Discussion: Is there a real estate housing bubble, and, if there is, what will pop it?

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mgdeals said: [Q]bassmanben said: [Q]cameron2003 said: [Q]I am a UC Davis Alum too. I guess Davis graduates are cheap, I had a feeling...Aggie pride. We pwn Stanford.

UCD = backup plan if you don't get into Cal.

For me it was UCB > UCLA > UCI > UCSB > UCD <img src="i/expressions/face-icon-small-tongue.gif" border=0>

mgdeals said: [Q]bassmanben said: [Q]cameron2003 said: [Q]I am a UC Davis Alum too. I guess Davis graduates are cheap, I had a feeling...Aggie pride. We pwn Stanford.

UCD = backup plan if you don't get into Cal.

Haha, no its for people that dont want to live in or near Berkeley.

cameron2003 said: [Q]mgdeals said: [Q]

UCD = backup plan if you don't get into Cal.

Haha, no its for people that dont want to live in or near Berkeley.Exactly. Don't want to be near those tree-hugging pot-smoking hippies. And William Hung.

bassmanben said: [Q]cameron2003 said: [Q]I am a UC Davis Alum too. I guess Davis graduates are cheap, I had a feeling...Aggie pride. We pwn Stanford.


i gave up the cold war university and went for uc berkeley

From today's Baltimore Sun:

*****
Home sales down 22% from year ago
Metro area skids in June as listings pile up, prices flatten

By Lorraine Mirabella
Sun reporter

Originally published July 11, 2006

Housing sales in the Baltimore area skidded more than 22 percent last month from June 2005 levels, the biggest drop in more than seven years, and prices flattened as the real estate slowdown extended into the prime summer season.

On average, homes in the region commanded just 3.41 percent more than they did a year earlier - the first time price appreciation fell into the single digits since March 2004.

(More in link)
******

Link to Baltimore Sun

vinny09 said: [Q]In all, I'm thinking if I walked in right now, I could probably get one for $410K-$420K. Currently, they have 32 total homes released in their 1st phase, with 15 sold so far, but none built. Advice greatly appreciated. Thanks!

I know this area well; we just sold our rental house in Davis early 2005 after 8 years. We did not do any 1031 exchange, contrary to advice of many real-estate professionals; just paid our taxes and took our profits. The pricing in Woodland has gone crazy; at least the Davis school district is good and is a nice town to live(hated the city bureaucracy as a landlord).

Woodland does not have an economic base to support the current home prices, has poor schools & and is not as attractive to Asian immigrants as SF & LA areas are.

If you can afford a fixed-rate loan and have 20% down-payment, go ahead and buy the home if you plan to stay in Woodland for the next 5 years.

cameron2003 said: [Q]Interesting, but I doubt many people would walk away from their house if they still had liquidity (stocks, paychecks, savings as mentioned) to make payments. Just my gut feeling, but why would you walk away if you still had resources left to pay it?

I guess if you were upside down by a lot and thought the housing market would never come back, you might.

I hear this argument repeatedly and don't buy it one bit. Any normal, rational sane person paying $5000/ month mortgage on a $700,000 loan realizes their new neighbor next door will be paying ~$3000/month on their $400,000 loan for an identical house, I don't believe there are many people who will happily keep paying the $5000 because they "can afford it" and be content to wait 10 years until the market comes back.

chuzzlewit said: [Q]cameron2003 said: [Q]Interesting, but I doubt many people would walk away from their house if they still had liquidity (stocks, paychecks, savings as mentioned) to make payments. Just my gut feeling, but why would you walk away if you still had resources left to pay it?

I guess if you were upside down by a lot and thought the housing market would never come back, you might.

I hear this argument repeatedly and don't buy it one bit. Any normal, rational sane person paying $5000/ month mortgage on a $700,000 loan realizes their new neighbor next door will be paying ~$3000/month on their $400,000 loan for an identical house, I don't believe there are many people who will happily keep paying the $5000 because they "can afford it" and be content to wait 10 years until the market comes back.But that's assuming the same interest rate is paid. What seems a constant is the total housing payment that is about equal to rent (despite booms and busts).

tooshy said: [Q]But that's assuming the same interest rate is paid. What seems a constant is the total housing payment that is about equal to rent (despite booms and busts).

That is true in a normal market.... Not so in some hot spots like Cali, NY, DC, FL. Also I would rather pay a higher interest rate than a higher price house. Rates will always go down.

hope69 said: [Q]tooshy said: [Q]But that's assuming the same interest rate is paid. What seems a constant is the total housing payment that is about equal to rent (despite booms and busts).

That is true in a normal market.... Not so in some hot spots like Cali, NY, DC, FL. Also I would rather pay a higher interest rate than a higher price house. Rates will always go down.

did u ever see such a "normal market"? maybe just some urban myth, if housing payment is close to rent, who will rent....

caonima said: [Q]hope69 said: [Q]tooshy said: [Q]But that's assuming the same interest rate is paid. What seems a constant is the total housing payment that is about equal to rent (despite booms and busts).

That is true in a normal market.... Not so in some hot spots like Cali, NY, DC, FL. Also I would rather pay a higher interest rate than a higher price house. Rates will always go down.

did u ever see such a "normal market"? maybe just some urban myth, if housing payment is close to rent, who will rent....

If housing payment is close to rent, the people who will rent (instead of own) will be:

1) those who can't come up with a down payment (or qualify for a loan with no down payment)
2) those who can't qualify for a loan (most likely bad credit or low income)
3) those who can't afford the extra costs of owning - like taxes, insurance, home repairs, etc. Rent is usually pretty fixed, and landlords tend to do most repairs. But, if you own, then it's all up to you.
4) those who aren't financially savvy to realize when it is better to buy then rent
5) those who aren't going to live in an area for long

...and the reasons could go on and on.

chuzzlewit said: [Q]cameron2003 said: [Q]Interesting, but I doubt many people would walk away from their house if they still had liquidity (stocks, paychecks, savings as mentioned) to make payments. Just my gut feeling, but why would you walk away if you still had resources left to pay it?

I guess if you were upside down by a lot and thought the housing market would never come back, you might.

I hear this argument repeatedly and don't buy it one bit. Any normal, rational sane person paying $5000/ month mortgage on a $700,000 loan realizes their new neighbor next door will be paying ~$3000/month on their $400,000 loan for an identical house, I don't believe there are many people who will happily keep paying the $5000 because they "can afford it" and be content to wait 10 years until the market comes back.

I dont think its as easy as that to walk away. Im not sure about this, but I think your credit is pretty much ruined. You also lose your down payment. There are other reasons that make staying rather than walking away attractive. Im sure there are examples of major corrections (in your example its more like a bubble which is another question) where people could walk away in droves. What about L.A. in the 90s?

caonima said: [Q]hope69 said: [Q]tooshy said: [Q]But that's assuming the same interest rate is paid. What seems a constant is the total housing payment that is about equal to rent (despite booms and busts).

That is true in a normal market.... Not so in some hot spots like Cali, NY, DC, FL. Also I would rather pay a higher interest rate than a higher price house. Rates will always go down.

did u ever see such a "normal market"? maybe just some urban myth, if housing payment is close to rent, who will rent....

My expense
$1900+190 (maintenance)+ $20 RE for 15years = $2210/month 30year mortgage + $130k down
My renter pays
$3100/month
$3100 - 2210 = $890/month = $10,680/year profit per year, which equates to 8.25% return on my 130k down payment.

Renter pays my mortgage, maintenance, RE and I get 8.25% return on my $130k investment. Not a "urban myth" to me

EDIT: sorry $140k downpay so 7.63% Return

"Housing Market Cools in SoCal" LA Times 12 July 2006

"Southern California's housing market continued to show more signs of weakening in June as the median home price in San Diego fell for the first time in nearly a decade and sales tumbled in Los Angeles County, according to real estate figures released today.

The median price of all homes sold in San Diego last month sagged 1% from the same month last year to $488,000, according to DataQuick Information Systems, a real estate research firm. The last time San Diego County, which once ranked as one of the region's hottest real estate markets, reported a year-over-year drop in the median price was in July 1996, DataQuick said....."

[Q]
My expense
$1900+190 (maintenance)+ $20 RE for 15years = $2210/month 30year mortgage + $130k down
My renter pays
$3100/month
$3100 - 2210 = $890/month = $10,680/year profit per year, which equates to 8.25% return on my 130k down payment.

Renter pays my mortgage, maintenance, RE and I get 8.25% return on my $130k investment. Not a "urban myth" to me

How about property tax on the place? Accounting for vacancy? Insurance? Income tax on the rental?

Namlemez said: [Q][Q]
My expense
$1900+190 (maintenance)+ $20 RE for 15years = $2210/month 30year mortgage + $130k down
My renter pays
$3100/month
$3100 - 2210 = $890/month = $10,680/year profit per year, which equates to 8.25% return on my 130k down payment.

Renter pays my mortgage, maintenance, RE and I get 8.25% return on my $130k investment. Not a "urban myth" to me

How about property tax on the place? Accounting for vacancy? Insurance? Income tax on the rental?

RE (Real Estate tax) = $20/month (15year tax abatement)already accounted on my bill above.
Vancancy? 2 year lease, need 15days to freshen up paint.
Insurance? included in maintenance
Income tax on rental? everyone pays income tax (140k on my bank is also subject to income tax)

Pun said: [Q]
Income tax on rental? everyone pays income tax.

Sure, but doesn't it act like a tax and/or negative incentive for people trying to do what you're doing? Say you want to just buy some real-estate and hold it. You want the rent to cover your mortgage of $1000. So you rent it out for $1000, but you have to pay income tax on that $1000 that is really just going straight to the bank. Net result, you really need to rent it for $1000 + ($1000 * your income tax rate) if you're hoping to have the renter really pay your mortgage.

it doesnt work that way.
Most home mortgages are tax deductible and you can get little creative with your rental thus avoiding any tax on rental.

You don't need to "get creative". If it's a rental, then all mortgage interest is deductible, plus real estate taxes, any utilities you need to pay, HO insurance, any expenses you incur trying to rent it, and any expenses of managing the rental. On top of all this, you get to depreciate the house and take that deduction. Most people will owe zero tax on their rental income...

I was talking about getting creative with $900 profit from rent - mortgage.
Thanks for clarifying the information though.

Pun, you forget the OC of the 140k down... =P

Pun said: [Q]My expense
$1900+190 (maintenance)+ $20 RE for 15years = $2210/month 30year mortgage + $130k down
My renter pays
$3100/month
$3100 - 2210 = $890/month = $10,680/year profit per year, which equates to 8.25% return on my 130k down payment.

Renter pays my mortgage, maintenance, RE and I get 8.25% return on my $130k investment. Not a "urban myth" to me

EDIT: sorry $140k downpay so 7.63% Return

Just 7.63% return?? dude I get higher return rate than that <img src="i/expressions/face-icon-small-tongue.gif" border=0> and I know next to nothing about investing <img src="i/expressions/face-icon-small-tongue.gif" border=0> If you were getting 15%+ then that's a different story. You bought 15 years ago that's when the RE market just went under so you got a good deal to start with. Now, let's see how much your renter would have to pay if he/she buys your house right now??? I say he/she has to pay at least 2 to 3 x the amount he/she pays for rent right now.

hope69 said: [Q]Pun said: [Q]My expense
$1900+190 (maintenance)+ $20 RE for 15years = $2210/month 30year mortgage + $130k down
My renter pays
$3100/month
$3100 - 2210 = $890/month = $10,680/year profit per year, which equates to 8.25% return on my 130k down payment.

Renter pays my mortgage, maintenance, RE and I get 8.25% return on my $130k investment. Not a "urban myth" to me

EDIT: sorry $140k downpay so 7.63% Return

Just 7.63% return?? dude I get higher return rate than that <img src="i/expressions/face-icon-small-tongue.gif" border=0> and I know next to nothing about investing <img src="i/expressions/face-icon-small-tongue.gif" border=0> If you were getting 15%+ then that's a different story. You bought 15 years ago that's when the RE market just went under so you got a good deal to start with. Now, let's see how much your renter would have to pay if he/she buys your house right now??? I say he/she has to pay at least 2 to 3 x the amount he/she pays for rent right now.

I purchased the condo 2 years ago.
Greater return then 7.63% at no risk? let me know where, I will invest millions.

EDIT: If I had purchased the condo 15years ago, i would get 15-30times the original purchase price

wpd7 said: [Q]Pun, you forget the OC of the 140k down... =P

$900/month is the return on my 140k.

Pun said: [Q]I purchased the condo 2 years ago.
Greater return then 7.63% at no risk? let me know where, I will invest millions.

EDIT: If I had purchased the condo 15years ago, i would get 15-30times the original purchase price

Heard REIT before? Or the notes that banks sales?? I was able to lock in some notes and REIT investment for the past few years. At 0% risk and 8%+ growth guaranted, but there a few conditions. One I can not drop or withdraw the amount I put in for 5 years. Two if the market go up more than 10% per year then my return will be 8%+ however, if the market tanks. I will not lose any money, but I wouldn't get any return that year neither.

Pun said: [Q]I purchased the condo 2 years ago.
Greater return then 7.63% at no risk? let me know where, I will invest millions.

EDIT: If I had purchased the condo 15years ago, i would get 15-30times the original purchase price

lol so how you were able to rise the rate to 3000 per month and someone still want to rent it?? <img src="i/expressions/face-icon-small-tongue.gif" border=0> I guess you must be in a REALLY nice area. Not so for most people. Right now the renter pay vs home owner pay is about 1:3 or close to it. so the owners would have to fork over 3 x the amount the renters pay <img src="i/expressions/face-icon-small-tongue.gif" border=0>

hope69 said: [Q]Pun said: [Q]My expense
$1900+190 (maintenance)+ $20 RE for 15years = $2210/month 30year mortgage + $130k down
My renter pays
$3100/month
$3100 - 2210 = $890/month = $10,680/year profit per year, which equates to 8.25% return on my 130k down payment.

Renter pays my mortgage, maintenance, RE and I get 8.25% return on my $130k investment. Not a "urban myth" to me

EDIT: sorry $140k downpay so 7.63% Return

Just 7.63% return?? dude I get higher return rate than that <img src="i/expressions/face-icon-small-tongue.gif" border=0> and I know next to nothing about investing <img src="i/expressions/face-icon-small-tongue.gif" border=0> If you were getting 15%+ then that's a different story. You bought 15 years ago that's when the RE market just went under so you got a good deal to start with. Now, let's see how much your renter would have to pay if he/she buys your house right now??? I say he/she has to pay at least 2 to 3 x the amount he/she pays for rent right now.

We pay $2000/month in rent for a 900k house (San Francisco area)

hope69 said: [Q]lol so how you were able to rise the rate to 3000 per month and someone still want to rent it?? <img src="i/expressions/face-icon-small-tongue.gif" border=0> I guess you must be in a REALLY nice area. Not so for most people. Right now the renter pay vs home owner pay is about 1:3 or close to it. so the owners would have to fork over 3 x the amount the renters pay <img src="i/expressions/face-icon-small-tongue.gif" border=0>Rental prices for a 3BR townhouse in my area in the South Bay is around $2000-2500. My mortgage payment (incl. property tax) for a comparable 3BR townhouse ($650K) in the same area is $3700. Once you factor in tax savings, it's down to $2900.

NotSeniorYet said: [Q]
We pay $2000/month for a 900k house (San Francisco area)

pop it in the RE calc. That number doesn't match.. unless you had an insane amount of downpayment.

Here are some numbers

Gross annual income: 160000

Downpayment amount: 280000

Monthly debt:0

Mortgage rate:7%

Annual property taxes:3500

Annual homeowner insurance:481

affordable house price:891,488.76

Loan amount:611,488.76

Monthly mortgage
payment:

4,068.25

hope69 said: [Q]At 0% risk and 8%+ growth guaranted, but there a few conditions. One I can not drop or withdraw the amount I put in for 5 years. Two if the market go up more than 10% per year then my return will be 8%+ however, if the market tanks. I will not lose any money, but I wouldn't get any return that year neither.You have an interesting definition of "guaranteed growth".

Sorry about the confusion, that is rent not a payment on the house <img src="i/expressions/face-icon-small-smile.gif" border=0>

jayK said: [Q]Rental prices for a 3BR townhouse in my area in the South Bay is around $2000-2500. My mortgage payment (incl. property tax) for a comparable 3BR townhouse ($650K) in the same area is $3700. Once you factor in tax savings, it's down to $2900.

wow the same place in So Cal I can get for 1200 per month <img src="i/expressions/face-icon-small-tongue.gif" border=0> I guess people up north are willing to pay higher rents <img src="i/expressions/face-icon-small-tongue.gif" border=0>

jayK said: [Q]hope69 said: [Q]At 0% risk and 8%+ growth guaranted, but there a few conditions. One I can not drop or withdraw the amount I put in for 5 years. Two if the market go up more than 10% per year then my return will be 8%+ however, if the market tanks. I will not lose any money, but I wouldn't get any return that year neither.You have an interesting definition of "guaranteed growth".

yeah at 0% risk that's the best deal I can find from that time <img src="i/expressions/face-icon-small-tongue.gif" border=0>

NotSeniorYet said: [Q]Sorry about the confusion, that is rent not a payment on the house <img src="i/expressions/face-icon-small-smile.gif" border=0>

lol its all good.... I thought you must had like 500k for down payment <img src="i/expressions/face-icon-small-tongue.gif" border=0>

http://www.dqnews.com/

Bay area sales slow for 14th month in a month, as prices continue to creep up slowly. I feel like its the last few feet of a marathon, Im slowing down, yet the olympic victory is mine...

http://www.dqnews.com/

Bay area sales slow for 14th month in a month, as prices continue to creep up slowly. I feel like its the last few feet of a marathon, Im slowing down, yet the olympic victory is mine...

hope69 said: [Q]jayK said: [Q]hope69 said: [Q]At 0% risk and 8%+ growth guaranted, but there a few conditions. One I can not drop or withdraw the amount I put in for 5 years. Two if the market go up more than 10% per year then my return will be 8%+ however, if the market tanks. I will not lose any money, but I wouldn't get any return that year neither.You have an interesting definition of "guaranteed growth".

yeah at 0% risk that's the best deal I can find from that time <img src="i/expressions/face-icon-small-tongue.gif" border=0>

that is a not a guaranteed growth. When the market tanks, you in fact lose money by not getting the fair market return.

Pun said: [Q]
that is a not a guaranteed growth. When the market tanks, you in fact lose money by not getting the fair market return.
well, so far the market hasn't tanked and i am getting 9%+ return for the past 3 years <img src="i/expressions/face-icon-small-tongue.gif" border=0> Same can be said for RE <img src="i/expressions/face-icon-small-tongue.gif" border=0> Oh BTW some of my investment were from my ROTH account which means 0 taxe <img src="i/expressions/face-icon-small-smile.gif" border=0>

EDIT:

And remember to always diverse your investment. My bet is on weapons and nukes. For some reason people around the world always like to kill each other for stupid reasons... So as long as we are around there will always be war and war needs weapon and nukes <img src="i/expressions/face-icon-small-tongue.gif" border=0>

Well, just because the market has not tanked it doesn't make it a guaranteed growth.
Any investment is a risk but the point I was trying to make was there is always an exception to a rule. In this case, my rental pays my mortgage and I do get guaranteed return of 7.63% on my initial down

Pun said: [Q]Well, just because the market has not tanked it doesn't make it a guaranteed growth.
Any investment is a risk but the point I was trying to make was there is always an exception to a rule. In this case, my rental pays my mortgage and I do get guaranteed return of 7.63% on my initial down

lol I am going to use the same point you said about my investment. RE doesn't guarant growth just because your getting 7.63% return right now doesn't mean you'll continue to do so in the future. Right now your rental can pay for your mortagae, but what if the RE market tanks and the rent vs own price range get close? No one would rent and then the rental payment goes take a noise dive... and your going to have some negative cash flow <img src="i/expressions/face-icon-small-tongue.gif" border=0>

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