If the market were going in their favor, you would probably be hearing them bragging about their winning move.
An absolute bottom not necessary. If I can make the deal work, it is close enough. The idea is I want the combination of my down payment I, the monthly payment, and the rent would be able produce a zero or slightly negative cash flow. That is the loan payment is about the same as the rent!!! I don't want too much negative cash flow. If I have to, I can tolerate up to $200.00/month negative cash flow. It is just like saving to me. Of course positive cash flow is great. The rent will always go up and catch up with the payment. My little down payment will start earning the price appreciation from there. My 20% down payment is a 1:4 leverage. The rent will pay the loan payment for me. OK!!! This is not as exciting as day trading.
Agree with this. I believe the fed will step in at some point if it gets too bad. Too late for some, if there is no rate cut next spring, real estate will be spooky to say the least. No one absolutely knows the future, I am sure the fed is watching closely. The large builder inventories are problematic and buyers are real nervous about buying into a falling market, ditto for small developers.
. November 22, 2006 SouthAmerica: How about if the Chinese and other countries start diversifying from their US dollar holdings â and the US dollar starts declining? In that scenario the Fed might have to step in to stop a possible US dollar meltdown â and the only way to do that it is to increase even further the Fed Funds rate up to 6 percent or even higher. Please donât rule that possibility out. But again, the world is a mess right now, and anything can happen at any time - and the entire Middle East it seems to me - it is spinning completely out of control. .
Housing prices expected to drop more Berkeley economist says recovery will take 3 or 4 years Marni Leff Kottle, Chronicle Staff Writer Tuesday, November 21, 2006 It may take the California housing market three years to recover from its downturn because homes have simply gotten too expensive for most buyers, whose salaries haven't risen nearly as fast as housing prices, an economist said. The median price of an existing home in California will fall 4.8 percent next year and 2.9 percent the year after, Ken Rosen, chairman of the Fisher Center for Real and Urban Economics at UC Berkeley, said Monday during a presentation at the center's annual real estate and economics symposium. That would translate into a drop of nearly $30,000 in the price of a Bay Area home in 2007, based on numbers released last week by the DataQuick real estate information service, which found that that the median price of a home in the region was $614,000 in October. "This is not a one-year event and this is not a six-month event," Rosen said. "It's going to take three or four years for incomes to catch up to housing prices." Other economists agreed. "We are at the beginning of the correction in the housing market in terms of prices," said Stephen Levy, director of Palo Alto's Center for Continuing Study of the California Economy. "The prices now are way out of line with the income and income prospects of people and they are way out of line with the kind of house you can by in comparable western cities like Phoenix or Denver or Portland or Las Vegas." A quicker and sharper decline in housing prices would lead to a speedier recovery by spurring more buyers to enter the market and creating enough demand to soak up excess inventory, according to Levy. The California Association of Realtors predicts a more-modest decline of 2 percent next year and hasn't yet done a forecast for 2008, according to Leslie Appleton-Young, the group's chief economist. She also saw a somewhat shorter period of decline, although she said she doesn't expect to see a dramatic increase in prices for a while. "It's going to take another 18 months or so to work itself out," she said. Appleton-Young, like Rosen, said that sellers who are refusing to drop their asking prices are dragging out the decline. Sellers will need to readjust their expectations -- and lower prices -- in order to get the market moving again, she said. "The period from 2002 to 2005 was unique -- we had an extremely strong market and it was not sustainable," Appleton-Young said. "Sellers cannot add 20 percent on to what their neighbors sold their house for a year ago and expect that to be the market. It's not." The number of buyers who purchased their homes with unconventional loans, or mortgages that start out with extremely low payments and in some cases allow borrowers to rack up more debt than equity, also raise concerns about the stability of the housing market, Rosen said. "Anyone who could fog a mirror could get a 105 percent loan," he said. "And that means anybody." Rosen also pointed to buyers canceling sales of new homes as another factor weighing down the market. Developers often sell homes before they are complete, taking a deposit of typically about 3 percent. Buyers are walking away from those deals in record numbers, swelling inventory. "They had lots of orders with a small down payment -- those really weren't sales at all," Rosen said. "They were options, and many of them have been canceled." The two brightest spots in the broader real estate market are apartment rentals and office space, where rents are rising and the number of vacant units is falling, Rosen said. The vacancy rate for apartments in San Francisco has dropped below 4 percent, Rosen said, and rents have climbed 10 percent. Strong job growth is fueling higher demand for office space. The vacancy rate is down to about 12 percent in San Francisco and is lower for premiere Class A space, he said. "We're growing again in a very sustainable fashion," he said. The outlook Among Ken Rosen's housing comments: The market needs three years to recover from its decline. "It's not over." Prices rose too fast from 2002 to 2005. "Affordability is an issue. Housing prices moved up way faster than income." Office space and apartment rentals are doing better than other parts of the real estate market. "We're beginning to see substantial rent growth." http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2006/11/21/HOUSING.TMP
This will only happen only if the interests of the homeowner ( mainly the middle class) happen to coincide with the larger interests ( the drivers) of the US economy. You are correct in saying that RE is a local issue. It is just that now it is now a local issue in a global, increasingly borderless world. This new world is the world in which we all live whether we like it or not and old expressions like "buy land because they just aint making any more of it" no longer cut the mustard. The price of RE is predominantly a function of money supply in this brave new world of ours and those who ignore this fact do so at their peril. Assuming that the Fed cuts rates next year, are you going to buy more leveraged RE or are you going to take the opportunity to reduce debt. On the other hand the Fed may be instructed to increase rates to satisfy the mortgagees, namely China, Japan and Taiwan. If a rates increase hits around the same time as oil hikes life will become interesting ... on a local basis of course! Then there is the third option .. the wort of all ... the death by a 1000 cuts. A balance will be provided whereby RE will be left to drift off slowly under the cover of talking heads telling you that it has bottomed and all is well. Never the less it continues to drift, on a local basis of course. Costs will continue to inflate and somehow live just doesnt seem the same any more. Welcome to the wonderful world of stagflation.... just pray that it does not happen
atozcom: Your break-even cash flow will turn negative real fast when those renters quit paying, stay as long as possible (until you can finally force them out) and trash the place to boot. I ran 40+ units for 12 years before I finally had enough and cashed out. I have friends in LV and they tell me it's a pretty common thing there especially considering the local lifestyle. Good luck.
A lot of people have responded to this thread before me, but I would like to welcome your friends to the club. Whats the name of the club you say? Yep, the losing money club. It goes something like this. You see the price of a company going WAY UP and you decide to jump right in thinking your going to ride it a little higher. Uh-oh, then it starts to decline. Then you feel the pain of losing money. To add insult to your injury, there are others around you. People online, in your community, etc. They all have stories of bagging lots of cash from their own deals, but now you sit there with that red entry on your balance sheet. I have been there before, in fact, more times then I like. I know the pain that the couples feel. However, it was greed that got myself into the hairy situations and it was greed that got those couples into their situation. Do I feel sympathy for them? Yes, I can relate to their pain. It makes us all stronger and we learn a valuable lesson from this all. Buy at "the low", sell at "the high". You cant expect to get on top of a skyscraper and keep riding it forever. Time, patience and buying when no one wants it are the keys Many a rich man have learned the hard way like Donald Trump who declared bankruptcy in the late 80s. He learned from his lessons. When he was offered to bid on those overpriced apartments in NYC, he simply sat back and said "no thanks". He has learned the hard way when a trend is just about over.