patrick.net

Roberto, please present your fundamentals to justify a 23% increase in prices in just one year. Is that the normal rate of return for residential real estate? Did incomes rise 23%, or even 8.1% year over year? Did property taxes and insurance decrease? What was GDP last time prices were this high in Phoenix. Why is GDP 50% less today? Are consumers being met with lower costs for daily essentials like food and gas, or have most doubled in just a few years?

A quick search shows the median home price in Phoenix in the year 2000 was $112,000. Using the governments official inflation calculator that comes out to $151,000 in today's money. Yet, currently, the median is $242,000. Prices are way out of line, especially considering the proclaimed fear is deflation, deleveraging has yet to fully happen and bubbles usually don't go back to their highs so quickly. And per captia income in Phoenix is $24k. Yep, I am sure that $250k home is affordable and should keep rising 23% every year.

You talk like one of the internet stock traders of the late 1990's. Certain that Etoys was worth $200 and buying it at $100 meant you would double your money. At least then we didn't know how big the internet is. With real estate we have traditional values and very long charts. Just because prices fell 50% from a bubble doesn't make it a great deal if they are still 100% higher than historical values.

Every now and then his right hand needs a break...

MsBennet says

Roberto started a threaded so he could say "ney-ney-ney-neya, I was right you were wrong" for the umpteenth time. I guess his ego needed its daily stroking.

robertoaribas says

And yeah, i'm just as flashy as those guys you see on tv: I ride a bicycle to work, and walk my dog for fun. I'm almost purely vegan, and cook my own beans and vegetables at home... I drive a honda.

LOL! you seriously need to dig deep into some nice Angus Steak.. and get a muscle car..

mmmmm! Juicy!

Homeboy says

I think there are more people in California on this forum than Arizona

Like Arizona, Nevada and SoFla were hot for 2nd homes for retirement..lots of media attention certainly helped push prices down... but plenty of hype remained in CA.

Oddly enough, SoCal doesnt get as much attention as it had for so many decades...
SFBA seems to get the spot light more now days... I think i will shift back we lose
more jobs due to high costs.

thomaswong.1986 says

Oddly enough, SoCal doesnt get as much attention as it had for so many decades...

SFBA seems to get the spot light more now days... I think i will shift back we lose

more jobs due to high costs.

The Los Angeles market has done better than the San Francisco market, according to Case/Shiller. Both were at 100 in 2000; now Los Angeles is at 180.23 and San Francisco is only at 147.45.

Homeboy says

The Los Angeles market has done better than the San Francisco market, according to Case/Shiller. Both were at 100 in 2000; now Los Angeles is at 180.23 and San Francisco is only at 147.45.

one should hope its not based on hype, but more on fundamentals.. time will tell how prices correct. from my view, SFBA seems to get more hypsters than prior decades.. if they all have moved back to Socal/LA.. heck i will take that all day long.. its all job killers in SFBA.

one should be careful on what "has done better".

Homeboy says

Not sure what you think you're gloating about.

He just likes to gloat. It doesn't have to be about anything in particular.

What he doesn't seem to realize is that more people would take him seriously if he didn't come off as a complete wanker.

ducsingle5313 says

What he doesn't seem to realize is that more people would take him seriously if he didn't come off as a complete wanker.

Apparently people with superior intellects are pretentious twats.

David Losh says

Let's see how much debt you can pile onto an unsuspecting public. The fact is you have no clue where pricing for housing units will settle. Even though all indications are that you, along with every one else in today's market place, have paid more than properties are worth.

As his PITI is substantially lower than his rental income, it logically indicates the exact opposite.

Bigsby says

As his PITI is substantially lower than his rental income,

It's still debt, even though some one else pays it, it's an over all drain on the economy.

I actually wanted to post this article that explains the Case Shiller way of looking at housing: http://stream.wsj.com/story/economy-stream/SS-2-17745/SS-2-38872/

"What the index measures: S&P/Case-Shiller covers just 20 of the nation’s largest metros. It is value weighted, meaning more expensive homes have a bigger impact on the home-price reading. New York and Los Angeles alone account for 35% of the composite-20 index, both because these cities are large and because home prices there are among the most expensive in the country, according to Jed Kolko, chief economist at real-estate website Trulia."

