I'm starting to get that "2006" feeling again

[Paul65k]

GE is a big mess for a lot of other real reasons.
Cooking their books for years and an under funded pension is just for starters.
They're also under an SEC investigation.

Exactly!!!

 

[HighRoller]

History bears this out for me......in the last downturn when 2 rentals we owned (on in So Cal and another in Phoenix) values were down 50 and 40% respectively we did have to lower the rent in Phx by 10% to keep it full, which was still positive BTW and the rent in OC stayed steady........in the mean time I have 8 more years of mortgage paid off, not to mention the additional tax write offs I benefited from but both homes are well above the pre-crash values.......and rents are up 40% as well

The people who lost in the last downturn were the ones who were over-leveraged and elected to sell......make good decisions and you will be just fine through tumultuous times.

Great. Now I have to buy TWO rounds of Beer so I can pick your brain about rental properties as well!!

 

[HighRoller]

View attachment 623383

I remember watching the Armando Montalago infommercials, and seeing people walk out saying "the market is going to go up forever. It's like endless money!" Now poor Armando probably had to sell his expensive shades to put gas in his Hummer.

A hot economy eventually cools. And those who are furthest out on the branch in terms of debt will fall off.

 

[COCA COLA COWBOY]

I think we are missing the most important exercise of this thread. What should we short as far as stocks go? 1-2-3-GO!

 

[HB2Havasu]

Sold my house and I am renting for the first time in my life. In the meantime my down payment is earning crazy interest. Going to wait it out for a couple and see what happens.

Curious what your doing about capitol gain taxes?

 

[rivergames]

% on Houses In LA won't drop much. Asians are buying them up like crazy. They throw the money here in lieu of getting bent on taxes back home

 

[JDKRXW]

I think we are missing the most important exercise of this thread. What should we short as far as stocks go? 1-2-3-GO!

GM.
Just like last time.
Consumer have to decide what payments they can make because interest rates are heading up.

 

[COCA COLA COWBOY]

Curious what your doing about capitol gain taxes?

No capital gains if you owned it for two years and it was your primary residence.

 

[COCA COLA COWBOY]

% on Houses In LA won't drop much. Asians are buying them up like crazy. They throw the money here in lieu of getting bent on taxes back home

I had a Chinese buyer once that got a 1% loan from China!

Chinese almost never sell. They buy to keep forever and pass on for future generations. Pretty good idea right?!?!

 

[RichieRich]

I had a Chinese buyer once that got a 1% loan from China!

Chinese almost never sell. They buy to keep forever and pass on for future generations. Pretty good idea right?!?!

And they usually buy 2 at a time

 

[RichieRich]

You guys all suck...I am literally opening escrow on a Havasu house today
I’m freaking out

 

[COCA COLA COWBOY]

You guys all suck...I am literally opening escrow on a Havasu house today
I’m freaking out

Your not the only one, I spent last night going over financials.

 

[530RL]

I had a Chinese buyer once that got a 1% loan from China!

Chinese almost never sell. They buy to keep forever and pass on for future generations. Pretty good idea right?!?!

They buy a house and invest in a business to get an EB-5 visa and then turn it into citizenship.

Everything is for sale in America.

 

[LargeOrangeFont]

They buy a house and invest in a business to get an EB-5 visa and then turn it into citizenship.

Everything is for sale in America.

Exactly. And they get money out of the country.

 

[thmterry]

All I know is that last time gas hit $5 a gallon the economy was in the shitter all the way across the board.

 

[DrunkenSailor]

So after day 1 at the conference i know a few things. I drank way more last night then I thought I did. Brits have some weird drink orders. Bar munchies at my age are a horrible idea. Everyone has one eye on the clock because we know that it is ticking. Today will be the big day so here we go!

