balancing debt to rents was possible. Here’s the pencil neck “Freddie Blassies” alternative to a crystal ball. Rents are colliding with mortgage principal and interest payment affordability.

Its coming and it won’t be a function of lower rates dropping through the bottom as much as the ongoing liquidation of property down at 20 to 30 cents on the dollar. (Hint - - ask your local stock broker what MSNBC means when they say the “vulture’s” are quit…they are yet to be seen) . M Soliman http://www.borrowerhotline.com
Web Reference:  http://borrowerhotline.com
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per, , San Francisco, CA
Fri Jul 18, 2008
Jed - I withdraw. You are the smartest guy in the room, a genius, a God's gift to home buyers! lol
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Jed Lane, Agent, Petaluma, CA
Fri Jul 18, 2008
John the Bruce,
In the other thread per stated that San Francisco property values were down and cited the Case Schiller report number for the San Francisco Bay region. What I was vindicated on, maybe won is the wrong term, was that the SF city and county numbers were not down but had shown a positive number.
Case Schiller is a good indicator of movement and I like that it isn't averages and medians which are skewed by sales at the top or bottom. But even with in the numbers reported in the latest report is a larger percentage of reduced second time sales prices due to the high level of forclosed properties. It is recognized by experts that the market is not at all normal so the numbers need to be understood by more than lookiing at face value.
Per - If you think I insult you and you don't insult me, which you have right from the start of our conversations, what can I say.
In our first conversation you immediately slammed me and my knowledge which has set the tone for how I respond. I really don't think you are here for discussion. I think you are here to find people that will reinforce your perceptions, not give other views. Everything I've said to you I've said with the highest respect yet this is the load I got on my first answer when I posted
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Thanks for telling me that I'm not capable of analyzing market data. My question still stands unanswered but I'm glad your promotional blurb got published.

Are there any serious professionals in this forum that can give an honest answer? I'm interested in understanding if there are any market signs (and what those are) pointing to a possible bottoming process? What general market metrics / indicators should I look at to determine if the prospects are shifting from negative to positive?

Tue Apr 29 2008, 09:02
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Gosh doesn't sound very respectful.

Let the community decide if I was disrespectful to you prior to your flame attack. Here is the link and start at the bottom.

http://www.trulia.com/voices/Market_Conditions/Is_there_anyt…

I answered your question with thought and knowledge and you just slammed me. But I didn't complain about your disrespect. I'm too much of a professional to let someone using an alias get me rattled.
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Jed Lane, Agent, Petaluma, CA
Thu Jul 17, 2008
So, it was you that I won the argument with before on the Case Schiller. You have a one track mind and it doesn't seem to open.
Why are you here? Are you trying to convince yourself that you have made the right decision, are you trying to flame or are you looking for someone with the knowledge to actually advise you.
Your sarcastic and accusatory tone say your a flamer. But you have come back with the same statement/question again.
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