Definition of "Irony"

[redshift]

drew and Ski_Banker, thank you very much for delving more into this subject. As I said, this is what I've been told and I'm no expert (and young to boot). Yes, the timing issue is what seems to be the most fuzzy with the investors and analysts I've talked to. They all seem to predict the recession around the same time, but not when the housing market will decline. My problem is this:

I want to purchase a relatively expensive home ($800K - $1 million) and keep my current one. This is A LOT of money for me personally and because of the volatile nature of the housing market (in AZ), I'm a little afraid to jump in. I understand that I have a long event horizon so purchasing now probably won't hurt me over the course of 30 years even if values do drop for the next few years. My biggest concern is that if I do buy and the ground falls out from underneath me, I'm going to have to sell my current house - which I think would be a waste of a wonderful investment. What do you guys think? Keep in mind that I'll be living in my next home until old age. Any advice you can give me?

Thanks!

BTW, I'm sooo sorry to hijack this thread. Maybe Lud can split this into a new one.

 

[steveny]

drew and Ski_Banker, thank you very much for delving more into this subject. As I said, this is what I've been told and I'm no expert (and young to boot). Yes, the timing issue is what seems to be the most fuzzy with the investors and analysts I've talked to. They all seem to predict the recession around the same time, but not when the housing market will decline. My problem is this:

I want to purchase a relatively expensive home ($800K - $1 million) and keep my current one. This is A LOT of money for me personally and because of the volatile nature of the housing market (in AZ), I'm a little afraid to jump in. I understand that I have a long event horizon so purchasing now probably won't hurt me over the course of 30 years even if values do drop for the next few years. My biggest concern is that if I do buy and the ground falls out from underneath me, I'm going to have to sell my current house - which I think would be a waste of a wonderful investment. What do you guys think? Keep in mind that I'll be living in my next home until old age. Any advice you can give me?

Thanks!

BTW, I'm sooo sorry to hijack this thread. Maybe Lud can split this into a new one.

You will always make money in real-estate all you have to do is live long enough to do so.
I own a lot of property but very few single family homes that I rent. Most of the single family houses I flip and use the profits to buy multi-family buildings. There is very little profit in renting single family homes. The damage one tenant can do can wipe out years of profits in a matter of months. Also you have loss of rent for the entire house while you are have it repaired. If a tenant wipes out one unit in a 10 unit building the property is still generating money while the one unit is being repaired.
If I were in your situation I would sell the single family buy my new home for myself and use the rest of the money to buy a multi-family building.

 

[drew]

....and to continue at that same rate of increase the average house in Cali. will be 10 million dollars in the next five years. Not going to happen!

Yes. I know. My statement rephrased: one would have to wait at least five years for the prices to not be considered overvalued. Which will put them at the 10 year mark to wait to buy a house....a very long time for our short lifespan.

The prices are NOT SUSTAINABLE at their current level. Nobody I know has had their salary increase at 3x-5x. It would take decades of an annual 4% raise to match the house prices.

In So Cal a basic $1M house will cost about $6K-$8K per month in just debt service and property taxes. The same house rents for $2500-$3500 a month (and they expect you to maintain it along with a gardener).

This is essentially the P/E ratio for this business: and it makes no financial sense. VERY similar to the Dot Bomb of the late 90's: the companies did not make financial sense, they were "fake". The market reflected this reality *eventually*, but along the way a lot of people got insanely rich on "fake" companies and a lot of people lost out.

IMHO: This housing market is FAKE too, but since it deals in real money...they Want To Believe. The bellwether is all the TV shows that you see: "Flip this House", "Sell this house" and "Property Ladder" mean that this is a fad coming to a quick end. The power of perception coupled with mob mentality is much stronger than reality and reason. (Disclaimer: This fake housing market has treated me extremely well. But it is fake like Enron: which made a lot of money in its day too.)