David Losh says

Bigsby says

As his PITI is substantially lower than his rental income,

It's still debt, even though some one else pays it, it's an over all drain on the economy.

I'm not quite sure why someone buying a few undervalued properties would be considered a drain on the economy.

And more to the point, you said he paid more than the properties were worth. No, he didn't.

so you're a guttersnipe with property??

robertoaribas says

I ride a bicycle to work, and walk my dog for fun. I'm almost purely vegan, and cook my own beans and vegetables at home... I drive a honda.

Bigsby says

I'm not quite sure why someone buying a few undervalued properties would be considered a drain on the economy.

And more to the point, you said he paid more than the properties were worth. No, he didn't.

Because of the over all debt. You say under valued, Roberto says under valued, I say you would need to sell them to know for sure.

What we had, as the chart shows is a massive loss of equity. You only have equity if you capture it.

I can put up charts, and graphs all day long to disprove this under valued theory you have. This post is based on sales data, like Case Shiller.

The premise is that housing prices will crash, which I don't buy into. A deal is a deal, and Roberto either got a deal or he didn't. We'll know when the properties are sold.

Oh yeah, that rental income to pay for the property. Some one is paying the debt. Roberto made a deal, and has captured a return based on that rental income, a home buyer isn't that lucky.

You have to calculate over all payments to the value of the property. In most cases the home buyer is still paying twice the purchase price for the property through interest payments. If the home buyer ends up underwater which many have, they are stuck with the debt on a depreciationg asset.

Depreciating asset, look that up, because not all Real Estate is going up in price, or value, any more.

David Losh says

Because of the over all debt. You say under valued, Roberto says under valued, I say you would need to sell them to know for sure.

Why? If he's making far more on rental than PITI, then they are clearly a good value purchase.

David Losh says

I can put up charts, and graphs all day long to disprove this under valued theory you have. This post is based on sales data, like Case Shiller.

Then put up the charts that prove he paid too much for his purchases.

David Losh says

Oh yeah, that rental income to pay for the property. Some one is paying the debt. Roberto made a deal, and has captured a return based on that rental income, a home buyer isn't that lucky.

If a home buyer had wanted one of his properties and got it instead of him, then they too would have made a good deal. They would be living in a house at a cost far lower than renting it.

David Losh says

You have to calculate over all payments to the value of the property. In most cases the home buyer is still paying twice the purchase price for the property through interest payments. If the home buyer ends up underwater which many have, they are stuck with the debt on a depreciationg asset.

A lot of these so called depreciating assets seem to have an unusual habit of appreciating in value. And yes, you pay interest on your loan, but what does that matter if your mortgage payment is substantially lower than the rental cost? And that is not even mentioning that you'll own the house once you've paid the loan off.

Your arguments would make more sense if it was directed at someone who had paid an arm and a leg for their properties and was barely covering their PITI. That person isn't Roberto from the figures he has mentioned.

Everything in moderation. Until 1980 , we had 1 trillion in debt. Reagan tripled it in his short two terms in office. Now we are adding that 1 trillion every year . Personal credit card debt just to buy Chinese made junk that nobody needs is really not that productive.

Now housing fine, because in today's world, there really is not any serious consequence to walking away from your debts, if the market collapses. If it doesn't you get to keep the profits.

The Professor says

The problem is that the fundamentals do not support higher housing prices.

They clearly do in many areas. The BA, LA etc.. aren't the entirety of the US housing market.

David Losh says

You mean by inflation which is tame compared to the trillions of dollars the Fed has dumped into the economy.

In terms of wealth creation appreciation would need to be in excess of inflated dollars.

You don't say. And like I said, plenty of people over the years have found that their property has appreciated in value above the rate of inflation. Others have lost out. Such is life.

Are you going to post those graphs that will ruin Roberto's day?

Bigsby says

Then put up the charts that prove he paid too much for his purchases.

How many do you want? http://money.cnn.com/2012/02/28/real_estate/home_prices/index.htm

This indicates that after the great bottom call that Roberto had for 2010? I can't keep track of the BS, prices fell to 2002 levels.

Just because some one pays more for a property than it is worth doesn't increase the value of the property.

I'll say it again, it is the greater fool principle.

Look it, there are always good deals, every day, in the Real Estate market place. A Real Estate transaction is between a buyer, and a seller.

