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- 24 May 2002
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Some kid asked the board if he should buy a house or an NSX a few years ago. We told him to buy a house. I hope he's doing OK.
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Housing Market in the US
- Thread starter Ultraman
- Start date
Just to add a couple points to the discussion:
1. Location. This boom and bust cycle is not universal. Housing here in TN is not going down at all, because it never went up! Where it boomed, it will usually bust.
2. Economy: I think the case that MAJOR recession + commodity inflation + ARM readjusting means = bloodbath is good logic but extremist. I bet on mild recession, aggressive fed action, and low interest rates stopping us short of bloodbath stage.
3. Inflation: Return to normal values is definitely going to happen, but I don't think were are ever going to see 1998 prices again. Even if you figure a 'normal' appreciation rate of 3%/yr then you are still should expect to see a price 34% higher in 2008 than in 1998.
4. Interest Rates: Another reason I don't think we'll get to 1998 prices, even adjusted for inflation, is low interest rates. Low interest rates = higher home prices because people can buy a more expensive home for the same monthly payment. IIRC interest rates at that time were about 8%. Now they are 6%. 100k at 8% is $733/mo. 100k at 6% is $600/mo. So by going from 8-> 6% you can afford ~22% more house.
As much as I would LOVE for it to as a buyer, I just don't see any macro data that supports the pendulum swinging too far the other way. Back to normal, then yes. Below an inflation adjusted 1998 price, doubtful. The only way I can see that is a MONSTER recession.
JMO. Tawk amongst yaselves.
1. Location. This boom and bust cycle is not universal. Housing here in TN is not going down at all, because it never went up! Where it boomed, it will usually bust.
2. Economy: I think the case that MAJOR recession + commodity inflation + ARM readjusting means = bloodbath is good logic but extremist. I bet on mild recession, aggressive fed action, and low interest rates stopping us short of bloodbath stage.
3. Inflation: Return to normal values is definitely going to happen, but I don't think were are ever going to see 1998 prices again. Even if you figure a 'normal' appreciation rate of 3%/yr then you are still should expect to see a price 34% higher in 2008 than in 1998.
4. Interest Rates: Another reason I don't think we'll get to 1998 prices, even adjusted for inflation, is low interest rates. Low interest rates = higher home prices because people can buy a more expensive home for the same monthly payment. IIRC interest rates at that time were about 8%. Now they are 6%. 100k at 8% is $733/mo. 100k at 6% is $600/mo. So by going from 8-> 6% you can afford ~22% more house.
As much as I would LOVE for it to as a buyer, I just don't see any macro data that supports the pendulum swinging too far the other way. Back to normal, then yes. Below an inflation adjusted 1998 price, doubtful. The only way I can see that is a MONSTER recession.
JMO. Tawk amongst yaselves.
As a student of the markets, I'll make one final point. What I take from these threads [here and elsewhere] is something quite powerful but easy to miss.
As long as the majority of people believe it has farther to fall, that is exactly what will happen. This is also a significant factor of the massive run up of the last 5-8 years.
The elements of greed and fear that will push equities past the tipping point are much better disguised in the real estate market.
As long as the majority of people believe it has farther to fall, that is exactly what will happen. This is also a significant factor of the massive run up of the last 5-8 years.
The elements of greed and fear that will push equities past the tipping point are much better disguised in the real estate market.
California is definitely the right time to buy. Look for foreclosures and you will save even more.
Ski_Banker
Suspended
Bwahahaha!!
[I hope he's doing ok too...not laughing at that]
Here's the thread...great reading if I do say so myself
http://www.nsxprime.com/forums/showthread.php?t=77004&highlight=housing+real+estate
What do you base that on?
I am actually looking at a foreclosed home that is listed with a reactor at a market rate (fair, not great, deal). Sold 'as is' and could use a little work. Price is not discounted to reflect this. Ordinarily I would just walk away but I really like this house (layout, style, etc). Couple questions there:
- How do you make a low offer more appealing to the REO?
- How do you cover your ass to do with potential tax liens or other legal hassles?
- Any other tips here?
Bwahahaha!!
[I hope he's doing ok too...not laughing at that]
Here's the thread...great reading if I do say so myself
http://www.nsxprime.com/forums/showthread.php?t=77004&highlight=housing+real+estate
Which goes back to my philosophy of NOT listening to a advice about anything on a car forum that isn't about cars.
Not that I don't love you guys, but honestly...I skim thru most of the "expert" opinions here.
(If everyone was correct, we'd all be wrong)BTW- I grew up 45mins from Rochester in Mendon. Close?
Glad to see a picture of the Space Needle in the "Recession proof" cities.
Lets hope that 787 dreamliner actually flies someday....
That's because everybody loves their trucks there. Oklahoma is the same way. They'll take their coveted truck anyday of the week over a BMW.
1. Make the offer more appealing - offer more than asking IF the house warrants it. If that is not possible, then the bigger downpayment makes the difference - the bank wants to know you can close.
2. Cover yourself using a Title company and get title insurance just like when buying a non foreclosed home. The "as-is" part generally refers to condition of property. Title will help you to find out if there are any encumberances on the property.
3. If it is for personal use, then buy the house you want. I always say I'd rather pay more for what I want than less for something I don't want.
4. If it is for investment (not flipping -forget that for a couple of more years), then make sure you can cover your fixed costs w/ rents in the area.
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I just put in an offer on a short sale... background:
I live in Maricopa, AZ, which has been highlighted on CNN and other major news channels for sh*tty housing market...
I got in when Maricopa just sprung up, so I am okay in my current house, it's just small... someone we know has to relocate, so their house is up for short sale. It's a Lennar, 3500 square feet, 3CG, granite, 18" tile, in great shape, only a couple years old that originally sold for 350k... it's listed for 189k and we put in an offer for a bit less. We can afford both house payments, the rate is pretty good, and our plan is to rent it cheap for a year or two, sell our current house, and move in to the big one.
I can't see this house for seling for much less, so we think it's a good time to try it. (We both have good jobs with excellent job security)
So my piont is, I guess, if the stars are in the right alignment, it can be a good time to buy.
What I really had wished was that we had been renting for the last few years and were first time buyers right now...
Good luck to all home buyers... even the Canadians that are buying them down here like they are free!!
I live in Maricopa, AZ, which has been highlighted on CNN and other major news channels for sh*tty housing market...
I got in when Maricopa just sprung up, so I am okay in my current house, it's just small... someone we know has to relocate, so their house is up for short sale. It's a Lennar, 3500 square feet, 3CG, granite, 18" tile, in great shape, only a couple years old that originally sold for 350k... it's listed for 189k and we put in an offer for a bit less. We can afford both house payments, the rate is pretty good, and our plan is to rent it cheap for a year or two, sell our current house, and move in to the big one.
I can't see this house for seling for much less, so we think it's a good time to try it. (We both have good jobs with excellent job security)
So my piont is, I guess, if the stars are in the right alignment, it can be a good time to buy.
What I really had wished was that we had been renting for the last few years and were first time buyers right now...
Good luck to all home buyers... even the Canadians that are buying them down here like they are free!!
Just some insight on this very debatable subject. I'm speaking strickly about California, and I'm basing these conclussion on the Economic report by LAEDC (you can down load it for your own enjoyment at www.laedc.org/reports/)
LAEDC stands for Los Angeles Economic Development, they are an non-profit org. and their annual reports was rated #1 by Wall Street Journal.
According to LAEDC, the So. Cal area had been in a housing shortage for a long time, even today, but unforturnately, we are short on "affordable housing" (means aound $350K or less for SFR). But due to high cost in land value in the major cities in So. Cal, plus building material's cost double in the last few years. The builders needs to build high price home or condos to make a prifit. So we see more and more people are moving to Riverside County and San Bernardino County, because these 2 counties still have lands that is cheap enough for builder to buy and build home in the affordable range.
In the past few years, housing market here in So. Cal had been crazy, home prices had raise to an all time high, thanks to the sub-prime lenders, they had help put lots of home owners into homes they can not afford, now that the sub-prime is gone, the home values are way down (in some areas more than others), these home owner are no longer being able to make payments, therefore, we start seeing Short Sales and REOs appear in the market.
Please do remember one thing, since So.Cal is still short of affordable homes, we got lots of buyers standing on the fence waiting to jump in to buy the house of their dreams. Therefore, when price drop to the affordable range, buyer starts to show up. Believe it or not, I know of areas that homes are get multiple offers on a regular bases and in the month of May along, there are over 130 home went into escrow. That is just from one zip code.
In So.Cal. not all the city are hit as hard by this housing down turn, they all got hit, but some are much harder than others. Some areas are what I call "slow bleeding", price drop 7-10% in the past year, but some area lost an arm+a leg (25% drop in last 12month). The easiest way to tell where is hit the hardest is this. If 80% or more of this area's listings are either Short Sales or REOs, than we know this is one of the hardest hit area, becasue the lender are the major seller in this area and they control the final sold price. If this area only had 30% or less of this area's listings that are either Short Sales or REOs, than the home owners like you and I are still controlling the price in this area, because we can choose not to sell.
Also another factor to consider how low would the price drop here in So.Cal. We need to consider replacement costs. Which mean if I were to knock this house down, how much would it cost for me to rebuild it. In So. Cal, the large builders pays anywhere from $98/sqft. to $113/sqft. to build a new house not counting the cost of the land. With the affordable housing shortage, do you think lenders will sell under those replacement cost numbers?
In conclusion, for those interest in So.Cal. there are some great deal you can get into as your resident or an investment, but you really needs to know where and what to look for. If you want to know where and what is "hot" here in So.Cal. PM me.
Here is a clip from NAR http://easylink.playstream.com/gvimedia/NAR/NAR_Midyear_Mkt_Update.wvx
It has some very interesting insights also.
LAEDC stands for Los Angeles Economic Development, they are an non-profit org. and their annual reports was rated #1 by Wall Street Journal.
According to LAEDC, the So. Cal area had been in a housing shortage for a long time, even today, but unforturnately, we are short on "affordable housing" (means aound $350K or less for SFR). But due to high cost in land value in the major cities in So. Cal, plus building material's cost double in the last few years. The builders needs to build high price home or condos to make a prifit. So we see more and more people are moving to Riverside County and San Bernardino County, because these 2 counties still have lands that is cheap enough for builder to buy and build home in the affordable range.
In the past few years, housing market here in So. Cal had been crazy, home prices had raise to an all time high, thanks to the sub-prime lenders, they had help put lots of home owners into homes they can not afford, now that the sub-prime is gone, the home values are way down (in some areas more than others), these home owner are no longer being able to make payments, therefore, we start seeing Short Sales and REOs appear in the market.
Please do remember one thing, since So.Cal is still short of affordable homes, we got lots of buyers standing on the fence waiting to jump in to buy the house of their dreams. Therefore, when price drop to the affordable range, buyer starts to show up. Believe it or not, I know of areas that homes are get multiple offers on a regular bases and in the month of May along, there are over 130 home went into escrow. That is just from one zip code.
In So.Cal. not all the city are hit as hard by this housing down turn, they all got hit, but some are much harder than others. Some areas are what I call "slow bleeding", price drop 7-10% in the past year, but some area lost an arm+a leg (25% drop in last 12month). The easiest way to tell where is hit the hardest is this. If 80% or more of this area's listings are either Short Sales or REOs, than we know this is one of the hardest hit area, becasue the lender are the major seller in this area and they control the final sold price. If this area only had 30% or less of this area's listings that are either Short Sales or REOs, than the home owners like you and I are still controlling the price in this area, because we can choose not to sell.
Also another factor to consider how low would the price drop here in So.Cal. We need to consider replacement costs. Which mean if I were to knock this house down, how much would it cost for me to rebuild it. In So. Cal, the large builders pays anywhere from $98/sqft. to $113/sqft. to build a new house not counting the cost of the land. With the affordable housing shortage, do you think lenders will sell under those replacement cost numbers?
In conclusion, for those interest in So.Cal. there are some great deal you can get into as your resident or an investment, but you really needs to know where and what to look for. If you want to know where and what is "hot" here in So.Cal. PM me.
Here is a clip from NAR http://easylink.playstream.com/gvimedia/NAR/NAR_Midyear_Mkt_Update.wvx
It has some very interesting insights also.
In terms of vertical construction, more like $50-60 for a decent spec level from a large builder.
Everyone has an opinion about the current real estate market. But unlike other types of markets, everyone thinks they're an expert. Therefore, I'll keep my 2 cents to myself, thank you.
Back in 2006 I had an oppertunity to invest in an 300 new homes project near the Palm Springs area, the best building cost they could get at that time was $98/sqft. for home size of 1800+. Prior to that I had also assist in building custom home in SF area in the 2.5mil range, that that project's building cost was around $220/sqft.
Every active General Contractor I had spoke to in the So.Cal. area had mention the days of sub $60/sqft days are long gone. so if you know someone that can do it for the price you had mention, please let me know. I need their assistance, because me and my investors had been paying too much.
I have some experience but it pertains to Texas law which is often a little goofy on these subjects compared to the rest of the country. You can do a 'mini title check' simply by going to the county tax office if you know a decent amount about the property. If it's for sale at the courthouse on 'foreclosure Tuesday', it'll already be organized in a book for you.
You can contact the attorney representing the foreclosing party to make sure that any federal obligations have been dealt with. Typically any state/school/etc. taxes have been paid and are up to date as long as the bank still owns the home. If the state owns the home [didn't pay their property taxes], all mortgages are wiped clean and you just pay the remaining tax liabilities which can include federal liabilities. This is why your lender will typically pay these 'for' you. Regardless as the other poster said, you will want to get title insurance before you actually purchase the home. I have established a relationship with a local title insurance organization and they do a title check for free since I give them some business. *Note, this is Texas law*
As for negotiating, that's on a case by case basis. Of the foreclosed homes in Austin, I'd say 33% of them have what I would consider a 'fair price' within 5%. There are many however, usually from the same bank, that are stubborn and think all their properties are made of gold. In the nicer areas of Austin property values have remained constant or easily kept up with inflation due to the massive transition of retirees from Houston/Dallas moving there.
I've seen custom builds into the $500/sf range, so obviously there are plenty of ways to increase your costs. Builders negotiate a discount for volume, so a one off project may not be built at under $60/sf. These figures are based on what public builders spend per sf on their numerous projects. But 300, 1800 sf homes in Palm Springs for $98/sf sounds high to me. I worked on a 200+ unit project (with a clubhouse/amenities) in Palm Desert at around the same time that was built for around $64/sf. This was for a large, private builder who squeezed the hell out of their employees and subs, but even still that's a huge difference between what you're quoting.
PM me and let me know what you're currently working on.
Here's a picture of the clubhouse:
Attachments
Was the 65/sf for sfr or multi? If sfr, were the lots liveable? I haven't seen any new construction sfr in norcal that low.
Edit: Nevermind. I just realized that you said built for 64/sf. Selling was probably more like 120/sf+.
Thank you for the info, I will need to get with you in the near future. I'm not a construction guy so I can only go by the quotes that I get from the projects I was involve in.
Quick question for you, would single story home cost more that 2 story homes? (That project of 300 were all single story homes, although the project is now long over, I would like to know more for my own good.)
By the way, that club house looks great.
According to MLS, there were 45 SFR homes closed escrow between April till now in the city of Victorville that are under $250k. The average per sqft. out there is about $90, there were 4 homes went for as low as $67/sqft.
I don't know the conditions of those houses, but if you don't mind the drive, you can sure find some great deals around.
No need to rush into anything. Prices aren't going up anytime soon.
I have very strong reason to believe there will be another wave of foreclosures beginning in late 2008/early 2009 and the market, especially in SoCal, will soften even further.
Subprime and negatively amortizing loans were still being done in great numbers all the way up to early 2007. With 2 or 3 year fixed periods on these loans anyone can do the math and see where this is headed. We have just experienced the resetting of the loans done in 2004-2005. Wait for the 2006-2007 batch to hit...
Buying now, particularly for investment, is not a bad idea but it will get even better. Why buy before you have to? It's not going to get better as a whole for the next 18 months.
The SoCal real estate market has always been predictably cyclical. 7-10 years of growth followed by 3-7 years of stagnation/decline. At best we are in year 2 of this latter cycle. We won't begin the upwards cycle before 2009 and probably at least until 2010. Then it will be a similar climate to 1997. Whether appreciation will progress as it did from 1998-2006 is unclear but the growth cycle will begin again.
IMHO SoCal properties will once again reach the point where the price is in line with the rental market meaning the rent one can get for a certain property will be in line with the mortgage payments even with little down payment. When this happens it's a simple matter of buying everything one can and holding on for 5-7 years while it appreciates, then dumping it.
I know several investors chomping at the bit to pull the trigger on 2 or 3 investments but are lying in wait for the markets to reach bottom. I'm one of these people as well. I know many fools who thought it was a great idea to buy during a still-appreciating market (2003-2005) and ate it hard.
The great thing about the housing market is that its a very slow-moving market and shouldn't catch anyone by surprise. It's hard to miss buying at the low point. The catch is that it's much harder to know the true high point and it takes awhile for any return. If you're in it for the long haul (is 5 years really a long haul?
) and have your eye on buying at the low point you'll do very well. Ask any real estate investor doing it since the 80s. I guarantee you they made quite a bit during this last run (97-06).There is a decent high level article on this topic today's USAToday (money section, front page). The basic points as I recall them were:
Foreclosures at historical highs nationwide (2.4% IIRC)
Delinquent payments at highs nationwide (6.4% IIRC)
Values to fall another 10% on average
Market to decline until end of '08 at least
Cali and Fla markets starting to show some signs of starting to pick up
Lenders being more stringent (duh)
Foreclosures at historical highs nationwide (2.4% IIRC)
Delinquent payments at highs nationwide (6.4% IIRC)
Values to fall another 10% on average
Market to decline until end of '08 at least
Cali and Fla markets starting to show some signs of starting to pick up
Lenders being more stringent (duh)
Ski_Banker
Suspended
Keep in mind that the U.S.A. Today, 3 years ago, was writing about how real estate never goes down...
I wouldn't put much, if any, faith in specific forecasts (from anyone). No one, and I mean no one, knows with any clarity when this will end. To say that in Q4 2008 things will be bottoming is utter bullshit. No one knows where this cycle will end, but it certainly won't be tomorrow.
I wouldn't put much, if any, faith in specific forecasts (from anyone). No one, and I mean no one, knows with any clarity when this will end. To say that in Q4 2008 things will be bottoming is utter bullshit. No one knows where this cycle will end, but it certainly won't be tomorrow.
Agreed, and even if there WERE credible sources they usually are NOT in USATODAY. That said, to some extent perception is reality.
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