Post: #1

I've been kicking around the idea of building a new house on some vacant land I have and this concerns me.

I talked to a friend yesterday who's a real estate attorney and he seems to think a bubble is coming and real estate is going to be down to cash money prices after the government stops backing Fannie/Freddy and it will happen. Banks will bump their interest up and require 50% down (as he thinks) to hold the notes themselves..

So, being curious I went on Zillo and noticed in my area houses have gone up..A lot in the last year and so has rents...

As for my house idea I'm going to the sky on huge stilts to get a waterview. If anyone has cool ideas about that post them.

Post: #2

I've been watching the market start to heat up here in SoCal, and decided not to wait to buy my so-called retirement home...glad I did, now that it's mine! All cash - first home I've ever owned that was not financed; stoked that I never have to pay a mortgage again!

Post: #3

If you're building, I don't see raw materials going down in price as much as pre-existing homes people are trying to move. Also, if you're building for the pupose of residing there and are not looking to flip it, then it shouldn't matter if the market goes to pot.

If you need a loan, then it will be a lot harder to get one if Fannie/Freddie go under without another program to replace.

Post: #4

anyone who is in debt when shit hits the fan s going to wipe out hard

build it, or dont

but don't take on debt doing it

Real Estate values aren't the only thing that are going to get squeezed.

Post: #5

When do you guys think this second crash is going to happen? I missed out on a lot of opportunities by being too young to have enough cash in the last one. If it happened soon I would be pumped.

Post: #6

yes its coming...a commercial RE crash that will be much bigger.

Post: #7

(09-05-2013 03:04 PM)jimukr104 Wrote:  yes its coming...a commercial RE crash that will be much bigger.

Why do you think it's coming?

I was going to build with cash over the next two years but...Why build a house that's not going to be worth what you spent to build it? If there's a crash it would be worth half (i think)

Post: #8

All the fiat money has to go somewhere and generate interest.

Post: #9

(09-05-2013 10:06 AM)el mechanico Wrote:  I've been kicking around the idea of building a new house on some vacant land I have and this concerns me.

I talked to a friend yesterday who's a real estate attorney and he seems to think a bubble is coming and real estate is going to be down to cash money prices after the government stops backing Fannie/Freddy and it will happen. Banks will bump their interest up and require 50% down (as he thinks) to hold the notes themselves..

So, being curious I went on Zillo and noticed in my area houses have gone up..A lot in the last year and so has rents...

As for my house idea I'm going to the sky on huge stilts to get a waterview. If anyone has cool ideas about that post them.

No chance this happens. If US govt doesn't back fnma & flmc they will subsidize another way. That would absolutely wreck the economy and be worst then the depression. No houses would sell, rents would go through the roof, it would be pure anarchy.

As far as the CRE crash, we are supposed to be in the middle of it. Half of all mtgs maturing this year are underwater. You don't hear shit about it, banks extend terms, unless they are real bad then they sell to investors and file for bankruptcy, but banks don't want to show the losses so they extend loans/refiance anyways. So all this doom and gloom just isn't happening it will stay just like it is for the foreseeable future. Go ahead and build.

Post: #10

Highly local. Right now I wouldn't buy in LV - too few houses on the market for how many are delinquent / should be foreclosed on / vacant. Last I looked into it a few weeks ago, something like 64000 houses were empty and only about 7500 were on the market, but residential prices are up 20% this year. I wouldn't do it.

Simultaneously, I was recently on a trip to NY. Manhattan real estate is its own thing and an alright store of value if you can afford it. There are some real gems upstate that I would buy now if I had any way of living in upstate and using the property. Really prestigious stuff from the 1850's-1880's that would be awesome to live in, though ruinously expensive to maintain.

Ultimately, the bubble or lack thereof is all local. If the economy gets worse, which is not immediately likely but not unthinkable either, people everywhere are going to suffer though. I personally wouldn't buy without a significant equity position.

Post: #11

I think we have 1-2 years at least. Dollar will collapse sooner or later.

Post: #12

DC area real estate is picking up big time. I think average length of time house is on market here is ~ 9 days.

Post: #13

(09-05-2013 10:06 AM)el mechanico Wrote:  As for my house idea I'm going to the sky on huge stilts to get a waterview. If anyone has cool ideas about that post them.

   

Post: #14

(09-05-2013 12:27 PM)King Solomon Wrote:  anyone who is in debt when shit hits the fan s going to wipe out hard

build it, or dont

but don't take on debt doing it

Why would people with loans get hit? I'm thinking people with 30-year fixed rate loans. As long as they are making the monthly payments, what is the bank going to do?

Post: #15

(09-05-2013 10:47 PM)paninaro Wrote:  

(09-05-2013 12:27 PM)King Solomon Wrote:  anyone who is in debt when shit hits the fan s going to wipe out hard

build it, or dont

but don't take on debt doing it

Why would people with loans get hit? I'm thinking people with 30-year fixed rate loans. As long as they are making the monthly payments, what is the bank going to do?

collapse of housing market -> collapse of housing industry -> dramatic reduction of cash in the economy -> knock-on domino effects on other industries (fewer paying customers, fewer investors) -> generalised crisis in the economy -> job losses as industries cut costs -> jobless home owners cannot afford to pay debts. Even if home owner sells his house, it won't cover his outstanding liability with bank due to depressed home prices -> collapse of mortgage inflows into banks -> collapse of banking/credit system. Banks control their losses by dramatically reducing credit outflow -> economic recession -> now everyone is screwed, including business owners -> even more defaults on bank loans -> economic depression -> everyone with a loan is bank-raped as banks desperately try to stay solvent

Post: #16

(09-05-2013 04:13 PM)Harvey Specter Wrote:  

(09-05-2013 10:06 AM)el mechanico Wrote:  I've been kicking around the idea of building a new house on some vacant land I have and this concerns me.