 

[New to boating]

The dymanics and drivers of RE market today have nothing in common with the 2nd quarter of 2006 RE price deflation event which continued for over 3 years. That event was caused by a "fake driver" in the market that created a number of other fake drivers, as follows:

The FAKE DRIVER was - Investment Banks and Hedge Funds that were providing take out financing that was fueled by a requirement to deploy as much money as possible as quickly as possible with "no rules"

This created a FAKE BUYER POOL - everyone could buy a home, employed or not, ZERO equity
This crated FAKE DEMAND (driven by the fake financing that created a fake Buyer pool)
This created FAKE PRICING (driven by the fake financing that created a fake buyer pool)

When the financing dried up - it all corrected because the core element driving the market was FAKE, it was unsustainable.

Today, we have ZERO fake drivers in the market... what we have are the following:

A "pricing correction" that started so far below "fair value" that pricing rose to 2x from "the bottom" and still was not close to fair value and everyone started to think it was "rising too fast" because they only look at "where we were and where we are" not why we are where we are.

A 100% demand driven market where the demand is real and authentic based upon qualified Buyers who are properly qualified and have "skin in the game".
This has caused Inventory to shrink, and pricing to elevate but the pricing is authentic (based upon deamand)
Existing product resale prices are benefiting significanlty from little to no New Builder inventory on the market.
Havasu and Phoenix Metroplex greatly benefiting from Traffic, cost of living, pollution in other Market like California, ..... making many residents consider other options.

In Havasu specifically you have more competition from New Builder Inventory (most on busy streets with inferior locations at this point) but even the crap lots are drying up.

Some other comments to address:

"Rising interest rates will kill demand" - No, they won't. People will still make a trade, they will simply adjust their acquisition target to less square footage or something different than they were going to buy when the rate was 1 point lower. And once again, people look at the "event" and react......without "thinking" about the dynamics. The event relating to the cost of permanent take out financing is that now the money costs more than "almost free"......which is what is has been... no alarm bell necessary.

"Any drop in pricing will cause "MASS DEFAULTS AND FORECLOSURES" - No, it wont. Homeowner Skin in the game and RULES BASED loan underwriting serves as a barrier for this to happen. There will always be foreclosures and a certain amount fo defaults and there have been, every single day since the pricing recovery, people get in difficult situations where walking away is their best option and they do, in weak markets, and in strong markets. This was greatly magnified in 2007, 2008 and 2009 where people who could actually afford to keep making thier payments walked away because the asset value was so far below what they paid they felt like they were throwing their money in a toilet.

"Watch Blackrock, Invitation Homes. Colony Financial and DO WHAT THEY DO".... this sounds sexy but makes no sense at all for a Homeowner. Why would anyone do that unless your home is actually your "business model"?. Sell it and, do WHAT? Bank some profit, wait how ever many years it takes for you to see "value pricing" again in the market and buy another one - and in the interim period Rent?, probably for a higher payment than you had when you owned a home you actually wanted to live in..... dosent sound like a brilliant idea at least to me. Investment Banks and Hedge Funds actually don't care about upside asset value, they care about fees, nothing more. More money out, more fees. When they were buying, they paid "retail" at the time - they paid more than anyone at the Trustee sales for 3 years, they were "buying inventory" - not looking for assets at distressed pricing making a longer term bet than the typical distressed asset investor. Anyone with significant liquidity in a down market can do the same thing - no "genius certification" required

In Summary..... we have a demand driven, price stabilized RE market where we will see pricing fluctuations both up and down (moderate swings) over the next few years.

Here is an article that would tend to support Havasu/Phoenix Metroplex prices continuing to rise....

Welcome to California http://www.foxnews.com/politics/201...amp-near-disneyland-fearing-new-skid-row.html

 

[HB2Havasu]

You guys all suck...I am literally opening escrow on a Havasu house today
I’m freaking out

You’ll be fine for the next 3-5 years. I’ve been hearing about the pending bubble bursting since 2012, lol. With interest rates, unemployment, and foreclosures at record lows I believe the prices will continue to rise at approx 3%-6% for the next 4 or 5 years. Every economy goes thru cycles with the current one still ascending. Eventually it will slow and prices will plateau or fall back some. If your buying this as a primary residence or a positive cash flow rental your golden. It’s the people who over leverage themselves that get caught with their pants around their ankles when the economy retreats. As sure as the sun will rise tomorrow the economy will adjust. I seriously doubt we will ever see anything again in our lifetimes like 2008, that was a perfect storm of clusterfucks!

