patrick.net

Goran_K says

In other news, from April to June 2012, we've only added 75,000 jobs a month. We need around 85,000 to 90,000 a month just to keep up unemployment unchanged, and around 100,000+ to start chipping away at the extremely high unemployment rate. The job situation actually got worse from April to June while the median home price in some metros rose. Hmm.

Home prices may be rising in the short term, but the fundamentals aren't supporting a long term trend.

If unemployment were at under 5%, I bet housing would be closer to peak than the ~33% off we're at now.

I get it, you want the perfect confluence of events before you'd consider a purchase.

1. 0 National/State Debt
2. Unemployment under 4%
3. CA Median wages at 75k
4. Dow above 15k

Those events will never come together, and thus there will never be a clear signal to buy. Of course, even if they did, housing prices would be so high they'd exceed 2006 levels, and then you still wouldn't buy.

robertoaribas says

condos compare to similar sized/ and number of bedroom homes, but at a percent. if a 3/2 condo rents for 70% of a similar sized 3/2 home in an area, there is an important point to be made vis a vis prices: buy the one that has the best price/rent ratio.

I can agree with that point.

As an aside, Robert, you being in the business, and being able to see the prices/rents for Concord, do you consider the city to be a good investment from a profit standpoint?

I personally cannot see the huge profits some continue to talk about.

Home prices rose in May from April in every city tracked by a leading index, a sign that increasing sales and tight inventories are supporting a modest housing recovery.

In other news, temperature rose from April to May in every city and then again from May to June and from June to July. At the rate of the temperature increase, it will be 200°F by December! Prepare for a mighty hot Christmas!

Just like during the initial burst, year-over-year changes are all that matter. People don't like to shop for houses in the winter. It's cold and there's snow and ice on the road.

robertoaribas says

well, you don't seem to be aware that this is the seasonally adjusted index... which means that it already accounts for this

Who does the adjusting and what fudging do they do? I'll still go with yoy stats.

zesta says

If unemployment were at under 5%, I bet housing would be closer to peak than the ~33% off we're at now.

I get it, you want the perfect confluence of events before you'd consider a purchase.

1. 0 National/State Debt
2. Unemployment under 4%
3. CA Median wages at 75k
4. Dow above 15k

Those events will never come together, and thus there will never be a clear signal to buy. Of course, even if they did, housing prices would be so high they'd exceed 2006 levels, and then you still wouldn't buy.

Nice. Talking about putting things in perspective. :)

Just a silly anecdotal data point, but the home we bought in 2009 in Marin from a highly-distressed "investor" wannabe, just appraised for 34% more than we paid as we prepare to sell it. Even 7% more than he originally paid in 2005 when he started his ill-fated flip.

Helps ease my heartburn about what I just paid down in Los Altos.

Are you moving down here?

Yes

Buster says

Yep, just what I suspected via casual observation. Prices are UP.

" The Standard & Poor's/Case-Shiller home price index released Tuesday showed increases in all of the 20 cities tracked. And a measure of national prices rose 2.2 percent from April to May, the second increase after seven months of flat or declining readings. "

I guess if your a BULL! this is all the goods news your going to get.. for the moment!

freak80 says

That's why businesses are moving there, to escape the social parasites on the "top" (the landed elite) and the "bottom" (the deadbeats living off the gummint).

Sounds like Santa Clara County, CA... before the boom!

"A fool and his money are soon parted"

thomaswong.1986 says

I guess if your a BULL! this is all the goods news your going to get.. for the moment!

I don't consider myself a bear or a bull. Just a realist and someone who looks at trends and numbers to guide my way. I try not to allow either extreme to sway my viewpoint if I cannot support them with facts.

Some have pointed out, correctly mind you, that this is not a y over y observation but rather m over m x2, and thus is not a solid trend. I agree. I do however see the probability of prices increasing > decreasing (in areas such as SF where the economy is decent) mainly because the intersection of current prices with historical linear increases mainly tied to the average inflation rate has been reached.

