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Realtor Watts eyes pent-up housing demand
January 4th, 2008, 11:59 am · 175 Comments · posted by Jon Lansner
Realtor/economist Gary Watts plays Eyeball ‘08, our two-week long, holiday cornucopia of opinion of how 2008 will play out for local real estate. Every day at noon, we’ll offer up a new market watcher’s thoughts on the market …
Watts’ forecasts of the O.C. housing market always draw emotion, no matter what your own outlook has been. While he saw the recent boom coming he missed the hints of the current slowdown. We asked the Mission Viejo real estate agent for his thoughts …
Eyeball: What’s your outlook for the O.C. housing market?
Gary: My forecast for 2007 appears to have been too rosy! Everything was in place: low interest rates, increase in wages, growing economy, low unemployment and the best selection of housing in 10 years at great prices . . . but the buyers remained on the sidelines. I was surprised by the financial crisis – especially since subprime makes up only 5% of the entire loan market while the Alt-A market (better than sub-prime but less than prime) makes up only 8%. 2008 could be a surprising year.
Eyeball: Chances we’ll see a bottom in 2008?
Gary: The first question I ask my Realtor audience is: “how many of you have qualified buyers waiting to buy?” Almost everyone’s hand shoots up immediately. This is called pent-up demand. As soon as the “fence-sitting” buyers begin to believe the bottom is near, they will once again enter the housing market. Not in a big way, but a way that will show a beginning trend towards a normal market.
Eyeball: What, if any, of the fixes proposed (rates, bailouts, regulation) or in place, will help the most?
Gary: The most helpful plan for existing O.C. homeowners, who bought in the past 24 months, will be lenders who are willing to renegotiate those existing loans. Modifying the existing notes to either lower the rate, refinance the loan, place deferred interest into a holding account, etc. will be the most beneficial.
Eyeball: What events might change your outlook, pro or con?
Gary: I don’t see a recession in 2008 but should the economy begin to slow down more rapidly than expected or mortgage interest rates begin to rise, that could put a damper on our housing market. On the Pro side, usually election years are very good to real estate with low interest rates and increasing employment, thus increasing the demand for housing!
Eyeball: Any “off-beat” economic indicator you’re watching now for signs of recovery?
Gary: The number of foreigners taking advantage of our cheap dollar and low prices to buy our undervalued real estate.
Eyeball: What might be the housing surprise we’ll be talking about a year from now?
Gary: The media reporting stories of how the 2008 buyers made a great buy in the Southern California real estate market!
• SATURDAY, 1/5: Bank economist Scott Anderson
• To read more from Eyeball ‘08, CLICK HERE
• Review Eyeball ‘07 by CLICKING HERE
175 Comments
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low unemployment?
gary, i suggest you do extensive research before u make predictions. There’s gonna be many more surprises for you in ‘08.
Gary, I had a feeling Jon would save you for last. The “Pent-up Demand” is leaving Orange County for Texas, Arizona, Nevada, and the Carolinas. We love you Gary … please keep the laughs coming!
Off Subject ~ So I’m watching CNBC this morning, anticipating the monthly jobs figure, and it’s NOT GOOD. It’s no big surprise to me, as when you enhance an economy with people buying and selling houses to each other, and people extracting perceived (temporary) equity to facilitate purchases far beyond their normal budget, this is what you get when the music stops.
But what really bothers me is all the crying on CNBC for the Fed to become more aggressive with sharper rate cuts. These phony bast**** are always in favor of free markets, until it comes time for the Fed to provide bail outs for their stupid trades. Do these fools not understand that the Fed doesn’t have much ammunition left, I mean the current Fed Funds is already very low.
This country is addicted to debt, and the Fed can only provide a little more comfort. Unfortunately, the problems with our economy will take a nasty recession to fix. A recession is the medicine, more cheap money is like poring salt on a gaping wound.
“and the best selection of housing in 10 years at great prices .”
Hmmm, great prices? Great for who? Realtors and sellers.?Not so great for the buyers and the banks that loaned gave them the loans to purchase to purchase homes that were priced 3x what the historical rates of appreciation would have pegged them at. Give me a break with the realtor propoganda!
The grand folly,saved for last
OK, the next question you might ask your realtor audience:
“How many of you sold houses in the past couple of years to people who won’t be able to make the payments?”
This is pent-up supply.
The biggest surpise of 2008 is that this paid shill can still manage to get his words printed on this blog. Gary, it’s time to retire in shame before it gets worse.
Oh man….and people pay for this opinion?
“And thats the news from Fantasyland!”
It’s good to hear what’s really happening in the trenches from people in touch with buyers on a daily basis.
“Trenches?”
Yeah, yesterday I was driving along, and I saw a realtor clubbing rats with a shovel for dinner. Realtors have it tough, what with incoming artillery and horrible disease and such.
Am glad those brave realtors are out there making sure we’re all safe and warm.
Realtors of Orange County! I salute you, brave but disheveled souls!
my 07 forecast appears too have been too rosy..
damn thats the understatement of the decade..
sub-prime was 5% and alt’s 8%–
thats a damn lie
I dont see a recession.. duh
hell you couldnt even see the real estate bubble
how the hell could you possibly see the recession
that would actually take a brain.. llooll
and of course hes not man enuf to say he was wrong
that doesnt surprise me
They LACK a fundamental grasp, that is. Sorry for the typo.
The emotional imbalance comes to the surface.
You are dilusional to think he suddenly knows everything. Remember what he said last year? I do
“Both sales and prices will be up from 2006. Sales should rise to our 10-
year average of 40,100, which puts sales up 10 percent, and prices should rise 7 percent for homes and the 4 percent-5 percent range for condos.”
He was also wrong on 2006 predictions the year before! Why do you listen to him?
I usually don’t post, as previous posters have stated, this guy has no concept of fundamentals. He disregards affordability, the credit crunch, and everything else that could have a negative impact on the housing market.
Gary - Can you please give an educated argument on why home prices are currently undervalued? I’m begging you for an argument. Back up your claim. I don’t buy realtors raising their hands on a qualified buyers question as a great fact based argument.
Please Gary provide a logical argument for the undervalued real estate in SoCal.
Low prices? stop drinking and wake up and face the reality.
OC homes are significantly overpriced! It doesn’t take a genius to know that. The commonsense of a three-year old can understand.
By the way, you guys need to distinguish value and price so people won’t get confused. Vaue is indeed inherent in the property. Properties do have an intrinsic value. The craziness of the market sets the price. Reality is that OC homes are priced 3 to 4 times more than their value.
I mostly feel bad for people who took his advice last year and bought, out of fear thinking they would have been priced out had houses appreciated by 7% in 2007 like he predicted.
Coincidentally, these are probably the same homeowners who would benefit from a non-realistic loan restructuring he calls a “helpful plan for existing O.C. homeowners, who bought in the past 24 months.”
I wonder if Gary Watts asks his realtor audience how many had listings expire or homes lost to foreclosure.
This is called pent up supply.
I would love to know Garys qualifications for calling himself an economist.
Question: Are the use of exclamation points something that they teach realtors to use at every opportunity or is the use of it an indication of a potential Realtor? I ask because they are unbiquitous in the majority of home descriptions, as if the writer were jumping for joy, and Gary uses them at the end of every positive statement.
So which comes first, the job or the exclamation point?
Jon-
I really appreciate your coverage, but I really think it’s time to replace Mr. Watts with a realtor who is a bit better with the facts.
For Mr. Watts to poll to find out that there are buyers out there is pretty stupid. The question is what is the percentage of sales in contract vs. listings that this group of realtors had, which of course he would never ask.
Please consider a professional for this slot, and not someone who has no backup or basis for his opinions. Otherwise he is no different than any of us bloggers. And you don’t interview us for your column.
Inventory is through the roof and pool of qualified buyers is way down.
This is not a formula for stability. This guy is an idiot.
“I was surprised by the financial crisis – especially since subprime makes up only 5% of the entire loan market while the Alt-A market (better than sub-prime but less than prime) makes up only 8%.”
Gary might want to look at the Loan Performance data for California and notice how much of the So. Cal. market is Alt-A and subprime..
I hope that photo has been stretched because that guy’s head is huge!
I wonder if he also asked how many of those people who were pre-qualified also had to sell their current home at the WTF price? Hmm.
Whats funny is that for all the insults and personal attacked hurled at Watts on these bubble blogs, realtors and buyers/sellers will still value his opinion more so than the greedy vultures who keep preaching about the coming end of the world. Watts gets air time in the media and all you arm chair experts/speculators are relegated to hurling insults on bubble blogs that many never bother reading.
Don’t forget that the Orange County Register is guilty of providing front page coverage to this buffoon, with crystal ball no less. Despicable. Yet the permabulls post here as if the OC register was trying to crash the market with this blog.
Look at reuters today: the credit contagion is limiting the ability of state governments to borrow so as to fund their deficits. But that is our way, from Uncle Sam, to the states, to the consumer. Just party on borrowed money and worry about it later. The bills are coming due now.
But why worry, Gary Watts says the market is coming back in a big way, nobody needs to work, just buy some OC real estate and enjoy the magic carpet ride.
There is nothing wrong with presenting both sides of the story.
This is not a communist country where freedom of speech are suppressed.
People here should be intelligent enough to reach their own conclusion.
Jon, Can you post Gary’s interview on the front page of Sundays marketplace section?
“Watts gets air time in the media”
Doesn’t make him right. We will see what happens in 2008.
Wrong in 2006, 2007 and god knows how many other times!
Did you ever find evidence (in writing with a link) when he was actually correct? I have never seen any!
“I was surprised by the financial crisis – especially since subprime makes up only 5% of the entire loan market while the Alt-A market (better than sub-prime but less than prime) makes up only 8%”
That is a total fabrication! Jon- why dont you challenge this clown when he lies??? Do we have to do all the heavy lifting around here?
Where is Pat “Taco Industrial Complex” Veiling? Can we get his opinion (spin) too?
well of course people want to own a home, that doesn’t mean they are going to buy a home - or will even attempt to anytime soon.
Hey Truthi…..
Your typically mean-spirited comment:
“Watts gets air time in the media and all you arm chair experts/speculators are relegated to hurling insults on bubble blogs…”
Shows only how disconnected you are.
Maybe, just maybe, we might instead be some of those…”qualified buyers waiting to buy” … that all those realtors so obediently promised Gary they were working with.
The real question Gary should be seeking answers to is, “What exactly are those qualified buyers waiting to buy?”
Guess what, sweetheart, we aren’t waiting to buy overvalued real estate — real estate priced at a level that was only supported by the bogus exploding loans of the past…..the loans that allowed buyers to live for a short time in homes that were priced higher than what they could hope to be able to pay for.
There is the simple and clear problem in a nutshell.
Why you, Gary, and so many others with a vested interest, believe a return to a “NORMAL” market would be a “good” thing is beyond understanding.
PDU, First of all I am not truthi . Second, you are the last person that should be pointing fingers at people with a “vested interest”. You are no different than Watts and other realtors. You are just pushing your agenda from a different angle.
Shockg,
You may add that pdu is another idiot who think he can see the future.
Recession Is Unavoidable
The December ISM Manufacturing Index plunged to 47.7, its lowest level in nearly five years.
Weakness in manufacturing was further confirmed today, with the release of a very weak December jobs report that revealed a loss of another 31,000 manufacturing jobs.
Anemic job growth (over-all payrolls increased by only 18,000) coupled with an increase in the unemployment rate to 5% are sending stocks and the dollar tumbling.
Evidence of run-away inflation with oil, food and housing priced at artificial highs and a falling dollar at all time lows.
Foreigners passing on overpriced properties in the U.S. but instead scooping up large chunks of distressed and discounted Wall Street Firms, further reducing America’s economic might.
A special thanks to Watts and other shills for creating this ill fated bubble and to truthi/shockg and all the other bubble buyers out there for guaranteeing this recession to be one of the worst ever witnessed of all time.
Actually the dollars were turned into the peso already.
Many Chinese are considering dumping the dollars for the euros.
This guy is the best. I love to here Realtors talking about the market.
cant wait to hear what he says in two years when the market has dropped by 40%
Okay boys and girls, here we go:
a One and-a Two
Housing Plummeting ~ Check
Credit Crunch ~ Check
Fed Cutting ~ Check
Administration Panicking ~ Check
Dollar Dropping ~ Check
Oil Rising ~ Check
Gold Rising ~ Check
Subprime Gone ~ Check
Markets Crashing ~ Check
Inflation Rising ~ Check
Manufacturing slowing ~ Check
And now, the final body blow:
Job Market collapsing ~ Check
Now, does anyone honestly believe this massive ponzi scheme has not lead our great country into a recession?
In case you guys don’t already know, Chindia will rule the world. The US is slowly fading into the background just like the old Europe.
Sensibull,
This looks like it: “Both sales and prices will be up from 2006. Sales should rise to our 10-
year average of 40,100, which puts sales up 10 percent, and prices should rise 7 percent for homes and the 4 percent-5 percent range for condos.”
For all his puffery, Watts is correct about one thing: There is “pent-up demand” - lots of us want to buy houses in OC. But, you know, I also have “pent-up demand” for a Ferrari 599 GTB. That does not mean it makes financial sense for me to buy the Ferrari. Just like it does not make sense for me to buy an over-priced house, no matter how much I want one and no matter how many stupid lenders will give me the money to get it.
What’s missing from today’s real estate market is any sense of urgency to act on that “pent-up demand.” Why? The prices have no connection to fundamentals, there is no evidence to indicate that prices are going up any time soon, and all the evidence indicates that prices are going down. Until prices come down much further, all of that demand will simply remain “pent-up.”
What fortune teller do all these realtors subscribe too? I have never seen a more brain washed group of individuals make more irrational statements about our local housing market. Hello, the stock market is off to it’s worst start in twenty five years, unemployment is at it’s greatest point in four years, weak dollar, price elasticity, cost push inflation, need I go on? Gary, may I suggest you think about dusting off your high school diploma and search for a job where your opinion doesn’t count and you punch a time clock. Try attending Grad School before you talk about market forecasting.
Having had dinner a few months ago with a prominent CEO of a local home builder a comment he made was extremely hilarious “I knew the game was out of whack when I saw strippers carrying century twenty one business cards driving mercedes”
Truthi - the only “…idiot who thinks he can see the future” on this entire page is Gary Watts!
I, as well as many others, welcome both sides of a particular debate.
Gary’s pathetic answers are the missing “side” to a debate that no one is having.
His job is not to spout facts, but rather to motivate Realtors(R) to pay for his services.
You should choose who you defend more carefully next time.
mbagrad,
at least you have a logical argument in this blog.
Gary - I’m not sure in what areas Realtors service who raise their hands when asked if they have prequaled a buyer. I work out of a broker’s office in Anaheim and couldn’t begin to tell you how many transactions have dropped out of escrow because the buyer couldn’t get the loan. I, personally, have spoken with many prospective buyers waiting for prices to drop further. I’m afraid that interest rates will begin to rise before prices drop significantly lower and rates will begin to rise. In fact, rates have all ready risen. Just ask these homeowners who have financed out of their 1% ARMs for 5-7% conventional loans if rates have risen. The Fed is running out of opportunity to drop rates lower and still compete higher returns for over-seas investments.
thanks TRUTHI for telling me something
I knew last year… while you were buying your
over priced house
rants,
i only paid $9,999,999 for my 2 bedroom condo in CDM.
The only good thing about the last year and 2008 will be less realtors in the world. Now if we can do something about lawyers………….
Of course realtors will raise their hands when you ask them whether they have qualified buyers waiting to buy. Most of them haven’t sold a house in months and don’t realize that it is more difficult to get a loan now.
On top of that they probably don’t want to lose face in front of their peers by admitting they have no clients left. Or that their “qualified buyers” will only buy when prices become reasonable and delusional homesellers face reality.
I agree with others, Gary’s answers are pathetic, just another David Lereah on a smaller level (but just as delusional).
A recession is coming? Great, just what we need.
who want to buy my 2 bedroom condo for 10mil?
Quoted from up above
“Eyeball: Chances we’ll see a bottom in 2008?
Gary: The first question I ask my Realtor audience is: “how many of you have qualified buyers waiting to buy?” Almost everyone’s
hand shoots up immediately. This is called pent-up demand. As soon as the “fence-sitting” buyers begin to believe the bottom is near, they will once again enter the housing market. Not in a big way, but a way that will show a beginning trend towards a normal market.”
He was asked if he sees a bottom to the market in 08. Does anyone see an answer here or just more drivel from another real estate “expert” dodging a question?
He said that when fence-sitters see a bottom they will start buying again. My answer is DUH, any moron knows that. You’re still not answering the question of whether or not you personally see a bottom this year. I just think he’s too afraid to answer at this point. He doesn’t want to tell the truth because his answer would be no, that he does not see a bottom. If he didn’t want me to answer the question for him, he should have answered the question he was asked himself. Also, I seriously doubt that subprime makes up only 5% of OC mortgage and alt-a at 8%. He is in dream land. I’m sorry, but 87% of mortgages in OC are not A-paper loans.
Truthi/Shockg,
The blazing insight (or perhaps incite might be more correct:) from your double response only illustrates what I meant by referring to you as being out of touch.
The two attacks - claiming I have an agenda as does a realtor and that I claim to see the future are so far out of line that it’s clear you post just to see your own posts and to incite.
My comments are only about the market as it exists and as it existed in the past and my belief that it is overvalued (by the sellers) as to present rent/buy cost relationships.
I stated (as I have in the past) my belief that today’s asking prices reflect the unrealistic levels that prices reached when buyers bought homes they were unable to afford priced at a level that was only supported by the bogus exploding loans of the past…..the loans that allowed buyers to live for a short time in homes that were priced higher than what they could hope to be able to pay for when those unrealistically low teaser start rates adjusted to where they should have been all along.
Today, not the future, shows the folly of the past. I don’t predict the future, however I believe today’s sellers will not find many buyers at prices based on yesterday’s loan programs.
Jay Leno could use some help with the writers on strike. He should have Gary on his show, this guy is great. He would be great for the ratings. I’m sure his “predictions” increase the traffic to this blog.
lessismore,
Well said and I completely agree. There will always be pent up demand! Doesn’t mean that anything can be done about it.
Rants:
Check out the summit tract in Aliso accross from SOKA
Down 100 gees from the peak of market expansion.
Looks like lower mortgage and tax payments to me!!!
You love garry wats. lloll lloll ribspliter
Time to get ready to come off the bench in 2009 / 10
Tell our wife’s only 2 more years in the 2bdr boxes!!
“My forecast for 2007 appears to have been too rosy! “
No? Ya think?
More like 90% of his prediction was nonsense. What a moron.
“awgee Says:
January 4th, 2008 at 3:54 pm
“My forecast for 2007 appears to have been too rosy! “
No? Ya think?
More like 90% of his prediction was nonsense. What a moron.”
Jon, Are you going to allow the name calling personal attacks to continue? Those who can’t be respectful should be banned.
It seems most of you believe Mr. Watt’s prior mistakes somehow disqualifies him from publicly stating his views. I wonder how many of you bears were personally predicting the market will fall in 2002, 2003, 2004, 2005 and 2006? If you were wrong then, perhaps you should disqualify yourselves from expressing an opinion now? Economics is not hard science. I don’t foresee a market rebound in 2008, but I’m not arrogant enough to believe I really know what will happen. I often find that the level of certainty expressed on such inherently uncertain matters is inversely proportionate to the level of knowledge and wisdom. I do think the bears have it right that 2008 won’t be a banner year for real estate, but reading their comments, I’m reminded of the expression “Even a broken clock is right twice a day.”
I’ve got one for Gary- The demand is constipated.
Everyone and I mean everyone in the media with an education to speak of and a reputation to back up their credibility have all stated OC RE is over-valued.
And this idiot comes out and states it’s undervalued. I’m sorry, I know it’s quite uncouth - but this guy is just a plain ol’ idiot that happened to have been lucky in the past. By the way, the predictions of the past were made by many people, including myself. I have always made money in RE - does that make me a qualified expert for forecasting - HELL NO!!!
But I have a better record than this idiot - at least I predicted this downturn quite closely, including the Fed’s reactions.
And shockg: Watts has a following of realtors. The RE investors I know think of him as something other than a source of useful information. Give it a rest.
His predictions probably goaded a few buyers into the market as well that are now being forced out of those homes and back in to the rental market where they belong. So in hindsight, I guess I can’t be that upset over these over-zealous, self-righteous, and grossly incorrect so-called RE experts. I never got hurt by their predictions and I will be leveraging the fallout they helped sow. Thanks for pointing that out for me.
I am a qualified buyer waiting to buy. Seriously. And I am going to wait. And wait. And wait. Until prices come down, alot. Maybe 2012. And you can express your vitriole saying that I will miss out, but I sold in the summer of 2005. You, on the other hand, sold at a loss. Money talks, _______ walks.
Gary was right one time when he called a downturn. He is right less often than a broken watch. At lease a broken watch is right twice a day.
Anyone who says this a good time to buy is greedy, self-serving, selfish, uncompassionate, and mean-spirited people.
OK, now someone - anyone - including shockg - please show me where OC incomes have risen dramatically in recent years. PLEASE!!!!
Because even as a member of our local chamber of commerce, the info we’re looking at can’t be further from that statement.
Home values have increased several fold in this county and yet there are still some arm chair economists that believe that is not unusual, it’s not an anomaly and wages have risen somewhat to match.
ARE THEY KIDDING ME?!?!?!?
Does he rally believe himself?
“undervalued real estate.”
oops, that’s really believe himself.
Wages did go up along with the values of home…
Wages for realtors and loan officers that is. Now 60% of them are out of work and the ones who aren’t can barely pay their mortgages. I feel sorry for them, but I’ve been in the business and got out of it because it’s feast or famine. Most of them are not smart enough to live within a reasonable budget and save money when times are good for five years so they can survive when times are bad for the next five.
HB Bear: That’s a good point you brought up. The man never outrightly conceded. Anyone with integretiy and a backbone would keep it simple, tell it like it is, admit being wrong, lose the false excuses and backup thier next wave of predictions with promises of retiring if they are proven wrong again.
Truthi:
I have no problem reading other people’s opinions when they are logical.
What logic did this moran present?
His prediction was too rosey?
How about dead wrong.
The only a minor percentage of properties in the O.C. are subprime?
I am in real estate and assure you those are not the facts.
I go to real estate meetings once a week.
The majority are all in disillusional mood.
As far as seminars, they are nothing buy rah rah.
That is all they are and the fools use their credit cards to get in.
This guy is nothing but a baffoon.
BOY OYY BOY THIS IS JUST TO MUCH TRUTH FOR PEOPLE TO HANDLE.
Gary looks like he is putting on some more weight-
Hi Gary:
I am a realtor here in the O.C. I do have people who would love to buy a home here you are right. Problem is they can not afford the price of a home here at this time. They have great credit, long term steady employment and a so so down payment. But a standard tract home costs over $500K and that is for nothing and I mean nothing special. I had a hard time placing my past clients and friends and family into homes I know they could not afford, unless they took an enourmous risk and went with a interest only type loan. I warned them, told them this is a short term answer to a long term solution, they bought anyway. Now they are strapped beyond belief and home prices are dropping so no refi here. I agree there are buyers out there and there always will be, but I think the fools have already bought and the ones who are thinking with their head and not emotions are waiting until prices come down to an affordable price.
on another note-
a free market, please, our country is so jerry rigged, It’s a free market until th eruling parties profits or votes are down “then intervention is needed for the good of all” The free market died years ago.
This guy’s comments should be in The Onion. Hysterical!
Gary Gary Gary
You are an expert!!!!
All i can do is have compassion for u and all that listen to ur fruitless predictions.
Compassion, compassion, compassion
The anger expressed here is mind-boggling. I can actually see the fists flying, the bared teeth, the spittle…. the cavemen with their spears thrown at Mr. Watts and chest-beating with obvious belief in their own perfect clarity of a very complicated subject.
This is a free country. We love free market. Some idiots want to turn this great free country into a dictatorial country by proposing all kinds bailout plans. We need to impeach those dictators!!
Armchair economists to the left of me…
Career renters to the right…
Boy !! This is absolutely amazing to see all these posts against this guy.
This is a perfect storm for the contrarian theory to teach a lesson to
the average Joe’s in this blog !! All I know anything may happen in this market except what eveybody here is saying. It’s just impossible for all these people to be right. There’s not even one person that agrees with this guy ?!!! Look Out !
Gary makes the mistake that many people make with the word “demand” used in an economic context. Demand is a position in which a person can make an action happen. In the case of real estate its is a down payment, proof of income, and a desire to purchase property. Most people have the desire but not the demand. We have a lot of people who “own” property and raised their hands during the bubble when you only needed desire. Raising your hand is easy. Raising money is hard.
Shane - Every one of these people disagreed with him just as vehemently (MORE vehemently, even) last year.
Let that sink in for just a second…
Does this man have no shame or humility whatsoever? How does he live with himself? My god, what a disgusting human being.
“awgee Says:
January 4th, 2008 at 5:49 pm
I am a qualified buyer waiting to buy. Seriously. And I am going to wait. And wait. And wait. Until prices come down, alot. Maybe 2012. And you can express your vitriole saying that I will miss out, but I sold in the summer of 2005. You, on the other hand, sold at a loss. Money talks, _______ walks.”
So when you shorted your house in 2005 did u plan on renting for 7 years? I doubt it. Did you plan on prices going up for another year? I doubt it. I sense that you are regretting your decision to sell and time the market. I can’t figure out why someone who plans on renting for 4 more years spends so much time and energy on a daily basis trying to convince anyone who will iisten that things will get as bad as they claim. Why not give the constant redundant posting a rest and reappear from your bomb shelter in 2012 and tell everyone how smart you were.
Newspapers have to please their advertisers, and real estate agents are one of the biggest advertisers of all. (Maybe they are the biggest advertiser for the OC Register.) So I suppose it’s inevitable Jon has to serve up someone like this Gary Watts guy shamelessly pushing a “buy now” point of view.
I hope Jon will be able to continue offering strong and loud counterpoints to the biased and bad advice given by Mr Watts here.
Bloggers dead on and the so called Pros way off, one day he will be right again.
Does this guy read the news, Gross and many others think we may already be in a recession or headed that way at least they are ahead of the curve.
Pent-up demand just waiting for the it’s ok, they are much smarter than that, a calculator and pencil is all it takes for most to realize it just does not make sense and not worth it.
Jobs, stocks, financing, banking, gas etc… you name it all in trouble to the point that our idiot leader had to come on tv today to tell the people its ok, he probably voted for Bush.
Foreigners will buy and do what, rent it out to the owners.
Housing stock will move because it cost hundreds of thousands of dollars less, but I’m sure he will avoid that part and say, see I told you.
Any hope for a recovery in real estate in 2008 died on Wall St. Friday.
Shockg,
When you thought you were Donald Trump did you forget the fact that he buys at the bottom and sells at the top?
Did you also forget that when awgee sold in 2005 he left the market with one heck of a positive net gain?
I sense that you are regretting your decision to hold on to your property and get angry when you see someone else make a profit, leaving you stuck holding the bag.
Your decision to be Watts’s personal cheerleader was another costly mistake that has cost you hundreds of thousands of dollars.
First time buyers can learn a lot from all your mistakes.
correction - Now, if you are paying cash & you think home prices are going to drop, you may just want to wait. Because I agree, prices are probably going to continue to drop.
a little optimism is correct. the only crashing in my newport subdivision is small waves in the bay created by the newport boat parade. most fun is reading all of this housing crash fables.
alex. the free market is best. high demand for orange county housing is pushing the month rents to extremes. rent is being raised $1,000 a year in newport. that is 25%. rent is going up very very fast. a recent rent open house was filled with lookers. dozens. was being move into next day. price was $4,000 monthly. smart people see this and will buy.
Gary, Fred. Today’s word is credibility (n): The quality, capability, or power to elicit belief
Fred, the bloggers on this board predicted EXACTLY what was going to happen to housing prices year-on-year for 2007. Thanks for the long-winded advertisement for your little show and all, but until you can prove that you had a 2007 prediction as accurate as we, Jon’s readers, had, why should we believe or have any interest in what you have to say? You have no credibility. Same goes for you Gary.
Everyone has had to tighten their belts to make a deal happen. Except for realtors. They still charge their 6% fee. I don’t feel sorry for them. They made a ton of money when the market was booming and they should be lowering their commissions. This would help buyers who are taking a very big risk to buy and the sellers who are having to cut, cut, cut their listing price in order to sell. Why aren’t the realtors lowering their commissions?
Gary, when you said “My forecast for 2007 appears to have been too rosy” – um you mean wrong!!! Lets be honest here folks, basically everyone in the Real Estate market wanted us to believe that the “sky is the limit” when it came to OC real-estate. But they were all wrong, and now I am so thankful that I didn’t jump into the market as a first time home buyer 2 years earlier. I waited, and will continue to wait, knowing that the relationship between wages and mortgage payments must realign. I plan on waiting at least another year, and would be foolish to jump into the sinking ship at this point.
Just keep an eye on these leading indicators so you know when the right time to buy is:
a) OC Employment Rate
b) OC Home Inventory Levels
c) OC Foreclosures
d) OC Wages
Rather than offer some unfounded opinion, or reading one just keep an eye on the numbers here. It will tell you what no body else seems to be able to: the truth!
shockg Says:
January 4th, 2008 at 10:30 pm
“So when you shorted your house in 2005 did u plan on renting for 7 years? I doubt it. Did you plan on prices going up for another year? I doubt it. I sense that you are regretting your decision to sell and time the market.”
Sounds like a sound plan, IMHO, the way prices are falling today and the REO market. The success of the short-play will depend on the price and features of the home purchased to cover the sale. Why do non-investors refer to selling before reaching maximum profit a short? With investments, selling high to buy low is shorting for a profit. With home buying, which is different from buying houses, short selling occurs before any profit is realized. There is a big difference here. I do agree, however, that the cost incurred from the time between selling and covering the sale, has to be taken into account therefore may eat any profit which may have been gained. 7 years of renting at $2000/mo, $168,000 which depends on how much rents will rise coupled with any tax consequence, could make the short position unfeasible.
trs - as we all know, RE is localized. Newport is a diverse market. There are parts of NPB not fit to live in even at $500/mo. while on the penensula or on the boardwalk, you’d be lucky to find a property for sale at just about any price, although I have heard there is a property for sale at $5M which is grossly over-priced. If you’re interested, contact Burr-White, it’s one of their rentals. And no, I do NOT work for them.
Hey HB Bear,
Economists are like weather people, they are usually wrong. I have no interest in predicting the future. I have philosophies that i stand by & that i show people who are educated, who understand what a cash on cash return is etc. Do you even own a home or have any Investment properties? Are you positive cash flow on your investments if you have any?
I don’t really care what happens to home prices personally, because my properties cash flow & I have a “long-term hold” philosophy when I personally buy Real Estate (as if you even cared).
The only thing I told people in ‘07 was to not pay points fees or closing costs on their refinance or purchase loans, because I felt rates were going to drop. And once they did, they could refi to the lower rate for absolutely zero cost. Wait let me guess, you paid closing costs too?
What does the price of tea in Africa have to do with anything that I said! I am talking about how to make money in Real Estate & that now maybe a opportunity to do that & you are worried about some stupid prediction.
GOI - get over it!
Credibility? No, I did not graduate from Wharton like Jon did. What about you? Call the show today & let’s let the listeners decide who they think is right, I encourage you to call our show, so you can make yourself look like a Idiot in front of the entire Southern California market - please give your name when you call - I can’t wait!!!
Get out your facts before you call, because you dont want to look stupid, do you?
Radio tip - don’t stutter it makes you lose credibility - ok HB Bear?
How funny, I am ripping on some guy that probably is upside down in his home & bought in ‘05, ‘06 or ‘07 - sorry had to get that out - Whew, now I feel better!!!
Gary sells real estate-Distorted answers
Shockg-Awgee has it right-
This is all about greed and envy. This housing market was the bad wolf inside of everyone being fed by friends, realtors, loan officers, the government and the fed. The good wolf inside people was toned out by all the rosy home news of the the past 4 years. That rose is empty of petals now.
Compassion and understanding for homeowners finding a place to rent is well and alive in this blog, we dont want to see people homeless but when you feed the bad wolf too much. This is what happens. People who can’t afford to own a home shouldn’t own. They should be renting, thats way better than living in a hut in a third world country.
I have compassion for the people who believed the lies and tried to get in on the american dream. But some dreams need to come from hard work, saving and waiting for bubbles to burst. This bubble is bursting fast now. Expect 20% losses this year alone.
Having purchase paper in the 90’s I can tell you underwriting will be tighter now than ever before. EVER!
Soon we will all be able to live near jimmy, shockg, truthi, gary and the bulls but at a substantial lower entry point. I’ll still be inviting you to any of my parties. Did you feed the good wolf or the bad wolf?
08 is going to hit all of us hard. No matter what they try to do to contain it!
My predictions are based solely on a 30 second informercial!
As a home inspector in Orange County, and being directly involved in seeing the market flunctuations with my business, the inspections of foreclosures, REO’s, short sales (bank owned properties) has increassed 25% of my real estate inspections. Most of my inspections last fall and this winter have been short sales and foreclosure properties, there are good deals out there now. And the market has corrected itself back to realistic values. If you compare the stock market and the 2000 crash, the same thing happened. The stock market crashed due and corrected itself back to realistic values. There will always be a demand for housing in Southern California, we have the best weather, plentiful employment and with divorce rates at an all time high (66% of marriages ending in divorce in southern california) the real estate market will continue to remain steady even with this correction.
Just my thoughts, Happy New Year Everyone… And if you ever need a property inspected, check out my website: http://www.americandreamhomeinspection.net
Thank you,
Justin Watts, Inspector
American Dream Home Inspection
(949)331-2602
Gary’s question: How many of you have qualified buyers waiting to buy? When, if ever has a realtor known what a qualified buyer is? Oh yea, breathe into the mirror….oh look, it fogged up, you’re a qualified buyer.
““awgee Says:
January 4th, 2008 at 5:49 pm
I am a qualified buyer waiting to buy. Seriously. And I am going to wait. And wait. And wait. Until prices come down, alot. Maybe 2012. And you can express your vitriole saying that I will miss out, but I sold in the summer of 2005. You, on the other hand, sold at a loss. Money talks, _______ walks.”
So when you shorted your house in 2005 did u plan on renting for 7 years? I doubt it. Did you plan on prices going up for another year? I doubt it. I sense that you are regretting your decision to sell and time the market. I can’t figure out why someone who plans on renting for 4 more years spends so much time and energy on a daily basis trying to convince anyone who will iisten that things will get as bad as they claim. Why not give the constant redundant posting a rest and reappear from your bomb shelter in 2012 and tell everyone how smart you were.”
It must really piss you off that I have been making an excellent return on my money while you just sit and watch the value of your property depreciate. Or did you already sell for a loss? Why in the world would I care how long I rent for? We are renting a beautiful home in a wonderful neighborhood for half what it would cost to own? Why would I be in any hurry to own again? I am making money and you are losing. 7 years, 3 years, what do I care? I will buy when I can own for less than I can rent? It really bother you that others make money while you lose, doesn’t it?
One other question Gary could (should) have asked his realtor cronies: How many of you bought a home or investment property in 2007? Still waiting for hands to go up……
shockedg - You do bring up an interesting question from which I am learning. You asked how I felt about selling one year early. I think it turns out it was about half a year in the neighborhood we sold, but still it is interesting to note how one feels watching an asset go up in value after one has sold it. Honestly, it bothered me for awhile. The zillow price kept going up, not by much, but still up, and my investments did not immediately go up, at least not by much. It was about 6 months to one year before I was ahead. And it did kinda bother me and I had some small doubts as to whether we did the right thing. After things turned around and it became very obvious that the residential real estate market was heading down, and way down, and our investments really started taking off, I felt much better. I guess it has been and will continue to be a learning experience. I would say that you can time the market, but maybe not exactly. Or maybe I can’t time it exactly, but exactness isn’t important. It may be more important to be able to believe in one’s position, unless proven wrong, and hold that postion until proven wrong. It seems one does not have to sell at the exact top nor buy at the exact bottom. You just have to ride a majority of the trend. And the larger bull and bear trends are not all that difficult to predict or observe. Not even for someone of average intelligence, such as myself. It would also seem important to be able to go against the crowd, (”If you don’t buy now, you will priced out of the market forever” or “Owning will never be cheaper than renting”), and taking action which others look down on you for. When we initially sold, our friends and aquaintances gave us wierd and sympathetic looks. Now, they just avoid the subject. Anyways, yes, it was a bit bothersome when we initially sold, but renting is quite pleasureable and profitable for now.
Anyone who has owned realestate in the past 40 years has weathered this storm before. No big deal. There are too many whiners out there expecting to make big money on their “real estate investment”. They forgot that it is a home first. Who was the idiot holding the pen when you were signing the loan docs? If you can’t make the payment, get out. If you can make the payment keep making it, sooner or later you everything will be all right!
“If you believe it is true, then it is not a lie”
Gary can keep sucking winds for the next 4 years.
I’m a Realtor who has been in this business for 10 years, I have seen the ups and now the big down. My nick name at my office is Chicken Little! In 2005 I sold off my investment property’s. In the beginning of 2006 I told everyone we are heading into a really bad year, you need to cut your over head expenses as an agent. Most everyone laughed at me! My office manager said things are going to pick up. What I did to see where the market was going was go to the library and research the last market crash. All the same players are in place. We have a Bush in office, oil out of control, interest rates going up unchecked, people losing there jobs. Homes not selling.
Does this sound right so far? NAR is saying the market has hit bottom. Well if you thought 2007 was bad get ready for 2008. The Feds have unemployment at 5% right? They are way off on this number. We have a lot of 10 99 people out of work and the Feds do not see them in the unemployment stats. You have, realtor’s mortgage brokers, escrow, title, and everyone who have been making money over the past 5 years whom were self employed. In the OC this number is huge. Many of whom can not find work. This number is going to blind side the Feds this year. We needed a market correction for a while. People were buying to get rich and not for habitat. Right now the buzz word is Short Sale, the problem is the banks have not gotten the news that the market has dropped or the people whom I have been working with just don’t get it. They don’t get that the home they loaned money on is worth much less then what is owed. This summer if the banks do not get with the program they are going to own a lot of property’s. No one knows where this market is going. I can tell you this, we have not seen the bottom yet. Chicken Little!
Mr. Lansner:
Why would you keep interviewing this guy, especially when it has become abundantly clear he’s a propaganda hack? At least that other consultant admitted he was WRONG. This guy is just a spin doctor.
How many years in a row of being woefully wrong and not even man enough to admit it, is it going to take until this guy no longer gets the free publicity?
If anyone basis anything regarding real estate on Zillow, I feel sorry for them. This is the worse website for evaluating properties that has ever come on the internet. They are constantly 25 to 50% incorrect on home values. Example: 5000 sq. ft. home on golf course in Laguna Niguel valued by Zillow at $1,100,000. Tract home on block behind, 3200 sq. ft, valued at 2.3 million when the last sale in that tract on same street and same view (larger home 3500 sq. ft.) went for 1.2 million. I can point to same mis-values in Laguna Beach, Corona Del Mar, Coto de Caza, Huntington Beach, etc. This site should be banned from the internet.
Bill - if you don’t like a value Zillow places on a property, enter your own value for that property. Zillow is the Wikipedia for RE, after all.
Zillow doesn’t factor in views and other amenities. Its a good tool for interior tract housing, that’s about it.
Slimy Bill, I am not Watt’s personal cheerleader. I have never been fond of realtorswho blindly quote his predictions. What I don’t like about you guys is that you attack and insult 90% of the guests on here. It amazes me that so many “experts” who go on record with their real names seem to not agree with the extreme doom and gloom messege being spread here. Are some of them paid shills? Im sure they are but you guys dismiss anyone who doesnt agree that prices will fall 50% and wont recover until 2012. You have a complete lack of respect for the people Jon takes the time to talk to about whats going on out there. people in the trenches. Names like moron, idiot, etc are constantly thrown at these people. Grow up.
goodness! This Gary Watts guy is just too much and never goes away. Does anyone take this guys outlandish predictions seriously anymore?
Another real estate pro thats not doing real estate. But instead doing a radio show. It must be really tough out there.
So Fred, how much does it cost to “buy in” to this opportunity of a life time?
Let me guess, “Only 10 flex payments of $59.99?”
But you’re right Fred, there are markets appreciating. And its not Orange County.
Why predict what interest rates are going to be?
Why predict when prices bottom out?
Look for affordability, then wait for normal sales volume and normal year over year price appreciation. Its not like prices are going to blast off again once these criteria are met.
I don’t know why the bulls get so upset on this blog. You would think they want prices to go down that way they can buy,buy, buy, that 2nd or 3rd investment property.
I guess you would be an upset bull if you were denied access to the housing atm machine or have a time bomb loan. I know there are a few bulls here positioned properly. They could care less about the direction of the market.
Thanks for the invite Fred. I think you should hang out. You might learn a few things about the market here in Orange.
“It must really piss you off that I have been making an excellent return on my money while you just sit and watch the value of your property depreciate. Or did you already sell for a loss? Why in the world would I care how long I rent for? We are renting a beautiful home in a wonderful neighborhood for half what it would cost to own? Why would I be in any hurry to own again? I am making money and you are losing. 7 years, 3 years, what do I care? I will buy when I can own for less than I can rent? It really bother you that others make money while you lose, doesn’t it?”
awgee, So far prices haven’t fallen far enough for you to be boasting about making huge profits. Your profits only exists in your greedy little head. If you factor in moving and transcation costs, you acutally have a long way to go before you can boast about making a significant profit. I could care less if you rent for the rest of your life. if you open yourself up for the arrogant boasting then you should expect to be challenged. This is afterall an open forum where all view points are welcome right??
shockg,
You must be as stupid as Gary and Truthi.
I sold at the top, summber 2005.
The interest on my money pays 75% of my rent (my rent is currently at $1,700 a month for a 2 brdm. & 2 bath condo.)
The house that I sold is worth about $150,000 less.
Do the math.
Also, we post on here because the ocregister.com and Jon allow us to.
Why do you bother reading all this truth (or negative information) if it only confirms what you know is correct down deep inside?
Just an FYI, selling a house and going cash (what I did as well in Dec 2004) is not shorting the asset. However if you want to short it you can use the Housing Futures on http://www.cme.com. I’m looking at Aug/Sept after another 15% or so to get back in. But I have an anxious wife and a family so I am probably willing to buy a little sooner than I otherwise would.
shockg:
Oh sorry, forgot to mention, I actually planned on renting for 2 years.
But prices just keep coming down, so now it has been 2.5 years (LOL)
So ,you can rent less money than own? No chance dude. As time goes on you will be priced out of the neighborhood you live in. When do you want to retire? And where? More than likely you will start complaining at that time about the high cost of rent and taxes. Oh, and wait ’til then to buy, I’m sure the prices will really drop by then. Oh well, priced out of the neighborhood? Maybe you will fit in in some nice little town like Banning or Boron for retirement. My bet is you are a typical complainer and we will be better off without you anyway.
Scary Gary….that’s what he was called in the 90’s. Just as in every up market, there comes a stagnant or worse, down market. People have to catch up with the prices. It can’t go straight up forever without a breather. In the early 80’s Volker , the fed chairman, raised rates to offset 13% inflation from the Carter years. RE sales stop due to rates at 17-18% fixed. Can you imagine what it took to qualify and yes I mean qualify ,cause there weren’t all the programs for stated income like the past decade. So 17% and high prices from 5 years of going up 20% a year in So Cal. Not many bought. The end of the 80’s had people going again for housing at high appreciation levels. By then there were S+L’s making bad decisions and helped many qualify.
Then Gary Watts says, hey wait..i think prices may go down. And the 50% increase by 1991, in the realtor ranks , the new ones without knowledge of the prior downturn all said Gary was a scary guy and also a genius. But what did they know. They had no comparisons and the market stayed down for 5 years.
During that time 90’s Subprime lending grew leaps and bounds. OC became the leader in that business and had most of the largest lenders. In house mortgage brokers for the RE offices were pushed to just make a loan so the RE salesperson could get their commission. Fraudulent income stating, over valued appraisals pushed by the mortgage people to meet the sales price, no downpayment, no reserves required ec..made this a circus. Now it has caught up to us and will take some time to get back to normal buying and selling. Banks will not do 100% any more,certainly no stated income, no downpayment and you could get that with a credit score under 580. This all when the buyer would say I can’t save, I can’t pay the current bills I have now and can’t prove any income……….shouldn’t that have a been a clue that when times get tough these buyers will not stay in their homes, while the values go down. But the wall street people say no problem…..we’ll charge rates that will cover the 5% defaults and the appeciation wil take care of the rest. Send us your loans….we’re hungry!
During this time RE sales people said wait…….I need to buy also. Everyone is making too much money……..and I need to also. So they got in the buyer mix.
Influx of immigrants and business booming in OC brought more.
Now the bad credit borowers, the borrowers that took out a neg am loan with small DP, the RE sales people that use to make lots of money now will have trouble keeping their primary residence since sales are off 60% for more for the average RE full time sales person. What all the new people didn’t think of…..was that when times get bad for sales……..you shouldn’t be investing in the same business that you get your income from.
All of these sectors are gong to make this situation worse. And it hasn’t played out ……….yet. Banks take 6-9 months to do a foreclosure in these times allowing for every possiblity for the borrower to get right. That started 4-6 months ago and the peak isn’t here yet. Then the RE people and some others that invested with 100 % NOO loans will have gone through their savings and the neg rents will start to eat up their reserves and consume their extra money. They will all add to the inventory. Many people are trying to refi but the banks are closing down in OC. It is in a distressed market according to pmi companies and others. This forces lenders to max finance 5-10% less in max loan sizes. For those that put 20% down in the last 2 years, they are probably being told that their neg am loan balance went up 7% and their the value went down 10% or more. Why? because the only comps are bargain sales and not many being done. Therefore..no comps…no values to bring in near what is necessary. And its going to get worse, since there will be more inventory hitting the market. That will slow the sales cause there will be more look at and slower decisions too purchase.
2008…..??? don’t think so …!! 2010..maybe if the fed lowers the discount and fed funds rate to 2% or less. With inflation…..we’ll get higher values based on hard costs to build ( not appreciation) and lower rates will get people into houses they can’t afford now. Once the inventory dwindles..we’ll get appreciation…..maybe in 2012 or after.
And a comment on Gary Watts…….what are his credentials that the Register gives him credence for? Does he even have a bachelor degree? And if that is all….why is he an “economist”? Does he have acess to data that a university professor have by subscription and research.
Laderarenter - When we initially leased our home, I did some checking to see what the owner’s mortgage was because I did not want to deal with foreclosure and not getting our deposit back. Do you have any concern that it may be difficult to get your deposit back since it sounds like the property you are renting may be foreclosed? And if you are concerned, what can you do about it? I appreciate any info in case we lease again from someone else.
Congratulations on your property sale and timing the market. Don’t you find it curious that the realtors all say you can’t time the market?
A little something for Fred Solomon to to disclose to those he’s pitching North Carolina real estate to:
—–
The News & Observer from North Carolina. “Record numbers of homeowners in the Triangle were threatened with losing their homes through foreclosures in 2007. Foreclosure proceedings were filed against 7,390 homeowners in Wake, Durham, Orange and Johnston counties.”
“Because the state largely was left out of market speculation that left many areas glutted with overpriced homes, foreclosures in North Carolina are proceeding slower than the national pace.”
“The increase in foreclosures is already swelling the inventory of unsold homes in the Triangle and could depress prices that have continued to rise throughout the national housing slump, said Bernard Helm, a residential sales consultant.”
“The inventory of unsold existing homes in November was up 24.5 percent to 13,107, according to the Triangle MLS. In 2007, total closings were down 5.4 percent in the first 11 months.”
“Most of the increased foreclosure filings are in urban areas where home sales and populations are concentrated, or in resort areas where there was more speculation. Filings increased 20 percent in Wake County to 4,461 and 11 percent to 7,943 in Mecklenburg County. In New Hanover, where many oceanfront homes are sold, filings rose 27 percent to 714.”
“‘Home prices in the Triangle have not dropped, but increased foreclosures will increase the inventory of homes on the market for sale and that will tend to put steadying or downward pressure on prices,’ Helm said. For sellers, ‘it’s going to be more difficult to get what you want — there’s more competition.’”
—–
Stay tuned……..and don’t buy the pitch that All Real Estate is local.
The last three (Bill) posts were not from me, but Bill #2 does make a lot of sense.
I don’t think I can take Fred seriously because he seems broke since he has to skim free advertising off of Jon’s blog rather then taking out an inexpensive ad in the paper like you would think someone of his statue should.
Quotes like this from Fred make me laugh, “Who the _ _ _ _ cares about what is going on with home prices here in So Cal”
You’re kidding right?
People are making the most important financial decision of their life and you don’t think price should matter.
Do you really want people to buy now and pay extremely higher payments then what the properties are actually valued at, therefore making the percentage of foreclosure a real possibility for buying at such high prices?
When affordability is at 4% in OC, shouldn’t people care about what’s going on with home prices?
Who cares if prices are higher a hundred years from now if their too expensive to buy right now.
Instead of comparing prices to interest rates why don’t you do something logical like compare prices to family’s incomes?
Laderarenting and Awgee-
We were one who sold Aug 2005. Like you two, our interest off the earnings pays a good portion of the rent. Our home skidded up another $20K-$30K in the 6-9 months after we sold, but if you factor in our loan pmt plus prop taxes plus upkeep, I figure we were about $10K-$15K from the top. On an $800K price, that means we sold at about 98%-99% of the top. I don’t know about you, but getting within 2% of the top of a market trend isn’t bad in my book.
I also agree that no one can time the market, but we can see trends and tops or bottoms developing.
Yes, my transaction costs will be high. But even if it cost me $56K (7%), if the house goes down in value $150K (it has blown past my net sale price after closing costs by about $25K and is still falling), I will feel fine about renting.
This bs that homeowners shouldn’t worry their little heads about overpaying for property is really disheartening. It reminds me when a car salesman thought that telling me that the color of the $30K car matched my suit color (I am female), that somehow my little head would think that would make it a good reason to buy. Are the RE bulls on this blog really that immoral? Self-interest is a reason, but where do you draw the line in blatant deception of your customer.
It is truly buyer beware when dealing with the likes of Truthi and Shockng and Watts.
I’ve been investing in O.C. for 31 years and have been through two market bottoms. I’m constantly amused by these so called “experts” like Gary Watts who always talk about “pent up demand” just waiting on the sidelines for prices to bottom so they can jump right in. NOTHING could be further from the truth. The reality is most buyers buy at the TOP. In fact, there are more buyers at the top of the market than at any other point in the cycle, while the fewest buyers are always at the bottom. Here’s why: Bear markets slide a “Slope of Hope”. The most optimism is at the top, and, and as the slide begins - slowly at first - buyers and sellers hold out hope. Eventually, as the slide accelerates and deepens, they give up that hope, one by one, until at the bottom, you find the LEAST amount of buyers and the MOST amount of sellers. That’s why the MORE “pent up demand” you hear about , the FURTHER away from the bottom we are - it means there’s still too much hope. And speaking of bottoms, know how you can tell when we’re there? You’ll know we’ve reached bottom when NO ONE (the masses) is talking about Real Estate any more. At the top, EVERYONE from taxi drivers to waitresses are touting R.E., and as long as everyone’s making money, it’s all anyone can talk about. At the bottom, R.E. will be unpopular, & won’t even be discussed, except by the FEW investors who will then return to begin the next cycle. Good luck.
I sold my stock portfolio in late 1998 and cried all of 1999 and 2000.
I bought my same portfolio back in 2002 and didn’t care.
If you got within 2% of the top of any market, congrats!
LaderaRenter has it correct. If something you own rents for $5K and costs $12K a month to own, you’re just plain stupid if you don’t pocket the $7K.
I don’t care if you’ve owned if forever and you are free and clear. In that case, you’re ahead $12K a month. But SOMEBODY has to come up with $12K a month at some point to justify the price.
Someday rentals will be $12K a month. And someday oil will be $500 a barrel too.
sorry: should of read “you’re just plain stupid if you don’t sell and pocket the extra $7K - in one lump sum, all up front.”
My apologies.
“Are the RE bulls on this blog really that immoral?”
Yes
Shockg:”I can’t figure out why someone who plans on renting for 4 more years spends so much time and energy on a daily basis trying to convince anyone who will iisten that things will get as bad as they claim. Why not give the constant redundant posting a rest and reappear from your bomb shelter in 2012 and tell everyone how smart you were.”
Its funny that you don’t take your own advice, you are doing the same thing just taking the other side of the argument.
Despite the fact that renting at 5k is much cheaper than a true purchase cost of approx 12k a month, because of the widespread use of the pay-option (negative am) arms, a lot of speculators were able to buy these homes and rent them back with little loss in cash flow. The payoption arm for my home, allows a mininmum payment of $3200 a month (only can go up 7.5% a year), with taxes and home owners, plus 2nd mortgage of $1000, the landlord’s ‘cash flow’ cost is about $5500 a month - so they are only ‘losing’ $500 a month. However, the interest accrual is more like 8 to 10k a month, that is causing negative amortization. Once the landlord’s loan “recasts’ - that is, gets to 115% amortization, then they must make payments like a regular amortizing loan - which means, their paymetn jumps to 12k a month. The landlord’s view is, why worry, (originally in 2005), we can simply sell later in 3 years for a 70% profit. Now- with the down turn, they are praying for Gary Watt’s turn around. In the end, because of California’s Anti-Deficiency Laws, when they lose the homes sometime next year, they won’t owe anything and simply walk away. Its easy to do this when people were getting the pay-option arm for 80-90% of the purchase price, and a second loan for the remaing 10%.
Typical Ladera Ranch/IRvine/Talega method of purchase in 2005 and 2006.
With respect to a foreclosure on the home I rent, - I have research database to check for a notice of default, and anyone can also check the OC tax collector’s website to say who’s late on their property taxes. Both good signs that they end is near for the landlord.
On timing the market - yes its very hard to time, but I learned from the 2000 stock market- not to get too greedy, and once ‘the cab drivers’ or “Shoe shine boys” are talking about real estate (or stock market or whatever) - then I know that the investmetn class is overpriced.
I thought the tales of people shorting the family home were overstated, but each week at the blog brings several confirmations of exactly that. I guess it’s not penciling out yet, or they’d just be kicking back and enjoying their lives.
“I have research database to check for a notice of default, and anyone can also check the OC tax collector’s website to say who’s late on their property taxes.”
I do this also, but I am curious if you have any concerns that it will be difficult to get your deposit back if your landlord gets foreclosed on?
As a full time Realtor I can tell you that yes I have qualified buyers who are waiting for the market to hit bottom. I am also representing four couples who are buying because they want to own a home with the intention of raising a family and not just purchasing RE as a get rich scheme. The population is growing and we can not avoid it. 30 years from now when the current renters are still renting my children will be their landlords because their father was smart enough to see real estate as a long term investment. To the person who asked if Realtors purchased properties in 2007 the answer from me is yes. You may think I am not very smart for purchasing last year but I have the credit, down payment, and I have positive cash flow on the two properties I purchased. I also plan to buy this year. I am not alone either, I am seeing more and more foreign investors buying property in Orange County and in my office a large percentage of these investors are buying with cash and not using our banks. We have represented buyers from Asia, Europe, and the middle East who purchase property in California just to send their children to our schools. In fact I know of kids that live here alone attending our schools while the parents are abroad. We need to wake up and see that we live in one of the most sought after locations in the world. So lets stop thinking instant gratification and start seeing real estate for what is has always been, a long term investment.
Laderarenter,
I too have sold my home here in ladera, and am currently renting. The house that I am renting, the owner is negative about $5200/month. Going to the courthouse is a pain, do you have a more efficient manner of gathering data on these loans?
awgee,
I think there is a very good chance we can kiss our deposit away, but if the bank ever asks you to move out, I would think they may be willing to sweeten the deal to have a cooperative tenant move out in a timely fashion. Anyway you pencil it out, we are better off on this side of the real estate trade.
Bored said:
“I thought the tales of people shorting the family home were overstated, but each week at the blog brings several confirmations of exactly that. I guess it’s not penciling out yet, or they’d just be kicking back and enjoying their lives.”
I scratch my head every time I hear you or someone else say this because I’d like to know just how one “shorts” their own home. Last time I checked, individual homes were not backed by a publicly traded security. So i’d like to know just how you envision someone “shorting” their own home.
Do you even know what the term “short” means?
There isn’t a better word for it.
In reponse to the landlord’s default or loan status, there are several websites available to the public (Realtytrac.com or foreclosures.com) are but two. There are also legal databases that one can use as well.
With a default notice, its three missed payments. After the default notice, it takes 3 months (usually) to have a ’sale date’ on the home. With respect to the deposit, once I see a default notice, play hardball with the landlord, and to be honest, I would plan on not paying the last month’s rent unless the landlord agrees to place the deposit in a trust or escrow account. (hopefully, your deposit is only one month’s rent, or slightly more, at best).
For anyone on this board, don’t get me wrong, I love real estate, and buying a home is usually preferable to renting. - but this real estate market is so out-of-wack with any normal price/valuation formula. Now that all of the title officers/escrows, mortgage brokers, realtors, and other related real estate finance and other people losing their jobs or taking huge hits in pay, coupled with the elimination of NINJA loans and other dubious real estate finance methods, there is simply no more hot air left in the bubble. People will have to start buying homes with real fundamentals, and the current pricing will at best case, not see price increases for five years, let alone what decreases we may see in the meantime.
I look fw to buying a home, and don’t even have to time the market perfectly, but I need to feel comfortable the price depreciation has slowed or stopped - right now, its a free fall. In South OC, inventories are at a 15-24 month supply - that’s historically unprecedented. This figure looks at middle-upper class homes $750k to $1.5m.
Only the 4+million range may do ok, as those homes are purchased
mostly cash from truly wealthy people (stock options, cash holdings) - and were not financed by exotic loans. Time will tell . . . . . .
laderarenter - Thanks for the info.
Spanky - I do not think I will run into the foreclosure situation with our present landlord as he is running a positive cash flow. He bought in 1996. But, I like to be prepared, and want to know how to be prepared if we rent from someone else in the future.
In order sell short, one must borrow the asset first, then sell the asset second. It seems many folks use the term short sale to refer to selling one’s home for less than the mortgage amount. Using the term short sale to describe the regular sale of a home shows not only ignorance, but also envy of those profiting from this market.
Main Entry: 1short
Pronunciation: \ˈshȯrt\
Function: adjective
11 a: not having goods or property that one has sold in anticipation of a fall in prices
I don’t think there’s a word for someone selling the family home in hopes of buying an equivalent home at a lower price. We should make one up.
“I don’t think there’s a word for someone selling the family home in hopes of buying an equivalent home at a lower price. We should make one up.”
Instead of one word, howz about: “Sell high, buy low.”?
If you make enough predictions, you’re bound to get one right once in a while.
Been a long time for Watt’s
Why is anyone listening to this guy?
Sure Gary,
keep talking.
Thomas, it’s quite simple. Call it what you want. Sell high with the jope of buying low. Many have done just that on this blog which makes them shills of sorts. You don’t have to a realtor to be a shill.
shills - Weren’t you accusing others of calling names? Sounds like the word “hypocrite” is appropriate here.
hope. Sorry
Since I’m listening to Gary Watts’ shameless peddling of a bursting bubble, maybe I can also ask Henry Blodget if it’s time to jump back into JDS Uniphase.
It’s amazing this two-bit carnival barker gets any ink.
Just went to a timeshare presentation in Maui. Found Watt’s and listened to his shpiel. Sounds the same in Maui as it does here. You know how property values are always going up and don’t miss this buying opportunity. Came back to the room and found dozens on FSBO websites for 30-50% off the price I was just offered.
All kidding aside, those that think you can’t time this market are deluded. Buyers! wait until you see the mortgage payment be so close to the rent that it seems irresistable and the time will be right!Those that wait for this will be doing what every other smart investor I know is doing.
Thomas,
Truthi/Shockg/Bored…..they are all one and the same…..I loved her standard evasion/ response to your challenge on using the term “shorting” a home:
She said: - - “There isn’t a better word for it.”
Pathetic……of course there isn’t a better word for it. It’s a concept that doesn’t exist, an event that can’t happen. There is NO word for “it” :))
PDU. There 2 words for it. Greedy Vulture.
And the word for someone who calls names after decrying those who call names is “hypocrite”.
Watts speaks the truth. Now is a great time to BUY BUY BUY!!!!!!
I’m confused. Why is someone a “shill” because they say they sold high with the hope of buying low? ..As shockg stated
and why are they “Greedy Vulture[s]?”
Seems like good business choices and planning to me.
WOW, What shortsightedness! You’re buying shelter over your head. IT IS NOT A SHORT TERM INVESTMENT. I’m glad no blogs were around when I bought my first home. I might have read, listened and believed. I was just a dumb college grad and knew I hated rental housing. It took several years to save the 20% down, I had to work three jobs just to qualify for the loan, ( Oh, and we women were not automatically granted a loan. It was a three month process to prove that we could and would repay), we had to spend three to four hours in a gas line to fill the tank, Jimmy Carter was President and interest rates went to 17%. You whiners have no clue what a bad economy is!
You also have no idea how demographics impact the economy. The Baby boomers in their peak spending years caused most of the property demand.
Don’t wait too long to buy. HERE COMES GEN Y. We Boomers are 78 million and the Gen Y’ers are 79 million strong. In the O.C., Gen Y is almost double the number of Boomers. THE SNOOZERS WILL LOSE.
Used House Salespeople only know one thing.
Buy now!, Buy now!, BUY NOW!
Gail, I agree with you 100%. I was a college grad in 95 and sold my car for the down payment of my first house. I rode a bicycle to work (ten miles round trip) five days a week for 9 months so I could own my own home. The people that are advising everyone not to purchase are the ones that don’t understand the concept of a long term investment.
The only thing is Gail when you bought with your 20% down, you didnt see it evaporate in 2 years. Whats wrong waiting while the market is in decline?
I am certain if I wait another 6 months I will easily get another 25K off of my prices range. Not only am I saving 25K I also saved 5K in down payment and I also made money on my total down payment. I also saved the double payment that I would have been making as compared to my rent. Not to mention property tax, and for me more likely HOA fees.
That 25K is only about 7% off of what the asking price is now. It seems most non-NAR/CAR related economists for see a drop of around 7%. So I imagine I will be saving around 40K by waiting 6 months.
Seems like a good plan to me.
Shockg: Are you kidding me? Selling high and buying low makes someone a shill?
Are you an idiot? I call that smart investing.
What does your REAL portfolio look like?
You still holding onto IBM stocks? Or were you 3 when that runup occurred?
You make no sense. You attack people that attack bloggers that post absolutely false information just becuase you don’t like people ganging up on someone. You have some real serious emotional problems. This is just a blog and yes, I’m having fun.
You need to relax buddy. Look on the bright side, you’ll be able to extract some equity from those OC homes you bought recently in about 5 or 6 years, maybe.
Oh wait, you just talk smack - you never backed it up with actual RE purchases.
SEE YA!!! Wouldn’t want to be ya!!!
Gail,
Why would you buy something that is declining in value when there is a chance to buy the same product soon, at a lower price? Especially, since it took you 3 job, several years, high interest rates, and long gas lines, to qualify.
Also, I am not sure who you calling whiners, but read your post again. Also, I am not sure you really understand the market, the baby boomers are far from being the sole reason the real estate markets move in one direction or another.
There are many reasons to buy real estate, for most people/families it for the satisfaction of owning a “home” and other emotional reasons. But, it is also typically, the most expensive investment people will make. It only makes sense to be informed and approach the purchase in a prudent manner, with respect to the current market environment.
In my experience, I have learned, that for some people, they are satisfied with an average deal, without regard for what the market might do in the near future. For those “Buyers”, if they feel secure about their employment and income situation and can comfortably afford all costs of home ownership (including a stable, fixed rate loan), and plan on staying in the home for reasonable period of time, then I see no reason why they shouldn’t buy a home now. But, they should also understand and be okay with the fact that there is a potential of home values declining in this current market.
continued on next post…
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It sounds like some of you forget this is a BUSINESS, and some people trade homes, like others trade stocks or other commodities. And investors and homeowners are not mutually exclusive, they are all needed. Without the investor, new home and commercial developments would not get built, etc..
Now, for me, as an investor, I fall in love with the deal, not the house. But, I need those Buyers looking for a “home”, and a fair deal, and ready and willing to buy my product with a longer term outlook, beyond the current market turmoil.
My point is, for some people, it IS A SHORT TERM INVESTMENT, and for others, it IS A LONGTERM PERSONAL INVESTMENT. SO, everyone’s RIGHT! But, I personally, would rather make money in a short amount of time, then lose it in that same time frame.
Hey…on a lighter note. I’m from the east coast and have a hankerin for a Taylor Pork Roll Sandwich. Does anyone know where I might be able to buy Pork Roll? I can’t find it anywhere out here.
Thank you…and back to our regular programming
The pent up buyers may be in for a surprise as most lenders are instituting “declining values” rules which will eliminate most 100% financing even for well-qualified buyers. A shortage of cash will prevent many from exercising the wait-and-see strategy. Many will not have the 5% of own funds required down payment. Any on-the-fence buyers need to position themselves well in advance.
I guess San Francisco and NYC real estate markets are over priced too? They are more expensive than OC. And, add in the twelve other locations in the world that are more expensive than NYC and you are starting to talk about a lot of real estate. And, all just because it is higher priced.
According to most of you, the international real estate crash is going to be tremendous.
Remember one thing. Just because you can’t afford it doesn’t make it over priced.
Get Real, California is still overpriced!~
Proof. I sold my house in Long Beach CA for $789K back in Aug of 07. Just talked to my Realtor and she told me that today I would be lucky to get $689K. A 100K drop in less than a year.
I am writing this from Spring Green Wisconsin, where I bought the same size house on 2 acres of land by the Wisconsin river for $225K!
Yes, it snows a lot out here. But that’s why you have something called a 4×4 with heated seats!
I do have NO smog, NO traffic, amazing beauty. The only thing I don’t have is ethnic diversity. The area is 98.8% white, so there are no mexican radio stations and no gangs to join.
You can look at the glass half empty or half full and depending on whether you are drinking or pouring will determine how you choose to look at the benefit.
Gary doesn’t have all the answers no one does. But I can’t help but notice that there still are people making a lot of money despite the housing market and the mortgage melt down.
Right now everyone is looking for someone to blame. Blame the lenders yeah it’s there fault they let unqualified borrowers get the money. Not that the borrowers should take any responsibility, you would think they would have the sense to know they can’t afford a mortgage that is let’s say, 50,60,70 or over 100% of what they earn? Or let’s blame the realtors who helped them find the house yes they are to blame after all I am sure the buyers only wanted to buy to provide a roof over their heads I am sure they did not have an ounce of greed or just plain old wanting to get ahead by buying the american dream and making a few bucks.
Bottom line no one wants to be Response-Abled. Taking responsibility for actions seems to be a thing of the past.
Sad, as a culture and society we need to get back to basics.
If you borrow, you need to read know and understand the COMMITMENT you are making to the lender. It’s your RESPONSIBILITY, It’s Your Hide, Your Credit, Your Life, IT”S YOU who are going to benefit or feel the consequences of your choices.
So Grow up, smell the roses. If you have not done so in the past, it’s not to late. Each day is a new day and it’s never to late so long as you are on this side of the greens. Remember the only ones with out any problems are those who are 7 feet under. I don’t know about you but I can tell you I am in no hurry to join them!