 

[CobraDave]

I just noticed the smaller new house builds on the island have reduced in price by about 20k. I was surprised to see that. Are there plenty of empty lots there still ? How’s the market on the island?


Sent from my iPhone using Tapatalk

 

[Bigbore500r]

You guys all suck...I am literally opening escrow on a Havasu house today
I’m freaking out

If you did your homework and came to the conclusion it was safe to buy / own for long term, I wouldn't worry about it. Key thing here is aLONG TERM investment at this point. With the rate being advantageous and the goal to own the home for "the distance" you will come out ahead. They aren't making any more property, just dividing it up into smaller slices till a comet takes us all out

 

[Englewood]

The recovery has taken 10+ years. The fundamentals are much different than 07/08. I think we are 3-5 years away from a major slowdown. Of course, if rates continue to rise, that could be MUCH sooner. I'm in the RE business and would not be buying a home right now.

Havasu prices are out of control. I'd be very cautious buying a home there right now.

I'm not sure how people make it work in SoCal.

$600k purchase ($4k/mo)
2 new cars ($1500/mo)
wife doesn't want to work

Dude's gotta make $200k/yr just to get by. Not too many jobs paying $200k.

 

[MSum661]

The recovery has taken 10+ years. The fundamentals are much different than 07/08. I think we are 3-5 years away from a major slowdown. Of course, if rates continue to rise, that could be MUCH sooner. I'm in the RE business and would not be buying a home right now.

Havasu prices are out of control. I'd be very cautious buying a home there right now.

I'm not sure how people make it work in SoCal.

$600k purchase ($4k/mo)
2 new cars ($1500/mo)
wife doesn't want to work

Dude's gotta make $200k/yr just to get by. Not too many jobs paying $200k.

Another unforeseen Wild Card is the 2018 Midterm Elections.
If things remain the way they are...I see no problem looking out at least 2-3 years.
If there is a rotation in belief's in 2018 and it generally sways us away from this fresh new upward movement...it could reverse.
Its a nice thing to see and feel the growth, but it doesn't hurt to search out and watch for the elements that could roll it backwards.
Stay optimistic......but thread lightly and be ready to hedge yourself to stay out ahead of the curve.
JMHO.

 

[LargeOrangeFont]

The recovery has taken 10+ years. The fundamentals are much different than 07/08. I think we are 3-5 years away from a major slowdown. Of course, if rates continue to rise, that could be MUCH sooner. I'm in the RE business and would not be buying a home right now.

Havasu prices are out of control. I'd be very cautious buying a home there right now.

I'm not sure how people make it work in SoCal.

$600k purchase ($4k/mo)
2 new cars ($1500/mo)
wife doesn't want to work

Dude's gotta make $200k/yr just to get by. Not too many jobs paying $200k.

Lots of solutions.. Don't pay $1500/month for cars, wife has meaningful income, don't have hobbies, don't live in a $600K house, or make more money

In short, live within your means.

 

[Advantage 1]

In short, live within your means.

Great comment. Wonder how many folks can say that?

 

[Cole Trickle]

I don't think the market is crashing but it seems to be slowing....

Inventory is the issue in So Cal and is causing prices to be ridiculous.

I saw a house listing in Havasu the other day...450K for a nice 1800 sq foot 3/2 with a bad ass pool/backyard (no huge garage) and thought Jesus that seems expensive to me.

The deals are all but gone but if you are planning on keeping it for the long haul like mentioned it's hard to beat current rates.