In 2010 the banks were ramping up foreclosures. Inventory was never higher. Then something happened. Robo-signing was exposed. The foreclosures were then frozen for two years. We just had a settlement and part of that was for the banks to try and refi or do short sales. Foreclosures are still mostly frozen. The low inventory we have now is all due to stalling, not because of some organic growth or market recovery. Sure, flippers who are fast can take advantage of the manipulation. But those who are chasing the market higher because they think this is the bottom, they will get hurt. The shadow inventory is not the homes the banks have already foreclosed on. It is the homes they refused to foreclose on the last few years. The people living in those homes without paying their prop taxes, mortgage, hoa and insurance will be kicked out one day. They have been living free for years, but if the banks really think the bottom has been reached they will stop stalling and foreclose, taking their new profits....

Bulls, Bears, and Ducks.

Goran_K says

you probably would lie about your personal stories as well

What took you so long to come that conclusion?

http://blog.cleveland.com/metro/2009/07/bank_walkaways_from_foreclosed.html

Call it Crazy says

Interesting article...

I gotta confess, I sometimes think things are a lot worse than anyone really wants to admit. It reminds me of that point in the grief cycle in end-of-life situations where the soon-to-be-bereft experience something like denial mixed with optimism. "He could still pull through!"

JodyChunder says

http://blog.cleveland.com/metro/2009/07/bank_walkaways_from_foreclosed.html

Bad link?

Works fine.

Bulls, Bears, Ducks, and Martians. Or is that a frog with big eyes? I can't tell.

I don't understand the point of arguing with a landlord about RE investment. I figure if a landlord didn't know anything about RE investment, he'd have been out of business a long time ago.

freak80 says

I don't understand the point of arguing with a landlord about RE investment. I figure if a landlord didn't know anything about RE investment, he'd have been out of business a long time ago.

There are a lot of amateur landlords out there. No doubt a lot of them will be out of business in the future.

APOCALYPSEFUCK is Shostakovich says

No one will real own up to how fuct things are until they realize they're reloading the fifth time in a single morning and that some of the fallen on the lawn are being eaten by the starving.

Please write a screenplay and get a movie made. Please. I want to watch it.

FunTime says

Please write a screenplay and get a movie made. Please. I want to watch it.

What about the movie Mad Max?

Goran_K says

Like I said to SF_Ace, do the numbers.

Are you using one of the calculators or using other calculations to come to your conclusion? Show them here. People here are better than me at coming to a quick understanding based on a few calculations and I'd appreciate seeing this math outright.

freak80 says

What about the movie Mad Max?

Really enjoy the whole series, but enjoying the more "zombie-movie-like" feel of AFIS' holed-up in a house keeping out the competition during the chaos state caused by national economic destruction apocalypse narrative.

Mad Max doens't have enough people, so more like 28 Days Later but driven by economics. Way scarier.

FunTime says

Goran_K says

Like I said to SF_Ace, do the numbers.

Are you using one of the calculators or using other calculations to come to your conclusion? Show them here. People here are better than me at coming to a quick understanding based on a few calculations and I'd appreciate seeing this math outright.

Goran_K: If this were a straight buy/rent comparison, would you rather rent for ~1850 or buy for 208k?

--

Let's do the math then..

208k / 20% down / @ 5.5% =
PI = 944
TI = 300
1244 / mo.

I'll leave out expenses and maintenance because I'm sure somebody will have a anecdotal story about how the roof caved it once and the landlord was screwed. One can fill in their own numbers there.

According to this 2010 thread 1900 doesn't seem unreasonable, 1850 would probably get it rented immediately to a good tenant. I'm guessing a rent increase in 2012 isn't out of the question.

http://64.142.97.50/?p=364226

If you consider a refi @ 4% that would drop PI by $150/mo and instead of growing principal by ~$2400/yr in the first few years of the loan it would grow at ~$3100/yr in the first few years.