I talked to a friend yesterday who's a real estate attorney and he seems to think a bubble is coming and real estate is going to be down to cash money prices after the government stops backing Fannie/Freddy and it will happen. Banks will bump their interest up and require 50% down (as he thinks) to hold the notes themselves..

So, being curious I went on Zillo and noticed in my area houses have gone up..A lot in the last year and so has rents...

As for my house idea I'm going to the sky on huge stilts to get a waterview. If anyone has cool ideas about that post them.

No chance this happens. If US govt doesn't back fnma & flmc they will subsidize another way. That would absolutely wreck the economy and be worst then the depression. No houses would sell, rents would go through the roof, it would be pure anarchy.

As far as the CRE crash, we are supposed to be in the middle of it. Half of all mtgs maturing this year are underwater. You don't hear shit about it, banks extend terms, unless they are real bad then they sell to investors and file for bankruptcy, but banks don't want to show the losses so they extend loans/refiance anyways. So all this doom and gloom just isn't happening it will stay just like it is for the foreseeable future. Go ahead and build.

Yep. Commercial RE's comeuppance was supposed to be a 2012-2014 problem as a lot of shitty 7 year mortgage and mezz financing contracts pushed just pre-crash came due. Hasn't really played out.

Post: #17

(09-05-2013 11:23 PM)Thomas the Rhymer Wrote:  

(09-05-2013 10:47 PM)paninaro Wrote:  

(09-05-2013 12:27 PM)King Solomon Wrote:  anyone who is in debt when shit hits the fan s going to wipe out hard

build it, or dont

but don't take on debt doing it

Why would people with loans get hit? I'm thinking people with 30-year fixed rate loans. As long as they are making the monthly payments, what is the bank going to do?

collapse of housing market -> collapse of housing industry -> dramatic reduction of cash in the economy -> knock-on domino effects on other industries (fewer paying customers, fewer investors) -> generalised crisis in the economy -> job losses as industries cut costs -> jobless home owners cannot afford to pay debts. Even if home owner sells his house, it won't cover his outstanding liability with bank due to depressed home prices -> collapse of mortgage inflows into banks -> collapse of banking/credit system. Banks control their losses by dramatically reducing credit outflow -> economic recession -> now everyone is screwed, including business owners -> even more defaults on bank loans -> economic depression -> everyone with a loan is bank-raped as banks desperately try to stay solvent

This is exactly what the big banks want you to believe, so the government will give them free bailouts from U.S. taxpayer, while savers and the responsible get screwed yet again.

Granted it would be really painful (short term), but in the long run America would come out much stronger and the greedy, parasitic Goldman Sacks of the world would finally get what is coming to them.

Post: #18

I think there are localized bubbles forming in markets like SF, BOS. The South, Midwest seem to be much more stable in terms of housing values.

The old rule of thumb is to take your annual income and 3-3.5X it -> That is how much house you can afford. I'm amazed to see people getting into bidding wars over 2 bed condos going for $500K+ in parts of Boston/Cambridge. I do see the justification for these types of valuations. If Boston is bad, then NYC is on another stratosphere of unaffordable.

I'm talking from an investors perspective: My deal flow/analysis has led me to make only lowball offers in Boston.

Post: #19

I recently sold my home after living there for just over 2 years for about a 50% profit after expenses. I still own a rental property and I'm thinking about cashing it out as well if the tenants leave, although I'm not sure what the return on that one would be.

Something seems fishy about the prices right now. I'd literally just refinanced my place and had it appraised at $150k, and 4 months later I've got someone beating down my door to throw $220k at me plus expenses. That's not rational.

Post: #20

Quote:Something seems fishy about the prices right now

That's exactly what I'm thinking and don't know why. Literally in two or three months all the cheap houses in my area are gone, people are asking double for their empty lots and the houses seem like 50k over value..

I don't get it.

I also know what people make here..

Post: #21

(09-06-2013 04:34 PM)aphelion Wrote:  Something seems fishy about the prices right now. I'd literally just refinanced my place and had it appraised at $150k, and 4 months later I've got someone beating down my door to throw $220k at me plus expenses. That's not rational.

I think it's known as the blow-off top.

No one knows when the bubble will burst, but it will. Better to miss the last 10% up to the peak than chase the market down once it comes off 20 or 30%.

Of course, if you're happy living in your home, continue to do so and watch the carnage around you.

Post: #22

Periodically I'll go on Zillow and I'll look at the purchase history of these places. It's like the Wild West. No rhyme or reason.

I'm expecting some course correction in the near future. I don't know. This is just weird.

Post: #23

(09-06-2013 04:41 PM)Acute Angle Wrote:  

(09-06-2013 04:34 PM)aphelion Wrote:  Something seems fishy about the prices right now. I'd literally just refinanced my place and had it appraised at $150k, and 4 months later I've got someone beating down my door to throw $220k at me plus expenses. That's not rational.

I think it's known as the blow-off top.

No one knows when the bubble will burst, but it will. Better to miss the last 10% up to the peak than chase the market down once it comes off 20 or 30%.

Of course, if you're happy living in your home, continue to do so and watch the carnage around you.

On the other hand, better to turn fake money into real money...

Post: #24

There hasn't been a lot of house built in 5 years or so. In many cities people owe more than they own, so they'd have to write a check to their bank if hey sold, so they don't. So supply is low.

On the demand side, hedge funds are buying up houses and turning them into rentals.

Low supply high demand means rising prices.

Post: #25

The banks are not chasing deficiency.

If hedge funds are buying up the houses that will create the bubble?? I have friends that work at banks none of them are really doing mortgages even though they say they are.