If you are looking for bargain relestate or something to turn in 3 years that ship sailed 3 years ago.

 

[LargeOrangeFont]

Great comment. Wonder how many folks can say that?

Few.

 

[Englewood]

Lots of solutions.. Don't pay $1500/month for cars, wife has meaningful income, don't have hobbies, don't live in a $600K house, or make more money

In short, live within your means.

While I agree completely, I am on the front lines and see what is really happening out there. Too many women watching the Kardashians and expect to sit home all day while having a Range Rover in the driveway.

 

[GRADS]

In short, live within your means.

Not saying I don't agree with this but what exactly is living "within your means" mean? If someone is pulling in $25K a month would driving a car that has a $1500 a month payment be living within their means?

 

[dnewps]

Not saying I don't agree with this but what exactly is living "within your means" mean? If someone is pulling in $25K a month would driving a car that has a $1500 a month payment be living within their means?

Once you leave California you begin to realize that just because you make 25k per month that does not mean you should have a $1500 payment. California mentality.

 

[GRADS]

Once you leave California you begin to realize that just because you make 25k per month that does not mean you should have a $1500 payment. California mentality.

Ok well lets scale it down and say someone is pulling in $2500 a month and has a $150 month payment on a car. Is that ok?

 

[LargeOrangeFont]

Not saying I don't agree with this but what exactly is living "within your means" mean? If someone is pulling in $25K a month would driving a car that has a $1500 a month payment be living within their means?

Depends on if they have a $15K house payment or not, a retirement plan funded and in place, and if there was other unsecured debt.

Living within your means is different for everyone. If you have little to no debt other than mortgage(s), paying all your bills on time, have a 6 month+ emergency fund, are properly funding your retirement and other secondary investments to meet your long term goals... You are living within your means. Do whatever you want with the leftover cash every month.

 

[LargeOrangeFont]

Ok well lets scale it down and say someone is pulling in $2500 a month and has a $150 month payment on a car. Is that ok?

If that is all they have, yes sure. There are more costs than just the payment - insurance, fuel, maintenance etc. That $150 a month payment is easily another $150 a month of sunk costs totaling $300 a month. Still that is probably OK if you are bringing in $2500/month. If you have a $1700/month rent, plus the monthly car stuff.. not so much.

 

[Paul65k]

Not saying I don't agree with this but what exactly is living "within your means" mean? If someone is pulling in $25K a month would driving a car that has a $1500 a month payment be living within their means?

It would make sense if your retirement plan was on track, the $25K a month was guaranteed and you can make more than $1500 a month on your investments or as a result of having that car for some business reason.......past that it's all ego!!!

 

[GRADS]

It would make sense if your retirement plan was on track, the $25K a month was guaranteed and you can make more than $1500 a month on your investments or as a result of having that car for some business reason.......past that it's all ego!!!

Everyone thinks their paycheck is guaranteed until it's not

 

[LargeOrangeFont]

While I agree completely, I am on the front lines and see what is really happening out there. Too many women watching the Kardashians and expect to sit home all day while having a Range Rover in the driveway.

Those are marriage issues and mismatched expectations that lead to financial problems.

My wife stays home and we make it work, but you have to have the same long term goals and expectations. The trade off is controlling monthly costs, and having a cheap mortgage/small house.

 

[COCA COLA COWBOY]

Everyone thinks their paycheck is guaranteed until it's not

Unless your self employed, then you are constantly looking ahead and worrying.

 

[DWC]

The recovery has taken 10+ years. The fundamentals are much different than 07/08. I think we are 3-5 years away from a major slowdown. Of course, if rates continue to rise, that could be MUCH sooner. I'm in the RE business and would not be buying a home right now.

Havasu prices are out of control. I'd be very cautious buying a home there right now.

I'm not sure how people make it work in SoCal.

$600k purchase ($4k/mo)
2 new cars ($1500/mo)
wife doesn't want to work

Dude's gotta make $200k/yr just to get by. Not too many jobs paying $200k.