Realtors Are Filthy Liars says

Why do people have to lie about housing?

Because Realtors are Liars. ;-)

freak80 says

Because Realtors are Liars. ;-)

Indeed. ;)

Why do anonymous cowards get upset when no one takes them seriously? If you want to have an honest debate then grow a pair and be willing to stand behind your opinions, statements and comments. Patrick does, as do all the most credible contributors.

Randy H says

Why do anonymous cowards get upset when no one takes them seriously? If you want to have an honest debate then grow a pair and be willing to stand behind your opinions, statements and comments. Patrick does, as do all the most credible contributors.

Reticulating Splines

Realtors have always been cowards.

Goran_K says

I think you're underestimating the home insurance, and tax part of the equations (I get closer to $1450 out of pocket), but even with your numbers, the margins aren't great.

According to the Contra County website, the tax total for 2010 was $2715.68 for that property or $226/mo. I don't know how much you think insurance is, but $900/yr for a 200k property is more than adequate.

That bring us back to $1244/mo for mandatory expenses. Doable at $1500/mo? Tight but possible, but how about @ 1900? Money-making machine.

You still didn't answer my question. Would you rather buy or rent the place if it were 1800 vs 209k?

You still didn't answer my question. W

Massive Housing Inventory says

Realtors have always been cowards.

...says the ironically anonymous coward. I'm no realtor lover; but I despise hypocrisy even worse. But thank goodness for "ignore".

zesta says

Let's do the math then..

208k / 20% down / @ 5.5% =
PI = 944
TI = 300
1244 / mo.

Let's run the math again with 4.25% for a 30-year fixed investment property, or a 7/1 ARM at 3.125% interest rate. :)

I used to come to this site for the information, now I just stay for the comedy.

robertoaribas says

As far as the renovation costs, I consider that part of my acquisition costs, NOT an ongoing expense.

What does it matter if it's "acquisition" cost? It's cash you invested into the property that counts against any profit you make from it which was my point. Any money you put into the house, whatever you choose to term the cost, you need to recoup before you can say your rental is profitable.

If your PITI is $2,000, and you collect $2,300 rent, but you spent $50,000 in renovations, it's ridiculous to say "Hey I'm profitable on this rental", because that completely ignores the fact that you put $50,000 into renovating the property to get it up to snuff.

I'm not sure what you consider foolish about that viewpoint.

Typically, budgeting 5% for vacancy is sufficient and $175/mo maintenance is high, but from previous threads I know that's going to be an argument nobody is going to win.

Did you consider in the principal that the owner accrues every year as well? ~2.5k/yr@5.5%
~3.5k/yr@4.5?
Growing much larger as time goes on!

How about the tax deductions, especially if the owner has an AGI of less than 150k?

There's a reason why you'd be buying if the buy rent ratio was $1800/208k, and I think it's still a buy if the rent ratio was $1500/210k. The same reason you'd prefer to buy vs rent is the same reason a investor wants to buy it and rent it out to you.

Re: Acquisition costs
How do you calculate ROI for this property...

Let's say it makes $500/mo or 6k/year after everything. Down payment was 41k and 9k was for renovation

Annual ROI = 6/50 = 12% ROI, not including accrued principal. Not too bad?

E-man says

zesta says

Let's do the math then..

208k / 20% down / @ 5.5% =

PI = 944

TI = 300

1244 / mo.

Let's run the math again with 4.25% for a 30-year fixed investment property, or a 7/1 ARM at 3.125% interest rate. :)

Learn from your victory. Prosper from your failure.

In Goran_K's world we're not allowed to refi. Not sure why, but it was one of his stipulations early on.

Goran,

Haven't you noticed that a lot of the space on this blog is on boasting about "how smart and savvy am I"?

Do you really wanna spend time to argue on details about it? Even if you "win" an argument like that, you lost because you lost ("wasted") your time doing so.