I want to purchase a relatively expensive home ($800K - $1 million) and keep my current one. This is A LOT of money

As Steveny pointed out: renting houses is very risky. You would only gain if the house continued to appreciate at a high rate. Renters can be very destructive in very short order.

Currently the cost to develop/build a house yourself is much better than buying one. Consider doing it yourself.

I think the US is just on the verge of realizing the wealth creating effects of globalization

Agree. At the expense of the entire middle class. There will be a concentration of wealth in so much fewer hands that it will make your head spin. The US will be richer, but it will be extremely lopsided. It is likely that if you draw a salary: you will not benefit.

My "buddy" Marshall Brain, who has abandoned this blog:

http://concentrationofwealth.blogspot.com/

But it makes for very good reading regardless. The older posts are still quite relevant.

**

NSX question: Anybody rebuilt their ABS Modulator? I know the manual states this is a No-No, but apparently the UK Parts manual has a break down of internal part numbers. Does the UK shop manual specify how to rebuild too?

Drew

 

[Ski_Banker]

Yes. I know. My statement rephrased: one would have to wait at least five years for the prices to not be considered overvalued. Which will put them at the 10 year mark to wait to buy a house....a very long time for our short lifespan.

The prices are NOT SUSTAINABLE at their current level. Nobody I know has had their salary increase at 3x-5x. It would take decades of an annual 4% raise to match the house prices.

In So Cal a basic $1M house will cost about $6K-$8K per month in just debt service and property taxes. The same house rents for $2500-$3500 a month (and they expect you to maintain it along with a gardener).

This is essentially the P/E ratio for this business: and it makes no financial sense. VERY similar to the Dot Bomb of the late 90's: the companies did not make financial sense, they were "fake". The market reflected this reality *eventually*, but along the way a lot of people got insanely rich on "fake" companies and a lot of people lost out.

IMHO: This housing market is FAKE too, but since it deals in real money...they Want To Believe. The bellwether is all the TV shows that you see: "Flip this House", "Sell this house" and "Property Ladder" mean that this is a fad coming to a quick end. The power of perception coupled with mob mentality is much stronger than reality and reason. (Disclaimer: This fake housing market has treated me extremely well. But it is fake like Enron: which made a lot of money in its day too.)



As Steveny pointed out: renting houses is very risky. You would only gain if the house continued to appreciate at a high rate. Renters can be very destructive in very short order.

Currently the cost to develop/build a house yourself is much better than buying one. Consider doing it yourself.



Agree. At the expense of the entire middle class. There will be a concentration of wealth in so much fewer hands that it will make your head spin. The US will be richer, but it will be extremely lopsided. It is likely that if you draw a salary: you will not benefit.

My "buddy" Marshall Brain, who has abandoned this blog:

http://concentrationofwealth.blogspot.com/

But it makes for very good reading regardless. The older posts are still quite relevant.

**

Drew

Very very well said. I agree completely with all your points. Impressed. :smile:

Rental rate to purchase price (the "P/E") is so applicable yet no one discusses it. The real estate industry (residential primarily) is the biggest sham because ALL MARKET PARTICIPANTS want the market to move in 1 direction - up - and there is practically no regulatory oversight. Unlike Wall Street. You can't short real estate prices (yet) if prices get out of hand, there's no SEC making sure the local mortgage broker isn't bs'ing you about a slug of debt you're about to take on, your friendly S&L doesn't really care if you overpay or are even as creditworthy as you say (since they package and sell the loan to bond investors), uncle sam incentivizes homeownership (but don't forget that although you can now deduct your mortgage interest, you give up the standard deduction), and finally - I think I learned that "real estate is the best investment" and that "real estate always goes up" in 5th grade - these mantras are so ingrained in our culture.

Actually, I'm tired of writing about this subject. Simple fact is that prices of any asset can go down as much as they go up (well, basically, i know the math). The real problem with residential real estate in some areas, however, is that people with hardly a dollar to their name are "buying" $500k properties, 99% debt financed. A small drop in prices and those folks will be wiped out.