Any time some yahoo starts making blanket statements about the Real Estate market place I know they don't know what the heck they are talking about.

Was Case Shiller a mistake? Sure, but it is there to sell mortgages to the unsuspecting public.

David Losh says

How many do you want? http://money.cnn.com/2012/02/28/real_estate/home_prices/index.htm

A lot more than that for starters. On what planet does that demonstrate he paid too much for his purchases? Unless you are now trying to peddle some kind of line that if he'd waited a few more weeks to buy, he could have bought them for even less, so look... he overpaid for them!!

Bigsby says

And like I said, plenty of people over the years

That was then this is now.

I think you have to go back to the 1930s to see the amount of equity loss we have had in the past decade.

It makes me nervous enough to want to do something else.

And yeah, I can do this all day long with the charts, and graphs.

This shows the increases after the 2009 bottom, if you want to call it that, to a top, and then another decline.

Geez, that looks like complete volitility to me, not the safe haven investment we have seen traditionally.

David Losh says

Look it, there are always good deals, every day, in the Real Estate market place. A Real Estate transaction is between a buyer, and a seller.

Any time some yahoo starts making blanket statements about the Real Estate market place I know they don't know what the heck they are talking about.

Blanket statements? You specifically said that he (along with everyone else) had overpaid. Talk about blanket statements.

David Losh says

Bigsby says

And like I said, plenty of people over the years

That was then this is now.

I think you have to go back to the 1930s to see the amount of equity loss we have had in the past decade.

It makes me nervous enough to want to do something else.

And yeah, I can do this all day long with the charts, and graphs.

And the relevance of that to his purchases is what exactly? For someone who doesn't like blanket statements, you sure have a proclivity for making them.

Bigsby says

Blanket statements? You specifically said that he (along with everyone else) had overpaid.

Yeah, that's true, you got me, because you are right, there is a deal a day in Real Estate.

You're right, I was too focused on the point at hand.

Shiller's not buying.

http://www.businessinsider.com/shiller-artificial-real-estate-economy-2013-3

thomaswong.1986 says

one should hope its not based on hype, but more on fundamentals.. time will tell how prices correct. from my view, SFBA seems to get more hypsters than prior decades.. if they all have moved back to Socal/LA.. heck i will take that all day long.. its all job killers in SFBA.

one should be careful on what "has done better"

It was merely an observation. Although some might think otherwise, not everything written here is intended as an investment strategy.

SFace says

not buying in the SFBA was disasterous, no other way around it.

Is this another crystal ball observation?

Did you read the report?

robertoaribas says

David: I am not missing anything. the problem is, you are not intelligent, and I am, so you don't understand 2/3 of what I write. you are a fat stupid middle aged guy

ZING!

Everyone drink when Roberto calls someone stupid.

David Losh says

Bigsby
says

Then put up the charts that prove he paid too much for his purchases.

How many do you want? http://money.cnn.com/2012/02/28/real_estate/home_prices/index.htm

This indicates that after the great bottom call that Roberto had for 2010? I
can't keep track of the BS, prices fell to 2002 levels.

Depending on the local foreclosure speed, housing markets bottom in different years. Phoenix was more like in 2009 and is on an upward trajectory. In some other areas, it may not have bottomed out. My theory is that if FED (and other central banks) are in control, we will bottom out sooner or later (if not already.) The reason is simple that prices have to go up when we run out of foreclosures. If FED suddenly loses control on interest rate or another collapse happens (e.g., Europe blows up,) housing price will go down one step. For a person like David who likes long term stability, it is probably safer to keep it in cash. For me, I never see housing as a safe heaven and just use it as an investment tool when the timing is right.

haha I like it.

Hennessy's Tavern in Hermosa Beach gets #1 socal beach slot IMO.

http://www.hennesseystavern.com/hermosa_beach.html

I clearly need to travel more....

Mobi says

For a person like David who likes long term stability, it is probably safer to keep it in cash.

I'm thinking of buying another cleaning company.

That must have been fun. I had the horrible misfortune of living at home w/parents in college. Theres a college under every rock in CA so this is common.

Roberto nailed it.

Get rich slowly and work smart and hard.

I saw the same opportunity Roberto saw. But here is the difference. I didn't want to deal with rentals and people.

So I lost out of my own free will. I chose not to do what Roberto did.

But I don't begrudge him for his success like some of you do. And I especially don't go online without evidence and smear others. It is getting old.

David Losh says

"back again, with his mindless nonsense... you know david lousy brain, I bought the following homes:

single family homes:

60K rented 825, worth 100K today
76k rented 950, worth 120K today
80K rented 1100, worth 140K today"

Now I'm not saying that RE is not a good investment. However, when you state "worth 100K today" you lose all credibility. Until you sell it it is only worth its cash flow. During the bubble, people kept saying: my RE is worth this and that. We know how that worked out for them. Things are worth something at time of sale. Until then they worth nothing.

robertoaribas says

back again, with his mindless nonsense... you know david lousy brain, I bought the following homes:

single family homes:

60K rented 825, worth 100K today

76k rented 950, worth 120K today

80K rented 1100, worth 140K today

Here is where you lose credibility. Nothing is worth anything until it is sold. Any good investor (RE, socks etc) knows this. Until then, you can (and should) brag about your return on investment and not more.

skeptic says

Now I'm not saying that RE is not a good investment. However, when you state "worth 100K today" you lose all credibility.

But my Zillow Zestimate says so. LOL.

skeptic says

Now I'm not saying that RE is not a good investment. However, when you state "worth 100K today" you lose all credibility.

Why does someone lose credibility if the numbers they are quoting are accurate? If they would have to pay 30% more today to get the same property, with the same monthly rental income, isn't that data point meaningful?

If I bought for $100k last year, and was pulling in $1,000 per month, but could buy the same thing for $50k today, wouldn't people (rightly) point out that I would have been better to wait and buy a year later?

Sure, you have to actually sell the property to realize your gains...but the point is that he could sell the property for more, and that's a meaningful indicator that his decision to buy wasn't bad. His decision to not sell today might end up being terrible, and I'm sure people will point it out if that happens.

I don't know, it seems entirely reasonable to me to use current market values compared to purchase price to gauge a buying decision.

Phoenix Area February Home Sales

http://www.dqnews.com/Articles/2013/News/Phoenix/RRMAAZ130325.aspx

A key price gauge analysts watch, the median price paid per square foot for existing single-family detached houses, rose to $99 in February, up from $96 in January and up 37.5 percent from a year earlier. The February figure was the highest since it was also $99 in September 2008.

Lenders foreclosed on 1,232 Phoenix-area houses and condo units last month, up 103.6 percent from the month before and down 52.1 percent from a year earlier. The number of homes lost to foreclosure during the first two months of this year totaled 5,522, down 66.7 percent from the same period last year.

n February, 333 Phoenix-area buyers purchased two or more homes on the open market (excludes foreclosure auctions). That was up about 31 percent from the same month last year, based on an analysis of buyer names in the public record. (Note: In some cases individuals and partnerships buy under different names). This February these multi-home buyers purchased 1,003 homes, which amounts to about 13 percent of all homes sold and represents a 38.3 percent increase from the number of properties that multi-home buyers purchased in February last year.

The largest buyer identified in February, appearing in public records as "THR Phoenix LP" and "THR Phoenix LLC," purchased 159 homes, or about 16 percent of all homes purchased by multi-home buyers in February. There were 18 buyers in February that each purchased five or more homes, but only seven of them bought 10 or more. Combined, the buyers who purchased 10 or more homes in February acquired 260 homes, or about 26 percent of all homes bought by multi-home buyers.

http://www.azcentral.com/realestate/investors/top-three-investors-map.html

Top investors

Buying sprees by billion-dollar hedge funds and real-estate investment firms have investors owning nearly 20 percent, or one out of every five, of the region’s single-family houses and condominiums, according to an Arizona Republic analysis of recent sales data. That's double the number of rentals considered normal in metro Phoenix in 2000, according to housing-market analysts. The map below shows which of the top three investors owns the most properties, by ZIP code. Each ZIP code is colored based on which of the three investors owns the majority of properties.

David Losh says

Mobi says

For a person like David who likes long term stability, it is probably safer to keep it in cash.

I'm thinking of buying another cleaning company.

Cleaning company is not cash but it is probably more liquid than real estates in that sense (closer to cash.)