Posted on 08/20/2008 6:30:46 PM PDT by SeekAndFind
The scammers in South FLA got busted for creating credit history and charging folks for each line they made up. The fed played their game, the bankers bought the myth, builders raked it in, and house flippers thought they could play real estate tycoon.
This article reads like an infomercial: "I bought my first house for X, and I made thousands..."
If I listened to those who were saying “best time to buy ever!” when they were saying that year ago, a year and a half ago, I would be out $50,000 or certainly more. Yep, just keep saying “best time to buy, EVER!” and one of these days, you will be right! Maybe...
Best time to buy, EVER — when prices are going up.
Best time to buy, EVER — when prices are dropping like a rock
Best time to buy, EVER — when prices are stagnant.
People are programmed to “buy the dips” that occur in normal cyclical corrections. That is why so many people catch falling knives when we are in less normal cyclical corrections, such as this one. We are unwinding an extreme credit bubble manifesting itself a housing bubble. Prices drop 20% from peak and some people leap in thinking they got a 2% discount. They don’t realize the peak was 50% over affordable market. So all they did was buy in at a lower premium, not at the bargain they think they did.
A lot of people have bought in Calfornia in the last year and most all of them have lost money as house prices continue to trend strongly down. Nope, no bottom yet. This crash can’t go on forever. it has to stop. But it won’t stop until affordability comes into line with rents (either prices keep falling or wages and rents must rise), and until the massive inventory of homes is reduced to about 8 months — this despite foreclosure repossessions occurring about as fast as the sales of them, and the HUGE shadow inventory of vacant homes and defaulted loans that has yet to be liquidated.
We aren’t close to a bottom. No way. No how. But I enjoy watching those ignorant of that fact catching falling knives. You have to learn somehow...
When there is dark, coagulated blood on the streets, it's time to buy.
When there is fresh, bright red blood flowing down the streets, it's time to keep eating your popcorn.
You got it. Best time to buy EVER, every day. It is never NOT the best time to buy. EVER.
Just you wait. As sure as we have a dwindling parade of Freepyannas proclaiming “best time to buy ever”, there will eventually be a similar parade of “housing will never be a good investment ever again.” In Sacramento, I head that long and loud back in 1992. That the housing boom was a freak phenomenon and would never occur again in our lifetimes.
I heard this from many coworkers, and I could no more convince them that the cycle HAD to turn up, than I could convince a new cast of coworkers in 2004 that the boom cycle HAD to turn down.
Watch and see. Before this crisis has completely run its course, as housing bottoms, we will see posts on this very forum saying that housing is a lousy investment, it is just for living in, and the change in demographics, etc. means houses will appreciate below inflation for decades. Mark my words. People will post this. Then I will know we have hit bottom. Yet, by 2020, we will probably be in another housing boom.
Probably. However, this is complex stuff. A lot of variables. Folks expect to read a book or even a pamphlet to get an idea of the cycles. And it just don’t work that way.
I gotta tell ya, I was shocked by the number of people — seemingly intelligent people — who jumped on the real estate bandwagon.
btt
Maybe, maybe not.
If I can get 5% per year appreciation on a house, I can become very wealthy. Why? The reason is that I can borrow 80% of the house price, and that is being very conservative.
If I put down 20% the return on my money (as opposed to the bank's money) is 25%. Now I have to be able to pay the mortgage until I can sell the house, but unlike other investments the loan can not be called if the value of the house drops.
The sure clue that the market is turning around and heading up is when real estate agents start buying houses for their own portfolios. We are seeing a little of that now. I have to see it continue for another 6 months before I put any more money in, but I haven't sold anything in the past 3 years either.
The sure clue that the market is turning around and heading up is when real estate agents start buying houses for their own portfolios.
Yes, they are financial whiz kids, intellectual paragons beyond comparison. They only wear those gold polyester jackets as an ironic affectation.
Hemet, California, you say?
Let me know when you have property for sale in some place where people actually want to live and where they are not risking heat stroke when they walk their dog. I might buy something from you.
If you have something in San Diego County west of Santee that generates a positive rental cash flow, let me know and I will buy a second San Diego County property.
I can’t say I was shocked.
People know to buy low and sell high, but most people can’t find the emotional disassociation to do so. They just aren’t cold-blooded enough to deny their greed or fear and follow core economic principals.
If you told people homes that were $150,000 and are $300,000 today won’t go up much more, nobody would buy one. They are logical enough to follow the buy low/sell high rules when they seem them. The problem is, after watching houses go from $150,000 to $300,000, they can’t control their emotions and they FEAR they will be priced out of the market, while they jealously watch friends, neighbors and family grow rich. They doubt themselves and buy at peak, then are shocked to their own blindness when prices fall.
I have posted repeatedly that stocks were going to fall and stated I took my money out of stocks in Dec. 2006 (a little too early — I admit). For months afterward, as the market dipped, people posted that the dips were wonderful buying opportunities. By the time the markets hit bear market territory, we were starting to see people post here “I moved all my investments into cash” or “should I get out of the market and move to cash”.
So the same was true here. If I could prove that the S&P was going to decline from 1550 to 1100, people would have sold out 1550. If I could have proved that Fannie and Freddie and Citi and Wamu were going to lose 80+% of their value, people would have sold. They aren’t dumb. They KNOW to buy low and sell high.
Yet, if you read the posts here, you read that people were getting out of stocks and into cash when we hit bear market territory, and obviously that was somewhat too late. (I say somewhat, because I still expect the S&P to hit 1100 or even 1000 before turning around and heading back up). But the point is, those people were selling low. Emotion got to them. The lost 20% and feared greater losses, so they sold out. So far it hasn’t hurt them. They can buy back most stocks for the prices they sold. Most haven’t exactly “wowed” the markets since then.
My point is, I’m not at all surprised people bought homes at peak and sold stocks at the interim low. People know academically to buy low and sell high. But we are emotional creatures and most people tend to get greedy during upswings and buy at peaks, and get fearful during crashes and sell at troughs. Just human nature...
Either one. Both are "fresh" which means that the bleeding is still active. If you jump in now, you too will bleed.
Well, there are some great indicators that housing has bottomed. Inventories reduce to the mean. Home prices conform to proper ratios to rents or incomes. Foreclosure rates stabilize and come down.
Just like there are indicators a boom is about to happen. Watch inventory. When inventory starts to drop to say 4 months for example, you are the cusp of another boom. It shows that demand for housing outpaces existing supply as houses are gobbled up faster than current sales + new homes.
The indicators are there, but people choose to ignore them and just say, “Best time to buy. EVER! every time we see a month to month increase in sales, even when NOT seasonally adjusted. Just mind boggling behavior.
Maybe you need to develop a better grade of contact in the RE profession.
The people I deal with own 10 - 100 houses each, with portfolio loan-to-value ratios of well under 50%.
I crack wise a good deal of the time, but I genuinely feel sorry for a good many of the people who got caught in this mess.
Many of them are very, very decent folks who were only doing what they thought they should be doing to succeed.
And many of them are folks who played by the rules and got screwed in a royal fashion.
marker
My take: if I see every investment banker, hedge fund kid, and sov fund running out of a burning building, I don’t go wandering in to see how hot it is.
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