__
You're absolutely correct about the concentration of wealth. From a purely economic perspective, that is potentially a good thing. From a social perspective, it is most certainly a bad thing. Whole 'nother bag of worms. Read Nobel economist John Kenneth Galbraith's 1960s "The Affluent Society" about wealth concentration over the last 10 centuries. Not boring and puts the "REALLY long term perspective" on things.

Andrew

 

[redshift]

So there is a big risk in renting out a single family home... under what conditions would you guys feel it would be safe. I obviously would like to rent mine out, when we move, to a nice family that would keep everything just as I left it... of course I understand that this could never happen. I do live in a nice neighborhood where this is really no riff-raff. My thinking is that the property value will continue to increase because it is in a nice area that is very close to Intel's engineering facility (2 miles), fab (10 miles), and within 5 miles of where yet another Intel fab is going up (~2000 jobs). Google is moving in close by very soon (within 10 miles) and there are many other IT/tech companies within a 10 mile radius (Motorola, Freescale, Microchip, the list goes on). With all the new white color jobs opportunities continuing to crop up in the immediate area, I really feel that my property will continue to grow in desirability.

So do I carefully screen potential renters and take the renting-risk, all the while hoping for continued growth in equity? Or do I cash out and move all that equity into the new home? What would you do in my situation? Like I said, I'm NO expert. :smile:

 

[NSX-GUY]

No, not irony just unfortunate.

The Kid - chime in if I'm wrong here:

Take your 799/mo lease to the dealer with a customer, in hand, that will agree to pay a somewhat higher amount (or for a longer period), and they will gladly reassign your lease to the third party and pocket the difference. WIN, WIN, WIN. 05's don't lease for anywhere near 799 anymore, so if the new lessor will pay maybe 900-1000 you'll be golden. The rest should be paperwork, maybe with some phone calls with AHFC with you, the dealer, and the customer present. Don't take "No" for an answer just because the dealer has never done something like that before. Make sure the customer has good credit beforehand, too.

The Kid doesn't need to chime in (he already *has* :biggrin: ) I know there's no problem re-structuring the lease at a higher rate but that's not what the "buyer" wants (of course). :frown:

 

[Ski_Banker]

The Kid doesn't need to chime in (he already *has* :biggrin: ) I know there's no problem re-structuring the lease at a higher rate but that's not what the "buyer" wants (of course). :frown:

Just answering your question.

I'm surprised that the "NSX Buyer" in this case can't find a way to make the lease transfer at 799 :wink:

 

[MiamiMermaid]

Re: Steveny, you have great wit

Would be more ironic if the house you picked to buy was owned by the person who wanted to take over your lease.
He wants to buy your car and can't you want to buy his house and can't.

LOL.... that was funny :tongue:

 

[Scot]

so......is that house you were wanting still on the market????? :biggrin:

I hear with enough work these NSX leases can be assumed....

 

[NsXMas]

Maybe this is a blessing in disguise...

I'm currently looking to buy another house, but I've been very weary for the following reason:

I've decided to horde my cash because I've been told by several market and financial analysts that the US is heading into a recession. As I understand, we will be in it late this year, or next, until late ~ 2009. Because of this, housing prices should see a relatively dramatic decline (at least in the "higher priced" homes). Those who have a buckets of cash in the bank at this time should be able to take advantage of the downturn. Anyway, this is just what I've been told... I really don't know how true it is, but it seems to be the general concessus between analysts I've asked.

Good luck!

Erin, the presidential election is in 2008. There WILL NOT be a recession until well after the election.

 

[Shumdit]

My "buddy" Marshall Brain, who has abandoned this blog:


Drew

Is this the "Howstuffworks" guy?

 

[Shumdit]

So for about 6 years now since my company took away our company cars (Chevy Blazer) and thankfully replaced it with a raise)) I've been driving some pretty nice machinery.

