There is a guy who made 5 or 600 mllion during the dot.com craze who was on CNBC about two months ago. He was saying that even he decided there was never a better time to rent a home in Cali than right now, and that he had decided to sell his home and rent. I've heard from a broker I know in San Diego that you can basically rent a 800,000 house right now for about $3,000 a month.
$3k is what my house would go for on the rental market... thats just above what my mortgage is then add prop taxes $600 month, maintenance and insurance and Id lose money renting it out. I can go rent a nice 2 bedroom apt in or right next to Beverly Hills for $2500 month and get that extra cash working for me. Most of my friends think Im nuts... I just really believe this is the smart investment.
of problems in the sub prime market. The first occurred in December when three sub prime lenders closed their doors. I expect more to come. The 2006 vintage loans are doing very poorly. A UBS analyst commented the loans are on path to be the worst performing loans ever. Here's a link to a great summation on Financial Sense: http://www.financialsense.com/Market/cpuplava/2007/0207.html
Those numbers are just about identical to my place that I'm renting in Westwood (Los Angeles) right now for $2,200/month (a 2 bed / 2 bath apartment). Comparable units next door to me are selling right now for $550,000. A $0 down 30-year fixed loan is around $3400/month in P+I (let's exclude PMI for now). Property tax of about $500/month. Earthquake insurance of $200/month (though most people skip this). HOA fees of $400/month. So if I were to buy this place from my landlord, I would be paying about $4500/month instead of $2,200/month.
In some quarters it's being called a liquidity crisis, the likes that haven't been seen in the subprime sector since 1998. On Friday, National Mortgage News Online reported that Merrill Lynch was making margin calls on certain warehouse customers, asking these non-depositories for more capital. Meanwhile, we're told that higher-ups at Merrill are questioning why it bought First Franklin -- and why it paid so much money for it. Will heads roll at Merrill? A spokesman there told us that yes, margin calls are occurring, but the company is more than happy with First Franklin. We're also told that some Wall Street firms are getting ready to trim back their warehouse lending operations. Which Wall Street firm will be the first to run screaming from the industry, shouting, "What have I done? What have I done?" Stay tuned⦠Lenders Direct CEO Mike McQuiggan had this to say about the subprime carnage: "I see our industry in true recession right now. It's touching everybody." LD closed its wholesale platform on Thursday⦠One source who's been in the industry for 30 years told us that loan buybacks could affect, at worst, 10% of subprime production this year. If B&C lenders fund $600 billion, that would be $60 billion⦠In case you missed it: HSBC increased its loan loss reserve on its subprime business to $10.6 billion, a 20% gain from an estimate it gave in December. What's so strange is that I don't recall the December number ever being publicized. I must've missed it. HSBC also is dropping its stated-income product and will cut its broker network. (Its purchase of Household Finance back in 2003 is not looking so good, is it? Expect heads to roll.) For the full story see Monday's NMN. Don't subscribe? Call (800) 221-1809. Also in Monday's NMN a story by NMN's Bonnie Sinnock about two U.S. firms buying a Mexican mortgage brokerage firm. Mexico's vacation market is booming⦠Subprime lender New Century Financial saw its stock dive by about 40% in two days after saying it would restate earnings because of accounting gaffes tied to loan buybacks. New Century, as you might recall, got socked around pretty good in the B&C meltdown of 1998, only to survive and emerge stronger⦠http://www.brokeruniverse.com/hearing/