That’s assuming no kids or toys. Healthcare and education add up quick.

 

[LargeOrangeFont]

Unless your self employed, then you are constantly looking ahead and worrying.

or 100% commission.

 

[HighRoller]

Ok well lets scale it down and say someone is pulling in $2500 a month and has a $150 month payment on a car. Is that ok?

In Cali? If you are only making $2500/mo you probably can't afford any payments other than a house!

 

[rivermobster]

or 100% commission.

Other than a few years working as a dealership shop foreman, thats the only way I have ever lived. To me, it would just suck working my ass off and taking home the same amount of money I did just standing around!

Everyone talks like it's some impossible thing to live within your means. Wtf people, stop trying to keep up with the Jones and impress everyone on the block and stay the fuck out of debt!

Life is short. But make decisions for the long run. It's not all that hard to do.

 

[Paul65k]

Everyone thinks their paycheck is guaranteed until it's not

Sounds like you just answered your own question

 

[HighRoller]

Other than a few years working as a dealership shop foreman, thats the only way I have ever lived. To me, it would just suck working my ass off and taking home the same amount of money I did just standing around!

Everyone talks like it's some impossible thing to live within your means. Wtf people, stop trying to keep up with the Jones and impress everyone on the block and stay the fuck out of debt!

Life is short. But make decisions for the long run. It's not all that hard to do.

It's not impossible to live within your means. Just inconvenient. Takes a lot of maturity and humility to drive a used car, especially in SoCal. But even the Three Little Pigs knew to build the foundation before you build the house!

 

[Xring01]

I am in vegas for the next 4 days for a conference with almost every bank and hedge fund on the planet in attendance. I will let you know what the buzz is around here when this thing gets rolling. Here are some facts. Subprime lending is dead. Alt a lending is dead. The new buzzword is non qm. Meaning qualifying mortgage. Everyone wants in but no one is diving. Interest rates have been historically low for far too long. They have to go up. Mortgage has been too heavily regulated so lending has gone elsewhere. The mortgage default rate is the lowest it has ever been in history. Accordingly the investor yield is horrible. You can't charge points or an increased rate for risk and if you do there are only a small handful of buyers in the secondary market. If you can't make the yield on houses where do you go? Suddenly school loans that you cannot bk became the safest debt. Auto became a cash cow and personal debt be it credit card or asset backed became the way to earn a yield on the investment side. The smartest money went into commercial. No business growth for years meant pent up demand combined with little to no regulation on what you can charge. Our next crash won't be real estate it will be commercial debt.

Disclaimer: This is just one persons opinion... NOT FACT, OPINION
Based on what I have heard from my friends in the Mortgage Industry, your above statement, agrees with their sentiments. There were a few smaller operations trying to get into Sub Prime, but I do know if they were able to do it long term. That was due to regulations. Please note: this is not my industry, just have friends who are.

What I care about is whats going to slow down the Stock Market. I am bullish on the US Stock Market for now. Its going to take some serious Global Politics to slow it down. I tried to buy a Rental House in CA or in TX about 9 months ago. When I did the math, NO FREAKING WAY. There was no ROI. So I put that extra $$$ in the markets.. Owe yeah. I am very happy I did.

The reason why I am Bullish on the US Stock Market has many reasons:
1. Corporate Earnings: Wow, enough said. Well run publicly traded company's are printing $$$ right now. Increasing Profits = increase Stock Price
2. Combined with cost of those stocks, puts avg S&P 500 Company at a forward PE Ratio of 17.5, which means its not over priced. Its priced correctly
3. Then consider alot of those company's have Billions of $$$ that are going to be re repatriated back into the US Economy. The more they invest, typically means the more profits they make. Now go back and re read 1 & 2, meaning Well run Publicly Traded Company's will most likely continue to go up in price = Bullish DOW JONES.
4. Apple is sitting on $280 Billion the last I heard, thats one freaking company.. yes a large one. Lets add up the $$$ from all the others combined.
5. Meaning the unemployment rate will continue to drop as that $$$ gets put into the US Markets. Wages will go up. Housing gets more affordable.
6. Company's in Dallas Texas are literally stealing employees from one another. LITERALLY at 25% pay raises. The same thing is going on the Mid West.
7. If Opec curbs oil production as it stated it would, price of oil goes up. Guess what happens in Texas and Dakotas when Oil goes above $60 barrel.. All those stacked Drilling rigs, get put back to work. Hiring alot more people. Creating a truly Energy Independent U.S. Which gives huge FU to OPEC Nations, who NEED OUR $$$ TO HAVE ANY FUTURE.

So I think: Its going to take a serious Global Political Event or War to slow this down.
The FED will do what we need them to do. Increase Rates, so the markets dont over heat. Higher rates is not a bad thing. It may be if you are planning to buy a house in the short term. Overall, its a good thing. Eventually we will have true ROI on our Savings Accounts. Anyone remember what those are? Or make Bonds worth buying again.

I agree that the West Coast housing market is expensive for an investor, when you factor in historical perspectives. But we have never been a true Global Economy firing on most cylinders before, like we are now. I believe the West Coast housing market will continue to go up. But I can make more $$$ in the markets right now. When I can't, then I may revisit getting into rental property's.

 

[LargeOrangeFont]

It's not impossible to live within your means. Just inconvenient. Takes a lot of maturity and humility to drive a used car, especially in SoCal. But even the Three Little Pigs knew to build the foundation before you build the house!

I try to live by the 90% of the fun for 50% cost rule. I try to buy most things used for about half what they cost new. If I bought the new/faster/better/bigger one for 2X the price, I am not going to have 2X the fun or get 2X the enjoyment... I might get 10%-15% more enjoyment.

 

[Xring01]

You guys all suck...I am literally opening escrow on a Havasu house today
I’m freaking out

Dont Freak out:
If you are buying with the right Debt/Income Ratio, with a 5-20% down payment. Planning to be there awhile, you will be fine...
Its almost always better to own the house you live in, than rent.

yes there are exceptions, but the moment someone gives sells working Crystal Balls, then sign me up for one.

 

[OutCole'd]

Maybe it's just me, but when a bunch of realtors or people in the loan industry tell me it's all good, there's nothing to freak out about, I freak out..... LOL

 

[rivermobster]

It's not impossible to live within your means. Just inconvenient. Takes a lot of maturity and humility to drive a used car, especially in SoCal. But even the Three Little Pigs knew to build the foundation before you build the house!

Oh please...

Is it really that inconvenient to not be burried in debt? I find it extremely convenient personally. I fucking HATE paying bills!

Do you really care more about what others think of you than you do about your families future? I love living in So Cal. I don't give a fuck what anyone thinks! LoL

Cars are used the minute you drive em off the showroom floor. You loose your ass buying new.

Your foundation comment is spot on though . Set yourself up so it doesn't matter What the economy does.

Live for today but plan for tomorrow. It's all a just a ballencing act. Be smart and make good decisions. It's NOT that hard to do.

 

[lbhsbz]

It's not impossible to live within your means. Just inconvenient. Takes a lot of maturity and humility to drive a used car, especially in SoCal. But even the Three Little Pigs knew to build the foundation before you build the house!

Its easier to drive used cars than it is to stress about how to pay for new ones.

 

[Deja_Vu]

You guys all suck...I am literally opening escrow on a Havasu house today
I’m freaking out

Me too, I just built a brand spanking new house.
But...Havasu is a niche market and with Californians bailing out and retiring it will likely continue to appreciate.

 

[JDKRXW]

Everyone thinks their paycheck is guaranteed until it's not

...... it's the same with their pension plan too.
https://www.shrm.org/resourcesandtools/hr-topics/benefits/pages/multiemployer-pension-fail.aspx