M Roadster, '98 NSX, M3 Convertible, CLK430 Cab, etc......

Anyway, while I am in a Lead Tech/Manager type position at work, many of my co-workers know I don't make all *that* much more than they do and from time to time one of them would ask me how I can afford to drive 'em and my usual response is "Well, you see I don't have a wife, any kids, or a mortgage, so, I am able to drive a considerably nicer car than I otherwise would be able to" :biggrin:

So, last May I leased an '05 NSX at the 799+tax (850 ttl) special lease rate. Plus about 125 or so per month insurance the NSX is running just about $1,000 a month. My rent of my apartment is $1,300. So, if I didn't have the NSX, I could afford the house payment in the low $2K range. But as of last May I wasn't even thinking about buying a house.

This past October however, I decided I wanted to buy a house here in NNJ and proceeded to find out about assigning the lease (ad here on nsxprime). At the time I was told by AHFC that it was up to the dealer and the dealer said it could be done but I would be a "co-borrower" on the new lease. Not the greatest idea but at least I would be off the hook for the $1K monthly payment and could then be comfortable with buying the house.

Well, due to various circumstances, holidays, etc I've only just recently re-awoken the nsxprime ad again and found (several) someone(s) who wants the car only to find out the dealer is no longer able to assign the lease. The dealer now says AHFC won't allow the "assignment of collateral" and AHFC told me back when that is was up to the dealer to re-assign the lease.

In any case, the buyout on the car (my only other option apparently), after having paid 10 months (7990) on a cap cost of 82,100 is 80,500. So, it appears as if I'm not getting out of the car for another 26 months which means of course, no house for at least another 26 months.

So, as of a week ago I have an "NSX'er" ready to take over the lease waiting for final "approval" from the dealer.

The REALLY ironic part ? As you are probably aware, when shopping for a house, you look and look and look some more and when you find exactly what you want you buy it RIGHT AWAY. Well, just 2 days ago, this past Sunday, I FOUND the house that I immediately want(ed) to buy only to find out I can NOT get out of the lease after all.

Now THAT'S irony, no ? :redface:

Did you ever get the car sold?

 

[redshift]

Erin, the presidential election is in 2008. There WILL NOT be a recession until well after the election.

Hey Frank, do you see the irony/hypocrisy in my situation? :biggrin:

 

[Scot]

ahah... that is why i bumped it up.... i drove the car to work today.

I took over his lease two days ago, so hopefully he is out house hunting right now.

Did you ever get the car sold?

 

[NSXLuvr]

Haha - Scot after all the talk about the NSX being not that special on s2ki.com you ended up getting it instead of the C6. I had a feeling you were leaning that way. Hope u luv it.:smile:

MDXLuvr/NSXLuvr.

 

[Matt_337]

nice to see you on this side scot

enjoy the car

 

[Shumdit]

Glad to see it got worked out (for both of you!)

 

[NSX-GUY]

Yep, finally got the lease transferred with ZERO help from The Kid and Bridgewater Acura.

Enjoy the car Scotty boy. Ya got a great deal my friend. :wink:

 

[Scot]

ya, just don't tell Steve C. ahah.

i couldn't get a local dealer to work with me on a C6, so I pushed a little harder at Honda to figure out how to get the lease..... Lease assumptions are possible, despite what "the kid" said.....

Haha - Scot after all the talk about the NSX being not that special on s2ki.com you ended up getting it instead of the C6. I had a feeling you were leaning that way. Hope u luv it.:smile:

MDXLuvr/NSXLuvr.

 

[Shumdit]

I say we all call The Kid's boss:biggrin: :biggrin: :wink:

 

[The Kid]

Yep, finally got the lease transferred with ZERO help from The Kid and Bridgewater Acura.

Enjoy the car Scotty boy. Ya got a great deal my friend. :wink:

Ouch:redface: